Seafood business opportunities
Speech delivered by
Einar K. Guðfinnsson, Minister of Fisheries of Iceland
Ladies and gentlemen.
It’s a great pleasure for me to join you at this conference here today. I will discuss how we
in Iceland have made the fisheries sector more profitable. Furthermore I will discuss the
urgent need for a better management of shared stocks which will, when achieved, open
multiple opportunities in the fisheries business, and thirdly I want to mention the
possibilities of adding further value to our products. I consider that these three issues, the
competitiveness of the fisheries sector, better management of resources and better use of our
limited catch are fundamental when we reflect on seafood business opportunities.
In Iceland we have developed a fisheries management system with individual transferable
quotas (ITQ). The quotas represent shares in the total allowable catch and are allocated to
fishing vessels.
The management has three pillars. The general individual transferable quota system (ITQ),
where permanent quota shares and annual catch quotas are divisible and transferable to other
fishing vessels. Secondly the small vessels ITQ, and thirdly there are regional policy
instruments.
In the general ITQ individual fishing enterprises may not control more than the equivalent of
12% of the value of the total quotas allocated for all species and 12% to 35% for individual
species. In the small vessels ITQ no one will be allowed to control more than the equivalent
of 6% of the value of the total quotas allocated for all species and 6% to 9% for individual
species.
This is very important. We want to ensure that ownership in Icelandic fisheries is not limited
to few. The fish stocks are our most important natural resource. In this regard we have had
success. The distribution of holdings in Icelandic fisheries is wider than in most of the other
sectors. At same time we have seen large and effective companies in the fishing sector
emerge which have been able to establish themselves in other countries. That is also
important.
The Minister of Fisheries has the mandate to allocate up to 12 thousand tons of cod
equivalent quotas to use for special purposes. These 12 thousand tons are normally less than
3% of the total quota allocations. They are basically intended to serve as shock absorbers
and as regional policy instruments.
From my point of view, it is important that the extent
of these shock absorbers and other special measures remain limited compared to the total
operations of the industry. They are important and even more than that in some fishing
communities. However all special allocations interfere with the internal functioning of the
industry and affect the competitive positions of the operators. Serious internal distortions in
the industry would undermine the legislation, surveillance and control. Therefore they
should remain limited and well defined.
We believe we have a dynamic fishing sector in general and at the same time it does
contribute to the positive development of regional communities. Our fishing industry by
and large operates in the regional areas. However we should always bear in mind that there
are limits to which we can place burdens on the fisheries sector in such a way that it ceases
to be profitable. It is acknowledged that our fisheries policies do play a role in a progressive
regional policy. We are however aware of that the fishing deserves and needs to be a
vigorous and competitive industry. Otherwise they will in the long run loose in the difficult
competition for people and capital. People want a good income and a good life. The
prerequisite for that is a thriving industry, which plays a major role in the local communities.
It is for this reason that we try to ensure that this goes hand in hand and we try not to
sacrifice the profitability in this sector. This is obviously a difficult policy to conduct. And
we have not always succeeded. On the contrary. But this has been and still remains our main
policy objective.
Part of our fisheries policy is a special preferential treatment of long-line fishery where the
line has been baited onshore and the vessels land their catches daily. This is a controversial
issue, but plays an important part in conducting a regional policy without sacrificing
economic efficiency. Normally these extra allocations can be expected to fit in under the 12
thousand tons ceiling of the Minister’s mandate but this is not required by the law. These
extra allocations are generally favoring the smallest vessels and thus also the smaller fishing
communities.
The small vessels regime is now identical to the one for the larger vessels. There is however
an important exception. The smaller vessels can only use long-line or hand-line. There is
full transferability of fishing rights between the small vessels but it is not possible to transfer
quotas from the small boats to the larger vessels. The smaller vessels can buy quotas from
the bigger ones, but not vice versa. We should in this context remember that the smaller
vessels in Iceland have been seen as playing an important role for the smaller fishing
communities. That is the main reason for how generously we have deliberately increased
their fishing rights, quotas. We have been able to develop a fisheries policy for the smaller
vessels that is both profitable and efficient. The most efficient of them bring more than a
thousand tons ashore every year. They are often only manned by two persons in addition to
those that bait their hooks on land. I think this is a good example of how we can combine
economic efficiency in fisheries with participation in a regional policy.
