- Email: [email protected]
Compliance costs and the small fisher: A study of exiters from the New Zealand fishery
ARTICLE IN PRESS
Marine Policy 32 (2008) 120–131 www.elsevier.com/locate/marpol
Compliance costs and the small fisher: A study of exiters from the New Zealand fishery James Stewarta,, Kim Walsheb a
Unitec Business School, Private Bag 92025, Mt Albert, Auckland, New Zealand b Akroyd Walshe Limited, P.O. Box 28814, Remuera, Auckland, New Zealand Received 30 April 2007; accepted 21 May 2007
Abstract Over 3000 predominantly small-scale fishers have exited the New Zealand’s quota management system (QMS) between its inception in 1986 and 2000. This study, based on the Ministry of Fisheries database and a questionnaire sent to the exiters, establishes that compliance costs in general, and those specifically related to the QMS, were one of the most consistent reasons for exit. Uncertainty about future QMS policy and the high cost of quota were also significant factors. It appears that the small fishers’ perception of high compliance cost can be supported by industry data. r 2007 Elsevier Ltd. All rights reserved. Keywords: New Zealand quota management system (QMS); Exit; Compliance costs; Small fishers
1. Introduction In 1986 New Zealand introduced its QMS (quota management system) in response to the evident depletion of key fish species. In the transition from an open access fishery to a quota managed fishery, quota was allocated based upon a scaled back proportion of the prior catch history of individual fishers. This resulted in many fishers operating with suboptimal capacity utilisation. These fishers were faced with the decision to either acquire further quota or exit the fishery. Given the increasing cost of quota and the fact that industry studies report that larger firms have higher returns than smaller firms [1] it appears many smaller fishers found that exit was more viable than expansion. Exit is also facilitated by the possession of highly marketable individual transferable quota (ITQ) [2]. This has resulted in a considerable concentration of quota ownership in key QMS managed species [3–6]. The rationalisation of capacity was predicted by the literature [7,8]. The fact that the rationalisation process has been gradual, or somewhat Corresponding author. Tel.: +64 9 815 4321; fax: +64 9 815 2904.
E-mail addresses: [email protected] (J. Stewart), [email protected] (K. Walshe). 0308-597X/$ - see front matter r 2007 Elsevier Ltd. All rights reserved. doi:10.1016/j.marpol.2007.05.004
delayed, rather than immediate may be explained in part by strategic behaviour. Fishers may attempt to time their exit to coincide with higher prices for quota in quota markets [9,10]. The above presupposes that profitability is the key driver for exit. However, in this study some 27 factors were considered as potential reasons for exit. These ranged from personal reasons such as health and retirement, to policy issues such as penalties for non-compliance and concern over sustainability of fish stocks. As expected, profitability was a key reason for exit. However, it was increased compliance costs that rated highest as the reason of exit. It appears that the exiters possess some characteristics in common: small scale; one or two employees; operating a small vessel and working in the inshore fishery. Also, exiters were generally in their 40 s and were mostly quota owners [11]. Despite this there are also fundamental differences amongst the exiters. We were able to distinguish between fishers who own quota and those who leased quota. The following combinations were evident:
Owns and fishes their entire quota entitlement. Owns and leases out their quota entitlement.
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
Owns and fishes some of their quota and leases out the rest. Owns no quota but leases in all their entitlement. A combination, such as owning quota in one species, leasing some of it out, and leasing other species in. Own or leases quota, and also operates as a processor of fish.
It is likely that these differences in ownership structure would also result in differences in operational performance, such as profitability. It follows that this would translate to differences in the perceived reasons for exit. This has been borne out by the survey results. While there is consistency in the reasons for exit across all exiters there were more pronounced reasons for certain subcategories of exhibits. For example, non-quota owners report low profitability to be significantly more important as a reason for exit than do quota owners. 2. Methodology Information on why fishers exited the New Zealand QMS was gathered by a questionnaire mailed to 3023 exiters throughout New Zealand and overseas. The questionnaire was developed in three parts. Section 1 of the questionnaire gathered information which would identify characteristics of the exiters, such as size, fishing method and post-exit employment [10]. Section 2 gathered data on the reasons for exiting, categorised into five subgroups:
the QMS; general business issues; profitability; sustainability; and personal reasons.
In the above, 27 individual factors were listed. Exiters were asked to score the factors on a 7-point Likert scale, or a ranking of zero (indicating that the factor did not contribute to the exit decision). Section B of the questionnaire is reprinted as Appendix A. This paper reports on and discusses the results of Section 2—the reasons for exiting the QMS. Based on the New Zealand Ministry of Fisheries (MFish) database of quota holders and lessees, 3023 fishers were deemed to have exited from the QMS. From this, 357 questionnaires were returned with at least part of the data recorded. In all, 329 were entered into the database resulting in an effective response rate of 13.2%. In order to establish the size of fishing entity a value was placed on quota holding and quota owning. This was achieved using MFish database of average trade and lease prices for August 2002. Thereby establishing a dollar value (pseudo revenue) of quota holding and owning for each individual fisher as identified by a unique quota ID number held in the MFish quota database.
121
To test whether our sample was representative of the total population of exiters an X2 homogeneity test was used. Our hypothesis was that the distribution of the pseudo revenue of returnee was the same as the distribution of the population. The results show for example that 69% of the total population of exiters owned quota to a value $10,000 or less compared to 72% of our sample. Similarly, 62% of the total population of exiters and 62% of our sample held quota valued at $10,000 or less (see Appendix B). 3. Results The proposition made by Weninger and Just [9] that an ITQ fishery would comprise of a heterogeneous mix of operators leading to exit of the less efficient operators over time is supported by the evidence from this study. As mentioned earlier, fishing industry financial results give evidence that smaller quota holders achieve a lower return on assets than do the major quota holders. For example the 1990/1991 Economic Review report from the Fishing Industry Board states that the return on assets after interest and tax was 4.5% for the minor quota holders (catching and processing sectors combined) compared with 6.6% for the major quota holders (catching and processing sectors combined). This would suggest that minor quota holders are more likely to exit the QMS with major quota holders acquiring the exiters’ quota—a conclusion borne out by other research [2,3,12]. The motive scores from the 329 respondents are summarised in Table 1. For ease of reference the 27 reasons have been coded alphabetically. The definitions of the 27 reasons are given in the questionnaire (Appendix A). The range of values and standard deviations for each of the reasons are given in Appendix C. The N value gives the number of respondents that considered the reason to have influenced their decision to exit. N represents the number of exiters that scored the particular reason between 1 and 7. For example out of the sample population (329), 229 considered reason L (profit— increased compliance costs) to be a contributing factor in their decision to exit. The factor mean score was found by aggregating the individual scores (excluding 0 not a factor) given for each of the 27 reasons for exit and dividing this total by the total number of responses to each reason. The percentage as a factor value was the percentage of respondents who considered the particular reason to be an exit factor (minor or major). The mean value was calculated as the sum of all scores divided by the total number of respondents including those that did not think the reason was a factor. In Table 1 the means are ranked in descending order. The range of means (from 0.69 to 3.95) suggests some factors were unimportant in the respondents’ decision to exit the QMS, while others were clearly quite influential for most exiters.
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
122 Table 1 Motives for exit ranked by mean Code
Reasons for exit
N
Factor mean
% as factor
Mean
L A U P M K G S I D E H J B R V O F N C Q T X Z W AA Y
Profit—increased compliance costs Quota system—administration Sustain—uncertainty—policy Profit—high cost of buying of additional quota Profit—low profitability Profit—increased operating costs General business—administration Profit—insufficient cost Profit—reducing margins—wholesale Quota system—quota acquisition Quota system—penalties General business—operations Profit—adverse retail price signals Quota system—fishing Profit—replacement cost Sustain—uncertainty—biomass Profit—sustained operating losses Quota system—ACE regime Profit—alternate investment opportunity Quota system—catch portfolio matching Profit—sellers market Profit—fish less plentiful Personal—health Personal—family Personal—age Personal—hard work Personal—safety concerns
229 231 211 202 211 211 212 191 198 180 176 190 168 168 168 168 153 151 153 158 153 160 124 135 125 120 89
5.51 5.32 5.78 5.97 5.22 5.21 5.10 5.51 5.30 5.18 5.11 4.43 4.80 4.67 4.60 4.57 4.78 4.83 4.71 4.42 4.48 4.16 4.31 3.66 3.77 3.65 2.46
71.80 72.20 66.10 63.30 66.10 66.10 66.90 59.90 61.90 56.20 55.20 59.70 52.70 52.50 52.80 52.80 48.00 47.50 48.00 49.50 48.30 50.00 38.90 42.30 39.30 37.50 28.00
3.95 3.84 3.82 3.78 3.45 3.45 3.41 3.30 3.28 2.91 2.82 2.64 2.53 2.45 2.43 2.41 2.29 2.29 2.26 2.19 2.17 2.08 1.68 1.55 1.48 1.37 0.69
In the questionnaire the 27 factors we subdivided into five groupings:
finally an internal business strategy issue of quota acquisition.
3.1. Profitability
the QMS; general business issues; profitability; sustainability; and personal reasons.
