Proceedings of the Standing Senate Committee on
Fisheries
Issue 13 - Evidence, November 3, 1998
OTTAWA, Tuesday, November 3, 1998
The Standing Senate Committee on Fisheries met this day at 7:00 p.m. to consider the questions of privatization and quota licensing in Canada's fisheries.
Senator Gerald J. Comeau (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, I call the meeting to order. We are continuing with the questions of privatization and quota licensing in Canada's fisheries. I welcome our guest tonight, our witness from New Zealand.
Alastair Macfarlane is the General Manager, Trade and Information, of the New Zealand Seafood Industry Council. Called the new voice of the seafood industry, the primary role of the New Zealand Seafood Industry Council, commonly called SeaFIC, is to promote the development of New Zealand seafood industry and to advise the government and industry on fisheries management policies and practices, which is a statutory obligation. SeaFIC's activities include developing trade and standards, coordination, research and development, and providing logistical support in achieving cost efficiency. It is divided into four business units: business services, trade access, information and quality, and science and industry training. The major aspect of SeaFIC's activities is said to be in the area of stock assessment and a review of the total allowable commercial catches.
I hope I have not said everything you were going to tell us in your opening. That was to help us out in the beginning. Thank you for appearing to provide some out-of-country experience in the areas the committee is studying.
If you have any opening comments, sir, please proceed.
Mr. Alastair Macfarlane, General Manager, Trade and Information, New Zealand Seafood Industry Council Ltd.: Mr. Chairman, I thank you very much for summarizing at least my organization for the members of the committee. I am assuming that there is some general awareness of the fisheries management system in New Zealand as it is operated.
Honourable senators, for the last ten years, New Zealand has operated a system of rights-based management with very clear output controls on the fishery, and with annual reviews of total allowable catch. The key to the success of the industry has been the establishment of clear rights of an individual nature which are freely tradable, both in sales terms and as lease property.
The rights, in a legal sense, are rights to harvest. In an operational sense, or an attitudinal sense, they are more and more being seen, first, as the primary assets of fishing businesses and, second, as implying an interest in the biomass, in the species interrelationships of the fishery, therefore leading to a real interest among fisheries commercial stakeholders to want to take part in fisheries management decision-making.
In the last three or four years, the government has instituted a regime of full cost recovery for the costs of fisheries management and the science which supports fisheries management. This regime is driving the industry into the formation of stakeholder groupings, groupings related to fisheries either of a geographical or species nature, which want to engage more effectively in the process of decision-making about the businesses and resources within which they have risk investments.
Rather than giving you a lecture about the fisheries management system in New Zealand, I would suggest that it is probably more effective for you to question me, in that I do not really want to guess what it is you need to know.
The Chairman: Thank you. To let you know who we are, I am from Nova Scotia. Other members are from various parts of Nova Scotia, New Brunswick and British Columbia. I wish to open the questions with Senator Stewart.
Senator Stewart: I am from Nova Scotia. In fact, I live in a fishing village.
Could you tell us briefly about the membership of the New Zealand Seafood Industry Council? Is this a council composed of members or representatives of what one might call the big companies? Are there any owners of relatively small boats -- let us say 32-foot, 36-foot, perhaps 42-foot -- in your organization, or are your fisheries such that boats of that relatively small size play only an insignificant part?
Mr. Macfarlane: To answer your second question first, it very much depends on the fishery. The inshore fisheries, and in particular high value sedentary species like rock lobster and abalone, are fished predominantly from small boats by owner-operators who will generally own quota or certainly be leasing quota and fishing into a commercially and vertically integrated arrangement with a processor.
In answer to your question about the form of the seafood industry council, SeaFIC is legally structured as a company. It has shareholding currently within the two primary trade associations, one being for the larger quota owners and vertically integrated marketing companies, the Fishing Industry Association of New Zealand, and the other held by the Federation of Commercial Fisherman, which is the owner-operator small-boat sector.
