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Marine Policy 30 (2006) 111130

Farming the reef: is aquaculture a solution for reducing fishing

pressure on coral reefs?

Robert S. Pomeroya,, John E. Parksb, Cristina M. Balboac

aDepartment of Agricultural and Resource Economics and Sea Grant/Community Conservation Network, University of Connecticut-Avery Point,

380 Marine Science Building, 1080 Shennecossett Road, Groton, CT 06340 USAbInternational Program Office, U.S. National Oceanic and Atmospheric Administration, 1315 East-West Highway, Silver Spring, MD 20910, USA

cForestry and Environmental Studies, Yale University, 210 Prospect, New Haven, CT, USA

Received 26 July 2004; accepted 11 September 2004

Abstract

This paper presents the results of an analysis to determine the financial and social feasibility of aquaculture technologies for live

reef organisms, including food fish and marine ornamentals, as an alternative to wild capture of live reef organisms in nearshore

waters in the Indo-Pacific region. The paper provides information and policy guidance for appropriate aquaculture technology

application for Indo-Pacific nations, which are the source of most live reef organisms supplied for international trade. Cautionary

evidence indicates that, under certain conditions, some forms of small-scale aquaculture of live coral reef organisms can be a useful

solution for reducing fishing pressure on coral reefs.

r 2004 Elsevier Ltd. All rights reserved.

Keywords: Aquaculture; Indo-Pacific; Live Reef Fish Trade; Coral reef conservation

1. Introduction

In 1999, in Honolulu, Hawaii, hundreds of industry,

government, academic, and non-government organiza-

tion representatives gathered at the first-ever Marine

Ornamentals Conference to discuss the marine orna-

mentals industrythat is, the production and marketing

of marine organisms (fish and invertebrates) used for

ornamental purposes, including in aquaria. Out of this

conference arose the recommendation to give highest

priority to projects involving the advancement of marineornamental aquaculture and reef preservation [1].

Conferees also recommended initiatives to encourage

consumer understanding that cultured ornamentals are

a more sustainable and higher value alternative to

wild-caught live reef organisms [1].

In February 2001, experts from industry, conserva-

tion organizations, and governments involved in the

trade in live reef food fish gathered in Honolulu to

create a coordinated strategy for making this industry

environmentally and economically sustainable. Out of

this intense strategy meeting came several recommenda-

tions, one of which was to assess the potential for

mariculture to displace wild product in the market,

provide alternative livelihood opportunities, and reducethreats without undue adverse impactsy [2].

Responding to the call from both these conferences, a

research project, Farming the Reef, was developed to

undertake a thorough bioeconomic assessment of

culture technologies for live reef organisms, including

food fish and marine ornamentals, and the financial

viability of these technologies in the international

marketplace for live reef organisms. The goals of the

project were to: (a) review and determine the potential

ARTICLE IN PRESS

www.elsevier.com/locate/marpol

0308-597X/$ - see front matterr 2004 Elsevier Ltd. All rights reserved.

doi:10.1016/j.marpol.2004.09.001

Corresponding author. Tel.: +1 860 405 9215;

fax: +1860 4059109.

E-mail addresses: [email protected] (R.S. Pomeroy),

[email protected] (J.E. Parks), [email protected] u

(C.M. Balboa).
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application of such technologies as alternatives to wild

capture of live reef organisms in developing-country

nearshore waters, and (b) if potential exists, to provide

information and policy guidance for appropriate tech-

nology application within developing Indo-Pacific na-

tions, which are the source of most live reef organisms

supplied for international trade. This paper presents theresults of this study into the techniques and financial

feasibility of culturing live reef organisms as an

alternative to wild capture.

2. Coral reefs and the trade in live reef fish

Like coral reefs the world over, the reefs of Southeast

Asia and the islands of the Western Pacific (hereafter

referred to as the Indo-Pacific) are an important source

of goods and services to the people living there.

