Country Report Iceland July 1998 Main report

Economic policy: International agreement on fish quotas reached --

The government has reached an agreement with Norway and Greenland which set new fishing quotas for capelin, a small salmon-like fish used principally for feed and oil. According to the new treaty, which is valid for three years, Iceland's share of the total quota will increase from 78% to 81%, with Norway's share decreasing by 3% to 8%, while Greenland's share remains at 11%. This increase in quota met, to some extent, Iceland's demands that its share should reflect the fact that Icelandic fishermen have in recent years caught nearly 90% of the total catch while Norwegian vessels have repeatedly failed to catch their quota (2nd quarter 1998). The new agreement also contains provisions for strengthened surveillance of vessels engaged in the fishing of capelin, with satellite surveillance being introduced in the near future. Alongside the main agreement Iceland and Norway reached a bilateral agreement which restricted the share of the capelin quota available to Norway within the Icelandic exclusive economic zone (EEZ) to 35%, down from 60%. Similarly, Iceland and Greenland reached agreement which provides capelin fishermen from both states relatively unhindered access to their respective EEZ. Although the capelin agreement marked a minor victory for Iceland, it did not prove to be the catalyst for a resolution to the contentious issue between Iceland and Norway regarding fishing rights in a small stretch of international water in the Barents Sea just outside the Norwegian EEZ, where Icelandic fishermen have at times caught large quantities of cod.

-- while domestic changes have a positive impact

On the basis of recommendations from the marine research institute (MIR), Thorstein Palsonn, the minister of fisheries, raised the fishing quota for cod for the 1998/99 fishing year (September to August) by 32,000 tonnes to 250,000 tonnes from the previous year. This will be the third year in a row that the Icelandic economy has benefited from a rise in the cod quota. However, the growth in cod stocks has had negative impact on the number of other species such as shrimp, for which the government had to cut the quota by 15,000 tonnes to 60,000 tonnes. Similarly, the quotas for herring and haddock have been cut substantially in line with MIR recommendations. Generally favourable environmental circumstances have enabled MIR to recommend that a preliminary quota for capelin be set at 945,000 tonnes, a quota which could be revised later in the year to a record 1.4m tonnes. The National Economic Institute (NEI) has estimated that the overall increase in 1998/99 fishing quotas is worth Ikr3bn in extra export earnings, equivalent to 0.4-0.5% of GDP.

© 1998 The Economist lntelligence Unit Ltd. All rights reserved
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