The Icelandic fisheries management system was certainly controversial when it was
established and has been one of the main contested issues of most parliamentary elections
since 1984 in one way or another. Its main asset is certainly its economic efficiency. From
my point of view transferable fishing rights are absolutely fundamental to any efficient
fisheries management scheme, regardless of whether it is an effort based system or a quota
system. The transferability is a driver for economic efficiency. But it can also have other
impacts such as negative ones for smaller fishing communities. That should be
acknowledged and not be overlooked. However these impacts should be mitigated by other
targeted measures such as limited regional measures, promotion the use of certain gear, or a
specific management system for parts of the fleet, along the lines that we have done in
Iceland. That certainly does not solve every problem everywhere. But that methodology
will most probably do better in combining efficiency with regional policy, than an approch
which sacrifices any goal of efficiency.
The fisheries management system has evolved significantly since it was first introduced in
1984. The changes that have been made to the Act reflect lessons – often hard lessons learned from experience and the outcome of an active and frequently tense debate within
the fishing sector and among the general public. We consider that we have progressed
positively and that the objective of developing a profitable sector that competes successfully
with other sectors in Iceland and foreign fisheries sectors has been maintained and
strengthened. Stability for the fishing sector is of course very important, not least political
stability. The fisheries sector is in competition with other sectors and the role of the
government is is to improve its working environment in every possible way and make sure
that everyone is aware of changes ahead.
Icelandic fishing vessels have in recent years caught between 1.7 and 2.1 million tons of fish
in the oceans around the island and in the high seas. This catch is normally between 2% and
2,5% of the total catch of wild fish in the world’s oceans. The market value of the seafood
production of Iceland is around 2 billion US dollars. Cod and cod products create normally
about 40% of the total value of seafood and is the single most important species. The
fisheries sector is the single most important exporting industry in Iceland contributing 60%
of the exports of merchandise and 40% of the exports of goods and services combined.
Iceland was number 12 on the list of world’s main fisheries countries in 2003 with 2, 2% of
the world catch in tons. Norway is number 10 with 2,8% of the total world catch. Iceland
and Norway are the only Western European countries at top 15 list from FAO.
If we take a look at the value of exports and imports 2003 in US-dollars, by the largest
exporters of marine products. Norway is number three and Iceland number thirteen. But
netto, export versus import, Norway is number one and Iceland seven, both way ahead of
other Western European countries. One of the reasons is a responsible management of
fisheries.
Among the things that undermine responsible management of fisheries, and thereby the
well-being of the people who depend on fisheries for their livelihood, are Illegal, Unreported
and Unregulated fisheries, usually refered to as IUU fisheries.
I am happy to note that Iceland and Norway have worked together to fight against IUU
fisheries and had some success although we still have much to do. In Iceland, we have been
pleased to note the initiative that Norway has taken on this issue in international fora,
including the use of port state jurisdiction as a tool against IUU fisheries. Iceland will work
with Norway and others to develop this approach further.
Through regional co-operation we have taken part in forming measures that close the ports
to fishing vessels that engage in IUU fisheries and to all vessels that support and supply
them. We are already starting to see this co-operation bear fruit.
Last year the Icelandic Coast Guard spotted a cargo vessel accepting transshipments at sea
from a fishing vessel that was fishing illegally for redfish in the Irminger Sea outside
Icelandic jurisdiction. Information on the cargo vessel was distributed through our regional
network and the result was that the vessel’s attempts to unload its illegally-taken products in
European ports were all unsuccessful. In the end, the vessel had to go all the way to Africa
to unload.
This is not only inconvenient for the IUU operators but also costly. At the beginning of this
year, Iceland declared that we are going to step up our anti-IUU efforts and put increased
emphasis on creating more of these costly inconveniences for IUU operators. The Coast
Guard will increase its surveillance efforts in the area where the IUU problem is greatest,
giving us increased information not only on the illegal fishing vessels but also on those who
supply and support them. This information will be used in efforts to prevent IUU fishing.
