Column/Asia

Shared Waters, Shared Futures: ASEAN-Led Cooperative Fisheries Governance in the South China Sea

Posted on by Christopher Kirch
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The loss of fish in the South China Sea is a crisis for Southeast Asia. Due to overfishing, 64% of regional fish stocks are at a medium to high risk of collapse, and Southeast Asia faces a loss of up to $15 billion USD in annual landed value and 10 million jobs. Southeast Asia is uniquely reliant on fish from the South China Sea: its primary sector contributes nearly seven times more to its GDP than its regional peers of Japan, Australia, and South Korea, and fish constitutes 38% of its animal protein intake, one of the highest in the world. This economic and nutritional reliance on fish makes Southeast Asia especially vulnerable to the harms of fishery collapse in the South China Sea: threatening its ability to grow its tertiary sector, and causing malnutrition, undercutting quality of life and productivity.1 A loss of fish worsens the region’s geopolitical security, intensifying a reliance on China, which continuously subverts the region through territorial disputes and vessel incursions.23 The collapse of marine fish stocks in the South China Sea devastates the economic, nutritional, and sovereign basis of Southeast Asia.

This article argues that ASEAN should coordinate a regional individual transferable quota (ITQ) system within the exclusive economic zones of Southeast Asia. An ITQ regime under ASEAN avoids the economic and political transaction costs of policies in the status quo and is the framework that optimizes the macroeconomic, microeconomic, and environmental conditions of Southeast Asia. To pursue this argument, this article employs the paradigm of institutional economics—the study of how institutions influence economic outcomes and behavior—using a counterfactual outcome assessment methodology between the ITQ, open-access, and command-and-control policy frameworks.

This article is subsequently divided into four parts. The first part is an evaluation of the causes of the current overfishing crisis and academic consensus. The second is a study on the feasibility of ASEAN to coordinate an ITQ system between its member states. The third is a comparative analysis of the economic and environmental benefits of an ITQ system to Southeast Asia to the open-access and regulatory alternatives. The fourth part is a conclusion that synthesizes the article’s argument and articulates its unique contribution to scholarship.

Hooked on Inaction—The Political and Economic Barriers to Overfishing Solutions

Southeast Asia’s overfishing crisis continues due to the prohibitive transaction costs of regulatory enforcement, requiring a reevaluation of academic recommendations of command-and-control interventionist policies. Despite the existential challenge of declining fish populations, overfishing in Southeast Asia has accelerated: regional fish production nearly doubled in the last twenty years and total fish stocks have decreased by up to 95%. Overfishing is due in part to how unpopular sustainable fishing policies remain in ASEAN countries, as demonstrated in the toppling of Thailand’s Prime Minister.4 As the fishing sector produces $67 billion for Southeast Asian communities, governments grapple with the complex effects of potential regulatory interventions—risking economic downturns, mass unemployment, and poverty.5 As a result, Southeast Asia cannot enact command-and-control regulations on fish production because of its high political and economic transaction costs.

Nonetheless, academic literature continues to erroneously recommend command-and-control regulatory interventions to solve international overfishing issues: Gaurav N. Lanjewar and fellow authors advocate for fishing bans; Takashi Fritz Matsuishi argues for the promotion of multispecies fisheries; ​​Ca-Van Pham and co-authors recommend bans on fish trawling.6 7 8 This contemporary scholarship on overfishing in Southeast Asia largely ignores the coordination problems that prevent the implementation of command-and-control interventions. Politicians are incentivized to oppose short-term production restrictions for re-election.9 Institutional consumers, such as the hospitality sector, are often incentivized to ignore regulations due to their upward pressures on input costs. Southeast Asian fish producers are incentivized to oppose regulations because they decrease profits.10 Therefore, many stakeholders in Southeast Asia are dissuaded from implementing such frequently discussed recommendations in academia. 

