Trang, Vietnam. Fisheries Research, 127-128:98-108.

PAPER I

Nguyen Ngoc Duy, Ola Flaaten, Nguyen Thi Kim Anh and Quach Thi Khanh Ngoc

(2012). Open-access Fishing Rent and Efficiency - The Case of Gillnet Vessels in Nha

Trang, Vietnam. Fisheries Research, 127-128:98-108.

ContentslistsavailableatSciVerseScienceDirect

Fisheries Research

jo u r n al h om ep a ge :w w w . e l s e v i e r . c o m / l o c a t e / f i s h r e s

Open-access fishing rent and efficiency—The case of gillnet vessels in Nha Trang, Vietnam

Nguyen Ngoc Duy

, Ola Flaaten

, Nguyen Thi Kim Anh

, Quach Thi Khanh Ngoc

aFacultyofEconomics,NhaTrangUniversity,No.02,NguyenDinhChieuStreet,NhaTrang,VietNam

bNorwegianCollegeofFisheryScience,UniversityofTromsø,N-9037Tromsø,Norway

a r t i c l e i n f o

Articlehistory:

Received23August2011

Receivedinrevisedform18April2012 Accepted20April2012

Keywords:

Economicperformance Fishingrent

Fishingsubsidies Standardisedeffort Vietnamesegillnetfishery

a b s t r a c t

Thispaperfirstdiscussesvesselbehaviourandefficiencytheoreticallyandthenappliesthisknowledgeto evaluatetheeconomicperformanceofanopen-accessfishery.ThecaseoftheNhaTrang,Vietnam,gillnet fisheryissurveyedwithrespecttotheearnings,costsandtechnicalcharacteristicsandefficiencyof58 offshorevesselsin2008.Onaverage,thesevesselsprovedtobeheterogeneouswithagrossprofitmargin of17.3%andaprofitmarginof3.8%despitetheopen-accesscharacteristicsofthisfishery.However, addingthecalculatedinterestof9%perannumontheowner’scapitaltothecostssignificantlyworsens theeconomicresults.Enginecapacity(HP),gearsizeanddaysoffishingbestreflectthefishingeffort ofvesselsintheproductionfunction,andthesewereusedtocomputestandardisedeffortandcost efficiency.AnapplicationoftheSalterdiagramshowsthatalargenumberofvesselswithhighrelative standardisedeffortarethemostcost-efficient,butnotwithoutexception.Themajorityofthesevessels earnedintra-marginalrent,whilethesmallestvesselsaremostdependentonthegovernment’s2008 quasi-lump-sumfuelsubsidyscheme.

© 2012 Elsevier B.V. All rights reserved.

1. Introduction

This paper investigates the economic efficiency and perfor- manceofvesselsinanopen-accessfishery.Threemainhypotheses aretested:first,thatthevesselownerhasapositivegrosscashflow fromhisfishingoperation;second,thatthecalculatedopportunity costofcapitalisnotcoveredinfullbecauseofthespecialchar- acteristicsofthefishingindustry;andthird,thatfishingefficiency variationishigherthancostefficiencyvariationamongvessels.Itis wellknowninthefisherieseconomicsliteraturethatinequilibrium thepotentialresourcerentiswastedunderopenaccessifthefleet consistsofhomogeneousvessels(Clark,1990).However,itisalso wellknownthataproducer’ssurplus,calledintra-marginalrent infisheries,mayexistevenunderopen-accessequilibrium(Copes, 1972).Sincefisheriesmanagementhasbothbenefitsandcosts,it maybeappropriatetoknowwhetheranopen-accessfisherycre- atesanynetbenefits,suchasintra-marginalrent,beforeinstigating costlymanagementsystems(WallisandFlaaten,2003).

TheempiricalfocusisaVietnameseopen-accessgillnetfishery in the South China Sea, which is fished competitively by ves- sels from more than 10 countries. Vietnam has a coastline of

∗Correspondingauthor.Tel.:+84983128350;fax:+84583831147.

E-mailaddresses:[email protected],[email protected](N.N.Duy), ola.fl[email protected](O.Flaaten),[email protected](N.T.K.Anh),

[email protected](Q.T.K.Ngoc).

about3260kmanditsexclusiveeconomiczone(EEZ)extendsover morethanonemillionsquarekilometres(FAO,2005).InVietnam’s marinewaters,thereareabout3.1milliontonnesofstandingstock ofmarinefishwithmorethan2000fishspeciesandaround1.4 milliontonnesofpotentialsustainableyields(FAO,2004).

Owingtothefearoftheoverexploitationofcoastalresources,a programmeinvestinginoffshorefishingvesselshasbeenimple- mentedsince 1997.The Vietnamesegovernment,therefore,has emphasisedtheneedtodevelopitsoffshorefleetwithgreatcau- tiontoavoidthedevelopmentofaneconomicallyunsustainable fleet (FAO, 2005). In 2005, the Ministry of Fisheries proposed twonewmajordevelopmentgoalsforoffshorefisheries¹:(1)“to ensuresustainableandefficientoffshorefisheries,whilemaintain- ingbothmarineecosystemfunctionsandharmoniousrelationships withcoastal fisheriesand contributing tothe protectionof the sovereigntyoftheterritorialwatersandthenationalsecurityof Vietnam”and(2)“toenhanceincome,createnewoccupationsand improvethelivingstandardsoffishingcommunitiesthatdepend on offshore fisheries” (FAO, 2005). In order to assess whether thesetwodevelopmentgoalsarebeingachieved,themonitoring andreportingofannualperformanceindicatorswereintroduced at a conference on the national strategy for marine fisheries

1TheMinistryofFisherieshasnowmergedwiththeMinistryofAgricultureand RuralDevelopment.

0165-7836/$–seefrontmatter© 2012 Elsevier B.V. All rights reserved.

http://dx.doi.org/10.1016/j.fishres.2012.04.008

management anddevelopment inVietnam (FAO, 2005).² These indicators are referred to as measures to assist when draft- ingpoliciesformarineresourcemanagement. Thus,Vietnamese policymakersrequire not only reliable assessments of offshore resources,butalsoanunderstandingoftheeconomicrealitiesof offshorefishing(FAO,2005;Longetal.,2008).