An initial review of the mean rankings suggested these groupings of factors have differing importance to the decision to exit. Four factors had a mean between 3.8 and 4.0 (reasons L, A, U and P). A further five factors (reasons M, K, G, S and I) fit within a narrow range of 3.5 and 3.3. The following group of 13 factors (reasons D, E, H, J, B, R, V, O, F, N, C, Q and T) ranged from 2.1 to 2.9. Next four factors (reasons X, Z, W and AA) ranged between 1.4 and 1.7. Finally, reason Y (personal safety concerns) had the lowest rank of 0.7. In looking at the overall mean results it is significant to note that the four highest ranking reasons for exit were external factors related to the QMS system, followed by general business compliance issues. The sixth and seventh ranking reasons were internal cost and profitability issues. The eighth issue was an external QMS issue related to quota allocation, followed by an external market issue and
Since profitability was rated as a major reason for exit, and assuming that the respondents to this survey were the less efficient operators, what is interesting to note is the cause of the adverse profitability; rather that arising from the internal operating costs of the firm (e.g. the landed cost of fish) it appears that costs are being driven by external factors specifically compliance associated with the QMS administration and other regimes operations (e.g. Maritime Safety Association). The study found that fishers did not exit because of perceptions that the resource was over-fished. Reason T (Profit—fish less plentiful [more difficult to catch fish]) was ranked 22nd out of 27 reasons for exit, and reason V (sustain-uncertainty of biomass [uncertainty of the future sustainability/health of the resource]) was ranked 16th. 3.2. Compliance with the QMS administration The two highest ranked (by mean and number of responses) motives for exit, reason L (profit—increased compliance costs) and Reason A (quota system—administration) relate to a similar theme but address different issues; reason A addresses the issue of effort, and reason L
ARTICLE IN PRESS
3.3. Factors external to the firm vs. factors internal to the firm As an alternative approach to analysing the influences on the exiter’s decision to leave, the 27 reasons were reclassified into three categories; firstly those reasons which were external factors, secondly internal business strategy factors, and thirdly personal factors. The mean scores for the three factors (and the external factor subcategories) are given in Fig. 1. 3.4. External factors These were factors which were considered to be outside of the exiter’s control, that is factors that they could not influence but had to comply with. This group comprised 14
3.5 2.98
123
3.03
2.75
2.56 2.25
Personal
Internal
Resource issues
Markets
General Bus
1.36
QMS
4 3.5 3 2.5 2 1.5 1 0.5 0
External
addresses the issue of profitability. The Appendix A definitions do, however, link the two motives in that reason A identifies paperwork, and reason L identifies filing of catch returns. The results suggest a consistency in concern about administration of the QMS. New Zealand Fisheries Reporting Regulations require permit holders to provide a variety of catch effort and landing returns, including a daily catch effort with the following parameters: location, date, target species, quantity of effort used, methods used and quantities caught for the five most abundant fish species. In addition, monthly harvest returns are required showing trip data and catch landing data. These returns are recorded in the Catch effort database of MFish. The database is very large and employs 35 people programming, entering, validating and extracting data. Yearly, approximately 200,000 forms are returned by fishers and processors. The third highest mean score reason U (sustainability— uncertainty [Policy: uncertainty as to the future direction of QMS policy]) scored 3.82. Reason U ranked fourth equal (211 responses) in the number of respondents who considered the uncertainty of QMS policy had an influence on their decision to exit. This is consistent with Dewees [13] finding that small-scale quota owners perceived the holding of snapper (a key species for small fishers in the QMS in Northern New Zealand) quota as very risky due to the likelihood of policy changes which could significantly reduce the value of their individual quota holdings. Further, given fishers’ tendency towards risk-aversion [14] and the small fishers’ perception of the high risk of policy change, exit becomes the optimum strategy. Uncertainty about future policy may be related to issues about how the QMS is to be managed, but likely there were other concerns as well. Non-commercial sectors (Maori Customary and recreational fishers), and other fishing sectors (such as aquaculture) also compete for the fishery resource. Concern about the policy impacts on the QMS consequent to the management of these sectors is a major concern to commercial fishers.
Mean score
J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
Categories and subcategories Fig. 1. Breakdown of reasons for exit.
reasons, which were further subdivided into four subcategories namely:
issues surrounding the QMS regulatory regime; general business compliance,; market trends and influences; and resource sustainability issues.
Table 2 gives the means and average of the means for the four subcategories of factors and the external category as a whole. The average of the means for the external factors was higher (2.98) than for the other categories. Of the external factors, issues associated with the QMS framework were rated as the most important reasons for exit (3.50) whilst issues related to resource sustainability were the least important (2.25). 3.5. Internal factors These were factors considered to be within the exiter’s realm of control or influence. For example factor B (Quota system—fishing [difficulty arising from your catch exceeding your allowable quota]) was a factor considered to be within the fisher’s control since the fisher could target fishing to match a catch portfolio. Although the fisher might (in catching the final tonnage) over- or under-fish, there were a number of provisions the fisher could take to ameliorate the problem. The extent to which this was a difficulty would depend on the managerial ability of the exiter. Significantly factor B did not rank highly as a reason for exit. Copes [2] points out that multispecies fisheries are notoriously difficult to manage, however, in the case of the New Zealand QMS it appears that the various provisions [15] for managing by-catch are making the fishers task of dealing with catch-quota variance more manageable. Table 3 gives the means and average of the means for the internal factors. Overall the internal factors were regarded to be slightly less important (2.75) to the external factors. However, there is likely to be some interaction between internal and
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
124 Table 2 External reasons for exit External
Code
Reasons for exit
Mean
QMS
L A U P S F G H I J N Q V T
Profit—increased compliance costs Quota system—administration Sustain—uncertainty—policy Profit—high cost of buying of additional quota Profit—insufficient quota Quota system—ACE regime General business—administration General business—operations Profit—reducing margins—wholesale Profit—adverse retail price signals Profit—alternate investment opportunity Profit—sellers market Sustain—uncertainty—biomass Profit—fish less plentiful Overall average
3.95 3.84 3.82 3.78 3.3 2.29 3.41 2.64 3.28 2.53 2.26 2.16 2.42 2.08
General business Markets
Resources
Table 3 Internal reasons for exit Reasons for exit
Mean
K
Profit—increased operating costs Profit—low profitability Quota system—quota acquisition Quota system—penalties Quota system—fishing Profit—replacement cost Profit—sustained operating losses Quota system—catch portfolio matching
3.45
E B R O C
3.5 3.03
2.56 2.25 2.98
Table 4 Personal reasons for exit
Code
M D
Average of means
Average of means
3.45 2.92 2.82 2.45 2.43 2.29 2.19
2.75
external categories given that some of these factors may have been viewed by the exiters as one issue. 3.6. Personal factors Table 4 gives the means and average of the means for the factors related to health and safety, and family considerations. Personal reasons were consistently regarded as a minor reason for exit producing an average mean of 1.35. The two lowest scores were for hard work and safety concerns; surprising given the hazards and dangers associated with fishing and processing. It would appear that exiters have accepted the risks as part of the job rather than seek to remove themselves from it. 3.7. Analysis by subcategory The exiter profile shows that exiters were largely homogeneous in terms of size of operation. The typical
Code
Reasons for exit
Mean
W X Y Z AA
Personal—age Personal—health Personal—safety concerns Personal—family Personal—hard work
1.48 1.68 0.69 1.55 1.37
Average of means
1.35
exiter was a small-scale fisher rather than a large-scale fisher, or a processor, or an investor. There were, however, some processors and investors amongst the respondents. For example 41 respondents stated they had some involvement in processing, although only eight stated that their main involvement was processing. There were 45 respondents who stated an involvement in investment, although only six reported that they were mainly investors. Some heterogeneity was evident in quota ownership status, 25% of exiters had no interest as quota owners and solely leased their harvest rights. In order to assess the extent to which variance in exiter profile may influence the reasons for exit, analysis was undertaken in the following groups:
quota owners vs. non-quota owners; size by employee number; and solely fishers vs. interest in processing.
3.8. Quota owners vs. non-quota owners The profiles established that of the exiters, 227 had an interest as a quota owner whereas 86 had no interest as a quota owner (i.e. solely lessees). We hypothesised that these two groups could have differing reasons for exit.
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
Table 5 gives the top five reasons for exit by quota owners and non-quota owners. The quota owner group ranked U, L, A, P in the top five reasons for exit. For the non-quota owner group only L and P occur in their top five reasons. However, although the reasons A and U are not ranked in the top five for the non-quota owner group they do have relatively high scores overall, 4.08 and 3.94, respectively. Fig. 2 compares the difference in the scores for the quota owner group vs. the non-quota owner group. The results indicate that, in general, non-quota owners scored the reasons for exit more highly than the quota owner group with the exception of the personal reasons for exit where the pattern was reversed. Appendix D, summarising the results of a t-test of significance of the means of quota owners vs. non-quota owners, found 13 out of 27 reasons gave a significant result. Of these the first eight were reasons that were ranked significantly higher by non-quota owners than by quota owners. The first eight significant reasons relate in general, to cost and profitability issues suggesting that non-quota
Table 5 Top five reasons quota owners and non-quota owners exited the QMS Ranking
Quota owners
Non-quota owners
1
U Sustain—uncertainty— policy (3.78) L Profit—increased compliance costs (3.77) A Quota system— administration (3.74) P Profit—high cost of buying of additional quota (3.46) G General business— administration (3.34)
M Profit—low profitability (4.67) P Profit—high cost of buying of additional quota (4.56) L Profit—increased compliance costs (4.44) I Profit—reducing margins—wholesale (4.27) K Profit—increased operating cost (4.24)
3 4 5
owners have poorer financial results than the exiters as a whole. Notably M (profit—low profitability) and O (profit—sustained operating losses) were ranked higher by the non-quota owner group compared to the quota owner group. McClintock et al. [16], a study of three fishing communities in the South Island, New Zealand report that fewer young fishers are entering the industry due to lower profit margins and the high cost of quota. Also, leaseholders pay the rental for the quota whether they catch the quota limit or not, thereby lowering profitability. Fishers who own some quota are better off since they have greater potential to lease or buy other quota and can choose the company to whom they sell their catch [16,17]. Whilst a reasonable degree of homogeneity is apparent in the exiter population, the non-quota owner group is different both in terms of their non-ownership status and in the way they ranked the reasons for exit. Furthermore reasons P, I and K were scored significantly higher by the non-quota owner group. It appears that the non-quota owner group produced results that were different from the exiters as a whole. Not only are reasons M, P, I and K significantly higher in the non-quota owner group, but they are also in the top five for that group. It is interesting to note that reasons I and K do not feature in the top five rankings in any other employee or owner subgroup. An explanation for the variance in ranking may be due to the lease cost that non-quota owners pay for quota. The non-quota owner pay an explicit cost (the lease price of quota); quota owner pays no such explicit lease cost but do incur an implicit cost in the form of forgone lease revenue, or the potential return on capital associated with quota ownership. Whilst actual losses are likely to be a catalyst for exit in the short term, losses based on implicit costs may motivate exit over time as the true impact of such costs are assessed.
