Thursday, June 3, 2010


Economic and Political Weekly August 19, 2000 3061
In recent years the term ‘governance’
has come into increased currency. The
Commission on Global Governance
defined governance simply as “the sum of
the many ways individuals and institutions,
public and private, manage their
common affairs.” The World Humanity
Action Trust (WHAT) defines governance
as “the systematic framework of social,
economic, legal and political structures
within which humanity chooses and/or
accepts to manage its affairs”. Until a few
decades ago “the sum of the many ways”
and the “systematic framework” were
largely defined within the formal structures
and capacity of nation states. It was
therefore bounded within the concept of
national sovereignty, the idea that the
government of a state recognises no external
authority and that its rule is supreme
within its national boundaries.
The situation has changed today. While
nation states remain powerful, the authority
and power of intergovernmental
organisations, international non-government
organisations and the global market
have increased enormously. This has contributed
to the development of a much
more complex situation with regard to the
range as well as the level of choices open
to humanity to manage its affairs. Governance
can be without government. Governance
can take place at different levels, both
above and below the confines of nation
states. These levels can interact and create
reciprocal influences that come to have
strong bearings on the social, economic,
legal and political choices before people
in society. This is a dynamic process. It
is also specific to a particular context.
In this brief paper, we attempt to give
a picture of the changing scenario of
governance in Icelandic fishery, viewed
from the perspective of a third world
observer. By commencing with a detailed
history, we make an effort to highlight how
individuals and social groups exercised
choices and initiated actions that widened
the interest in fishery. It moved from being
an occupational choice for the livelihood
of farm labourers in isolated coastal communities
to become a rallying ‘nationalist’
concern for the people of Iceland as a
whole. This has naturally created changing
realms of governance. They have both
influenced, and been affected by, legally
binding international agreements and the
growth of the international market. The
compulsions of the present have been
conditioned by the past and hold questions
for the future.
Iceland, that little island nation, which
hangs from the Arctic Circle, has earned
a place for itself in the realm of global
fisheries. Here is a poor European nation
which was settled for the last 1100 years
that became wealthy not by colonial exploits
or industrial transformation, but
rather through the vigorous and nationalistic
pursuit of developing its fisheries.
Today, fisheries are responsible for some
75 per cent of Iceland’s total revenues
from goods exported (around 5 per cent
of the world’s total fishing exports) and
yield 55 per cent of all national foreign
currency earnings. In 1995, Iceland exported
marine products valued at ISK 90
billion (USD 1.3 billion) from a total catch
of over one million tonnes. Annual catches
in recent years have averaged around 1.5
million tonnes, but the volume depends
very much on catches of pelagic species,
especially capelin, which have fluctuated
widely from one year to the next. In terms
of catch volume, Iceland ranks 14th among
the world’s leading fishing nations. Some
15,000 people in Iceland – 11 per cent of
the total national workforce – work directly
in fishing or fish processing, if this
employment sector is defined in the traditional
manner. In fact, this is a very low
proportion compared with the importance
of the sector for the entire Icelandic
Early History
The process of fisheries development
can be said to have begun about 700 years
ago in the early 14th century when
Hanseatic merchants based in Bergen began
to import dried cod fish from Iceland. This
linkage in itself was not accidental. The
first Viking settlers to Iceland came from
this part of western Norway. This trade
attracted the English merchants who,
shortly after 1400, began sailing to Iceland
in search of dry cod. Later they financed
English fishing interests to catch cod off
the coasts of Iceland and also bought it
from the local Icelandic fishermen.
The Danish crown, which ruled Iceland
at that time, frowned upon this contact.
However, Denmark lacked the necessary
naval power to block the English trade. In
fact, clashes between England and Denmark
during mid-15th century can be traced
to the killing of a Danish governor who
tried to stop both English trade with Iceland
and English fishing in Iceland’s coastal
waters. These tensions continued until the
early 16th century after which English
interests in Iceland waned with the discovery
of rich fishing grounds off the North
American coast of Newfoundland.
