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An Economic Analysis of the Domestication of the Tuna Fishery – the Case of Kiribati

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An Economic Analysis of the Domestication of the Tuna Fishery – the Case of Kiribati View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Lincoln University Research Archive AN ECONOMIC ANALYSIS OF THE DOMESTICATION OF THE TUNA FISHERY – THE CASE OF KIRIBATI A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Commerce and Management at Lincoln University By Agnes David Yeeting Lincoln University 2009 ABSTRACT The Western and Central Pacific Ocean (WCPO) is home to the largest tuna fishery stock in the world. However, Pacific Island members of the Western and Central Pacific Tuna Commission (WCPTC) argue that their share of the economic rent from the tuna catches taken out of the Pacific region is very small, being on average only about 6% of the total net benefit, when compared to the share earned by Distant Water Fishing Nations (DWFNs). Kiribati is one of the Pacific Island Countries (PICs), which relies heavily on its fishery for its economic development and sustainability. Kiribati earns 40% - 50 % of its government revenue from fisheries access fees paid by DWFNs for tuna caught in the the Kiribati EEZ. The Government of Kiribati (GoK) believes that Kiribati could get greater benefit if they develop their own domestic tuna fishery. This study uses Cost-Benefit Analysis (CBA) and SWOT Analysis to investigate whether domestication of the tuna fishery is the right move for Kiribati or not. The CBA reported in this thesis adapted a model developed by Campbell (2004) to investigate and evaluate fisheries policy in Papua New Guinea (PNG). However the model in this thesis is reflective of the situation and case of Kiribati. In analyzing the different options identified in this study, the CBA indicated negative (-) NPV(s) for the medium-sized vessel option and positive (+) NPV(s) for the large-sized vessel option. The SWOT analysis however, complemented the CBA by further investigating the tuna domestication options in the economic, social and business and business environment of Kiribati. The SWOT analysis indicated that the existing situation and business conditions in Kiribati appears to favor the small to medium sized vessel options which are less risky than the large purse seine vessel option. i ACKNOWLEDGEMENTS I wish to acknowledge the assistance and contributions of the many people who have dedicated their time and effort towards the successful completion of this important project. First and foremost, my sincere thanks go to my Supervisors, Dr. Kathryn Bicknell and Professor Ross Cullen, for their dedication and untiring effort in providing me with the best ever guidance and support throughout this project. Without their encouragement, constructive advices and inspiration, I would have not been able to complete this important study. Their many hours of patience and tolerance in assisting me develop the thesis for this study, right from the very beginning until the very final stages, are deeply appreciated indeed. In addition, I would also like to acknowledge the assistance provided by those who have willingly agreed to be interviewed by me during the course of my research work. In this connection, I particularly would like to extend my sincere gratitude and appreciation to staff and officials of the Ministry of Fisheries and Marine Resources Development in Kiribati, for their assistance, support and cooperation in providing data and information for this study. Many thanks also to Les Clark and his wife Sanga Clark for their contribution and comments. Thanks to my fellow post-graduates and friends Karina Acosta, Ting Ting Su and Jerry Niatu and others in Orchard Building, for their respective personal encouragement and invaluable comments they provided. Last but not the least, I must also extend my sincere thanks and appreciation to my sponsor the NZ Government, for giving me this opportunity to do this research through NZAID scholarship program. Finally, I would also like to thank my family back home, my husband and my son Teuea Maerere for all the support and encouragement they have shown and given to me throughout my struggle to complete this important study. ii LIST OF TABLES 1.1 Tuna Catches from the top ten countries fishing in the Western and Central Pacific (thousand metric tonnes) 4 1.2 Access fees paid by DWFNs 4 4.1 Summary Table for SWOT analysis of Small-Medium tuna fishing industry in Kiribati 68 4.2. Summary Table for SWOT analysis of Small-Medium tuna fishing industry in Kiribati 69 5.1 Capital cost and operating costs for option 1 106 5.2 Summary Result for option 1 106 5.3 Capital and Operating Costs for Option 2 107 5.4 Summary Result for option 2 108 5.5. Capital and operating costs for Option 3 109 5.6. Summary Result for Option 3 110 5.7. Capital and Operating cost for option 4 111 5.8. Summary Result for option 4 112 5.9 Capital and Operating cost for Option 5 113 5.10 Summary Result for Option 5 114 5.11 (a)-(e): Sensitivity Analysis Result: NPVs for Hypothetical Tuna fishing project (option 1) - ($ millions at 2%,5%,10%,20%,30%) Tuna catch Switch (0.5) and Access fees Switch (1) 120 5.12 (a)-(e) : Sensitivity Analysis Result : NPVs for Hypothetical Tuna fishing Project (Option 3), ($ millions at 2%,5%,10%,20%,30%), Tuna catch Switch (0.5) and Access fees Switch (1). 