5.0 4.5
No Interest as Quota Owner Interest as Quota Owner
4.0 Mean Ratings (1-7)
2
3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 A B C D E F G H
I
J
K
125
L M N O P Q R S T U V W X Y Z AA Motives for Exit
Fig. 2. Quota interest as owner vs. quota interest not as owner.
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
126
With the exception of reason D (quota system—quota acquisition) the non-quota owner group’s perception of the QMS related reasons per se did not differ significantly from the overall group. It is noteworthy that the non-quota owners rated personal reasons significantly below the quota owner group. We could find no survey information to suggest why this difference occurred. 3.9. Small vs. large fisher Comparisons were made between firms with
zero-or-one employee; two employees; and three-or-more employees.
Table 6 compares the top reasons for exit amongst the three categories. The three subgrouping by employee levels each rank the top four by all exiters, reasons (L, A, U and P) in their own top five rankings. Whilst this consistency is important to our establishing key determinates of exit, it is also noteworthy that there were high ranking reasons unique to each group.
Reason M (profit—low profitability) occurs only in the zero-to-one employee’s category. Reason M was also ranked first for the non-quota owner group. It would appear that these two categories are particularly vulnerable to changes in industry profitability. Table 7 shows the results of a t-test analysis of means. No significant difference occurring in the reasons for exit between firms with two employees and those with three-ormore employees. Results for exiters with zero-to-one employees compared with three-or-more employees indicated that the larger firms ranked three factors significantly higher. They were B, C and D; these relate, respectively, to compliance-fishing, catch portfolio matching and quota acquisition. Comparing exiters with zero-to-one employee with exiters with the two employees’ category, seven factors were significantly higher for two employee group. All were quota system compliance issues and general business issues. For exiters with two employees compared with those with three or more employees there were no significant differences in rating for the factors. Reasons B and C were significantly higher for exiters with two employees and exiters with three-or-more employees than for the group zero-to-one employee exiters.
Table 6 Top reasons for exit by number of employees categories Ranking Zero-to-one employee
Two employees
Three-or-more employees
1
L Profit—increased compliance costs (3.86)
A Quota system—administration (4.74)
2
L Profit—increased compliance costs (4.47)
3 4 5
P Profit—high cost of buying of additional quota (3.84) U Sustain—uncertainty—policy (3.78) A Quota system—administration (3.49) M Profit—low profitability (3.49)
P Profit—high cost of buying of additional quota (4.69) A Quota system—administration (4.25)
6 7 8
S Profit—insufficient cost (3.43) K Profit—increased operating costs (3.41) G General business—administration (3.12)
G General business—administration (4.24) U Sustain—uncertainty—policy (4.21) P Profit—high cost of buying of additional quota (4.10) E Quota system—penalties (3.87) H General business—operations (3.33) F Quota system—ACE regime (3.29)
U Sustain—uncertainty—policy (4.21) D Quota system—quota acquisition (4.08) L Profit—increased compliance costs (4.04) G General business—administration (3.73) K Profit—increased operating costs (3.63) B Quota system—fishing (3.60)
Table 7 Comparison of weighted score for employee size
A B C D E F G H
Reasons for exit
Zero-to-one employee vs. three-and-more employees
Zero-to-one employee vs. two employees
Two employees vs. 42 employees
Quota system—administration Quota system—fishing Quota system—catch portfolio matching Quota system—quota acquisition Quota system—penalties Quota system—ACE regime General business—administration General business—operations
NS 0.001 0.026
0.001 0.002 0.01
NS NS NS
0.005 NS NS NS NS
NS 0.001 0.001 0.006 0.019
NS NS NS NS NS
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
$ per FTE
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 -
2003
In the case studies of the South Island, New Zealand communities of Riverton and Moeraki, it was indicated that many aspects of the QMS administration (catch records, management of by-catch and quota rental) favour major companies at the expense of small operators who lack both the administrative skills and the capital to retain their position within the industry [16]. 3.10. Solely fishers vs. an interest in processing Fig. 4 shows the internal, external and personal categories average scores for the processor and fisher groups. The five top reasons for exit by those with an interest in processing and those solely fishers is given in Table 8. 4
10-19
20-49
50-99
1.5 1
Personal
Internal
Total External
External Resources
External Markets
General Business
QMS
Fig. 4. Breakdown by external, internal and personal factors.
Table 8 Top five reasons for exit by those with an interest in processing and those solely with a fishing interest Ranking
Interest in processing
Solely fishing interest
1
P Profit—high cost of buying of additional quota (4.11) L Profit—increased compliance costs (3.77)
L Profit—increased compliance costs (4.12)
4
FTE Group
Fig. 3. Total costs per employee by size of enterprise (FTE Group, 2003 and 2006). Source: Business New Zealand KPMG compliance cost survey, September 2006.
2
Breakdown by Factors
2006
100+
2.5
0
3 6-9
3
0.5
2
0-5
Processors Fishers
3.5 Average Scores
Exiters with two employees also had other factors which were ranked higher than group zero-to-one employee exiters (namely E, F, G and H). The fact that about 95% of the fishers responding to this survey had five or fewer employees indicates that exiters were predominantly small-scale. This is relevant, given the high ranking accorded to business compliance costs, and is consistent with industry surveys of business in general in New Zealand’s economy. The Business New ZealandKPMG compliance cost survey of businesses in New Zealand (2006) [18] shows that small enterprises [0–5 full time equivalent employees (FTE)] bear much higher compliance costs per employee than larger enterprises (see Fig. 3). These compliance costs are tax-related, employmentrelated, environment-related and others. In 2006 small enterprises were faced with compliance costs of $3353 per employee per year. By contrast, an enterprise with over 100 employees faces compliance costs of around $400 per employee per year. These business compliance costs are in addition to the QMS specific compliance costs which include preparing detailed catch reports and information on effort. Reports are required for each fishing trip to record details indicating vessel, location, species and quantities. Catch must be matched against specific quota and who the fish was sold to. Fishers also need to be prepared for the likelihood they will catch fish other than their target species (by-catch) This also needs to be matched against quota held or additional quota must be purchased after the bycatch is landed Modifications to the catch-balancing regime, such as annual catch entitlement (ACE) introduced in 2001, have removed some of the difficulties associated with accurately predicting the composition of a day’s catch in a mixed-species fishery (15). McClintock et al. [16] report that some fishers who left the industry were partially literate and frustrated by the record-keeping required by the QMS. And, furthermore that financial pressures resulting from recent increases in compliance costs, including levies remitted to MFish and fees paid to other government agencies, have resulted in some fishers selling quota to meet their levies [16].
127
5
U Sustain— uncertainty—policy (3.60) A Quota system— administration (3.57) G General business— administration (3.14)
U Sustain— uncertainty—policy (3.99) A Quota system— administration (3.96) P Profit—high cost of buying of additional quota (3.77) M Profit—low profitability (3.70)
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
128
suggests that scale of operation is a factor in their exit. Industry records have demonstrated that the return on assets for major quota holders is higher than for minor quota holders. This fact suggests that concentration of the holdings is likely to continue. The second area of concern appears to be about the administrative burden and costs of the QMS, a concern which may relate more to the smaller quota holders and owners. A related issue was concern about the uncertainty of future policy and the direction of the QMS. In contrast, concern about the uncertainty of the biomass ranked in the lower half of the scores for motives for exit. It would appear that exiters considered the QMS to be at least moderately successful in achieving sustainability. It is apparent from recent trends that exit from New Zealand QMS is continuing [5]; to what extent the reasons for continuing exit match those brought out by this study is not known. Also, exiters may have quite different perceptions of the QMS to those of incumbents; the QMS may serve as a vent for the general frustrations associated with a fisher’s inability to operate profitably in an industry undergoing rationalisation. A more comprehensive test of the pressures to exit would include a survey of incumbents, this would likely produce the same list of causal factors but perhaps some variance in their rankings. The pressure to exit, in general, is greater for the small-scale exiter, and in particular, for those faced with the need to lease quota.
Table 9 Comparison of scores for processors vs. fishers
I K X AA
Reason for exit
Significance
Profit—reducing margins-wholesale Profit—increased operating costs Personal—health Personal—hard work
0.004 0.037 0.007 0.008
Both groups have the same four highest priority reasons (however, not in the same order). Table 9 shows the difference in scores between those with an interest in processing and those solely with a fishing interest. Significant differences in the scores occurred in five reasons. Reasons I (profit—reducing margins—wholesale), reason K (profit—increased operating costs), reason X (personal—health) and reason AA (personal—hard work) were all rated significantly higher by fishers. Profitability appears to be more of a concern to fishers than for processors. One possible explanation is that processors were often fishers as well, enabling them to enjoy the benefits of vertical integration such as avoiding the transaction cost of the processor acquiring fish product. The perception amongst the solely fisher group that personal (health and hard work) is more of an issue in their decision to exit than for the fisher or processor group suggests that fishing is more hazardous than is processing.
Appendix A. Reasons for exit 4. Conclusions Survey of the reasons for exit from the QMS as quota owner, quota lessor, quota lessee. Section B: reasons for exit. Please review the following factors that may have influenced your exit from the fishery. Using that scale provided, please rank the effect that each of these factors had on your decision to exit. Reasons for exit: (Please circle the number which best represents the extent to which the factor reflects to your decision to exit) (Table A1). In completing Section B (ranking reasons for exit) please refer to the explanations contained in the Table A2.
