DETERMINING THE DATA NEEDED TO TEST THE FEASIBILITY OF A QUOTA SYSTEM FOR INDONESIAN CORAL REEF FISHERIES

By

PUTUH SUADELA

Source: http://awsassets.wwf.or.id/img/original/img_2410_wwf_indonesia_1.jpg

A MAJOR PAPER SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ENVIRONMENTAL

SCIENCE AND MANAGEMENT

UNIVERSITY OF RHODE ISLAND

May 20, 2016

MAJOR PAPER ADVISOR: DAVID A. BENGTSON, Ph.D

MESM TRACK: SUSTAINABLE SYSTEMS

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LIST OF CONTENTS

ABSTRACT ................................................................................................................................................. 4

1 INTRODUCTION ............................................................................................................................... 5

2 METHODS .......................................................................................................................................... 9

3 CORAL REEF FISHERIES IN INDONESIA ................................................................................. 9

4 COMPONENTS IN ECOSYSTEM MODELS FOR QUOTA SYSTEM FEASIBILITY ......... 10

4.1 Ecological ................................................................................................................................... 10

4.1.1 Habitat ................................................................................................................................. 10

4.1.2 Multispecies ........................................................................................................................ 11

4.1.3 Biological reference points ................................................................................................. 11

4.1.4 Targeting ............................................................................................................................. 11

4.1.5 Discards ............................................................................................................................... 12

4.2 Social ........................................................................................................................................... 13

4.2.1 Fishery-dependent ............................................................................................................... 13

4.2.2 Equity .................................................................................................................................. 13

4.2.3 Education ............................................................................................................................ 13

4.3 Economics ................................................................................................................................... 14

4.3.1 Overcapitalization ............................................................................................................... 14

4.3.2 Fishery value ....................................................................................................................... 14

4.3.3 Market ................................................................................................................................. 14

4.4 Governance ................................................................................................................................. 14

4.4.1 Spatial ................................................................................................................................. 14

4.4.2 Quota allocation .................................................................................................................. 15

4.4.3 Transferability ..................................................................................................................... 16

4.4.4 Species aggregation ............................................................................................................. 16

4.4.5 Catch balancing ................................................................................................................... 17

4.4.6 Implementation ................................................................................................................... 17

4.4.7 Monitoring and enforcement ............................................................................................... 18

4.5 Politics ......................................................................................................................................... 18

4.5.1 Urgency ............................................................................................................................... 18

4.5.2 Transparency ....................................................................................................................... 19

5 ECOSYSTEM MODELING OF A QUOTA SYSTEM IN CORAL REEF FISHERIES .......... 19

6 CONCLUSION ................................................................................................................................. 25

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ACKNOWLEDGEMENT ........................................................................................................................ 25

REFERENCES .......................................................................................................................................... 26

LIST OF FIGURES

Figure 1. Ecological subsystem of a quota system in coral reef fisheries ................................................... 20

Figure 2. Social subsystem of a quota system in coral reef fisheries .......................................................... 20

Figure 3. Economics subsystem of a quota system in coral reef fisheries .................................................. 21

Figure 4. Governance subsystem of a quota system in coral reef fisheries ................................................ 22

Figure 5. Political subsystem of a quota system in coral reef fisheries ...................................................... 22

Figure 6. Ecosystem modeling diagram of a quota system in coral reef fisheries ...................................... 24

LIST OF APPENDICES

Appendix 1. Volume of marine capture fisheries production by species, 2004 – 2014 (tons) ................... 33

Appendix 2. Value of marine capture fisheries production by species, 2004 – 2014 (billions of rupiah ) . 34

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ABSTRACT

Indonesia’s fisheries are managed by traditional fishery management strategies such as license limitation,

fishing vessel limitation, gear type and size limitation, etc. which still allow the fishermen to race for fish.

The Indonesian Government established a Strategy Plan for the years 2015 - 2019 where one of the

strategies is to maintain fishery resources sustainability by developing a quota management system. The

feasibility of a quota system for coral reef fisheries by the Indonesian Government needs to be analyzed

by first determining and defining the variables involved in a quota system and how they interact with one

another. One way to investigate this is to build an ecosystem model. Here I develop a qualitative

ecosystem model to obtain insights and determine the variables needed for future quantitative analyses. A

literature review on quota management systems for many aspects was conducted to gain insight from

other countries in developing and implementing quota management systems, especially in multi-species

fisheries, which is the characteristic of Indonesian coral reef fisheries. Variables or components to build

an ecosystem model are determined, defined and grouped into five subsystems: ecological, social,

economics, governance, and politics. This ecosystem model is useful for managers and decision makers

by laying out the system interactions and feedbacks, thus leading to a better understanding of dynamics

associated with a potential quota system. Additionally, the resulting model can serve to as a starting point

for quantitative analysis that investigates the feasibility of a quota system for coral reef fisheries in

Indonesia.

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1 INTRODUCTION Indonesia’s fisheries are managed by traditional fishery management strategies such as license limitation,

fishing vessel limitation, gear type and size limitation, etc. These strategies still allow the fishermen to

race for fish, and by not controlling the number of fish that can be caught, the sustainability in many

fisheries is threatened. Therefore, the Indonesian Government established a Strategy Plan for the years

2015 - 2019 through Ministerial Decree No. 25 in 2015, where one of the strategies is to maintain fishery

resources sustainability by developing a quota management system (MMAF 2015). To carry out the

strategy, the Government should understand what requirements are needed for a fishery to be regulated by

a quota system.

Since the 1970s, fishing quota or catch share management systems have been introduced in several

countries (Walters and Pearse 1996). New Zealand was the first country that developed a Quota

Management System (QMS) in the form of Individual Transferable Quotas (ITQ) in 1986, which

allocates the catch quota of commercial species (Sanchirico et al. 2006, Lock and Leslie 2007). The

Individual Vessel Quota (IVQ) system for the groundfish trawl fishery was implemented in Canada in

1997 after the fishery was closed in 1995 due to Total Allowable Catch (TAC) overages, discards, and

stock management concerns (Sanchirico et al. 2006). In the US, the first catch share program was

implemented in 1990 in the Mid-Atlantic Surf Clam and Ocean Quahog fishery, and now 15 catch share

programs have been implemented around the country (NOAA 2015).

