An Economic Analysis of FRDC Investment in the Southern Bluefin Tuna (SBT) Aquaculture Subprogram (Cluster 6)

Background

The Australian Southern Bluefin Tuna (SBT) aquaculture industry commenced development in 1991. Tuna, generally about two to four years old, are captured from the wild for growing out in pontoons on aquaculture farms near Port Lincoln in South Australia. After 3 to 8 months of fattening, the fish are caught and most are exported to Japan.

The industry has grown significantly in the past eighteen years and is currently the largest finfish aquaculture industry in Australia. Industry growth has been supported by technology advancement, much of which has been driven by research and development investment by the Australian Southern Bluefin Tuna Industry Association (previously Tuna Boat Owners Association of Australia), the South Australian Government and FRDC. The SBT Aquaculture Subprogram was initiated in 1997 by the FRDC to coordinate R&D for the SBT across a range of areas including production, quality, value adding, health, environment and education and training.

Lessons Learnt for Future Investment

Lessons learnt from this analysis include:

• The results demonstrate the importance of markets and delivering what is required to those markets. This is particularly important when overall demand is highly dependent on a single market.
• It should be noted that strategic research outputs have not been valued in the current analysis but are critical in ensuring future benefits continue to be delivered. The strategic investments not valued should be noted, and their investment costs recorded, so that future analyses can attribute any realised benefits to them.
• Win-win situations for addressing environment and productivity issues in aquaculture have been demonstrated, a similar situation to that observed in research and development success for agriculture.

Conclusions

On the basis of the distribution of the 28 benefits identified, and equal weighting for each benefit, it could be concluded that public benefits to Australia could make up 37% of the total benefits. If the subjective weightings are taken into account, the public benefits would contribute 27% of the total benefits.

Investment was made in a total of 15 projects within the cluster with the FRDC contribution approximating 34% of the total costs involved. The investments were divided into six themes and benefits were valued in three of these themes. The principal reason for no values being assigned to benefits in the other themes was due to them containing a high proportion of strategic research.

The three themes where benefits were valued were manufactured feeds, residues and markets, and environmental issues. The highest level of benefits was apparent in the residues and markets theme.

The investments were regarded as a high priority by both the FRDC and the aquaculture industry. In the event that public funding to FRDC were cut by half, it is likely that most of the projects in the cluster would have still been funded by FRDC, industry and state agencies, assuming an industry contribution was still in place. It is estimated that investment in the areas of manufactured feed, residues and markets, environmental issues and planning and support would have gone ahead in some form, with some of the more strategic projects in the areas of fish health and metabolism being significantly restricted. Overall the investments made would have been somewhat less well coordinated and some projects that would have proceeded would have started later and taken longer to complete.

Overall, the investment criteria estimated for the 15 projects in the cluster were positive with a net present value (for all investment) estimated at $160 million and a benefit-cost ratio of 7 to 1 (discount rate of 5%, and benefits measured over 30 years from final year of investment).

It should be noted that not all benefits identified in the analysis were valued so that the results are likely to be underestimates of the actual benefits derived from the investment.

 

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