Tothebestofourknowledge,officialgovernmentinstitutions donot regularlycollectcostsandearnings datafor theevalua- tionoftheeconomicperformanceandefficiencyofoffshorefishing fleetsdespitethestatedneedforthis.However,someindependent researchpapershavebeenpublishedinrecentyearsforoffshore vessels(Longetal.,2008;Flaaten,2008).Thisstudyaddressesthe economicperformanceand efficiencyofgillnetvesselsin South CentralVietnaminthe2008seasonthroughacostsandearnings survey.Thehomeportofthesevessels,thecityofNhaTranginthe provinceofKhanhHoa,isoneofthemainportsforVietnamese offshorevesselsfishingtheSouthChinaSea.Thegillnetfleetwas selectedforthisresearchmainlyfortworeasons:(1)gillnetisone ofthemainVietnamesegeartypesforoffshorefisheriesand(2)gill- netisafishinggearwhichhashighselectivityandisconsideredto belesslikelythantrawltodamagetheseafloor(King,1995).Arep- resentativesurveyofallVietnameseoffshorevesselswouldhave beenthepreferredapproachforthisresearch.However,owingto bothfinancialandtimeconstraintsthisworkhadtobelimitedto asmallergeographicarea.

Itisnowaratherstandardproceduretoconductcostsandearn- ingssurveysandmeasurebasiceconomicperformanceindicators forafishery.Thesameappliestothiscase.However,thispapercon- tributestothefurtherdevelopmentofthemethodsofcomparing economicperformanceandefficiencyofvesselsbythestandard- isationoffishingeffortandtheestimationofaSalterdiagramfor thisfleet.Thismethodmakesitpossibletoestimateintra-marginal rentforeachvesselandforthefishery.Further,theprofitability effectsofthe2008governmentfuelcostcompensationsubsidyare estimatedanddiscussed.Thissubsidyschemewasintroducedto compensatefishingvesselsforthelargeincreasethatyearinfuel andlubricantoilcosts,butwasabolishedafteroneyear.³

Theremainderofthispaperisorganisedasfollows.Section2 givesbackgroundinformationontheinvestigatedfishery.Section 3describesthetheoryandmethodsusedanddeveloped.Section 4focusesonthedatafromthecostsandearningssurvey.Section 5isdevotedtotheresearchresults.Section6highlightsthekey featuresoftheresults,andthefindingsandrecommendationsare summarisedinSection7.

2. Background

Vietnam’scoasthasmanybaysandestuariesaswellasdiverse coastalandmarineresources,andthustheEEZofVietnamcontains anabundantnumberofspecies(FAO,2005).Thesehavecreated goodpotentialforthedevelopmentofmainlymulti-speciesmarine capturefisheriesaswellasmarineaquaculture.Thefisheriessec- tor,includingmarinecapturefisheries,hasbecomeanimportant sectorinthenationaleconomy, contributing4%toGDPin2006 (Pomeroyetal.,2009).However,Vietnam’smarinefisheriesare consideredtobesmallscale(Pomeroyetal.,2009;Raakjaeretal., 2007)andopenaccess(Longetal.,2008;FAO,2009).Marinefish- eries’ production levels have increasedcontinuously over time (GSO,2008),andthenumberoffishingvesselshasincreasedsignifi- cantlyandfarbeyondthecontroloffisheriesmanagers(FAO,2005).

Coastalfishingcapacityhasexceededthesustainablelimit(FAO,

2 SeetheseperformanceindicatorsinFAO(2005).

3 TheVietnameseGovernment2008fuelcostsupportforfisherswasoutlinedand discussedinDecision(2008a,b).

2004,2005),⁴andcoastalresourceshavethusbeenoverexploited andseemtobedecreasing.

Mostoffshorefishingvesselsof theKhanhHoaprovinceare locatedintheprovincialcapitalNhaTrang.In2009,theNhaTrang offshoregillnetfleet amountedto233of290vesselsthat have engineslargerthan50horsepower(HP),morethan80%,and178 of208vesselswhoseenginesarelargerthan90HP,nearly86%

(DECAFIREP,2009⁵).Mostgillnetvesselswithenginesofmorethan 250HParealsolocatedinthiscity.Theoffshorefisheryhasbeen openaccesssinceitsinceptionandaminorresourcetaxwasabol- ishedin2008(Flaaten,2008).

NhaTrang’soffshoregillnetoperatorsoftenoperateinwaters 50–70nauticalmilesfromthecoastline,alongtheterritorialwaters oftheKhanhHoaprovince,andmovetowardstheeastandsouth- westwaters(6^◦00–8^◦00N;104^◦30–108^◦00E)andsouthwestof theSpratlyIslands(TruongSa)(6^◦00–9^◦00N;110^◦30–114^◦00E), aswellastofishinggroundsofhighseawaters(6^◦00–7^◦00N;

109^◦00–110^◦00E)(Fig.1).Theactualfishinggroundsdependon themovementdirectionoffishandtheaggregationofmigratory species.Thetargetfishspeciesaremainlytunaandmackerel.Off- shoregillnetvesselsoperatefromSeptember(orOctober)toJuly (orAugust)ofthefollowingyear.Themajorfishingseasonfortuna runsfromFebruarytoJuly(calledthesouthwestmonsoon),when fisharefoundintheoffshorewatersfromKhanhHoatotheBaRia- VungTauprovince,whilethefishingseasonformackerelspecies rangesfromFebruarytoJune.Thesecondseasonisnormallycalled thenorthwestmonsoon,rangingfromOctober(orNovember)to Januaryofthefollowingyear.Tunaisconcentratedintheextreme southofVietnaminthesecondseasonandonlygillnetvesselswith alargeamountofenginepowercanventurefurtherintothisfish- ingground.Offshoregillnetvesselsoftenstayonshoreforrepairs andmaintenancefromAugusttoSeptember.Themajorityofthem aretunagillnetvessels,asitisdifficulttofindmackerelgillnetters inNhaTrangbecauseofmackerelstockdepletionandtheweak fishingexperienceandcapacityofpredictionofthefishingground (KimAnhetal.,2006).

3. Theoryandmethods

Theeconomicperformanceoffisheriesisoftenassessedfrom economicsurveysofvesselsparticipatinginthefishery.Froma fisheriesmanagementperspectivewithheterogeneousvessels,the levelofeconomicrentaccruingintheopen-accessfisherycanbe estimatedfromtheeconomicprofitsofthevesselssurveyedand itconsistsoftwocomponents:resourcerentandintra-marginal rent (Copes, 1972; Coglan and Pascoe, 1999). Resource rent is dissipatedunderopen-accessconditionsbecauseofthecommon propertyproblemdiscussedinGordon(1954),Hardin(1968)and Munroand Scott (1985). Withheterogeneous vesselsunder an open-accessregime,theprofitsgeneratedcouldbeconsideredto beintra-marginalrentgainedbythefactorsofproduction,suchas capital,variableinputsandlabour,throughmoreefficientvessels andpractices(CoglanandPascoe,1999).

In this study, the main economic performance indicators (Table 1) are used toestimate thelevel of intra-marginalrent generatedbyeachvesselintheopen-accessgillnetfishery.⁶The

4Inthefisheriescontext,thecoastalseaareasaremeasuredfromthecoastto thelineconnectingpointsof24nauticalmilesfromthecoast.Fishinginthesea areasoutsidethe24nauticalmilelimit,totheouterlimitofVietnam’sseaareas,is referredtoasoffshorefishing(Decree,2006).