124 5.13 (a)-(e): Sensitivity Analysis Result: NPVs for Hypothetical Tuna fishing Project (Option 5), ($ millions at 2%,5%,10%,20%,30%),Tuna Catch (1) and Access Fees (1) 127 iii 5.14 (a): Sensitivity Analysis Result: NPVs for Hypothetical Tuna fishing project (option 1), ($ millions at 5%), Tuna catch Switch (0.5) and Access fees (0) fishing industry in Kiribati 130 5.14 (b): Sensitivity Analysis Result: NPVs for Hypothetical Tuna fishing project (option 1), ($ millions at 5%), Tuna catch Switch (1) and Access fees (0) fishing industry in Kiribati 130 6.1 Possible Outcome of developing a domestic tuna fishery in Kiribati 140 iv LIST OF FIGURES 1.1 Kiribati Map 2 2.1 WCPO and EPO 17 2.2 Catch distribution by species 19 2.3 Annual total catch of skipjack, yellowfin, bigeye and albarcore by fishing method in the WCP-CA 20 2.4 Annual total catch, by species in the WCP-CA 21 2.5 Pole-and-line vessels operating in the WCP-CA 22 2.6 Employed – cash workers and village workers 31 2.7 GDP level and Growth rate from 1996 – 2006 33 2.8 Exports and Imports – 1982 – 2005 35 2.9 Annual RERF – Market Value 37 4.1 SWOT ANALYSIS – FOUR MATRIX ANALYSIS 65 5.1 Sample Summary Spreadsheet 98 v LIST OF APPREVIATIONS ADB Asian Development Bank CBA Cost-Benefit Analysis CEO Chief Executive Officer CPPL Central Pacific Products Limited DWFNs Distant Water Fishing Nations EEZ Exclusive Economic Zones ENSO El Nino Southern Oscillation EPO Eastern Pacific Ocean FAD Fisheries Aggregating Device FFA Fisheries Forum Agency FSM Federated States of Micronesia FV Fishing Vessel GoK Government of Kiribati KTDMP Kiribati Tuna Development Management Plan LL Long-line MCIC Ministry of Commerce Industry and Cooperatives MCTTD Ministry of Communication Transport and Tourism Development MFED Ministry of Finance and Economic Development MFMRD Ministry of Fisheries and Marine Resource Development MT Metric Tons MSY Maximum Sustainable Yield NEPO National Economic Planning Office NPV(s) Net Present Value(s) NSO National Statistics Office OFP Ocean Fisheries Program PEs Public Enterprises PIC Pacific Island Countries PIS Pacific Island States PNG Papua New Guinea PS Purse Seine SA Sensitivity Analysis SPC Secretariat of the Pacific Community SWOT Strength, Weakeness, Opportunities, Threats UNCLOS United Nations Convention and Law of the Sea VDS Vessel Day Scheme WCP-CA Western and Central Pacific Conservation Area WCPO Western and Central Pacific Ocean WCPTC Western and Central Pacific Tuna Commission vi TABLE OF CONTENTS ABSTRACT i ACKNOWLEDGEMENTS ii LIST OF TABLES iii LIST OF FIGURES v LIST OF APPREVIATIONS vi CHAPTER ONE – INTRODUCTION AND BACKGROUND OF THE STUDY 1.1 Kiribati Location, Social and Economic Background 1 1.2 WCPO Tuna Fishery 3 1.3 Concern over PIC share of Tuna Economic Rent 5 1.4 History of domestication in the PICs – Kiribati 7 1.5 Continued Dream of Kiribati 10 1.6 Need to take a harder look at whether domestication is better than managing access fees 10 1.7 Scope of the Study 12 1.8 Problem Statement 13 1.9 Research Questions 14 1.10 Thesis Outline 14 CHAPTER TWO – AN OVERVIEW OF THE WESTERN AND CENTRAL PACIFIC TUNA COMMISSION (WCTPC) AND THE CASE OF KIRIBATI 2.1 Introduction 15 2.2 The Western and Central Pacific Ocean 16 vii 2.2.1 Where is the WCPO? 16 2.2.2 Tuna in the WCPO 17 2.2.3 Fishing methods used in the WCPO 19 2.3 Tuna Management in the WCPO 22 2.3.1 The South Pacific Commission 22 2.3.2 The Forum Fisheries Agency 24 2.3.3 The Western and Central Pacific Tuna Commission 26 2.4 The Case of Kiribati 28 2.4.1 An Overview of the Kiribati economy 28 2.4.2 The population and unemployment in Kiribati 31 2.4.3 Recent trends in economic growth 33 2.4.4 Barriers to economic development 34 2.4.5 The Revenue Equalisation Reserve Fund (RERF) 36 2.5 Importance of Fisheries to the Kiribati Economy 37 2.5.1 Economic, Cultural and Social Importance of Fisheries to Kiribati 37 2.5.2 Fisheries Employment in Kiribati 38 2.5.3 License fees in Kiribati 39 2.6 The History of tuna industry in Kiribati 40 2.7 Potential Options for domestic tuna fishery in Kiribati 42 2.7.1 Tekokona III Project 44 2.8 Summary 45 CHAPTER THREE – LITERATURE REVIEW 3.1 Introduction 47 3.2 What is domestication? 47 3.3 Domestication Results in the South Pacific 49 3.4 The theory of Comparative
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