Academic scholarship therefore requires a fundamental reimagining of the policy solutions to the overfishing crisis in Southeast Asia. Individual transferable quotas, a type of market-based fishing management policy, are one such solution used in over 20 countries worldwide.11 Governments establish the annual allowable catch of a fish species and divide it between local producers in the form of individual quotas, after which, producers can purchase, sell, or loan these quotas in the private sector for the right to harvest fish.12 ITQ systems are economically and environmentally effective due to their ability to achieve multiple stakeholder aims: fish producers prioritize short-term profits while governments emphasize the need for sustainable fishing practices. For fish producers, quotas are government-allocated assets that increase their relative wealth and production to non-quota holders.13 14 For governments, annual catch limits ensure the regeneration of a species. The enforcement costs of ITQ systems are minimal because they are self-actualizing: producers are vested in the long-term value of their quotas and aim to become stewards of their ecosystems.15 ITQ systems are successful because they align the respective economic and ecological incentives of private and public stakeholders. ASEAN should implement a regional ITQ system in Southeast Asia because it is feasible and economically and environmentally superior to the open access and command-and-control policy alternatives. 

Reeling in Reform—ASEAN’s Feasibility for a Regional ITQ System

ASEAN can realistically implement a regional ITQ system due to its diplomatic consensus, precedence in environmental projects, and industrial capacities. ASEAN can coordinate a regional ITQ system due to its alignment on reforms on sustainable fishing: the ASEAN Ministers on Agriculture and Forestry enacted the “Resolution and Plan of Action on Sustainable Fisheries for Food Security for the ASEAN Region Towards 2030” in 2020, which enacted regional cooperation on sustainable fish production. This agreement, currently in effect, shares the burden of responsibility of fishing reform among Southeast Asian states and reduces the political capital required for ASEAN to enact an ITQ system. ASEAN can coordinate a regional ITQ system due to this explicit consensus towards sustainable fishing. 

ASEAN could further coordinate an ITQ system due to its precedence in coordinating binding resolutions on multinational ecological projects. Scholarship discusses the organizational norm of the ‘ASEAN Way’ that forbids international intervention in domestic affairs due to historic unease over colonization.16 17 18 Nonetheless, the organization has previously instituted two legally binding multilateral agreements on ecological protection: the Conservation of Nature and Natural Resources (1985) and the ASEAN Agreement on Transboundary Haze Pollution (2002).19 These agreements demonstrate a willingness for the group to work under shared legal regulations for mutual environmental benefit. Pramudianto discusses the success of these resolutions for regional environmental protection.20 The bloc can similarly implement an ITQ to meet its sustainability goals. ASEAN can organize a regional ITQ system due to its precedent of implementing similar multilateral environmental agreements.

ASEAN fulfills the institutional scientific, commercial, and legal criteria to feasibly implement an ITQ system. The Southeast Asian Fisheries Development Center compiles annual information on over 800 aquatic species in every ASEAN state. Markets are bullish on government securities from Southeast Asia, and ASEAN has established effective institutions, such as the Ministerial Meeting on Transnational Crime, to address maritime crime.21 ASEAN is well-positioned to implement an ITQ system because it satisfies its technical, financial, and enforcement requirements.

Market Tides—Economic Resilience Through ITQ Fishing

ASEAN should implement an ITQ system not only because it can, but because it should. An ASEAN-led ITQ system in Southeast Asia has superior macroeconomic, microeconomic, and competitive benefits than the open-access and command-and-control fishing arrangements. It preserves the strength of Southeast Asian macroeconomies by averting the projected loss of up to $15 billion of economic output and 10 million livelihoods in the open-access status quo. An ITQ system maintains capital flows that support local fishing enterprises, unlike command-and-control regulations such as marine protected areas, which impose structural adjustment costs, reduce capital investment, and exacerbate the relative effects of supply-side shocks.22 23 ASEAN should coordinate an ITQ system in Southeast Asia because it preserves the strength of regional macroeconomies compared to the open-access and regulatory alternatives

On a more granular basis, an ITQ system improves the conditions of fishing sectors in Southeast Asia. The status quo of fish production in the South China Sea is the current open-access ‘race to fish’ model, where producers maximally harvest fish in minimal timeframes.24 Unlike an ITQ system, this framework provides no safeguards for the long-term sustainability of fish populations.25 Under an ITQ system, fishers can decide when to produce, such as to avoid adverse weather conditions, minimizing inter-annual variability in production rates.26 Stable supply chains minimize operational losses for downstream market actors.27 Additionally, compared to conventional regulatory interventions that halt economic activity, ITQ systems encourage optimized fish production: efficient producers purchase quotas from inefficient producers, reducing costs and increasing profitability.28 ASEAN should implement an ITQ system in Southeast Asia, providing a more sustainable and productive alternative to the open-access and command-and-control policy approaches.

