A COST-BENEFIT ANALYSIS OF PROJECTS IMPLEMENTED TO
ASSIST THE BLACK PEARL INDUSTRY IN
MANIHIKI LAGOON, COOK ISLANDS
Emily McKenzie
SOPAC Secretariat
December 2004
SOPAC Technical Report 371
This study was instigated by the Cook Islands Government.
It was funded by the Secretariat of the Pacific Community and the South Pacific Applied Geoscience Commission.
[2]
Cataloguing in Publication Data:
McKenzie, Emily
A cost-benefit analysis of projects implemented to assist the Black Pearl industry in Manihiki Lagoon, Cook
Islands/Emily McKenzie. – Suva: SOPAC, 2004.
57 p.: ill.; 30 cm
ISSN: 1605-4377
1. Pearl Oyster Culture – Manihiki Lagoon – Cook Islands
2. Pearl Industry – Cook Islands
I. SPC II. SOPAC Technical Report 371 III. Title
[SOPAC Technical Report 371 – McKenzie]
[3]
TABLE OF CONTENTS
LIST OF FIGURES ___________________________________________________________________4
LIST OF TABLES ____________________________________________________________________4
EXECUTIVE SUMMARY ______________________________________________________________5
ACKNOWLEDGEMENTS______________________________________________________________6
OUTLINE __________________________________________________________________________7
INTRODUCTION_____________________________________________________________________8
1.
BLACK PEARL FARMING IN MANIHIKI ___________________________________________9
1.1.
TRADITIONAL USE OF WILD OYSTERS ____________________________________________9
1.2.
PEARL FARMING __________________________________________________________10
1.3.
RISE AND FALL OF THE COOK ISLANDS PEARL INDUSTRY _____________________________12
1.4.
CAUSES OF THE DECLINE OF THE MANIHIKI PEARL INDUSTRY __________________________13
1.5.
IMPACT OF THE MANIHIKI PEARL INDUSTRY _______________________________________17
1.6.
SUMMARY _______________________________________________________________19
2.
PROJECTS IMPLEMENTED IN MANIHIKI _________________________________________20
2.1.
LAGOON MONITORING PROJECTS ______________________________________________20
2.2.
PEARL OYSTER MONITORING PROJECTS _________________________________________23
2.3.
MAPPING PROJECTS _______________________________________________________25
2.4.
CAPACITY BUILDING PROJECTS _______________________________________________27
2.5.
MANIHIKI PEARL FARMING MANAGEMENT PLAN ____________________________________29
3.
METHODS __________________________________________________________________32
3.1.
OVERVIEW _______________________________________________________________32
3.2.
PREVIOUS RELATED STUDIES _________________________________________________32
3.3.
PROJECT COSTS __________________________________________________________33
3.4.
CHANNELS OF PROJECT BENEFITS _____________________________________________33
3.5.
MODEL AND INDICATOR OF PROJECT BENEFITS ____________________________________37
4.
FINDINGS __________________________________________________________________39
4.1.
COST BENEFIT ANALYSIS ____________________________________________________39
4.2.
SENSITIVITY ANALYSIS ______________________________________________________40
4.3.
QUALITATIVE ANALYSIS OF INTANGIBLE PROJECT BENEFITS ____________________________45
5.
DISCUSSION ________________________________________________________________47
5.1.
LIMITATIONS _____________________________________________________________47
5.2.
RECOMMENDATIONS _______________________________________________________48
5.3.
CONCLUSIONS ____________________________________________________________49
6.
BIBLIOGRAPHY _____________________________________________________________50
6.1.
PROJECT REFERENCES _____________________________________________________50
6.2.
OTHER REFERENCES _______________________________________________________51
GLOSSARY OF PEARL TERMINOLOGY ________________________________________________55
GLOSSARY OF ECONOMICS & PROJECT TERMINOLOGY ________________________________56
APPENDICES
1
2
3
4
5
6
STAGES OF PEARL PRODUCTION __________________________________________58
MAPS __________________________________________________________________59
PROJECT COSTS_________________________________________________________60
MODEL OF PEARL PRODUCTION ___________________________________________62
COST-BENEFIT ANALYSIS FINDINGS ________________________________________70
SENSITIVITY ANALYSIS FINDINGS __________________________________________71
[SOPAC Technical Report 371 – McKenzie]
[4]
LIST OF FIGURES
Figure 1:
Figure 2:
Figure 3:
Figure 4:
Figure 5:
Figure 6:
Figure 7:
Figure 8:
Figure 9:
Figure 10:
Figure 11:
Figure 12:
Figure 13:
Figure 14:
Figure 15:
Figure 16:
Figure 17:
Figure 18:
Figure 19:
Value of pearl oyster shell exports from the Cook Islands, 1989-2003 _______________9
Pearl farm in Manihiki Lagoon _____________________________________________10
Manihiki pearls for sale in Rarotonga market _________________________________11
Value of fish, pearl and all other exports from the Cook Islands ___________________12
Value of pearl exports from Cook Islands and French Polynesia __________________13
Average price and quantity of black pearls at auctions in Tahiti 1985-2002 __________14
Poor quality pearls from diseased oysters____________________________________16
Pearl production indicators before and after disease outbreak ____________________17
Relationship between value of pearl exports & real GDP growth in Cook Islands _____19
Timeline of projects implemented in Manihiki Lagoon, 1996-2004 _________________21
Oceanographic monitoring buoy in Manihiki Lagoon____________________________22
Total number of cultured pearl oysters in Manihiki Lagoon, 1991-2003 _____________24
Ministry staff hand out maps to pearl farmers _________________________________25
Map of individual pearl farm in Manihiki Lagoon _______________________________26
Map showing position of all pearl farms in Manihiki Lagoon ______________________26
Student harvesting pearls at the technician training course ______________________27
Channels through which project activities create benefits ________________________34
Pearl revenue accruing to Cook Islanders with & without the projects, 2003-2019_____39
Pearl revenue accruing to Cook Islanders with no management plan, 2003-2019 _____41
LIST OF TABLES
Table 1:
Table 2:
Table 3:
Table 4:
Table 5:
Table 6:
Table 7:
Table 8:
Table 9:
Use of project information by pearl farmers _____________________________________36
Model of pearl production ‘with projects’ and ‘without projects’ ______________________38
Cost-benefit analysis indicators ______________________________________________40
Cost-benefit indicators, projects do not include management plan ___________________41
Cost-benefit indicators with higher pearl prices __________________________________42
Cost-benefit indicators with decreased pearl prices ______________________________43
Cost-benefit indicators with higher project costs _________________________________43
Cost-benefit indicators with no employment of local technicians_____________________44
Summary of cost benefit analysis ____________________________________________44
[SOPAC Technical Report 371 – McKenzie]
[5]
EXECUTIVE SUMMARY
In November 2000 the black pearl industry in Manihiki Lagoon in the Northern Cook Islands was
severely affected by an oyster disease, which, along with low international pearl prices, has
caused a steep decline in pearl export revenue, from NZ$18.4 million in 2000 to NZ$2.8 million in
2003. Overstocking and poor handling of pearl oysters, combined with adverse environmental
conditions, were found to be the major causes of the Manihiki disease outbreak in 2000. Scientific
research and experience in other pearl farming countries suggest that more sustainable farming
practices and lagoon management would have prevented the disease and subsequent decline in
the quality and quantity of pearl production.
The Cook Islands Ministry of Marine Resources, with the assistance of other organizations, has
implemented various projects in Manihiki, which aim to achieve sustainable development of the
black pearl industry and avoid future disease outbreaks. These projects involve diverse activities,
including: monitoring the physical and chemical parameters in the lagoon; monitoring pearl oyster
health and stocking levels; mapping the lagoon bathymetry and pearl farms; building local
capacity in pearl farming and lagoon management skills, and drawing up a lagoon management
plan and code of practice.
The Cook Islands Government and supporting organizations have invested considerable
resources in the projects in Manihiki. Will the projects reap economic benefits greater than their
costs? This study develops a model of pearl production to estimate the economic benefits that
the projects are likely to bring the Cook Islands. The technique of cost-benefit analysis is used to
compare the estimated benefits over a fifteen year time period between 2004 and 2019 with the
total project costs.
The model of pearl production developed in this study assumes that more sustainable oyster
stocking densities and farming practices will improve oyster health, and increase the yield and
quality of pearls harvested. In the first cost-benefit analysis scenario, it is assumed that the
projects are supported by the implementation and enforcement of a pearl farming management
plan, which regulates oyster-stocking densities and farming practices. In this scenario, the Net
Present Value of the projects is approximately NZ$39.8 million i.e. the pearl revenue generated
by the projects exceeds the total project costs by NZ$39.8 million in 2004 present value terms.
The projects also have additional indirect, secondary and non-monetary benefits.
If the draft management plan is not implemented and enforced, however, incentives will remain
for resource users to stock the lagoon at unsustainable oyster densities and employ poor farming
practices. In this future scenario, the projects will have a negative Net Present Value of
[SOPAC Technical Report 371 – McKenzie]
[6]
approximately (NZ$2.4 million) i.e. the project costs exceed the pearl revenue generated by the
projects by NZ$2.4 million in 2004 present value terms. Many of the indirect, secondary and nonmonetary benefits will also be lost.
The main conclusion of this study is that the information and skills generated by the projects in
Manihiki have the potential to generate multi-million dollar net benefits for the Cook Islands, but
these will only materialise if there is an effective resource management regime to ensure
sustainable farming practices, such as the Manihiki pearl farming management plan and code of
practice, which are currently in draft form. On the basis of this conclusion, it is strongly
recommended that the draft Manihiki pearl farming management plan be implemented as soon as
possible, to guarantee that the projects effectively reap their substantial potential economic
rewards for the Cook Islands.
ACKNOWLEDGEMENTS
This study was funded by the Secretariat of the Pacific Community (SPC) and the South Pacific
Applied Geoscience Commission (SOPAC).
Meitaki maata to the many people who assisted the research in Rarotonga and Manihiki,
including pearl farmers, pearl retailers and Island Council members who provided valuable
information and assistance. Particular thanks to the pearl farmers in Manihiki who provided
comments on the first model of pearl production: Tina Browne, Marc Ellis, Kora Kora, Apii Piho
and Henry Puna. I would also like to thank Ian Bertram, Jo Anderson, Tangi Napara and Teina
Tuatai at the Ministry of Marine Resources, and Terai McFadzien at the Bank of the Cook Islands
for their help and support throughout my stay in the Cook Islands.
I am very grateful to those people who assisted in the planning and write-up stages of the
research while I was based in Fiji. Special thanks to Ian Bertram and Jo Anderson at the Ministry
of Marine Resources, Berni Aquilina, Roger Fouquet at Imperial College London, and Ben Ponia
at SPC who provided valuable comments on different aspects of the first draft of the report.
Thanks also to Paula Holland at the South Pacific Regional Environment Programme, Padma Lal
at Australian National University, Elisabeth Paul at the Universite de Liege, Bernard Poirine at the
University of French Polynesia and Neil Sims at Black Pearls Inc. who provided constructive
advice and comments in the planning phase.
[SOPAC Technical Report 371 – McKenzie]
[7]
OUTLINE
Section 1 of this report gives some background information relating to the black pearl farming
industry in Manihiki in the Cook Islands. Section 1.1 describes how wild oysters were traditionally
used in Manihiki. Section 1.2 summarises the history of black pearl farming in Manihiki Lagoon
since it began in the mid-1980s, and describes the stakeholders and institutions currently involved
in the industry. Section 1.3 examines the growing importance of the Manihiki black pearl industry
to the Cook Islands economy in the 1990s, and its subsequent decline after 2000. Section 1.4
explores two of the main factors causing the recent decline of the Manihiki black pearl industry:
the fall in international black pearl prices and the pearl oyster disease outbreak in Manihiki in
November 2000. Section 1.5 discusses the impact of the rise and fall of the Manihiki pearl
industry on the local Manihiki and national Cook Islands economies.
Section 2 describes the various projects that have been implemented to assist the black pearl
industry in Manihiki between 1996 and 2004: Section 2.1 describes the lagoon monitoring
projects; Section 2.2 covers the pearl oyster monitoring projects; Section 2.3 summarises the
mapping projects; Section 2.4 describes the capacity building projects, and Section 2.5 outlines
the draft Manihiki pearl farming management plan and code of practice.
Section 3 provides an overview of the economic methods and model used in this study. Section
3.1 gives a general overview of the cost-benefit analysis. Section 3.2 discusses previous related
studies. Section 3.3 outlines the costs involved in the projects. Section 3.4 describes the channels
through which the projects create benefits. Section 3.5 summarises the model of pearl production
used to generate a project benefit indicator.
Section 4 gives the findings of the cost-benefit analysis. Section 4.1 summarises the cost-benefit
indicators generated by the original model of pearl production. Section 4.2 shows the effects of
adjusting the assumptions within the model through sensitivity analysis. Section 4.3 discusses
some of the indirect, secondary, and non-monetary costs and benefits of the projects that are not
included in the quantitative analysis.
Section 5 discusses the findings of the report. Section 5.1 highlights the limitations of the
analysis. Section 5.2 gives some recommendations on how to ensure that the projects effectively
achieve their large potential economic benefits. This is followed by the report’s final conclusions in
Section 5.3.
[SOPAC Technical Report 371 – McKenzie]
[8]
INTRODUCTION
The objective of this study is to evaluate the economic net benefits of projects implemented to
assist the black pearl industry in Manihiki in the Northern Cook Islands1. The Cook Islands
Ministry of Marine Resources, with the assistance of other organizations, has implemented
various projects in Manihiki, which aim to achieve sustainable development of the black pearl
industry and avoid pearl oyster disease outbreaks. These projects involve diverse activities,
including: monitoring the physical and chemical parameters in the lagoon; monitoring pearl oyster
health and stocking levels; mapping the lagoon bathymetry and pearl farms; building local
capacity in pearl farming and lagoon management skills, and drawing up a lagoon management
plan and code of practice.
This study uses the economic technique of cost-benefit analysis to assess the benefits of these
projects relative to their associated costs. It is the first overall evaluation and cost-benefit analysis
of the projects in Manihiki. It is also the first analysis of its type in the international pearl industry,
and in the Cook Islands as a whole. The intention is that the findings and recommendations of
this report will influence the evolution of future project activities in Manihiki and in aquaculture
industries elsewhere in the Pacific. It is also intended that this study demonstrate the merits of the
cost-benefit analysis approach for assisting resource allocation decisions in the Pacific.
1
See Appendix 2 for maps showing Manihiki and its location in the Cook Islands and the wider Pacific.
[SOPAC Technical Report 371 – McKenzie]
[9]
1.
BLACK PEARL FARMING IN MANIHIKI
1.1. Traditional Use of Wild Oysters
The black-lipped pearl oyster, Pinctada margaritifera, occurs naturally in a number of lagoons in
the Northern Cook Islands, including Manihiki Lagoon. There are three products that can be
derived from black-lipped pearl oysters: oyster meat, mother-of pearl (the nacre from the inner
oyster shell) and black pearls. Traditionally people in Manihiki dived for wild oysters and used the
mother-of-pearl for fishhooks, tools and ornaments and consumed the oyster meat locally (Taime,
1999). Natural black pearls were rarely found in wild oysters2. In the mid-nineteenth century,
Manihiki began to export mother-of-pearl for the manufacture of buttons and jewellery. Pearl
oyster shell is still exported from the Cook Islands, and used for the manufacture of buttons and
local crafts, but its importance declined hugely over the 1990s, with a small increase in 2003, as
shown in Figure 1. In 2003, the value of mother-of-pearl exports was only 4 percent of its value in
1.2
1
0.8
0.6
0.4
0.2
0
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
Value of pearl oyster shell exports
(NZ$ millions)
1989.
Year
Figure 1: Value of pearl oyster shell exports from the Cook Islands, 1989-2003. [Source: Cook Islands Annual Statistics Reports]
2
Approximately only one in 15,000 wild black-lipped pearl oysters holds a natural black pearl.
[SOPAC Technical Report 371 – McKenzie]
[10]
1.2. Pearl Farming
Pearl culture (farming oysters to produce black pearls3) began in Manihiki in the 1980s. In 1982
the first Manihiki family began pearl farming in the lagoon, and by 1989 there were over 40 local
pearl farms, with a total of approximately 400,000 adult cultured pearl oysters (Ponia, 1996). The
number of pearl farms continued to increase during the 1990s, as black pearl farming rapidly
became the main source of income in Manihiki, with a temporary setback after Cyclone Martin4 in
1997. By 2003, there were 205 pearl farms in Manihiki, consisting mostly of small, family-based
units, with an estimated total of one million adult cultured pearl oysters (MMR, 2003). The pearl
industry transformed the Manihiki economy from largely subsistence- to aquaculture-based.
Figure 2: Pearl farm in Manihiki Lagoon.
Manihiki has always been the centre of Cook Islands pearl farming, producing between 90 and 99
percent of Cook Islands pearls throughout the 1990s. In 2003 about 95 percent of production
came from Manihiki (MMR, 2003a). The rest of Cook Islands pearls are produced by a few farms
in Penrhyn and Rakahanga, two islands also in the Northern Group of the Cook Islands (see
Appendix 2 for a map of the Cook Islands).
There are four main groups of stakeholders in the Manihiki pearl industry within the Cook Islands:
pearl farmers in Manihiki, pearl retailers in Rarotonga and Aitutaki (the two islands where the
majority of Cook Islands tourism is based), pearl consumers, and the Cook Islands government.
All of these stakeholder groups are economically affected by the state of the black pearl industry.
See Appendix 1 for an explanation of the different stages of pearl culture.
Cyclone Martin caused widespread devastation to Manihiki in 1997, destroying homes, pearl farms, seeding facilities and farming equipment,
and killing 19 people. There was massive disruption to farming programmes.
