Economic viability - Economics and Financing of Aquaculture

Economics and Financing of Aquaculture

Economic viability

On national planning of aquaculture development, the characteristics of programmes for social benefits and commercial profit have been outlined. The distinctions between the two become less clear when the economics of the operations are considered, as on a long-term basis both types of activities have to be economically profitable to be sustainable. Socially oriented aquaculture can expect governmental support in the form of easy loans and grants, subsidies and free technical advice and assistance. Such support is generally time-bound and intended to improve the socio-economic and nutritional conditions of communities. Although under certain circumstances it may be maintained on a prolonged basis, it is expected that the targeted improvements will eventually be achieved and the assistance can then be phased out. On a somewhat similar basis, incentives may be offered to commercial enterprises for initial periods in the form of tax rebates and exemptions, concessional loans, etc. In both cases, economic viability will be essential for continued operation and future expansion. Whether it is a small-scale farmer or an entrepreneur involved in large-scale production, the attractiveness of aquaculture depends to a very great extent on the economic benefits. The social benefits are often closely intermingled with economic benefits.

The decline of the numerous homestead fish ponds established for improved nutrition of rural people in parts of Africa is adequate proof of this.

Despite the basic importance of economic viability, very little attention has been paid to

this aspect, and promotion of aquaculture has suffered considerably for lack of appropriate data and documentation on relevant evaluations. Costs and earnings are undoubtedly site-specific, and what is economic in one area may not be so in another. However, rough evaluations of the feasibility of an enterprise or project can be made on the basis of similar ones operating under as comparable a situation as possible. It is also necessary to compare the costs and earnings of other similar activities for which opportunities exist in the area before making decisions on investment in aquaculture.

Problems of obtaining reliable data from commercial operations are not peculiar to aquaculture. But, unlike many other sectors, aquaculture has until very recently been carried out almost entirely by individual farmers or small groups that seldom maintained the type of data required for proper economic analysis.

So, the paucity of adequate and appropriate data has been a major constraint. Most of the presently available data on commercial operations are based on special surveys undertaken by investigators. The limitations of laboratory and experimental data for economic evaluations are well known. Pilot productions, which could be of value for this purpose, are too few to be of much help. It has yet to become an accepted practice for aquaculture scientists to incorporate economics as an important variable in experimental designs. In the absence of this, many experimental findings remain of only technical significance and do not find application in production programmes.

The lack of economic data also seriously affects access to suitable financing that is badly needed for the development of the aquaculture industry. Not only does it constrain investment financing, but it also makes the organization of proper risk insurance extremely difficult.