A regional ITQ system improves the competitiveness of regional fishing sectors more than the open-access and interventionist scenarios. ITQ fisheries can integrate upper limits on quota acquisitions to prevent monopolistic markets.29 This arrangement is an improvement over the status quo of the open-access model, where the lack of de facto maritime regulation causes companies to crowd out small-scale subsistence and indigenous producers, eroding market competitiveness and economic equity.30 Moreover, conventional regulations are economically regressive: compliance costs are relatively higher for small-scale producers than for large ones.31 To countervail this effect, under an ITQ system, individual quotas are collateral for small-scale producers to enter credit and insurance markets. ASEAN should implement an ITQ system in Southeast Asia to promote a more equitable and prosperous fishing market in the South China Sea.

Anchoring Biodiversity—Conservation Through Governance

Beyond its economic benefits, ASEAN should implement an ITQ system in Southeast Asia because of its environmental advantages over the open-access and command-and-control policy frameworks. Christopher Costello and co-authors compiled data for 11,135 global fisheries and concluded that fish population collapses are half as likely to occur in ITQ fisheries than in non-ITQ fisheries.32 This result is due to two inherent qualities of ITQ-managed fisheries: adaptive management and trophic conservation. In contrast to the unvarying nature of most policy interventions, governments can adjust individual quota distributions to new scientific and ecological circumstances such as climate change. These adjustments create ecological resilience.33 Additionally, ITQ systems preserve the trophic hierarchy of ecosystems. In comparison to most fishing regulations which are species-agnostic, ITQ systems regulate catch limits per species. This precision that integrates ecological dynamics is necessary to support complex multi-species fisheries.34 Fish producers are incentivized to support this ecological composition to maintain the value of their quotas, reducing the use of ecologically unsustainable traditional fishing methods in Southeast Asia, such as poison and blast fishing.35 ASEAN should implement an ITQ system in the South China Sea to prevent ecological collapse in the region’s fisheries.

Conclusion

ASEAN should implement a regional ITQ system because it is superior to the open-access and interventionist scenarios, economically and environmentally. Economically, ITQ systems maintain national output, increase sectoral profits, and counter market monopolies. Environmentally, an ITQ system enables policy adjustments to future scientific and ecological conditions while preserving biodiversity. This article demonstrates that a regional ITQ system organized by ASEAN prevents the collapse of fish stocks in the South China Sea with optimal economic and environmental results.

This article, which argues for ASEAN to implement an ITQ system, contributes to scholarship by analyzing the implications of market-based systems for socio-economic goals in Southeast Asia and the South China Sea. The current body of scholarship focuses on regulatory practices as a basis for the global sustainability of fish stocks. In contrast, this article argues how free market principles through an ITQ system limit overfishing and increase economic growth. Ultimately, this work further paves the way for future empirical investigations of ITQ initiatives in small-scale fisheries in Southeast Asia for insights on methods for regional scalability and sustainability as well.

Featured/Headline Image Caption and Citation: A Fishing Village Near Mui Ne, On the South China Sea in Vietnam, taken by Kent MacElwee | Image sourced from Flickr | CC License, no changes made

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  12. Ibid. ↩︎
  13. James Acheson, Spencer Apollonio, and James Wilson, “Individual Transferable Quotas and Conservation: A Critical Assessment,” Ecology and Society 20, no. 4 (2015), https://www.jstor.org/stable/26270307. ↩︎
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  25. Ibid. ↩︎
  26. Eriko Hoshino et al., “Individual Transferable Quotas in Achieving Multiple Objectives of Fisheries Management,” Marine Policy 113 (2020): 1–8, https://doi.org/10.1016/j.marpol.2019.103744. ↩︎
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Author

Christopher J.T. Kirch is a third-year economics and public policy student at Lafayette College in Easton, Pennsylvania. He interned at the U.S. Embassy in London and conducted data science research for Columbia University. Currently, he works in federal politics in his hometown of Tokyo, Japan.
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