3
4
[SOPAC Technical Report 371 – McKenzie]
[11]
Figure 3: Manihiki pearls for sale in Rarotonga market.
The Manihiki Island Council is the democratically elected administrative body of Manihiki, with
responsibility for regulation and management of the Manihiki pearl industry. At present, farming
permits are required to establish a pearl farm and are allocated by the Island Council. To obtain a
five-year permit, applicants must pay a NZ$200 fee to the Island Council, be of Manihikian
descent, and have access to resources sufficient to establish a pearl farm. The current farming
permit does have accompanying regulations on farming practices, but these regulations are
limited, unsystematic and not enforced. In the history of Manihiki pearl farming, not a single pearl
farmer has yet been penalised for poor farming practices. The rules and regulations governing
pearl farming in Manihiki will change dramatically if the draft Manihiki pearl farming management
plan and code of practice are implemented. The Ministry of Marine Resources and Manihiki pearl
farmers jointly drafted the management plan and code of practice. The documents currently await
approval by the Manihiki Island Council. The management plan and code of practice are
discussed in detail in Section 2.5.
The Ministry of Marine Resources (MMR) is the government agency responsible for aquaculture
development in the Cook Islands. Its main role in the pearl industry is to provide support through
research and technical advice. It has been closely involved with all of the projects in Manihiki that
are evaluated in this report.
The Cook Islands Pearl Federation and Pearl Guild are two additional institutions, which provide
support to the pearl industry. Membership of the Cook Islands Pearl Federation is limited to
farmers. The Federation helps to coordinate supplies of farming inputs to Manihiki, but has been
inactive since 2000. Members of the Pearl Guild are mostly pearl wholesalers and retailers. The
[SOPAC Technical Report 371 – McKenzie]
[12]
Guild focuses on maintaining high quality standards for Cook Islands pearls through regulations
and grading procedures.
1.3. Rise and Fall of the Cook Islands Pearl Industry
Throughout the 1990s the only sector bringing more revenue than black pearls to the Cook
Islands economy was tourism. From 1990 to 2002, pearl exports were the biggest revenue earner
out of all the Cook Islands’ export commodities (with the exception of 1996), as shown in
20
18
16
14
12
10
8
6
4
2
0
Fish exports
Pearl exports
All other exports
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
Value of exports (NZ$ millions)
Figure 4.
Year
Figure 4: Value of fish, pearl and all other exports from the Cook Islands. [Source: Cook Islands Annual Statistics Reports]
The value of pearl exports increased rapidly between 1997 and 2000. In 2000 the pearl industry
earned $18 million of export revenue5, accounting for over 90 percent of total export revenue and
20 percent of Cook Islands Gross Domestic Product (GDP). Official statistics for pearl export
values pre-1999 are likely to underestimate the true growth of the industry, as there was
extensive under-reporting of pearl revenues during this period.
Since 2001, however, the shine has been wearing off the Cook Islands pearl industry. The value
of pearl exports fell dramatically from $18.4 million in 2000 to $2.8 million in 2003, as shown in
Figure 4. In 2003 exports of fish (tuna and tuna-like species) overtook pearls as the most valuable
export commodity in the Cook Islands.
5
Unless otherwise specified all $ figures in this report are in New Zealand dollars.
[SOPAC Technical Report 371 – McKenzie]
[13]
Manihiki black pearls are sold locally as well as exported. In 2001 and 2002, reported revenue
from local sales by Cook Islands jewellery companies (including sales of jewellery other than
pearls) was $11.6 million and $10.6 million respectively (MFEM, Revenue Management Division,
2004 via personal communication with MMR officials). In addition, pearl retailers estimate that
roughly 20 percent of production is not reported in official records of export and local sales
revenues.
1.4. Causes of the Decline of the Manihiki Pearl Industry
Two factors caused the decline in Cook Islands pearl revenue between 2000 and 2003: a rapid
fall in international pearl prices in the 1990s, and a disease outbreak in Manihiki in 2000.
1.4.1.
International Black Pearl Prices
One of the factors contributing to the recent decline in Cook Islands pearl export revenue was
plummeting international black pearl prices. The farmers interviewed in Manihiki (n=15)
experienced an average fall in the price received per pearl from $200 in the early 1990s to $20 in
2003. French Polynesia supplies the vast majority of the world’s black pearls (see Figure 5), and
hence has a significant influence on international black pearl prices. French Polynesia is followed
by the Cook Islands as the second biggest producer of black pearls, with a few other Pacific
Value of pearl exports (US$ millions)
Island Countries producing very small quantities, such as Fiji, Kiribati and the Solomon Islands.
180
160
140
120
100
French Polynesia
Cook Islands
80
60
40
20
0
1995
1996
1997
1998
1999
2000
Year
Figure 5: Value of pearl exports from Cook Islands and French Polynesia [Source: Secretariat of the Pacific Community (SPC)]
[SOPAC Technical Report 371 – McKenzie]
[14]
In the last ten years, French Polynesia has rapidly increased the supply of black pearls on the
world market, causing a fall in average prices. Figure 6 shows the increase in the volume of pearl
production in French Polynesia over the 1990s, and the consequent fall in average international
16
450
14
400
12
350
300
10
250
8
200
6
150
100
2
50
0
0
19
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
2099
2000
2001
02
4
1 Fcfp = 0.02 NZD
Year
Number of pearls sold (thousands)
Average price per pearl (Fcfp
thousands)
pearl prices.
Average price
(Fcfp)
Number of pearls
sold
Figure 6: Average price and quantity of black pearls at auctions in Tahiti, French Polynesia, 1985-2002. [Source: GIE Poe Rava
Nui / Perles de Tahiti]
Recent regulation of the sale of low quality pearls from French Polynesia has boosted prices in
the last year. At an auction in September 2003 the price of black pearls increased by 25 percent
from the previous auction (Jewellery Net Asia, 2004).
1.4.2. Pearl Oyster Disease
The second factor contributing to the recent decline in Cook Island pearl export revenue is the
November 2000 disease outbreak in Manihiki, which severely affected the black pearl industry by
causing abnormally high levels of sick oysters and oyster mortalities. This section gives background information on oyster diseases generally, before describing the outbreak in Manihiki in
more detail.
Bacterial disease in pearl oysters is usually associated with opportunistic bacteria that are always
present in sea water. These bacteria invade hosts that are weakened or ‘stressed’ by
[SOPAC Technical Report 371 – McKenzie]
[15]
unfavourable conditions. Keeping oysters at high densities (overcrowding) is a critical source of
stress that makes them susceptible to disease because it reduces the amount of food and
dissolved oxygen available to each oyster6. To avoid disease outbreaks, it is crucial to keep
oysters well spaced apart, giving the animals sufficient supplies of food and oxygen to resist
bacterial disease. Other sources of stress that make pearl oysters susceptible to disease include
rough handling, polluted water, exposure to extreme temperatures, nucleus implantation
(seeding), transportation, and the build up of fouling organisms on the oyster shell. One or a
combination of these factors may precipitate a disease outbreak.
Previous disease outbreaks crippled pearl industries in French Polynesia, Indonesia, Myanmar
and Australia (Tun, 2000). They were usually associated with localised overstocking, poor
husbandry practices, and adverse environmental factors (Heral, 2001). Disease outbreaks
negatively affect the profitability of pearl farming by killing oyster stock, lowering the rate of
success of seeding operations, slowing oyster growth, reducing average pearl quality, and
increasing the number of ‘reject pearls’ (pearls of such bad quality that they are not suitable for
sale) (Zanini 1997, Lacreuse 2001, Poirine 2003b).
In the 1990s there was growing concern about the potential for high stocking densities to cause a
disease outbreak in Manihiki Lagoon similar to those experienced elsewhere (Hine, 1998). In
November 2000, these fears were proven to be well founded when pearl farmers from Manihiki
reported an abnormally high mortality of oysters. During the last two weeks of November,
approximately 350,000 (17 percent) of farmed adult pearl oysters, known in Manihiki as ‘parau’,
and one million (34 percent) of farmed juvenile pearl oysters, known in Manihiki as ‘kati’, died. At
some of the worst affected farms, up to 70 percent of recently seeded pearl oysters died (MMR
2000b). Of the surviving pearl oyster population, the disease infected about 90 percent of ‘parau’
in Tukao Bay and 60 percent of ‘parau’ in Tauhunu (see Appendix 2 for a map of Manihiki
showing these areas). The disease continues to affect oyster health; in December 2003 ten
percent of pearl oysters were still infected (Diggles and Maas, 2004).
Vibrio harveyi was the bacteria associated with the oyster mortalities in Manihiki (Diggles and
Hine, 2001). The disease outbreak was caused by a combination of four unfavourable conditions,
which stressed the pearl oysters, making them vulnerable to bacterial disease. First, localised
overstocking of oysters led to restricted food and oxygen availability, starving and weakening the
animals. Second, poor handling of oysters (holding the animals in shallow areas for extended
periods during seeding) further weakened the oysters. Third, windless and dry weather conditions
in September and October 2000 reduced the amount of lagoon flushing and caused a rise in
6 Pearl oysters feed on algae and other small organisms, which occur in limited amounts in tropical waters, so a large amount of water must be
filtered daily for the pearl oyster to obtain sufficient food (Ponia, 1996).
[SOPAC Technical Report 371 – McKenzie]
[16]
water temperature, stressing the oysters even more. Fourth, a massive spawning event caused
high concentrations of Vibrio harveyi bacteria in the water. A system of lagoon management
regulating farm practices might have prevented the overstocking and poor handling of oysters,
and thereby avoided the disease outbreak.
The disease outbreak in Manihiki continues to have a detrimental impact on pearl production.
Since the disease, a higher proportion of oysters are not of seeding health-standard, reject the
nucleus or die due to the trauma of the seeding operation, and produce poor-quality pearls.
Figure 7 shows poor-quality pearls from diseased oysters in Manihiki Lagoon.
Figure 7: Poor quality pearls from diseased oysters.
Figure 8 shows four indicators of pearl production in Manihiki before and after the disease
outbreak, based on information provided by farmers, retailers, and graders of pearl quality. The
first indicator, ‘percentage seedable’, shows the percentage of pearl oysters, from the total
number of oysters conditioned for seeding, that technicians can actually seed. Pearl oysters that
are weak or stunted from disease may not be seedable if their pearl sacs are too small. The
second indicator, ‘percentage retention’, shows the proportion of pearl oysters from the total
number of oysters seeded that do not reject the nucleus in the six weeks after the trauma of
seeding. The third indicator, ‘percentage harvestable’, shows the proportion of pearl oysters from
the total number of pearl oysters seeded that do not reject the nucleus or die in the 18 months
after seeding. The fourth indicator, ‘percentage saleable’, shows the percentage of pearl oysters
from the total number of oysters seeded producing saleable pearls (graded A-C in terms of
quality).
[SOPAC Technical Report 371 – McKenzie]
[17]
80%
70%
Percentage
60%
50%
Before disease
After disease
40%
30%
20%
10%
0%
% seedable
% retention % harvestable
% saleable
Production Indicator
Figure 8: Pearl production indicators before and after disease outbreak.
The disease outbreak had a dramatic effect on all four of the production indicators, with harmful
repercussions for pearl farmers’ incomes and revenues.
1.5. Impact of the Manihiki Pearl Industry
The development of a lucrative pearl farming industry in Manihiki significantly impacted the local
population; it affected factors such as employment, migration, communications, and transport.
Before pearl farming developed Manihiki was mostly subsistence based. Over the 1980s and
1990s, more and more of the population became involved in pearl farming. By 2003, 283 people
were directly employed in the pearl farming sector out of a resident population of roughly 500,
which includes children and the elderly who are unable to work. The pearl industry offers a
working environment and a lifestyle that is close to the traditional activities of the local population.
The development of the pearl industry brought lucrative opportunities for enterprise and
employment in Manihiki, and enticed people of Manihikian descent to move back to the atoll from
their residences in Rarotonga and New Zealand. This reversed the usual trend of migration away
from the outer islands.
Due to the growth of Manihiki pearl farming, the isolated atoll became substantially more
advanced in terms of transportation and communications. Before the early 1980s, transport was
by foot or on one of a few boats. Now numerous boats and scooters service the lagoon and atoll.
Before pearl farming developed the Manihiki power supply was limited and unreliable, with few
televisions, phones or computers. Now there are many more of these consumer durables, and
electricity is usually supplied twelve hours a day.
[SOPAC Technical Report 371 – McKenzie]
[18]
The growth of pearl farming may also have had some negative social impacts. Many small farm
operators are heavily in debt due to their investments in pearl farming. Inequalities in Manihiki
between families involved in pearl farming have increased. There have been some incidents of
conflict relating to pearl farm boundaries and farming practices.
The subsequent repercussions of the decline of the pearl industry was felt throughout the local
Manihiki economy, pushing many farmers further into debt and preventing them meeting their
loan repayments. Large-scale farmers are better able to absorb the revenue losses but smallscale farmers do not benefit from the same economies of scale and are struggling to break even
(Bank of Cook Islands, 2002). Some small-scale farmers were forced to give up pearl farming, or
chose to focus on the sale of ‘kati’ (juvenile oysters) collected on ‘haruharu’ (the collectors used to
catch and grow kati) to large-scale farmers as a more economically viable alternative to pearl
farming. The decline of the industry has a particularly significant effect on Manihiki because there
are so few alternative means of generating income on the island. Tourism is currently constrained
by the lack of regular transport links to Manihiki, so without pearl farming it is likely the atoll would
return to a predominantly subsistence existence, based on fishing, craft and restricted agriculture
(due to limited soil resources), with a number of residents leaving to return to New Zealand and
Rarotonga.
The decline of the pearl industry also had repercussions throughout the national economy. It
affected the incomes of pearl farmers in Manihiki and also the incomes of retailers in Rarotonga,
economic growth, government tax receipts, the national trade balance, and income distribution
(MFEM, 2003). Figure 9 shows a clear correlation between the value of pearl exports and real
GDP growth in the Cook Islands. The correlation coefficient is 0.90 (where 1.0 is a perfect
correlation).
[SOPAC Technical Report 371 – McKenzie]
[19]
Pearl export value (NZ$
millions)
20
18
16
14
12
10
8
6
4
2
0
-5
0
5
10
15
Real GDP growth (% change over previous year)
Figure 9: Relationship between value of pearl exports and real GDP growth in the Cook Islands, 1995-2002. [Source: Cook
Islands Annual Statistics Reports]
1.6. Summary
The development of the Manihiki black pearl industry in the 1980s and 1990s had a major impact
on the local economy of Manihiki and the national economy of the Cook Islands. Falling
international black pearl prices and the Manihiki disease outbreak in 2000 caused the decline of
the industry between 2000 and 2004. The disease outbreak continues to have a detrimental
impact on production, harming incomes and revenues in the industry. The recent decline of the
industry directly affected the key stakeholders of the industry – the pearl farmers, the pearl
retailers and the national government.
[SOPAC Technical Report 371 – McKenzie]
[20]
2.
PROJECTS IMPLEMENTED IN MANIHIKI
The Cook Islands Ministry of Marine Resources, with the assistance of supporting organizations,
has implemented various projects in Manihiki, which aim to achieve sustainable development7 of
the pearl farming industry. The projects involve diverse activities, including: monitoring the
physical and chemical parameters in the lagoon; monitoring pearl oyster health and stocking
levels; mapping the lagoon bathymetry and pearl farms; building local capacity in pearl farming
and lagoon management skills, and drawing up a lagoon management plan and code of practice.
Section 2 of this report describes the activities involved in the different project areas, and explains
how the projects can assist the pearl industry. References for further details on individual projects
are given in the bibliography.
A timeline of the various projects implemented in Manihiki Lagoon is shown in Figure 10. Some
projects were already underway in Manihiki before the oyster mortalities in 2000, which provided
a major impetus for further projects to avoid disease outbreaks recurring in the future.
2.1. Lagoon Monitoring Projects
A number of projects have been implemented in Manihiki to monitor lagoon parameters. Formal
monitoring of Manihiki Lagoon began in 1996 with the establishment of the Lagoon Ecology
Monitoring and Management Project (LEMMP). The LEMMP was contracted out to a United
States based company, RDA International (RDA International, 1997). The LEMMP mostly
consisted of data collection to assess the status of pearl farming and the lagoon environment.
Among other things, the project provided baseline survey data on physical, chemical and
biological lagoon parameters, and recommendations on advisable oyster stocking densities,
stocking rates, and management options. The baseline information collected through the LEMMP
is still used as a reference database on the lagoon ecosystem.
In 1996 an analysis of lagoon circulation was undertaken by the South Pacific Applied
Geoscience Commission (SOPAC) to provide support to the LEMMP (Solomon, 1997). SOPAC
provided physical oceanographic data and an analysis of lagoon circulation and flushing. The
study researched the properties and movement of water into, out of and around the lagoon.
Sustainable development is defined in this report, in accordance with the World Commission on the Environment and Development definition, as
‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’.
7
[SOPAC Technical Report 371 – McKenzie]
[21]
Lagoon ecology monitoring and management project (RDA)
Study of lagoon water circulation (SOPAC)
1996
1997
Survey of pearl oyster health (NIWA)
1998
Oyster census (MMR)
1999
Survey of pearl oyster health (NIWA)
2000
Study of lagoon water quality (SOPAC)
2001
Survey of lagoon bathymetry (SOPAC)
Farm mapping (SOPAC and MMR)
Geographic Information System (GIS) Workshop (SOPAC)
First technician training course (MMR)
2002
Purchase of YSI Probe (MMR)
Second technician training course (MMR)
Survey of pearl oyster health (NIWA)
Oyster census - wild and farmed shell (MMR)
Installation of monitoring buoy (SOPAC)
Training in buoy deployment (SOPAC)
Drafting of lagoon management plan
& code of practice (MMR)
November
2000
Disease
outbreak
Type of Project
Lagoon
Monitoring
Pearl Oyster
Monitoring
2003
Mapping
Capacity
Building
Management
Third technician training course (MMR)
Studies of flushing and circulation (UQ)
2004
Figure 10: Timeline of projects implemented in Manihiki Lagoon, 1996-2004.
