Economic benefits and costs of alternative arrangements for tuna fisheries development in the exclusive economic zone: The case of Indonesia

The current Law of the Sea Convention assigns exclusive jurisdiction over the living and non-living resources within the 200-mile exclusive economic zone to coastal states. In the case of fisheries exclusive jurisdiction also means development planning and management by the coastal nation for optimum utilization of the pelagic and demersal resources. This paper attempts to quantify the economic benefits and costs to the government of Indonesia, as steward over the resources within the E.E.Z., of choosing between alternative institutional arrangements for tuna fisheries development.

In evaluating the alternative institutional arrangements for tuna fisheries development within the E.E.Z., we distinguish between indigenous enterprises and foreign enterprises who might lease rights to fish for tuna for payment of an access fee. Prior to the E.E.Z. declaration in 1980 (and currently), all relatively large-scale tuna fishing in Indonesian waters was pioneered by state enterprises, for both skipjack and large tuna, a joint venture for skipjack and a licensing (fee-fishing) arrangement with Japanese longline tuna fishermen. These are considered to be the options facing the government for pioneering the development of the potential tuna resources in the E.E.Z. The objective function of the government is to maximize the potential value of the net benefits derived from utilization of the tuna resources under its jurisdiction.

In this paper, because we have no means of estimating or weighting socio-political objectives, we consider only economic objectives which are translated to economic benefits. Since we want to compare benefits as a function only of the particular arrangement, we correct for scale of operations by measuring foreign exchange earnings per 1,000 metric tons of tuna caught, employment generation per million dollars of gross income, and net income in terms of net present value of 1,000 metric tons of tuna production.