fort’. Without
an inbuilt
‘effort’ reduction
scheme, limited-entry systems are likely to result in the collapse of the resource due to the inex-
orable increase in exploitation rate from adoption of new technology and competition between oper-
ators. We predict that this will be a step towards development of more formal property rights that
confer more secure license tenure and transferabil- ity. Furthermore, where ecotourism operations
involve a discrete and defined geographic loca- tion, such as a coral reef, the property right will
increasingly take the form of tradable private property albeit leasehold, similar to that which
exists for coral island resorts. Steps in this direc- tion have begun in activities such as swimming
with whale sharks in Ningaloo Marine Park, Western
Australia, and
whale watching
in Queensland’s Hervey Bay.
4. Economic rent and property
The issues of economic rent and property, while defined separately, are inextricably linked for
marine natural resources. Economic rent, accord- ing to the Pareto definition, is the payment to a
factor in excess of what is necessary to keep it in its present employment Pearce, 1992. World
Bank 1996, in discussing fisheries and forestry resources, referred to rent as the economic surplus
over and above normal profits earned from the exploitation of those resources. While valuable
marine natural resources should be capable of generating considerable economic rent, this usu-
ally has not happened, at least for any sustained period of time. The simple reason for this failure,
and the ultimate cause of the over-exploitation and collapse of many marine resources, has been
the inability to clearly define ownership of indi- vidual parts of the resource. This has meant that
resources, especially in the open ocean, have been exploited as open access or, in some cases, com-
munity or common property. In these circum- stances, any rent generated is dissipated in
wasteful competition between operators or by new operators continuing to enter the arena, resulting
in high costs and over-capitalization until the costs of harvesting the resource equal or exceed
the revenue produced from its sale. Even when a fishery is fully exploited, addi-
tional operators usually will continue to seek en- try to the fishery. The new entrants will generate
little if any additional catch, but simply divide the existing catch into smaller shares while increasing
the overall effort and costs of harvesting the available catch. They continue to seek entry be-
cause they judge their potential catches against those of the most successful fishers, rather than
the catches of the average or less successful fishers. For renewable resources like fish stocks,
the restraint required for sustainability, leaving some portion of the resources to generate future
stocks, cannot be achieved without strict controls on the number of fishers and their fishing effort.
Without these controls, any stock not used as soon as it becomes available is taken by one’s
competitors. The inevitable result is that the re- source becomes depleted and may collapse. These
outcomes are remarkably pervasive whenever marine natural resources are exploited without
strict controls on the number of participants and their effort — the conditions characteristic of
imperfect property rights and dissipation of eco- nomic rent.
The two key questions in relation to economic rent from marine resources are: 1 how it can be
generated over the long term; and 2 how is it distributed or who keeps it? It might be inferred
from the preceding discussion that the establish- ment of clear-cut property rights over marine
resources should ensure that they would continue to generate economic rent over the long term.
This clearly is not the case. Property rights, on their own, do not guarantee that resources will be
exploited in a way that will continue to generate rent.
For example, in the case of individual transfer- able quotas for fisheries, the introduction of quo-
tas, while in theory removing much of the incentive for competition between fishers and the
tendency to over-capitalize catching capacity, can- not guarantee these outcomes Copes, 1986.
Fishers still must make judgements on when to catch their quota. Should they catch their quota
as quickly as possible to be certain of getting it, or should they space out their catches to suit market
conditions, to smooth out supply, or improve
their chances of catching a better size class — and risk not catching their quota? They might risk a
poorer market later in the season, or unexpected reductions in quota if managers come to believe
that stocks are not as large as previously thought. Such factors mean that there is still competition
between fishers. Then there are questions of over- quota catches either incidental or intentional,
‘high grading’ discarding smaller fish when larger ones are caught, management of by-catch, and
the reliability of data reporting and enforcement measures, regardless of the property rights.
To improve the chance of generating long-term rent, there still needs to be strict overall controls
on the costs of harvesting. In fisheries, once the number of operators has been limited, this usually
translates into other controls on effort, such as restrictions on upgrading vessels and gear, areas
fished, or duration of fishing.
