Review of the

Great Barrier ReefMarinePark Structural Adjustment Package

John Gunn, Greg Fraser, Brian Kimball

Review of the Great Barrier ReefMarinePark Structural Adjustment Package

Table of contents

Page

1Executive summary

2Establishment of an independent review of the Great Barrier Reef Marine Park Structural Adjustment Package

2.1Background

2.2Terms of reference for the review

2.3Approach to the review

2.4Structure of this report

3Part A: The Great Barrier Reef Marine Park Structural Adjustment Package (the Package)

3.1Australian Government policy on marine protected areas and displaced fishing

3.2Great Barrier Reef Representative Areas Program

3.3The nature and scope of the Package

3.4Changes to the scope of the Package

3.5Assistance provided under the Package

4Part B: Assessment of program management

4.1Clarity of program objectives

4.2Research into the economic impacts of the Zoning Plan

4.3Increases in program costs

4.4The complexity of the Package

4.5The timing of assistance

4.6Stakeholder communication and engagement

4.7Stakeholder satisfaction

4.8Implementation planning

4.9Governance and administration of the Package

4.10Timeliness of decision making

4.11Employee, social and community assistance elements of the Package

4.12The achievement of equitable outcomes for applicants

5Part C: The costs and benefits of the Package

5.1Managing displacement of fishing effort

5.2Responding to equity and fairness considerations

5.3Economic benefit to regional economies

5.4Ecological benefits of the Zoning Plan

5.5Stakeholder perspectives on cost-benefits

5.6Cost-benefit summary

6Part D: Comparison of the GBRMP Structural Adjustment Package with the Commonwealth South-east Marine Region structural adjustment process

6.1Conservation objectives and the contexts for adjustment

6.2Design and adjustment processes

6.3Package components

6.5Outcomes

7Part E: Policy considerations and recommendations for future structural adjustment packages

7.1Policy considerations

7.2Recommendations relating to marine reserve structural adjustment policy

7.3Recommendations relating to structural adjustment program design and implementation.

7.4Recommendations relating to program management

7.5Knowledge management

Appendices

Appendix A – Terms of reference

Appendix B – Stakeholders interviewed during the review

Appendix C – Survey instrument used during the review

Appendix D – Detailed summary of stakeholder comments made in response to the stakeholder survey

Appendix E – Best practice assessment model for program management

Appendix F – Overview of structural adjustment considerations and history in Australian natural resource management

Appendix G – References – further reading

1
Review of the Great Barrier ReefMarinePark Structural Adjustment Package

1Executive summary

Background

The Great Barrier ReefMarinePark Zoning Plan 2003 (the Zoning Plan) came into effect on 1 July 2004. The Zoning Plan significantly changed the areas of the Great Barrier ReefMarinePark (the MarinePark) open to extractive uses, notably fishing.

In May 2004 the Australian Government announced that, in response to the impacts of the Zoning Plan on fishing and related businesses, a structural adjustment package (the Package) would be provided with the objectives of:

  • assisting fishers, fishery-related businesses, employees and communities adversely affected by the Zoning Plan, and
  • managing in the most cost effective manner any displaced fishing effort that has unsustainable ecological or economic impacts.

The Government’s approach to development of the Package was guided by a Marine Protected Areas and Displaced Fishing: A Policy Statement[1]. Under this policy, the provision of compensation or structural adjustment assistance is considered on a case-by-case basis.

The Department’s interpretation of the policy statement and the “purpose” of the Program were further articulated in the Package Guidelines (June 2004):

“…the Government is providing a structural adjustment package to ensure the fair and equitable treatment for those fishers, fishery related businesses, employees and communities that can demonstrate they have experienced negative impacts due to the rezoning.”

Between June 2004 and September 2006, the Government responded to views of industry stakeholders by making six major changes to the scope and availability of assistance provided by the Package.

The Package has provided $213.7 million[2] for structural adjustment to 1782 fishers, seafood processors and upstream providers to the fishing industry.

