Changes Ahead: New Fisheries Legislation

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With the recent economic success of the pelagic fishing industry in the Faroe Islands, pressure is mounting to open the doors for newcomers while at the same time subjecting fishing rights to new restrictions and increased taxation.

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[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][By Q. Bates]

The Faroe Islands are home to a fishing industry of remarkable diversity, ranging from vertically-integrated fishing companies running vessels and factories that are among the most sophisticated anywhere in the world, to include a local fleet of middle-range trawlers and liners, all the way down the scale of complexity to inshore handliners and a tradition going back thousands of years for the most fundamental methods of subsistence fishing.

The Faroese pelagic fleet was already rapidly modernizing with new tonnage through the 1990s and the first decade of the present century, but the mackerel boom that made its presence felt from 2010 onwards, although fishermen had been already for some years reporting exceptional mackerel populations, has fueled the expansion as there was a need to handle larger volumes.

The pelagic sector is the one that has seen the most explosive growth over the last two decades. Today’s sophisticated pelagic vessels capable of operating on the key species of mackerel, herring, blue whiting and capelin bear little resemblance to the relatively small vessels of twenty years ago that landed fairly low-grade raw material, much of it for meal production. What is especially noticeable is that a handful of enterprising companies have turned themselves from purely fishing companies into fishing and processing ventures with shore-based production and marketing that bring the whole process under one roof.

There are now three large-scale processing plants accepting pelagic landings. The Faroe Pelagic factory in Kollafjørður was already there, a troubled venture that went through several sets of hands before Dutch company P&P made a real success of it. This were followed by Varðin’s factory at Tvøroyri and then by the Pelagos factory in Fuglafjørður, a collaborative set-up by Christian í Grótinum, Framherji and the Havsbrún fishmeal plant, which in turn is owned by aquaculture giant Bakkafrost, the Faroe Islands’ largest single exporter. Both of these factories were built and commissioned in record time—only six months—by Icelandic company Skaginn.

The nature of modern pelagic fisheries is such that small operators are at a disadvantage. Catches are larger and caught over a much wider sea areas, standards are extremely high and there is intense competition from producers in neighboring countries. Having said that, the Faroese, for the moment, are in the fortunate position of still being able to export to Russia as other European nations have found that market closed to them. While there’s no immediate expectation that this will change, there’s no doubt that Faroese producers are unlikely to have the Russian market to themselves indefinitely.

“I don’t expect the situation to change,” said Herálvur Joensen, director of the Faroese vessel operators’ federation Føroya Reiðarafelag. “There’s no indication from Russia that they intend to blacklist us, and there’s no indication from the European Union that we should join in on their policy on Ukraine.”

Mr. Joensen commented that there is a level of political pressure, mainly from the Faroese pelagic sector, for the Faroese authorities to negotiate a better deal with the EU. At present exports of processed mackerel and herring to the EU are subject to a tariff, and the position has been supported by the main opposition parties for the government to explore this. “The government is looking at the options, but these things always make slow progress,” he said.FBR16_LORES_3233

New legislation

“Generally things are in good shape,” Mr. Joensen said. “Prices have been good and some vessel groups are doing better. 2015 was a better year for the groundfish trawlers and longliners.”

But things change. It’s one of the factors that outsiders to the fishing business fail to take into account. Policy managers and economists apparently assume that there’s a stability to the ocean’s natural resources that means fish can be seen as stable commodities just as coal and potatoes are.

That simply isn’t the way it is. Fish swim, eat and breed. Their populations fluctuate within cycles, and they change as ocean temperatures drop or rise by a degree or two, multiplying with a rapidity that takes everyone by surprise as their feed sources grow and decline with almost equal rapidity.

A dozen or more years ago, mackerel were a scarce, carefully guarded species, each fish caught treated like a little gold bar as quotas were tight and mackerel took some hunting. Now mackerel are everywhere from the Bay of Biscay to Greenland. There are similar tales of cod, herring and a dozen other species that have disappeared for a while and they never fail to return.

This is far from being a uniquely Faroese situation as there are boom and bust tales of fish stocks disappearing and inexplicably returning that go back centuries, yet administrations the world over continue to treat these resources as if they never change from year to year.

The Faroese have often gone their own way, apparently in far closer touch with the realities of fluctuating stocks and conditions that shift and change. All the while, the rest of the world appears to be enthralled with the so-called free-market principles of Individual Transferable Quotas. The Faroese saw what effects their brief flirtation with a quota system for groundfish in home waters had in the mid 1990s and rapidly abandoned the experiment as unworkable, switching instead to a days-at-sea regime for mixed groundfish fisheries and quotas for pelagic species.

Things have changed. At the top end, the fishing business as a whole has become more international, more sophisticated. Vertically integrated companies exporting large volumes of processed fish share quaysides with day boats, while the success and enterprise of the relatively larger companies has not gone without notice.

The political pressure to make fishing pay more for the privilege to catch fish is growing, plus there is the opinion that the industry needs to be opened up to newcomers. But with an industry that has been slimmed down dramatically, a trend that is far from being purely a Faroese one, as this is happening across the north Atlantic region, the question is where could newcomers fit in? Those players currently making a good living out of fishing are in a precarious business that could suddenly become dramatically less profitable at the stroke of a pen—as demonstrated in other countries as the Russian embargo took hold. These are also operators who have worked long and hard through the less easy times to get where they are today, taking on debts to invest and modernize. Now that the pelagic fishing industry is in a healthy condition and attractive to new entrants, these established operators are unlikely to be impressed at being asked to step aside for newcomers who have taken none of the risks.