5ForthisandotherreferencesintheVietnameselanguagefurtherinformation canbeobtainedfromthecorrespondingauthor.

6Thisrentisnotrelevanttotherentgainedbypreventingexcessiveharvesting capacitythatiscausedbytheClassIandIIformsofthecommonpropertyproblem discussedinMunroandScott(1985).

Fig.1. Thedistributionoffishinggroundsandfishingproductivityofgillnetvesselsinthesouthwestmonsoon,2008.

Source:RIMF(2011).

main indicator added for this analysis is gross cash flow. This indicatorisreferredtoasagoodshort-termindicatorinfisheries (EuropeanCommission,2004).Apositivegrosscashflowmeans thatvesselownersareabletopayforalltheiroperatingcostsand meetatleastpartoftheirobligations tocreditors.Areasonable firsthypothesishereisthatthevesselownerhasapositivegross cash flow in thefishing operationyear, includingthefuel cost quasi-lump-sumsubsidy.

The surveyed gillnet vessels are owner-operated, and the skipper–owners, as well as other family members, receive Table1

Definitionofperformanceindicators.

Grossrevenue=landingsvalue

Income=grossrevenue−variablecosts(exceptlabourcost) Grossvalueadded=income−fixedoperatingcosts Grosscashflow=grossvalueadded−labourcost

Profit=grosscashflow−depreciation−interestpaymentonloans Netprofit(rent)=profit−calculatedinterestonowner’scapital Grossprofitmargin=grosscashflow/grossrevenue

Profitmargin=profit/grossrevenue

Returnoncapitalvalue=profit/netcapitalvalue Returnonowner’scapital=profit/vesselowner’scapital

remunerationthroughthesharesystemascrewmembers.Even thoughtheopportunitycostoftheowner’scapitalmaybe“high”, theopportunitycostoftheskipper–ownerandfamilymembers’

labourmaybe“low”.Thetrade-offbetweenthesetwoopportunity costfactorsimpliesthatskipper–ownersdonotnecessarilyinclude thefullopportunitycost ofcapital.A relativelyhighamountof capitalinvestedisoftenseenasahigherpriorityforfisheriesman- agementandpolicymaking.Moreover,theeffectoftheopportunity costoflabouronthemeasureofnetprofitmaybelessproblematic sinceowner–operatorsreceiveanexplicitcrewshare(Boncoeur etal.,2000).Thus,asecondhypothesisisthatthecalculatedoppor- tunitycostofcapitalisnotcoveredinfullinanopen-accessfishery.

Vesselsmaybedifferentwithrespecttotechnicalcharacteristics and catchefficiency,but intheend theyallhave tomeet their economicobligationstosurviveaseconomicunits.Thus,a third hypothesisisthatthefishingefficiencyvariationishigherthancost efficiencyvariationamongvessels.

Thefollowingsubsectionsdescribetheeconomicperformance assessment and the method for comparing vessel economic efficiency. The theory of heterogeneous fishing vessels in an open-accessfisheryisalsopresentedbrieflyasdiscussionsforback- groundinthisempiricalresearch.

3.1. Economicperformanceindicators

TheeconomicperformanceindicatorsarepresentedinTable1.

Mostdefinitionsoftheseindicatorsarethesameasthoseusedin EuropeanCommission(2004)andLongetal.(2008).Thesedefini- tionsalsocorrespondinprincipletothoseusedinseveralprevious profitabilityanalysesoffishingvesselsinindustrialisedcountries (Flaatenetal.,1995;Pascoeetal.,1996;Whitmarshetal.,2000;Le Floc’hetal.,2008).

Thegrossrevenueis calculatedfor twocases: oneincluding andoneexcludingthefuelsubsidies.The2008fuelcostsupport appearsas quasi-lump-sum subsidies per trip, payabledirectly tofishers for a limited number of trips per year. Vesselswith anengineof90 HPor largercanbesupportedwith10 million VNDpertrip,toamaximumofthreetripsperyear.Vesselswith an engine from 40 HP to 90 HP can receive 6.5 million VND pertrip, toa maximum of fourtrips per year, and others cor- respondingly4millionVNDpertriptoamaximumoffivetrips per year (Decision, 2008b). Fishers have to accept the market fuelpriceintheirfishingoperations.Althoughthe2008fuelcost supportmayseemlikeafishingeffortsubsidy,inrealityitwas income support for fishers; hence, this subsidy item has been addedtogrossrevenueinsteadofsubtractingitfromcostsinthis study.

Asthepurposeofthepresentstudyistocalculateeconomic performance indicators, non-cashcosts are taken into account.

Forthisstudy,depreciationiscalculatedbasedonthefixedcap- ital value of vessels and gear, valued at current prices. This meansthat assetsacquiredinanearlier period(historicprices) have tobe revalued to convertthem into 2008 prices. Annual averageconsumer price indices are used for this revaluation.⁷ Depreciationisobtainedusing a straight-linedepreciation plan based on the owner’s estimated lifespan of the fixed capital items.

Theopportunitycost oftheowner’s capitalisdefinedasthe calculatedinterest (I)on theowners’ capitalin theyear ofthe profitabilityanalysis(2008),which iscalculatedby theformula I=[(TK−D)−L]r.TKisthetotalfixedcapitalstockrevaluedat2008 pricesandDistheaccumulateddepreciationin2008.Thus,TK−D isthenetcapitalvalueofthevesselin2008.Listheremainingdebt ortheremainingbalanceontheloanin2008and [(TK−D)−L]

isthevesselowner’s capitalor levelofequity in 2008.risthe rateofinterest,whichisdefinedastheVietnameselendinginter- estrate.Forthisfishingyear,theinterestrateis9%perannum,⁸ whichwaschosentoreflecttheopportunitycostoftheowner’s capital.

Thelackofmalleabilityoffisheriesinvestmentsbringsabout economicaccountingdifficulties.Inpractice,vesselsandfishing equipmentcannoteasilybemodifiedoralteredtoparticipatein othersectorsoftheeconomy;thus,adjustmentoutofthefisheryis likelytobealong-runphenomenon(Clarketal.,1979).Although thisisdeemedappropriate,theinterestrateabovecanbetaken intoaccountfortheopportunitycostoftheowner’scapital.This isinlinewithpreviousresearchthatusedtheinterestrateofgov- ernmentbondstoassesstheeconomicperformance offisheries (Flaatenetal.,1995).

7 Priceindicesfortherelevanttypesofassetsshouldbeused.However,construct- ingconstantqualitypriceindicesforcapitalgoodsisadifficulttaskand,moreover, informationonthepriceindicesfortherelevantassettypesisunavailableinmost developingcountries,includingVietnam.Informationonannualaverageconsumer priceindicesisavailablefromIMF(2009).

