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Sunk_fm.qxd 10/6/08 8:53 PM Page i 46193 Public Disclosure Authorized The Sunken Billions The Economic Justification Public Disclosure Authorized for Fisheries Reform October 2008 AGRICULTURE AND RURAL DEVELOPMENT Sustainable Development Network Public Disclosure Authorized ADVANCE EDITION Public Disclosure Authorized THE WORLD BANK FAO Washington, DC Rome Sunk_fm.qxd 10/6/08 8:53 PM Page ii © 2008 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, NW Washington, DC 20433 Telephone: (202) 473-1000 Internet: www.worldbank.org/rural E-mail: [email protected] All rights reserved. The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax (202) 522-2422, e-mail [email protected]. World Bank and Food and Agriculture Organization, 2008. The Sunken Billions. The Economic Justification for Fisheries Reform. Agriculture and Rural Development Department. The World Bank. Washington DC. Sunk_fm.qxd 10/6/08 8:53 PM Page iii Contents ACRONYMS AND ABBREVIATIONS vii ABSTRACT ix ACKNOWLEDGMENTS xi EXECUTIVE SUMMARY xiii 1 Global Trends In Fisheries 1 1.1 Introduction 1 1.2 The Deteriorating State of the Marine Fishery Resources 2 1.3 Profile and Trends in Global Fisheries Production 3 1.4 Trade and Fish Consumption 5 1.5 The Economic Performance of World Marine Capture Fisheries 7 1.6 Value of Production and 5lobal Fish Prices 7 1.7 Fishing Costs and Productivity 9 1.8 Fishing Effort and Fishing Fleets 13 1.9 Subsidies and Management Costs 17 2 Estimate of Net Economic Loss in the Global Marine Fishery 21 2.1 Background 21 2.2 Use of the Terms ‘Net Benefits’ and ‘Economic Rents’ 22 2.3 Description of the Aggregate Model 24 2.4 Model Parameters and Data 24 3 Results 31 3.1 Main Results 31 3.2 Evidence from Other Studies 32 3.3 Linkages to the Broader Economy 33 3.4 Sensitivity Analysis and Confidence Intervals 35 4 The Way Forward 37 4.1. Fisheries Reform Makes Economic Sence 37 4.2. Rebuilding Global Fish Capital 38 4.3. Summary: The Way Forward 41 iii Sunk_fm.qxd 10/6/08 8:53 PM Page iv iv Contents 5 Appendices 43 Appendix 1. The Concept of Economic Rent in Fisheries 44 Appendix 2. Model and Model Estimation 46 Appendix 3. Stochastic Specifications and Confidence Intervals 51 Appendix 4. Supplementary Data 56 NOTES 61 REFERENCES 63 List of Figures 1. Reported Global Marine Catch 1950–2006 (million tons) 3 2. Catch of Selected Species Groups in Marine Fisheries (million tons) 4 3. World marine and Inland Capture and Aquaculture Production 1950–2005 4 4. World Capture and Aquaculture Production 1950–2005 5 5. Total Recorded Marine Capture Production by Economic Group—1970–2005 (million tons) 5 6. World Population (billions) and Global Fish Supply (million tons)—1970–2003 6 7. Regional Trends in Annual Fish Supply Per Capita in kg (1961–2003) 7 8. Trends in the Nominal Export Value, Nominal and Real Export Unit Value of Fishery Products 8 9. Trends in U.S. Real Price Indexes for Fish and Seafood Products (1947–2006) 9 10. Real Trends in Crude Oil Price, Vessel Material Costs, and Fish Export Unit Value (Indices, 1998 = 100) 10 11. Trends in Fish, Food, and Fuel Prices 11 12. Global Population Growth (billion) and Trend of Total Number of Capture Fishers (thousand) 12 13. Total Number of Capture Fishers by Region (thousands 1,000) 12 14. Gross Revenue Per Marine and Inland Capture Fisher (Average 1998–2000 in US$) 13 15. Annual Catch (Marine and Inland) Per Capture Fisher (tons)—1970–2000 14 16. Total Number of Undecked Fishing Vessels Per Region 1970–1998 (in thousands) 14 17. Total Number of Decked Fishing Vessels by Region 1970–1998 (in thousands) 15 18. Estimated Number of New Fishing Vessels Built and Total Registered Fleet Size (Vessels Over 100 GT/GRT) 15 19. Fleet Productivity Development (Total Decked Vessels) 16 20. Maximum Sustainable Yield and Maximum Economic Yield 00 21. Comparative Yield-Effort Curves Corresponding to the Logistic (Schaefer) and Fox Biomass Growth Functions. 