According to Brinson and Thunberg (2013), catch share programs are a fishery management tool that

dedicates a secure share of quota allowing individual fishermen, fishing cooperatives, fishing

communities, or other entities to harvest a fixed amount of fish. Catch shares are allocated privileges to

land a portion of the total allowable catch (TAC) in the form of quota shares. ITQ programs are a form of

catch shares program where the shares are transferrable; shareholders have the freedom to buy, sell, and

lease quota shares (Garrity 2011).

A quota management system can be used to ensure sustainable utilization of fisheries resources by

controlling harvest levels directly (Lock and Leslie 2007), however, regulators need to resolve several

issues to ensure sustainable utilization. These include the spatial scale where species are managed, the

process for setting sustainable harvest levels, the allocation of catch among the different fishing sectors,

and the definition of quota. A quota management system is considered as the cornerstone of all the

conservation measures to maintain fish stock and conserve the resources (Karagiannakos 1996) and also

to make the fisheries more profitable and to halt over-capitalization (Little et al. 2009).

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Individual quotas (IQs), particularly individual transferable quotas (ITQs), have attracted considerable

attention from both the scientific community and fisheries management agencies since the 1970s

(Arnason 1990). ITQs are widely recognized to prevent the ‘race for fish’ and, when transferable, are

believed to increase the economic efficiency of fishing activities (Grafton and McIlgorm 2009, Marchal et

al. 2011). Several countries have implemented a quota system in their fisheries managements. Some

countries obtained positive results in their fisheries performance after going through several

improvements (e.g., the multispecies fisheries in New Zealand, halibut fishery in British Columbia,

Canada, the offshore scallop fishery in Nova Scotia, Canada, the surf clam and ocean quahog fisheries in

eastern U.S., the sablefish fishery in Alaska, U.S., and the rock lobster fishery in Tasmania, Australia).

However, in other countries the decline in fish stocks still occurred after ITQ implementation (e.g., the

multispecies fishery in Nova Scotia, Canada, the northern abalone fishery in British Columbia, Canada,

and the squat lobster fishery in Chile (Branch 2009)).

ITQs represent a dominant form of fisheries management in countries such as Australia, Canada, Chile,

Iceland, The Netherlands, and New Zealand. In the European Union (EU), the common fisheries

management framework builds mainly on biological measures and only to a limited extent on access

regulation measures (Marchal et al. 2011). At the level of EU Member States, quota allocation procedures

are usually not explicit, except in the Netherlands and Denmark, where ITQs are implemented formally

(Marchal et al. 2009, Marchal et al. 2011)

In 1986, New Zealand introduced a QMS based on ITQ rights operating within an administered TAC. The

TAC covers all mortality to a fish stock caused by human activity, including the annual total allowable

commercial catch and total allowable non-commercial catch which are customary (e.g. allocated for

customary fishing rights of the Maori) and recreational fishing (Batstone and Sharp 2003, Lock and Leslie

2007). Before allocating catch levels between fishing sectors, the allowance of the customary catch was

first identified, and the remainder of the TAC can then be allocated to the commercial and recreational

fishing sector (Lock and Leslie 2007).

The QMS relies on biological models to provide estimates of maximum sustainable yield (MSY), and

current and projected stock biomass (B) levels. In the stock assessment consultative process, several data

need to be provided such as records of annual landings, estimates of catch per unit effort (for some

fisheries) and, in sports fisheries, estimates of recreational harvest. The consultative process involves

biologists, fisheries managers, and other stakeholders, who consider available data and information to

provide an estimation of biomass at maximum sustainable yield (BMSY) and recommendation on the

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appropriate level of TAC. Management of stock levels toward BMSY should be adjusted by social and

economic considerations (Batstone and Sharp 2003).

Implementation of ITQ can reduce TAC overruns (catch > TAC) when it is enforced properly. In the

groundfish fisheries in British Columbia, ITQ implementation reduced the frequency of TAC overruns

(Branch 2009). Similar results were shown in New Zealand after ITQ implementation (Branch 2009).

Reduced TAC could also be supported or even proposed by quota holders when they are interested in

raising stock size and catch per-unit-effort (CPUE), as happened for New Zealand Paua (abalone) fishery

where 10% reduction of TAC was requested (Branch 2009).

For coral reef fisheries, implementation of ITQ has been applied in several locations. For example, ITQ

has been implemented on the Coral Reef Fin Fish Fishery (CRFFF) in the Great Barrier Reef, Australia

since 2004, with ITQ’s allocated separately for coral trout, red throat emperor and ‘other reef fish species’

important to the commercial sector (Mapstone et al. 2008, Little et al. 2009). According to Mapstone et al.

(2008), introduction of the quota management in the Great Barrier Reef resulted in a progressive decline

of fishing efforts between 2004 and 2006 from 70% to 55% of that in 1996; meanwhile, commercial

harvest declined to 70% of that in 1998 and CPUE increased 20% compared to that in mid-1998.

Potential ecological problems such as discarding can be a problem in multispecies ITQs fisheries. A

comparison study of the Australian southeast trawl fishery with the British Columbia groundfish trawl

fishery reveals one possible solution (Branch 2009). Based on the study, discards in the Australia fishery

are not monitored and are high, whereas in the British Columbia fishery, discards are deducted from

quotas and every vessel carries an on-board observer, and discards have decreased. According to Branch

(2009), incentives management under ITQs theoretically should cause fishers to avoid any damaging

practices to protect resources they have an interest in and to avoid poor publicity which could affect

market prices.

