Coastal state fishery development: Foreign fleets and optimal investment dynamics

Abstract

An economic optimization model is formulated to evaluate coastal state fishery development options, involving (i) the optimal level investment in the domestic fleet, (ii) the nature and extent of involvement by foreign ‘distant water’ fleets. The coastal state utilizes two regulatory tools: allocation of the annual Total Allowable Catch between domestic and foreign fleets, and imposition of a royalty on the foreign fleet's harvest. Depending on the royalty rate and specific combinations of economic parameters, the optimal pattern of fishery development may involve: exclusion from the fishery of one or the other of the fleets, transitory coexistence as one fleet depreciates over time, or stable long-term coexistence of both fleets. The initial fleet sizes, the unit cost of capital and the depreciation rate are found to play major roles in determining the extent of each fleet's participation in optimal exploitation of the coastal resource.