The Faroes are nothing unusual in being split by political rivalries with wildly differing opinions and although the long-term aims may well be similar, there are very different ideas of how they should be achieved. Regardless of the difference, everyone of every political stripe has been aware for the last eight years that reform of Faroese fisheries management was coming after the decision in 2007 to recall licenses after a ten-year grace period.

“We have reform on the agenda and the present licenses expire at the end of 2017,” Mr. Joensen noted, making the point that it has been well known since 2007 when a 10-year cap was put in place that this would have to be addressed, although the issue is only now being addressed seriously, with less than two years to go to the deadline.

“There is an acute need for the new system to be in place and the present government has several things on its mind, mainly how fishing can contribute more to the public coffers. Also there is pressure for the licensing system to be reformed to allow more open access. But the trend has been that the number of vessels has been going down and there is in reality limited scope for newcomers to the industry.”FBR16_LORES_3435

Heavy scrutiny

The current left-leaning administration favors industry reform, and judging by the rhetoric, at least on the surface with a policy of encouraging fresh blood into the fishing business and with the ideal of making the industry pay more for every kilo it lands.

You can’t help but wonder if those who feel the industry should pay more understand precisely how central to coastal economies fishing companies are. Every penny spent in the local shop or at the hairdresser’s came out of the codend in one shape or form, contributing directly to the society around them.

Is this a determination to tinker simply change for change’s sake, or a grab for popular sympathy—which means votes?

All around the world we see administrations making ill-advised and frequently counter-productive changes to fisheries management legislation that can often contradict the last round of new rules, all the while walking on eggshells so as not to upset the media and poorly-informed public opinion. Is the same thing now happening in the Faroes, where the myriad problems of the over-complex and unwieldy Common Fisheries Policy next door in Europe should be clearly visible?

Principles of free-market economics are seemingly behind the present government thinking on fisheries reform, with a small group of highly visible economists (public employees, by the way) energetically promoting this policy in the media and presumably behind the scenes. Their noticeable lack of connection with the industry, and growing disconnect between the central administration and the fishing regions that are essentially the whole of the Faroe Islands apart from a part of the capital, is something that raises concerns.

The coverage that the issue in particular of auctioning fishing rights has received in the public arena has undoubtedly swayed public opinion, although there are still substantial questions that need to be answered as time ticks past, and 2017 is alarmingly close.

The uncertainty over what the future holds is a serious headache for business, resulting in a reluctance to invest coupled to a concern over future stability for those who have already made investments.

As Tórheðin Jensen at pelagic company Varðin pointed out, a system of auctions means nobody is sure of access to fish until the auction has been concluded and the next year always remains an unknown quantity, with implications for creditworthiness and long-term visibility.

“If you can’t be sure that you have access to the fish, then you don’t get loans,” he said.

“If you have short-term visibility, then we have no choice but to invest on a short-term basis as well and a long-term strategy isn’t possible.”

He added: “We already pay a catch tax of 1 dkk per kilo of mackerel fished, 0.20 dkk per kilo of blue whiting and 0.70 dkk per kilo of herring, and we would much prefer to pay this catch tax than have to bid for catch quotas. That’s only going to have negative effects as it strikes at the core of these companies’ economies.”

Mr. Jensen commented that the catching sector appears to be under a level of heavy scrutiny that the fish farming industry has been able to avoid.

Own views on ownership

A nine-person commission, of which Mr. Joensen is himself a member, has been appointed by the Ministry of Fisheries to come up with proposals, with an August deadline to present these to government. Central themes for the reform of the fisheries licensing system revolve around issues of allowing operators to bid for licenses or short-term fishing rights, and the issue of the duration of fishing licenses, all of which remain to be discussed before recommendations can be put to the government.FBR16_LORES_3637

Understandably, nobody is too keen to offer many predictions beyond hazarding guesses that a new system could combine auctioned quotas with some kind of preference in place for those with track records behind them, while it remains impossible to predict what the other sectors in Faroese waters, such as the groundfish trawlers and longliners, will have to adjust to in future.

As things stand, part of the fleet operates under various quota regimes, such as the pelagic fleet that operates across Norwegian, Icelandic and EU waters as well as within the Faroese EEZ, and others fishing in other nations’ waters, while those fishing on Faroese grounds work under a days-at-sea regime.

“The bigger companies are more used to working with quotas and have mixed feelings about them, but the Faroese groundfish companies are generally happy with the days at sea,” Mr. Joensen said.

“The main opposition to a quota system for the groundfish in the Faroes is that we have very mixed fisheries. The saithe fishery is the cleanest groundfish fishery, although there’s always some by-catch. But if you target cod or haddock with either trawl or longline, then you’re always going to get tusk, ling and other species with it.”

“We haven’t got to that yet,” he added. “We’re still dealing with the hardcore issue of licensing and foreign investment.”

As far as foreign ownership of fishing enterprises is concerned, according to Mr. Joensen, the understanding is that foreign ownership should be limited to a minority shareholding with the decisions taken in the Faroes.

“The present Minister of Fisheries [Høgni Hoydal] would like to see no foreign ownership at all, at least not in fishing vessels, although the processing industry is a different matter.

“We have members who are both wholly Faroese and partly foreign-owned companies so the association doesn’t have a position on this—although the members have their own views.”

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