Several options can also be considered to manage associated and dependent habitats and species in

combination with an ITQ regime on target species (Gibbs and Thebaud 2012). Those options include

establishing TACs and quotas for a range of associated and dependent habitats and species, integrating

associated and dependent species into the TACs of target species, applying incentive-based measures

other than catch shares, complementing input control into ITQ regime, and ITQ scheme with spatial

fishing rights. However, these options are potentially costly to implement and manage and would need to

be responsive to ongoing scientific research.

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In determining the quota management system criteria, a conceptual study by Arnason (1990) using basic

fisheries modeling was conducted to generate equations containing the minimum information

management scheme for an Individual Transferable Share Quota System (ITSQ). The study suggested

that a fisheries management system has to satisfy a number of social and economic requirements, and

among other things, it must be cost-effective. Batstone and Sharp (2003) applied the above model in New

Zealand and found evidence that supports the use of quota prices to guide the setting of limits to

commercial harvest of X species. The result of the study also suggested that the information gathered in a

quota process could complement the findings of stock assessment research in fisheries management. A

further conceptual study using a simple aggregative model of ecological fisheries attempted to seek ways

(institutional arrangements, management methods, etc.) to achieve a more efficient utilization of marine

ecosystems (Arnason 1998). Based on the study, a multispecies variant of the individual transferable

share quota system (ITSQ) seems to offer an alternative to the traditional approaches in fisheries

management using ITQs by manipulating the vector of total quotas (TAC) to the point where aggregate

quota are maximized.

From a biological perspective, Walters and Pearse (1996) examined the importance of stock assessment in

quota management systems to set allowable annual catches (Walters and Pearse 1996). They examined in

detail the stock assessment problem and the objective to reduce uncertainty. Key points from that study

are that under individual quota management systems, accurate and timely stock assessment is needed and

there is a potential role of fishers, by taking advantage of the incentives of quota holders, to contribute to

gathering the information to improve stock assessment.

Regarding environmental issues, some studies point out the impact of the quota management system on

the marine ecosystem. Fisheries management in European waters is gradually moving from a single-

species perspective towards a more holistic ecosystem approach to fisheries management (EAFM), and

Reiss et al. (2010) concluded that the relationship between TACs and effort is insufficient for TACs to be

used as the principal management tool within an EAFM (Reiss et al. 2010). Transferable Quotas have

largely positive effects on target species, but mixed or unknown effects on non-target fisheries and the

overall ecosystem (Branch 2009).

A study of multi-species individual fishery quotas using an agent-based approach was conducted by

modelling the effect of an ITQ system on a multi-species and multi-sector fishery and applying the model

to a CRFFF in Queensland – Australia (Little et al. 2009). The model simulates the use of tradeable quota

units by operators in the fishery and considers several components such as initial quota allocation to

operators, seasonal fish prices and individual operator variable cost, fishing efficiency and experience,

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and constraints on vessel movement. The model predicted some effects that the ITQ system can have on

reductions of effort, increases in profit, and changes over time in quota prices. However, ecological

impact also emerges by implementing an ITQ system in a multi-species fishery where increased discards

of the less profitable species could affect community-level biomass.

The first step to determine the feasibility of a quota system for coral reef fisheries by the Indonesian

Government is to determine and define the variables needed to build an ecosystem model. A qualitative

analysis can be used as a method to obtain insight and determine the variables needed for future

quantitative analyses. Designing a pilot scale investigative study of a quota system in coral reef fisheries

is expected to illustrate the data needs for quota management system implementation for Indonesian coral

reefs.

2 METHODS The process in developing this major paper was to review literature on quota management systems for

many aspects and countries. The purpose was to gain insight from other countries’ experiences in

developing and implementing quota management systems, especially in multi-species fisheries, which is

characteristic of Indonesian coral reef fisheries. Based on this literature review, variables or components

to build an ecosystem model are determined and defined; these can then be considered for use in a quota

system for Indonesian coral reef fisheries. Components are grouped into five subsystems: ecological,

social, economics, governance, and politics.

3 CORAL REEF FISHERIES IN INDONESIA Reef fish spend their lives in a coral reef region from their juvenile stage until adult (Sale 1991). Reef fish

consist of six trophic groups: herbivores, omnivores, plankton feeders, crustacean and fish feeders,

piscivores, and others (McConnell and Lowe-McConnell 1987). Reef fish are one of the largest fisheries

resources in Indonesia in terms of catch and economic value. According to Allen and Adrim (2003),

Indonesia has 2057 reef fish species from 113 families with 10 major families: Gobiidae (mudskippers,

272 species), Labridae (wrasses,178 species), Pomacentridae (anemone fish, 152

species), Apogonidae (cardinal fish, 114 species), Blenniidae (blennies, 107 species), Serranidae

(groupers, 102 species), Muraenidae (eels, 61 species), Syngnathidae (pipefish,

61species), Chaetodontidae (butterflyfish, 59 species), and Lutjanidae (snappers, 43 species).

Reef fish provide important ecological value for the coral reef ecosystem and also economic value for

fishermen in Indonesia. Demand for reef fish is increasing, leading to increased fishing efforts. According

to DGCF (2015), reef fish catch increased 9.64% in 2014 (231,955 ton) from 2013 (211,570 ton), while

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the value also increased 25.5% to IDR 6.15 trillion in 2014 from IDR 4.90 trillion in 2013. The highest

fishery production in 2014 was Redbelly yellowtail fusilier (ekor kuning) with 81.563 tons followed by

Blue-lined seabass (kerapu karang) with 50.516 tons (Appendix 1). However, the highest value fish was

Blue-lined seabass with a value of IDR 1.54 trillion followed by Leopard coral grouper with IDR 1.53

trillion (Appendix 2).

Coral reef fisheries are overexploited by small-scale fishers as a consequence of high demand of reef fish,

low operational fishing cost, availability of employment and destructive fishing methods (Arami 2006).

Fishing gear that are mostly used to catch reef fish are traps, bottom long line, hand line, gillnet, and set-

net. Several problems for reef fisheries in Indonesia are stock depletion, illegal or destructive fishing

activities, and coral reef habitat degradation. Other problems are fishermen’s poverty, fisheries production

and export collection data, bycatch of protected and endangered species, horizontal conflict among

fishermen, law enforcement, management institutions and regulations, and illegal, unreported and

unregulated (IUU) fishing activities by foreign vessels.