The second major question concerns the distri- bution of any rents that are generated. The op-
portunity to appropriate rents is a significant factor in attracting resource users into various
marine industries, including fishing and tourism. There is some argument that rents are the only
factor, although this argument is complicated by the non-monetary values and satisfactions associ-
ated with lifestyle that attach to many outdoor natural resource uses, values and satisfaction that
appear to persist long after any ‘surplus produc- tion’ rent has been dissipated.
The answer to who appropriates the economic rent from marine natural resources usually is not
linked to who owns those resources. Most natural resources are in ‘public ownership’. That is, they
are the property of the state and are managed by government agencies, supposedly on behalf of the
whole community. The 200-mile EEZ, for exam- ple, established after the ‘Cod Wars’ between
Great Britain and Iceland in the mid-1970s, de- fines the sovereignty of individual nations over
areas of ocean. Nations may then manage fishing rights and exploitation of non-living marine re-
sources, both by nationals and foreigners, within the EEZ. However, where rent is generated, it is
mostly
appropriated by
the resource
users, whether they are commercial fishers, tourism
charter operators or oil and gas prospectors, with little or no benefit distributed to the wider com-
munity who are the actual resource owners. Fur- thermore, some rents are transferred overseas
when foreign fishing fleets operate whether ille- gally or under license within national waters.
Management policies for such resource uses tend, unfortunately, to be reactionary. The re-
source is already heavily exploited before manage- ment strategies are developed. In economic terms,
users should be required to distribute the rent back to the owners of the resource, the commu-
nity, in some way. This might, for example, re- quire users to purchase the rights for exploitation
via an auction or tendering process, or require payment of a resource rental tax, with the pro-
ceeds returned to the community via government services, taxation rebates or a dividend. But be-
cause policy is normally made after a resource is heavily exploited, governments, even if they are
willing, find it difficult to recover rents on behalf of the community. Industry groups exploiting the
resources, not surprisingly, strongly resist any moves in this direction. In cases such as Aus-
tralia’s southern blue fin tuna industry, where individual transferable quotas are now employed,
the rent was retained by those fishers already in the industry because of the allocation of fishing
property rights to the participants.
At the same time, where fishing communities have built livelihoods based on access to a partic-
ular marine resource, such communities have a valid argument for the appropriation of some
portion of the rent arising or, at least, some preferential access to those resources. This sup-
ports the requirement that sustainability also takes account of social aspects of resource use and
management. Similarly, in many parts of the world, e.g. the South Pacific, marine resources are
held in a manner akin to private property rights by village or clan-based communities. Clearly,
such groups can rightly claim access to the re- sources in question and to the rents arising from
exploitation of those resources. The important feature of this situation is that the property rights
are well specified. In this case, the nation gains a benefit through the taxation system and, possibly,
through export income.
Long-line fishing for tuna species in the South Pacific nation of Samoa, however, provides an
example where poorly specified property rights is leading to misallocation and dissipation of eco-
nomic rent. The fishery commenced operations in earnest in late 1993. In that year, the value of
exports was Samoan Tala ST150 000; this grew to ST45 million in 1999 when more than 5000
tonnes tuna were exported to canneries in Ameri- can Samoa mainly albacore and to the US
sashimi market mainly yellowfin and bigeye. However, for historical reasons associated with
the encouragement of local village fishers to un- dertake commercial activity, export fishers many
of whom operate industrial size vessels are zero- rated for the Samoan value-added goods and
services tax, pay few import duties on inputs, and are not subject to either income tax or any sort of
resource rental tax. Consequently, these fishers are appropriating all the economic rent from ex-
ploiting a resource that belongs to all the people of Samoa. In such a case, there is a strong argu-
ment for the introduction of a resource rental tax on fish landings.