The French and Germans took the space
vacated by the English only to be ousted
in the early 17th century (1602) by the
Danish crown which monopolised all
Icelandic Fisheries Governance
A Third World Understanding
Today Icelandic fisheries are the most productive in the world. The country’s historic
efforts at gaining sovereignty over its fishery resources and the governance structures it has
instituted highlights the need to move from an open access regime, with possession rights
only, to a regime of explicitly recognised property rights. Recent attempts at conservation
of fishery resources through privatisation has led to dominance of foreign firms
threatening the country’s fishery sovereignty.
3062 Economic and Political Weekly August 19, 2000
foreign trade by royal decree. This trade
monopoly remained for nearly 250 years
(until 1855) and could be enforced due to
the absolute monarchy enforced over
Iceland by the Danish king.
The coastal fishery in Iceland developed
significantly during the 17th and 18th
centuries. The main occupation of most of
the inhabitants was farming. But the
labourers who worked in the southern and
western regions were permitted to go fishing
in the late winter and spring when landbased
activity was at a low ebb. However,
the labourers were required to stay in the
domestic service of a farmer, and the
establishment of permanent households in
fishing stations was restricted. Thus the
landowners, in collaboration with church
functionaries and officials, monopolised
the fishing. These restrictions preempted
it from developing into an independent
This situation continued into the mid-
18th century (1784) when famine, as a
result of damage to pastures and animals
caused by a major volcanic eruption, killed
one-fifth of the population. The situation
was so bad that the Danish king even
considered the possibility of the evacuation
of the whole island. This natural
calamity, coupled with the exploits of an
adventuresome Dane who tried to capture
power in Iceland in the early 19th century,
made for a gradual weakening of the
colonial hold over Iceland. The power of
the richer farmers who employed several
farmhands declined considerably. This
gave rise to an increase of ‘unattached’
landless people. Poverty increased and
people were faced with the choice of leaving
agriculture or leaving Iceland. During this
period (1870 to 1914) over 15,000 people
migrated to Canada.
Capitalist Development
The Danish trade monopolies were rapidly
relaxed in the late 19th century and
local accumulation became possible. An
Icelandic merchant class gradually emerged
and played a significant role in investing
in the fisheries. Icelandic salted cod began
to develop new markets abroad as a result
of its quality. This was based on a method
originally developed by the Basque people.
Soon the all-important Spanish market,
which was dominated by the Norwegians,
was totally in the hands of Iceland. The
pope also helped the Lutheran Icelanders
in their fish exports. This he did inadvertently
by making salted fish the main item
on the menu during the many days that
meat was not to be consumed by Catholics
in Europe.
For the landless peasants, who remained
in Iceland, fishing gradually became an
important alternative. This gave rise to the
gradual creation of independent fishing
settlements along the coast. The petty
entrepreneur, the fishing peasant, the
skipper-owner and the merchant company
were examples of the different forms of
production that gradually emerged over
the next century. All this happened during
the struggle for Icelandic independence. It
would not be an exaggeration to say that
the gradual emergence of capitalist development
in fishery aided in the political
transformation of Iceland. The introduction
of the decked fishing vessels in the
end of the 19th century made it possible
to catch fish farther offshore than could
be done on open fishing boats. The official
declaration of a fishing limit with an
exclusive zone of three nautical miles in
1901 gave legal sanction to this process
of expansion.
Iceland got home rule in 1904. The
technological progress in fishing after that
was considerable. Motors were installed
in many of the open fishing boats and a
number of steam-driven trawlers were
acquired. Initially the large merchants
owned a substantial part of the fleet. The
productivity of fishing increased greatly,
and agriculture became relatively less
attractive as a source of subsistence to the
peasantry. All restrictions on the freedom
to move to the fishing villages were either
abolished or quietly forgotten and fishing
became a full-time occupation. The infrastructure
such as harbours, wharves and
processing facilities were set up in the
fjords by the merchants. They hired
labourers from the new coastal settlements
to work on their boats and at the processing
facilities. This provided jobs for several
hundreds during the winter months. Gradually
the number of small skipper-owners
and petty entrepreneurs increased. The
merchants who provided credit so that the
processing facilities would receive adequate
supplies of fish facilitated this.