Since 2004, in addition to the impacts of the Marine Park Zoning, the Queensland fishing industry and associated sectors faced a number of pressures from a range of external policy (e.g. effort displacement following the Queensland Government’s creation of a Great Barrier Reef Coastal Marine Park without any adjustment assistance; Commonwealth fisheries adjustment through the Securing our Fishing Future package) and market factors (e.g. significant rises in fuel prices, unfavourable foreign exchange rates in key export markets, competition from cheap imports in key domestic markets, competition for labour driven by a burgeoning mining sector etc ). In combination, these pressures had a very significant negative impact on the viability of fisheries and many businesses associated with the fishing industry along the Great Barrier Reef. Their cumulative impact has been described by a number of industry members as being akin to the “perfect storm”.

In February 2006 the Australian Government agreed that an independent review (hereafter referred to as ‘the Review’) of the development and implementation of the Package should be undertaken to guide future policy development. The Review was initiated by the then Department of Environment and Heritage (DEH) in June 2008 with broad terms of reference (ToR).

In brief, the key foci of the Review were to:

  • assess whether the Package met its objectives
  • review the design, implementation and management of the Package
  • examine the procedural fairness and equity of the funding allocation processes
  • undertake a preliminary examination of the benefits accrued from the adjustment expenditure, and
  • provide recommendations and examine policy considerations for future marine structural adjustment packages.

The Review focused principally on those components of the Package where the majority of expenditure occurred and drew on the findings of two earlier, relevant reviews:

  • The Review of the Great Barrier ReefMarinePark Act 1975 that made findings, among other things, regarding the Zoning Plan, and
  • An independent review of the licence buyout component of the Package conducted by FERM Consulting completed in October 2007.

Key findings against each Term of Reference (ToR) are summarized below, along with key recommendations for improving the development and delivery of future structural adjustment associated with marine reserves[3].

ToR 1 : The extent to which the Package has met the needs of different sectors, and in particular, commercial fishing industry sectors, recreational fishing and charter operators, land-based fish processing and marketing businesses and land-based service businesses.

Key Findings

  • Despite expenditure of $213.7 million, a majority of the stakeholders, across all sectors, felt strongly that the Package failed to adequately compensate them for the impacts of the Zoning Plan, and thus failed to meet their needs.
  • Many stakeholders found it difficult to conceptually or financially separate the impacts of the Zoning Plan from the significant negative impacts of a number of external factors, and most of those interviewed saw the Package as a form of compensation, rather than as an attempt to support structural adjustment of affected industries.
  • A minority of stakeholders – in the main, from the non-commercial fishing sectors - acknowledged that the Package had assisted them to restructure, reduce debt or remain solvent over a difficult period. A handful viewed it as a significant contributor to successful restructuring.
  • As there was very little or no quantitative assessment of the impacts of the Zoning Plan on most industry sectors prior to the implementation of the Package, nor has there been a detailed socio-economic analysis of the impacts of the Package on businesses, individual industry sectors and regional economies since 2004, it is difficult to argue on the basis of facts with industry perceptions that the Package has not adequately met the needs of their industries.
  • The scope of the Package was broad, both in the range of businesses and stakeholders for which assistance was made available, and the forms of that assistance. While this allowed the Government to respond effectively to emerging stakeholder needs by amending the scope of the Package, it also meant that the objectives were open to wide interpretation, and as a consequence the Program implementation team (and the Government) were constantly faced with an expectation management challenge.
  • Given that the Package had not met stakeholder expectations, this Review evaluated whether the Package had met Government objectives. On one hand, given that considerable assistance was provided to more than 1300 businesses affected by the Rezoning, it would appear to have met Government objectives. Somewhat surprisingly however, relatively little effort was made to evaluate/design what the fishing and fishery-related businesses should/would look like post-restructuring. DEWHA offered to provide funding support to the Queensland Seafood Marketers Association in engaging a consultant to work with the processing sector to identify how an orderly adjustment program to downscale the overall size of the sector could be achieved. However, the offer was not taken up. Late in the Program a consultant’s report[4] found little prospect for seafood processor rationalisation due to antagonism between businesses and competition (rather than collaboration). The combination of business unresponsiveness and the Departmental approach meant that each individual application for adjustment assistance was evaluated on its merits, often leaving the same number of operators competing for less business.
  • The fishery buy-back components of the Package, reviewed previously by FERM (2007), were able to achieve significant reductions in effort in some of the fishery sectors significantly impacted by the Zoning Plan. A key conclusion of the FERM review was that ‘unless fisheries management arrangements are capable of controlling the level of effort in areas remaining open to fishing, a fisheries buyout of itself will not necessarily prevent displaced effort from having unsustainable impacts’. This review supports that conclusion.