Four principal outcomes of the Samoan situa- tion arise. First, the appropriation of economic
rent totally by commercial fishers, who pay no taxation, is highly inequitable, given that the re-
sources belong to all Samoans. Second, there is now evidence of declining catch per unit effort as
more and more fishers enter the industry, leading to greater competition and increasing effort to
catch available stocks of fish. Third, tuna stock assessments undertaken by the Secretariat of the
South Pacific indicate that, despite the tuna being migratory stocks, there is an approximate sustain-
able catch to be had in each country’s EEZ. Overexploitation of stocks will result in declining
overall catches and associated problems such as reduced fish sizes. Finally, the open access for
Samoan fishers nature of the fishery results in economic inefficiency in Samoa as investment and
other resources are re-directed to the long-line fishery because of the potential, through poorly
specified property rights, to appropriate any avail- able rent.
In tourism, an example of rent appropriation by commercial interests is provided in Australia’s
Great Barrier Reef Marine Park. Tourism opera- tors in the Park have, in general, appropriated the
economic rent available from access to the reef and its marine life. The Marine Park Authority
allocates 6-year permits, but charges only a permit application fee to commercial tourism operators,
while users pay a so-called Environmental Man- agement Charge EMC of A4 per day. But a
valuable property right is thereby given essentially free-of-charge to permit holders who, subse-
quently, seek to appropriate rents from exploiting the resources of the Reef. Furthermore, permits
are fully transferable. Yet the Marine Park is a public asset: it belongs to all Australians, who pay
for management costs that exceed A25 million annually. EMC collections totalled A3.58 million
in 1997 – 1998, and were 19 of total Australian Government appropriations for the Park in that
year. So non-users are paying for the management of an asset from which others appropriate rents.
There is a strong argument that the wider com- munity, as represented by the Authority and the
Government, should appropriate at least a por- tion of the rent. In the Low Isles off Port Douglas
north of Cairns, a permit is said to have a market value of around A100 000. This repre-
sents a windfall for operators holding the first permits for the area, yet it rightly belongs to the
community. In economic terms, users should be required to distribute the rent back to the commu-
nity in some way. This might, for example, re- quire users to purchase the initial rights for
exploitation via an auction or tendering process, with the proceeds returned to the community via
government services
The southern blue fin tuna case, previously discussed, also illustrates the potential of the eco-
nomic system to signal information and scarcity value, with the trading price for quota reflecting
fisher’s expectations about future rents in the fishery. When quotas were introduced in 1984,
quota traded for A800 to A1200 per tonne. By 1987, when most of the adjustments in quota
holdings and fleet structure had taken place, prices had risen to A3200 – 3500 per tonne. By
1992, prices had reached A20 000 per tonne.
In summary, the reality of most current re- source management policies is that those who
exploit natural resources tend to capture most or all of whatever rent is generated. This might result
in resource use that is inefficient from an eco- nomic viewpoint when it encourages the diversion
of investment funds into the industry until all available rent has been appropriated or dissi-
pated. However, inefficiency does not arise from who captures the rent; for example, a sole owner
would be likely to operate an efficient fishery. Rather, it is the way in which the property rights
are specified, rather than their allocation, that offers a solution to inefficiency. Conversely, the
way in which rents are captured is generally in- equitable, resulting in a low or zero return to the
owners of the resource, the wider community, and it is likely to lead to overexploitation of the
resource in question. Alaska provides some con- trast to the normal situation. The government
there captures some of the rent via a fisheries landing tax and through license fees for oil pro-
duction, both of which are economic instruments, and distributes this share directly to all taxpayers
each year, similar to the payment of dividends to company shareholders. This is clear recognition of
community ownership of the state’s natural re- sources. If governments were, alternatively, to
collect resource rentals and re-distribute those through the provision of community services, par-
ticularly to those areas and sectors most in need, then distribution and equity problems would
again be addressed. Additionally, resources might be used in a more sustainable fashion if the
incentive to overexploit them and dissipate the rent was reduced by an appropriate allocation of
the rent. This requires proper management of resources to ensure that rent is produced and
clear, and transparent policy strategies designed to return a proportion of the rent to the true
resource owners.
5. Sustainability