The New Zealand QMS fishery comprises a mix of fishers in terms of size, fishing methods, target species. From this population it is evident that exiters were predominantly small-scale fishers having one or two employees, whilst there were variations in the extent of quota ownership vs. quota leasing. In general, fishers expressed reluctance to exit and some frustration in their inability to expand their operations to enable an acceptable level of profitability. The results of the survey show that minor quota holders and owners have concerns over low profitability; this Table A1 Not a factor
Moderate effect
Major factor
The quota management system Compliance—administration Compliance—fishing Catch portfolio matching Quota acquisition Penalties ACE regime
0 0 0 0 0 0
1 1 1 1 1 1
2 2 2 2 2 2
3 3 3 3 3 3
4 4 4 4 4 4
5 5 5 5 5 5
6 6 6 6 6 6
7 7 7 7 7 7
General business issues Compliance—administration Compliance—operations
0 0
1 1
2 2
3 3
4 4
5 5
6 6
7 7
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
129
Table A1 (continued ) Not a factor
Moderate effect
Major factor
Profitability Reducing margins—wholesale Adverse retail price signals Increased operating costs Increased compliance costs Low profitability Alternate investment opportunity Sustained operating losses High cost of buying of additional quota Sellers market Replacement costs Insufficient quota Fish less plentiful
0 0 0 0 0 0 0 0 0 0 0 0
1 1 1 1 1 1 1 1 1 1 1 1
2 2 2 2 2 2 2 2 2 2 2 2
3 3 3 3 3 3 3 3 3 3 3 3
4 4 4 4 4 4 4 4 4 4 4 4
5 5 5 5 5 5 5 5 5 5 5 5
6 6 6 6 6 6 6 6 6 6 6 6
7 7 7 7 7 7 7 7 7 7 7 7
Sustainability Uncertainty—policy Uncertainty—biomass
0 0
1 1
2 2
3 3
4 4
5 5
6 6
7 7
Personal reasons Age/Retirement Health Safety concerns Family Hard work
0 0 0 0 0
1 1 1 1 1
2 2 2 2 2
3 3 3 3 3
4 4 4 4 4
5 5 5 5 5
6 6 6 6 6
7 7 7 7 7
Table A2 The quota management system Compliance—administration: The amount of time spent completing the paper work associated with fishing a quota. Compliance—fishing: Difficulties arising from your catch exceeding your allowable quota. Catch portfolio matching: Difficulties associated with bycatch for which you do not hold a quota. Quota acquisition: Issues associated with purchasing or leasing appropriate quota for species caught. Penalty: The risks attached to the QMS in relation to penalties for non-compliance and breaches of the fisheries legislation. ACE regime—Increasing time involved in complying with the 1996 Fisheries Act General business issues Compliance—administration: Compliance with general legislation relating to the running of a business e.g. GST, PAYE, Department of Statistics. Compliance—operations: Compliance with legislation specifically relating to your operation, e.g. OSH. Profitability Reducing margins—wholesale: Adverse change in the price paid by a wholesaler to you relative to your operating costs (falling profit margins). Adverse retail price signals: Adverse change in the current retail market price, relative to your operating costs (falling profit margins), indicating a deterioration in future profitability. Increased operating costs: Cost associated with catching your quota increasing, such as labour, fuel. Increased compliance costs: Costs associated with complying with the requirements of QMS, e.g. filing catch returns. Low profitability: Sustained periods of low profit/occasional loss. Alternate investment opportunity: Opportunity to attain higher return through an alternative investment. Sustained operating losses: Losses sustained over a period of three or more years. High cost of buying of new quota: Limited prospects for expansion. Sellers market: High value attached to the quota itself, made exit attractive. Replacement costs: Actual or anticipated cost of replacing equipment. Insufficient quota: Quota allocation was not enough to operate efficiently. Fish less plentiful: More difficult to catch fish. Sustainability Uncertainty—policy: Uncertainty as to the future direction of QMS policy. Uncertainty—biomass: Uncertainty as to the future sustainability/health of the resource. Personal reasons Age/Retirement: Reached an age where a decision was made to retire from fishing. Health: Personal health made continued participation in the industry difficult. Safety concerns: General hazards associated with the industry. Family: More time onshore. Hard work: Fishing involves long hours and the work is too hard.
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
130
Appendix B. A comparison of population and sample ownership and holding values See Table B1.
Table B1 Pseudo revenue class
Lowest $–$0.05 $0–$10,000 $10,001–$20,000 $20,001–$30,000 $30,001–$40,000 $40,001–$50,000 $50,001–$60,000 $60,001–$70,000 $70,001–$80,000 $80,001–$90,000 $90,001–$100,000 $ 100,000-highest p-value of chi-square homogeneity test
Owned quota
Held quota
Population
Sample
Population
Sample
0.02653 69.0451 6.25995 3.52785 2.75862 2.70557 2.04244 1.61804 1.77719 1.19363 0.95491 8.09019 0.97225
0 72.093 7.309 2.3256 2.6578 4.3189 0.6645 2.3256 1.6611 0.6645 1.3289 4.6512
0.7945 61.997 7.1769 3.6811 2.0127 3.178 2.5159 2.7278 2.4629 1.4831 1.0858 10.885 0.9787
0.6645 62.126 9.9668 2.99 2.6578 4.9834 1.9934 2.3256 1.6611 0.9967 1.3289 8.3056
Appendix C. Summary statistics from Section B of the Questionnaire See Table C1.
Table C1 Reason for exit
N
Minimum
Maximum
Mean
Deviation
Quota system—administration Quota system—fishing Quota system—catch portfolio matching Quota system—quota acquistion Quota system—penalties Quota system—ACE regime General business—administration General business—operations Profit—reducing margins—wholesale Profit—adverse retail price signals Profit—increased operating costs Profit—increased compliance costs Profit—low profitability Profit—alternate investment opportunity Profit—sustained operating losses Profit—high cost of buying of additional quota Profit—sellers market Profit—replacement cost Profit—insufficient cost Profit—fish less plentiful Sustain—uncertainty—policy Sustain—uncertainty—biomass Personal—age Personal—health Personal—safety concerns Personal—family Personal—hard work
272 258 255 256 262 241 264 251 254 242 263 267 262 248 252 262 246 251 263 258 265 252 266 265 245 255 256
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7
4.38 2.93 2.65 3.52 3.31 2.98 4.06 3.3 3.98 3.21 4.06 4.61 4.05 2.89 2.78 4.48 2.77 3.02 3.9 2.43 4.48 2.96 1.7 1.98 0.87 1.9 1.64
2.63 2.82 2.75 2.95 2.99 2.94 2.67 2.71 2.81 2.80 2.65 2.66 2.76 2.91 2.93 2.99 2.74 2.76 2.99 2.60 2.81 2.77 2.35 2.66 1.57 2.42 2.30
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
131
Appendix D. Significance tests quota owner non-quota owner exiters See Table D1.
Table D1 Significance test (pp0.05)-means for quota owner exiters and non-quota owner exiters
D I J K M O P R W X Y Z AA
Reasons for exit
Significance level
Quota system—quota acquisition Profit—reducing margins—wholesale Profit—adverse retail price signals Profit—increased operating costs Profit—low profitability Profit—sustained operating losses Profit—high cost of buying of additional quota Profit—replacement cost Personal—age Personal—health Personal—safety concerns Personal—family Personal—hard work
0.04 o 0.0001 0.001 0.003 o0.001 o0.001 0.007 0.027 o0.0001 o0.0001 0.001 0.017 0.017
References [1] Fishing Industry Board. Fishing Industry Board Economic Review 1984 to 1994. Wellington, New Zealand: Fishing Industry Board. [2] Copes P. A critical review of the individual quota as a device in fisheries management. Land Economics 1986;62(3):278–91. [3] Stewart J, Callagher P. New Zealand fisheries management: changes in property rights structure and implications for sustainability. Journal of Sustainable Development 2002;11:69–76. [4] Connor R. Trends in fishing capacity and aggregation of fishing rights in New Zealand under individual transferable quota. In: Shotton R, editor. Use of property rights in fisheries management. FAO Fisheries technical paper 2000, vol. 404(2). Rome, Italy: Food and Agriculture Organization. [5] Newell R, Sanchirico J. Analysis of concentration and consolidation in New Zealand fishing quota markets. Report to the New Zealand Ministry of Fisheries, June 2003. [6] Sissenwine M, Mace P. ITQs in New Zealand: the era of fixed quota in perpetuity. Fisheries Bulletin 1992;90:147–60. [7] Lindner R, Campbell H, Bevan G. Rent generation during the transition to a managed fishery: the case of the New Zealand ITQ system. Marine Resource Economics 1992;7:229–48. [8] Batstone C, Sharp B. New Zealand’s quota management system: the first ten years. Marine Policy 1999;23(2):177–90. [9] Weninger Q, Just R. An analysis of transition from limited entry to transferable quota: nonMarshallian principles for fisheries management. Natural Resource Modelling 1997;10(1):53–83.
[10] Stewart J, Walshe A. A study of exiters from the New Zealand quota management system. Report to the New Zealand Ministry of Fisheries, June 2004. [11] Stewart J, Walshe K, Moodie B. The demise of the small fisher? A profile of exiters from the New Zealand fishery. Marine Policy 2006;30:328–40. [12] Pradham N, Leung P. Modeling entry, stray, and exit decisions of the longline fishers in Hawaii. Marine Policy 2004;28:311–24. [13] Dewees C. Effects of individual quota systems on New Zealand and British Columbia fisheries. Ecological Applications Supplement: Ecosystem Management for Sustainable Marine Fisheries 1998;8(1):S133–8. [14] Branch T, Hilborn R, Haynie A, Fay G, Flynn L, Griffiths J, et al. Fleet dynamics and fisherman behaviour: lessons for fisheries managers. Canadian Journal of Fisheries and Aquatic Sciences 2006;63(7):1647–68. [15] Sharp B. Designing property rights for achieving sustainable development of the oceans. In: Ecological economics of the oceans coasts. Edgar Elgar Publishing; 2008, forthcoming. [16] McClintock W, Baines J, Taylor C. Retreat from the frontier: fishing communities in New Zealand. Paper prepared for the eighth international symposium on society and resource management, Bellingham, Washington, USA, June 17–22, 2000. [17] Copes P. Social Impacts of fisheries management regimes based on individual quotas. In: Pa´lsson G, Pe´tursdo´ttir G, editors. Social implications of quotas in fisheries. Copenhagen: Nordic Council of Ministers; 1997. p. 61–90. [18] Business New Zealand KPMG compliance cost survey, September 2006.