4 COMPONENTS IN ECOSYSTEM MODELS FOR QUOTA SYSTEM FEASIBILITY Fisheries are complex systems consisting of the integration of human (including social, economic, and

political components) and ecological subsystems. In developing a quota system, we should consider a

broad ecosystem-based fisheries management approach to meet three objectives of fisheries management:

ecological, economic and social sustainability (Sumaila 2010). The system should consider not only

improved economic efficiency and equity but also maintenance of fisheries resources and ecosystem

sustainability. Governance forms the principles and objectives in such fishery management system,

develops the policy and regulatory framework, and connects government with fishery societies (FAO).

Based on those objectives, components in a quota system are grouped into five subsystems: ecological

social, economics, governance, and politics.

4.1 Ecological

4.1.1 Habitat

Coral reef ecosystems are one of the important ecosystems in coastal fisheries with a high biodiversity of

associated species, various trophic levels, and ecology function (e.g. feeding ground, nursery ground, and

spawning ground) for associated species including reef fish (Arami 2006). Reef fish have complex cycles

consisting of several distinct life-history stages (egg, larvae, juvenile, and adult) which may require

spatially separated habitats. A prerequisite for population persistence is suitable abiotic conditions, food

availability, and shelter to escape from predation or disease, as well as connectivity among habitats to

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allow the survivors to mature and return to the spawning grounds to reproduce successfully (Rijnsdorp et

al. 2009).

4.1.2 Multispecies

Quota systems (setting the TAC on the target species) have ecological consequences, especially in multi-

species fisheries, by their effects on the incidental catches of other species through high-grading,

particularly when discard mortality is high (Little et al. 2009). Specifically, the problem occurs in multi-

species fisheries where fishers may have sufficient quota for one species but not for another, which can

occur when either the ratio of species TACs, based on biological productivity, or individual quota

holdings, do not match the ratio of species’ catch rates (Little et al. 2009).

4.1.3 Biological reference points

Determining the total allowable catch (TAC) is important in a quota system. A quota system is a

mechanism for dividing up the TAC, thus if the TAC is set at unsustainable levels, the fishery is likely to

collapse regardless of the method of allocating the TAC (Branch 2009). Setting the TAC relies on

biological models in stock assessments to provide estimation of biological reference points. Biological

reference points are widely used to define safe levels of harvesting for marine fish populations such as

minimum acceptable biomass levels or maximum fishing mortality rates and each is defined based on the

level of some criterion (e.g., yield per recruit, MSY, etc.) (Collie and Gislason 2001). The values of

biological reference points are determined through biological models which incorporate the principle of

population dynamics of the target species including vital life history characteristics (such as growth,

reproduction and mortality) and historical abundance data (Collie and Gislason 2001, Little et al. 2009).

In a quota system for multispecies fisheries, ratios of TAC between one species and other species should

also be considered when they are caught by the same fishing gear. The TAC of one species can affect

catch rates, harvest level and the amount of discards of other species (Little et al. 2009). A harvest level

that is optimal for one species might be too high or too low of other species in a mix of species. When the

TAC of a certain species has been fulfilled, fishermen could continue to catch other species and discard

the species that no longer has available TAC, however, this could cause discarding issues.

4.1.4 Targeting

The ability to target specific species in multispecies fisheries such as coral reef fisheries is needed in

designing a quota system. Targeting ability depends on: the number of species and the relatively distinct

stock by area or depth; the selectivity of fishing gear; level of vessel electronic technology for

discrimination of fish species and fish stocks; harvesting strategy (whether there are different strategies

for different species or one strategy for all species); and period of harvesting that could affect the ability

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of fishermen to control catch rates and species composition, where short period could result in less ability

to control than long period as fishermen can modify fishing gear or fishing ground to improve their

targeting ability over longer times (Squires et al. 1998). Also, understanding fishing dynamics is

important in designing a quota system in coral reef fisheries. Information on the movement, reef selection

processes, and fishing activities of individual vessels are needed and further simulation can predict how

the fishing effort will respond dynamically to changes of management measures such as a quota

restriction (Little et al. 2008, Little et al. 2009).

4.1.5 Discards

Discarding may result in high-grading where fishermen discard lower-value fish (i.e. fish with lower

quality), or by reaching the TAC of one species, but not other species. This can result in unfavorable

impacts on fish stocks. In multispecies fisheries, quota systems may increase discarding when a) at-sea

enforcement is minimal, b) it is difficult or expensive to lease quota to cover overages, c) discarding is

allowed, d) discarding does not count against quota, e) high market demand and value on certain or

targeted fish, and f) quota lease prices are high (Branch 2009). Discarding incidence under a quota system

implementation in multispecies fisheries can be reduced through a) increasing enforcement, b) assigning

observer on board to enhance the monitoring system and data collection of discarded fish, c) fishing

industry agreement on adjusting their catch mix and methods of operation, d) severe penalties, e)

assigning individual bycatch quota along with individual targeted species quota where when the

individual bycatch quota is reached, the target species quota will be closed, f) discard being deducted

from quota holdings, and g) flexibility of fishers’ to alter their fishing behavior (Diamond 2004, Branch

2009).

There are other ways to reduce discarding in a quota system while still being able to remain profitable,

one of which is enabling quota leasing to cover the overage and allowing catches to be landed legally

(Sanchirico et al. 2006, Branch 2009). Allowing the quota to be shifted to or borrowed from the following

year with a penalty of over-quota can also be an alternative way to reduce discarding, however this

mechanism can increase the risk of overfishing due to exceeding TAC (Sanchirico et al. 2006, Branch

2009). Another mechanism is by allowing quota trading among fisheries and gear types where instead of

discarding their bycatch, they could purchase quota from each other when their bycatch is the others

fisheries target catch (Fujita and Bonzon 2005, Branch 2009).