Recommendations

  • Future structural adjustment associated with the development of marine protected areas should aim to effectively adjust levels of fishing effort and/or catch to account for reduced access to resources, and to minimize the impacts of displaced effort. Where available fishery management measures do not prevent activation of latent effort, structural adjustment should not be attempted until such time that the latent potential is removed. In this event, autonomous adjustment is recommended.
  • The nature and extent of change to be achieved through structural adjustment should be explicitly articulated.
  • Similarly, the scope, objectives and components of a structural adjustment package should be defined and all relevant industry and government stakeholders consulted to test its efficacy before it is announced and implemented.
  • The funds to be expended on a structural adjustment package should be capped, taking into account the scope and nature of the adjustment to be achieved. In all likelihood this would mean allocation of adjustment funds would be competitive, as for example it was in the Securing our Fishing Future Package.
  • The Commonwealth should seek to harmonise, as far as possible, restructuring of a Commonwealth fishery with relevant State government fisheries management policies and programs.

Recommendations on Commonwealth Structural Adjustment Policy with respect to marine reserves and displaced fishing

First, it is important to emphasise that while the Package had many detractors, and indeed this review has found significant room for improvement in the design and implementation of structural adjustment programs for fishing and related industries, the guiding policy of the Package – the 2004 Marine Protected Areas and Displaced Fishing: A Policy Statement –provides an excellent foundation on which to build a more comprehensive marine reserves compensation or structural adjustment policy. Many of the clear statements of intent and directives within the 2004 policy statement were only partially implemented due to the very short lead time involved in the GBRMP Package, with significant negative consequences.

The significant and uncapped cost, changes to and complexity of the package components and processes, stakeholder dissatisfaction (setting aside the benefits of the Zoning Plan) and questionable structural adjustment outcomes of the Package suggest the need for an improved approach to adjustment associated with displaced effort in the future.

The lessons learned from the GBR experience most relevant to policy amendments are:

  1. Without a well-defined set of structural adjustment or compensation package guidelines and boundary conditions (e.g. which elements of the affected industry and associated up- and down-stream industries will and won’t be considered; whether or not compensation will be capped; how individual businesses will be evaluated), there is increased probability of “gaming”, “special circumstances” pleading and associated political influence, scope creep, cost overruns and stakeholder dissatisfaction.
  2. Without enough time to adapt a policy or set of guidelines to the specific circumstances of each marine protected area displacement (including time to collect and analyse required bio-socio-economic data and consult with stakeholders), the likelihood of the program meeting its objectives is significantly decreased.
  3. Fishers, particularly smaller owner-operators, found the complexity of the Departmental processes difficult – in particular with regard the documentation requirements, but also because of their inherent lack of familiarity with such processes. Business advisors were thus required, and a not-insignificant proportion of the Package benefit went to these advisors rather than those for whom the Package was developed.
  4. The inclusion of up- and down- stream industries within a structural adjustment process increases complexity. In general terms, one can expect that the further up- or down- stream a business is from the displaced fishing industry, the smaller the impact of displacement will be on the viability of that business. As a result, the ability of the business to autonomously adjust/adapt is greater than those that are more closely reliant on fishers and fish products. The experience with this Package was that the further a business was from the fishing industry, the more difficult it became to quantify the impact and estimate the need/quantum of compensation.
  5. There was a fundamental mismatch between stakeholder desires and expectations for adequate (and timely) financial compensation for impacts of the rezoning, and the Department’s approach to implementation of the Displaced Fishing Policy which for some components required complex evaluation of structural adjustment entitlements of individual businesses. The mismatch and associated dissatisfaction created an adversarial environment for development and implementation of the Package. This could have been avoided by simplifying the process.
  6. The lack of due and timely consideration of the requirement for, and design of, an adjustment program associated with the GBRMP Rezoning provides a salutary lesson around the need for integration of processes involved in marine park design and implementation and those of adjustment planning and implementation. Assuming that adjustment will remain a tenant of Commonwealth Marine Protected Area implementation, these should be considered components of one process.
  7. Despite the Department’s best efforts to run the Package on a least-cost basis, the very significant expenditure suggests that future adjustments should not be conducted without adequate estimation of the economic impacts of fishing displacement, or be offered on an uncapped basis.