The skipper-owners and the petty entrepreneurs
utilised their family resources of
capital and labour. As capital was scarce,
and labour availability depended on both
the sex compositions of the household and
its stage in the family development cycle,
not all skipper-owners or petty entrepreneurs
were successful. Those who had
sons of the appropriate ages could expand
their activities and gradually enlarge their
enterprise and even form a company with
family members as shareholders. Family
and private firms in the harvesting and
processing of fish became a common
organisational arrangement alongside the
peasant fishing economy. It would seem
that the control exercised by these large
family firms on the fish economy of
Iceland was considerable.
In 1911 the Fisheries Association of
Iceland was formed. This seems very much
in keeping with the country’s democratic
tradition as well as the tradition of keeping
good records. It was an organisation with
representational membership from all the
interest groups and regions of the country.
It established the tradition of calling an
annual meeting called a ‘Fiskithing’ (fisheries
congress) which became a forum to
discuss matters of concern to the fisheries.
It played a lead role in training and education
of people employed with the fisheries
and later helped in founding the
Icelandic Fisheries Laboratories and the
Marine Research Institute. The multi-stakeholder
and multi-regional character of the
Fisheries Association of Iceland gave the
industry a fair degree of openness of
operation and provided the basis for a good
form of participation by the ‘interested
public’ in the governance of the fishery.
The radical transformation of the occupational
structure and the development of
the capitalist forms of work organisation
led to the advent of both a labour movement
and a cooperative movement. This
needs to be situated against the background
of the boom in fish exports during the first
world war. In 1916 a national organisation
of trade unions was established though it
was legalised only in 1938. The merchant
owners of fishing companies had to conform
to the formal demands of labour
unions both of crew on the boats and the
workers in the processing plants.
Women came to play an important role
in the fishery. In the production process
they were involved in the making and
mending of nets and baiting of hooks.
Their role was also indispensable in the
other preparations needed to get a fishing
trip going. In the processing operations
their role was more direct and crucial, first
in the salting and drying and later in the
freezing plants. The invisible component
of women’s work – running the household
and raising the children – was also particularly
high and taxing in the homes of
fishermen who were away at sea for long
on the larger boats. Women’s franchise
Economic and Political Weekly August 19, 2000 3063
rights and the early right to attend schools
of higher education provided opportunities
to move out of the conventional
roles and jobs. It also helped to foster a
nascent women’s movement in which
many from coastal communities were involved.
Unlike in many other developed
maritime countries, the organised involvement
of women in fishery is another of
the unique features of Iceland’s fish
economy. Both at the workplace and the
home, women seem to have benefited from
the rising productivity of the sector in this
time period.
The growth of labour rights, the expansion
of capitalist enterprise and the success
of fishery further fuelled the struggle for
independence. In December 1918 Iceland
became a state under the Danish crown.
Either party to the agreement could terminate
the treaty after 25 years if negotiations
about its renewal proved fruitless. Following
this, a new system of political parties
based on class divisions emerged and class
antagonism grew. The great depression
increased class tensions and the outbreak
of the Spanish civil war in 1936 closed the
important Spanish market for Icelandic
salt fish. This created a period of high
unemployment in fishery. The fishery
capitalists formed the union of Icelandic
fish producers (SIF) to gain better control
over the processing and marketing of salt
fish products. Iceland also acquired its first
coast guard vessel in 1920 since it was
highly dissatisfied with the way the Danish
navy administered the then three-mile
fishing zone, especially in the case of British
trawlers, which often fished as close to
land as they could reach.
When the second world war broke out,
the German occupation of Denmark and
the British occupation of Iceland put a cap
on the union between Iceland and the
Danish crown. Before the war, foreigners
were responsible for two-thirds of the
demersal fish catch in Icelandic waters.
The demand for Icelandic fish skyrocketed
during the war. Catches made by Icelandic
vessels increased since foreign vessels were
busy in pursuit of things other than fish.
The US took over the defence of Iceland
and stationed a force of 60,000 in a country,
which at that time had a population
of 120,000. This brought employment and
prosperity to the economy and coastal
fishery benefited greatly. In 1944 the
Icelanders decided to terminate the treaty
with Denmark and the Icelandic Republic
was formed on June 17, 1944 at Thingvellir,
the original seat of the Althing. Severing
ties with Denmark also meant taking full
charge of their fishing policies.
