Fisheries and Economic Development

A Guest Lecture Prepared for theUnited Nations University Fisheries Training Program

Reykjavik, Iceland

Gunnar KnappProfessor of Economics

Institute of Social and Economic ResearchAnchorage, Alaska USA

Gunnar.Knapp@uaa.alaska.edu

January 2013

IMPORTANT QUESTIONS

• How can developing countries’ fisheries resources be used to increase the well-being of fishermen, fishing communities, and the broader society?

• What should governments do—and not do—to promote the contribution of fisheries to economic development?

• These are difficult questions.• The answers clearly depend in part on the fisheries and the countries

—they are not the same answers for everyone.

• I can’t answer them! I don’t know enough about:– Developing countries’ fisheries resources and fisheries– Developing countries– The process of economic development– What strategies have proved effective in actually promoting

development

What I will try to do in this lecture

• Discuss these questions from the broad perspective of how economists think about the processes and challenges of economic development.

• Suggest possible answers and strategies for you to consider and debate

THINK FOR YOURSELVES!• Listen to what outside “experts” have to say but don’t necessarily

take their advice.• Outside “experts” don’t necessarily:

– Understand your situation– Share your objectives

In general . . .

If you want to help people . . .Give them control over the decisions that affect them

and let them decide for themselves

If you want to help fishermen . . .Give them control over their fisheries and

let them decide for themselves how to use them.

But . . .

Who represents the people?Who represents the fishermen?

1. OBSERVATIONS ON THEGENERAL PROCESS OF

ECONOMIC DEVELOPMENT

What is “economic development”?

• Increase in total value of– What the country produces– What citizens earn– Living standards and well-being– Broadly distributed and shared (not just elites)

• Accompanied by social and political development– Literacy– Education– Health care– Rule of law– Political freedom and participation

Economic development is a process of the entire societywhich occurs simultaneously in many dimensions

• Rule of law (personal safety, honest government)• Political stability• Effective government: laws, courts, services• Education and literacy• Public health• Infrastructure: transportation, communication, utilities• Balanced economic growth:

– Professional services (accounting, legal, marketing)– Repair services (welding, engine maintenance)– Manufacturing

It is difficult for any specific sector, such as fisheries, to advance beyond the overall level of economic development of the society

At its core, economic development requires increasing the economic value of what the country can produce, based on:

• Investment in:– Physical capital (buildings, machines, boats, etc.) so that each

worker can become more productive– Infrastructure (transportation, communication, energy) which

further contribute to productivity– Human capital (education) so that the population is more skilled

• Shifting labor from traditional less productive activities (such as traditional agriculture) to newer more productive activities (such as manufacturing and services)

A critical factor in economic development is creating incentives for the processes to happen naturally—by making people want to do them

voluntarily

• Investment in:– Physical capital– Infrastructure – Human capital

• Shifting labor from traditional less productive activities to newer more productive activities

Market forces can provide the incentives for these changes—if but only if governments allow them to and create the conditions for

markets to work!

What needs to happen for economic development

How markets can provide incentives

What government needs to do

Investment in private capital

Opportunities to earn profit by investing

Rule of law so that earnings are not stolen or reduced by bribesReasonable tax ratesMarket prices

Investment in public infrastructure

Investment in the infrastructure projects which offer the greatest economic rate of return for the country

Investment in human capital

Higher earnings potential for better educated people

Provide good universal basic education

Shift in labor to more productive activities

Higher wages in new sectors Not interfere with wage incentives by subsidizing less profitable activities

What do you need for successful economic development?

