Trade liberalization, Fisheries sector, Water pollution, Economic instruments
This report presents a case study on the impact of trade and investment policies on the environment, focusing of the fisheries sector in Uganda. The study identifies three main concerns: water pollution by fish processing and other manufacturing firms; over-fishing as evidenced by declining harvests in the last 4 years - leading to use of unconventional and harmful fishing methods, including use of poison; and poor quality standards at fish landing sites and in some processing firms which has led to an export ban by the European Union, which takes over 70 percent of Uganda's fish exports. The study proposes both command-and-control measures and economic instruments for sustainable environmental management.
In Uganda fisheries, liberalisation provoked major growth in foreign investment and in exports of processed fish to new, developed country markets. The sector's export value rose from US$ 1.3 million in 1990 to US$ 45 million in 1996. Fisheries provide up to one million jobs. An analysis of fishing on Lake Victoria was done to establish pricing and profitability levels. Profitability ranges from US$40 to US$1250 per ton of processed fish exported, depending on the species. Domestic, artisanal processing shows a much lower profitability. A Sensitivity Analysis was carried out to test the ability of enterprises to pay for environmental compliance. The test case was a medium-sized firm with a daily processing capacity of 30 tons. Using data from 1989 to 1996 (environmental regulations were strongly introduced in 1995), pre- and post-compliance Net present Value (NPV) and Internal rate of Return (IRR) were determined and compared. In the base case, NPV was US$ 54,160 while that for the Sensitivity case was US$ 47,150. The IRR remained very healthy at 21%. The ability to pay for environmental compliance is clearly established. A mix of MBIs and CAC approaches is proposed:
- Quality Control - EU directives on hygienic processing of fish should be implemented. Fishers should be required, and assisted, to invest in cold transportation, which will increase revenue by US$148 per ton transported: Pollution management;
- A Marginal Cost estimation suggests that voluntary compliance for pollution control is not economically attractive to firms. Therefore, an appropriate combination of regulatory measures, induced self-regulation and incentives should be designed. The Malaysian model for Control of Industrial Effluents is recommended;
- Solutions to the problem of overfishing require several actions. Measures should be taken to define property rights, conferring common resource ownership rights on a specified group. The cost of resource harvesting must be raised through user fees while resource rights, within overall limits, and these could be made tradable.
The net annual benefit to be derived from application of this combined policy mix would be US$ 3.1 million. |