Independence came at the time of the
second world war. The post-war period
saw the rapid expansion of the trawler
fleet. Fish freezing became a highly technical
industry and the mainstay of Icelandic
fishery exports to Europe. There was
a phase of overexpansion, full employment,
and high inflation. The lack of a
strong political leadership marked the postwar
period. Political coalitions were the
norm in the Althing (parliament). Broadly,
they could be characterised as the ‘nationalistic’
group composed of the left-wing
parties and the ‘pro-western’ group composed
of the agrarian and the social democratic
parties. Their politics came to
flashpoints on two recurrent issues of postwar
politics: defence (on the question of
joining NATO) and fishing limits (on the
question of extending the limits of the
territorial fishing zone).
The overwhelming dependence of the
country on fisheries for its livelihood and
economic development highlighted the
need to take more proactive steps to protect
fishing grounds and ensure effective
governance over them. Following the
Truman proclamation of 1945, several Latin
American countries such as Mexico,
Argentina and Chile began claiming
national sovereignty over water covering
the continental shelf. Iceland followed
closely by enacting a law in April 1958
concerning the scientific conservation of
continental shelf fisheries. The first article
of the law reads as follows:
The ministry of fisheries shall issue regulations
establishing explicitly bounded
conservation zones within limits of the
continental shelf of Iceland, wherein all
fisheries shall be subject to Icelandic rules
and control: provided that the conservation
measures now in effect shall in no way
be reduced. The ministry shall further issue
the necessary regulations for the protection
of fishing grounds within said zones...
The regulations shall be revised in the light
of scientific research.
In May 1958, following the failure of
UNCLOS I to reach an agreement on the
extension of the fishing zone beyond the
territorial sea of 3 nautical miles, Iceland
unilaterally extended its fishing zone to 12
nautical miles in September 1958. It then
gave notice to the British trawlers still
fishing up to four miles off Iceland to
withdraw. When they did not, Icelandic
gunboats arrested two of the trawlers. In
response a British frigate and destroyer
dashed in to recapture them. This led to
the beginning of the famous ‘cod wars’.
The British Navy repeatedly sent their
gunboats to the Icelandic fishing grounds
to protect British trawlers. The Icelandic
coast guard was puny compared to the
might of the British navy. Yet they prevailed
because of their approach, in later
encounters, of perfecting the art of cutting
the trawl ropes of the British trawlers rather
than confronting their navy vessels. This
strategy paid off. British trawlers gradually
withdrew thereby increasing the stocks
under Iceland’s exclusive control.
The success of this approach resulted in
Iceland joining company with many developing
Asian countries during UNCLOS II
in 1960. Together they argued for the
concept of ‘preferential rights’ in matters
of fisheries jurisdiction in special cases of
‘overwhelming dependence’ of the coastal
state upon fisheries resources in the adjacent
sea for its livelihood and economic
development. The relevant portion of the
Icelandic proposal stated that:
Where a people is overwhelmingly dependent
upon its coastal fisheries for its livelihood
or economic development and it
becomes necessary to limit the total catch
of a stock or stocks of fish in areas adjacent
to the coastal fisheries zone, the
coastal state shall have preferential rights
under such limitations to the extent rendered
necessary by its dependence upon
the fishery.
UNCLOS II failed to reach any agreement
on extended territorial zones. This
led Iceland to further extend its fishing
zone to 50 nautical miles in 1972, and
finally to 200 nautical miles in 1976 while
UNCLOS III negotiations were still on.
This they did by amending their 1958 law
concerning the scientific conservation of
continental shelf fisheries.
The role of government in Iceland’s
fisheries can be summarised as (1) setting
the rules concerning fishing, and (2) providing
the sector with an optimal operating
environment. The ministry of fisheries is
responsible for the governance of fisheries
in Iceland and the implementation of legislation,
and issue regulation to this effect.
Its duties are general administration, longterm
planning and relations with other
fisheries institutions at the international
level. The ministry is assisted in these tasks
by three bodies: the directorate of fisher3064
Economic and Political Weekly August 19, 2000
ies, the marine research institute and the
icelandic fisheries laboratories. In 1998
the ministry of fisheries had a staff of 17
and a budget of US $ 3 million.
