Angola's Depleted Fish Stocks Case Issue

     CASE NUMBER:        319
     CASE MNEMONIC:      ANGFISH
     CASE NAME:          Depleted Angolan Fish Stocks

A. IDENTIFICATION

1. Issue

Angola is emerging from three decades of war and as the government
starts to implement new policies that will bring the economy in
line with what western institutions deem appropriate the government
is being forced to make some drastic decisions with regard to its
natural resources. The coastal waters off Angola have traditionally
been considered plentiful, but over fishing by international
trawlers has left a question mark over the countries fish stocks. 
As the government attempts to sell it countries various sectors to
foreign investors, in an attempt to pull itself from its financial
nightmare, it is over selling the potential of its fishing sector
to the detriment of its subsistence fishermen and its marine
environment.  

2. Description

After almost three decades of war the Republic of Angola is looking toward
a future of peace and reconciliation.  Foreign investment and the
subsequent increases in international trade that will follow are essential in
establishing the environment which will secure such Angolan aspirations. 
However, Angola was left ill equipped to manage its rich resource base after
its colonial rulers, the Portuguese, left in 1975 and the situation was made
even worse by further protracted civil conflict.  Decades of little or no
education system and limited positions for Angolans within the work force
has resulted in a severe lack of technical and managerial talent to lead the
country out of its troubles.  Foreign investment is a like a carrot and stick,
Angola knows it must have it, but it also knows that the road to capturing
it is far from smooth.

When the Portuguese pulled out of Angola in 1975 they left behind a
confused infrastructure and no real base to allow the elites to control the
false country.  As Angola emerges from the bloody thirty years of conflict
that have maimed its near existence, it remains one country, with resources
enough to pull it from the depths of destruction, and still part of the
lusophone world with a legacy of suppression.  Angola has for the last three
decades been battling outside influences to develop its own identity.  First,
the Portuguese, then its own differing ideologies, then the parties of the
cold war the U.S. and U.S.S.R. and their clients, South Africa and Cuba
(respectively).  Even now the situation is not in the hands of the Angolans
as they strive to meet the demands of the Western financial institutions and
their calls for readjustment.

Angola became a hot spot in the international media in 1961 when
independence protests against the Portuguese erupted.  This in itself was
not a new phenomenon for the continent as other colonial powers such as
the British and French had dealt with their own respective insurgencies by
handing over their interests.  In the case of Angola the situation was much
different, unlike Britain and France Portugal was not a strong and
democratically controlled country and thus it refused to cede authority to
the resource rich colony because it needed to nurture its economic
relationship.  The protracted nationalist uprising continued until 1974 when
Portugal suffered a motion of dissent from within its own borders in the
form of a military coup.

Although it gained its independence in 1975 from Portugal Angola was left
open for internal conflict and international manipulation.  Its people were
starved of education and training by the iron grip of Portuguese colonial
rule and thus Angola was ill equipped to control its power hungry elites
and develop its rich resource base into a thriving economy.  Instead the
three main nationalist movements fought one another invoking a type of
totalitarian and stagnant rule void of looking to the future and ironically
similar to the one the country had endured during the colonial period.   

Today it seems that Angola has finally emerged from more than two decades
of civil war with its economy in tatters and its whole society down-trodden. 
The war lead to a serious migration of people from their rural places of
origin, infrastructure has been destroyed, and most trade activity and the
central bank network have disappeared.   The early 1990s showed promise
for an economic recovery with  the signing of the Bicesse peace accords and
the restoration of security in most areas.  The period was marked by larger
crop yields, and the repairing of most roads and some bridges for free
travel.  By the end of 1992 however, the short lived peace was disrupted
and the country was again emersed in war.  
     
The post Bicesse accords war was the most brutal that Angola had felt in its
protracted thirty year war.  Factories, banks, schools, and health centers
were further destroyed and left inoperable.  The level of destruction can
clearly be seen by the 22.6% decrease in GDP and the 11 fold decrease in the
countries currency (Kwanza (NKz)) in 1993.  In addition to the
deterioration of the basic infrastructure the reduction of health services
have left Angola with poor water and sewage systems which in turn have led
to a huge increase in endemic disease and thus Angola is left with one of the
highest infant mortality rates in the world, 209/1000 live births.             
   