The aim is to make it more difficult, and thereby more expensive, for the IUU operators to
get oil and other necessary supplies in addition to making it difficult and costly to get their
products to the marketplace.
One of our new initiatives is to send letters to those who are involved in the fisheries sector
in various countries to point out what vessels have been formally identified as IUU vessels
and encourage them not to do any business with the vessel’s operators. In all, almost
thousand such letters have now been sent from the Icelandic Ministry of Fisheries. The IUU
operators need much the same service as legal operators do. Legitimate and reputable
companies do naturally not want to be connected with these illegal activities and our letters
are intended to raise their awareness of the IUU problem and encourage them to make sure
that they are not directly or indirectly involved themselves.
The bottom line is that IUU fishing is a business, albeit an illegal business. While the
financial rewards remain high and the risks low, the business will continue. If we are
successful in lowering the financial gains and increasing the risks, we will prevent these
illegal activities. Failure to do so will undermine our efforts to manage our fisheries in a
responsible and sustainable manner.
The sustainability of fisheries is of outmost importance for the fisheries sector.
Unsustainable practices will both have negative ecological consequences in the decline of
fish stocks and negative social and economic consequences as there will be less fish to
utilize.
Fish stocks that are confined only within the jurisdiction of one state are the management
responsibility of that state. However, where the stocks also are straddling outside national
jurisdiction there is a need and duty for co-operation on the fisheries management. The
absence of responsible management measures can be disastrous, as we have seen ourselves
for example in the collapse of the Atlanto-Scandian herring stock more than 35 years ago.
We know what to avoid and we know the way to avoid it. For joint fish stocks we need to
have a management agreement in place between the coastal states and the states that fish for
the stock on the high seas. However, this has often been difficult to achieve.
I would like to take the blue whiting stock in the North-East Atlantic as an example. We had
many years of unsuccessful discussions on management measures. At the same time as we
were failing to reach an agreement on the management, we were fishing far beyond what
can be considered sustainable. Had this situation continued, we would almost certainly have
seen the blue whiting stock collapse. Everyone would have lost if it had come to that. One
can defend what one sees as a fair claim for a share in the fisheries but we all have much to
lose by not reaching an agreement and much to gain by reaching an agreement.
This is why I was pleased when we finally managed to settle our differences and sign a
coastal state agreement on the management of blue whiting late last year. I believe Iceland
got a lower share of the blue whiting fishery than was reasonable, but our interests in having
an agreement in place and preventing the stock from collapsing weighed enough for us to
accept our share according to the agreement.
Recognizing the importance of having agreements in place is such that it was a grave
disappointment that Norway chose to break up the stable agreement we had for herring
fisheries for a number of years. We already know from experience what happens if we over
fish from the Atlanto-Scandian herring stock. We have watched it collapse and although it
has recovered greatly over the years since the collapse it has not yet fully reached its
potential.
Norway, as the main stakeholder in the stock, has the most to lose if the stock collapses
again. In spite of this, it is Norway that is initiating a process in which the herring fishing
nations will now for the second year in a row fish much more that is sensible. It is hard to
see how a larger share of a declining stock is preferable to a stable share of a growing stock.
I’m sure Norway feels it should rightfully have a higher share of the herring stock than it has
under the previous agreement. However, the same can be said for Iceland and probably other
parties. One must always weigh the benefits of breaking up a management regime against
the costs of having no management in place. The outcome of that equation does not look
good when it comes to Atlanto-Scandian herring.
The blue whiting process teaches us at least two lessons in this context. Firstly, it can take a
long time to get an agreement on the management of straddling fish stocks. This would
appear to be particularly difficult in cases like the herring where most of the parties to the
negotiations see no reason to change the prior agreement while one party claims it can not
accept that agreement. Secondly, during this sometimes long period when no agreement is in
place there can be a serious overexploitation of the fish stock.