There are other ministries and agencies
that assist in the process of governance.
The ministry of justice administers the
Icelandic coast guard. The ministry of
communications administers the directorate
of shipping and the port and lighthouse
authority. The ministry of foreign
affairs administers the matters relating to
trade and exports as well as international
The directorate of fisheries undertakes
the day-to-day administration of the fisheries.
It is responsible for applying legislation
on fisheries management, including
supervision of processing and handling of
fish products. It collects and publishes data
and other fisheries statistics. It authorises
fishing by issuing fishing permits to vessels.
It also issues the quotas to these
vessels and supervises the transfer of quotas
and controls the reporting of data on the
landings of vessels and monitors the
weighing-in of catches. To be able to
coordinate this for the whole country the
directorate works in collaboration with the
harbour authorities and the association of
local authorities.
The directorate provides on-board and
port supervision of vessels to inspect catch
composition, equipment used and fish
handling methods. The Icelandic coast
guard and the directorates of customs and
shipping collaborate to fulfil this mission.
The directorate issues licences to processing
plants and ensures that they keep to
the quality and hygiene standards. This is
undertaken by commissioning inspection
bodies. They in turn conduct on-board and
land-based inspection in accordance to
norms developed. The directorate approves
these inspection bodies and supervises their
operations. It also inspects processors on
an intermittent basis to verify that official
requirements are being complied with. In
1998 the directorate had a regular staff of
59 and operated on a budget of US $ 5
million of which half is covered by
licencing and other fees.
There is one important point that we
must keep in mind. The campaign for
control of territorial waters was both the
campaign of the Icelanders for priority in
exploiting the natural resources surrounding
their country, and at the same time a
campaign to achieve responsible exploitation
of the fish stocks at the level of the
individual fishing unit. Icelanders had
argued that competition among fishermen
from different nations pursuing different
goals with respect to the quantity and
quality of fish brought ashore could lead
to inefficient use of the resource. Foreigners
would be concerned about balancing
the cost and revenue for each given trip,
whereas natives would take future catches
into account in deciding what to fish and
when to do it. The mood in Iceland had
been – get rid of foreigners so that we can
manage the resource in a responsible
With the progressive extension of the
exclusive fishing zone (to 12, 50 and then
200 miles) the fishery resource therein
became the state property of Iceland.
However, coastal fishery was for all practical
purposes an open access realm for the
people of Iceland within the larger rubric
of state property. Anyone could invest in
a boat, obtain a licence and go fishing from
anywhere in the island.
This resulted in increasingly excessive
fishing capital and effort compared to the
reproductive capacity of the fish stocks.
It is estimated that between 1945 and 1983,
fisheries capital increased by well over
1,200 per cent and real catches by 300 per
cent. This long-term decline in the economic
performance of Icelandic fisheries
did not go unnoticed by the fisheries
authorities. It also probably got reflected
at the local level by increasing losses at
the level of the fishing units. The move
towards creating a consensus for change
in the property rights structure and the
nature of governance of fisheries at the
local level required a process of consensus
building at the popular level. No change
in this could be made by administrative
fiat. As it involved major wealth distribution
implications, there had to be a political
consensus on these matters. Given the
centrality of fisheries in the economy and
the democratic culture of Iceland, this was
a daunting task.
The initial efforts to introduce mechanisms
of governance at the local level were
to apply effort limitations that focused on
limiting the number of vessels and fishing
days. This did not yield the desired results.
The situation of individuals assuming
management and self-governance responsibility
without a well-defined structure of
rights seemed to be at the root of the failure
of these efforts. To overcome this, Iceland
broke new ground in the area of fisheries
management and governance by allocating
property rights to the resources at the level
of the individual units. This can be viewed
as transference of the rights achieved by
the nation to the individual stakeholders
who had a direct interest in fishery.