8 Theinterestrateof9%p.a.isbasedoninformationfromtheannualreportsof theStateBankofVietnam(SBV,2008,2009).

3.2. Behaviourofheterogeneousfishingvesselsinanopen-access fishery

Whenonevessel’slandingisconsideredtobeasmallproportion ofthetotallandingoffish,itisfirstlyassumedthateachvesselisnot abletoimpactonthemarketpriceoffishinthecompetitivemarket.

Itisreasonabletoconsiderfishersasprice-takersandassumethat thepriceoffishisthesameforallvessels.Second,sincefishstocks areconsideredtobeconstantfromonevessel’spointofview,itis assumedthattheactivityofthevesselhardlyaffectsthetotalstock biomass.Therefore,thevessel’sharvestfunctionisafunctionofits effort,giventheperiodoftimeandthestocklevel.Itisassumedthat thisfunctionistheSchaeferharvestfunction,h(e;X)=qeX,whereh isthelandedcatch,eistheeffortofanindividualfishingvessel, giventhestockleveloffish,X,andthecatchabilitycoefficient,q.In whatfollows,itisassumedthatfishingeffortcanbemeasuredand comparedamongvessels.Howthiscanbeachievedempiricallyis demonstratedbelow.

The profit of the vessel is (e;X)=ph(e;X)−tc(e) or (e;X)=pqeX−tc(e), where p is the market price of fish and tc(e)isthetotalcostofeffort.Inthelong-term,tc(e)consistsofthe totalvariablecostsofeffort,tvc(e),andafixedcost,f,whereasin theshort-termitisonlythetotalvariablecostofeffort.Thetotal revenueofavessel,pqeX,isafunctionofthevessel’seffort,given p,qandX.

Fortheobjectiveofprofitmaximisation,theprofitofonevessel ismaximisedatthelevelofeffortatwhichitsmarginalcostequals itsmarginalrevenue,mc(e)=pqX.Themarginalrevenueofeffort equalstheproductofthepriceoffish,catchabilitycoefficientand levelofstock,pqX.Allvesselshavethesamemarginalrevenueof standardisedeffort,equaltofisheryaveragerevenue, atagiven pointintime.

In the short-term,the vessel operates at a positive level of effortonlyifpqX≥tvc(e)/e=avc(e),whereavc(e)istheaverage variablecostofthevessel’seffort.Themarginalrevenueofeffort hastobemore thantheminimumaveragevariablecostofthe vessel’seffort.Inthelong-term,theconditionfortheexistence ofthefishingoperationsofindividualsisthatthemarginalrev- enueofefforthastobelargerthantheminimumaveragetotal costofeffortinordertocoverthefixedcapitalcost,f.Thismeans pqX≥tc(e)/e=[tvc(e)+f]/e=atc(e),whereatc(e)istheaverage totalcostofthevessel’seffort.Thefixedcapitalcost,f,equalsdepre- ciationandinterestpaymentsonloansasdiscussedabove.Italso includesthecalculatedinterestontheowner’scapitalsinceweare discussingnetprofit.

FromtheSchaeferharvestfunctionh=qeX,thecatchperunitof effort(CPUE),h/e=qX,maybecalculated.ThisimpliesthattheCPUE ofeachvesselisqXsincethefishingeffortofheterogeneousvessels isstandardised,andthefishstocklevelisassumedtobeconstant intheshort-term.Sincefishpriceisconsideredtobethesamefor allvessels,theaveragerevenueofthevessel’sstandardisedeffortis thussimilaramongfishingvessels,andequalstheaveragerevenue oftheeffortofthefishery.Asaresult,theeconomicefficiencyof thevesselisreferredtoasthecostefficiencyofthevessel’seffort.

Heterogeneousvesselswithdifferentcoststructuresarethusdif- ferentwithrespecttocostefficiency,resultinginthegenerationof differencesinrentunderunregulatedopen-accessconditions–in theshortaswellasinthelongrun.CoglanandPascoe(1999)and Flaaten(2010)discussedinmoredetailthebehaviourofheteroge- neousfishingvesselsfromtheseperspectives.

3.3. Theeconomicefficiencymethod 3.3.1. Fishingeffortstandardisation

Inthisstudy,tocomparetheeconomicefficiencyofvesselsthe fishingeffortofvesselsisstandardised.Standardisedfishingeffort

indicatorsforvesselsareestimatedusingtheproductionfunction approachtoeffort.Hannesson(1983)andCampbell(1991)applied thismethodtotheestimationoffishingeffortintheLofotenwinter codfisheryandintheTasmanianrocklobsterfishery,respectively.

Eideetal. (2003)alsoincludeda seasonaltermtotakecareof intra-annualvariation in theCPUE. Padilla and Trinidad (1995) appliedtheproductionfunctiontofishingeffortstandardisation inthesmall-pelagicfisheryinthecentralPhilippines,thecatchof whichwasreferredtoasameasureoffishingeffort.

TheSchaeferproductionfunctionofeachvesseldiscussedabove isaspecialformoftheCobb–Douglasfunction,h=qe^ˇ1X^ˇ2,namely withˇ1=ˇ2=1.Thegeneralformoftheeconomicproductionfunc- tionish=f(e,X),whereeisavectorofinputsconsistingofcapital (K),labour(L)andothervariableinputs(V).Withcross-sectional vesseldataforoneyearbeingusedfortheshort-term,anassump- tionof constant stockresources isreasonable. Thisassumption impliesthattheproductionfunctionisseparable.Thisseparability allowsfortheaggregationofindividualinputsintotheaggregate variablefishingeffort.Theproductionfunctioncanthusberewrit- tenh=f(g(e),X).Theeffortfunctionofeachvessel,g(e),canalsobe presentedintheformoftheCobb–Douglasfunction:

e=Ax1^˛1x^˛2²... x^˛_k^k (1) whereeisnowthestandardisedfishingeffort;x₁,x₂,...,x_kare thekinputsofthevessel;andAisaconstant.TheCobb–Douglas functionhasbeenwidelyusedinanalysesofthefisheriessector, includinginHannesson(1983),Campbell(1991)andPadillaand Trinidad(1995).Inpractise,Eq.(1)canbeestimatedthroughalog- linearfunction.

Inpreviousresearch,itseemsmostcommontoestimateapro- duction(catch)function,suchthattheestimatedcatchfunction alsocanbeconsideredtobeaneffortfunction(Hannesson,1983;

Eideet al., 2003; Andersen, 1999). Padilla and Trinidad (1995) estimated fishing effort equations, which were used to derive standardisedmeasuresoffishingeffort,throughusingthecatch interpretedaseffectivefishingeffort.Byassumingthattheprices offisharefixedandthesameforallvesselsandmonthswithinone year,annualgrossrevenueisconsideredtobeaproxyfortheannual quantityoffish,forwhichactualdataarelacking.Thus,annualgross fishingrevenuepervesselcanbeinterpretedasa fishingeffort indicator,whichusuallyvariesacrossvessels.