There are 14 directors of the company at the moment. Under New Zealand company law, directors may not be formally representative of any particular sectional interests. They are required under the company law to act on behalf of the interests of the company. However, the 14 directors are drawn from individual sectors of the industry. We have, variously, directors in a sense representing the interests of the deepwater fishery, the midwater fishery, and inshore high value species, which are predominantly owner-operator fished. We thus have both corporate and owner-operator representation. The rock lobster fishery, which is a high value fishery in its own right, has its own representation. The aquaculture sector and the wild shellfish sector are also there. Among those 14 directors we have directors drawn from the corporate sector and directors drawn from the owner-operator sector.
Senator Stewart: Am I correct in assuming that, in the case of the lobster and the abalone fisheries, the individual transferable quota system applies and, if so, are those quotas freely tradable?
Mr. Macfarlane: The answer to both questions is "yes".
Senator Stewart: What has been your experience with regard to concentration as a result of the transferability of quotas?
Mr. Macfarlane: In terms of those particular fisheries, they have had restrictions placed on the aggregation of quota into a smaller number of hands. The aggregation law requires, in the case of abalone and currently for lobster, that no more than 10 per cent may be owned by any one individual or association of individuals by a fisheries management area. There are 10 fisheries management areas around the country. There is a considerable degree of disaggregation of quota in those high-value species.
Senator Stewart: When you say "individuals", are you including not only natural persons but also artificial persons?
Mr. Macfarlane: Yes, we are. Under the law, there is an aspect described as "the associated persons test", which means that individuals, natural or otherwise, who form commercial relationships with others in the fishery need to ensure that their combined interests in the fishery are kept within the aggregation limits, unless they have a dispensation from the minister to step outside of those limits.
Senator Stewart: Your last comment leads me to ask the following, namely, is there a careful supervision, either by the minister or by someone acting on his behalf, to assure that these fisheries do not land either openly or subterraneously into the hands of a small number of persons?
Mr. Macfarlane: The law is very clear. It requires that any aggregation of quota beyond 10 per cent in those particular fisheries requires the authorization of the minister. If anyone moves to acquire quota or an interest in quota beyond 10 per cent without ministerial authorization, that additional quota will be automatically forfeited to the Crown and there is no right of retrieval, so the property will be lost.
For those who are involved in these particular fisheries -- and, as you may imagine, they are disaggregated but relatively small fisheries -- the total catch of abalone is not much more than 1,000 tonnes. The total allowable catch, nation-wide, for rock lobster, is about 3.5 thousand tonnes. Minimum holdings of quota in those fisheries for ownership purposes are of the order of 1 to 2 tonnes for personal business.
The knowledge among the participants in the fishery about who is doing what with whom is relatively easy to acquire. There are both direct policing and compliance. These are the responsibilities of the Ministry of Fisheries, plus the opportunity for those who are in the business to express their concerns about arrangements that they believe step over the mark.
Senator Stewart: We were surprised to learn from one of the Icelandic witnesses that one of the considerations that had to be taken into account when the government was putting its stamp of approval upon a transfer of a quota related to political constituencies. I heard him say "constituencies" and I was convinced that he meant "communities". However, when Senator Butts inquired specifically, he said, "No, I mean political constituencies." Do you have anything like that in New Zealand?
Mr. Macfarlane: No, we do not.
Senator Stewart: Is there any contest between the north island and the south island?
Mr. Macfarlane: The nature of the fisheries management system is to divide the fisheries management areas in accordance with the biological realities of the fishery. I have an atlas associated with the fisheries management system in New Zealand which may be a useful document for you to acquire. I am leafing through it to see if I can find the page dealing with paua and abalone. It may be possible to see that on the screen. You will see that there are a number of areas which are management areas around the coast. They go out to the edge of the economic zone. This may not be coming up terribly clearly, but those who are involved in, say, fishing area 5 for abalone are investors in that particular fishery. There is nothing to prevent an individual living in Auckland to own quota in power 5 and to lease that into the community that is fishing in the fishery. That individual in Auckland will be as restricted as anyone else to the quota aggregation limits that apply in that particular fisheries management area.
Senator Perrault: We have heard from a witness from the University of British Columbia who participated in the design of the New Zealand quota licensing system. We have heard individual ownership being praised by them, the idea being that if a person has a real stake in this resource they will be conscientious custodians and this was the best way to achieve a renewal of our species. However, there are others who believe that the plans do not necessarily provide the incentives for research and fishing management, and it appears to be a controversial matter. I would be interested to hear your views on that.
