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Revenues and costs mainly determine the
economics of fishing operations. Revenues depend on
species and quantities caught and prices obtained,
which again depend on marketing channels and
markets, seasonal fluctuations and other factors.
The main cost factors are capital investment and
operation costs, which can be divided in labour
costs, running costs and vessel costs. The major
components of labour costs are wages and other
labour charges such as insurance and employer' s
contributions to pensions funds. Running costs are
principally composed of fuel, lubricants, cost of
selling fish, harbour dues, cost of ice, food and
supplies for the crew. The major elements of vessel
costs are vessel and gear repair and maintenance
expenses and vessel insurance. In addition, fishing
operations also have external costs, which are
sometimes difficult to quantify. External costs are
defined as costs which are created by a fishing
enterprise for others, i.e. other enterprises or
society, for example through depletion of fish
stocks or destruction of the coastal ecosystem.
The economic and financial performance of
fishing operations is generally assessed with the
help of two indicators. For the assessment of the
economic performance of a fishing vessel, as in the
case of other economic enterprises, the ratio
between net cash flow and total earnings (NCF/TE)
is used. This ratio is a general indicator of
economic profitability/viability of enterprises as
it shows the amount of total earnings required by a
certain type of fishing vessel in order to generate
a given amount of net profit. The financial
performance is assessed with the help of the rate
of return on investment (ROI). The ratio shows how
much money needs to be invested in a fishing
enterprise in order to generate a certain net
profit.
The economic performance of fishing operations
is affected by various factors including
fluctuations in revenue, perishability of product,
falling yields i.e. catch per unit of effort,
static or falling demand, unforeseen increases in
the cost of key inputs and catch and effort
restrictions. Theory suggests that in an
open-access, unregulated fishery, the fishery will
eventually end up producing at the point where
total revenue equals total costs.
Recent empirical information on the economics of
fishing operations has been provided by a global
study on the economic viability of marine capture
fisheries, which is presently being carried out by
the FAO Fisheries Department. The study began in
1995 in close cooperation with fisheries research
institutions and national fisheries administrations
in selected countries in Asia, Africa, Latin
America and Europe. The findings of the study
suggest that, in spite of heavily exploited
fisheries resources, marine capture fisheries are
generally still an economically and financially
viable undertaking. In most cases, it generates
sufficient revenue to cover the cost of
depreciation, the opportunity cost of capital and
thus generate sufficient funds for reinvestment.
Marine capture fisheries are also an important
source of food, income and generate employment and
foreign exchange earnings, which is particularly
important for developing countries.
Those categories of fishing units which incurred
operational losses at the time of the study are
located at the extreme ends of the scale of fishing
operations, i.e. in the very small-scale as well as
in the very large-scale sector of the industry and
include both artisanal gillnetters and large
industrial deep-sea trawlers. In the former case,
over-exploitation of inshore fisheries resources
and competition from more efficient fish capture
technologies such as purse seiners and coastal
trawlers seem to be responsible for the negative
financial performance. In the latter case, excess
capture capacity and related excessive costs of
operation and investment vis-à-vis limited
fishing grounds and fisheries resources seem to be
the important factors.
As far as financial performance and cost of
fishing operations are concerned, some trends are
highlighted below. In trawl fisheries, for example,
noticeable differences can be observed between
developed and developing countries regarding
financial performance and productivity. While
productivity, measured as value of production per
crew member, was found to be generally higher in
developed countries, the rate of return on
investment was found to be generally higher in
developing countries. The higher degree of
productivity in developed countries studied can be
probably attributed to a higher degree of
mechanisation and sophistication of equipment for
fish detection, capture and on-board handling of
fish.
Their lower cost of operation in relation to
gross earnings and their lower cost of
investment/higher depreciation because of the use
of older fishing vessels explain the higher
profitability of trawl fisheries in the developing
countries studied. As the cost of labour increases
in developing countries in the course of overall
economic development and as old fishing vessels are
being replaced through newly-built ones, it can be
expected that the difference in profitability of
fishing operations as compared to developing
countries might gradually disappear.
In the case of small-scale fishing vessels, the
differences between productivity on the one hand
and financial performance on the other are even
much more pronounced. While productivity is again
higher in developed countries, the financial
performance of the small-scale fishing units
studied in developing countries is significantly
better than of those in developed countries because
of lower cost of investments and lower cost of
operation.
As far as the cost of operations is concerned,
the cost structure of trawl fisheries differs
significantly between developing and developed
countries. The differences seem to be mainly
related to differences in the remuneration of
labour, which depend on the overall level of
economic development. As could be expected, the
cost of labour is the most important cost component
in the developed countries studied. The second most
important cost component is running costs, closely
followed by vessel costs. In the developing
countries studied, running costs and vessel costs
account for the major share of the operating cost
while labour costs are only of secondary
importance. As countries develop and the level of
remuneration increases, above differences in the
cost structure can be expected to disappear.
The general positive economic performance of
marine capture fisheries is being achieved in an
environment where fisheries resources are fully
exploited and in many cases overexploited. With a
view to ensure sustainability and viability also in
future, there is an urgent need to strengthen and
put in place efficient measures to limit fishing
effort and to rehabilitate coastal areas and
aquatic resources.
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