MMR
NIWA
RDA
SOPAC
UQ
– Ministry of Marine Resources, Cook Islands Government
– National Institute of Water and Atmospheric Research (New Zealand)
– RDA International
– South Pacific Applied Geoscience Commission
– University of Queensland, Australia
[SOPAC Technical Report 371 – McKenzie]
[22]
Slow rates of water exchange between the lagoon and the ocean were found in Manihiki,
suggesting that the lagoon takes a long time to "flush" itself with fresh oceanic waters. This slow
exchange can increase the impacts of disease and pollution. The data from the lagoon circulation
study can be used to assess the suitability of different lagoon areas for pearl farming, and the
direction that a disease outbreak is likely to spread.
A study of water quality in Manihiki Lagoon was undertaken by SOPAC shortly after the disease
outbreak in November 2000 (Sharma, 2001). SOPAC used the baseline data from the 1996
lagoon circulation study as a comparison to determine possible reasons for the sudden increase
in oyster mortality in 2000. Parameters considered in the study included water temperature,
salinity, dissolved oxygen and turbidity. The study found that Manihiki Lagoon had notably low
levels of dissolved oxygen immediately following the disease outbreak, indicating that the
probable causes of the disease outbreak were overstocking of pearl oysters and the slow water
exchange between the lagoon and the ocean. This study gave an idea of the levels of water
quality parameters that can be considered critical indicators of dangerous conditions for pearl
farming.
Logistical limitations of the labour intensive methods of data collection used in the LEMMP led the
Ministry of Marine Resources, with the assistance of SOPAC, to install an oceanographic
monitoring buoy in Manihiki Lagoon in November 2003. Figure 11 shows the monitoring buoy
after installation in the lagoon.
Figure 11: Oceanographic monitoring buoy in Manihiki Lagoon.
[SOPAC Technical Report 371 – McKenzie]
[23]
The monitoring buoy has several advantages over the system of data collection through the
LEMMP. The monitoring buoy automatically measures a variety of chemical and physical lagoon
parameters every hour. These parameters include sea-surface temperature, salinity, air
temperature, dissolved oxygen, chlorophyll levels (an indicator of phytoplankton concentration),
solar radiation, barometric pressure, pH values, and wind direction and speed. The data is
retrieved daily with an uplink via satellite phone, automatically updated on the SOPAC web page,
and downloaded from the web page and disseminated to pearl farmers on a weekly basis through
the Ministry of Marine Resources. Currently a report on the monitoring buoy data is compiled by
SOPAC every month.
In 2003, the Ministry of Marine Resources purchased a hand-held YSI probe, which is capable of
collecting measurements of a range of different lagoon parameters, including temperature, pH,
salinity, dissolved oxygen, turbidity and oxygen reduction potential (orp) in locations other than
where the monitoring buoy is situated.
These lagoon-monitoring projects can assist the pearl industry to improve the sustainability of
pearl farming by:
1.
Acting as an early warning system of environmental conditions that may cause a pearl
oyster disease outbreak. The projects provide information that can be used by pearl
farmers to improve their farming practices and avoid disease outbreaks. For example, if
the monitoring buoy indicates environmental conditions that are likely to stress the oysters,
farmers can avoid further stressing them by delaying handling, cleaning and seeding.
2.
Providing technical information that helps to estimate the carrying capacity of the lagoon
(the number of pearl oysters the lagoon can handle without detrimental effects to the
lagoon ecosystem). The projects can also allow early detection of lagoon degradation from
increased pearl farming if stocking densities of pearl oysters reach unsustainable levels.
3.
Providing baseline data that can be used to assess the potential of other lagoons for pearl
farming.
4.
Contributing to international research in areas such as pearl farming, climate change and
coral reef studies.
2.2. Pearl Oyster Monitoring Projects
Some of the projects in Manihiki have surveyed the oyster population, monitoring factors such as
stocking densities and oyster health. The LEMMP provided baseline survey data on pearl oyster
population dynamics. This is still used as a reference database.
[SOPAC Technical Report 371 – McKenzie]
[24]
Censuses are regularly conducted by the Ministry of Marine Resources to estimate the number of
farmed adult and juvenile pearl oysters. The censuses show that the number of adult and juvenile
oysters cultured in Manihiki Lagoon has gradually risen, with a fall in the number of adult pearl
oysters between 2000 and 2003, as shown in Figure 12.
Number of oysters (millions)
7
6
5
4
Juvenile pearl oysters
3
Adult pearl oysters
2
1
0
1991
1996
2000
2003
Year
Figure 12: Total number of cultured pearl oysters in Manihiki Lagoon, 1991-2003. [Source: Ministry of Marine Resources, Census
Results]
The New Zealand National Institute of Water and Atmospheric Research (NIWA) conducted pearl
oyster health surveys in 1998, 2000 and 2003 in Manihiki Lagoon. The 1998 survey found no
serious signs of disease among Manihiki pearl oysters. The health survey in 2000 was
undertaken immediately following reports of abnormally high mortalities of pearl oysters. The
survey found that Vibrio harveyi, a bacterial disease, was associated with the observed
mortalities, which were widespread throughout the lagoon. The most recent survey in 2003 found
that a smaller but still significant proportion of oysters in Manihiki were still affected by the
disease, with significant long-term health effects, such as persistent lesions and growth
abnormalities (Diggles & Maas, 2004).
Regular monitoring of pearl oysters in Manihiki Lagoon can assist the pearl industry to improve
the sustainability of pearl farming by:
1.
Alerting resource users when the health of oysters deteriorates, so preventative or
curative measures can be taken.
2.
Determining the likely causes of past disease outbreaks, which can help to prevent future
recurrences.
[SOPAC Technical Report 371 – McKenzie]
[25]
3.
Finding areas with unsustainable oyster stocking levels and densities, indicating high risk
of disease outbreaks.
4.
Allowing regulation of the stocking of pearl oysters within the carrying capacity of the
lagoon.
2.3. Mapping Projects
A number of mapping surveys have been conducted in Manihiki Lagoon. In 2002 a lagoon
bathymetry survey was undertaken by SOPAC, which mapped the water depth throughout the
lagoon (Bertram and Tuatai, 2002). The position of pearl farms was determined using a
differential Global Positioning System (GPS). In 2002, SOPAC linked the pearl oyster census
database to the bathymetric lagoon map, farm maps and IKONOS satellite imagery via a
geographic information system (GIS). The GIS makes it possible to view multiple layers of
mapping data at once to get a holistic view of the lagoon. Each pearl farmer in Manihiki Lagoon
has been provided with an individual map showing their farm boundaries, neighbouring farm
boundaries, and the depths of the lagoon within and around their farm. Figure 13 shows staff at
the Ministry of Marine Resources handing out individual farm maps to pearl farmers in Manihiki.
Figure 13: Ministry staff hand out maps to pearl farmers.
An individual farm map showing overlapping boundaries between neighbouring pearl farms is
shown in Figure 14. A map showing the position of all pearl farms in Manihiki Lagoon is shown in
Figure 15.
[SOPAC Technical Report 371 – McKenzie]
[26]
Figure 14: Map of individual pearl farm in Manihiki Lagoon.
Figure 15: Map showing position of all pearl farms in Manihiki Lagoon
Mapping the lagoon can assist the pearl industry to improve the sustainability of pearl farming by:
1.
Identifying areas of the lagoon where there is a high-risk of disease outbreaks, such as
areas with shallow depths and high-density farming.
2.
Allowing regulation of the stocking of pearl oysters within farm boundaries and within the
carrying capacity of the lagoon.
3.
Identifying overlapping pearl farms, allowing negotiation of boundaries to avoid conflicts
and overstocking.
[SOPAC Technical Report 371 – McKenzie]
[27]
4.
Showing areas suitable for pearl farming so space can be allocated systematically for new
farms and rotation of pearl lines.
2.4. Capacity Building Projects
Many of the projects in Manihiki have made capacity building an explicit project objective, such as
the GIS training workshop, pearl technician training courses, oyster health surveys, and buoy
deployment.
In-country training on GIS was conducted by SOPAC to enable local staff at the Ministry of Marine
Resources to interpret and use the maps, satellite imagery and census data, which were collected
through the mapping projects. Computers used by the Ministry of Marine Resources and Manihiki
Island Council were upgraded to allow use of the GIS database.
A pearl technician training course was established in Manihiki for local pearl farmers from the
Northern Cook Islands. The first phase of the course involves three weeks of study, covering all
the skills required to be a seeding technician, including theory on pearl oyster biology and good
farm husbandry practices, and practical seeding of oysters. The second phase of the course
involves 2 - 18 months of incubation and husbandry of the seeded oysters. The third phase of the
course involves harvesting and grading the oysters that were seeded by the students, typically 18
months after seeding. The first phase of the course was run three times by an experienced
seeding technician, in 2002, 2003 and 2004, and the first set of students harvested their pearls in
2004. There are plans for the course to be run two more times. Figure 16 shows a student from
the first technician training course harvesting pearls from oysters seeded 18 months earlier.
Figure 16: Student harvesting pearls at the technician training course. [Source: Berni Aquilina]
[SOPAC Technical Report 371 – McKenzie]
[28]
The technician training course was designed to provide the Cook Islands pearl industry with
competently trained local technicians who can perform the seeding operation required to create
cultured pearls. Learning the art of seeding is difficult because of the highly secretive nature of
the industry. Seeding (also called grafting or nucleus implantation) is a surgical procedure in
which a nucleus (a round bead made from the shell of a freshwater mussel) and a small piece of
mantle tissue (the inner shell of another pearl oyster) are inserted in to the oyster gonad. In a
successful operation, the cut heals and the grafted mantle tissue grows around the nucleus to
form a black pearl. Currently foreign pearl technicians do most of the seeding operations in
Manihiki, and usually take a third of the harvested pearls in exchange for their services. The
technician training course aims to allow Cook Islanders to carry out seeding operations, and to
become more self-sufficient in the Manihiki pearl industry’s requirements for seeding services.
The technician training course also aims to stop the present unsustainable practice of highvolume seeding schedules. Because foreign technicians are only available to seed for a limited
period in the year, seeding is currently often done in large volumes with high densities of oysters
kept in shallow areas for long periods. This practice stresses pearl oysters, making them more
susceptible to disease8. The associated ecological and disease risks of high-volume seeding
could be avoided if local technicians were available to seed all year round.
As part of the oyster health survey in 2003, local staff at the Ministry of Marine Resources were
taught skills in shell dissection, description, diagnostics and treatment for analysis of oyster
samples to be sent to New Zealand for testing, and skills in monitoring Vibrio Harveyi levels in the
lagoon water.
In late 2003 staff from the Ministry of Marine Resources in Rarotonga and Manihiki were given
training at the SOPAC Secretariat in deployment and maintenance of the oceanic monitoring
buoy.
Capacity building in pearl farming and lagoon management skills can assist the pearl industry to
improve the sustainability of pearl farming by:
1.
Enabling local staff at the Ministry of Marine Resources to collect, interpret and use
scientific data to improve lagoon management.
2.
Allowing self-sufficiency in the pearl industry’s requirements for seeding services.
3.
Reducing or eliminating the unsustainable practice of high volume seeding schedules,
which carries ecological and disease risks.
8
The disease outbreak in 2000 began in Tukao Bay where there was high intensity seeding taking place.
[SOPAC Technical Report 371 – McKenzie]
[29]
4.
Allowing early detection of disease outbreaks by local staff at the Ministry of Marine
Resources.
5.
Ensuring that the monitoring buoy is well-maintained, and continues to supply regular and
reliable data on lagoon parameters.
2.5. Manihiki Pearl Farming Management Plan & Code of Practice
A pearl farming management plan needs to be implemented in Manihiki Lagoon to overcome the
problems of overstocking and poor farming practices. The problems facing Manihiki are a clear
example of the ‘tragedy of the commons’ noted famously by Hardin (1968). The tragedy of the
commons arises when individuals consuming or using a common property resource do not bear
the total costs of their actions, which leads to over-exploitation of the resource. In Manihiki, when
an individual is allocated a pearl farming permit, the farmer has free access to the allocated
lagoon area, and faces very few enforced restrictions on how that area is used. When an
individual farmer increases the stock density on his or her farm, this reduces the level of oxygen
and food available for all oysters, increases the likelihood of disease at all farms, and reduces the
yield and quality of pearls for all farmers. The individual farmer does not bear the total cost of this
action, because he or she does not account for the costs suffered by other users. As a result of
this ‘negative externality' there will be overexploitation of the lagoon resource and overstocking of
pearl oysters. Other practices with negative externality elements include maintenance of farm
lines, handling of oysters, rotating farm areas to leave space fallow, and disposal of cleaning
wastes.
Economic theory predicts that, unless pearl farming is regulated in Manihiki, the competitive
equilibrium will lead to overexploitation (the level of oyster stock and oyster stocking densities will
be above the economic and biological optimum) and every farmer will earn zero economic profit
(Poirine, 2003a). Even if all pearl farmers are aware that overexploitation harms profits, there is
no incentive for each individual farmer not to increase oyster density unless they can ensure that
others will be prevented from doing so. As each farmer tends to increase oyster density, the
productivity of pearl farming decreases. During and after disease outbreaks, pearl quality and
productivity deteriorate, causing a reduction in each farmer’s profits. There are examples of pearl
industries in other areas of the world where unmanaged and unregulated expansion of cultured
pearl production led to overstocking, reduced profits, oyster disease outbreaks and the eventual
destruction of the industry (Rowntree, 1993; Poirine, 2003a).
It is therefore in the common interest of all farmers to introduce a system for strict enforcement of
good farm practices and limits to oyster density. A pearl farming management plan, or alternative
system of public management and regulation, could overcome the market failure facing the
[SOPAC Technical Report 371 – McKenzie]
[30]
Manihiki pearl industry by creating an enforceable regulatory system of property rights for use of
lagoon resources. The Ministry of Marine Resources, in consultation with pearl farmers, has
drafted a pearl farming management plan and code of practice for the pearl industry in Manihiki.
The draft is currently awaiting approval by the Manihiki Island Council. It is designed to cover a
ten-year time period from 2004 to 2014. The objective of the draft management plan is ‘to
establish ecologically sustainable pearl farming husbandry practices for the protection,
conservation and management of Manihiki Lagoon and to improve the economic well being of the
Manihiki community’. The current draft suggests four management measures to achieve this
objective9, which are outlined below, along with a discussion of how the projects contribute to
each management measure.
First, the draft management plan introduces an ‘Area Management System’ for Manihiki, whereby
farm areas are defined for all pearl farmers, and no overlap of farm boundaries is permitted. This
is expected to ensure secure tenure to pearl farm permit holders, efficiently allocate the limited
space in the lagoon that is suitable for pearl farming, reduce the likelihood of overcrowding of
pearl oysters and unmanaged growth of farms, and enable oyster densities and stocking rates to
be more easily monitored. A number of the project outputs, such as the lagoon maps and census
data on oyster stocking rates, will provide valuable information inputs for the effective
implementation of the Area Management System.
Second, the draft management plan recommends a limit on pearl oyster stocking densities to
prevent overcrowding of oysters and thereby reduce the risk of disease outbreaks. The
recommended stocking density limits are based on scientific information, including data supplied
through some of the projects in Manihiki, such as the Lagoon Ecology Monitoring and
Management Project, oyster censuses, and pearl oyster health surveys. According to the 2003
oyster stock survey, 16 percent of farms are above the maximum stocking density of 4,000 shells
per hectare suggested in the draft management plan.
Third, the draft management plan recommends a maximum limit on the total number of farmed
oysters to ensure the carrying capacity of the lagoon10 is not exceeded, and thereby reduce the
risk of disease. The limit established in the lagoon management plan is informed by scientific
information, including data gathered through the projects in Manihiki.
Fourth, the draft management plan includes a code of practice, which establishes rules and
recommendations for sustainable individual farm practices. Many of the rules within the code of
9 The management plan is still in draft form, and may be subject to changes on the basis of further consultation between pearl farmers, the
Manihiki Island Council, and the Ministry of Marine Resources.
10 Carrying capacity is the ability of an environment to support a number of animal communities or production activities.
[SOPAC Technical Report 371 – McKenzie]
[31]
practice are shaped by information generated through the projects, such as census results, maps,
health surveys and monitoring data. Rules and recommendations relate to individual farm
practices that can have a negative externality effect on the health of the lagoon, and hence on
other farmers. Such practices include pearl oyster densities, maintenance of farm lines, handling
of oysters, rotating farm areas to leave space fallow, and disposal of cleaning waste.
There is an inter-dependent relationship between the scientific information generated through the
projects and the management plan. In order to enforce sound rules, the management plan
requires scientific data on which to base management decisions. Information from the projects
has shaped the management plan and been used to form the Area Management System and the
limits for oyster stock densities and total stocks. But the success of the projects also depends on
the management plan to ensure that the information is used to improve pearl farming practices.
A penalty and enforcement system for the management plan remains to be decided. As it
currently stands the draft management plan suggests penalties be imposed on farmers who do
not report, or falsely report information, or who do not comply with the plan and code of practice.
The success of the management plan will depend on the effective enforcement of penalties for
those farmers who continue with unsustainable practices. The management plan is fundamentally
important for the continuation of pearl farming in Manihiki. Without an enforced system of rules
and regulations, incentives for individual farmers to overexploit the lagoon will lead to reduced
profits for all, repeated disease outbreaks and could eventually cause the demise of the Manihiki
pearl industry.