The country is blessed with abundant natural wealth including petroleum,
diamonds, agriculture, and fishing (possibly) resources, Angola is destined
to become one of Africa's richest nations.  The country has a population of
approximately 11 million people and a territory of about 480,000 square miles
or about twice the size of Texas.

A few facts on the economic potential of Angola should suffice to
demonstrate the diversity of its resources, the enormity of its potential and
its tremendous importance to the private sector:
- Angola is the second largest producer of oil in sub-Saharan Africa and
provides 7% of all U.S. oil imports
- U.S. Exports to Angola have more than doubled since 1989 and the United
States is Angola's largest trading partner.
- Bilateral trade figures (with the US) for 1994 reached 2.4 billion dollars.

In addition, Angola:
- was once the world's fourth largest source of diamonds and coffee and
could again achieve that status;
- has substantial, largely untapped deposits of iron ore, gold, plutonium,
copper, lead, zinc, quartz, gypsum, black granite, marble, and a variety of
other strategic base metals; and,
- was once self-sufficient in most food stuffs and a significant exporter of
a number of commercial crops, such as: sisal, palm oil, bananas, and sugar.

Angola, despite its troubled past, has a good history of cooperation with the
international and particularly the U.S. business community.  U.S. oil
companies such as Chevron, Texaco, Exxon, and Occidental have all operated
in Angola for decades and often cite the cooperative working relationship
with the government as a key factor for their success.  The oil industry
provides a good example of the U.S.-Angola partnership which has
benefited both Angola and the US.  Angola is taking steps to distance itself
from the statist, monopolistic economy of the colonial period and the more
recent socialist experiment which followed independence.  It is now slowly
moving toward a free market economy and is actively promoting trade and
investment.
     
This process has not been without its glitches and setbacks.  The original
move away from the Marxism-Leninism model was as early as 1987 when the
ruling Popular Movement for the Liberation of Angola (MPLA) instituted a
bold economic restructuring plan.  The plan included reducing the budget
deficit, restructuring the public sector, liberalization of the many
controlled prices, exchange rate adjustment, and rescheduling the large
external debt.  Later in the program further programs were initiated to
move Angola from a centrally planned economy to a market driven one.  The
MPLA was moderately successful in its liberalization efforts with real GDP
stabilizing and showing a slight increase by 1990.  However, the economic
reforms that had begun to show beneficial returns were thrown into chaos
as the two sides resumed fighting following claims by the United National
Party for the Independence of Angola (UNITA) that the (1992)
internationally monitored democratic elections were rigged in favor of the
MPLA.

Following the signing of the Lusaka Protocol on November 20th, 1994 and
the ensuing cease-fire both the ruling MPLA and the main opposition party,
UNITA, have pledged to put the countries previous economic reforms back
on track in an attempt to jump start the economy that funded the war effort
and was subsequently left broken and in shambles.
     
The first such initiative was the 1995 economic reform program whose major
components are to:
1) Reduce the budget deficit. 
2) Implement new monetary policies 
3) Privatize public enterprise. 
4) Adopt appropriate exchange-rate policies. 
5) Implement new interest rate policies.
6) Reform the banking and finance sectors.  

As with all emerging economies these terms are some what vague and some
would say merely political economy rhetoric to please the IMF and World
bank, but a closer analysis puts the Angolan economic problems into a
better perspective.
     
The first issue of reducing the budget deficit by approximately 12
percentage points of GDP by the close of 1996 from a high of 25 percentage
points in 1994,  will show immediate signs of success because the
government will no longer be spending vast sums on the war effort.  The
MPLA funded its war effort by mortgaging its oil potential beyond the year
2000.  In turn UNITA funded its military machine by extracting large
reserves of diamonds from Northern Angolan (Lunda Norte) diamond
mines.  With the reduction in government spending on the military, and
various subsidies for the more affluent, government expenditure will be
reduced drastically.  In addition, a revamping of the tax system has been
initiated which will reduce a number of exemptions and broaden the tax
base.  This contractionary fiscal policy will reduce the Angolan deficit only
if the government can stimulate its economy with other sources such as
foreign investment.
     