We have been told repeatedly that private quotas offer fishers a powerful incentive to destroy low value and undersized fish that count against the individual quota for higher valued fish, especially if they are too small to be economically viable for individual operators. Is high grading a problem in the New Zealand fishery, or is it working as you envisioned it a few years ago?
Mr. Macfarlane: The system works very well and it is well-supported by the industry. There is no strong opinion to want to go back to an open access system. We have a number of bycatch species and smaller species that currently sit outside of the quota management system.
The quota management system applies to approximately 37 major species. They are the core of the industry working on the 80/20 rule. Upwards of another 100 species of commercial value at present sit outside the system but are gradually being brought into the system. No one in the industry wishes to see that movement stopped. The body of opinion is to want to bring the rest of the fishery inside the quota management system, obviously under terms and conditions which make biological and commercial sense.
In terms of your question about performance, and in particular the question about science, we have a regime now of full cost recovery of fisheries management and fisheries science. The way in which it has been implemented, which has as much to do with negotiation with the industry as anything, has been to see that the costs of management fall directly upon those fisheries where the management costs are created. There is no will to want to spread costs to cross-subsidize from one fishery to another.
The result of that is that some fisheries demand more hands-on management than others, and the costs therefore are higher for some fisheries than for others. More often than not, the cost of in-shore fisheries management is higher than deep-water, off-shore fisheries management, as a generalization.
On average, the costs of management are working out at approximately 5 to 6 per cent of the raw material value or the unprocessed value. However, the costs are falling variously at between 1 to 2 per cent for the big volume, off-shore, deep-water fisheries, to more than 12 per cent for high-value fisheries of highly migratory species, which is tuna.
When management costs and science costs associated with them start to get up to those sort of levels, they are commercially unsustainable. There is no doubt there is a move in the industry to want to minimize those costs and look to making as much efficiency gain in the science, in particular, as that is the major driver of the costs. The nature of business, one could say, is to want to test the boundaries in anything. There is not uncommonly a view that the science should be only that which is necessary to achieve the outcome required, which is the measurement of sustainability and ensuring that sustainability objectives and targets are being met on an ongoing basis.
We have a management system which is relatively state-of-the-art, and there is not a significant amount of will among the scientists and technicians to want to necessarily explore second-best options or options which may spread costs more efficiently than the best possible outcome.
Fishery science is resource intensive. When you run an output-based system, as we do here, then it is very demanding of data and scientific advice. There has been quite a deal of contesting of the effectiveness of the science which is being provided. That can commonly be interpreted publicly as a drive by the industry to want to see less science and cheaper science. To a degree, that is true, but I believe it is more accurate to describe that as a desire to see the science better fitted to the commercial worth of the fishery. It is no use having a science program which completely strips away all of the commercial value of the fishery. That is unsustainable.
Senator Perrault: We heard one witness from New Zealand who testified that initial assumptions about the level of cost efficiency that companies would achieve was unrealistic and that only about 80 per cent of the costs of management are being recovered. The industry appears to be unable or unwilling to absorb total costs. There are obviously differences of opinion in New Zealand about efficacy.
Mr. Macfarlane: It is a controversial subject.
Senator Perrault: We have been known to have our share of controversy as well.
Mr. Macfarlane: To be clear about the 80 per cent statement, however, there are varying points of view as to how you should manage your policy settings on cost recovery. The policy setting for cost recovery in New Zealand on management cost is the avoidable cost principle. In other words, if this industry did not exist, then we would not have to manage it; therefore, all of the costs, regardless of whether they are being generated for commercial reasons or otherwise, should be delivered upon the commercial industry. That is an industry perspective of the cost setting.
The industry has sought, through a parliamentary select committee in a series of hearings, a reconfiguration of the cost recovery policy to be the actual costs being generated directly by the commercial sector. It is unreasonable in the view of industry for industry to be paying the government's policy advice costs or the costs of criminal compliance when no other sector of the economy is required to pay for the equivalent costs of the police force directly.