Marine Policy 32 (2008) 120–131 www.elsevier.com/locate/marpol
Compliance costs and the small fisher: A study of exiters from the New Zealand fishery James Stewarta,, Kim Walsheb a
Unitec Business School, Private Bag 92025, Mt Albert, Auckland, New Zealand b Akroyd Walshe Limited, P.O. Box 28814, Remuera, Auckland, New Zealand Received 30 April 2007; accepted 21 May 2007
Abstract Over 3000 predominantly small-scale fishers have exited the New Zealand’s quota management system (QMS) between its inception in 1986 and 2000. This study, based on the Ministry of Fisheries database and a questionnaire sent to the exiters, establishes that compliance costs in general, and those specifically related to the QMS, were one of the most consistent reasons for exit. Uncertainty about future QMS policy and the high cost of quota were also significant factors. It appears that the small fishers’ perception of high compliance cost can be supported by industry data. r 2007 Elsevier Ltd. All rights reserved. Keywords: New Zealand quota management system (QMS); Exit; Compliance costs; Small fishers
1. Introduction In 1986 New Zealand introduced its QMS (quota management system) in response to the evident depletion of key fish species. In the transition from an open access fishery to a quota managed fishery, quota was allocated based upon a scaled back proportion of the prior catch history of individual fishers. This resulted in many fishers operating with suboptimal capacity utilisation. These fishers were faced with the decision to either acquire further quota or exit the fishery. Given the increasing cost of quota and the fact that industry studies report that larger firms have higher returns than smaller firms [1] it appears many smaller fishers found that exit was more viable than expansion. Exit is also facilitated by the possession of highly marketable individual transferable quota (ITQ) [2]. This has resulted in a considerable concentration of quota ownership in key QMS managed species [3–6]. The rationalisation of capacity was predicted by the literature [7,8]. The fact that the rationalisation process has been gradual, or somewhat Corresponding author. Tel.: +64 9 815 4321; fax: +64 9 815 2904.
E-mail addresses: [email protected] (J. Stewart), [email protected] (K. Walshe). 0308-597X/$ - see front matter r 2007 Elsevier Ltd. All rights reserved. doi:10.1016/j.marpol.2007.05.004
delayed, rather than immediate may be explained in part by strategic behaviour. Fishers may attempt to time their exit to coincide with higher prices for quota in quota markets [9,10]. The above presupposes that profitability is the key driver for exit. However, in this study some 27 factors were considered as potential reasons for exit. These ranged from personal reasons such as health and retirement, to policy issues such as penalties for non-compliance and concern over sustainability of fish stocks. As expected, profitability was a key reason for exit. However, it was increased compliance costs that rated highest as the reason of exit. It appears that the exiters possess some characteristics in common: small scale; one or two employees; operating a small vessel and working in the inshore fishery. Also, exiters were generally in their 40 s and were mostly quota owners [11]. Despite this there are also fundamental differences amongst the exiters. We were able to distinguish between fishers who own quota and those who leased quota. The following combinations were evident:
Owns and fishes their entire quota entitlement. Owns and leases out their quota entitlement.
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
Owns and fishes some of their quota and leases out the rest. Owns no quota but leases in all their entitlement. A combination, such as owning quota in one species, leasing some of it out, and leasing other species in. Own or leases quota, and also operates as a processor of fish.
It is likely that these differences in ownership structure would also result in differences in operational performance, such as profitability. It follows that this would translate to differences in the perceived reasons for exit. This has been borne out by the survey results. While there is consistency in the reasons for exit across all exiters there were more pronounced reasons for certain subcategories of exhibits. For example, non-quota owners report low profitability to be significantly more important as a reason for exit than do quota owners. 2. Methodology Information on why fishers exited the New Zealand QMS was gathered by a questionnaire mailed to 3023 exiters throughout New Zealand and overseas. The questionnaire was developed in three parts. Section 1 of the questionnaire gathered information which would identify characteristics of the exiters, such as size, fishing method and post-exit employment [10]. Section 2 gathered data on the reasons for exiting, categorised into five subgroups:
the QMS; general business issues; profitability; sustainability; and personal reasons.
In the above, 27 individual factors were listed. Exiters were asked to score the factors on a 7-point Likert scale, or a ranking of zero (indicating that the factor did not contribute to the exit decision). Section B of the questionnaire is reprinted as Appendix A. This paper reports on and discusses the results of Section 2—the reasons for exiting the QMS. Based on the New Zealand Ministry of Fisheries (MFish) database of quota holders and lessees, 3023 fishers were deemed to have exited from the QMS. From this, 357 questionnaires were returned with at least part of the data recorded. In all, 329 were entered into the database resulting in an effective response rate of 13.2%. In order to establish the size of fishing entity a value was placed on quota holding and quota owning. This was achieved using MFish database of average trade and lease prices for August 2002. Thereby establishing a dollar value (pseudo revenue) of quota holding and owning for each individual fisher as identified by a unique quota ID number held in the MFish quota database.
121
To test whether our sample was representative of the total population of exiters an X2 homogeneity test was used. Our hypothesis was that the distribution of the pseudo revenue of returnee was the same as the distribution of the population. The results show for example that 69% of the total population of exiters owned quota to a value $10,000 or less compared to 72% of our sample. Similarly, 62% of the total population of exiters and 62% of our sample held quota valued at $10,000 or less (see Appendix B). 3. Results The proposition made by Weninger and Just [9] that an ITQ fishery would comprise of a heterogeneous mix of operators leading to exit of the less efficient operators over time is supported by the evidence from this study. As mentioned earlier, fishing industry financial results give evidence that smaller quota holders achieve a lower return on assets than do the major quota holders. For example the 1990/1991 Economic Review report from the Fishing Industry Board states that the return on assets after interest and tax was 4.5% for the minor quota holders (catching and processing sectors combined) compared with 6.6% for the major quota holders (catching and processing sectors combined). This would suggest that minor quota holders are more likely to exit the QMS with major quota holders acquiring the exiters’ quota—a conclusion borne out by other research [2,3,12]. The motive scores from the 329 respondents are summarised in Table 1. For ease of reference the 27 reasons have been coded alphabetically. The definitions of the 27 reasons are given in the questionnaire (Appendix A). The range of values and standard deviations for each of the reasons are given in Appendix C. The N value gives the number of respondents that considered the reason to have influenced their decision to exit. N represents the number of exiters that scored the particular reason between 1 and 7. For example out of the sample population (329), 229 considered reason L (profit— increased compliance costs) to be a contributing factor in their decision to exit. The factor mean score was found by aggregating the individual scores (excluding 0 not a factor) given for each of the 27 reasons for exit and dividing this total by the total number of responses to each reason. The percentage as a factor value was the percentage of respondents who considered the particular reason to be an exit factor (minor or major). The mean value was calculated as the sum of all scores divided by the total number of respondents including those that did not think the reason was a factor. In Table 1 the means are ranked in descending order. The range of means (from 0.69 to 3.95) suggests some factors were unimportant in the respondents’ decision to exit the QMS, while others were clearly quite influential for most exiters.
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
122 Table 1 Motives for exit ranked by mean Code
Reasons for exit
N
Factor mean
% as factor
Mean
L A U P M K G S I D E H J B R V O F N C Q T X Z W AA Y
Profit—increased compliance costs Quota system—administration Sustain—uncertainty—policy Profit—high cost of buying of additional quota Profit—low profitability Profit—increased operating costs General business—administration Profit—insufficient cost Profit—reducing margins—wholesale Quota system—quota acquisition Quota system—penalties General business—operations Profit—adverse retail price signals Quota system—fishing Profit—replacement cost Sustain—uncertainty—biomass Profit—sustained operating losses Quota system—ACE regime Profit—alternate investment opportunity Quota system—catch portfolio matching Profit—sellers market Profit—fish less plentiful Personal—health Personal—family Personal—age Personal—hard work Personal—safety concerns
229 231 211 202 211 211 212 191 198 180 176 190 168 168 168 168 153 151 153 158 153 160 124 135 125 120 89
5.51 5.32 5.78 5.97 5.22 5.21 5.10 5.51 5.30 5.18 5.11 4.43 4.80 4.67 4.60 4.57 4.78 4.83 4.71 4.42 4.48 4.16 4.31 3.66 3.77 3.65 2.46
71.80 72.20 66.10 63.30 66.10 66.10 66.90 59.90 61.90 56.20 55.20 59.70 52.70 52.50 52.80 52.80 48.00 47.50 48.00 49.50 48.30 50.00 38.90 42.30 39.30 37.50 28.00
3.95 3.84 3.82 3.78 3.45 3.45 3.41 3.30 3.28 2.91 2.82 2.64 2.53 2.45 2.43 2.41 2.29 2.29 2.26 2.19 2.17 2.08 1.68 1.55 1.48 1.37 0.69
In the questionnaire the 27 factors we subdivided into five groupings:
finally an internal business strategy issue of quota acquisition.
3.1. Profitability
the QMS; general business issues; profitability; sustainability; and personal reasons.