However, the coral reefs of the Indo-Pacific are

distinctive in two very important ways.

First, they represent the epicenter of global marine

biodiversity, containing 45 percent of all the worlds

coral reef species [3,4].

Second, they are also at the epicenter of the most

destructive fishing practices in the world, particularly

the use of dynamite and cyanide [5]. Given current

trends, nearly 80 percent of the coral reefs in Southeast

Asia [4] and 60 percent in the Pacific [6] are considered

at risk of loss in the coming years. Increasing human

populations in the Indo-Pacific region are creating

growing demand on coral reefs for food, livelihoods,

and other benefits. This pressure has driven exploitationmethods and rates to the point of widespread destruc-

tion, which has been documented at local and national

scales [4,7].

But it is not only people in the Indo-Pacific who are

driving the destruction of the worlds largest and most

diverse coral reefs. The people of North America,

Europe, and East Asia are fueling the rate of Indo-

Pacific coral reef loss through their consumption of live

organisms that inhabit these reefs. In particular, two

kinds of international trade in live reef organisms

presently account for the majority of overseas consump-

tion of wild reef organisms and coral reefs in the Indo-

Pacific: (1) trade in live reef food fish, which markets live

fish for consumption in restaurants, largely in Asia [5],

and (2) trade in live marine ornamentals, which markets

live corals, fish, and other reef-associated organisms for

use in marine aquaria, largely in the United States [8,9].

Among the destructive practices used to harvest live

reef organisms is the use of cyanide, which fishers often

squirt on a reef to stun the fish and make them easier to

capture. This practice not only stuns the fish, but also

destroys the fish habitat. In addition, the Live Reef Fish

Trade (LRFT) often targets spawning aggregations and

selectively over-fishes certain high-demand species.

These destructive fishing techniques have imperiled an

estimated 56 percent of the Indo-Pacifics reefs [4]. A

recent global assessment of some 200 fisheries around

the world concluded that the Indo-Pacifics live reef

fisheries represent some of the most threatened fisheries

on the planet, due in large part to the growing and

lucrative trade in live reef fish and the associateddestructive fishing techniques [10].

Both kinds of trade in live reef fishfood fish and

marine ornamentalsare quite lucrative. The trade in

live reef food fish generates an estimated US$500 million

to US$1 billion annually [11]. The trade in live marine

ornamentals is estimated at US$28 million to US$44

million annually [9,12]. At a national level, the liveli-

hoods of untold thousands of fishers in source countries

for the LRFT, such as Indonesia and the Philippines,

are utterly dependent on trade in these organisms. In-

country buyers, wholesalers, and exporters also provide

important revenue streams to source countries. The

trade in live reef fish has become a global industry, with

sophisticated and well-funded harvesting and marketing

structures and international trade arrangements. Most

importantly, the demand for live reef products is on the

rise globally [13]. In general, source countries are

tropical developing countries, while importing countries

are in North America, Europe, and East Asia. Given the

economic importance to both source and import

countries, it is not surprising that to date, calls to end

the international trade in live reef fish have not been

successful.

3. Is aquaculture a solution?

Aware that many reef organisms are being fished out

of Indo-Pacific waters faster than they can replenish

themselves, the scientific and conservation communities

have come to a consensus that present methods and

rates of harvesting wild, live reef organisms from Indo-

Pacific coral reefs cannot be sustained. Amidst growing

international concerns, decision-makers, conservation-

ists, and the industry are seeking economically and

ecologically sustainable solutions. Aquaculture is in-

creasingly being cited as one of the most important

potential solutions for reducing fishing pressures on

coral reefs associated with the collection of live reef

organisms for the LRFT [1,1423].

The term aquaculture refers either to producing

juvenile fish and invertebrates in hatcheries, or to

collecting juveniles from the wild and nursing them

through to a larger or adult size. It also includes the

propagation of marine plants such as edible algae.