3.3.2. Relativestandardisedfishingeffortandvesseleconomic efficiency

AdaptingthedefinitionofrelativefishingpowerbyBeverton andHolt(1957),therelativestandardisedfishingeffortofvesseli canbedeterminedbythefollowingformula:

ε_i= e_i

e¯ (2)

whereεiistherelativestandardisedfishingeffortofvesseli,e_iisthe standardisedfishingeffortofvesseliand ¯eistheaveragestandard- isedeffortofallvessels.Thisdefinitionofεiisusedbelowtoanalyse theeconomicefficiencyofvessels.Bynature,usingtheresultsof

“standardisedeffort”estimatedinEq.(1)or“relativestandardised effort”calculatedfromEq.(2)shouldleadtothesameconclusions.

Thenotionof“relativestandardisedeffort”isappliedinthisstudy.

Calculating“relativestandardisedeffort”alsogivesindicesofrel- ativefishingpower.Theseindicescanbeexpressedastherelative fishingpowerefficiencyofvessels.

Inthis study,theratioofcosttorelative standardisedeffort reflectsthecostefficiencyandeconomicefficiencyofthevessel.The relationshipbetweencostefficiencyandtherelativestandardised effortofeachvesselwillbegraphedusingaSalterdiagram,withrel- ativestandardisedeffortalongthehorizontalaxisandtheaverage

costperunitofrelativestandardisedeffortontheverticalaxis.⁹For eachvessel,relativestandardisedfishingeffortismeasuredbythe widthofthebar,whereastheheightofthebarmeasurescostper uniteffort(Fig.3).Allvesselsarearrangedfromlefttorightaccord- ingtotheircostefficiencylevels,fromthemostcost-efficientone totheleastcost-efficient.

4. Data

The2008datawereobtainedbyasurveyofcostsandearnings aswellasthetechnicalandoperationalcharacteristicsofoffshore gillnetvesselsinNhaTrang(AppendixA,Tables A.1andA.2).¹⁰ Thesedatawerecollectedthroughdirectface-to-faceinterviews withfishinghouseholds, which wererepresentedby thevessel ownerand/or hiswife. Theyconsistof detailed information on variousaspectsofthegillnetfisherysuchasvesseltechnicaland operationalcharacteristicsandcostandlandingvalueinformation.

Fromapopulationof225registeredoffshoregillnetvesselsin NhaTrang,asampleof58gillnetvesselswasselectedforinvesti- gation.Thesampleofgillnetvesselsinvestigatedcomprisesabout 25.8%ofthepopulation.Theinvestigationprocesswasperformed withtheaimofobtainingarepresentativesample.Hulllengthwas thephysicalcharacteristicusedtotestthesamplerepresentative- nessbecauseofavailabledata.Acomparisonofthehulllengthof thesamplewiththatoftheoffshoregillnetfleetinNhaTrangasa wholesuggeststhatthesamplewasfairlyrepresentativeofthefleet (AppendixB).Althoughtherewouldbesomeuncertaintiesabout thereliabilityoftheresultsofanysurvey(Pascoeetal.,1996),the statisticalresultspresentedbelowarethoseofthesample.

5. Results

5.1. Economicperformanceindicators 5.1.1. Thesubsidiescase

Table2showsthattheaveragevessel’sannualgrossrevenue fromfishingoperationswas1044.6millionVND.¹¹Becauseall58 surveyedgillnetvesselsreceivedthe2008quasi-lump-sum fuel subsidy,theaveragegrossrevenueincreasedby2.8%.Theresults showthatincome,grossvalueadded,grosscashflowandprofit arepositiveforanaveragevessel,whereasnetprofitisnegative becauseofthecalculatedinterestontheowner’scapital(Table2).

Theaverageannualcrewsharewasabout17.1millionVND,result- ingintheaveragemonthlycrewshareduringfishingseasonof1.65 millionVND,withtheaverageannualtotaloperatingmonthsofa gillnetvesselbeing10.3.

AlsoshowninTable2,theaveragesofvessels’grossprofitmar- ginandprofitmarginwere17.3%and3.8%,respectively,withwide rangesforboth indicators.However,byusingthesamplemean valuesinTable2,thesetwoindicatorswouldincreaseto18.2%and 4.7%,respectively.Theaveragesofvessels’returnoncapitalvalue andreturnontheowner’scapitalwere5.3%and6.1%,respectively, alsowithlargeranges.Thelargevarianceofthereturn oncapi- talvalueandreturnontheowner’scapitalwascausednotonlyby greatdifferencesinprofit,butalsobywiderangesinthenetcapital valueandnetowner’scapitalofvessels.

Onthepositivegrosscashflowhypothesis:Theaveragevessel’s grosscashflowwas195.8millionVND(Table2).Therewereonly

9Othertypesofsoftwareprograms,suchasGLIM(e.g.Healy,1988),couldof coursehavebeenusedforthistypeofanalysis.

10Acopyofthequestionnairemaybeobtainedfromthecorrespondingauthoron request.

11VND:Vietnamesedong,theunitofVietnamesecurrency.Theaverageexchange ratefor2008was1USD=16,302.3VND(GSO,2009).

Table2

Economicperformanceindicators,inmillionVND,2008.

Criteria Thesubsidiescase Thenon-subsidiescase

Mean S.D. Mean S.D.

Grossrevenuefromfishing 1044.6 341.2 1044.6 341.2

Subsidy 29.2 1.6

Grossrevenuewithsubsidy 1073.7 342.3

Variablecosts 604.4 174.5 604.4 174.5

Income 469.3 193.8 440.2 192.9

Fixedcosts 89.4 30.1 89.4 30.1

Grossvalueadded 379.9 172.3 350.7 171.4

Labourcosts 184.1 78.4 184.1 78.4

Grosscashflow 195.8 121.2 166.6 120.5

Depreciation 136.4 45.8 136.4 45.8

Interestpaymentonloans 8.9 13.9 8.9 13.9

Profit 50.5 93.1 21.4 92.7

Calculatedinterestonowner’scapital 68.9 39.2 68.9 39.2

Netprofit −18.4 84.4 −47.6 84.4

Netcapitalvalue 862.8 454.7 862.8 454.7

Netowner’scapital 766.1 435.3 766.1 435.3

Grossprofitmargin^a 0.173 0.083 0.147 0.089

Profitmargin^a 0.038 0.085 0.008 0.092

Returnoncapitalvalue^a 0.053 0.127 0.007 0.128

Returnonowner’scapital^a 0.061 0.139 0.007 0.142

Averageincomeperfisherman 17.1 5.8 17.1 5.8

Source:Owndataandcalculations.

aTheseindicatorsareestimatedwithrelativetostandarddeviation,andmeasuredindecimalnumbers.

twovessels(vesselnumbers25and40)whosegrossrevenuewith the2008subsidiesdidnot offsettheirvariable,fixedoperating andlabourcosts.However,thepositivegrosscashflowhypoth- esisisnotstatisticallyrejectedforthesampleof58vesselssince theaveragevessel’sgrosscashflowwaspositiveandsufficientlyfar fromzero.