An initial review of the mean rankings suggested these groupings of factors have differing importance to the decision to exit. Four factors had a mean between 3.8 and 4.0 (reasons L, A, U and P). A further five factors (reasons M, K, G, S and I) fit within a narrow range of 3.5 and 3.3. The following group of 13 factors (reasons D, E, H, J, B, R, V, O, F, N, C, Q and T) ranged from 2.1 to 2.9. Next four factors (reasons X, Z, W and AA) ranged between 1.4 and 1.7. Finally, reason Y (personal safety concerns) had the lowest rank of 0.7. In looking at the overall mean results it is significant to note that the four highest ranking reasons for exit were external factors related to the QMS system, followed by general business compliance issues. The sixth and seventh ranking reasons were internal cost and profitability issues. The eighth issue was an external QMS issue related to quota allocation, followed by an external market issue and
Since profitability was rated as a major reason for exit, and assuming that the respondents to this survey were the less efficient operators, what is interesting to note is the cause of the adverse profitability; rather that arising from the internal operating costs of the firm (e.g. the landed cost of fish) it appears that costs are being driven by external factors specifically compliance associated with the QMS administration and other regimes operations (e.g. Maritime Safety Association). The study found that fishers did not exit because of perceptions that the resource was over-fished. Reason T (Profit—fish less plentiful [more difficult to catch fish]) was ranked 22nd out of 27 reasons for exit, and reason V (sustain-uncertainty of biomass [uncertainty of the future sustainability/health of the resource]) was ranked 16th. 3.2. Compliance with the QMS administration The two highest ranked (by mean and number of responses) motives for exit, reason L (profit—increased compliance costs) and Reason A (quota system—administration) relate to a similar theme but address different issues; reason A addresses the issue of effort, and reason L
ARTICLE IN PRESS
3.3. Factors external to the firm vs. factors internal to the firm As an alternative approach to analysing the influences on the exiter’s decision to leave, the 27 reasons were reclassified into three categories; firstly those reasons which were external factors, secondly internal business strategy factors, and thirdly personal factors. The mean scores for the three factors (and the external factor subcategories) are given in Fig. 1. 3.4. External factors These were factors which were considered to be outside of the exiter’s control, that is factors that they could not influence but had to comply with. This group comprised 14
3.5 2.98
123
3.03
2.75
2.56 2.25
Personal
Internal
Resource issues
Markets
General Bus
1.36
QMS
4 3.5 3 2.5 2 1.5 1 0.5 0
External
addresses the issue of profitability. The Appendix A definitions do, however, link the two motives in that reason A identifies paperwork, and reason L identifies filing of catch returns. The results suggest a consistency in concern about administration of the QMS. New Zealand Fisheries Reporting Regulations require permit holders to provide a variety of catch effort and landing returns, including a daily catch effort with the following parameters: location, date, target species, quantity of effort used, methods used and quantities caught for the five most abundant fish species. In addition, monthly harvest returns are required showing trip data and catch landing data. These returns are recorded in the Catch effort database of MFish. The database is very large and employs 35 people programming, entering, validating and extracting data. Yearly, approximately 200,000 forms are returned by fishers and processors. The third highest mean score reason U (sustainability— uncertainty [Policy: uncertainty as to the future direction of QMS policy]) scored 3.82. Reason U ranked fourth equal (211 responses) in the number of respondents who considered the uncertainty of QMS policy had an influence on their decision to exit. This is consistent with Dewees [13] finding that small-scale quota owners perceived the holding of snapper (a key species for small fishers in the QMS in Northern New Zealand) quota as very risky due to the likelihood of policy changes which could significantly reduce the value of their individual quota holdings. Further, given fishers’ tendency towards risk-aversion [14] and the small fishers’ perception of the high risk of policy change, exit becomes the optimum strategy. Uncertainty about future policy may be related to issues about how the QMS is to be managed, but likely there were other concerns as well. Non-commercial sectors (Maori Customary and recreational fishers), and other fishing sectors (such as aquaculture) also compete for the fishery resource. Concern about the policy impacts on the QMS consequent to the management of these sectors is a major concern to commercial fishers.
Mean score
J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
Categories and subcategories Fig. 1. Breakdown of reasons for exit.
reasons, which were further subdivided into four subcategories namely:
issues surrounding the QMS regulatory regime; general business compliance,; market trends and influences; and resource sustainability issues.
Table 2 gives the means and average of the means for the four subcategories of factors and the external category as a whole. The average of the means for the external factors was higher (2.98) than for the other categories. Of the external factors, issues associated with the QMS framework were rated as the most important reasons for exit (3.50) whilst issues related to resource sustainability were the least important (2.25). 3.5. Internal factors These were factors considered to be within the exiter’s realm of control or influence. For example factor B (Quota system—fishing [difficulty arising from your catch exceeding your allowable quota]) was a factor considered to be within the fisher’s control since the fisher could target fishing to match a catch portfolio. Although the fisher might (in catching the final tonnage) over- or under-fish, there were a number of provisions the fisher could take to ameliorate the problem. The extent to which this was a difficulty would depend on the managerial ability of the exiter. Significantly factor B did not rank highly as a reason for exit. Copes [2] points out that multispecies fisheries are notoriously difficult to manage, however, in the case of the New Zealand QMS it appears that the various provisions [15] for managing by-catch are making the fishers task of dealing with catch-quota variance more manageable. Table 3 gives the means and average of the means for the internal factors. Overall the internal factors were regarded to be slightly less important (2.75) to the external factors. However, there is likely to be some interaction between internal and
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
124 Table 2 External reasons for exit External
Code
Reasons for exit
Mean
QMS
L A U P S F G H I J N Q V T
Profit—increased compliance costs Quota system—administration Sustain—uncertainty—policy Profit—high cost of buying of additional quota Profit—insufficient quota Quota system—ACE regime General business—administration General business—operations Profit—reducing margins—wholesale Profit—adverse retail price signals Profit—alternate investment opportunity Profit—sellers market Sustain—uncertainty—biomass Profit—fish less plentiful Overall average
3.95 3.84 3.82 3.78 3.3 2.29 3.41 2.64 3.28 2.53 2.26 2.16 2.42 2.08
General business Markets
Resources
Table 3 Internal reasons for exit Reasons for exit
Mean
K
Profit—increased operating costs Profit—low profitability Quota system—quota acquisition Quota system—penalties Quota system—fishing Profit—replacement cost Profit—sustained operating losses Quota system—catch portfolio matching
3.45
E B R O C
3.5 3.03
2.56 2.25 2.98
Table 4 Personal reasons for exit
Code
M D
Average of means
Average of means
3.45 2.92 2.82 2.45 2.43 2.29 2.19
2.75
external categories given that some of these factors may have been viewed by the exiters as one issue. 3.6. Personal factors Table 4 gives the means and average of the means for the factors related to health and safety, and family considerations. Personal reasons were consistently regarded as a minor reason for exit producing an average mean of 1.35. The two lowest scores were for hard work and safety concerns; surprising given the hazards and dangers associated with fishing and processing. It would appear that exiters have accepted the risks as part of the job rather than seek to remove themselves from it. 3.7. Analysis by subcategory The exiter profile shows that exiters were largely homogeneous in terms of size of operation. The typical
Code
Reasons for exit
Mean
W X Y Z AA
Personal—age Personal—health Personal—safety concerns Personal—family Personal—hard work
1.48 1.68 0.69 1.55 1.37
Average of means
1.35
exiter was a small-scale fisher rather than a large-scale fisher, or a processor, or an investor. There were, however, some processors and investors amongst the respondents. For example 41 respondents stated they had some involvement in processing, although only eight stated that their main involvement was processing. There were 45 respondents who stated an involvement in investment, although only six reported that they were mainly investors. Some heterogeneity was evident in quota ownership status, 25% of exiters had no interest as quota owners and solely leased their harvest rights. In order to assess the extent to which variance in exiter profile may influence the reasons for exit, analysis was undertaken in the following groups:
quota owners vs. non-quota owners; size by employee number; and solely fishers vs. interest in processing.
3.8. Quota owners vs. non-quota owners The profiles established that of the exiters, 227 had an interest as a quota owner whereas 86 had no interest as a quota owner (i.e. solely lessees). We hypothesised that these two groups could have differing reasons for exit.
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
Table 5 gives the top five reasons for exit by quota owners and non-quota owners. The quota owner group ranked U, L, A, P in the top five reasons for exit. For the non-quota owner group only L and P occur in their top five reasons. However, although the reasons A and U are not ranked in the top five for the non-quota owner group they do have relatively high scores overall, 4.08 and 3.94, respectively. Fig. 2 compares the difference in the scores for the quota owner group vs. the non-quota owner group. The results indicate that, in general, non-quota owners scored the reasons for exit more highly than the quota owner group with the exception of the personal reasons for exit where the pattern was reversed. Appendix D, summarising the results of a t-test of significance of the means of quota owners vs. non-quota owners, found 13 out of 27 reasons gave a significant result. Of these the first eight were reasons that were ranked significantly higher by non-quota owners than by quota owners. The first eight significant reasons relate in general, to cost and profitability issues suggesting that non-quota
Table 5 Top five reasons quota owners and non-quota owners exited the QMS Ranking
Quota owners
Non-quota owners
1
U Sustain—uncertainty— policy (3.78) L Profit—increased compliance costs (3.77) A Quota system— administration (3.74) P Profit—high cost of buying of additional quota (3.46) G General business— administration (3.34)
M Profit—low profitability (4.67) P Profit—high cost of buying of additional quota (4.56) L Profit—increased compliance costs (4.44) I Profit—reducing margins—wholesale (4.27) K Profit—increased operating cost (4.24)
3 4 5
owners have poorer financial results than the exiters as a whole. Notably M (profit—low profitability) and O (profit—sustained operating losses) were ranked higher by the non-quota owner group compared to the quota owner group. McClintock et al. [16], a study of three fishing communities in the South Island, New Zealand report that fewer young fishers are entering the industry due to lower profit margins and the high cost of quota. Also, leaseholders pay the rental for the quota whether they catch the quota limit or not, thereby lowering profitability. Fishers who own some quota are better off since they have greater potential to lease or buy other quota and can choose the company to whom they sell their catch [16,17]. Whilst a reasonable degree of homogeneity is apparent in the exiter population, the non-quota owner group is different both in terms of their non-ownership status and in the way they ranked the reasons for exit. Furthermore reasons P, I and K were scored significantly higher by the non-quota owner group. It appears that the non-quota owner group produced results that were different from the exiters as a whole. Not only are reasons M, P, I and K significantly higher in the non-quota owner group, but they are also in the top five for that group. It is interesting to note that reasons I and K do not feature in the top five rankings in any other employee or owner subgroup. An explanation for the variance in ranking may be due to the lease cost that non-quota owners pay for quota. The non-quota owner pay an explicit cost (the lease price of quota); quota owner pays no such explicit lease cost but do incur an implicit cost in the form of forgone lease revenue, or the potential return on capital associated with quota ownership. Whilst actual losses are likely to be a catalyst for exit in the short term, losses based on implicit costs may motivate exit over time as the true impact of such costs are assessed.