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4.2 Social

4.2.1 Fishery-dependent A quota system has potential consequences on fishery-dependent families and communities which depend

on the design of the quota system, the prevailing kinship, inheritance and taxation systems, and other

factors (McCay 1995). A family-based fishery may be particularly vulnerable when not all family

members were able to finance acquiring a sufficient amount of fishing rights. This could shift the socio-

cultural dynamics and cause the potential loss of fishing right.

Social impact analysis is an approach to determine possible consequences of a quota system on a fishing

dependent community. In doing so, it requires identification of community participants who depend upon

the fisheries in that area, identification of the amount of dependency on the fishery, identifying other

employment opportunities that exist within the community in case they have to switch to other fisheries

or occupations outside the fishing sector due to the implementation of a quota system. Data can be

obtained from commercial landings data, demographic information, and social structure and dynamics

based on census data to examine community structure and potential impact of a quota system

implementation.

4.2.2 Equity

Equity is an important issue in a quota system. A quota system may increase social inequity in fishing

communities, where quotas are concentrated in large fishing companies that are more economically

efficient than small-scale fishermen. The claim of fishing rights or the right to earn revenue from fisheries

by native people should also be considered in a quota system. Therefore, limitation on the amount of

quota that can be held by each quota holder should be enforced to mitigate social problems. Alternatively,

quota can be allocated to communities in the form of community transferable quotas (CTQs) or to

residents of a territorial area as territorial user rights in fisheries (TURFs) quota systems (Sumaila 2010),

allowing them to lease out their fishing rights in exchange for revenues (McCay 1995).

4.2.3 Education

A management system can be applied successfully if related stakeholders can best participate in the

design and implementation. Providing sufficient information and training to stakeholders is needed to

raise awareness and increase understanding about the benefits and cost of the system implementation for

their long-term economic return and livelihood (NOAA). Stakeholders include fishermen (small and large

scale), market dealers, and other related participants in quota systems.

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4.3 Economics

4.3.1 Overcapitalization

Overcapitalization or investment that cannot readily be turned to other uses is the major reason

economists offer for supporting a quota system (McCay 1995). Input control in fisheries management

such as a limited-entry system provides incentives for over-investment. Declining profit can tend to

happen when entry and effort are not strictly limited.

4.3.2 Fishery value

Understanding the economic and technological structure of the harvesting process is crucial to designing

and implementing an effective quota system for multispecies fisheries. Information on the technical

interaction among the different species harvested and economic input is needed by knowing whether the

stocks of all species are harvested jointly or separately using all economic inputs such as the vessel, labor,

gear, equipment and fuel (Squires et al. 1998). Profitability calculation of individual vessels is also

needed by using the vessel cost structure, the expected catch rates of the various species, and the fish

price for which the operators can sell their product (Little et al. 2009). Cost data are needed to know the

distribution of the average cost per vessel per day of fishing whether for live or dead target fish by

sampling individual vessels to identify vessel cost structure (Little et al. 2009).

4.3.3 Market The ability of the market to absorb landed fish year-round with a negotiable price for fishermen is

important in a quota system. By having a sufficient quota and dependable market, fishermen are able to

sell their catch year-round based on their quota, rather than catch as many as possible in a short period of

time. Thus, implementation of a quota system is expected to affect market conditions by eliminating

seasonal abundance of fish product, ensuring a steadier supply of fresh fish, improving product quality,

and lowering fishing operation costs due to fishing trip length and input selection efficiency.

4.4 Governance

4.4.1 Spatial

A fish species can consist of numerous geographically isolated and biologically distinct populations, so

that managing separate fish stocks independently instead of nationally in a quota system might be the

optimal method to ensure the sustainability of the stock (Lock and Leslie 2007). Managing fish stocks in

smaller areas will more likely control the population size within a level that may sustain the Maximum

Sustainable Yield (Batstone and Sharp 1999). However, managing multiple fish stocks could increase the

costs of monitoring, enforcement and quota trading (Lock and Leslie 2007).

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Collecting data for spatial distribution of catch and effort can be derived from logbook data of catch

records and coordinates where fishes were caught. The data should be from different fishing sectors,

small-scale and larger industry. The spatial distribution data could capture the major patterns of fishing

activity in coral reefs locally or regionally depending on the scope of quota system implementation.

4.4.2 Quota allocation

Determining quota allocation is crucial in designing a quota system. The way the quota is allocated,

traded and regulated influence how the quota market and the fishery will work. In developing a quota

system, the management authority must determine initial allocation (to whom, how much), the nature of

the right (exclusivity, quality of life, duration), ownership limits (minimum or maximum quantities,

nationality of owners) and limits over transfers (divisibility, restrictions on sale, leasing options) (Lock

and Leslie 2007). Allocating quota varies between countries and can be characterized based on ownership

when associated: to a fisherman is called Individual Fishing Quota (IFQ); to a vessel is called Individual

Vessel Quota (IVQ); to a community is called Community fishing quota; to an organization (producer) is

called ring-fenced quota (van Hoof et al. 2007).

Identifying a quota allocation mechanism that is acceptable for a certain fishery is necessary to achieve

the success of a quota system, so that the implementation of the system will be supported by the industry

or fish processor. The commitment of fishers to the implementation of a quota system may be maintained

as they are supported by the processing industry that they depend on for buying their catch. Therefore,

commitment of both the fishers and the processing industry should be considered in allocating the quota

to fishers.

Deciding to whom the quota will allocated among the fishers is a key point in developing a quota system.

Fishers characteristics should be identified, i.e., whether they are full-time fishers, part-time fishers,

vessel owners, or people who are involved in the fishing industry but do not own vessels or boat. Based

on this survey of characteristics, determine which fishers are eligible to receive quota. Rationalizing the

fishing industry and reducing capacity can be achieved through the eligibility of quota requirement, but

significant losses to the ineligible people who are removed from the fishery should then be mitigated.