Senator Robertson: Mr. Macfarlane, we have been told that you are the new voice of the seafood industry. What does "new voice" really mean, and who is the old voice?
Mr. Macfarlane: I am one of the old voices. I am not quite sure what it means myself. It sounds a little bit like a PR statement.
The difference between the Seafood Industry Council and the industry organization that preceded it is that the former organization, the Fishing Industry Board, was a statutory body with a responsibility to the Minister of Fisheries. While it had industry representation upon it, there was a point of view in the industry that it was unclear as to who owned the Fishing Industry Board. It was being paid for by the industry, but there was a perception that perhaps the Fishing Industry Board was more answerable to the minister than to the industry.
The two national trade associations that I mentioned as being the shareholders currently in the Seafood Industry Council are, in many respects, irrelevant organizations in a system which is moving to stakeholder organizations at the individual fishery level as being the way in which decisions on resource management should be taken. The Seafood Industry Council has a responsibility to oversee issues of a general or generic nature to the industry, to seek, where possible, to derive a consensus from among the interests, and then to express that consensus strongly to authorities in the position of decision-making. That is the new voice of the industry. We have a single generic voice on broad issues and an opportunity for those who are risk-taking in individual fisheries to directly involve themselves more effectively in the decision-making about the resources within which they have an investment.
Senator Robertson: You mentioned earlier in response to Senator Stewart that you had 14 directors representing various sectors of the industry. I would gather, then, that these various sectors would provide you with funding. Are you also funded by the government, or are you funded totally by these various component parts of the industry?
Mr. Macfarlane: At present, the Seafood Industry Council operates under a contract of service delivery to the old Fishing Industry Board so that it can gain access to the levy which exists across the industry which the Fishing Industry Board collects. There is no direct funding from the government. The money only comes from industry sources.
That particular form of statutory levy has been, in the past, an effective instrument for funding this kind of generic activity. It is likely, however, that within the course of the next year or so, that basis of funding will change either to another form of levy under another piece of legislation which is available to industry bodies or to direct invoicing to interest groups and the like. This is an issue which is currently being worked through. I can assure you there is no direct government funding.
Senator Robertson: In reading your mandate, it seems to me that you are performing the functions of what we would consider the Minister of Fisheries here in Canada, for instance. Does this mean that, under your ITQ system, the role of the Minister of Fisheries has been essentially reduced and, if so, reduced to what?
Mr. Macfarlane: To give you the scale of things, the Ministry of Fisheries still exists. The Ministry of Fisheries has 60 policy officers and employs something like 200 people in total. The Ministry of Fisheries is heavily involved in advising the minister as he is required to be advised about sustainability matters in the fishery.
The Seafood Industry Council, by comparison, has a staff of less than 20. While we are involved in the issues which occupy the minds at the Ministry of Fisheries, our role is more often than not to contest the advice of the ministry, rather than to be the adviser to the minister.
The minister's responsibilities are still very clear. The minister is required to make decisions about the setting of total allowable catch levels annually. The minister is required to have that responsibility. Regardless of how the detail may evolve over the next year or so towards more direct co-management responsibility, at the end of the day, the minister will have the responsibility for ensuring long-term sustainability. That will not change.
Senator Robertson: An earlier witness -- I guess it was the manager of science policy for the Ministry of Fisheries -- told us that no formal system exists to evaluate the benefits and the costs of the ITQ system. Do you agree with that statement, sir? If so, how do you get around that so as to provide policy advice to the government and to industry?
Mr. Macfarlane: There are two ways to answer that question. Certainly, there is no formal mechanism in place for assessing the cost benefit success in an economic or socio-economic sense of fisheries management.
The Ministry of Fisheries, for its part, is primarily concerned with environmental issues and resource sustainability. The concern of economic sustainability of the industry is a commercial concern. There is no system of subsidization nor any opportunity for the government to provide economic assistance to parts of the industry, should there be any, that are needing to adjust to reduced circumstances in a fishery due to either fisheries effects or biological variability. That risk is now entirely transferred to the commercial sector and the commercial sector effectively has no protection.
Senator Butts: Mr. Macfarlane, would I be correct in saying that your council is a combination of all the stakeholders -- the fishers, the processors, the businesses -- all in one council?