You don’t need

• Resource wealth• Foreign aid• Government investment in:

– Development projects– Commercial enterprises

• Government control of investment

• Government subsidies

You do need

• Rule of law• Honest government• Personal safety & freedom• Market freedom• Work ethic• Education ethic• Investment ethic• Fair distribution of income• Government investment in:

– Education– Basic infrastructure

• Reasonable taxes• Access to world markets

The rest of the world can’t and won’t give you economic developmentYou must want it and do most of it yourselves

What the rest of the worldcan’t give you

• Rule of law• Honest government• Personal safety & freedom• Market freedom• Work ethic• Education ethic• Investment ethic• Fair distribution of income• Reasonable taxes

What the rest of the worldcan give you

• Assistance with investment in education and basic infrastructure

• Access to world markets

If you look around the world, economic developmenthas been most successful in countries where:

• Families place a high priority on education for their children• People work hard• People are willing to save and invest• People have personal freedom and safety• Governments are less corrupt• Development is primarily driven by markets rather than government:

– Private rather than government enterprises– Limited subsidization

• Countries open their markets to trade

One of the most important things developed countries can do to

promote economic development is open their markets to products from

developing countries.

2. OBSERVATIONS SPECIFICALLY RELATED TO FISHERIES DEVELOPMENT

How can developing countries’ fisheries resources be used to increase the well-being of fishermen, fishing communities, and the broader society?

What should governments do—and not do—to promote the contribution of fisheries to economic development?

Stop destructive practices which createlong-term harm to fishery resources

• Destruction of coral reefs• Destruction of fishery habitat• Environmental pollution

Stop foreign theft of fishery resources

• Stop foreign fishing in your waters unless there is:– Monitoring– Reporting– Payment in some form

• Enlist international assistance if needed

Define and enforce fishing rights

• Fisheries development requires that societies protect fishery resources and invest in fishing

• Incentives matter! People are more likely to protect fishery resources and invest in fishing if they know:– they know they will continue to have the right to fish– they know others cannot take their fish if catches or prices improve– they have a voice in the management of the resources

• Rights may be defined in many ways (rights to fish, catch shares, etc.)• Rights may potentially be allocated to many kinds of groups:

– To traditional fishermen– Users of particular types of gear– Communities– Enterprises– Individuals

• The rights must be defined, enforced, clear and secure.• Defining and allocating fishing rights is a critical function of government

Invest in infrastructure

• Focus on infrastructure which provides broad general benefit to the entire fisheries sector (and beyond) and which private businesses cannot provide:– Harbors– Roads– Transportation to internal and external markets– Reliable utilities (electricity, water, etc.) needed for processing

and refrigeration• The most important infrastructure for fisheries development is not

necessarily at the coast– Transportation infrastructure which allows products to get to

market

Promote conditions which create incentivesfor private investment in fisheries

• Don’t give people boats or engines or nets• Do create conditions which make them want to and able to buy

boats and engines and nets

• Fishing rights: the knowledge that they will have fish to catch• Good management to protect the fishery resources• Access to capital loans• Infrastructure to land and transport their fish

Gain more value from your fish

• Most countries cannot significantly increase their wild fishery catches• But they can increase the value from the resources:

– Better handling to improve yields and quality– Better processing for more valuable products– Assistance in marketing– Sale to higher-paying international markets

• International standards for:– Food safety– Product quality– Traceability– Sustainable fisheries management

• None of this is easy• Foreign investment can help. It will only happen with:

– Good fisheries management ensuring resource supply– Favorable investment conditions– Adequate infrastructure

Facilitate the development or private organizations and public-private partnerships to advance common goals for the fishing industry

• Marketing organizations• Market research• Technical assistance

The greatest economic opportunities for fisheries-related economic development may be in aquaculture.

• Wild fisheries have limited potential for economic growth– Long-term growth potential limited by ocean carrying capacity– High capital costs of offshore fisheries– Natural fluctuations in stocks– Uncertainties associated with climate change

• Many developing and medium-income countries have had significant economic success with aquaculture:– China, Thailand, Vietnam, Indonesia, etc.– More apparent “success stories” as potential models– Feedback loops to local economy (feed production, ponds, etc.)

Things NOT to do

• DON’T encourage more people to engage in fishing for limited resources

• DON’T or give people boats, engines or other gear that they are not willing to make substantial investments in themselves

• DON’T provide permanent subsidies– You can’t build a competitive fishing industry which can be an

engine of economic development through continuing subsidies– Permanent subsidies lead to permanent dependence

• DON’T limit where people can sell their fish or what products they can make or where they can sell them– Markets are usually better than governments at finding the most

valuable ways to use fish