25 22. Sensitivity Analysis of the Results (a) Logistic and (b) Fox Models 35 23. Density and Distribution Functions for the Estimated Rents Loss for Logistic, Fox and Combined Logistic and Fox Functions 36 24. Economic Rents 44 25. Illustrative Resource Rents in a Resource Extraction Industry 44 26. The Equilibrium Fisheries Model 46 27. Graphical Illustration of the Global Fishery 50 28. Graphical Illustration of Logistic Model Stochastic Simulations 52 Sunk_fm.qxd 10/6/08 8:53 PM Page v Contents v 29. Graphical Illustration of Fox Model Stochastic Simulations 52 30. Graphical Illustration of Combined Logistic and Fox Model Stochastic Simulations 52 31. Distribution of the Estimated Rents Loss 53 32. Simulated Distribution of the MSY 54 33. Simulated Distribution of the XMAX 54 34. Simulated Distribution of Biomass Growth in Base Year, XDOT 54 35. Simulated Distribution of Landings, Y 54 36. Simulated Distribution of Profits, PROF 55 37. Simulated Distribution of Price, p 55 38. Simulated Distribution of Schooling Parameter, b 55 39. Simulated Distribution of Elasticity of Demand, d 55 40. Example of Increasing Wealth in New Zealand’s Fisheries 60 List of Tables 1. Estimate of Fisheries Subsidies with Direct Impact on Fishing Capacity Per Year ($ billion—year 2000) 18 2. Empirical Data Used as Model Inputs and Estimation of Model Parameters 25 3. Estimated Capital Cost of Global Fishing Fleet ($ billion) 28 4. Global Fleet Profits Current and Previous (1993) Studies 28 5. Main Results—Point Estimates of Rents 32 6. Estimates of the Economic Losses from Global Marine Fisheries 32 7. Illustrative Rent Losses in Major Fisheries Assessed with the Model Used in This Study 33 8. Confidence Intervals for Rent Loss Estimate 36 9. Summary of Model Coefficients and Variables That Need to be Estimated 47 10. Data for Estimation of Model Coefficients and Variables 48 11. Formulae to Calculate Model Parameters 48 12. Empirical Assumptions for Estimation of Model Coefficients 49 13. Calculated Model Coefficients (implied) 49 14. Empirical Assumptions: Stochastic Specifications 51 15. Estimated Rent Loss: Main Results ($ billion) 53 16. Motorized fishing Fleets in Selected Major Fishing Countries, 2004 56 17. Selected Examples of Relationship Between Estimated MSY and Biomass Carrying Capacity 56 18. Estimation of the Weighted Average Global Schooling Parameter 57 19. Indicative Results of Selected Case Studies on Economic Rents in Fisheries 58 20. Projection of Rent Loss 1974–2007 ($ billion) 59 List of Boxes 1. Stagnating Global Marine Catch 3 2. What Are Subsidies? 18 3. The Framework of Prior Studies 22 4. Net Benefits, Economic Rents, and Overfishing 23 5. Downstream Efficiency Gains in Alaska and Peru 34 Sunk_fm.qxd 10/6/08 2:50 PM Page vi Sunk_fm.qxd 10/6/08 2:50 PM Page vii Acronyms and Abbreviations ARD Agriculture and Rural Development Department, World Bank DEC Development Research Group, World Bank EEZ Exclusive Economic Zones ENV Environment Department, World Bank EU European Union FAO Food and Agriculture Organization of the U.N. FIES Agriculture Information and Statistics Service GAC Governance and Anti-Corruption GDP Gross Domestic Product GRT Gross Registered Tonnage GT Gross Tonnage IIFET International Institute for Fisheries Economics and Trade IMF International Monetary Fund IPCC Intergovernmental Panel on Climate Change IPOA International Plan of Action ITQ Individual Transferable Quota IUU Illegal, Unreported and Unregulated Fishing kg kilogram kW kilo Watt MEY Maximum Economic Yield MSY Maximum Sustainable Yield NMFS National Marine Fisheries Service OECD Organization for Economic Cooperation and Development PoI Plan of Implementation SOFIA The State of World Fisheries and Aquaculture (FAO publication) t Tons (= metric tons) UBC University of British Columbia WSSD World Summit for Sustainable Development WTO World Trade Organization All dollar amounts are U.S. Dollars unless otherwise indicated. vii Sunk_fm.qxd 10/6/08 2:50 PM Page viii Sunk_fm.qxd 10/6/08 2:50 PM Page ix Abstract The Sunken Billions: The Economic Justification for Fisheries Reform This study concludes that marine capture fisheries are an underper- forming global asset. The study shows that the difference between the potential and actual net economic benefits from marine fisheries is in the order of $50 billion per year. Improved governance of marine fisheries could capture a substantial part of this $50 billion annual economic loss. Reform of the fisheries sector could generate consid- erable additional economic growth and alternative livelihoods, both in the marine economy and other sectors. The comprehensive reforms required imply political, social, and economic costs.