Aquacultures proponents argue that if live coral reef

and coral-reef associated organisms (including both fish

and invertebrates) could be adequately and competi-

tively cultured, in time it would satisfy some or all of the

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demand for wild-caught reef organisms. More specifi-

cally, they suggest that small-scale aquaculture may be

able to provide a technologically feasible, economically

appealing alternative livelihood for fishers who would

otherwise harvest live reef organisms from the wild. This

shifting of fishing effort out of wild harvest and into fish

farming activities would then reduce or eliminatedestructive and over-fishing of live reef organisms in

the Indo-Pacific, thereby increasing protection of the

regions remaining coral reefs.

However, close examination of this argument reveals

that the following conditions must be met for the

aquaculture argument to hold:

1) Small-scale aquaculture technologies exist that allow

for the culture of the major live reef species that are

traded internationally.

2) Small-scale aquaculture uses appropriate technolo-

gies that are feasible at a community level as well as

socially and culturally compatible.

3) Small-scale aquaculture is profitable enough that it

can both: (a) realistically meet livelihood needs as an

alternative to fishing, and (b) provide sufficient

incentive (i.e., returns) to displace, and not merely

supplement, wild-harvest fishing effort.

4) Fishers are willing to shift out of wild-harvest fishing

into small-scale aquaculture as an alternative liveli-

hood that they will find as rewarding as fishing in

terms of job satisfaction and lifestyle.

5) Small-scale aquaculture of coral reef organisms is

ecologically more sustainable than continued harvest

of wild stocks at present rates of extraction.

Despite conventional wisdom that aquaculture is a

solution to the problems of destructive and over-fishing

of live reef organisms, none of the above conditions nor

the overall assumption have been objectively tested and

analyzed at an international level.

The reality is that coral reef aquaculture development

in the Indo-Pacific is in its infancy. Successful aquaculture

in coral reef environments in the tropical Indo-Pacific is

currently confined to the cultivation of only a few species,

such as seaweed (Eucheuma and Gracilaria), microalgae

(Spirulina), giant clams (Tridacnidae), milkfish (Chanos

chanos), and pearl oysters. There have been numerous

attempts to develop various forms of fish and invertebrate

culture in coral reef environments, but few have come to

fruition. Most past efforts have focused on the introduc-

tion of familiar species, such as oysters and mussels.

None has been a commercial success, although remnants

of introduced stocks survive in many areas [24]. Most

aquaculture efforts at the nearshore, tropical community

level have not been closed-cycle culture; that is, they do

not rear fish from egg to adult, but rather grow out wild-

harvested juveniles to adult size. Some studies [25,26]

indicate that many fishers would resist shifting from wild-

harvest fishing to aquaculture because of economic,

social, and cultural difficulties. Also, aquaculture can

threaten healthy coral reefs through such impacts as

nutrient loading and habitat destruction associated with

cage and pen cultivation of desirable species [24].

These observations illustrate the need to test the

general aquaculture argument and the five underlyingconditions that must be met in order for the argument to

hold. If small-scale aquaculture is to be taken seriously

as a solution for reducing fishing pressures on coral

reefs, its biological, technological, economic, and socio-

cultural feasibility must be objectively and comprehen-

sively assessed. This involves critically evaluating the

production and marketing of live reef organisms for

food and ornamental use before prescribing small-scale

aquaculture as a cure for what ails the coral reefs of the

Indo-Pacific. The Farming the Reef study was initiated

to meet the need for such an evaluation.

4. Study methodology

As previously described, the goal of the Farming the

Reef study was to provide information and policy

recommendations on the application of small-scale

aquaculture of live reef organisms in developing-country

tropical nearshore waters. In particular, small-scale

aquaculture was examined as a priority solution for

reducing the pressures on coral reefs arising from

destructive and over-fishing associated with the interna-

tional trade in wild-caught live reef organisms and as an

option for those needing new livelihoods to wild-harvestfishing.