The new monetary policy has placed controls on the National Bank of Angola
(Banco Nacionale de Angola (BNA)) for the first time in its history. 
Previously the BNA financed unlimited credit to the government and other
public enterprises and thus there was an overextended money supply
skewing the system towards high inflation and unstable exchange rates. 
By limiting the amount that the BNA can lend the government will be
reducing the money supply and decreasing inflationary pressures which
undermine so many sectors of Angolažs economy and general
competitiveness in international trade.  In addition, the stricter credit
policy will enable international reserves to increase and allow for
infrastructure spending once the economy has stabilized which in turn will
have its own effect of stimulating the economy through an expansionary
monetary policy. 
          
The last critical initiative that the Angolan government has attempted, in
order to push the economy in the direction of market liberalization, is to
reform the financial sector.  Currently the problem lies in the fact that the
BNA did not adequately control the money supply during the war and thus
an excessive expansion of money was created.  In addition, state owned
commercial banks led to a decrease in competition within the banking sector
and therefore an overall decrease in efficiency.  The government has
proposed to give the BNA an independent hand in exchange rate and
monetary policy areas, thus creating less of a vacuum for policy decision
making and allowing the market to play a much greater part.          
     
The second initiative was the Consolidated Humanitarian Appeal launched
in February 1995.  The appeal focussed on three primary areas of
assistance:
1) Emergency assistance to the Angolan people. 
2) Integration and demobilization of the two armies. 
3) Support for demining efforts in the country.
Under this program the World Food Program is distributing food, demining
efforts have been initiated and the United Nations is coordinating the
demobilization and re-integration of the combatants through UNAVEM III
which has placed 7,000 blue helmets on the ground in Angola.
     
The third initiative took place on September 25th in Brussels when the
Angolan Government and the U.N.D.P launched the Round Table on
Reconstruction and Rehabilitation.  The Round Table emphasized:

1) increasing production, employment in agriculture, forestry, fisheries
and private sector development; 
2) rehabilitating basic infrastructure within the country with emphasis on
roads, bridges, water, energy, housing; and, 
3) restoring social services to the population including basic education and
primary health care.
The donor response to the initiative exceeded all expectations with the
international community pledging nearly one billion dollars of assistance to
Angola.  The Conference's largest single pledge came from the US with $190
million.
     
Angola has also expressed a strong interest in attracting investment
beyond the petroleum sector.  Pursuant to this the Angolan Government has
taken steps to improve the trade and investment climate.  The most
important of these is the recent passing into law of a new foreign
investment legislation which reduces barriers to investment and provides
needed protection and guarantees designed to attract new investment.  

The 1994 law states that:
- Private commercial banking is now permitted as well as investment in
infrastructure development.
- Foreign investors are allowed to transfer abroad dividends, profits, and
proceeds of the sale of investments.  In addition, liberalized foreign
exchange rates should facilitate the repatriation of capital by improving
access to foreign exchange.
- Foreign investors who employ a large number of Angolans and provide
training and benefits equal to those given to foreign nationals will receive
special fiscal incentives.
- Investments of $250,000 to $5 million no longer need prior government
approval.  Investments between $5 million and $50 million require prior
approval, but government evaluation is promised within 90 days. 
Investments in excess of $50 million must be approved by the Ministry of
Planning.
     
Clearly the Angolan Government is on the correct track to establishing an
enabling environment that will in turn attract foreign investment and get
the country back on its feet.  However, it is questionable whether the
fishing sector is part of the rich resources which the country is so often
attributed with. 

The Angolan coastline stretches for 1,600 Kilometers and before the war was
renowned for its richness of mackerel, tuna and sardines.  Pre-war catches
averaged 600, 000 tons per year, but during the war shrunk to 35,000 tons
per year and since the signing of the Lusaka peace accords have risen  to
122, 000 tons per year.  In addition, the West coast of Africa benefits from
the confluence of cold currents from the south with equatorial currents. 
The currents off the Angolan coast pushes phytoplankton nutrients up the
coast to produce rich and self sustaining feed resources.  Such conditions
are ideal for pelagic fish species such as sardines, mackerel and demersal
species.  In the brochures now being distributed by the Angolan
government the emphasis for the fishing sector is on the large pre war
catches.  However, what is not mentioned is the fact that during the civil
war the Marxist leaning government allowed a large number of Russian
trawlers to fish its waters.  There are no documented estimates as to the
level of over fishing that occurred during the period, but
environmentalists have claimed it to be extensive.  