[SOPAC Technical Report 371 – McKenzie]
[32]
3.
METHODS
3.1. Overview
This cost-benefit analysis assesses whether the projects implemented in Manihiki to achieve
sustainable development of the black pearl industry, as outlined in Section 2, are worthwhile
investments for the Cook Islands. A model of pearl production is developed to estimate the
economic benefits that the projects are likely to generate. The technique of cost-benefit analysis
is used to compare the estimated benefits over a fifteen-year time period between 2004 and 2019
with the total project costs. The net economic benefits of the projects are calculated in present
value terms as an indication of whether they are good economic investments. The reliability of the
findings is checked by changing key assumptions in a sensitivity analysis. The quantitative
analysis in Sections 4.1 and 4.2 focuses on the direct monetary project costs and monetary
benefits of the projects in terms of the pearl revenue generated. Section 4.3 gives a qualitative
analysis of some of the indirect, secondary and non-monetary project benefits and costs.
3.2. Previous Related Studies
This study is the first cost-benefit analysis undertaken to evaluate pearl farming management
projects at the community and national level. Very little similar work has been done so far in the
area of cost-benefit analysis and evaluation of resource management projects in the Pacific
region. In 2003, economic decision tools (including cost-benefit analysis) were developed through
the Marine Studies Programme at the University of the South Pacific to assist farmers to
understand the costs and benefits involved in aquaculture production (including pearl farming) in
comparison with other rural development options (Johnstone & Pickering, 2003). These tools
were designed to evaluate individual management and investment decisions by farmers at the
micro-level, however, rather than evaluating the costs and benefits of holistic resource
management projects at the community and national level.
[SOPAC Technical Report 371 – McKenzie]
[33]
3.3. Project Costs
In economic theory the correct measure of project costs is the ‘opportunity cost’ of all the inputs
invested in the projects. Opportunity costs are the value of the project inputs in the next best
alternative activity. The opportunity cost of the Manihiki project inputs is approximated as their
market value i.e. the monetary expenses incurred in project implementation and operation. Future
project costs are estimated on the basis of the best approximations of those involved in the
projects. All project costs are included in the analysis, even if the source of funding is not the
Cook Islands government11. Details of past project costs and estimates of future project costs are
given in Appendix 3.
3.4. Channels of Project Benefits
There are three main channels through which the project activities produce benefits for the Cook
Islands. These channels are illustrated in Figure 17.
The majority of the funding for the projects has come from international aid agencies such as the Asian Development Bank and New Zealand’s
Aid and International Development Agency (NZAID).
11
[SOPAC Technical Report 371 – McKenzie]
[34]
Project
Activities
Some of the project activities build
local capacity e.g. the technician
training course teaches seeding
skills
Some of the project activities
produce scientific information
e.g. the monitoring buoy
produces data on lagoon
parameters
Project
Outputs:
Scientific
information
Project
Output:
Improved local
capacity
Project outputs ensure
that the management
plan is based on reliable
scientific information
Policy:
Management
plan and code
of practice
Capacity building increases pearl
farming skills and raises awareness of
sustainable farming practices
Pearl farmers directly use the scientific
information from the projects to make
pearl farming practices more sustainable
Management plan
ensures sustainable
pearl farming practices
are implemented and
enforced
Goal:
Sustainable
development of
the black pearl
industry in
Manihiki
Non-monetary benefits:
The projects have intangible benefits e.g.
contribution to research on climate change
Monetary benefits:
The projects increase the quality and yield of
pearls, which brings more revenue to the Cook
Islands sustained over future generations
Figure 17: Channels through which project activities create benefits.
[SOPAC Technical Report 371 – McKenzie]
[35]
The red left-hand channel illustrates how capacity building projects, such as the pearl technician
training course, produce economic benefits for the Cook Islands by increasing the skills needed
for sustainable farming practices, and lagoon management. Capacity building activities may also
have wide-ranging positive externality benefits outside the pearl industry if the skills learnt through
the training are applied elsewhere. For example, staff at the Ministry of Marine Resources who
attended the GIS workshop may use their skills in GIS and MapInfo software in other areas of
marine management.
Capacity building is just one element of the project activities. Many of the projects in Manihiki
produce scientific information to assist the pearl industry, such as maps, surveys, censuses, and
lagoon parameter data. Assessing the benefits of this information is difficult. The information will
only contribute to sustainable development of the pearl industry and provide tangible economic
benefits if resource users and managers use and apply it. Scientific information will generate
economic benefits for the pearl industry if the information is:
1) Used voluntarily and directly by individual pearl farmers to make their farming practices
more productive and sustainable (green right-hand channel in Figure 17); or,
2) Used as advisory inputs to form the rules and regulations within the pearl farming
management plan, which forces farmers to make their farming practices more productive
and sustainable (blue central channel in Figure 17).
Many pearl farmers are aware of the potential for applying the scientific information produced
through the projects to their farming practices, but only a few farmers are actually doing so. Out of
the fifteen pearl farmers interviewed in Manihiki for this study, 66 percent plan to adjust their
farming practices in light of the information provided by the maps and monitoring buoy, but only
20 percent of farmers have actually done so. Many of the farmers who do not currently use the
monitoring buoy data for their farming but would like to do so, requested an educational workshop
to help them understand, interpret and apply the information.
Table 1 gives examples of some of the ways in which pearl farmers have adjusted or plan to
adjust their farming practices in response to scientific information produced through four of the
project areas.
[SOPAC Technical Report 371 – McKenzie]
[36]
Table 1: Use of project information by pearl farmers.
Project
Information produced
Use of information by pearl industry
Monitoring buoy
Lagoon parameters e.g.
dissolved oxygen, water
temperature
If the monitoring buoy shows dangerous
environmental conditions in the lagoon that stress the
oysters, farmers may adjust farming practices. For
example, if dissolved oxygen levels are unusually
low, farmers delay cleaning and seeding, because
this would further stress the oysters and could lead to
high mortality rates.
Oyster health surveys
Statistics on the health of pearl
oysters in lagoon
If the oyster health surveys show that oysters are
diseased, farmers may adjust farming practices. For
example, they may kill sick oysters to prevent the
disease from spreading and reduce stock densities to
prevent the disease recurring.
Mapping
Maps showing lagoon
bathymetry and position of
individual pearl farms
Farmers may use the maps to change the location
and layout of farms to prevent overstocking of
oysters, move to deeper areas of the lagoon, and
avoid overlapping with neighbouring farms. For
example, the maps are currently being used to plan
where haruharu would be optimally located to collect
juvenile oysters.
Oyster censuses
Estimates of oyster stocks and
densities
If the farm censuses indicate high densities of pearl
oysters in certain areas, farmers may change the
location and layout of farms to avoid overstocking
and disease outbreaks.
Economic theory suggests that, even if farmers are aware of the scientific information, and
understand that they must adjust their farming practices and reduce oyster stocking densities to
lower the risk of oyster disease outbreaks, there will always be incentives for individual farmers
using a communally-owned and unregulated lagoon to increase oyster stocks above the
biological and economic optimum (Poirine, 2003a). It is only through implementation and
enforcement of a pearl farming management plan that it can be ensured that the scientific
information from the projects will improve farming practices and lagoon management.
Hence, the blue central channel in Figure 17, which shows how scientific information from the
projects feeds in to the management plan, is the most important channel through which the
projects create economic benefits for the Cook Islands. A pearl farming management plan
requires high-quality scientific information on the lagoon environment and the pearl oyster
population to ensure that the rules and recommendations within the plan are based on sound
data.
[SOPAC Technical Report 371 – McKenzie]
[37]
In summary, there are three channels through which the projects in Manihiki generate benefits for
the Cook Islands pearl industry: capacity building; voluntary use of scientific information
generated through the projects by pearl farmers to improve farming practices, and use of scientific
information to shape the pearl farming management plan, which forces pearl farmers to improve
farming practices. The last channel is the most important for ensuring sustainable development of
the pearl industry, because, without a management plan, incentives will remain for farmers to
overexploit the lagoon.
3.5. Model and Indicator of Project Benefits
In economic theory the correct measure of project benefits is the revenue generated by the
project plus the resulting change in consumer and producer surplus. In practice it is often not
possible to conduct a detailed estimation of consumer and producer surplus, because supply and
demand curves are difficult to determine. Instead, a substitute indicator can be used that gives a
close approximation to the willingness to pay off producers and consumers for the projects.
In this cost-benefit analysis it is assumed that, through the three channels outlined in Section 3.3,
the projects will improve the quality and yield of pearls produced in Manihiki, and thereby increase
the level of annual pearl revenue earned by the Cook Islands. The approximate indicator of
project benefits is the difference in pearl production revenue accruing to Cook Islanders12 when all
of the projects are implemented (the situation ‘with the projects’) and when the projects are not
implemented (the situation ‘without the projects’). A model of pearl production that uses
assumptions based on the best available information provided by pearl farmers, retailers, graders,
academics, pearl technicians, and oyster biologists generates this indicator. Full details of the
assumptions and findings of the model are given in Appendix 4. The choice of assumptions for
particular variables can be debated, so a sensitivity analysis is undertaken to check the impact of
altering key assumptions.
It is assumed that the management plan will be implemented in 2004 and all other future projects
will be implemented as currently planned. The benefits are calculated over a fifteen-year period
between 2004 and 2019.
The stream of benefits and costs over time are discounted to find the present value of the
projects, using a real discount rate of 11 percent. The chosen discount rate is based on the lower
end of the band of interest rates usually applied on pearl loans by the Cook Islands Development
12
Revenue removed from the country by foreign pearl technicians is not included.
[SOPAC Technical Report 371 – McKenzie]
[38]
Bank, which vary between 11 and 13.75 percent (Bank of Cook Islands, 2002). All costs and
benefits are adjusted for inflation using the New Zealand Consumer Price Index (CPI) and given
in real terms.
It should be noted that the benefit indicator used for this cost-benefit analysis only includes the
pearl revenue generated by the projects. These benefits are likely to be only the tip of the iceberg,
as there are many potential indirect, secondary and non-monetary benefits from the projects.
These are discussed in Section 4.3.
Table 2 shows the main assumptions within the model.
Table 2: Model of pearl production ‘with projects’ and ‘without projects’13.
Component
Assumptions with the projects
Assumptions without projects
Total quantity of
adult cultured pearl
oysters.
The management plan limits the total stock of
oysters to 1.5 million adult farmed oysters (the
recommended sustainable capacity of the
lagoon).
Oyster density is regulated by the management
plan to a maximum of 4,000 farmed shells per
hectare, which prevents future disease
outbreaks and improves oyster health.
There is no regulation of the total stock of
oysters, so the level rises above the
advised sustainable capacity to 2.7 million
adult farmed oysters by 2019.
There is no regulation of oyster density,
so density increases beyond sustainable
levels, causing disease outbreaks to recur
in the future and oyster health to
deteriorate.
Average international pearl prices and
ratio of pearl prices for different quality
pearls remain at 2003 levels.
Average pearl quality reduces due to
deteriorating oyster health.
The average price per pearl produced in
Manihiki decreases due to a fall in the
average quality of pearls.
The percentage of seedable oysters
decreases due to poor oyster health,
which creates weak, stunted pearl sacs
that are difficult to seed.
Oyster density.
Average price per
pearl on world
market.
Average pearl
quality.
Average price per
pearl produced in
Manihiki.
Percentage of
seedable oysters.
Average international pearl prices and ratio of
pearl prices for different quality pearls remain at
2003 levels.
Average pearl quality improves because of better
oyster health,
The average price per pearl produced in Manihiki
increases due to a rise in the average quality of
pearls.
The percentage of seedable oysters increases
due to improved oyster health, which creates
strong, large pearl sacs that are easy to seed.
Percentage of
saleable pearls.
The percentage of pearls of saleable quality
increases due to improved oyster health.
The percentage of pearls of saleable
quality decreases due to poor oyster
health.
Percentage of
revenue removed by
foreign technicians.
Foreign technicians continue to remove a third of
pearl production revenue until 2008. After 2009
Manihiki farmers employ local technicians, who
have demonstrated their skills, so no further
pearl production revenue is removed from the
Cook Islands.
Foreign technicians continue to remove a
third of Cook Islands pearl production
revenue from 2004 to 2019.
13
See Appendix 4 for full details of the assumptions and findings of the model of pearl production.
[SOPAC Technical Report 371 – McKenzie]
[39]
4.
FINDINGS
4.1. Cost-Benefit Analysis
Figure 18 shows the projected total pearl revenue accruing to Cook Islanders with and without the
projects i.e. the amount of pearl revenue that is expected to be earned by Cook Islanders over the
14
B
12
10
8
6
4
2
A
C
0
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
Pearl production revenue accruing
to Cook Islanders
(NZ$ millions)
next fifteen years with the projects and in the absence of the projects.
Year
With projects
Without projects
Figure 18: Pearl revenue accruing to Cook Islanders with and without the projects in Manihiki, 2003-2019.
The incremental benefits from the projects are estimated as the difference between pearl revenue
‘with the projects’ and ‘without the projects’, shown in Figure 18 as the area ABC. It is these
incremental benefits, discounted over time, that are used in the cost-benefit analysis calculations.
The project costs are subtracted from the incremental project benefits to find the net benefit of the
projects. Full details of the cost-benefit analysis findings are given in Appendix 5.
Table 3 summarises the findings of the cost-benefit analysis.
[SOPAC Technical Report 371 – McKenzie]
[40]
Table 3: Cost-benefit analysis indicators.
Indicator
Net Present Benefit
Value
$44,015,892
Net Present Cost
$4,247,466
Net Present Value
$39,768,426
Discounted Benefit-Cost Ratio
10.4
Internal Rate of Return
28%
Discounted Payback Period
Four years
The projects have a large positive Net Present Value of $39.8 million. The ratio of benefits to
costs is 10:1. The internal rate of return is 28 percent, which is well above the chosen discount
rate of 11 percent, indicating that the projects are an excellent investment. The projects have a
short payback time, as the pearl revenue generated within four years recovers projects costs. All
of these indicators suggest that the projects in Manihiki are an extremely worthwhile investment
for the Cook Islands.
4.2. Sensitivity Analysis
Sensitivity analysis involves adjusting various assumptions within the original model of pearl
production to see the effect on key economic indicators of a range of likely future scenarios.
Sensitivity analysis is necessary when assumptions are made about the development of uncertain
future parameters, such as future prices and project developments. This section analyses five
likely future scenarios with different assumptions from the original model, which have been
identified as key variables in determining the net benefits. It is a partial sensitivity analysis, in
which only one assumption is adjusted at a time, with all other assumptions held constant. Full
details of the findings of the sensitivity analysis are given in Appendix 6.
4.2.1. Scenario 1: Manihiki management plan not implemented
A critical assumption of the original model is that the management plan is implemented in 2004,
and the rules and regulations are enforced. If the management plan is not implemented and
effectively enforced, pearl farming practices are unlikely to change, and the projects will fail to
generate substantial pearl revenue. This is not an unlikely scenario, as various draft management
plans have been proposed over the last fourteen years, and have failed to be implemented thus
far (MMR 2003a, MMR 2003b, MMR 2000a, Ponia and Okatai 2000, Ponia 2000, Sims 1990a).
In Scenario 1, it is assumed that the projects are not supported by a management plan so the
projects fail to prevent future disease outbreaks and a general decline in oyster health and pearl
[SOPAC Technical Report 371 – McKenzie]
[41]
production. Hence, pearl revenue declines and the projects fail to reap their large potential
economic benefits. The projects do generate some revenue because a few farmers voluntarily
and directly use the scientific information to adjust their farming practices, and the capacity
building projects continue to generate benefits (the red and green channels in Figure 17 continue
to generate benefits).
Figure 19 shows the projected total pearl revenue accruing to Cook Islanders with and without the
0.8
0.7
0.6
A
0.5
B
0.4
0.3
0.2
0.1
C
0.0
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
Pearl production revenue (NZ$
milions)
projects, when the management plan is not implemented or enforced.
Year
With projects (no management plan)
Without projects
Figure 19: Pearl revenue accruing to Cook Islanders with projects but no management plan and without projects in
Manihiki, 2003-2019.
Without the management plan, the incremental pearl revenue benefits, shown on Figure 19 as the
area ABC, are vastly reduced, and outweighed by the total project costs. Table 4 summarises the
findings of the cost-benefit analysis for Scenario 1.
Table 4: Cost-benefit indicators, projects do not include management plan.
Indicator
Value
Net Present Benefit
$1,845,197
Net Present Cost
$4,247,466
Net Present Value
–$2,402,269
Discounted Benefit-Cost Ratio
0.4
Internal Rate of Return
0%
Discounted Payback Period
Greater than 15 years
[SOPAC Technical Report 371 – McKenzie]
[42]
Without the management plan, the projects have a negative Net Present Value of ($2.4 million)
i.e. the project costs exceed the pearl revenue generated by the projects by $2.4 million in
present value terms. The discounted benefit-cost ratio is less than one and the internal rate of
return is below the chosen discount rate of 11 percent. The projects fail to generate pearl revenue
sufficient to cover the project costs before 2019. All of the economic indicators suggest that,
without a management plan, the projects are no longer a wise investment for the Cook Islands.
4.2.2. Scenario 2: International pearl prices recover
In Scenario 2 it is assumed that international pearl prices rapidly recover to the previous high
levels of the mid-1990s. A number of possible future developments in the pearl industry might
cause an increase in international pearl prices, such as regulations in French Polynesia limiting
the production of low quality pearls, or Japanese economic recovery boosting demand for black
pearls. Pearl prices have increased at the last three Poe Rava Nui auctions in French Polynesia,
indicating that prices may continue to rise. Table 5 summarises the findings of the cost-benefit
analysis for this scenario.