Mr. Macfarlane: That is the intent of it, yes. Just to be clear about this, the processing sector, in large part, operates as part of vertically integrated companies. Therefore, the processing sector has within it ownership of quota. The processing sector, in addition, contracts for further sources of supply from the owner-operator sector. It does not necessarily work back the other way.
Senator Butts: Are there other organizations outside of your council? For example, do some fishers have unions?
Mr. Macfarlane: Yes, there is a Fishing Industry Guild for the people who are involved in working on fishing vessels. Right now, because that organization does not have significant quota ownership or quota holding, they are working for either wages or for share of the return of fishing trips. They sit outside of the Seafood Industry Council.
Senator Butts: Is your council self-regulating? Are there specific policies for environmental protection or stock sustainability?
Mr. Macfarlane: The council does not have explicit policies in those areas of its own. It tends to operate within the policy settings of the fisheries management system and is involved in contesting that the technical work which is going on to reach decisions about where total allowable catch levels should be set is being done in accordance with best practice.
Senator Butts: The background of that question was that we heard a witness from your country who was worried about the future of the stocks and the sustainability of the entire system. Would you comment on that?
Mr. Macfarlane: That is a common opinion among some of the environmental lobbyists. It is, however, with little or no foundation.
The Chairman: We understand that there have been some rather major reductions in scientific research as the industry takes on more of this responsibility through the co-management regime.
Apparently, industry seems to be spending its research money on such things as market development research and market identification rather than on stock assessment.
In the process as well, very few environmental lobby groups may be sniping at some of the work of the industry. Perhaps these groups are left out of the process and that may be the cause of the sniping.
Lyndon Johnson used to say that it is better to have them inside the tent throwing out the used water, than outside throwing in the used water.
I am suggesting that these environmental people might feel they have to resort to these negative comments because they are being left out of the decision making. Could you comment on that?
Mr. Macfarlane: There may be that sector, I will not deny it. The decision-making process has been described by external commentators commenting at a technical level on the process for sustainability measures as being one of the most open in the world. That comment has come particularly from researchers at the fisheries school at the University of Washington, in Seattle.
The way in which the technical work is done for setting TACCs is through a series of fisheries working groups. Those groups will have within them expertise from the science establishment as well as from industry. The door is open to members of environmental and recreational fishing bodies to be on board as well.
There is an issue as to whether those non-commercial bodies have within them the technical expertise to be able to engage at the same level of intensity as those who are involved professionally in the business or who have a commercial risk.
One of the arguments which has been repeatedly raised by ECO, which is the Environmental Coalition Organization, whom I suspect might have spoken to you already, is the issue of financing and the capability that they may have to engage in their process. What they are seeking at the end of the day is financial assistance from the government so that they can engage in that process.
There is a similar argument being espoused elsewhere in New Zealand in relation to the Resource Management Act, which relates to land-based resource management issues. There is an industry that has developed around that. Those in the voluntary sector feel financially excluded from being able to engage properly in that process.
At the end of the day, there is a real challenge for the nation and for the government in particular as to how it wishes to see this argument conducted. However, I believe it is erroneous to confuse a decision-making and review process from the outcome of that process.
A reasonable analysis of the sustainability measures and the results which are being achieved in the fisheries management system in New Zealand would suggest that fisheries are being managed sustainably, in general, and that those fisheries which have been depleted in the past are clearly showing signs of stock rebuild and recovery. The overwhelming majority of fisheries are currently at biological maximum sustainable yield or better.
The Chairman: Is it the opinion of the members in your organization that most of the commercial fisheries are at sustainable levels, if not better?
Mr. Macfarlane: If I can be clear about the definition, sustainability is a very broad thing. According to fisheries science theory, you can identify a point or range that is biologically the maximum sustainable yield. However, you can and clearly in Canada you have been forced to manage fisheries sustainably at suboptimal levels.
We have several important commercial fisheries that are quite clearly not at biological maximum sustainable yields, however they are being managed sustainably. There are clear signs of stock recovery going on.