Given these lessons, we recommended consideration of the following amendments to the Displaced Fishing Effort Policy:

  1. To avoid the necessity for each package to be designed from the bottom-up, and the risks associated with special circumstances cases driving repeated amendment (and growth) in adjustment package, we recommend that a displaced fishing policy should be supported by delegated legislation. This would allow core/higher level components of adjustment packages to be set. The legislation would preferably set out a “tool box” of secondary adjustment measures that could be implemented as required. A useful example of this approach can be seen in Commonwealth Fishery Management Plans. We accept that this will take significant effort (including wide consultation), and open the Department to the potential for challenges in the Administrative Appeals Tribunal. However, we see significant benefit in broad stakeholder engagement in setting up the delegated legislation, and in providing a strong design framework for this critical component of the Commonwealth’s National Representative System of Marine Protected Areas.
  2. The amount of money and assistance set aside for compensation and/or adjustment should be capped. The cap should be commensurate with the projected impact of conservation measures on the fishing and related downstream industries.
  3. Adjustment should primarily focus on impacts on the fishing industry.
  4. With certain provisos regarding pre-existing fishery management arrangements (see section 7.3 below), the most cost-effective adjustment approach for the fishing industry is reduction of fishing through vessel/effort unit/quota buyout. A two-stage tender process is recommended.
  5. There should also be some consideration of compensation of first-order downstream industries (e.g. processors/fish wholesalers), as these are commonly local businesses solely or heavily reliant on the product of local fishers. We recognize that these businesses will not satisfy the requirements for dispossession under just terms compensation. However, there likelihood of significant impact provides an argument for consideration.
  6. For first-order down-stream businesses, where economic analysis at the local and/or regional scale suggests fishing sector downsizing will have very significant impacts on viability, consideration of one, or a combination, of the following two approaches is recommended:

a.Tendered buyout proportional to the assessed impact

b.A formula-based, single compensation payment to all operators in those sectors, based on proportional assessed impact. The compensation should take into account a reasonable period for business adjustment, but certainly not account for ‘lifetime’ impact.

  1. For land-based businesses (second- and third-order up- and down-stream and all upstream) operating where fishing is a minor component of the regional economy., autonomous adjustment is recommended. This is in part recognition of the likely positive impacts of marine reserves on increased conservation-based tourism, and in part the inherent autonomous adjustment potential of these businesses.
  2. For land-based businesses where fishing is a more significant component of the regional economy, funding directed towards regional assistance programs targeting affected towns/communities is recommended. The lessons learned from this Package and SOFF regarding community/regional assistance should be taken into account in the design of any future program.

ToR 2 : Review the level of funds provided for adjustment assistance and why the cost of the Program increased to the extent that it did over the life of the Package. Was the Package cost effective and could alternative approaches have achieved similar or improved results?