Table 5: Cost-benefit indicators with higher pearl prices.
Indicator
Value
Net Present Benefit
$88,031,784
Net Present Cost
$4,247,466
Net Present Value
$83,784,318
Discounted Benefit-Cost Ratio
20.7
Internal Rate of Return
33%
Discounted Payback Period
Three years
If international pearl prices recover, the projects will be an even better investment with a Net
Present Value of approximately $83.8 million.
4.2.3. Scenario 3: International pearl prices decline
A number of possible future developments in the pearl industry might cause a further fall in black
pearl prices, such as an increase in the supply of cheap substitutes from China or Pacific Island
Countries. This is an unlikely scenario as prices are estimated to be at the long-term average cost
for less-effective producers in French Polynesia, so a further fall in prices would cause many
producers to exit, driving down supply (Poirine, personal communication). Table 6 summarises
the findings of the cost-benefit analysis for this scenario.
[SOPAC Technical Report 371 – McKenzie]
[43]
Table 6: Cost-benefit indicators with decreased pearl prices.
Indicator of net benefits
Net Present Benefit
Value
$22,007,946
Net Present Cost
$4,247,466
Net Present Value
$17,760,480
Discounted Benefit-Cost Ratio
5.2
Internal Rate of Return
22%
Discounted Payback Period
Six years
If international pearl prices decrease further, the projects will not be as profitable an investment,
with a Net Present Value of only $17.8 million.
4.2.4. Scenario 4: Future project costs are higher than expected
In Scenario 4 it is assumed that future real project costs are double what is expected by those
involved in the projects. The cost-benefit analysis indicators are summarised in Table 7.
Table 7: Cost-benefit indicators with higher project costs.
Indicator
Value
Net Present Benefit
$44,015,892
Net Present Cost
$4,643,069
Net Present Value
$39,372,823
Discounted Benefit-Cost Ratio
9.5
Internal Rate of Return
27%
Discounted Payback Period
Four years
Even if future project costs are double the level expected, the projects remain an excellent
investment for the Cook Islands, with a Net Present Value of approximately $39.4 million.
4.2.5. Scenario 5: Manihiki farmers do not employ local technicians
In Scenario 5, it is assumed that local pearl technicians trained on the technician training course
are not employed by pearl farmers14, so foreign technicians continue to remove a third of pearl
revenue from the Cook Islands. The cost-benefit analysis indicators for this scenario are
summarised in Table 8.
14 A third of the Manihiki pearl farmers interviewed for this study said that they would never employ local technicians, regardless of whether they
have had training on the pearl technician training course.
[SOPAC Technical Report 371 – McKenzie]
[44]
Table 8: Cost-benefit indicators with no employment of local technicians.
Indicator
Net Present Benefit
Value
$30,776,860
Net Present Cost
$4,247,466
Net Present Value
$26,529,394
Discounted Benefit-Cost Ratio
7.2
Internal Rate of Return
25%
Discounted Payback Period
Four years
If Manihiki farmers refuse to employ local technicians trained on the pearl technician training
course, the Net Present Value of the projects is reduced to approximately $26.5 million.
Table 9 summarises the findings of the cost-benefit analysis and sensitivity analysis.
Table 9: Summary of cost-benefit analysis.
Situation
NPV
NPB
NPC
IRR
BCR
Payback Period
Original assumptions
$39.8m
$44m
$4.2m
28%
10
Four years
No management plan
-$2.4m
$1.8m
$4.2m
0%
0.4
More than 15 years
Pearl prices recover
$83.8m
$88m
$4.2m
33%
21
Three years
Pearl prices decline
$17.8m
$22m
$4.2m
22%
5
Six years
Project costs increase
$39.4m
$44m
$4.6m
27%
9.5
Four years
Locals not employed
$26.5m
$30.8m
$4.2m
25%
7
Four years
NPV – Net Present Value; NPB – Net Present Benefit; NPC – Net Present Cost; IRR – Internal Rate of Return; BCR – Benefit Cost
Ratio.
The projects will have a large multi-million dollar Net Present Value under a range of different
assumptions about future scenarios. The exception to this is the situation in which the
management plan is not implemented. In this scenario, the projects have a negative Net Present
Value of -$2.4 million.
It should be noted that there is no cost recovery on any of the projects under assessment, so
although without a management plan pearl farmers will suffer from reduced pearl revenues and
incomes, the industry does not bear the direct costs of the projects. The projects were funded by
a variety of donor agencies and the Cook Islands Government.
[SOPAC Technical Report 371 – McKenzie]
[45]
4.3. Qualitative analysis of intangible project benefits
The quantitative cost-benefit analysis in the previous sections only considered the revenue
generated by the projects. The projects will have other benefits, but these have not been included
in the quantitative analysis because they are difficult to quantify and put in monetary terms, and
doing so is beyond the scope of this study. This section discusses the other impacts the projects
are likely to have, which will create costs and benefits beyond those considered in Sections 4.1
and 4.2. A further study would be needed for a comprehensive analysis of these indirect,
secondary, non-monetary and social effects.
4.3.1. Indirect and Secondary Effects of Pearl Revenue
The pearl revenue generated through the projects in Manihiki will have indirect effects on the
Cook Island economy by creating demand for intermediary goods and services through ‘backward
linkages’. Currently almost all of the intermediary goods and services purchased by Manihiki pearl
farmers come from suppliers in New Zealand, but if goods are purchased locally there will be
indirect benefits in terms of revenue and employment in Cook Islands support industries. There
are also forward linkages from farmers to locally-based pearl retailers in Rarotonga and Aitutaki.
The pearl revenue generated through the projects will also have secondary effects throughout the
Cook Islands economy, which causes a multiplier effect. Increased consumption will result in new
demand for local production and imports, and greater saving will allow for new investments.
Calculations of the size of these secondary effects is beyond the scope of this study, but it is
important to note that increased pearl revenue will have significant repercussions in secondary
markets.
4.3.2. Non-monetary benefits
Many of the projects also have potential non-monetary benefits. Some of these non-monetary
benefits are likely to be large, although there is considerable uncertainty attached to them, and
quantifying them in monetary terms is outside of the scope of this study. A brief list of the likely
non-monetary benefits of the projects, which affect stakeholders outside of the pearl industry, is
given below:
•
Preventing overstocking and pollution of the lagoon will have widespread environmental
benefits. For example, the code of practice regulates pollution of the lagoon through rejection
of cleaning wastes, which will benefit many species within the lagoon ecosystem. The
employment opportunities provided by the pearl industry relieve pressure on local reef
fisheries. Destructive fishing practices are discouraged because they harm pearl oysters.
[SOPAC Technical Report 371 – McKenzie]
[46]
•
The monitoring buoy data may be used in international research related to ocean monitoring,
climate change and coral reefs, and international observation systems, such as the Pacific
Islands Global Ocean Observing System (GOOS). This research could provide a wide range
of substantial benefits in the long run both to the Cook Islands and the world as a whole.
•
The skills developed through the capacity building projects may have benefits outside of the
pearl industry if the skills are applied to other areas, such as management of other marine
resources.
•
The projects may have safety related benefits. For example, the monitoring buoy data on
barometric pressure and wind speeds may provide advanced warning of extreme weather
events and the lagoon maps may be used for safe navigation of the lagoon, although this
navigational benefit may only be applicable for projects in Penrhyn Lagoon.
4.3.3. Distribution of benefits
The projects create a more equitable distribution of income across the Cook Islands by
encouraging development of a remote outer island. If the projects are supported by the
implementation of the management plan, and the pearl industry develops sustainably as a result,
the projects may generate a more equitable distribution of income within Manihiki, if the benefits
are widespread among all farmers. If disease outbreaks recur in the future, the small-scale
farmers will be the first to leave the industry, leaving only a few large-scale farmers, who have the
economies of scale needed to break even. The Ministry of Marine Resources in Manihiki reported
that smaller farmers were already leaving the industry in 2004 (Jo Anderson, personal
communication).
4.3.4. Transformation of social structures
The introduction, implementation and enforcement of the projects evaluated in this report, in
particular the draft management plan and code of practice, may create social strains and
pressures within the Manihiki community. Enforced and effective management of the lagoon
could, however, generate social strengths, such as greater trust within the community and a
stronger sense of fulfilment and identity. Whether the social transformation instigated by the
projects follows a negative or positive direction will be crucial for the successful implementation of
the projects. A further study should be undertaken to address the impact of the projects on the
transformation of social structures in Manihiki and the Cook Islands more generally, as a detailed
examination of these issues is beyond the scope of this cost-benefit analysis.
[SOPAC Technical Report 371 – McKenzie]
[47]
4.3.5. Reputation among donor agencies
There may be indirect costs and benefits through the reputation established by the Cook Islands
for attracting future funding from international donors and aid agencies, relating to the failure or
success of the pearl farming projects in Manihiki.
5.
DISCUSSION
In the original cost-benefit analysis, it is assumed that the projects are supported by the
implementation and enforcement of a pearl farming management plan and code of practice,
which regulate oyster-stocking densities and farming practices. In this scenario, the Net Present
Value of the projects is approximately $39.8 million i.e. the pearl revenue generated by the
projects exceeds the total project costs by $39.8 million in 2004 present value terms. The finding
of a large positive Net Present Value is robust to alterations of assumptions about future pearl
prices, future project costs, and employment of locally-trained pearl technicians. The projects also
have additional indirect, secondary and non-monetary benefits.
If the draft management plan is not implemented and enforced, however, incentives will remain
for resource users to stock the lagoon at unsustainable oyster densities and employ poor farming
practices. In this future scenario, the projects will have a negative Net Present Value of
approximately ($2.4 million) i.e. the project costs exceed the pearl revenue generated by the
projects by $2.4 million in 2004 present value terms. Many of the indirect, secondary and nonmonetary benefits will also be lost.
5.1. Limitations
This cost-benefit analysis has intrinsic limitations. First, the model of project benefits is based on
assumptions about future developments in the pearl industry, which are necessarily uncertain.
The numeric conclusions of this study should therefore be considered in light of the assumptions
made, as outlined in Appendices 4, 5 and 6, and attention paid to the results of the sensitivity
analysis in Section 4.2.
A second limitation of this analysis is that the quantification of project benefits only includes the
monetary value of the pearl revenue generated. However, the net benefits of the projects using
only this indicator are found to be large, and the intangible and non-monetary impacts that have
not been quantified are likely to be overwhelmingly positive, so the failure to consider nonmonetary factors is not expected to affect the implications and recommendations of this report.
[SOPAC Technical Report 371 – McKenzie]
[48]
5.2. Recommendations
The following recommendations provide a road map for reaching the large positive net present
value of $39.8 million predicted in the original cost-benefit analysis.
5.2.1. Projects must be supported by good management structures
Projects that aim to achieve sustainable development and management of natural resources
need to be supported by resource management regimes, to ensure that the information and skills
generated by the projects are channelled in to good management decisions. The economic
benefits of capacity building and scientific research projects will be limited without good
management structures.
It is strongly recommended that the draft Manihiki pearl farming management plan be
implemented as soon as possible, to guarantee that the projects effectively reap their substantial
potential economic rewards for the Cook Islands. Determination will be needed on the part of the
Island Council and the Manihiki community to ensure that the management plan is put in to
practice and effectively enforced. Implementation and enforcement will be a challenge and may
require substantial resources. This cost benefit analysis has shown, however, that if the
management plan is not implemented, multi-million dollar potential economic benefits of the
projects in Manihiki will be sacrificed.
5.2.2. Management plan must be enforced effectively
To be effective, the management plan must include the right to remove the permits of repeat
offenders to create real incentives for farmers to eliminate unsustainable farming practices.
Several farmers interviewed for this study suggested that successful enforcement is more likely if
a legal authority from outside of the Manihiki community imposes penalties to ensure that farmers
meet the requirements of the management plan.
5.2.3. Monitoring buoy data must arrive promptly and regularly
The information from the monitoring buoy must arrive promptly and regularly to be of direct use to
farmers, and make a difference to production decisions. In early 2004 several farmers handled
their oysters, either for cleaning or seeding, and subsequently experienced very high mortality
levels among the oysters. A monthly report summarising the monitoring buoy data later indicated
that dissolved oxygen levels were unusually low around the time that the oysters were handled. If
farmers had received the monitoring buoy information earlier they might have delayed handling
the oysters, and the mortalities could have been avoided.
[SOPAC Technical Report 371 – McKenzie]
[49]
5.2.4. Capacity building needed for interpretation of scientific data
An educational workshop that teaches farmers how to interpret the scientific information from
projects, such as the monitoring buoy, maps, oyster censuses and health surveys, would help
them to apply the information to their farming practices. Such a workshop was suggested by
several of the farmers interviewed for this study.
5.3. Conclusions
In conclusion, the information and skills generated by the projects in Manihiki have the potential to
generate multi-million dollar net benefits in terms of pearl revenue for the Cook Islands, and
numerous other indirect, secondary and non-monetary benefits. But these benefits will only
materialise if there is an effective resource management regime to ensure sustainable farming
practices, such as the Manihiki pearl farming management plan and code of practice that are
currently in draft form. The findings show that it may be better not to introduce the projects than to
invest but fail to fully implement them, thereby incurring all the costs, but reaping few of the
benefits. On the basis of this conclusion, it is strongly recommended that the draft Manihiki pearl
farming management plan be implemented as soon as possible, to guarantee that the projects
effectively reap their substantial potential economic rewards for the Cook Islands.
[SOPAC Technical Report 371 – McKenzie]
[50]
6.
BIBLIOGRAPHY
6.1. Project References
6.1.1. Lagoon Monitoring Projects
RDA International. 1997. Lagoon ecology monitoring and management project, Manihiki Lagoon,
Cook Islands. RDA International, California.
RDA International. 1995a. Summary Technical Report: Cook Islands black-lip pearl oyster project.
RDA International.
RDA International. 1995b. Final Report: Cook Islands black-lip pearl oyster project. RDA
International.
Sharma, S. et al. 2001. Water quality analysis, Manihiki Lagoon, Cook Islands. SOPAC Technical
Report 331. South Pacific Applied Geoscience Commission.
Smith, R. et al. 2003. Manihiki and Penrhyn Atoll oceanographic monitoring buoys: an application
of coastal GOOS. SOPAC Technical Report 362. South Pacific Applied Geoscience
Commission.
Smith, R. December 2003. Manihiki and Penrhyn Atoll oceanographic monitoring buoys: Monthly
Data Report No. 1. SOPAC Data Report 11. South Pacific Applied Geoscience Commission.
Solomon, S. 1997. Circulation studies in Manihiki Lagoon, Cook Islands. SOPAC Technical
Report 246. South Pacific Applied Geoscience Commission.
Solomon, S. 1996. Physical oceanography and analysis of lagoon circulation and flushing,
Manihiki Atoll, Northern Cook Islands. SOPAC Preliminary Report 87. South Pacific Applied
Geoscience Commission.
6.1.2. Pearl Oyster Monitoring Projects
Diggles, B.K, Maas, E. 2004. Cook Islands pearl oyster and lagoon health monitoring programme,
December 2003. NIWA Client Report: WLG2004-24. Prepared for Government of the Cook
Islands, Ministry of Marine Resources. National Institute of Water and Atmospheric Research
Ltd (NIWA).
Diggles, B.K., Hine, P.M. 2001. Mortality of black-lip pearl oysters (Pinctada margaritifera) in
Manihiki Lagoon. NIWA Client Report: WLG 01/5. Prepared for Government of the Cook
Islands, Ministry of Marine Resources. National Institute of Water & Atmospheric Research
(NIWA).
Hine, P.M. 1998. A survey of the health of black-lip pearl oysters (Pinctada margaritifera) and
other bivalves in the Cook Islands. Report to the Ministry of Marine Resources of the
Government of the Cook Islands. National Institute of Water and Atmospheric Research
(NIWA).
MMR. 2003. Manihiki stock summary. Unpublished information based on census survey data
2003. Ministry of Marine Resources, Government of the Cook Islands.
Ponia, B. et al. 1999. Manihiki Island black pearl farm census and mapping survey. MMR
Miscellaneous Report: 22. Ministry of Marine Resources, Government of the Cook Islands.
6.1.3. Mapping Projects
Bertram, I., Tuatai, T. 2002. Final report: Manihiki Lagoon bathymetry survey for the development
of a Manihiki pearl farm management plan under the New Zealand Overseas Development
Assistance Program. MMR Final Report. Ministry of Marine Resources, Government of the
Cook Islands and South Pacific Applied Geoscience Commission.
[SOPAC Technical Report 371 – McKenzie]
[51]
Chung, Q., T. Tunatei, E. Veikoso. 2002. Geographic Information Systems and Remote Sensing
for pearl farm management in Manihiki, Cook Islands. Pacific Islands GIS/RS News. Issue 1,
2002.
6.1.4. Capacity Building Projects
Aquilina, B. 2004. Proposal for MMR experimental seeding, May 2004. Unpublished proposal
prepared for the Ministry of Marine Resources, Cook Islands.
Aquilina, B. 2004. Feedback for students of MMR Group 1 pearl harvest. Unpublished report for
students of technician training course and Manihiki community.
Aquilina, B. 2003. Report on second presentation of Module 1: Cook Islands pearl technician
training course. Unpublished report prepared for the Ministry of Marine Resources, Cook
Islands.
Aquilina, B. 2003. Course notes for Cook Islands pearl technician training course, 2nd edition.
Unpublished report prepared for the Ministry of Marine Resources, Cook Islands.
Aquilina, B. 2002. Report on first presentation of Module 1: Cook Islands pearl technician training
course. Report prepared for the Ministry of Marine Resources, Cook Islands.