There is an argument you can have as to whether you are achieving that within reasonable time frames or not. There is also an argument as to whether you can achieve stock recovery at all. However, it is important to be aware that there is, to my knowledge, no evidence of any fishery that is being fished in such a fashion that it is being fished into decline.
The Chairman: Is there no provision with your organization or the Ministry of Fisheries, to assist people other than industry people, who are financed through the catches of the fish, to be involved in stock assessment and in the future of the fishery of New Zealand?
Mr. Macfarlane: The industry finances its own way into those discussions. The other bodies finance their own way.
The Chairman: Everything being done by non-industry groups is financed by these people through their own pocket. Do they do it on a completely voluntary basis?
Mr. Macfarlane: Yes, they are funded in exactly the same way environmental lobby groups anywhere are funded. They may be funded by subscription or charitable foundations.
Senator Stewart: I was surprised to learn from our witnesses from Iceland what a large part the fisheries play in the economy of that country. The reason that was important was that it explained the deep concern of the government and the people of Iceland that the various fisheries are being well-managed.
Could you tell us roughly what percentage of the New Zealand GNP is desired from the fisheries? Alternatively, if you have estimates in mind, what percentage of New Zealand's money earning exports is earned from the fisheries?
Mr. Macfarlane: The gross national product of New Zealand is in the order of $100 billion New Zealand dollars per year. The fishing industry's contribution to gross national product is less than 2 per cent.
The export income of the industry accounts for approximately 90 per cent of the industry's overall revenue. It is approximately $1 billion New Zealand.
The food and beverage exports of New Zealand, in total, amount to $10 billion so it is roughly about one-tenth. It is about the fourth or fifth largest export sector of the economy. In a sense, it is in the eye of the beholder. The fishing industry could not be said to be in any way dominating the economy of New Zealand, unlike the pastoral agriculture sector.
Senator Stewart: Am I correct in thinking in part as a result of the chart or map that you showed us earlier that fisheries are important throughout the coastal area of New Zealand?
Mr. Macfarlane: Fisheries do play an important role as a recreational opportunity in and around the City of Auckland. Auckland has a population of about one million people, whereas the total population of the country is approximately 3.7 million. The City of Auckland is in proximity to some very highly productive inshore fisheries along the north-east coast of New Zealand.
There is quite a degree of conflict between the interests of the general population who wish to be able to catch fish on their summer holidays and the commercial industry that wishes to catch fish as part of property rights and part of a business year round. It would be naive to deny that in particular pockets, particularly near Auckland, there is a conflict between industry and recreational fishers.
Senator Stewart: I am having difficulty stating my next question because you seem to be have so very many species.
What about the nature of the processing plants? Do some processing plants process several groundfish species? To what extent are the processing plants concentrated in certain towns or cities? The fish may be caught out yonder and brought in for processing, creating jobs in some places rather than where the fish were caught.
Mr. Macfarlane: We have the groundfish fisheries, the fishery for hoki, a hake-like species, concentrated along this coast and down into southern water, and also though the Cook Strait area. The processing for that fish is concentrated in the cities of Nelson, Timaru and Dunedin. Upwards of 60 per cent of that fishery, which is 250,000 tonnes a year, is processed in those areas.
A significant proportion and a growing proportion of the catch from that particular fishery is processed at sea on specialized factory trawlers, either into frozen fillets or frozen block for the processing sectors in the northern hemisphere.
We have a large number of smaller companies in and around the City of Auckland involved in the processing and handling of high-value inshore species, mainly into product forms of chilled fish for air freight to north Asian markets.
The rock lobster fishery is predominantly found around the southern coast. Most of that fish is exported in a live form to Asian markets. It is held in holding tanks in the coastal villages and then transported by air through Auckland. It very much depends on the fishery. It very much depends on what is available, but there is a concentration of processing in and around the north eastern North Island and along the southeastern coast of the South Island.
Senator Stewart: My last question asks you to tell tales out of school. Your organization is big and quite inclusive. Insofar as topics of discussion within the council are concerned, what are the most controversial topics?
Mr. Macfarlane: Anything to do with commercial value has controversy associated with it. There was a comment earlier from the Chairman about the industry getting together and financing market development and the like. My perception is that there is little evidence of that. There was more of that activity five or six years ago than is currently the case.