Methods for distributing the initial allocation for individual operators are auction, sale at fixed price, or

given away for free (Copes 1986). Except for the case of auction, a determination would have to be made

as how large a quota each operator would receive. The quota could be given to the operators by equal

shares, or based on historical catch performance, or on fishing vessels and gear capacity, or number of

crew, or various combinations of these and/or other criteria related to consideration of equity, rationality

or practicability.

16

Amount of quota that can be held by operators or quota holders should be limited to mitigate the social

problems of concentration of fishing power or monopoly. This is already a feature of many existing ITQ

systems. In some fisheries, equity concerns may be alleviated by allocating ITQs to communities in the

form of CTQs or to residents of a territorial area as TURF quota systems (Wingard 2000; Christy 1982).

With such schemes in place, the economic efficiency benefits of ITQs may be captured while minimizing

their negative social impacts (Sumaila 2010).

4.4.3 Transferability

An individual quota is transferable when regulations allow the quota holders to sell, buy or lease their

quota (Soliman 2014). Transferability of individual quotas fosters economic efficiency because more

efficient fishers tend to harvest a greater share of the total allowable catch (TAC) and because it provides

incentives for inefficient fishers to exit the fishery (Squires et al. 1998). The net benefits of quota

transferability should be assessed in order to achieve biological, economic and social objectives of

fisheries management. Some transferability limitations are “owner-on-board”, “use it or lose it” or

“active fishing entities”. Allowing inter-sector transfer should also be taken into account to promote

future access opportunities and contribute to conservation and management goals in reducing

overcapacity and improving economic efficiency.

4.4.4 Species aggregation

Most quota systems manage a single species, however, coral reef fisheries are usually multispecies. A

quota system can be simplified if those species can be aggregated into a single TAC or quota as long as

they are caught in the same ratio consistently. However, based on biological criteria, each species has

substantial differences in terms of the age structure, recruitment and year class which make aggregation

problematical in setting a quota (Squires et al. 1998).

The Gulf of Mexico Fishery Management Council (Council) and the National Oceanic and Atmospheric

Administration (NOAA) implemented Reef Fish Management Plans and established an individual fishing

quota program for red snapper in 2006 (began in January 2007) and for grouper and tilefish in 2009

(began in January 2010) (Council and NOAA 2006, Council and NOAA 2008). For grouper and tilefish,

they argued that by having a single grouper share will further complicate the future establishment of

annual catch limits. Instead they preferred to establish species-specific shares for red grouper, gag, other

shallow water grouper, deep water grouper and tilefish (Council and NOAA 2008). Under the

arrangement, fishermen could harvest aggregate quota limits within each grouping and could potentially

reduce the amount of discard. The Council would be allowed to adjust the harvest level within each

grouping. This should benefit fishermen because overharvesting one species in a group would not lower

17

the whole grouper complex. Thus, this was considered to be the only alternative that could prevent

overfishing while achieving optimum yield on a species-specific basis.

4.4.5 Catch balancing

In a multispecies fishery, species are caught simultaneously whether they are being targeted or captured

unintentionally. TACs in multispecies fisheries are typically set independently, with little or no

consideration for relative catch rates and productivity, so catches are often out of balance with TACs

(Holland and Herrera 2006). Catch balancing is considered in developing a quota system to address this

issue. The mechanism of catch balancing is to allow fishers to deal with their excess catch of species over

the quota or the unintentional catch of species without quota by allowing exchange of quota across,

allowing fishers to carry back or carry forward quota between years, and allowing fishers to surrender or

discard catch that they cannot match with quota (Holland and Herrera 2006, Sanchirico et al. 2006, Lock

and Leslie 2007). However, it is difficult to predict the catch composition and fishers will not exactly

catch the quota that they have. Therefore, this mechanism should be carefully designed in a quota system

so that the fishers do not encourage overfishing and exceed TAC.

Some approaches used for catch balancing were addressed by Sanchirico et al. (2006). The first approach

allows market transactions, such as permanent and temporary transfer of quota. Retrospective balancing

or trades after landings can be permitted to allow fishermen to cover overharvest of quota. Other

approaches through non-trading mechanisms have been used, including rollover provisions such as

carrying forward or back of quota, deemed value payment where fishers are charged a fee for each unit of

catch they land that exceeds their quota, and/or permitting fishers to discard catch that cannot match their

quota. However, the last option can result in discarding issues that weaken a quota system ecologically.

Another approach is by permitting cross-species exchanges where quota of one species can be used to

cover catches of another species at an arranged trading ration.

4.4.6 Implementation

The success of implementation of a quota system depends on the ability of the authority institution to

properly design and enforce the regulation, as well as society’s acceptance and compliance with the

system. Design characteristics including the exclusivity, durability, transferability, security, flexibility,

and divisibility of the rights or privileges will collectively determine the “desirability” or quality of the

property right or privilege granted to program participants (Anonymous 2008). Conducting public

consultation through workshops and other forms of discussion with the stakeholders potentially enhances

the success of a quota system implementation. When quota holders are encouraged to undertake co-

management in the quota system, it might simplify the system’s implementation and achieve the fisheries

18

management objectives for sustainable fisheries. In addition, duration of the quota system implementation

should be explicitly defined.

4.4.7 Monitoring and enforcement

Since a quota system depends on the setting of TAC, support from stock assessment processes backed up

by effective monitoring and enforcement are needed. Hence, effective monitoring and strict enforcement

are critical to the success of a quota system. Unreported catches can result in difficulties of monitoring of

quota catches and enforcement. The condition of multispecies fisheries and numerous participants in the

quota system increase the challenge in monitoring and enforcement. Moreover, large numbers and

geographical dispersion of landing sites and buyers of the quota catches increase the difficulties.

Unreported catches could result in unreliable stock estimation and fishing effort control.

Quota busting or not reporting of over-quota catch can also be a problem in a quota system. The chance of

detection of quota busting is influenced by the number of vessels, market channels, and geographically

widely dispersed activity where the larger magnitudes increase the difficulties of monitoring and

enforcement (Copes 1986). Quota busting could happen when the stock is valuable, enforcement is

difficult or poorly funded, fines are small, and dissatisfaction with the initial quota allocation leads to

widespread cheating on quotas (Branch 2009).