5.0 4.5
No Interest as Quota Owner Interest as Quota Owner
4.0 Mean Ratings (1-7)
2
3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 A B C D E F G H
I
J
K
125
L M N O P Q R S T U V W X Y Z AA Motives for Exit
Fig. 2. Quota interest as owner vs. quota interest not as owner.
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
126
With the exception of reason D (quota system—quota acquisition) the non-quota owner group’s perception of the QMS related reasons per se did not differ significantly from the overall group. It is noteworthy that the non-quota owners rated personal reasons significantly below the quota owner group. We could find no survey information to suggest why this difference occurred. 3.9. Small vs. large fisher Comparisons were made between firms with
zero-or-one employee; two employees; and three-or-more employees.
Table 6 compares the top reasons for exit amongst the three categories. The three subgrouping by employee levels each rank the top four by all exiters, reasons (L, A, U and P) in their own top five rankings. Whilst this consistency is important to our establishing key determinates of exit, it is also noteworthy that there were high ranking reasons unique to each group.
Reason M (profit—low profitability) occurs only in the zero-to-one employee’s category. Reason M was also ranked first for the non-quota owner group. It would appear that these two categories are particularly vulnerable to changes in industry profitability. Table 7 shows the results of a t-test analysis of means. No significant difference occurring in the reasons for exit between firms with two employees and those with three-ormore employees. Results for exiters with zero-to-one employees compared with three-or-more employees indicated that the larger firms ranked three factors significantly higher. They were B, C and D; these relate, respectively, to compliance-fishing, catch portfolio matching and quota acquisition. Comparing exiters with zero-to-one employee with exiters with the two employees’ category, seven factors were significantly higher for two employee group. All were quota system compliance issues and general business issues. For exiters with two employees compared with those with three or more employees there were no significant differences in rating for the factors. Reasons B and C were significantly higher for exiters with two employees and exiters with three-or-more employees than for the group zero-to-one employee exiters.
Table 6 Top reasons for exit by number of employees categories Ranking Zero-to-one employee
Two employees
Three-or-more employees
1
L Profit—increased compliance costs (3.86)
A Quota system—administration (4.74)
2
L Profit—increased compliance costs (4.47)
3 4 5
P Profit—high cost of buying of additional quota (3.84) U Sustain—uncertainty—policy (3.78) A Quota system—administration (3.49) M Profit—low profitability (3.49)
P Profit—high cost of buying of additional quota (4.69) A Quota system—administration (4.25)
6 7 8
S Profit—insufficient cost (3.43) K Profit—increased operating costs (3.41) G General business—administration (3.12)
G General business—administration (4.24) U Sustain—uncertainty—policy (4.21) P Profit—high cost of buying of additional quota (4.10) E Quota system—penalties (3.87) H General business—operations (3.33) F Quota system—ACE regime (3.29)
U Sustain—uncertainty—policy (4.21) D Quota system—quota acquisition (4.08) L Profit—increased compliance costs (4.04) G General business—administration (3.73) K Profit—increased operating costs (3.63) B Quota system—fishing (3.60)
Table 7 Comparison of weighted score for employee size
A B C D E F G H
Reasons for exit
Zero-to-one employee vs. three-and-more employees
Zero-to-one employee vs. two employees
Two employees vs. 42 employees
Quota system—administration Quota system—fishing Quota system—catch portfolio matching Quota system—quota acquisition Quota system—penalties Quota system—ACE regime General business—administration General business—operations
NS 0.001 0.026
0.001 0.002 0.01
NS NS NS
0.005 NS NS NS NS
NS 0.001 0.001 0.006 0.019
NS NS NS NS NS
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
$ per FTE
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 -
2003
In the case studies of the South Island, New Zealand communities of Riverton and Moeraki, it was indicated that many aspects of the QMS administration (catch records, management of by-catch and quota rental) favour major companies at the expense of small operators who lack both the administrative skills and the capital to retain their position within the industry [16]. 3.10. Solely fishers vs. an interest in processing Fig. 4 shows the internal, external and personal categories average scores for the processor and fisher groups. The five top reasons for exit by those with an interest in processing and those solely fishers is given in Table 8. 4
10-19
20-49
50-99
1.5 1
Personal
Internal
Total External
External Resources
External Markets
General Business
QMS
Fig. 4. Breakdown by external, internal and personal factors.
Table 8 Top five reasons for exit by those with an interest in processing and those solely with a fishing interest Ranking
Interest in processing
Solely fishing interest
1
P Profit—high cost of buying of additional quota (4.11) L Profit—increased compliance costs (3.77)
L Profit—increased compliance costs (4.12)
4
FTE Group
Fig. 3. Total costs per employee by size of enterprise (FTE Group, 2003 and 2006). Source: Business New Zealand KPMG compliance cost survey, September 2006.
2
Breakdown by Factors
2006
100+
2.5
0
3 6-9
3
0.5
2
0-5
Processors Fishers
3.5 Average Scores
Exiters with two employees also had other factors which were ranked higher than group zero-to-one employee exiters (namely E, F, G and H). The fact that about 95% of the fishers responding to this survey had five or fewer employees indicates that exiters were predominantly small-scale. This is relevant, given the high ranking accorded to business compliance costs, and is consistent with industry surveys of business in general in New Zealand’s economy. The Business New ZealandKPMG compliance cost survey of businesses in New Zealand (2006) [18] shows that small enterprises [0–5 full time equivalent employees (FTE)] bear much higher compliance costs per employee than larger enterprises (see Fig. 3). These compliance costs are tax-related, employmentrelated, environment-related and others. In 2006 small enterprises were faced with compliance costs of $3353 per employee per year. By contrast, an enterprise with over 100 employees faces compliance costs of around $400 per employee per year. These business compliance costs are in addition to the QMS specific compliance costs which include preparing detailed catch reports and information on effort. Reports are required for each fishing trip to record details indicating vessel, location, species and quantities. Catch must be matched against specific quota and who the fish was sold to. Fishers also need to be prepared for the likelihood they will catch fish other than their target species (by-catch) This also needs to be matched against quota held or additional quota must be purchased after the bycatch is landed Modifications to the catch-balancing regime, such as annual catch entitlement (ACE) introduced in 2001, have removed some of the difficulties associated with accurately predicting the composition of a day’s catch in a mixed-species fishery (15). McClintock et al. [16] report that some fishers who left the industry were partially literate and frustrated by the record-keeping required by the QMS. And, furthermore that financial pressures resulting from recent increases in compliance costs, including levies remitted to MFish and fees paid to other government agencies, have resulted in some fishers selling quota to meet their levies [16].
127
5
U Sustain— uncertainty—policy (3.60) A Quota system— administration (3.57) G General business— administration (3.14)
U Sustain— uncertainty—policy (3.99) A Quota system— administration (3.96) P Profit—high cost of buying of additional quota (3.77) M Profit—low profitability (3.70)
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
128
suggests that scale of operation is a factor in their exit. Industry records have demonstrated that the return on assets for major quota holders is higher than for minor quota holders. This fact suggests that concentration of the holdings is likely to continue. The second area of concern appears to be about the administrative burden and costs of the QMS, a concern which may relate more to the smaller quota holders and owners. A related issue was concern about the uncertainty of future policy and the direction of the QMS. In contrast, concern about the uncertainty of the biomass ranked in the lower half of the scores for motives for exit. It would appear that exiters considered the QMS to be at least moderately successful in achieving sustainability. It is apparent from recent trends that exit from New Zealand QMS is continuing [5]; to what extent the reasons for continuing exit match those brought out by this study is not known. Also, exiters may have quite different perceptions of the QMS to those of incumbents; the QMS may serve as a vent for the general frustrations associated with a fisher’s inability to operate profitably in an industry undergoing rationalisation. A more comprehensive test of the pressures to exit would include a survey of incumbents, this would likely produce the same list of causal factors but perhaps some variance in their rankings. The pressure to exit, in general, is greater for the small-scale exiter, and in particular, for those faced with the need to lease quota.
Table 9 Comparison of scores for processors vs. fishers
I K X AA
Reason for exit
Significance
Profit—reducing margins-wholesale Profit—increased operating costs Personal—health Personal—hard work
0.004 0.037 0.007 0.008
Both groups have the same four highest priority reasons (however, not in the same order). Table 9 shows the difference in scores between those with an interest in processing and those solely with a fishing interest. Significant differences in the scores occurred in five reasons. Reasons I (profit—reducing margins—wholesale), reason K (profit—increased operating costs), reason X (personal—health) and reason AA (personal—hard work) were all rated significantly higher by fishers. Profitability appears to be more of a concern to fishers than for processors. One possible explanation is that processors were often fishers as well, enabling them to enjoy the benefits of vertical integration such as avoiding the transaction cost of the processor acquiring fish product. The perception amongst the solely fisher group that personal (health and hard work) is more of an issue in their decision to exit than for the fisher or processor group suggests that fishing is more hazardous than is processing.
Appendix A. Reasons for exit 4. Conclusions Survey of the reasons for exit from the QMS as quota owner, quota lessor, quota lessee. Section B: reasons for exit. Please review the following factors that may have influenced your exit from the fishery. Using that scale provided, please rank the effect that each of these factors had on your decision to exit. Reasons for exit: (Please circle the number which best represents the extent to which the factor reflects to your decision to exit) (Table A1). In completing Section B (ranking reasons for exit) please refer to the explanations contained in the Table A2.
