Theoretical considerations and practical implications of subsidies to the artisanal fisheries sector in

39 Pages·2005·1.33 MB·English

PROGRAMME FOR INTEGRATED DEVELOPMENT OF
ARTISANAL FISHERIES IN.WEST AFRICA
IDAF PROGRAMME
Technical Repoi-t 91 October 1996
TheoreticaL Considerations and Practi all
Implications of Subsidies to the Artisanal
Fisheries Sector in West Africa
11 15
lo
Mauritania 17
Senegal 18
Cape Verde
The Gambia
Guinea Bissau
Guinea o
Sierra Leone
Liberia
Côte d'ivoire Equatorial Guinea
Ghana Gabon
Togo 17, Sao Tome and Principe
Benin Congo
Nigeria Zaire
Cameroon Angoia
DANIDA DEPARTMENT OF INTERNATIONAL DEVELOPMENT COOPERATION OF DENMARK
FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS

Technical Report N° 91 October 1996
Theoretical Considerations and Practical
Ir p1icafions of Subsidies to the Artisanal
Fis ries Sector in West Africa
by
Benoît Horemans
Fisheries Planning Expert,
1DM Programme
FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS
Cotonou, October 1996
The designations employed and the presentation of material in this publication
do not imply the expression of any opinion whatsoever on the part of the Food
and Agriculture Organization or the financing agency concerning the legal status
of any country or territory, city or area, or of its authorities, or concerning the
delimitation of its frontiers or boundaries.
For bibliographic purposes this document should be cited as follows:
Horemans, B., Theoretical Considerations and Practical Implications of Subsidies to the Artisanal
1996 Fisheries Sector in West Africa. Programme for the Integrated Development of
Artisanal Fisheries in West Africa, Cotonou, Benin. 20 p., IDAF/WP/91.
IDAF Project
FAO
P.O. Box 1369
Cotonou, Republic of Benin
Telex: 5291 FOODAGRI Fax: [phone] Tel: [phone]
THE VISION FOR IDAF PHASE III
INTRODUCTION
Development strategy during the 1960 and 1970s was based on the philosophy that
developing countries lacked improved technology and capital for speeding up their development.'
Industrialization was promoted in order to capitalize on the abundant fish resources. However,
the anticipated expansion of the economy did not happen and the development approach shifted
towards an integrated rural strategy where emphasis is put on the community as a whole to up-
grade incomes and the quality of life through technical assistance and the active participation of
fisherfolk and the community.
In this context, emphasis was initially placed on the Community Fishery Centre (CFC)
concept as a means of promoting artisanal fishery development. But it became apparent that the
presence of a complex of facilities and seivices tailored to meet local needs was no guarantee that
the structures/facilities would be used or that development would occur. The active participation
of fisherfolk and the mobilisation of local and community resources was imperative in order to
assure sustairiability of initiatives undertaken by development projects and/or the community.
So far and in general terms, the JDAF Programme has worked under the context of
abundant or seemingly adequate fishery resources with moderate population pressure. The
scenario is however changing (and very fast for that matter) and wewould soon face the triple
constraints of reduced or depleting fish stocks, degrading environment and increasing population
pressure. Like in other sectors, it must be anticipated that just to survive, parts of the population
surplus in the fishing communities will enter the artisanal fisheries, which will increase the
competition for the resources among the small scale fisherfolk in addition to the prevailing
competition between the artisanal and industrial fisheries, with their attendant effect on the
environment.
This scenario calls for a côntinuation of the integrated participatory strategy which remains
relevant to the development of artisanal fisheries in West Africa. However, the emphasis needs
to be placed on the elements and mechanisms that favour the sustainability of initiatives:
responsible fishing, the empowerment processes that ensure the devolution of major resource
management and development decisions to the local community, the strengthening of national
human and institutional capacities at all levels for a sustainable and equitable fisheries resources
management and development, as well as in the follow-up and consolidation of past achievements.
DEVELOPMENT OBJECTIVE
Thus the development objective of the Programme in the present phase III which started on 1 July
1994 is to ensure twenty coastal West African countries a sustainable development and
management of their artisanal fisheries for maximum social and economic benefit of their fishing
communities in terms of employment, proteins and earnings, This will be done through an
integrated and participatory approach in which emphasis will be laid on equity, gender issues, the
transfer of technology for development, environment protection, as well as the strengthening of
human and institutional capacities.