Abreakdownofthesampleaccordingtotheenginesizeofves- selsshowsthatmostannualperformanceindicatorsincreaseon averagewithenginesize(AppendixA,TableA.3).Costsfollowthe sametrendasgrossrevenueandvesselenginesize.Anaverage gillnetvesselofeachgroupcoveredthecashcostaswellasthe depreciation.In2008,thetwovesselgroupswithlargerengines hadeconomicperformanceindicatorsfarbetterthanthoseofthe twovesselgroupswithsmallerengines.However,whilevessels withmorethan400HPonaveragefor2008barelycoveredalltheir expensesandreceivedonlyaverysmallsurpluswithanetprofit (rent)of0.3millionVND,othervesselsattainedanegativenetprofit (AppendixA,TableA.3).

5.1.2. Thenon-subsidiescase

Theaveragequasi-lump-sumsubsidywas29.2millionVNDper vessel(Table2).Withoutthesubsidy,onemorevesselwouldhave hadanegativegrosscashflowandsevenadditionalvesselswould havehadanegativeprofit.Theaveragegillnetvesselwasearning aprofitof21.4millionVNDfromitsactualfishingoperationsat marketprices,but50.5millionVNDincludingthefuelcostsub- sidy.Onlyvesselswithmorethan250HPonaveragewereableto coverdepreciationandinterestpaymentsonloansfromtheirgross fishingrevenue(AppendixA,TableA.4).

Ontheopportunitycostofcapitalnotcovered-in-fullhypothesis:

Itmaybeconcludedthatthesecondhypothesis,inwhichthecal- culatedopportunitycostof capitalis notcoveredin fullin this open-accessfishery,cannotberejected.Thenetprofitisnegative foranaveragevesselbothinthecaseofsubsidiesandnon-subsidies (Table2).Additionally,allvesselgroupsonaverageearnnegative netprofitsinthetwocases,exceptforthevesselgroupwithengines of400HPandlargerinthesubsidiescase(AppendixA,TablesA.3 andA.4).Thus,vesselownersdonotconsidertheopportunitycost oftheowner’scapitalinfullasaregularfishingcost.

5.2. Standardisedfishingeffort–econometricresults

Initially,manyfactorswereconsideredtobeaninputbundleto generatefishingeffort.However,someofthemwereexcludedfrom thefinalmodelbecauseneitherindividualnorjointtestsproduced anyevidencetosupporttheirsignificanteffectsonthefishingeffort ofthevessel.Consequently,enginecapacityandfishinggear,as proxiesforcapitalinputs,andfishingdaysinayear,astheproxy forvariableinputs,wereidentifiedasthefactorsaffectingthefish- ingeffortofthevessel.Theestimatedcoefficientsarepresentedin Table3.

Theeconometricresultsindicatethattheeffectofindependent variablesinexplainingvariationsinfishingeffortissignificantfor thesamplevesselswithanR² of98.7%.TheF-statisticof1419.4 specificallyshowsthattheestimatedrelationshipissignificant.All thecoefficientsestimatedfortheexplanatoryvariablesaresignifi- cantlydifferentfromzeroatthe1%levelorbetterbasedontheOLS estimationwithWhite’sprocedureforcorrectingforheteroskedas- ticity.

Theequationusedtostandardisefishingeffortforeachvesselis e_i=exp(−0.018)∗HP_i^0.251GEAR_i^0.541DAY_i^0.474 (3) whereHPishorsepower,GEARisthenumberofpiecesofgillnets andDAYisthenumberoffishingdaysin2008.Theresultsestimated fromEq.(3)showthatvesselnumber35hastheloweststandard- isedeffortof478.53,whereasthehigheststandardisedeffortof 1514.77isforvesselnumber30.Averagestandardisedfishingeffort is1043.18(unitsofeffort).

Table3

Parameterestimateandteststatisticsofthestandardisedeffortfunction.

Variable name

Estimated coefficient

t-Value P-value White t-value

White P-value

lnHP 0.251 16.400 0.000^a 20.570 0.000^a

lnGEAR 0.541 12.530 0.000^a 12.330 0.000^a

lnDAY 0.474 9.649 0.000^a 10.600 0.000^a

Constant −0.018 −0.060 0.952 −0.063 0.950

Source:owndata.

R²=0.987;F-statistic=1419.4.

aStatisticallysignificantatthelevelof1%.

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

3544556465449554740363482254553383458505218334512414433711239222320214213298 7112610579322716416192817153130

Relative standardised effort

Vessel number (ID)

Fig.2. Therelativestandardisedeffortofthe58gillnetvessels,2008.

Source:Owndata.

5.2.1. Relativestandardisedfishingeffort

Fig.2showsthattheminimumandmaximumvaluesofrelative standardisedeffortare0.46and1.45,withcorrespondingvessel numbers35and30,respectively.Thus,thehighestrelativestan- dardisedeffort,therebyalsofishingefficiency,ismorethanthree timesthelowest.Therewere28vesselswitharelativestandardised effortoflessthanone,whereas30vesselshadarelativestandard- isedeffortgreaterthanone(Fig.2).Themajorityofvesselswith relativestandardisedeffortindicesabove onehadengines with morethan250HPand300piecesofgillnetsormore(Appendix A,TablesA.1andA.2).

5.3. Economicefficiencyofvessels

5.3.1. Short-termresultswithoperatingcosts

Fig.3ashowstherelativecostefficiencyofthe58gillnetvessels intheshort-term,rankedbytheheightofthebar,whichmeasures theaverageoperatingcostperunitofrelativestandardisedeffort.¹² Thewidth of each barin Fig. 3displays theestimated relative standardisedeffort,εi,ofonevessel.Tocomparethelevelofrent generatedamongthesamplevesselstheaveragerevenueperunit ofrelativestandardisedeffortisalsoshowninFig.3a,bothforthe caseofexcludingsubsidies(solidline¹³)andthecaseofincluding subsidies(dashedline¹⁴).Ingeneral,themajorityofthemostcost- efficientvesselsintheshort-termwerethosewithlargerelative standardisedefforts(aboveone),whilethereweremanyvessels

12 Theaverageoperatingcostperunitofrelativestandardisedeffortofvesseli=[total variable,fixed,labourcostsofvesseli]/εi,whereεiisshownverticallyinFig.2.

