A numerical comparison of fish quota values and standard resource rent calculations using New Zealand’s

commercial fish resourcePaper for 13th Meeting of the London group on

Environmental Accounting Brussels, 29 September - 3 October 2008 Jane Harkness and Luke Aki

PresentationJane Harkness – Statistics New Zealand

Introduction

• Asset accounts in monetary terms

• Methodology determined by data availability

• Market value approach

• Residual value approach

Summary of results

Figure 1: Fish Stock Valuations$(000)

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1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Residual value method market price method

The Quota Management System

• Began in 1986

– In 1986 the QMS managed 27 species

– In 2007 the QMS managed 96 species

The Fisheries Management Areas

• Species are managed in Quota Management Areas, 618 in 2007

• 10 Fisheries Management Areas FMAs

hoki HOK has one QMAcardinal fish CDL has 10

The Fish Monetary Stock Account• Asset value of New Zealand’s commercial

fish resource

Exclusions

• Recreational catch

• Customary fishing

• Aquaculture

• Non QMS species

Management Mechanisms

• Quota represents shares for a species in a Quota Management Area

• Total Allowable Commercial Catch TACC is set annually

• The Quota holding generates an Annual Catch Entitlement ACE (after 2001)

Methodology, Fish Monetary Stock Account

• Quota x TACC

• Where Quota information is absent ACE trades used as approximation of resource rent RR

• Quota x TACC + NPV

• Assumptions

Data & Methods

• Ministry of Fisheries administer the QMS and assist in interpretation of data

• Data supply

– Supplied by FishServe

– Trades of Quota and ACE must be registered

– TACC, catch also supplied

Issues

• Choice of discount rate

• Reliability of price information

• Comparability of alternate methods for estimating resource rent

Residual value estimates of the fish stock

• where market price information is not available

• Asset value is estimated based on the NPV of the implied resource rents

Estimating a resource rent• R = TR - (IC+CE+CFC+NIT+NP)

• NP = i * K

• Where

R resource rent

TR total revenue

IC intermediate consumption

CE compensation of employees

CFC consumption of fixed capital

NIT net taxes on production

NP normal profit

i the rate of return on capital

K the value of fixed capital stock

Excluding QMS transactions from income and expenditure• ITQ are classified as intangible non-

produced assets

• Trades are capital transactions

• ACE sales/purchases classified as rent

Differences in scope

• Residual valuation covers fishing and aquaculture

• Market valuation covers species managed under the QMS

Fishing and fish processing

• High levels of integration

• Fish processing is included in Other food manufacturing

• Can all assets be identified and measured

Where is the quota held

Quota Shareholding for Selected Species1 by Industrial Classification2

ANZSIC division Percent

A Agriculture, Forestry and Fishing 2

C Manufacturing 23

F Wholesale Trade 1

L Property and Business Services 46

M Government Administration and Defence 24

unallocated 3

1 hake, hoki, ling, orange roughy, oreo, scampi, snapper, squid

2 Australian and New Zealand Standard Industrial Classification (ANZSIC) 1996 version 4.1

Units may

• Own quota but no longer engaged in fishing

• Own quota with an associated company classified to fishing

• Own quota and engaged in fishing but classified to fish processing

Accounting or economic valuations

• Fixed assets

• Historic or book value asset prices

• Or

• Current replacement cost

Figure 2: Modified fish stock valuations$(000)

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1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Residual value method (modif ied) market value method Residual value method (original)

Expected or actual catch

• Expected volumes and prices

• Or

• Actual harvest experience

questions

• Discount rate in actual years

• Cost recovery or resource rent

• Residual method operation and theory