The New Zealand QMS fishery comprises a mix of fishers in terms of size, fishing methods, target species. From this population it is evident that exiters were predominantly small-scale fishers having one or two employees, whilst there were variations in the extent of quota ownership vs. quota leasing. In general, fishers expressed reluctance to exit and some frustration in their inability to expand their operations to enable an acceptable level of profitability. The results of the survey show that minor quota holders and owners have concerns over low profitability; this Table A1 Not a factor
Moderate effect
Major factor
The quota management system Compliance—administration Compliance—fishing Catch portfolio matching Quota acquisition Penalties ACE regime
0 0 0 0 0 0
1 1 1 1 1 1
2 2 2 2 2 2
3 3 3 3 3 3
4 4 4 4 4 4
5 5 5 5 5 5
6 6 6 6 6 6
7 7 7 7 7 7
General business issues Compliance—administration Compliance—operations
0 0
1 1
2 2
3 3
4 4
5 5
6 6
7 7
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
129
Table A1 (continued ) Not a factor
Moderate effect
Major factor
Profitability Reducing margins—wholesale Adverse retail price signals Increased operating costs Increased compliance costs Low profitability Alternate investment opportunity Sustained operating losses High cost of buying of additional quota Sellers market Replacement costs Insufficient quota Fish less plentiful
0 0 0 0 0 0 0 0 0 0 0 0
1 1 1 1 1 1 1 1 1 1 1 1
2 2 2 2 2 2 2 2 2 2 2 2
3 3 3 3 3 3 3 3 3 3 3 3
4 4 4 4 4 4 4 4 4 4 4 4
5 5 5 5 5 5 5 5 5 5 5 5
6 6 6 6 6 6 6 6 6 6 6 6
7 7 7 7 7 7 7 7 7 7 7 7
Sustainability Uncertainty—policy Uncertainty—biomass
0 0
1 1
2 2
3 3
4 4
5 5
6 6
7 7
Personal reasons Age/Retirement Health Safety concerns Family Hard work
0 0 0 0 0
1 1 1 1 1
2 2 2 2 2
3 3 3 3 3
4 4 4 4 4
5 5 5 5 5
6 6 6 6 6
7 7 7 7 7
Table A2 The quota management system Compliance—administration: The amount of time spent completing the paper work associated with fishing a quota. Compliance—fishing: Difficulties arising from your catch exceeding your allowable quota. Catch portfolio matching: Difficulties associated with bycatch for which you do not hold a quota. Quota acquisition: Issues associated with purchasing or leasing appropriate quota for species caught. Penalty: The risks attached to the QMS in relation to penalties for non-compliance and breaches of the fisheries legislation. ACE regime—Increasing time involved in complying with the 1996 Fisheries Act General business issues Compliance—administration: Compliance with general legislation relating to the running of a business e.g. GST, PAYE, Department of Statistics. Compliance—operations: Compliance with legislation specifically relating to your operation, e.g. OSH. Profitability Reducing margins—wholesale: Adverse change in the price paid by a wholesaler to you relative to your operating costs (falling profit margins). Adverse retail price signals: Adverse change in the current retail market price, relative to your operating costs (falling profit margins), indicating a deterioration in future profitability. Increased operating costs: Cost associated with catching your quota increasing, such as labour, fuel. Increased compliance costs: Costs associated with complying with the requirements of QMS, e.g. filing catch returns. Low profitability: Sustained periods of low profit/occasional loss. Alternate investment opportunity: Opportunity to attain higher return through an alternative investment. Sustained operating losses: Losses sustained over a period of three or more years. High cost of buying of new quota: Limited prospects for expansion. Sellers market: High value attached to the quota itself, made exit attractive. Replacement costs: Actual or anticipated cost of replacing equipment. Insufficient quota: Quota allocation was not enough to operate efficiently. Fish less plentiful: More difficult to catch fish. Sustainability Uncertainty—policy: Uncertainty as to the future direction of QMS policy. Uncertainty—biomass: Uncertainty as to the future sustainability/health of the resource. Personal reasons Age/Retirement: Reached an age where a decision was made to retire from fishing. Health: Personal health made continued participation in the industry difficult. Safety concerns: General hazards associated with the industry. Family: More time onshore. Hard work: Fishing involves long hours and the work is too hard.
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
130
Appendix B. A comparison of population and sample ownership and holding values See Table B1.
Table B1 Pseudo revenue class
Lowest $–$0.05 $0–$10,000 $10,001–$20,000 $20,001–$30,000 $30,001–$40,000 $40,001–$50,000 $50,001–$60,000 $60,001–$70,000 $70,001–$80,000 $80,001–$90,000 $90,001–$100,000 $ 100,000-highest p-value of chi-square homogeneity test
Owned quota
Held quota
Population
Sample
Population
Sample
0.02653 69.0451 6.25995 3.52785 2.75862 2.70557 2.04244 1.61804 1.77719 1.19363 0.95491 8.09019 0.97225
0 72.093 7.309 2.3256 2.6578 4.3189 0.6645 2.3256 1.6611 0.6645 1.3289 4.6512
0.7945 61.997 7.1769 3.6811 2.0127 3.178 2.5159 2.7278 2.4629 1.4831 1.0858 10.885 0.9787
0.6645 62.126 9.9668 2.99 2.6578 4.9834 1.9934 2.3256 1.6611 0.9967 1.3289 8.3056
Appendix C. Summary statistics from Section B of the Questionnaire See Table C1.
Table C1 Reason for exit
N
Minimum
Maximum
Mean
Deviation
Quota system—administration Quota system—fishing Quota system—catch portfolio matching Quota system—quota acquistion Quota system—penalties Quota system—ACE regime General business—administration General business—operations Profit—reducing margins—wholesale Profit—adverse retail price signals Profit—increased operating costs Profit—increased compliance costs Profit—low profitability Profit—alternate investment opportunity Profit—sustained operating losses Profit—high cost of buying of additional quota Profit—sellers market Profit—replacement cost Profit—insufficient cost Profit—fish less plentiful Sustain—uncertainty—policy Sustain—uncertainty—biomass Personal—age Personal—health Personal—safety concerns Personal—family Personal—hard work
272 258 255 256 262 241 264 251 254 242 263 267 262 248 252 262 246 251 263 258 265 252 266 265 245 255 256
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7
4.38 2.93 2.65 3.52 3.31 2.98 4.06 3.3 3.98 3.21 4.06 4.61 4.05 2.89 2.78 4.48 2.77 3.02 3.9 2.43 4.48 2.96 1.7 1.98 0.87 1.9 1.64
2.63 2.82 2.75 2.95 2.99 2.94 2.67 2.71 2.81 2.80 2.65 2.66 2.76 2.91 2.93 2.99 2.74 2.76 2.99 2.60 2.81 2.77 2.35 2.66 1.57 2.42 2.30
ARTICLE IN PRESS J. Stewart, K. Walshe / Marine Policy 32 (2008) 120–131
131
Appendix D. Significance tests quota owner non-quota owner exiters See Table D1.
Table D1 Significance test (pp0.05)-means for quota owner exiters and non-quota owner exiters
D I J K M O P R W X Y Z AA
Reasons for exit
Significance level
Quota system—quota acquisition Profit—reducing margins—wholesale Profit—adverse retail price signals Profit—increased operating costs Profit—low profitability Profit—sustained operating losses Profit—high cost of buying of additional quota Profit—replacement cost Personal—age Personal—health Personal—safety concerns Personal—family Personal—hard work
0.04 o 0.0001 0.001 0.003 o0.001 o0.001 0.007 0.027 o0.0001 o0.0001 0.001 0.017 0.017
References [1] Fishing Industry Board. Fishing Industry Board Economic Review 1984 to 1994. Wellington, New Zealand: Fishing Industry Board. [2] Copes P. A critical review of the individual quota as a device in fisheries management. Land Economics 1986;62(3):278–91. [3] Stewart J, Callagher P. New Zealand fisheries management: changes in property rights structure and implications for sustainability. Journal of Sustainable Development 2002;11:69–76. [4] Connor R. Trends in fishing capacity and aggregation of fishing rights in New Zealand under individual transferable quota. In: Shotton R, editor. Use of property rights in fisheries management. FAO Fisheries technical paper 2000, vol. 404(2). Rome, Italy: Food and Agriculture Organization. [5] Newell R, Sanchirico J. Analysis of concentration and consolidation in New Zealand fishing quota markets. Report to the New Zealand Ministry of Fisheries, June 2003. [6] Sissenwine M, Mace P. ITQs in New Zealand: the era of fixed quota in perpetuity. Fisheries Bulletin 1992;90:147–60. [7] Lindner R, Campbell H, Bevan G. Rent generation during the transition to a managed fishery: the case of the New Zealand ITQ system. Marine Resource Economics 1992;7:229–48. [8] Batstone C, Sharp B. New Zealand’s quota management system: the first ten years. Marine Policy 1999;23(2):177–90. [9] Weninger Q, Just R. An analysis of transition from limited entry to transferable quota: nonMarshallian principles for fisheries management. Natural Resource Modelling 1997;10(1):53–83.
[10] Stewart J, Walshe A. A study of exiters from the New Zealand quota management system. Report to the New Zealand Ministry of Fisheries, June 2004. [11] Stewart J, Walshe K, Moodie B. The demise of the small fisher? A profile of exiters from the New Zealand fishery. Marine Policy 2006;30:328–40. [12] Pradham N, Leung P. Modeling entry, stray, and exit decisions of the longline fishers in Hawaii. Marine Policy 2004;28:311–24. [13] Dewees C. Effects of individual quota systems on New Zealand and British Columbia fisheries. Ecological Applications Supplement: Ecosystem Management for Sustainable Marine Fisheries 1998;8(1):S133–8. [14] Branch T, Hilborn R, Haynie A, Fay G, Flynn L, Griffiths J, et al. Fleet dynamics and fisherman behaviour: lessons for fisheries managers. Canadian Journal of Fisheries and Aquatic Sciences 2006;63(7):1647–68. [15] Sharp B. Designing property rights for achieving sustainable development of the oceans. In: Ecological economics of the oceans coasts. Edgar Elgar Publishing; 2008, forthcoming. [16] McClintock W, Baines J, Taylor C. Retreat from the frontier: fishing communities in New Zealand. Paper prepared for the eighth international symposium on society and resource management, Bellingham, Washington, USA, June 17–22, 2000. [17] Copes P. Social Impacts of fisheries management regimes based on individual quotas. In: Pa´lsson G, Pe´tursdo´ttir G, editors. Social implications of quotas in fisheries. Copenhagen: Nordic Council of Ministers; 1997. p. 61–90. [18] Business New Zealand KPMG compliance cost survey, September 2006.