The immediate objectives are:
To identify, assess and disseminate strategies and mechanisms for sustainable management
I
and development of the artisanal fisheries in fishing communities;
To improve the competence of national Fisheries Departments staff in development and
management planning of artisanal fisheries;
3. To enhance regional technical competence in the fisheries disciplines, particularly in
fishing and fish technology;
To improve information and experience exchange related to artisanal fisheries within the
region;
5 To promote regional and sub-regional collaboration for the development and management
of artisanal fisheries
In this context, IDAF will among other things tackle the following major aspects in
it's work:
assisting in the elaboration and implementation of a clear and coherent national
development policy for the artisanal fishery sector;
providing advice on management and allocation of resources between artisanal and
industrial fishing fleets, both national and foreign;
u involving users in the design and management of on shore infrastructures;
monitoring the sector's evolution by the setting up of an economic indicator system for
the sector adapted to the financial and human availabilities;
improving fishing technologies in accordance with the available resources;
increasing the final product's value by improvement in processing and marketing;
promoting community development in accordance with the lessons learned from Phase I
and II and oriented towards the sustainability of actions undertaken;
reinforce the Programme's information/communication system.
It is anticipated that by the end of the third phase of the Project, the region will have a
nucleus of field oriented experts capable to respond to the challenges of the artisanal fisheries
sector and to spur development in their individual countries in keeping with the aspirations and
needs of fisherfolk.
SUMMARY
The objectìve of the present document is to introduce to the reader who is not an expert
in fisheries economics the theoretical context of subsidies to the fisheries sector in general, The
document also provides some concrete examples of the implementation of the subsidy policy to
the artisanal fisheries sector in some West African countries.
The document is divided into 6 sections. After the introduction, sorne useful terms are
defined to avoid any discrepancy. Section 3 presents a classification of the various types of
subsidies. Section 4 emphasises the specificity of the fisheries sector, especially the economic
implications of the renewable nature of the resource. Section 5 illustrates some aspects of the
economic situation of artisanal fisheries within four countries in the region, some with a subsidy
policy and others without. The document ends with a brief conclusion.
In a free access situation, which characterizes most artisanal fisheries in West Africa,
where total revenue is equal to total cost, subsidies do not bring any supplementary benefits.
Moreover, subsidies encourage fishing effort well beyond the level corresponding to free access,
and their removal requires a considerable reduction of flsh.ing effort and employment, which is not
always politically acceptable.
On the other hand, they generally cause wastage and fraud, discouragement to private
operators and delays in the adoption of more efficient technology from an economic poìnt of view.
The fundamental difference between the subsidies granted to the agricultural sector and
the ones for fisheries is that, in the former, it can be expected that these subsidies will increase
production whereas in the second case, within a free access context, it decreases. Tt is therefore
essential to understand that, in the fisheries sector, a subsidy is not only the instrument of a
redistribution policy, but also an instrument whose utilisation has an impact on the development
and management of a fishery.
Concerning undeveloped fisheries, if they still exist in West Africa's artisanal Sector, other
instruments of development are available to the administration: building of infrastructure, market
research, marketing promotion, etc.
One of the assumptions on which the Structural Adjustment Programmes are based is that
the removal of subsidies will establish market prices reflecting the actual value of goods and
services produced. It is within this macro-economic framework that reduction and removal of
subsidies is observed. Public finance deficits among countries in the region leave no hope to
expect a fundamental change of this policy in the near future. Ifa policy of subsidy continues to
he topical within many sectors of the economy, it does appear as an instrument to be handled with
more care in the fisheries sector.
IDAF Technical Report N° 91
TABLE OF CONTENTS
INTRODUCTION..
DEFINITIONS
.
CLASSIFICATION OF SUBSIDIES
3
3.1. Social Assistance
3
3 1. 1 Emergency Programmes 3
3.1.2. Regional Development 4
3.1.3. Social Welfare 4
3.1.4. Fiscal incentives (tax and duties)
5
3.2. Economic Assistance
5
3.2.1. Operational subsidies
5
3.2.2. Modernisation, diversification 6
3.2.3. Development 6
3.2.4. Withdrawals 7
CHARACTERISTICS OF THE FISHERIES SECTOR .. 7
4. 1. Simple B jo-economic model 7
4.2. Subsidy to Producers 9
4.2.1. Subsidy on price of inputs 9
4.2.2 Price support 10
4.3. Subsidy to Consumers 11
SOME EXAMPLES 12
5.1. Togo 12
5.2. Ghana 13
5.3. Senegal 15
. . .