These property rights took the form of
individual transferable quotas (ITQs). ITQs
are property rights to the fishery resources
that are transferable and divisible at the
discretion of the individuals, but subject
to some overall norms. The assumption
implicit in this approach is that individual
rights to property will aggregate to yield
enlightened governance of that property
by the individuals to whom the rights are
The build-up to the decision for this
change was multi-pronged and took over
a decade. In 1975 the marine research
institute issued a report on the status of
the Icelandic cod stocks. The report, nicknamed
‘The Black Report’ pronounced
that the Icelandic cod stocks would soon
collapse if fishing was continued at the
same level of effort. Several weeks later
a working committee of the governmental
science and research council published
another report titled ‘Development of
Marine Fisheries’. This was later nicknamed
‘The Blue Report’. It merely restated
the existence of the “problem of the
commons” in marine fisheries even if all
the fishermen were of the same nationality.
This report concluded that the fishery
management methods in use at the time
were aimed at guarding the interests of
occupationally or geographically defined
groups in Iceland, but had no roots in the
biological sciences or economics. The
belief that extending national jurisdiction
would automatically lead to sustainable
fishing was therefore beginning to be
questioned. This created considerable
public opinion about the crisis in the fishery
– both its biological and economic
aspects. It was not only the scientists and
policy-makers who addressed the issues,
parliamentarians and community leaders
were involved in the process.
The Fiskithing deliberated over this
contentious issue for over a year and
finally in their annual congress in December
1983 they decided to support the
government’s moves to introduce an ITQ
system on a temporary basis for one year.
The government in power at that time (a
right wing coalition) moved cautiously.
Before the year was over the parliament
passed an amendment to the fisheries act
of 1976 giving the minister of fisheries
Economic and Political Weekly August 19, 2000 3065
discretionary power to put a vessel quota
system in place. In the upper house of the
parliament, the amendment received only
the minimum majority necessary of 11 of
20 MPs in support. To ensure sufficient
support for the system a very important
provision was added. Vessels below 10
GRT were allowed to opt out of the catch
quota and abide by earlier effort restrictions
instead. This dual system of local
level fishery governance continued between
1984 and 1987. In January 1988 the parliament
enacted a general-vessel quota legislation
to cover all demersal fisheries and
made the effort option less attractive. In
1990 a more comprehensive legislation,
the fisheries management act, was passed.
Only vessels below 6 GRT were exempt
from the ITQ system. All vessels had to
be licensed and a moratorium was put on
issuing new licences. The ITQ system was
extended indefinitely.
The system operates in the following
manner: Every fishing vessel with a commercial
fishing permit is allocated a permanent
‘quota share’ mainly on the basis
of its catches from 1981-83. This quota
share is a percentage of the total allowable
catch (TAC) of all regulated species. The
allotted catch of each vessel therefore
changes from year to year depending on
the TAC for the species in question. The
success of the ITQ system depends
crucially on the information governance
capability of the system. Every fish landing
has to be recorded and instantly collated
to ensure that quotas are not busted.
The municipalities operate the weightstations
and they collect fees from the
vessels to cover operating costs. The information
is then put on the web page of
the directorate and in print on a monthly
basis. Catch status can be ascertained over
the phone.
Annual quotas may be sold for an individual
fishing year, but such transactions
are subject to certain limitations to prevent
sudden disruption. From 1998 onwards,
such transactions have to be transacted
only through a ‘Kvotabanki’ (quota bank).
Recent years have witnessed a rapid growth
in the sales of both permanent quota shares
and annual quotas and the quotas themselves
have attained a very big premium
in the market. From the starting position
in 1983, the ITQs have got concentrated in
the hands of a few fishing units. This process
of concentration can be viewed from
two perspectives. It can be seen as either
increasing the efficiency and stability of
the sector or as the growing marginalisation
of those whose strength in the market is
limited or non-existent. The current debate
in Iceland on the merits and demerits of
ITQs are drawn along these lines.
Questions for the Future
Who are the ultimate owners of the fishery
resource? The issue of the privatisation of
the access to the resource has become a
contentious issue in Iceland itself. The
small boat owner’s association that represents
an important segment of the fishery
from a political perspective, if nothing
else, has questioned this approach. Their
main contention is that ITQs have not led
to resource conservation. They point out
that the TACs for the important species
like cod have in fact reached their all time
low levels in the 1990s – almost a decade
after privatisation of fishing rights.