There is intensive competition between companies. We see cooperation in access to the resource in securing the property right, and considerable competition and sensitivity about financial performance and anything to do with valuation of businesses. For example, with respect to bycatch issues, there is a requirement in New Zealand that all fish must be landed. Highgrading is absolutely illegal. Anyone caught highgrading is guilty or potentially guilty of a crime against the property because it is essentially theft.
In order to make the bycatch system work, and in recognition that it can be difficult at the margin to be able to lease quota -- and instances can arise where there is a little more catch than there has been quota in certain species -- a penalty payment system called deemed value is available. It is set to remove any profit involved in the catch of that fish.
The process of establishing deemed values from one year to the next is fraught because it requires an investigation of the actual commercial value of the fish. That is commercially sensitive and something that must be handled carefully.
Senator Perrault: Mr. Chairman, the term "economic globalization" is used a great deal throughout the world. Is serious consideration being accorded in New Zealand to the idea of opening your industry to foreign ownership? If so, what controls are being contemplated?
Mr. Macfarlane: We already have stringent controls on foreign ownership. The current Fisheries Act permits foreign ownership up to 24.9 per cent of quota in any particular business -- in other words, a 24.9 per cent voting interest in a business that owns quota. Under certain circumstances in the 1996 act, which has yet to be fully implemented, the minister has discretion to grant investment up to 40 per cent of the quota interests of a company.
There is a variety of opinion in the industry at the moment on this issue. There is probably a growing acceptance -- and I think I am right in saying this -- that in the future of the industry will require a greater level of foreign investment in fisheries and in businesses than is currently permitted under the act.
One of the tests would be if a large company decided it needed to increase its capitalization and looked around for an investment partner. The situation of the stock market and the corporate sector in New Zealand generally is that there is a very high degree of foreign investment. The stock market is in excess of 40 per cent foreign investment based. Most of the large corporations have significant foreign investment associated with them. If any of the existing corporations take a position in a fishing company, this can readily lead to the company getting close to, if not exceeding, the current foreign investment rules.
It is a similar argument for aggregation limits for high-value species. When you have 10 fisheries management areas and a very small fishery in tonnage terms, those aggregation limits, in the same way as foreign investment limits, can act as a constraint on investment and individuals being able to move in and out of the business. Both the aggregation issue and the issue of foreign investment are likely to be resolved in both instances by recourse to normal competition policy in New Zealand.
I would anticipate that some time within the next two to five years the fishing industry will be governed by general requirements for foreign investment and for competition rather than specific legislation geared for the fishing industry.
Senator Robertson: The reliability of stock assessment has been a major concern in our fishery for some time. Some observers in our country have suggested that our scientists have not been very accurate in their estimates of fish stocks. I believe you said that a major activity of your council is stock assessment. I understood you to say that there are other bodies doing stock assessment as well as your own. What bodies other than your own organization do stock assessments? Is there a similarity in prognosis of how the stock is doing?
Mr. Macfarlane: In answer to your stock assessment question, we have within our organization a stock assessment capability. However, we undertake very little stock assessment per se. Our stock assessment capability is used in the pursuit of testing the stock assessment that is done elsewhere. The provision of science advice, as you probably have heard already, is now externally contracted. The major organization which provides most of the science work in the fishing sector is the National Institute of Water and Atmosphere Research. Most of the ground stock assessment work is going on within NIWA and the results of that and the processes that have gone into getting those results are open for debate. It is at that point, in general, that our organization comes into that arena.
The Chairman: Mr. Macfarlane, would you please send us the charts and maps you showed us during your presentation in order that they might become part of our record?
Mr. Macfarlane: It is a publication called "An Atlas of Area Codes and TACCs". It is produced annually and we can provide you with a copy.
The Chairman: Thank you very much for that, and thank you for your valuable contribution to our committee this evening. It is very much appreciated.
Mr. Macfarlane: Thank you very much for the opportunity.
The Chairman: Is it agreed that the maps to which Mr. Macfarlane referred will become part of the record of the committee?
Hon. Senators: Agreed.
The committee adjourned.