An Economic Analysis of FRDC Investment in the Abalone Aquaculture Subprogram (Cluster 5)

Background

In 1994 Australian abalone wild catch fisheries produced 60% of the world supply, but as the wild catch declined, aquaculture production of abalone increased substantially. In 1999 world production of abalone from aquaculture was nearly 8,000 tonnes of which only 1% was produced in Australia.

Abalone aquaculture began in Australia in the early 1980s in South Australia and Tasmania. From about the mid-1990s specialised diets and improved tank technology allowed the production cycle to be shortened with minimum market size of 70 mm being attained in 3 to 4 years (Weston et al, 2001). Abalone farming spread to other states including Victoria.

The production system depended on producing larvae by spawning recently collected wild brood stock or wild or farmed broodstock that had been held in conditioning systems. Surfaces for settlement of the larvae were vertical plastic plates already colonised by a variety of algal species. Juveniles were then weaned onto formulated feeds and then grown out in either land based tanks or sea based systems. As of the date of funding of the first project in this cluster (the late 1990s), abalone produced in Australia under aquaculture was expected to increase further.

The FRDC Abalone Aquaculture Subprogram was established in July 1993 with the objective of providing excellent, timely and responsive research to the Australian abalone aquaculture industry so they could be profitable and internationally competitive, and could pursue ecologically sustainable development. The subprogram integrated almost all research on abalone aquaculture research in Australia, either directly (FRDC funded projects) or by forming affiliations with projects funded by other sources.

Features of the subprogram were:

• Industry being highly involved in planning and via the Steering Committee, ensuring relevance and adoption of findings:
• An independent program leader
• Emphasis on high quality science
• A comprehensive extension program
• Coordination between industries in different states

The ten projects in this cluster focused on spawning (1), tank settlement (1), health and disease (3), breeding and breeding aids (2), water quality (1) and management and coordination (2).

Lessons Learnt for Future Investment

Lessons learnt from this analysis include:

• From an evaluation viewpoint this subprogram has been very difficult to evaluate due to the difficulty of contacting and obtaining responses from appropriate personnel. Of the six Principal Investigators for the ten projects, four had retired or moved overseas. Other people in the researcher organisations were not knowledgable enough of the industry or the specific project to be of assistance. FRDC could attempt to ensure some form of corporate responsibility is addressed in research organisations, but this may be difficult to enforce. This issue is part of a larger challenge of improving the tracking of outcomes for all investments.
• A second suggestion is that it would be helpful to resource allocation and subsequent economic evaluation if there was a standardised industry production budget available for the small and growing Australian aquaculture industries. Such a cost model could be developed to answer what if questions and assist priority setting within and between industries.

Conclusions

Investment was made in a total of 10 projects within the abalone farming cluster with the FRDC contribution approximating 41% of the total costs involved.

Eleven benefits were identified in the evaluation of which six were considered private benefits and five public benefits, with the latter being made up of one economic benefit, three environmental benefits and one social benefit. Of the four benefits valued, three were associated with reducing the cost of production of abalone and all fell into the private benefit category of increasing productivity and profitability. No public benefits were valued due to lack of evidence for causality.

In the event that public funding to FRDC were cut by half, it is likely that some, but not all, of the investment would still have been funded.

The investment criteria estimated for the cluster were positive with a net present value (for all investment) estimated at $50 million and a benefit-cost ratio of over 7 to 1, all expressed in 2008/09 $ terms and estimated using a discount rate of 5% over 30 years from the final year of investment.

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