08/01/2019 - 14:50

Government blind in $70m lobster move

08/01/2019 - 14:50

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Opponents continue to blast government changes to lobster licensing arrangements as it emerges that, despite the state potentially pocketing nearly $70 million annually from the moves, a cost benefit analysis of the major policy shift unveiled in December was not undertaken.

Government blind in $70m lobster move
Lobster fishing is one of WA's most significant agricultural industries. Photo: Ian Derick, WAFIC

Opponents continue to blast government changes to new lobster licensing arrangements as it emerges that, despite the state potentially pocketing nearly $70 million annually from the moves, a cost benefit analysis of the major policy shift unveiled in December was not undertaken.

Minutes of confidential discussions between the state and the Western Rock Lobster Council in November show the industry body had rung alarm bells about three weeks before the policy was announced to the public.

The council estimated the government would raise $69 million a year from leasing the new licences, or $1.4 billion if sold.

However, both those numbers were assuming a market price that may not be achievable given the state will be imposing major restrictions on where the production from the new pots might head.

The industry body also noted that no cost benefit work had been done by the state government.

A representative for Fisheries Minister Dave Kelly told Business News the proposal’s benefits had been outlined in modelling undertaken in 2017 by ACIL Allen Consulting for the lobster council.

That report includes details of the industry’s economic impact, and sensitivity analysis of fluctuations in price and production levels, but did not cover the specifics of the government’s plan to lease new permits or reserve them for domestic consumption.

Part of the problem, the lobster council said, was that the government had not taken account of the impact of the changes on investment certainty or risk in capital markets associated with the industry.

There was also concern about the rapidity of growth in the permits, saying it had expert analysis suggesting a 5 per cent a year increase would be the highest sustainable level.

The state’s plan would increase production slightly more than this, by 27 per cent over five years.

There are other interesting snippets that emerge from the minutes.

One of the council's worries was that the state government had not shown how its plans would benefit tourism or create jobs.

The council also said its own modelling showed the government’s plan would reduce the industry’s gross production value to below $300 million annually, because new supply entering the Chinese market would put pressure on prices.

In 2017, GVP was about $450 million.

Exactly how WRLC arrived at the figure is unclear, however.

For context, Chinese lobster imports have grown in recent years, with US sales to China about 5,500 tonnes and Canadian shipments to China around 8,100t, according to a 2017 United Nations Food and Agriculture Organisation report.

Mr Kelly told Business News that, so far, there was no evidence that licence prices had changed since the announcement.

“The government reached agreement with the Western Rock Lobster Council on a plan to grow the industry and boost WA jobs," Mr Kelly said.

"Any uncertainty that exists now is only there because some people are trying to unravel that agreement.”

The government will be consulting with industry bodies about how the domestic reservation will be used.

Shredded

Western Rock Lobster Council chief executive Matt Taylor said the government’s intervention in the sector was unprecedented, and that it may open the gate for further moves in other primary industries.

“We were told to go into a confidentiality arrangement with government for a four-week period ... we negotiated a policy package which we thought we’d take to industry for consultation,” Mr Taylor told journalists today.

“We were then told it would be announced as policy.”

Mr Taylor said many elements from the government’s industry package had come from the council’s 10-year growth plan.

The government offered about $27.5 million to support the initiatives, such as setting up a body corporate, establishing an institute for spiny lobster research and a new lobster festival, among other concepts.

“I think Mr Kelly has seen (our) plan, and wanted to own that growth and do it in three years rather than 10,” Mr Taylor said.

“We don’t want (his) $27.5million, we want to fund ourselves, we want to set up an independent body corporate.”

mala (sic) Fisheries managing director Ray Yukich said the industry did not provide much lobster into the domestic market because of red tape.

“The reason there’s very little lobster on the local market is simply because we’re not allowed to sell them there, that's why they’re exported,” he said.

“The government has banned us selling to anyone that’s not a registered buyer.

“We’re happy to sell to the local market but we’re not allowed to, it’s simple as that.”

Opposition leader Mike Nahan said the Western Rock Lobster fishery had previously been well managed by fishermen, government and processors collaborating.

“This government has shredded that, it has shredded it in the most serious way,” he said.

“Instead of playing its role as a regulator, it has decided to nationalise 17 per cent of the industry.

“This is something like you see in a third world country.

“The industry was based on private sector money, private sector investors.”

Both Mr Yukich and Mr Nahan called on the government to work with the lobby group to redraft its plans.

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