5,4. Sao Tome and Principe 16
CONCLUSION 17
Bibliography 19
IDAF Technical Report N° 91
1. INTRODUCTION
During the FAO/CECAF/[DAF Workshop on Artisanal Fisheries Development and Planning
which was held in Lome (Togo) in November 1985, the following recommendations concerning
subsidies were mader
"i. The attention of governments should be called to the negative a3pects (for public
finance and the fisheries sector.) of long-term subsidies.
The effect of subsidies should be studied before their introduction, as well as the
means lo reduce or stop them in the short or medium term when appropriate. The
amount of taxes on inputs should also be studied.
There ¡s the need to ensure the participation of the target group in the formulation
and implementation ofpolicies leading to of subsidies.
Except for afishing industry in its infancy, subsidies are not generally recommended.
Even at that stage, the time of introduction must be well studied and a limit to their
their duration imposed.
Governments with su bszdy programmes should review them with a view to reduce them
and so as to improve the performance of the industry;
It is essential for governments lo concentrate their efforts on making fishing inputs
and equipment readily available without necessarily subsidizing them."
Ten years later, it seems to have become necessary to go deeper into theoretical discussions
and review the practice of subsidy policies in the region, especially in two countries where
fisheries represent an essential sector of the economy r Senegal and Ghana. Thus, two case studies
were carried out respectively by K. Afibi in Ghana in 1995 and M Kebe in Senegal in 1996. They
are published in a separate report (IDAF/WP/90).
The objective of the present document is to introduce to the reader who is not an expert in
fisheries economics the theoretical context of subsidies to the fisheries sector in general. The
document also provides some concrete examples of the implementation of the subsidy policy to
the artisanal fisheries sector in some West African countries.
The document is divided into 6 sections. After the introduction, some useful terms are
defined below to avoid any discrepancy in future. Section 3 presents a classification of the various
types of subsidies. Section 4 emphasises the specificity of the fisheries sector, especially the
economic implications of the renewable nature of the resource. Section 5 illustrates some aspects
of the economic situation of artisanal fisheries within four countries in the region, some with a
subsidy policy and others without. The document ends with a brief conclusion.
2. DEFINITIONS
Subsidy is a financial transfer from one economic agent to another. This transfer can either
benefit producers, be they private or public firms, or consumers. It can be direct or indirect.
IDAF Technical Report N° 91
Direct subsidy is a payment made by the government to a producer and constitutes a direct
financial transfer1, The most frequent example in West Africa is the provision of fuel to fishermen
at a price lower than the market price.
There are also indirect subsidies: which occur, for example, when based on the market, a
price other than that which would result from a completely competitive market. The advantage
to a producer or consumer as a result of this difference constitutes an indirect financial payment.
This is the case when, for example, the government imposes a high tax on imported fish in order
to keep the price of locally caught fish at a particular level.
Thus, direct transfer occurs when transactions are based on a price other than the market
price, while indirect transfer occurs when market price is applied after it has been manipulated and
would not be in a situation of perfect competition2.
Finally, there are direct or indirect subsidies originating from outside the national ecnomy.
Typicaily, these concern the financing of aid projects, preferential import tariffs within the .ontext
of some conventions, loans at a preferential rate from international financial institutions, etc.
These subsidies are generally beyond the control of the recipient government for whom it attracts
no cost, Consequently, they will not be analysed here.
It is necessary to recall briefly, the differences between financial and economic analyses for
a better understanding of the importance of the concept of subsidies.
Financial analysis is based on market prices, i.e. the price actually paid by producers for
inputs and the price paid by the consumers for the product, i.e. fish. This analysis is most reevant
from a private point of view, that of the owner of the fishing boat, the fisherman, the creditor or
the consumer. In a perfect competition economy, market prices accurately reflect the value of
goods and services
However, the perfect competition market is only a theoretical model. Actually, market
In the fisheries sector, there are three other types of direct financial transfér: taxes, loans
and debt servicing (payment of interests and reimbursement of principal).
In economic theory, a market is in pefect competition if the following five conditions are
met:
the existence of a large number of firms, each with only a small share of the
market;
these firms produce a homogenous product by using an identical proluction
process,
these firms possess complete information, i.e. a good knowledge and forecast of
present and future prices, as well as the places to buy goods and services
there is a large number of consumers, none can individually influence the «arket
price; and
there is free access to industry, ì.e. a new firm can set up shop without hindrance
if it observes that profits above normal are generated, or leave the industry if it is
the other way round.
2 IDAF Technical Report N° 91