13 The average revenue per unit of relative standard- ised effort, without the 2008 fuel cost subsidy, is ARos(E)=

i=1totalrevenueofvesseli,withoutsubsidy/

14 Theaveragerevenue,includingthe2008fuelsubsidyperunitofrelativestan- dardisedeffortisARws(E)=

i=1totalrevenueofvesseli,withsubsidy/

.

withsmallerrelativestandardisedefforts(belowone)belongingto thegroupoflowercost-efficientvessels.¹⁵

5.3.2. Economicefficiencyofvesselsinthelong-term

Fig. 3b presents the estimated long-run cost efficiency. The heightofthebarsmeasurestheaveragetotalcost(excludingthe calculatedinterestontheowner’scapital),atc_i,perunitoftherel- ativestandardisedeffortofeachvessel.¹⁶ItwasseeninFig.2that 30vessels havearelative standardisedeffortaboveone,andin Fig.3bthedetailsshowthat22ofthesevesselsareamongthe34 cost-efficientones(atciislessthanorequaltoARos(E)).Thus,eight vesselsthatareamongthemostefficienthalfinefforttermsarenot amongthemostcost-efficienthalfwhencomparingaveragetotal costs.Fromavesselprofitabilitypointofview,governmentsubsi- diesshouldbeincludedontherevenueside.Fig.3bshowsthat24 ofthe30vesselswithrelativestandardisedeffortaboveonewere amongthe40cost-efficientvessels(atc_iisless thanorequal to AR_ws(E)).

Onthehypothesisofgreatervariationinfishingefficiencythanin costefficiency:Thishypothesisisclearlynotrejectedwhencom- paringFig.3withFig.2.Whereasthefishingefficiencyofthemost effectivevesselismorethanthreetimesthatoftheleasteffective one(Fig.2), thecorrespondingratioforcostefficiencyvariation isabouthalfofthis(Fig.3).Ofcourse,inFig.2themostfishing- efficientvesselsarefoundtotheright,whileinFig.3themost cost-efficientvesselsarefoundtotheleft.

15Forexample,inFig.3btheeightlowestcostvesselsfurthesttothelefthaveall inallnineunitsofstandardisedeffort,whereastheeighthighestcostvesselstothe righthaveallinallonlyaboutsixunitsofstandardisedeffort.

16Inthiscase,totalcostsconsistofvariablecost,fixedoperatingandlabourcosts, depreciationandinterestpaymentonloans,butwithoutthecalculatedintereston thevesselowner’scapital.Theaveragetotalcostsperunitoftherelativestandard- isedfishingeffortofvesseliareatci=[totalcostsofvesseli,excludingthecalculated interest]/εi.

9 48 2620 47 5731 374 2219

27 1 15 41 30 50

42 4323 33

39 6 1710 54

16 29 44 14

36

51 11 52

34 35

58

18 49

28 38 32 7

56 21 12

46 53

2 513

55 38

45 24

40 25

0 100 200 300 400 500 600 700 800 900 1000 1100 1200

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58

Relative standardised fishing effort ARws(E)= 1073.7

ARos(E)= 1044.6

(a)

3 54 6 41 1429 33 10 50 1542 3923 3043 9 1 48 2027 3126 47 5737 22419

17 34

51 58

16 44 36

18 52 11

56 28

49 8 21 7

46 53 32

35 12

5 13

2 55

45

38 25

40 24

0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58

Relative standardised fishing effort

Total cost and revenue per unit effort

ARws(E) = 1073.7 ARos(E) = 1044.6

(b)

Operating cost and revenue per unit effort

Fig.3. Thecostefficiencyamongthe58gillnetvesselsintheshortrun(a),andinthelongrun(b).Thehorizontalsolidlinesaretheaveragerevenuefromfishingperunit effortofthe58vessels,ARos(E);thehorizontaldashedlinesaretheaveragerevenueincludingsubsidiesperuniteffortofthe58vessels,ARws(E).Thefigurewithineachbar showsthevesselIDnumber.Unit:millionVNDpervesselperyear.

6. Discussion

AsshowninTable2,theoffshoregillnetvesselsinthesample ofthis study,onaveragein 2008 turneda profitfor the oper- atingyear. From anefficiency point of view, thedesign of the subsidyscheme,financialsupportpertrip,wasbetterthansup- portofdirectpricereductionperlitreoffuel.Fishersstillhadto facethemarketpriceofoil.Allinall,thefuelcostquasi-lump- sumsubsidy contributed to increasing theprofit of thegillnet vessels,relativelymoreforthesmallestvessels(AppendixA,Tables A.3andA.4).Thisisimplicitlybasedontheassumptionthatthe

fuelcost subsidydidnot changethe behaviourof vessels.This seemsreasonableforvesselsinthissurveysincetheaveragenum- berof trips in2008 was13.5andthe governmentsupportper tripcouldbepaidforamaximumoffourtripsperyearforthe smallest(inthissurvey)andforamaximumofthreetripsforthe biggestenginevessels.The2008quasi-lump-sumfuelcostsup- portwould beconsideredtobeanunfavourablesubsidyinthe longrun.Itcouldhaveaddedtotheexpansionofeffort,inprin- cipalleadingtostockdepletion(Sumailaetal.,2007).However, inhindsight thevery highoilpricein2007sofarseemstobe anexceptionfromthelong-runpricedevelopment.Vietnamese

policymakersdecidedtoabolishthearrangementafteronlyone year.

In2008,thelargerenginevesselsshowedabetterannualeco- nomicperformancethansmallerenginevessels.Therearemainly tworeasonsforthis.First,largerenginevesselshavehighergross revenue (higher fishing efficiency and higher catches). Second, theyare onaveragemorecost-efficient thansmallervessels.In addition,thetwogroupsof250–400HPandlargerthan400HP earnedthehighestannualincomeforcrewmembers.Thisispartly becauseoftheoveralllongerfishingseasonofthebiggervessels thanthesmallones.FortheNhaTranggillnetvesselssurveyed,the owner–operatorderivedincomefrombothbeingaskipper/crew memberandfromtheprofitasthevesselowner.Sincetheaverage annualprofitindicatorandcrewincomeincreasewithHP,there maybeincentivesforowner–operatorstoadopttechnologiesthat expandfishingefficiency.

The averageannual income per crew member, 17.1million VND,isabout75%morethanthe2008averageincomeof9.8mil- lionVNDintheKhanhHoaprovince(GSOofKhanhHoa,2008) andabout43%higherthanthe2008nationalaverageincomeof 11.9millionVNDper capita(GSO,2009).Thisalsocorresponds wellwiththefindingsreportedfor2004foroffshorelong-liners of KhanhHoa in Longet al. (2008)with14.5million VND per crew member, although CPI inflation was 55.4% from 2004 to 2008.Thisdemonstratesthatcrewmembersmayhaveearnedtheir opportunitycostoflabour,orabove,in2008.However,without furtherinvestigationitisnotpossibletotelliflowercrewremu- nerationwouldstillprovidesufficientmanpowerforthisoffshore fishery.