6.1.5. Pearl Farming Management Plan and Code of Practice
MMR. 2003a. Draft Manihiki pearl farming management plan: 2004-2014. Ministry of Marine
Resources, Government of the Cook Islands.
MMR. 2003b. Draft code of practice for responsible pearl farming in Manihiki Lagoon. Ministry of
Marine Resources, Government of the Cook Islands.
6.2. Other References
Anderson, M. 1998. The ecological sustainability of pearl farming in Manihiki lagoon, Northern
Cook Islands. SPC Pearl Oyster Information Bulletin 11: 7-11. Secretariat of the Pacific
Community.
Anon. 1990. Pearls make an island wealthy. Islands Business, June 1990.
Asian Development Bank. 2003. Asian Development Outlook 2003: Economic Trends and
Prospects in Developing Asia.
Bank of the Cook Islands. 2002. Review: pearl farming loans – Manihiki. Unpublished Bank of
Cook Islands report.
Boardman, A.E. et al. 1996. Cost-benefit analysis: concepts and practice. Prentice Hall, New
Jersey.
Braley, R.D. 1997. Draft Final Report, Outer Islands Marine Resources Management Training
Project. TA No. 2322-COO. Aquasearch, Queensland, Australia.
Cabral, P. 1989. Some aspects of the abnormal mortalities of the pearl oysters, Pinctada
margaritifera, in the Tuamotu Archipelago, French Polynesia. Advances in tropical
aquaculture: AQUACOP.
Cook Islands News. 17 May, 2004. Fishing booms, pearls slump.
Cook Islands News. 28 November, 2000. Task force to tackle pearl industry threat.
Cook Islands Star. December 8, 2000. Alert over threat to pearl industry.
Cropper, M.L., Oates, W.E. 1992. Environmental economics: a survey. Journal of Economic
Literature 30: 675-740.
Dashwood, J. 1992. Conflict resolution in the development of the Cook Islands pearl industry.
SPC Pearl Oyster Information Bulletin 4: 29-31. Secretariat of the Pacific Community.
[SOPAC Technical Report 371 – McKenzie]
[52]
Doroudi, M. S. & Southgate, P.C. The combined effects of temperature and salinity on the growth
and survival of the black pearl oyster, Pinctada margaritifera (L), larvae. James Cook
University, Townsville 4811, Queensland, Australia.
Evening Post, New Zealand. October 1991. Lagoon closure brings financial difficulties for
Manihiki pearl farmers. SPC Pearl Oyster Information Bulletin 4: 12-13. Secretariat of the
Pacific Community.
Fabre, P. 1997. Manual: financial and economic analysis of development projects. European
Commission, Belgium.
Fassler, C. 2002. Black pearl farming: a brief overview. SPC Pearl Oyster Information Bulletin 15:
28. Secretariat of the Pacific Community.
Fassler, R., Corbin, J. 1992. Pearl farming: an economic opportunity for Pacific Island Nations.
SPC Pearl Oyster Information Bulletin 4: 26. Secretariat of the Pacific Community.
George, C.D. 1992. Historical perspective on pearl oyster diseases. SPC Pearl Oyster Information
Bulletin 4: 4. Secretariat of the Pacific Community.
Gervis, M.H., Sims, N. A. 1992. The biology and culture of pearl oysters (Bivalvia: Pteriidae).
Overseas Development Administration, London, England & International Center for Living
Aquatic Resources Management, Manila, Philippines.
Goldman, B., Goldman, E. 1991. Pearl culture industry: ecological considerations. Report to the
Minister of Marine Resources following a visit to Manihiki Lagoon in January 1991.
Gordon, H.S. 1954. The economic theory of a common property resource. Journal of Political
Economy 62: 124-142.
Hardin G. 1968. The tragedy of the commons. Science 163: 1243-1248.
Haws, M. 2002. The basics of pearl farming: a layman’s manual. Center for Tropical and
Subtropical Aquaculture.
Heral, M. 2001. Editorial. Aquatic Living Resources 14: 153.
Hunt, C. 1997. Cooperative approaches to marine resource management in the South Pacific. In:
Larmour, P. (ed.). The governance of common property in the Pacific region. National Centre
for Development Studies, Australian National University, Canberra.
Hynd, J. S. 1960a. Report to the South Pacific Commission on an investigation of the blacklip
mother-of-pearl oysters, Pinctada margaritifera, in Manihiki, Cook Islands. CSIRO Marine
Biological Laboratory, Sydney.
Intes, A. 1995. The natural pearl shell populations in French Polynesia. SPC Pearl Oyster
Information Bulletin 8: 17-24.
Jewellery Net Asia, 2004. http://www.jewellerynetasia.com/
Johansson, P-O. 1993. Cost-benefit analysis of environmental change. Cambridge University
Press.
Johnstone, B., Pickering, T. 2003. The economics of aquaculture in comparison with other rural
development opportunities in Pacific Island Countries. Marine Studies Programme, University
of the South Pacific.
Lacreuse, P. 2001. Alerte écologique pour le lagon de Takapoto, les perliculteurs fuient l’atoll.
Tahiti Pacifique: 124, p26.
Les Nouvelles de Tahiti. 1992. Quality is the key to success for our black pearl industry. January
1992. SPC Pearl Oyster Information Bulletin 5: 17-19. Secretariat of the Pacific Community.
Newnam, R. 1995. The development of black pearl farming in Manihiki. SPC Pearl Oyster
Information Bulletin 8: 46. Secretariat of the Pacific Community.
MFEM. 2003. Cook Islands half-year economic and fiscal update for financial year 2003/2004.
Ministry of Finance and Economic Management, Government of the Cook Islands.
MFEM. 2003. Cook Islands Statistical Bulletin. Statistics Office, Government of the Cook Islands.
MMR. 2004. Newsletter for pearl farmers in the Cook Islands. Te Poe Marama: 1.
MMR. 2002-2003. Annual Report. Ministry of Marine Resources, Government of the Cook
Islands.
[SOPAC Technical Report 371 – McKenzie]
[53]
MMR. 2001-2002. Annual Report. Ministry of Marine Resources, Government of the Cook
Islands.
MMR. 2000-2001. Annual Report. Ministry of Marine Resources, Government of the Cook
Islands.
MMR. 2000a. Management protocols for the control of abnormally high mortality experienced on
pearl farms: recommendations for immediate action for Manihiki Island Council and Manihiki
pearl farmers. Ministry of Marine Resources, Government of the Cook Islands.
MMR. 2000b. Manihiki black pearl oyster disease outbreak, December 2000. Cabinet Paper.
MPED. 1991. Manihiki Island development plan. Ministry of Planning and Economic
Development, Government of the Cook Islands.
Pearce, D.W, Turner, R.K. 1990. Economics of natural resources and the environment. Harvester
Wheatsheaf, Hertfordshire.
Poirine, B. 2003a. Managing the commons: an economic approach to pearl industry regulation.
Aquaculture economics and management 7: 3 & 4.
Poirine, B. 2003b. Etude économique des facteurs de la rentabilité des fermes perlières. Service
de la perliculture, gouvernement de la Polynésie française.
Ponia, B., Okatai, T. 2000. Draft Manihiki Island Council pearl farming management guidelines.
Ministry of Marine Resources, Cook Islands. Miscellaneous Report 2000/5.
Ponia, B. 2000. Proposed grid system to manage pearl farms at Manihiki Lagoon. Ministry of
Marine Resources, Cook Islands. Miscellaneous Report 2000/6.
Ponia, B. E. 1996. Feeding models and chlorophyll levels at black pearl farms in the Cook
Islands: implications for management. M. Sc. Thesis. James Cook University, Australia.
Pouvreau, S., Prasil V. 2001. Growth of the black-lip pearl oysters, Pinctada margaritifera, at nine
culture sites of French Polynesia: synthesis of several sampling designs conducted between
1994 and 1999. Aquatic Living Resources 14: 155-163.
Radio Australia. 27 February 2001. Disease outbreak costs Manihiki pearl farms millions. SPC
Pearl Oyster Information Bulletin 16: 5. Secretariat of the Pacific Community.
Rapaport, M. 1996. Between two laws: tenure regimes in the pearl islands. The Contemporary
Pacific 8(1): 33-49.
Remoissenet, G. 1995. From the emergence of mortalities and diseases on Pinctada
margaritifera to their effects on the pearling industry. Technical Paper S7-6. Aquaculture
Workshop in Tonga.
Rowntree, J.T. 1993. A preliminary economic assessment of the expansion of the Cook Islands
cultured black pearl industry: constraints, opportunities and potential impacts. RDA
International.
Schroeder, R.E. 1992. Preliminary ecological assessment and pearl culture site evaluation of
Penrhyn (Tongareva) Lagoon. RDA International.
Sims, N.A. 1994. Growth of the wild and cultured black-lip pearl oysters, Pinctada margaritifera
(Pteriidae; Bivalvia), in the Cook Islands. Aquaculture 122: 181-191.
Sims, N.A. 1992a. Abundance and distribution of the black-lip pearl oyster, Pinctada margaritifera
in the Cook Islands, South Pacific. Australian Journal of Marine Freshwater Resources 43:
1409-1421.
Sims, N.A. 1992b. Population dynamics and stock management of the black-lip pearl oyster,
Pinctada margaritifera (L), in the Cook Islands, South Pacific. Australian Journal of Marine
Freshwater Resources 43 (6): 1423-1435.
Sims, N.A. 1992c. The compatibility of traditional and modern management in aquaculture: pearl
culture development in Manihiki, Cook Islands. SPC Pearl Oyster Information Bulletin 4: 26.
Secretariat of the Pacific Community.
Sims, N.A. 1990a. Discussing and drafting a pearl oyster management plan in the Cook Islands.
A report to USAID and the Cook Islands Government.
[SOPAC Technical Report 371 – McKenzie]
[54]
Sims, N.A. 1990b. A select bibliography on the biology, ecology and culture of pearl oysters.
South Pacific Commission, New Caledonia.
SPC. 2002. Study of the Cook Islands pearl industry. SPC Fisheries Newsletter 102. Secretariat
of the Pacific Community.
Taime, T. 1999. Current and Future Outlook of Penrhyn Shell Craft. Ministry of Marine Resources,
Government of the Cook Islands.
Tisdell, C.A., Poirine B. Socio-economics of pearl culture: industry changes and comparisons
focusing on Australia and French Polynesia. World Aquaculture 31(2): 30-60.
Torrey, R. (ed.) 1997. World class black pearls: Pearl World highlights the achievements of the
Cook Islands black pearl industry. SPC Pearl Oyster Information Bulletin 10: 31-32.
Secretariat of the Pacific Community.
Tun, Tint. 2000. A review of mass mortalities in pearl oysters. Paper presented to the Myanmar
Pearl Enterprise in July 2000. SPC Pearl Oyster Information Bulletin 14: p17. Secretariat of
the Pacific Community.
Viguie, J.P. 2003. Report on development of the black pearls sub-sector, Cook Islands. Report
contract no: 411/1/1318/02. European Commission.
Van Ginkel, B. 1988. Limited entry: panacea or palliative? Oystermen, state intervention, and
resource management in a Dutch maritime community. Journal of Shellfish Research: 7 (2):
309-317.
Zanini, J.M. 1997. Takapoto, un lagon sous haute surveillance. Te Reko Parau: 9. Service des
resources marines, Papeete.
[SOPAC Technical Report 371 – McKenzie]
[55]
GLOSSARY OF PEARL TERMINOLOGY
Chaplet: a set of cultured pearl oysters attached to a farm line.
Circle: pearls with concentric grooves around the perimeter.
Conditioning: process where oysters are mildly stressed to weaken the muscle and allow
technicians to open the oyster shell easily for seeding.
Cultured oysters: farmed black-lip pearl oysters, rather than wild oysters.
Fouling organisms: small plants and animals that colonise the shell of the oyster.
Gonad: reproductive organ, which produces either sperm or eggs.
Global Positioning System (GPS): satellite navigation system used in Manihiki to locate the
boundaries of pearl farms.
Haruharu: the collectors used to catch and grow juvenile black-lip pearl oysters (kati).
Kati: farmed juvenile pearl oysters.
Mantle: inner shell of a pearl oyster. Small pieces of the mantle of an oyster with good inner shell
colours are inserted during the seeding operation.
Nacre: the iridescent material lining the inside of the oyster shell. Layers of nacre are formed
around the nucleus to form a pearl sac after the seeding operation.
Nucleus: a round bead made from the shell of a freshwater mussel, inserted in to oysters during
the seeding operation.
Parau: farmed adult pearl oysters.
Pearl sac: the tissue containing the nacre-producing epithelial cells that enclose the developing
pearl. This term may also be used to refer to the extreme end of the gonad where the
nucleus is inserted in the seeding operation.
Rejects: oysters that spit out the nucleus after the seeding operation (also called vomits).
Retention rates: proportion of oysters that do not reject the nucleus after the seeding operation.
Seeding: a surgical procedure in which the nucleus and a small piece of mantle tissue are
inserted in to the oyster gonad. In a successful operation, the cut heals and the grafted
mantle tissue grows around the nucleus to form a ‘pearl sac’ (also called grafting or nucleus
implantation).
Spat: juvenile pearl oyster.
Spawning: release of eggs or sperm by the pearl oyster into the water.
Stressed oysters: oysters that are weak due to unfavourable external conditions.
Technician: person who performs the seeding operation.
[SOPAC Technical Report 371 – McKenzie]
[56]
GLOSSARY OF ECONOMICS & PROJECT TERMINOLOGY
Benefit cost ratio: ratio of the present value of project benefits to the present value of project
costs. A projects is only a good investment if the benefit cost ratio is greater than one.
Carrying capacity: number of pearl oysters the lagoon can handle without detrimental effects on
the lagoon ecosystem.
Code of practice: set of rules and regulations to establish ecologically sustainable pearl farming
husbandry practices.
Common property resource: a good or service shared by a community.
Discount rate: the rate required to compensate for receipt of money in the future rather than in
the present.
Economies of scale: increased efficiency in production as additional goods are produced.
Externality: spillover effects arising from the production and/or consumption of goods and
services for which no appropriate compensation is paid.
Geographic information system: a computer system capable of capturing, storing, analysing,
and displaying geographically referenced information.
Gross domestic product: the total value of goods and services produced by a nation within that
nation.
Internal Rate of Return: the discount rate at which the Net Present Value of a project is equal to
zero. A project is only a good investment if the internal rate of return is greater than the
discount rate.
Management plan: policy governing the management of a specific resource by a well defined
group of resource users with the authority to regulate its use by members and outsiders.
Net present benefit: present value of the total project benefits.
Net present cost: present value of the total project costs.
Net present value: the sum of the present values of all benefits associated with a project, less
the sum of the present values of all project costs. A project is only a good investment if the
net present value is greater than zero.
Payback period: the length of time it takes for the sum of the project benefits to cover the sum of
the project costs.
Present value: the value today of a benefit or cost that happens in the future, measured using
the discount rate.
Tragedy of the commons: individuals consuming or using a common property resource do not
bear the total costs of their actions, which leads to overexploitation of the resource.
[SOPAC Technical Report 371 – McKenzie]
[57]
APPENDIX 1
Stages of Pearl Production
Site selection and establishm ent of farm structure
O btain pearl oyster stock through spat collection
Drill and hang pearl oysters on chaplets
Pre-grafting culture period (6 m onths - 1 year)
Pre-grafting conditioning (induced spawning)
Seeding
O ysters kept in catch bags for six weeks to capture
any 'vom its'
Re-im plantation of
nucleus in selected
pearl oysters
Post-grafting culture (pearl developm ent, 12-24
m onths)
Harvest pearls
M arketing of pearls
Source: Haws, 2002
[SOPAC Technical Report 371 – McKenzie]
[58]
APPENDIX 2
Location Maps
[SOPAC Technical Report 371 – McKenzie]
[59]
APPENDIX 3
Project Costs
Details of the costs involved in completed project activities are given in the table below:
Past project costs
New
Cost (NZ$, Zealand CPI
current prices)
(2004
baseline)
Year
Project
1994
Lagoon Ecology Monitoring &
Management Project
1997
Cost (NZ$, constant
prices)
$917,227
82.4
$1,113,139.56
Circulation Studies
$20,000
88.5
$22,598.87
1998
Oyster health survey
$30,000
89.6
$33,482.14
2000
Oyster mortality survey
$35,080
91.8
$38,213.51
2001
Bathymetry survey
$57,500
94.2
$61,040.34
2001
Water quality analysis
$5,000
94.2
$5,307.86
2002
MapInfo/GIS training
$8,630
96.8
$8,915.29
2002
Technician training: Initial investments
$9,201
96.8
$9,505.17
2002
Technician training: First Course
$51,200
96.8
$52,892.56
2003
Technician training: Second Course
$51,200
98.5
$51,979.70
2003
Monitoring buoy
$110,000
98.5
$111,675.13
2003
Water quality and oyster health survey
$85,300
98.5
$86,598.98
2003
Draft management plan and code of
practice
$6,500
98.5
$6,598.98
2003
YSI probe
$8,000
98.5
$8,121.83
2004
Technician training: Third Course
$51,200
100
$51,200.00
It is assumed that there will be costs involved in two more technician training courses in 2005 and
2006, annual shell censuses and maintenance of the monitoring buoy, biennial updating of pearl
farm maps, and triennial pearl oyster health surveys. In addition, there will be costs involved in
implementing and enforcing the management plan and code of practice. Estimates of future
costs are summarised in the table below.
[SOPAC Technical Report 371 – McKenzie]
[60]
Estimates of future project costs (constant 2004 prices).