Implementing 100% observers on board should reduce unreported data in monitoring, but increases the

cost of monitoring and enforcement. This would probably be effective for offshore fisheries which have

fewer vessels and high economic return per trip, but not feasible for inshore fisheries such as coral reef

fisheries with large numbers of vessels and low value of landing (Squires et al. 1998). A community

quota system could be an alternative as community members have their objective to protect the interest of

resources against no-compliant competitors. A logbook system could cover the information needed for

quota reporting, such as the amount of catch of specific species and location, if fully implemented among

quota holders. Also, reporting of illegal activities by the fishers (whistle blower) should be an alternative

to be encouraged. ITQ fisheries often cost more to manage than equivalent input-controlled fisheries as

they require a system of quota reconciliation and monitoring of fisher activities and the setting of a TAC

(Grafton and McIlgorm 2009).

4.5 Politics

4.5.1 Urgency

All fishery managements must have a specific measurable goal and specific outcome for management.

Not every fishery is suitable for a quota system; hence, the quota authority should consider the

appropriateness of such a system and decide whether it can benefit the fishery or not. Characteristics of a

19

fishery where a quota system could be beneficial to be implemented are a) the fishery is overcapitalized,

b) stocks are overfished and overfishing is occurring, c) significant bycatch, d) regional/institutional

infrastructure exists, and e) stakeholders are receptive (NOAA). By adopting a principle of identifying

specific, clear, biological, economic and social objectives and outcomes for their fishery, a quota system

can be designed appropriately to controls and avoid unintended consequences.

4.5.2 Transparency

Transparency is an important principle in a quota system, from assessing its suitability to a fishery, to

designing, allocating, assigning transferability, and implementation until monitoring processes. Frequent

consultation with fishermen and other related stakeholders promotes transparent public participation in

constructing participation criteria in the system, analysis of trade-offs, and evaluation of the outcomes.

This would provide transparent opportunity for stakeholders to assess the pros and cons of setting a quota

system in a particular fishery to meet the goals and objectives of fisheries management plan.

5 ECOSYSTEM MODELING OF A QUOTA SYSTEM IN CORAL REEF FISHERIES Designing a pilot scale investigative study of a quota system in coral reef fisheries is expected to illustrate

the data needs for quota management system implementation for Indonesian coral reefs. Variables or

components to build an ecosystem model that are determined and defined can be used to determine the

feasibility of a quota system for Indonesian coral reef fisheries. This qualitative analysis can be used as a

method to obtain insight and determine the variables needed for future quantitative analyses.

An ecosystem model is developed for the quota system model. A diagrammatic model provides visual

representation of the quota system structure and function.. Five subsystems are determined: economics,

social, ecological, governance, and politics. Each subsystem consists of several components that are

connected each other to show the relationship and influences.

Figures 1 - 5 represent causal loop diagrams that show the causal structure involved in a quota system.

The arrows between components portray the direction of causal influences. There are two types of

connections, “+” or “-“, to show how a dependent variable will be influenced (positively or negatively) or

change (increase or decrease) based on the change in the independent variable. A positive link means a

positive impact, so if the cause variable increases, then the effect variable also increases. A positive

causal link will reinforce the initial causal influence. A negative link means a negative impact, so if the

cause variable increases, then the effect variable will decrease. A negative causal link will balance the

initial causal influence.

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Figure 1. Ecological subsystem of a quota system in coral reef fisheries

In Figure 1, the relationship between components in an ecological subsystem is shown. The most

important variable in the subsystem is the biological reference points as it requires ecological information

about the fish, habitat, and discards. The multispecies factor will add complexity to obtain biological

reference points, as it has to consider the relationships among species, trophic structure and fish

population dynamics. Habitat like coral reefs has multispecies of reef fish which tend to aggregate and are

caught simultaneously, which could increase discarding. Fishers have influence in the ecological

subsystem, by exploiting the fish and gaining benefit from them. They could cause overfishing, discards

and habitat destruction. However, their ability to target species by using selective fishing gear and

environmentally-friendly methods could mitigate discards and habitat degradation.

Figure 2. Social subsystem of a quota system in coral reef fisheries

21

The social subsystem diagram in Figure 2, consists of two components, fishery dependence and equity.

Fishery dependence arises from the dependence of fishers on the fish and also habitat in the ecological

subsystem, which will be shown in the ecosystem model (Figure 6). The magnitude of fishery dependence

will negatively influence the fishers’ social structure and performance. Equity factor is influenced

negatively by fishery dependence and transferability of quota in governance subsystem (shown in Figure

6). Social equity problem is occurred when a regime affects the distribution of rights, power,

opportunities and wealth, or how it affects the quality of life and the function of communities, household

and family life cycles (McCay 1995). Education is also an important factor for the successfulness in

designing and implementation of a quota system through raising awareness and understanding of

stakeholders. Well support from stakeholders including fishermen can give beneficial feedback to

fishermen’ economic return and livelihoods, also the sustainability of fish resources as one of the

system’s objectives.

Figure 3. Economics subsystem of a quota system in coral reef fisheries

Three components in economics subsystem are displayed in Figure 3. Overcapitalization negatively

influences fishers if their benefit from the fishing activity is below their capital or operational cost.

Fishery value is influenced by catch rates, fish price in market and operational cost of fishing. The market

(buyer) has the ability to control fish price, so most fishers (small-scale) do not have bargaining position

to earn a profit

22

Figure 4. Governance subsystem of a quota system in coral reef fisheries

Many components are incorporated in the governance subsystem referenced in Figure 4. Quota allocation

is based on information on spatial, species aggregation and biological reference points in the ecological

subsystem as shown in ecosystem model (Figure 6). Initial quota is needed for quota allocation and it

could be based on fishers’ catch history. Implementation of a quota system positively depends on

enforcement and monitoring performance, and the acceptance and compliance of fishers in the system.