Russian fishing vessels are notorious for their waste and thoughtless
trawling techniques which often times lead to the destruction of fish
habitats on the seabed.  Studies have shown that huge numbers of young
fish of the target species are killed before they have reproduced, along
with other marine creatures that often times are simply tossed overboard. 
The trawling technique also threatens immature fish, theoretically small
enough to escape through a trawlers net, but they often find their passage
blocked by larger fish.  According to the Food and Agriculture Organization
(FAO), the percentages of fully fished, over fished, depleted, and
recovering stocks in 1992 for the South Western Atlantic were:

Table 1 

Type% Fully Fished, Over fished,
Depleted and Recovering StocksDemersal72Pelagic77Crustaceans95Molluscs80
In more recent years the Spanish fishing fleets have also been active off
the coast of Angola, encouraged by the low level of local Angolan
competition.  Spanish trawlers are also notorious for using illegally sized
mesh nets which snag young fish and threaten the sustain ability of the
fish population. 

Recently the government deregulated fish prices and set up the Angolan
Support Fund for Fisheries Development.  The government, in the same
promotional publications, boasts registering 16 new foreign fishing
investment proposals in 1994, a clear indication that it considers the fishing
industry a revenue generating sector.

Angolan fishermen are not the culprits of the problem.  The civil war and
a general lack of maintenance has meant that very few Angolan trawlers are
even operational.  Most Angolan fishing activities are small-scale operations
with most boats under 30 feet and do not have an adverse affect on the level
of fish stocks.  

The fishing industry represents less than 6% of the countries total GDP, but
its domestic importance is much greater than the statistic indicates.  The
industry is labor intensive which is a plus for a country with such an
extraordinary unemployment level.  Like many African nations fish is a
staple food item for Angolans and value added fish products derived from
local catches offer significant export opportunities.  In addition, because
Angola is a Lom‚ country its fish products can enter the lucrative European
market duty free.

The right of Angola to exploit its coastal waters is well established in
customary law and formal treaties, but Angola is a signee to the United
Nations Convention on the Law of the Sea (UNCLOS) which among other
things stipulates that the government is bound to conserve its maritime
resources both within and outside of its territorial waters.  If the
Angolan government continues to market its fish sector, along within its
proven rich resource portfolio, with the intention of attracting foreign
investment, it is likely that fish stocks could be depleted to the levels seen
in the Mediteranean.  In addition, allowing developed countries like Spain
and Russia with high technology fishing equipment will crowd out Angolan
subsistence fishermen and further increase the countries unemployment
and food shortage problems.

Angola like much of Africa is stuck with the economic structure which
suited its colonial administrator: a producer and exporter of primary
agricultural and mineral commodities and an importer of manufactured
goods and services.  However, as peace continues to hold the Angolan
Government will be in a better position to take the necessary steps which
are needed to attract foreign investment.  Whether the Angolan fish sector
should be allowed to be part of the foreign investment attraction is a highly
contentious issue, which to date, has not been acknowledged by the
Angolan authorities.
     
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LOBSTER Case
MEDIT Case
SALMON Case
SEACUKE Case
SQUID Case
UKCOD Case
TURBOT Case

Keyword Clusters

(1): Trade Product       = FISH
(2): Bio-Geography       = OCEAN
(3): Environmental Problem= Species Loss Sea [SPLS]

4. Draft Author: Sean Morris, May 1996

B. LEGAL CLUSTER

5. Discourse and Status: DISagree and INPROGress

The Angolan authorities contend that their fish stocks are at a level which
allows for further exploitation.  To date environmental impact studies have
not been carried out because of the ferocity of the recently concluded civil
war.  As companies again reinvest into the Angolan economy feasibility
studies will be carried out which will determine whether Angola still posses
a substantial fish resource and thus offers a long term and profitable
incentive.

6. Forum and Scope: ANGOLA and UNILATeral

7. Decision Breadth: 1

8. Legal Standing: LAW

The Angolan authorities have signed UNCLOS and is bound by its
regulations.  But the government has also signed into law foreign
investment and deregulatory legislation which may be in conflict to its
UNCLOS obligations.