Technician
training
Censuses
2005
$50,000
$5,000
2006
$50,000
$5,000
Year
2007
2008
$5,000
$16,667
Health
surveys
Mapping
$3,000
$50,000
$3,000
$5,000
2009
$5,000
2010
$5,000
2011
$5,000
2012
$5,000
2013
$5,000
2014
$5,000
2015
$5,000
2016
$5,000
2017
$5,000
2018
$5,000
2019
$5,000
$3,000
$50,000
$3,000
$50,000
$3,000
$3,000
$50,000
$3,000
$50,000
$3,000
[SOPAC Technical Report 371 – McKenzie]
Buoy
maintenance
Total Costs
$20,000
$78,000
$20,000
$75,000
$20,000
$78,000
$20,000
$41,667
$20,000
$28,000
$20,000
$75,000
$20,000
$28,000
$20,000
$25,000
$20,000
$78,000
$20,000
$25,000
$20,000
$28,000
$20,000
$75,000
$20,000
$28,000
$20,000
$25,000
$20,000
$78,000
[61]
APPENDIX 4
Model of Pearl Production
Model of pearl production accruing to Cook Islanders with the projects
Total annual pearl
revenue
Percentage of
revenue not
removed by foreign
techniciansiii
Total annual pearl
revenue accruing
to Cook Islanders
50,600
$1,012,000
0.67
$674,667
23%
55,200
$1,104,000
0.67
$736,000
43%
26%
72,670
$1,635,075
0.67
$1,090,050
1,400,000
46%
29%
93,380
$2,334,500
0.67
$1,556,333
$27.50
1,500,000
49%
32%
117,600
$3,234,000
0.67
$2,156,000
2008
$30.00
1,500,000
52%
35%
136,500
$4,095,000
0.67
$2,730,000
2009
$32.50
1,500,000
55%
38%
156,750
$5,094,375
1.00
$5,094,375
2010
$35.00
1,500,000
58%
41%
178,350
$6,242,250
1.00
$6,242,250
2011
$37.50
1,500,000
61%
44%
201,300
$7,548,750
1.00
$7,548,750
2012
$40.00
1,500,000
64%
47%
225,600
$9,024,000
1.00
$9,024,000
2013
$42.50
1,500,000
67%
50%
251,250
$10,678,125
1.00
$10,678,125
2014
$45.00
1,500,000
70%
53%
278,250
$12,521,250
1.00
$12,521,250
2015
$45.00
1,500,000
70%
56%
294,000
$13,230,000
1.00
$13,230,000
2016
$45.00
1,500,000
70%
56%
294,000
$13,230,000
1.00
$13,230,000
2017
$45.00
1,500,000
70%
56%
294,000
$13,230,000
1.00
$13,230,000
2018
$45.00
1,500,000
70%
56%
294,000
$13,230,000
1.00
$13,230,000
2019
$45.00
1,500,000
70%
56%
294,000
$13,230,000
1.00
$13,230,000
Year
Average price
per Manihiki
pearl (NZ$)i
Total no. of adult
farmed oysters in
Manihiki Lagoon
Percentage of
seedable oysters
(from total no. in
lagoon)
Percentage of
saleable pearls
(from no. seeded)
Total no. of
saleable pearlsii
2003
$20.00
1,100,000
40%
23%
2004
$20.00
1,200,000
40%
2005
$22.50
1,300,000
2006
$25.00
2007
[SOPAC Technical Report 371 – McKenzie]
[62]
Model of pearl production accruing to Cook Islanders without the projects
Year
Average price per
Manihiki pearl
(NZ$)
Total no. of
oysters in Manihiki
Lagoon
Percentage of
seedable oysters
(from total no. in
lagoon)
Percentage of
saleable pearls
(from no. seeded)
Total no. of
saleable pearls
2003
$20.00
1,100,000
40%
23%
2004
$20.00
1,200,000
40%
2005
$15.00
1,300,000
2006
$10.00
2007
Total annual pearl
revenue
Percentage of
revenue not
removed by foreign
technicians
Total annual pearl
revenue accruing
to Cook Islanders
50,600
$1,012,000
0.67
$674,667
23%
55,200
$1,104,000
0.67
$736,000
36%
20%
46,800
$702,000
0.67
$468,000
1,400,000
32%
17%
38,080
$380,800
0.67
$253,867
$10.00
1,500,000
28%
14%
29,400
$294,000
0.67
$196,000
2008
$10.00
1,600,000
24%
11%
21,120
$211,200
0.67
$140,800
2009
$10.00
1,700,000
20%
8%
13,600
$136,000
0.67
$90,667
2010
$10.00
1,800,000
20%
8%
14,400
$144,000
0.67
$96,000
2011
$10.00
1,900,000
20%
8%
15,200
$152,000
0.67
$101,333
2012
$10.00
2,000,000
20%
8%
16,000
$160,000
0.67
$106,667
2013
$10.00
2,100,000
20%
8%
16,800
$168,000
0.67
$112,000
2014
$10.00
2,200,000
20%
8%
17,600
$176,000
0.67
$117,333
2015
$10.00
2,300,000
20%
8%
18,400
$184,000
0.67
$122,667
2016
$10.00
2,400,000
20%
8%
19,200
$192,000
0.67
$128,000
2017
$10.00
2,500,000
20%
8%
20,000
$200,000
0.67
$133,333
2018
$10.00
2,600,000
20%
8%
20,800
$208,000
0.67
$138,667
2019
$10.00
2,700,000
20%
8%
21,600
$216,000
0.67
$144,000
[SOPAC Technical Report 371 – McKenzie]
[63]
Model of pearl production accruing to Cook Islanders with the projects but no management plan
Total annual pearl
revenue
Percentage of
revenue not
removed by foreign
technicians
Total annual pearl
revenue accruing
to Cook Islanders
50,600
$1,012,000
0.67
$674,667
23%
55,200
$1,104,000
0.67
$736,000
38%
22%
53,105
$796,575
0.67
$531,050
1,400,000
36%
20%
50,400
$504,000
0.67
$336,000
$10.00
1,500,000
34%
19%
47,175
$471,750
0.67
$314,500
2008
$10.00
1,600,000
32%
17%
43,520
$435,200
0.67
$290,133
2009
$10.00
1,700,000
30%
16%
39,525
$395,250
1.00
$395,250
2010
$10.00
1,800,000
30%
16%
41,850
$418,500
1.00
$418,500
2011
$10.00
1,900,000
30%
16%
44,175
$441,750
1.00
$441,750
2012
$10.00
2,000,000
30%
16%
46,500
$465,000
1.00
$465,000
2013
$10.00
2,100,000
30%
16%
48,825
$488,250
1.00
$488,250
2014
$10.00
2,200,000
30%
16%
51,150
$511,500
1.00
$511,500
2015
$10.00
2,300,000
30%
16%
53,475
$534,750
1.00
$534,750
2016
$10.00
2,400,000
30%
16%
55,800
$558,000
1.00
$558,000
2017
$10.00
2,500,000
30%
16%
58,125
$581,250
1.00
$581,250
2018
$10.00
2,600,000
30%
16%
60,450
$604,500
1.00
$604,500
2019
$10.00
2,700,000
30%
16%
62,775
$627,750
1.00
$627,750
Year
Average price per
Manihiki pearl
(NZ$)
Total no. of
oysters in Manihiki
Lagoon
Percentage of
seedable oysters
(from total no. in
lagoon)
Percentage of
saleable pearls
(from no.
seeded)iv
Total no. of
saleable pearls
2003
$20.00
1,100,000
40%
23%
2004
$20.00
1,200,000
40%
2005
$15.00
1,300,000
2006
$10.00
2007
[SOPAC Technical Report 371 – McKenzie]
[64]
Model of pearl production accruing to Cook Islanders with the projects and higher pearl prices than expected
Year
Average price per
Manihiki pearl
(NZ$)v
Total no. of
oysters in
Manihiki Lagoon
Percentage of
seedable oysters
(from total no. in
lagoon)
Percentage of
saleable pearls
(from no. seeded)
Total annual pearl
revenue
Percentage of
revenue not
removed by foreign
technicians
Total no. of
saleable pearls
Total annual pearl
revenue accruing to
Cook Islanders
2003
$20
1,100,000
40%
23%
50,600
$1,012,000
0.67
$674,667
2004
$40
1,200,000
40%
23%
55,200
$2,208,000
0.67
$1,472,000
2005
$45
1,300,000
43%
26%
72,670
$3,270,150
0.67
$2,180,100
2006
$50
1,400,000
46%
29%
93,380
$4,669,000
0.67
$3,112,667
2007
$55
1,500,000
49%
32%
117,600
$6,468,000
0.67
$4,312,000
2008
$60
1,500,000
52%
35%
136,500
$8,190,000
0.67
$5,460,000
2009
$65
1,500,000
55%
38%
156,750
$10,188,750
1.00
$10,188,750
2010
$70
1,500,000
58%
41%
178,350
$12,484,500
1.00
$12,484,500
2011
$75
1,500,000
61%
44%
201,300
$15,097,500
1.00
$15,097,500
2012
$80
1,500,000
64%
47%
225,600
$18,048,000
1.00
$18,048,000
2013
$85
1,500,000
67%
50%
251,250
$21,356,250
1.00
$21,356,250
2014
$90
1,500,000
70%
53%
278,250
$25,042,500
1.00
$25,042,500
2015
$90
1,500,000
70%
56%
294,000
$26,460,000
1.00
$26,460,000
2016
$90
1,500,000
70%
56%
294,000
$26,460,000
1.00
$26,460,000
2017
$90
1,500,000
70%
56%
294,000
$26,460,000
1.00
$26,460,000
2018
$90
1,500,000
70%
56%
294,000
$26,460,000
1.00
$26,460,000
2019
$90
1,500,000
70%
56%
294,000
$26,460,000
1.00
$26,460,000
[SOPAC Technical Report 371 – McKenzie]
[65]
Model of pearl production accruing to Cook Islanders without the projects and higher pearl prices than expected
Year
Average price per
Manihiki pearl
(NZ$)
Total no. of
oysters in
Manihiki Lagoon
Percentage of
seedable oysters
(from total no. in
lagoon)
Percentage of
saleable pearls
(from no. seeded)
Total annual pearl
revenue
Percentage of
revenue not
removed by foreign
technicians
Total no. of
saleable pearls
Total annual pearl
revenue accruing to
Cook Islanders
2003
$40
1,100,000
40%
23%
50,600
$2,024,000
0.67
$1,349,333
2004
$40
1,200,000
40%
23%
55,200
$2,208,000
0.67
$1,472,000
2005
$30
1,300,000
36%
20%
46,800
$1,404,000
0.67
$936,000
2006
$20
1,400,000
32%
17%
38,080
$761,600
0.67
$507,733
2007
$20
1,500,000
28%
14%
29,400
$588,000
0.67
$392,000
2008
$20
1,600,000
24%
11%
21,120
$422,400
0.67
$281,600
2009
$20
1,700,000
20%
8%
13,600
$272,000
0.67
$181,333
2010
$20
1,800,000
20%
8%
14,400
$288,000
0.67
$192,000
2011
$20
1,900,000
20%
8%
15,200
$304,000
0.67
$202,667
2012
$20
2,000,000
20%
8%
16,000
$320,000
0.67
$213,333
2013
$20
2,100,000
20%
8%
16,800
$336,000
0.67
$224,000
2014
$20
2,200,000
20%
8%
17,600
$352,000
0.67
$234,667
2015
$20
2,300,000
20%
8%
18,400
$368,000
0.67
$245,333
2016
$20
2,400,000
20%
8%
19,200
$384,000
0.67
$256,000
2017
$20
2,500,000
20%
8%
20,000
$400,000
0.67
$266,667
2018
$20
2,600,000
20%
8%
20,800
$416,000
0.67
$277,333
2019
$20
2,700,000
20%
8%
21,600
$432,000
0.67
$288,000
[SOPAC Technical Report 371 – McKenzie]
[66]
Model of pearl production accruing to Cook Islanders with the projects and lower pearl prices than expected
Year
Average price per
Manihiki pearl
(NZ$)vi
Total no. of
oysters in
Manihiki Lagoon
Percentage of
seedable oysters
(from total no. in
lagoon)
Percentage of
saleable pearls
(from no. seeded)
Total annual pearl
revenue
Percentage of
revenue not
removed by foreign
technicians
Total no. of
saleable pearls
Total annual pearl
revenue accruing to
Cook Islanders
2003
$10.00
1,100,000
40%
23%
50,600
$506,000
0.67
$337,333
2004
$10.00
1,200,000
40%
23%
55,200
$552,000
0.67
$368,000
2005
$11.25
1,300,000
43%
26%
72,670
$817,538
0.67
$545,025
2006
$12.50
1,400,000
46%
29%
93,380
$1,167,250
0.67
$778,167
2007
$13.75
1,500,000
49%
32%
117,600
$1,617,000
0.67
$1,078,000
2008
$15.00
1,500,000
52%
35%
136,500
$2,047,500
0.67
$1,365,000
2009
$16.25
1,500,000
55%
38%
156,750
$2,547,188
1.00
$2,547,188
2010
$17.50
1,500,000
58%
41%
178,350
$3,121,125
1.00
$3,121,125
2011
$18.75
1,500,000
61%
44%
201,300
$3,774,375
1.00
$3,774,375
2012
$20.00
1,500,000
64%
47%
225,600
$4,512,000
1.00
$4,512,000
2013
$21.25
1,500,000
67%
50%
251,250
$5,339,063
1.00
$5,339,063
2014
$22.50
1,500,000
70%
53%
278,250
$6,260,625
1.00
$6,260,625
2015
$22.50
1,500,000
70%
56%
294,000
$6,615,000
1.00
$6,615,000
2016
$22.50
1,500,000
70%
56%
294,000
$6,615,000
1.00
$6,615,000
2017
$22.50
1,500,000
70%
56%
294,000
$6,615,000
1.00
$6,615,000
2018
$22.50
1,500,000
70%
56%
294,000
$6,615,000
1.00
$6,615,000
2019
$22.50
1,500,000
70%
56%
294,000
$6,615,000
1.00
$6,615,000
[SOPAC Technical Report 371 – McKenzie]
[67]
Model of pearl production accruing to Cook Islanders without the projects and lower pearl prices than expected
Year
Average price per
Manihiki pearl
(NZ$)
Total no. of
oysters in
Manihiki Lagoon
Percentage of
seedable oysters
(from total no. in
lagoon)
Percentage of
saleable pearls
(from no. seeded)
Total no. of
saleable pearls
2003
$10.00
1,100,000
40%
23%
2004
$10.00
1,200,000
40%
2005
$7.50
1,300,000
2006
$5.00
2007
Total annual pearl
revenue
Percentage of
revenue not
removed by foreign
technicians
Total annual pearl
revenue accruing to
Cook Islanders
50,600
$506,000
0.67
$337,333
23%
55,200
$552,000
0.67
$368,000
36%
20%
46,800
$351,000
0.67
$234,000
1,400,000
32%
17%
38,080
$190,400
0.67
$126,933
$5.00
1,500,000
28%
14%
29,400
$147,000
0.67
$98,000
2008
$5.00
1,600,000
24%
11%
21,120
$105,600
0.67
$70,400
2009
$5.00
1,700,000
20%
8%
13,600
$68,000
0.67
$45,333
2010
$5.00
1,800,000
20%
8%
14,400
$72,000
0.67
$48,000
2011
$5.00
1,900,000
20%
8%
15,200
$76,000
0.67
$50,667
2012
$5.00
2,000,000
20%
8%
16,000
$80,000
0.67
$53,333
2013
$5.00
2,100,000
20%
8%
16,800
$84,000
0.67
$56,000
2014
$5.00
2,200,000
20%
8%
17,600
$88,000
0.67
$58,667
2015
$5.00
2,300,000
20%
8%
18,400
$92,000
0.67
$61,333
2016
$5.00
2,400,000
20%
8%
19,200
$96,000
0.67
$64,000
2017
$5.00
2,500,000
20%
8%
20,000
$100,000
0.67
$66,667
2018
$5.00
2,600,000
20%
8%
20,800
$104,000
0.67
$69,333
2019
$5.00
2,700,000
20%
8%
21,600
$108,000
0.67
$72,000
[SOPAC Technical Report 371 – McKenzie]
[68]
Model of pearl production accruing to Cook Islanders with the projects but local technicians not employed at Manihiki pearl farms
Year
Average price per
Manihiki pearl
(NZ$)
Total no. of
oysters in
Manihiki Lagoon
Percentage of
seedable oysters
(from total no. in
lagoon)
Percentage of
saleable pearls
(from no. seeded)
Total no. of
saleable pearls
2003
$20.00
1,100,000
40%
23%
2004
$20.00
1,200,000
40%
2005
$22.50
1,300,000
2006
$25.00
2007
Total annual pearl
revenue
Percentage of
revenue not
removed by foreign
techniciansvii
Total annual pearl
revenue accruing to
Cook Islanders
50,600
$1,012,000
0.67
$674,667
23%
55,200
$1,104,000
0.67
$736,000
43%
26%
72,670
$1,635,075
0.67
$1,090,050
1,400,000
46%
29%
93,380
$2,334,500
0.67
$1,556,333
$27.50
1,500,000
49%
32%
117,600
$3,234,000
0.67
$2,156,000
2008
$30.00
1,500,000
52%
35%
136,500
$4,095,000
0.67
$2,730,000
2009
$32.50
1,500,000
55%
38%
156,750
$5,094,375
0.67
$3,396,250
2010
$35.00
1,500,000
58%
41%
178,350
$6,242,250
0.67
$4,161,500
2011
$37.50
1,500,000
61%
44%
201,300
$7,548,750
0.67
$5,032,500
2012
$40.00
1,500,000
64%
47%
225,600
$9,024,000
0.67
$6,016,000
2013
$42.50
1,500,000
67%
50%
251,250
$10,678,125
0.67
$7,118,750
2014
$45.00
1,500,000
70%
53%
278,250
$12,521,250
0.67
$8,347,500
2015
$45.00
1,500,000
70%
56%
294,000
$13,230,000
0.67
$8,820,000
2016
$45.00
1,500,000
70%
56%
294,000
$13,230,000
0.67
$8,820,000
2017
$45.00
1,500,000
70%
56%
294,000
$13,230,000
0.67
$8,820,000
2018
$45.00
1,500,000
70%
56%
294,000
$13,230,000
0.67
$8,820,000
2019
$45.00
1,500,000
70%
56%
294,000
$13,230,000
0.67
$8,820,000
Assume average price per Manihiki pearl increases, because average international pearl prices remain at 2003 levels, but average pearl quality in Manihiki improves due to better oyster health.