The development since Norway unilaterally increased its fishing last year seems to indicate
that we are headed in the direction of overexploiting the herring stock, perhaps to the extent
the blue whiting was overexploited before. When adding the fact that reaching an agreement
can take a long time, it is obvious that we are facing a very serious situation. I do not for a
moment think that Norway wants such a situation, but urgent action must be taken to
prevent the herring stock from declining. After having reached an agreement ten years ago
on the management of Atlanto-Scandian herring, it would bear bad testament to our ability
to manage fisheries in a responsible way is now fail in taking care of the stock.
Perhaps a third lesson we can learn from the blue whiting process can give us hope. We
have seen that we can reach agreements if there is sufficient will to do so.
Responsible management ensures the long-term conservation of the fish stocks and their
sustainable use by the fisheries sector. The stability that comes with having an agreement in
place also means that we can further develop the fisheries and increase the value of the
products. I’m confident that the blue whiting agreement will result in an increased
proportion of the catches we allocated for direct human consumption.
In Iceland we have had to face the fact that we will most probably not be able to take larger
quantities out of the sea to increase our turnover or profit in the fisheries sector. Most of our
species are fully utilized, and we want to continue to fish them at sustainable levels.
We have therefore during the last decade focused more on adding value to what we have.
This way of creating seafood business opportunities can be done by various means. One is to
increase production for human consumption. The changes in disposition of herring in
Iceland are a striking example. In the fishing year 2001/2002 two thirds of the herring catch
went to meal and oil production. Last fishing year over 76% of the herring catch was
processed for direct human consumption. And there was quite something to go for there. If
we compare the first ten months of 2004 with 2005 the export value of herring was the 44
million USD in 2004 but is 86 million USD in 2005, which is an increase in the export value
of 94% while that increase in tons was less than 30% We can reasonably assume that it is
possible to do likewise with some other pelagic species.
We have also put an extra effort and money into research into various means of adding value
to a limited quantity of catch. This includes research on improving and optimizing handling
of the raw material and production processes, bone removal and portioning with water jet,
production management and traceability, to mention but a few. This has given results, often
unexpected results. Traceability projects that have access to information from recent years
on catch, date and place of fishing trips, weather and other factors are giving managers an
effective and cost-reducing tool in organizing their production and sales.
Last year a work to study regularly the competitiveness of the Icelandic and Norwegian
fishing industries was initiated. We have seen the first report that shows that the
competitiveness between the two countries is similar but there are important differences in
some sub-indexes.
I think that this is valuable work that helps us to reflect on the highly political choice of
business environment for the fishing sector and consequently our societies and seafood
companies. These conditions in Iceland, in addition to the fisheries management system,
consist of making the business environment in general as favorable to companies as
possible. This has been done by alleviating taxes and reducing red tape. An exception to
that rule is the resource tax that was levied on the vessel operators in 2002.
The Icelandic fishing sector needs to be able to face both with internal competition and an
external competition. Internal competition meaning competition with other Icelandic
businesses, where we compete for adequate profits to be able to get the best qualified
personel into the fisheries sector, to be able to explore new ideas and approaches in fishing,
processing and marketing. The fisheries sector also needs economic efficiency to be able to
pay those employed in the fishing industry competitive wages and thus sustain fishing
companies in communities around the country.
At the same time we face external competition from other nations exporting to the
international seafood market as well as other food producers, some of which are heavily
subsidized. In that competition we should emphasize the health benefits of seafood
products.
Iceland and Norway have a common stake in promoting that seafood is healthy and safe.
We have some formidable assets. Both nations are well established on the best paying
markets for seafood. The seafood that we produce come mostly from stocks that are
harvested in a sustainable way, the catches come from the pristine waters of the North
Atlantic and are processed in carefully controlled conditions at sea and on land.
To sum up, I think that seafood business opportunities lie in making our fisheries sectors
competitive through economically efficient management systems and a tax system that is
conducive to responsible entrepreneurship. I am also of the opinion that we are losing very
important opportunities, both now and in the future, while we do not agree on management
for important shared stocks. The same applies if we do not fight IUU fishing that
undermines the conservation and management of important fish stocks. Thirdly I think that
there are considerable opportunities in increasing the value of a limited catch through its
disposition, but also as result of research and innovation.
To be able to use these opportunities we need a fishing industry that is strong, forwardlooking and responsible.
Thank you