C. GEOGRAPHIC CLUSTER

9. Geography
 
     Continental Domain: Africa
     Geographic Site: Western Africa [WAFR]
     Geographic Impact: Angola 

10. Sub-National Factors: YES

11. Type of Habitat: OCEAN

D. TRADE CLUSTERS

12. Type of Measure: Regulatory Standard [REGSTD]

13. Direct vs. Indirect Impacts: INDirect

14. Relation of Measure to Impact
 
     a. Directly Related to Product: YES FISH
     b. Indirectly Related to Product: NO
     c. Not Related to Product: NO
     d. Related to Process: YES Species Loss Sea [SPLS]

15. Trade Product Identification: FISH

16. Economic Data 
See Table 1

17. Degree of Competitive Impact: MEDium

18. Industry Sector: FOOD

19. Exporter and Importer: ANGOLA and MANY

E. ENVIRONMENT CLUSTER

20. Environmental Problem Type: Species Loss Sea [SPLS]

21. Species Information:

     Name:          Fish
     Type:          Animal/Fish/Bony
     Diversity:     NA

22. Impact and Effect: MEDium and REGULatory

23. Urgency and Lifetime: MEDium and Unknown

24. Substitutes: LIKE Products

F. OTHER FACTORS

25. Culture: YES

Angolan culture has been adversely affected by Portuguese colonialism and
remains in a state of flux today.  More than two decades of civil war and
another decade before that of fighting for its independence has
undoubtably affected the whole Angolan population.  At least one 
generation of Angolans have grown up not knowing what peace is like.  Most
of these problems have their roots in the false borders that the Portuguese
created when they annexed Angola.  In addition, many Angolans have
traditionally relied upon small-scale fishing for survival.  Further
depletion of Angolažs fish stocks could seriously threaten a traditional food
staple and way of life.   

26. Human Rights: YES

Gross violations by both sides in the more than two decades of civil war
occurred.  UNITA has been accused by Human Rights Watch of forcing
children to work in its diamond mines and both sides were repeatedly guilty
of conscripting children into their military forces.  In addition with few
checks and balances and little or no recognized legal system during the war
many cases of genocide were reported on both sides.  By increasing foreign
investment and strengthening the democratic roots in Angola the rule of
law will be followed closer because the Angolan authorities will have to
answer to a more empowered domestic population, and able international
community.  Consequently fewer human rights violations will occur in the
future. 

27. Trans-Boundary Issues: Yes

A rehabilitated Angola with increasing amounts of foreign investment will
have a spill over affect with Botswana, Zaire and Zambia.  Because of its
accessible location rehabilitation and modernization of its ports, railroad
system and airports will render it a natural transportation hub for the
region.  

28. Relevant Literature

Black, Richard, Angola, 1992, Clio Press, Santa Barbara, C.A.

Chand, Sheetal K., Transition to Market Studies in Fiscal Reform, 1992

Congressional Research Service, Africa: U.S. Foreign Assistance Issues,
11/9/95, The Library of Congress, Washington, DC.

Curtis, Patrice K., CRS Issue Brief Angola: U.S. Interests, September 1995,
Congressional Research Service, Washington, D.C.

Manley, Andrew; Quattek, Kristina; Kronston, Gregory,  Angola Country
Report: The Economist Intelligence Unit, 3rd quarter 1995, The Economist
Intelligence Unit, London

McCormick, Shawn H., The Angolan Economy: Prospects for Growth  in a
Postwar Environment, 1994, Center for Strategic and International Studies,
Washington, D.C.

Schroth, Peter W., Doing Business in Sub-Saharan Africa, 1991, American
Bar Association Section of International Law and Practice, USA.
 
Spikes, Daniel, Angola and the Politics of Intervention: From Local Bush War
to Chronic Crisis In Southern Africa, 1993, McFarland and Co., Jefferson,
N.C.

Sudarkasa, Michael E. M. The African Business Handbook: A Practical Guide
to Business Resources for U.S./Africa Trade and Investment, 1993, 21st
Century Africa, Inc. Washington, D.C.

Embassy of Angola (USA) Angolan American Economic Partnership: Trade
and Investment Reference Guide 1995, September 1995, Washington, D.C.

Embassy of Angola (USA) Presentation at CSIS by the Angolan Minister of
Finance: Augusto Da Silva Tomas, July 1995, Washington, D.C.

Government of Angola, First Round Table Conference of Donors: Programme
of Community Rehabilitation and National Reconciliation, September 1995,
Brussels, Belgium.