Capitalinvestmentandoperatingexpensesarerelativelyhighin thisoffshorefishery,andtheriskofdamagingandlosingworkers, vesselsandfishinggearishigh.Gillnetsoftenrepresenthalfofthe capitalinvestedandtheriskofdamageisquitelargeforthisfish- erybecauseofthehighdensityofvarioustypesofvesselactivities infishinggroundsaswellasdifficultweatherconditionsandthe remotenessofgrounds.Theseriskfactorsareofcoursealsovalid forvesselsandcrew,andtheymayresultinseriousoutcomes.In principle,risk-inducedprivatecosts,suchasinsurance,gearmain- tenanceandreplacementcosts,areincludedinthecostsofthis study.

Theshort-andlong-termrankingofthe58gillnetvesselswere notverydifferent.Alargenumberofvesselswithhighrelativestan- dardisedeffort(morethanone)werethemosteffective,bothfrom afishingefficiencyandfromacostefficiencypointofview.Asa result,thelargequasi-rentgeneratedintheshort-termandintra- marginalrentgainedinthelong-termweremostlyearnedbythe samevessels.¹⁷Thisresultindicatesthatprivatefishinginvestors maystillfindthisfisheryattractiveinthenearfuture.Eitherinvest- mentsinenginecapacityandfishinggearoranadditionalincrease infishingtime maycontinue thisgrowth.Thisseemstoreflect somewhatthesituationof KhanhHoa’sfisheries sincethetotal enginepowerof thefishingfleet continuedtoincreasein2009 (DECAFIREP,2009).Ofthevesselssurveyed,twogillnetvesselshad (estimated)negativegrosscashflowsand16outof58(27.6%)oper- atedataloss(profitbeforethecalculatedopportunitycostofthe owner’scapital)evenafterreceivingthe2008fuelsubsidies.These vesselsmaycontinueoperationsaslongastheownersconsider

17 Inpractice,thedifferencesinrentmayarisefromthedifferencesincatchcompo- sition.Mackerelspeciesoftenbringhigherrevenuethantunaspeciesinthisfishery.

However,asmentionedabove,themajorityofNhaTrang’soffshoregillnetoperators aretunagillnetvessels,whichweresurveyed.Theinvestigationfoundthat,infish- inggroundsofhighseawaters,skipjacktunaisthemajortargetspeciesoccupying over90%ofthetotalcatchandwithlittlevariationamongvessels.Therefore,itmay beappropriatetoassumethatthecatchcompositionisthesameforallvessels.

capitalcostsassunk.Thelossmaybeperceivedasarisingfrombad luckorapooryearandnotbeingexpectedtopersistovertime.The long-runresourceeffectoftheexpansion/contractionofcapacityin thisvesselgroupisprobablymarginalsincetheirresourcesmainly areinternationallyopen-accessresourcesintheEastSea(South ChinaSea).

Theaveragereturnontheowner’scapitalof6.1%waslessthan thepresumedopportunitycostrateof9%.Alargenumberofves- selsmadeeconomiclosses,aftercalculatedcapitalcosts,whereas asmallernumberofvesselsweregeneratingintra-marginalrent.

Ingeneral,thelargestvessels(highHP)earnedahigherrentthan thesmallerones,buttherearesomeexceptions.Theexceptions, namelythatsomeofthesmallervesselsperformwell,economi- callyspeaking,areimportantwhenitcomestopolicymaking.Itis notalwaysthecasethat“bigisbeautiful”andthatthesmallerves- selsshouldbeforcedorboughtoutifthefisheryistransformed fromopenaccesstomanagementofsomesort.Itshouldalsobe noted that theaveragegillnetvessel’seconomic loss, including thecalculatedinterestontheowner’scapital,doesnotnecessar- ilycontradicttheopen-accessfisheriestheorywithheterogeneous vesselssincetheresultsofthisstudyarebasedondataforonly oneyear.Moreover,theeffectsoftheworldeconomiccrisisonthe nationaleconomycombinedwith2007speakoilpricesmayhave createdspecialeconomicproblemsforVietnamaswellasforother developingcountries’fisheries.

7. Conclusion

Thisstudydemonstrates that for offshoregillnetvessels the engineHPeffect,theamountofgearandthedaysofoperationare thefactorsthatbestproduceindicatorsofvesselefficiency.Rela- tivestandardisedeffortwasdevelopedandestimatedforsurveyed vessels.Tothebestofourknowledge,thismethodforcomparing vesselefficiencyhasnotbeenpublishedpreviously.Thepresented economicanalysisshowsthatanaveragegillnetterin2008earned apositivegrossprofitmarginandprofitmargin,evenwhenthe quasi-lump-sumfuelsubsidiesareexcluded.Thisisclosetowhat wasexpectedbasedonthediscussionofthetheoryofopen-access fisheries.However,theaveragegillnetvesselwouldnothavebeen abletomeetallthecalculatedinterestontheowner’scapitalas well.Themosteconomicallyefficientvesselsaremainly,butnot only,those withhighrelative standardisedeffort.Thesevessels earnedmostoftheintra-marginalrentgenerated.The2008fuel subsidiesbroughtrelativelymorebenefitsforsmall-scalevessels than for large-scaleones.The resultsalsodemonstrate that on anannualbasis,averagecrewincomeisalmostthesameasfor theworkerswithhighereducationallevelsortechnical/vocational trainingworkinginthemostprofitableregisteredenterprisesin KhanhHoa,andonamonthlybasis,itisevenmore.

The2007strongoilpriceincrease sparkedoutcries inmany countries from frustrated fishers and other small businesses dependingonthisinput.Somegovernmentsreducedpetroleumor climatechangetaxesorothercompensationschemestomitigate theincome-reducingeffectsonoil-dependentbusinesses.Thisalso happenedinVietnamwiththeintroductionofquasi-lump-sumfuel costsupport.Asdiscussedinthispaper,thisarrangementhadasig- nificantpositiveeffectonthenetearningsofthesurveyedgillnet vessels.However,theincentiveforfisherstosavecostlyfueloil wasmainlyretained,eventhoughinthelongrunsucharevenue- enhancingschemewouldmostlikelyhavekeptoraddedcapacity tothefleetcomparedwiththesituationwithnosupport.Theactual crudeoilpricedeclineduring2008eliminatedtheargumentsfor furthersupportscheme.

Theeconomicefficiencyandperformanceofvesselsinanopen- accessfisheryhavebeeninvestigatedandithasbeendemonstrated