Assume half of the total adult cultured oysters in the lagoon are harvested each year (two year period between seeding and harvesting).
iii Assume it takes until 2009 for farmers to see sufficient evidence of experience by local technicians trained on the technician training course to employ them.
iv The health of oysters deteriorates without the management plan, but less than without the projects altogether because of actions taken by farmers voluntarily and directly to use the scientific information to improve their farming practices.
v Assume prices return to approximately the levels of the mid-1990s.
vi Assume prices half the level of 2003.
vii Foreign technicians continue to remove a third of pearl revenue.
i
ii
[SOPAC Technical Report 371 – McKenzie]
[69]
APPENDIX 5
Cost-Benefit Analysis Findings
Cost-benefit analysis calculations of Net Present Value (in red)
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sum
1
2
Discount
coefficient1
2.8394
2.5580
2.3045
2.0762
1.8704
1.6851
1.5181
1.3676
1.2321
1.1100
1.0000
0.9009
0.8116
0.7312
0.6587
0.5935
0.5346
0.4817
0.4339
0.3909
0.3522
0.3173
0.2858
0.2575
0.2320
0.2090
Real project
costs2
$1,112,995
$0
$0
$22,603
$33,500
$0
$38,219
$66,351
$71,324
$265,023
$51,200
$78,000
$75,000
$78,000
$41,667
$28,000
$75,000
$28,000
$25,000
$78,000
$25,000
$28,000
$75,000
$28,000
$25,000
$78,000
$2,426,881
Present value of
costs
$3,160,261
$0
$0
$46,928
$62,658
$0
$58,020
$90,743
$87,878
$294,175
$51,200
$70,270
$60,872
$57,033
$27,447
$16,617
$40,098
$13,486
$10,848
$30,492
$8,805
$8,884
$21,438
$7,210
$5,800
$16,302
$4,247,466
Revenue with
projects
Revenue without
projects
Incremental
benefits
Present value of
benefits
$736,000
$1,090,050
$1,556,333
$2,156,000
$2,730,000
$5,094,375
$6,242,250
$7,548,750
$9,024,000
$10,678,125
$12,521,250
$13,230,000
$13,230,000
$13,230,000
$13,230,000
$13,230,000
$125,527,133
$736,000
$468,000
$253,867
$196,000
$140,800
$90,667
$96,000
$101,333
$106,667
$112,000
$117,333
$122,667
$128,000
$133,333
$138,667
$144,000
$3,085,333
$0
$622,050
$1,302,467
$1,960,000
$2,589,200
$5,003,708
$6,146,250
$7,447,417
$8,917,333
$10,566,125
$12,403,917
$13,107,333
$13,102,000
$13,096,667
$13,091,333
$13,086,000
$122,441,800
$0
$560,405
$1,057,111
$1,433,135
$1,705,586
$2,969,457
$3,286,036
$3,587,111
$3,869,467
$4,130,560
$4,368,467
$4,158,738
$3,745,086
$3,372,578
$3,037,122
$2,735,031
$44,015,892
Discount rate of 11 percent is used.
Inflation accounted for using the New Zealand Consumer Price Index.
[SOPAC Technical Report 371 – McKenzie]
Present value of
net benefits
-$3,160,261
$0
$0
-$46,928
-$62,658
$0
-$58,020
-$90,743
-$87,878
-$294,175
-$51,200
$490,135
$996,239
$1,376,102
$1,678,139
$2,952,841
$3,245,938
$3,573,624
$3,858,619
$4,100,068
$4,359,662
$4,149,854
$3,723,648
$3,365,368
$3,031,322
$2,718,729
$39,768,426
[70]
APPENDIX 6
Sensitivity Analysis Findings
Scenario 1: Manihiki management plan not implemented
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sum
1
2
Discount
coefficient1
2.8394
2.5580
2.3045
2.0762
1.8704
1.6851
1.5181
1.3676
1.2321
1.1100
1.0000
0.9009
0.8116
0.7312
0.6587
0.5935
0.5346
0.4817
0.4339
0.3909
0.3522
0.3173
0.2858
0.2575
0.2320
0.2090
Real project
costs2
$1,112,995
$0
$0
$22,603
$33,500
$0
$38,219
$66,351
$71,324
$265,023
$51,200
$78,000
$75,000
$78,000
$41,667
$28,000
$75,000
$28,000
$25,000
$78,000
$25,000
$28,000
$75,000
$28,000
$25,000
$78,000
$2,426,881
Present value of
costs
$3,160,261
$0
$0
$46,928
$62,658
$0
$58,020
$90,743
$87,878
$294,175
$51,200
$70,270
$60,872
$57,033
$27,447
$16,617
$40,098
$13,486
$10,848
$30,492
$8,805
$8,884
$21,438
$7,210
$5,800
$16,302
$4,247,466
Revenue with
projects
Revenue without
projects
Incremental
benefits
Present value of
benefits
$736,000
$531,050
$336,000
$314,500
$290,133
$395,250
$418,500
$441,750
$465,000
$488,250
$511,500
$534,750
$558,000
$581,250
$604,500
$627,750
$7,834,183
$736,000
$468,000
$253,867
$196,000
$140,800
$90,667
$96,000
$101,333
$106,667
$112,000
$117,333
$122,667
$128,000
$133,333
$138,667
$144,000
$3,085,333
$0
$63,050
$82,133
$118,500
$149,333
$304,583
$322,500
$340,417
$358,333
$376,250
$394,167
$412,083
$430,000
$447,917
$465,833
$483,750
$4,748,850
$0
$56,802
$66,661
$86,646
$98,370
$180,755
$172,422
$163,965
$155,490
$147,085
$138,819
$130,747
$122,912
$115,345
$108,071
$101,106
$1,845,197
Discount rate of 11 percent is used.
Inflation accounted for using the New Zealand Consumer Price Index.
[SOPAC Technical Report 371 – McKenzie]
Present value of net
benefits
-$3,160,261
$0
$0
-$46,928
-$62,658
$0
-$58,020
-$90,743
-$87,878
-$294,175
-$51,200
-$13,468
$5,790
$29,613
$70,923
$164,139
$132,324
$150,478
$144,642
$116,593
$130,015
$121,863
$101,473
$108,135
$102,271
$84,804
-$2,402,269
[71]
Scenario 2: International pearl prices recover to levels of mid-1990s
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sum
Discount
coefficient
2.8394
2.5580
2.3045
2.0762
1.8704
1.6851
1.5181
1.3676
1.2321
1.1100
1.0000
0.9009
0.8116
0.7312
0.6587
0.5935
0.5346
0.4817
0.4339
0.3909
0.3522
0.3173
0.2858
0.2575
0.2320
0.2090
Real project
costs
$1,112,995
$0
$0
$22,603
$33,500
$0
$38,219
$66,351
$71,324
$265,023
$51,200
$78,000
$75,000
$78,000
$41,667
$28,000
$75,000
$28,000
$25,000
$78,000
$25,000
$28,000
$75,000
$28,000
$25,000
$78,000
$2,426,881
Present value of
costs
$3,160,261
$0
$0
$46,928
$62,658
$0
$58,020
$90,743
$87,878
$294,175
$51,200
$70,270
$60,872
$57,033
$27,447
$16,617
$40,098
$13,486
$10,848
$30,492
$8,805
$8,884
$21,438
$7,210
$5,800
$16,302
$4,247,466
Revenue with
projects
Revenue without
projects
Incremental
benefits
Present value of
benefits
$1,472,000
$2,180,100
$3,112,667
$4,312,000
$5,460,000
$10,188,750
$12,484,500
$15,097,500
$18,048,000
$21,356,250
$25,042,500
$26,460,000
$26,460,000
$26,460,000
$26,460,000
$26,460,000
$251,054,267
$1,472,000
$936,000
$507,733
$392,000
$281,600
$181,333
$192,000
$202,667
$213,333
$224,000
$234,667
$245,333
$256,000
$266,667
$277,333
$288,000
$6,170,667
$0
$1,244,100
$2,604,933
$3,920,000
$5,178,400
$10,007,417
$12,292,500
$14,894,833
$17,834,667
$21,132,250
$24,807,833
$26,214,667
$26,204,000
$26,193,333
$26,182,667
$26,172,000
$244,883,600
$0
$1,120,811
$2,114,222
$2,866,270
$3,411,172
$5,938,915
$6,572,072
$7,174,222
$7,738,934
$8,261,120
$8,736,934
$8,317,476
$7,490,173
$6,745,157
$6,074,243
$5,470,062
$88,031,784
[SOPAC Technical Report 371 – McKenzie]
Present value of net
benefits
-$3,160,261
$0
$0
-$46,928
-$62,658
$0
-$58,020
-$90,743
-$87,878
-$294,175
-$51,200
$1,050,541
$2,053,351
$2,809,237
$3,383,725
$5,922,298
$6,531,974
$7,160,735
$7,728,086
$8,230,628
$8,728,129
$8,308,592
$7,468,735
$6,737,946
$6,068,443
$5,453,759
$83,784,318
[72]
Scenario 3: Pearl prices decline
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sum
Discount
coefficient
2.8394
2.5580
2.3045
2.0762
1.8704
1.6851
1.5181
1.3676
1.2321
1.1100
1.0000
0.9009
0.8116
0.7312
0.6587
0.5935
0.5346
0.4817
0.4339
0.3909
0.3522
0.3173
0.2858
0.2575
0.2320
0.2090
Real project
costs
$1,112,995
$0
$0
$22,603
$33,500
$0
$38,219
$66,351
$71,324
$265,023
$51,200
$78,000
$75,000
$78,000
$41,667
$28,000
$75,000
$28,000
$25,000
$78,000
$25,000
$28,000
$75,000
$28,000
$25,000
$78,000
$2,426,881
Present value of
costs
$3,160,261
$0
$0
$46,928
$62,658
$0
$58,020
$90,743
$87,878
$294,175
$51,200
$70,270
$60,872
$57,033
$27,447
$16,617
$40,098
$13,486
$10,848
$30,492
$8,805
$8,884
$21,438
$7,210
$5,800
$16,302
$4,247,466
Revenue with
projects
Revenue without
projects
Incremental
benefits
Present value of
benefits
$368,000
$545,025
$778,167
$1,078,000
$1,365,000
$2,547,188
$3,121,125
$3,774,375
$4,512,000
$5,339,063
$6,260,625
$6,615,000
$6,615,000
$6,615,000
$6,615,000
$6,615,000
$62,763,567
$368,000
$234,000
$126,933
$98,000
$70,400
$45,333
$48,000
$50,667
$53,333
$56,000
$58,667
$61,333
$64,000
$66,667
$69,333
$72,000
$1,542,667
$0
$311,025
$651,233
$980,000
$1,294,600
$2,501,854
$3,073,125
$3,723,708
$4,458,667
$5,283,063
$6,201,958
$6,553,667
$6,551,000
$6,548,333
$6,545,667
$6,543,000
$61,220,900
$0
$280,203
$528,556
$716,568
$852,793
$1,484,729
$1,643,018
$1,793,555
$1,934,734
$2,065,280
$2,184,233
$2,079,369
$1,872,543
$1,686,289
$1,518,561
$1,367,515
$22,007,946
[SOPAC Technical Report 371 – McKenzie]
Present value of net
benefits
-$3,160,261
$0
$0
-$46,928
-$62,658
$0
-$58,020
-$90,743
-$87,878
-$294,175
-$51,200
$209,932
$467,684
$659,535
$825,346
$1,468,112
$1,602,920
$1,780,069
$1,923,885
$2,034,788
$2,175,429
$2,070,485
$1,851,105
$1,679,079
$1,512,761
$1,351,213
$17,760,480
[73]
Scenario 4: Future project costs higher than expected
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sum
Discount
coefficient
2.8394
2.5580
2.3045
2.0762
1.8704
1.6851
1.5181
1.3676
1.2321
1.1100
1.0000
0.9009
0.8116
0.7312
0.6587
0.5935
0.5346
0.4817
0.4339
0.3909
0.3522
0.3173
0.2858
0.2575
0.2320
0.2090
Real project
costs
$1,112,995
$0
$0
$22,603
$33,500
$0
$38,219
$66,351
$71,324
$265,023
$51,200
$156,000
$150,000
$156,000
$83,333
$56,000
$150,000
$56,000
$50,000
$156,000
$50,000
$56,000
$150,000
$56,000
$50,000
$156,000
$4,853,762
Present value of
costs
$3,160,261
$0
$0
$46,928
$62,658
$0
$58,020
$90,743
$87,878
$294,175
$51,200
$140,541
$121,743
$114,066
$54,894
$33,233
$80,196
$26,973
$21,696
$60,984
$17,609
$17,768
$42,876
$14,421
$11,600
$32,605
$4,643,069
Revenue with
projects
Revenue without
projects
Incremental
benefits
Present value of
benefits
$736,000
$1,090,050
$1,556,333
$2,156,000
$2,730,000
$5,094,375
$6,242,250
$7,548,750
$9,024,000
$10,678,125
$12,521,250
$13,230,000
$13,230,000
$13,230,000
$13,230,000
$13,230,000
$125,527,133
$736,000
$468,000
$253,867
$196,000
$140,800
$90,667
$96,000
$101,333
$106,667
$112,000
$117,333
$122,667
$128,000
$133,333
$138,667
$144,000
$3,085,333
$0
$622,050
$1,302,467
$1,960,000
$2,589,200
$5,003,708
$6,146,250
$7,447,417
$8,917,333
$10,566,125
$12,403,917
$13,107,333
$13,102,000
$13,096,667
$13,091,333
$13,086,000
$122,441,800
$0
$560,405
$1,057,111
$1,433,135
$1,705,586
$2,969,457
$3,286,036
$3,587,111
$3,869,467
$4,130,560
$4,368,467
$4,158,738
$3,745,086
$3,372,578
$3,037,122
$2,735,031
$44,015,892
[SOPAC Technical Report 371 – McKenzie]
Present value of net
benefits
-$3,160,261
$0
$0
-$46,928
-$62,658
$0
-$58,020
-$90,743
-$87,878
-$294,175
-$51,200
$419,865
$935,368
$1,319,069
$1,650,692
$2,936,224
$3,205,840
$3,560,138
$3,847,771
$4,069,576
$4,350,858
$4,140,970
$3,702,210
$3,358,158
$3,025,522
$2,702,426
$39,372,823
[74]
Scenario 5: Manihiki farmers do not employ local technicians
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sum
Discount
coefficient
2.8394
2.5580
2.3045
2.0762
1.8704
1.6851
1.5181
1.3676
1.2321
1.1100
1.0000
0.9009
0.8116
0.7312
0.6587
0.5935
0.5346
0.4817
0.4339
0.3909
0.3522
0.3173
0.2858
0.2575
0.2320
0.2090
Real project
costs
$1,112,995
$0
$0
$22,603
$33,500
$0
$38,219
$66,351
$71,324
$265,023
$51,200
$78,000
$75,000
$78,000
$41,667
$28,000
$75,000
$28,000
$25,000
$78,000
$25,000
$28,000
$75,000
$28,000
$25,000
$78,000
$2,426,881
Present value of
costs
$3,160,261
$0
$0
$46,928
$62,658
$0
$58,020
$90,743
$87,878
$294,175
$51,200
$70,270
$60,872
$57,033
$27,447
$16,617
$40,098
$13,486
$10,848
$30,492
$8,805
$8,884
$21,438
$7,210
$5,800
$16,302
$4,247,466
Revenue with
projects
Revenue without
projects
Incremental
benefits
Present value of
benefits
$736,000
$1,090,050
$1,556,333
$2,156,000
$2,730,000
$3,396,250
$4,161,500
$5,032,500
$6,016,000
$7,118,750
$8,347,500
$8,820,000
$8,820,000
$8,820,000
$8,820,000
$8,820,000
$86,440,883
$736,000
$468,000
$253,867
$196,000
$140,800
$90,667
$96,000
$101,333
$106,667
$112,000
$117,333
$122,667
$128,000
$133,333
$138,667
$144,000
$3,085,333
$0
$622,050
$1,302,467
$1,960,000
$2,589,200
$3,305,583
$4,065,500
$4,931,167
$5,909,333
$7,006,750
$8,230,167
$8,697,333
$8,692,000
$8,686,667
$8,681,333
$8,676,000
$83,355,550
$0
$560,405
$1,057,111
$1,433,135
$1,705,586
$1,961,703
$2,173,582
$2,375,138
$2,564,216
$2,739,112
$2,898,537
$2,759,519
$2,484,528
$2,236,940
$2,014,024
$1,813,322
$30,776,860
[SOPAC Technical Report 371 – McKenzie]
Present value of net
benefits
-$3,160,261
$0
$0
-$46,928
-$62,658
$0
-$58,020
-$90,743
-$87,878
-$294,175
-$51,200
$490,135
$996,239
$1,376,102
$1,678,139
$1,945,086
$2,133,484
$2,361,651
$2,553,368
$2,708,620
$2,889,732
$2,750,635
$2,463,090
$2,229,730
$2,008,225
$1,797,019
$26,529,394