Multispecies characteristics in coral reef fisheries increase complexity in a quota system as target and

non-target species could be caught altogether. Catch balancing and transferability of quota can be

considered to enhance the performance of a quota system implementation in such fishery. However, it

increases costs of monitoring and enforcement.

Figure 5. Political subsystem of a quota system in coral reef fisheries

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Figure 6. Ecosystem modeling diagram of a quota system in coral reef fisheries

25

The political subsystem, seen in Figure 5, consists of two components, urgency and transparency.

Urgency in the development and implementation of a quota system determines the goal of fisheries

management. Overfishing of a fishery is one of the factors why such a management system is needed.

Overcapitalization in the economics subsystem as shown in the ecosystem model (Figure 6) is also a

reason to apply a quota system. Transparency is one of important principles to be enforced in the quota

allocation process, monitoring, enforcement and implementation, as shown in ecosystem modeling

(Figure 6). Transparency process in a quota system will give benefit to the fishers and fish stock.

Figure 6 is the ecosystem modeling of a quota system in coral reef fisheries which combines ecological,

social, economics, governance and political subsystem. Inter-relationships of components beyond each

subcomponent are shown. Each component is important and influences how the quota system works. The

model is simplified by only incorporating several major components in each subsystem; meanwhile, each

component has more detailed information to be considered, as described in chapter 4.

6 CONCLUSION

The feasibility of a quota system for coral reef fisheries by the Indonesian Government needs to be

analyzed by first determining and defining the variables needed to build an ecosystem model. In creating

an ecosystem model for a quota system in coral reef fisheries, five subsystems are ecological, social,

economics, governance, and politics. Each subsystem consists of components that have relationships

inside a subsystem and inter-relationships with components beyond their subsystem. Each component is

important and influences how the quota system works. The ecosystem model which has been built is a

qualitative analysis to determine the data needed to develop and implement a quota system in coral reef

fisheries. This model can further be used for quantitative analysis for feasibility of a quota system

implementation in coral reef fisheries in Indonesia.

ACKNOWLEDGEMENTS

I would like to say thank you to Dr. David. A. Bengtson for being my faculty advisor, and for his

guidance through all semesters. Thank you to Dr. Austin Humphries for the idea of the ecosystem

modeling and Nicole Andrescavage for their help in reviewing this paper. I also thank to Dr. Peter August

and Dr. Arthur Gold for their guidance as the MESM coordinators. The Secretariat of CTI – Coremap –

DGCF is the driver of this scholarship program, therefore they have my thanks as well. To URI Fishery

Center members: Dr. Kathy Castro, Barbara Somers, and Laura Skrobe. To my family for their support

and patience. Last but not least, to my Indonesian students as my companions-in-arms during the study.

Their help and supports were key to the completion of my major paper and the study program.

26

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29

Appendix 1. Volume of marine capture fisheries production by species, 2004 – 2014 (unit in ton)

Reef fish 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Increasing rate (%)

2004-2014

2013-2014

Redbelly yellowtail fusilier

39406 45180 42809 58835 56040 67624 59890 71553 68131 77071 81563 8.5 5.83

Napoleon wrasse/ Humhead wrasse

115 144 670 760 4236 4594 2017 1232 984 1458 1234 78.74 -15.36

Blue lined seabass 14392 28577 36094 41461 30883 41314 48035 44322 46507 53274 50516 17.08 -5.18

Humpback hind 5807 6076 4589 6271 5993 8174 7440 8685 10698 11123 11650 8.84 4.74 Honeycomb grouper 2182 2537 2844 5087 6986 4293 3968 4315 6662 6818 8520 18.89 24.96

Greasy rockcod/ Estuary rockcod - - 1020 1117 4912 5662 3605 2255 7617 9776 13830 - 41.47

Leopard coral/ grouper 19162 8666 5642 7827 9139 14597 10087 14482 20699 18913 25902 10.95 36.95

White-spotted spinefoot 265 1337 1266 1047 1774 2380 3291 3411 4919 6784 9855 65.48 45.27

Barhed spinefoot 274 461 700 841 860 1052 2910 1343 1676 2517 3965 42.01 57.53 Orange-spotted spinefoot 3181 4782 11807 14598 14539 25713 13845 15968 22812 23836 24920 31.84 4.55

Total 84784 97760 107441 137844 135362 175403 155088 167566 190705 211570 231955 11.21 9.64

Source: (DGCF 2015).

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Appendix 2. Value of marine capture fisheries production by species, 2004 – 2014 (unit in billions of rupiah )

Reef fish 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Increasing rate 2004-2014

2013-2014

Redbelly yellowtail fusilier 183677 244126 241517 394875 350093 525742 513253 685230 740825 1014739 1082451 21.71 6.67

Napoleon wrasse/ Humhead wrasse 3019 3891 6767 13261 57932 93276 42581 34296 42934 50897 40222 54.56

-20.97

Blue lined seabass 147186 388151 607340 884079 583175 808358 1360591 1011674 1044426 1575465 1536415 36.46 -2.48

Humpback hind 213901 216327 66892 179975 202141 284917 280750 278713 340396 336491 429790 20.09 27.73

Honeycomb grouper 49022 58011 59793 105086 120292 87768 85133 104714 165232 170210 265478 22.14 55.97

Greasy rockcod/ Estuary rockcod 9747 8253 82035 120175 55699 44758 202393 330065 530450 60.71

Leopard coral/ grouper 237323 99985 94716 205085 235917 358341 275036 506280 876112 856124 1530133 33.06 78.73

White-spotted spinefoot 1050 9810 5925 5914 20708 21502 31669 54923 78418 137337 206445 133.72 50.32

Barhed spinefoot 1309 2092 3013 3683 5705 8014 11307 14888 24957 45940 7683 51.32 67.25

Orange-spotted spinefoot 25535 28756 81850 112368 126183 237634 167084 220047 289528 386571 456009 42.02 17.96

Total 862023 1051149 1177560 1912578 1784182 2545726 2823103 2955522 3805220 4903839 6085076 23.11 25.5