Following discussions with industry specialists and

scientific peers, the study team focused on several of the

most commercially important live coral reef species in

international trade. Criteria used to identify commer-

cially important species included:

International market demand

Per-unit export value

End-consumer purchase price

Total export and import volume

Three species of grouper were identified as the mostcommercially important food fish with potential for

production in small-scale aquaculture systems in the

Indo-Pacific, especially in Indonesia and the Philippines,

two leading source countries in the international trade in

live-caught reef organisms. These species are the:

Orange-spotted coral grouper (Epinephelus coioides)

Malabar grouper (E. malabaricus)

Humpback or panther grouper (Cromileptes altivelis)

Likewise, several commercially important species of

reef-associated ornamental fish and marine invertebrates

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were identified for examination of their potential for

small-scale aquaculture. They are:

Angelfishes (Pomacanthidae), e.g., bicolor angel (Cen-

tropyge bicolor)

Damselfishes (Pomacentridae), e.g., common clown-

fish (Amphiprion ocellaris)

Hard or stony corals (Scleractinia), e.g., Acropora

spp., Montipora spp.

Live rock (encrusting invertebrate communities ondead coral, reef rubble, or rock)

A mix of primary and secondary data was used for

this analysis. This project was not meant to undertake

new biological or technological research, but rather to

make use of the best available data and information to

conduct a financial analysis for aquaculture of each

selected species. Expert consultations regarding the

reproductive biology, technology, and economics of

aquaculture of the selected coral reef organism(s) were

held with more than 100 key informants across 11 Indo-

Pacific countries (Australia, the Fiji Islands, Indonesia,

Hong Kong, Japan, Malaysia, the Philippines, the

Solomon Islands, Taiwan, Thailand, and Vietnam),

and the United States. On-site review of actual culture

operations for live reef organisms was undertaken at 35

sites in nine Indo-Pacific countries and the United States

(Fig. 1). These sites included private business operators,

university and other research institutions, and conserva-

tion projects operating through national and interna-

tional nongovernmental organization (NGO) support.

A literature search and review was conducted on the life

histories, aquaculture techniques, and economics of the

selected live reef organism(s).

A financial analysis was undertaken for each selected

species, encompassing initial capital investment require-

ments, capital asset addition schedule, fixed costs,

annual operating costs, enterprise budget, and a cash

flow statement (5- or 10-year). As with any aquaculture

operation, the financial figures presented may vary due

to price changes, changes in survival rate, changes in

grow-out period, and improper management.

To determine whether small-scale aquaculture is: (a)

socially and culturally feasible in the developingcountries of the Indo-Pacific, and (b) a preferred

occupational alternative to wild-harvest fishing in terms

of job satisfaction and lifestyle, a socioeconomic

analysis was conducted using two data sources. One

involved surveys of fishers in 23 communities in

Indonesia, the Philippines, and Vietnam to examine

socio-cultural feasibility, job satisfaction, and occupa-

tional mobility [27]. A second source of data was a

survey of 700 fishers in 16 provinces in the Philippines

conducted as part of a larger United States Agency for

International Development coastal management project.

This study provided data on fisher attitudes about

shifting to other sources of livelihood [28].

5. Results

The studys findings are summarized below, organized

into four sections:

Grouper aquaculture

Marine ornamental fish aquaculture

Reef invertebrate aquaculture

Socioeconomic dimensions

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Fig. 1. Location of study sites for the farming the reef project.



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These summary results are drawn from four technical

reports ([2932]; respectively).

5.1. Grouper aquaculture

The fishery for live reef food fish has grown rapidly in

the last two decades as personal wealthand thedemand for luxury items and foodshas increased in

many Asian countries. Popular reef fish in this trade are

groupers (Family Serranidae, especially the genera

Epinephelus and Plectropomus), napoleon wrasse (Chei-

linus undulatus), also referred to as Napolean or Maori

wrasse, and snappers (e.g., Lutjanus argentimaculatus).