Even in the industry there is some divergence
of views on this matter. This is
particularly so in the face of trends like
greater on-board processing resulting in
loss of land-based jobs. There is also the
threat of communities losing jobs as a
result of the sale of ITQs by the firms or
individuals holding them to buyers from
other regions.
The matter has also been debated in the
supreme court of Iceland on the basis of
a case filed by an ‘ordinary citizen’ of the
country. The supreme court examined the
case by considering two constitutional
articles (Art 65 and 75) which give equal
rights for all citizens and freedom to choose
employment respectively. It also considered
Article 1 of the fisheries management
law, which makes clear that the fish resources
within the EEZ are public property.
Taking these three aspects together
the court ruled that the allocation of fishing
quotas to operative vessels according to
catch history (in 1984) was a reasonable
reaction to the resource situation at that
time. However, it ruled that converting this
to permanent rights, thus giving great,
permanent privileges to the owners of
operative vessels in 1984 cannot be justified
by any public interest and was therefore
unconstitutional. The judgment raised
the issue of who is the ultimate owner of
the fishery resources of Iceland – the public
or the ITQ holder?
Will national governance be undermined?
The most recent issue is the implication
of the foreign ownership of the
big fishery firms that hold a considerable
share of the total quota holdings. There is
considerable anxiety about the growing
concentration of the ITQs in the hands of
these few companies. The social justice
and distributional implications apart, there
is a moot question of the loss of national
control over resources. Many of the large
private companies are going public. This
action is helping them to argue that the
effective control of the companies is in the
hand of the many hundreds of shareholders
that are ordinary Icelanders. However, the
fact of the matter is that this accounts only
for a minor part of the shares. The original
owners and their subsidiary companies
still closely hold the majority shares.
Moreover, the overall quota holdings of
the 10 largest private firms increased from
25 per cent in 1991-92 to 38 per cent in
1998-99. In the context of the growing
globalisation of the fishing industry of
Iceland there is a legitimate concern that
these companies will increasingly be internationally
controlled. This can, in the long
run, give rise to a serious contradiction in
the governance and rights structures. While
the resources of the EEZ will belong to
the Icelandic republic and be governed by
national laws, the effective property rights
to the resource at the local level of the
fishing company can be very much in the
hands of foreign capital. Will national
governance be undermined from below?
Are ITQs appropriate for developing
countries? From our review of the history
we notice that Iceland had taken a lead role
in the UNCLOS to argue for the rights of
national governance of coastal waters,
particularly in cases where countries have
a greater level of dependence on fishery
for livelihood and food. This was a position
that was wholeheartedly supported by
the developing countries. Today we see
that there is a new enthusiasm on the part
of Iceland, particularly its fishery economists,
to propagate the use of private
property rights to the fishery as the sine
qua non for fisheries management to be
effective. The appropriateness of this
approach for developing countries needs
to be assessed cautiously.
In this context it is necessary to state the
assumptions behind the ITQ system and
examine if these are appropriate to the
context of developing countries. Firstly
there is the theoretical assumption that it
costs nothing to enforce the ITQ system
or at the least that the benefits will far
outweigh the costs. It is presumed that
fishery managers will be able to allot quotas
and decide the yearly TAC without interference
from the different interest groups
in the fishery – the boat owners, the pro3066
Economic and Political Weekly August 19, 2000
cessing plant owners, the local communities,
the environmentalists and other stakeholders.
Secondly, it is usually assumed
that individuals and fishing firms do not
try to cheat and harvest more than the
allotted quota. Thirdly, fishing firms are
explicitly supposed to be atomistic profitmaximisers
without any political leverage
to gain subsidisation of key inputs. It is
doubtful if these assumptions are valid
even in Iceland today and therefore
question the true efficiency of the ITQ
system in the context of real political
economy. How then is it valid for developing
Concluding Thoughts
Iceland is a unique country. As the tourist
literature announces, it is ‘Europe’s Best
Kept Secret’. The opportunity to learn about
this country, its people and its economy
are not everyday happenings. Fisheries
constitute the most important sector of the
economy and fish a central part of the diet
and culture. Iceland’s historic efforts at
gaining sovereignty over its fishery resources
have been a great source of inspiration
to developing nations in instituting
national governance structures which
played an important role in influencing the
course of the UNCLOS I, II and III discussions.
