Economic and market analysis of the live reef fish food trade in Asia-Pacific

• University of Western Australia, Australia
• James Cook University, Australia
• WorldFish Center, Malaysia
• Secretariat of the Pacific Community, New Caledonia
• Bogor Agricultural University, Indonesia
• Center for Marine and Fisheries Product Processing and Social Economics, Indonesia

The fish markets of Hong Kong and southern China place a price premium on live fish. This trade is now worth an estimated $US350 million a year. Fish are in demand for a number of factors; type, colour, taste and rarity. With population and economic growth continuing in southern China and Hong Kong and demand for live fish spreading beyond these markets it is anticipated that demand will rise substantially.

For many coastal communities the potentially lucrative returns from tapping into these markets have not been matched by the realities. A number of developing countries; Indonesia, Papua New Guinea, Vietnam, Fiji and other Pacific Islands are involved in the trade. For smallholder suppliers prices received for fish are usually low, reflecting the risk carried by those moving live fish from these areas to Hong Kong and China.

These low prices often result in overfishing to ensure greater returns. This threatens the sustainability of wild fisheries particularly where destructive practices are used. Another factor contributing to overfishing is a lack of knowledge of what fish species are desired by consumers. Knowing consumer preferences would allow more targeted fishing helping to alleviate stresses on wild fisheries through the development of sustainable management plans. It would also provide a focal point for aquaculture and mariculture enterprises and research to enhance productivity in these. Policy options to support the trade, including improving existing market supply chains, would also be possible.

This project aims to enhance the sustainable economic development of the live reef food fish trade, through economic analysis of policy options for improved market performance.

quantify short and long-term demand of live reef fish in Hong Kong and China sourced from Asia-Pacific, including developing countries
quantify short and long-term supply of live reef fish from wild-caught and aquaculture production, including developing countries using an empirical supply analysis
measure the key cost and risk components of the marketing chain
quantify future changes in supply and demand for live reef fish arising from new technology, management practices and economic growth
integrate demand, supply and market chain analyses to quantify effects of likely changes in supply and demand
model possible improvements in supply and demand
identify the highly-valued product attributes (e.g. colour, taste, texture) of wild-caught and aquaculture live reef product through panel taste evaluation tests
identify possible policy options to improve market performance
conduct analysis of policy options for regulating live reef fisheries, including benefit-cost and institutional economics
build capacity in economic assessment through the Asia-Pacific to provide and coordinate economic research and disseminate information on the trade utilising the existing live reef fish research and development networks (NACA, SPC, WorldFish)
feedback research results to live reef fish experts, validate the model and discuss policy implications, with research findings disseminated to key management agencies

The project has provided a comprehensive analysis of the key factors driving the future sustainability of the live reef food fish trade (LRFFT) across the Asia-Pacific and has provided a future blueprint for the key issues that need to be tackled by governments and fishers if future sustainability is to be assured. It has also developed a number of key analytical tools that can be used by economists and scientists to analyse the sustainability of live reef fish for food (LRFF) in the countries of the Asia-Pacific that currently supply the trade. Researchers from Pacific and Asian countries who participated in the work are now in a position to take the work forward in response to government requests for advice on the sustainability of supply and trade from their countries.

The research found that there were the following four critical areas where sustainability of the trade needed improvement:

1. Better governance of wild-caught fisheries: In general, live reef fisheries provide valuable export commodities for small-scale fishers throughout Asia-Pacific. However, these livelihood benefits are threatened due to poor governance and management of these fisheries leading to over-exploitation and the dissipation of fishery rents. Numerous strategic plans and actions have been initiated throughout Asia-Pacific such as banning the use of cyanide and explosives, advocating responsible fishing practices and encouraging aquaculture. However, many of these initiatives have not been legislated, preventing their enforcement. If they have been legislated, implementation and enforcement have been poor. Strong engagement by policy makers, fishing communities and other decision makers is required to assess and reform current governance structures to ensure economic, environmental and social sustainability of the fisheries.

2. Sustainable development of reef fish aquaculture: Culture production and technology of reef species has improved significantly since its inception in the late 1990s. There are two significant opportunities for aquaculture of live reef fish species. The first is to ensure the regional poor can benefit from the wider adoption of this technology. The second is to reduce stress on coral reefs from captured supply. The ability of the aquaculture sector to realise these opportunities depends on how well it relieves its dependence on wild-stocks for fry, fingerlings and food; minimises the impact of disease and deformity; reduces the interest costs on borrowed capital for aquaculture investments; minimises pollution from nutrient discharge and markets the acceptability of cultured fish as a substitute for wild-caught LRFF.

3. Integrated policies for assisting low-income fishing communities: Demand for live reef fish, especially in Hong Kong and mainland China, is expected to increase due to income growth, population growth, and the change in preferences towards fish prepared in this way. As a result the trade is expected to increase in the future. Trade volumes of cultured fish are expected to increase as production expands, particularly in China. The trend is the opposite for wild-caught fish, for which trade volumes are expected to decrease because of over-utilisation of the resource. There is scope to improve the management of reef fisheries by controlling overfishing, but this may require restricting current fisher access to the reefs, causing disruption of their livelihoods. It is therefore important that aquaculture development be closely integrated with existing wild-caught fisheries to provide new economic opportunities to these relatively low income fishing families.

A coordinated policy response in each live reef fish exporting country to simultaneously improve the governance of reef fisheries and sustainable development aquaculture technology will help ensure that no section of the community is excluded from benefiting from expansion in the live reef fish trade. Without this coordinated policy, there is a risk that low-income fishing communities or fish farmers will not benefit from the livelihood benefits of the live reef fish trade.

4. More informed consumer choices: Consumers currently seem to have definite preferences for wild-caught product over cultured product, and express a willingness to pay significantly higher prices for these fish. Preferred characteristics of wild-caught produce include better freshness, better smoothness, a stronger flavour, improved 'mouthfeel' texture, more elastic skin and more tender flesh. However, little is known about consumer preferences for cultured reef fish that have been fed on different diets and further research on consumer tastes is required.

Consumers in Hong Kong exhibit a high willingness to change consumption behaviour if given sufficient conservation information regarding their live reef fish purchases. The Hong Kong aquaculture industry is currently trialling a Certified Fish Tag Scheme for aquaculture producers to comply with certain environmental standards.

A successful ecolabelling system is expected to have positive effects on the supply of live reef food fish by encouraging consumers to purchase them, improve the biological sustainability of reef fisheries, and provide ongoing employment opportunities and incomes for fishers, fish farmers and those supplying to input markets of these products.