Today Iceland’s fisheries are the
most productive in the world at approximately
280 tonnes per fisherman per annum
compared to between 2 and 5 tonnes for
most developing countries. This huge
difference reflects the greater people-dominance
of the fisheries sectors of the latter
rather than the resource plenitude of the
former. The Icelandic fishery sector experience
at governance highlights the need
to move from an open access regime (with
possession rights only) to a regime of
explicitly recognised property rights.
However, property rights can take numerous
forms and the Icelandic experience of
local-level governance using private property
rights with instruments such as ITQs
may not provide a model for the third
world to follow. Subject to this caveat, the
Icelandic system of governance highlights
the potentials for making fishery the
‘engine of growth of the economy’ of a
very small nation with large fishery resources.
The ‘governance success’ of
privatisation also throws up larger issues.
The role of the ‘people of a nation’ as
stakeholders in the stewardship of
natural resources is the most important.
In the context of globalisation, and the
growing international integration of national
economies into a global system, true
national sovereignty over natural resources
can be in jeopardy. There is a need to
explicitly recognise the implications of
these factors.
[A visit to Iceland to have a first hand appreciation
of Icelandic fisheries would not have been possible
without the generous and gracious support extended
to me by the World Humanity Action Trust,
(WHAT), UK. This brief analysis and thoughts
about the governance issues in Icelandic fisheries
are based on my discussions between August 17
and 23, 1999 with numerous persons who have
a firsthand understanding of the history and state
of affairs. I would like to thank Rognvaldur
Hannesson for taking me around Iceland showing
me nature in its variety of forms – hot and cold
– and glimpses into the culture and history of the
people. This was a truly unique once-in-a-lifetime
experience. I must also place on record my sincere
gratitude to Thorolfur Matthiasson, Birgir
Runolfsson, Arthur Bogason, Orn Palsson, Jon
Thordarson, Kristjan Thorarinsson, Petur
Bjarnason, Egill Jonasson, and Gisli Palsson for
sharing with me their thoughts and writings, which
I have used liberally in this brief note. My thanks
also to Rognvaldur Hannesson and Grimur
Valdimarsson for comments on a first draft. It is
quite likely that there are errors and omissions,
the responsibility for that rests solely on my
Bjarnason P (1999): ‘The Fisheries Association
of Iceland’ (manuscript).
Bjorgulfsdottir M (1999): ‘Scrumtious Saltfish as
a Source of Life’, Atlantica, July-August 1999,
Bogason A (1998): ‘Crossing Boundaries’
(manuscript), paper presented at Vancouver,
Extavour WC (1979): ‘The Exclusive Economic
Zone: A Study of the Evolution and Progressive
Development of the International Law of the
Sea’, IUHEI, Geneva.
Fiskifelag Islands (1998): Utvegur 1997.
Hagstofa Islands (1998): Landshagir, Statistical
Yearbook of Iceland 1998, Reykjavik.
Kurien J (1998): Property Rights, Resource
Management and Governance: Crafting
an Institutional Framework for Global
Marine Fisheries, CDS/SIFFS Publications,
Matthiason T (1997): ‘Consequences of Local
Government Involvement in the Icelandic
ITQ Market’, Marine Resource Economics,
pp 107-126.
– (nd):‘The Icelandic Debate on Fishery
Management and Resource Rent Distribution’
Ministry of Fisheries (1998): Close to the Sea,
National Academy of Sciences (1999): ‘The
Icelandic Individual Transferable Quota
Program’, in Sharing the Fish: Towards a
National Policy on Individual Fishing Quotas,
Washington DC.
Nordal J and Kristinsson V (1996): ‘Fishing
Industry’ in Iceland, The Republic, Central
Bank of Iceland Publication, Reykjavik.
Runolfsson B (1999): ‘ ITQs in Icelandic Fisheries:
A Rights Based Approach to Fisheries
Management’, paper presented in Workshop on
Use Rights in European Fisheries, May, Brest.
The New Encyclopaedia Britannica (1994):
(15th Ed) Macropaedia, Vol 20, Iceland,
pp 760-767, Chicago.
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