Although relatively small in volume, the trade in live

reef food fish trade generates an estimated US$500

million to US$1 billion annually. The most important

markets are Hong Kong, the Peoples Republic of China

(PRC), and Taiwan. There is also significant demand

from Singapore and Japan, and to a lesser extent from

Korea, Thailand, and Malaysia. Wholesale prices in

Hong Kong in early 2001 for 10 common species of live

grouper ranged from US$8 to US$69 per kilogram.

Retail prices for the same period ranged from US$24 to

US$120 per kilogram. Regional trade in live grouper

totaled an estimated 40,00050,000 metric tons in 1997,

but trade volume is thought to have declined since 1998.

An estimated 6580 percent of this volume is imported

by Hong Kong.

Market-size live grouper are harvested in three ways:

wild capture, grow-out of wild-caught seed, and full-

cycle aquaculture. Approximately one half to two-thirds

of the regional supply of grouper comes from wild-caught adult fish [21,33]. Major sources of wild-caught

grouper are the Philippines, Indonesia, Thailand, and

Malaysia. In addition, Australia, Vietnam, Myanmar,

Papua New Guinea, and the PRC also supply wild-

caught grouper. However, supply sources are changing

as stocks are overexploited. New supply sources include

remote islands in the Indo-Pacific such as Micronesia,

the Maldives, the Solomon Islands, Fiji, and Kiribati.

Two particular concerns about the wild-capture

fishery for live grouper are overfishing of target species

and the use of cyanide. Overfishing of live grouper has

caused many species to become very rare, and target

grouper stocks often are locally overexploited if notlocally extinct [34]. Besides grouper taken for food,

juveniles are captured in the wild and grown-out

(cultured) in ponds or floating cages in several Asian

countries. Full-cycle aquaculture (the use of hatchery-

reared fingerlings rather than wild-caught juveniles) of

many grouper species is becoming more common

throughout Asia. Full-cycle cultured fish currently make

up only about 1015 percent of the total trade in live

grouper, but the supply is increasing. The most

important source countries for full-cycle cultured group-

er are Taiwan, the PRC, Indonesia, Thailand, and

Australia.

5.1.1. Grouper culture techniques

Full-cycle aquaculture of grouper consists of three

main stages: broodstock management and spawning;

hatchery (larval rearing)/nursery; and grow-out [35]

(Fig. 2). Initial broodstock can be caught in the wild

using fish traps or young fish can be captured and grown

to broodstock size. Broodstock are maintained in tanks,

ponds, or cages. Spawning patterns follow a lunar

rhythm. Natural spawning may be stimulated by the

manipulation of temperature, water flow, or complete

water change in the tank. Spawning may also be induced

using hormones. Larvae are generally reared in tanks.After the larvae-rearing stage, the grouper, which are

2530 mm long, are transferred to nursery culture tanks.

During nursery culture, the grouper grow to between 7.5

and 10 cm and are graded by size in order to reduce

cannibalism. Grouper may be grown out in cages or

ponds. Trash fish are the preferred feed for grow-out in

ARTICLE IN PRESS

Fig. 2. Grouper culture production and marketing chain in the Philippines.



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Indonesia and the Philippines. In Taiwan, however, the

majority of farmers have shifted to the use of moist

pellet feeds. Survival rates of more than 80 percent

can be achieved unless there is a disease problem.

In the Philippines, the culture period for E. coioides

and E. malabaricus from egg to market-size grouper

(600g) takes about 1 year. In Indonesia, the fullculture period for Cromileptes altivelis takes about 18

months.

5.1.2. Financial analysis

The analysis focused on full-cycle aquaculture, that is,

the use of hatchery-reared fingerlings. In Indonesia three

scenarios for culture of the grouper species Cromileptes

altivelis were analyzed: (1) individual broodstock, (2)

individual hatchery/nursery, and (3) individual grow-

out. In the Philippines, four scenarios for culture of E.

coioides and E. malabaricus were examined: the above

three, plus a fourth scenario, integrated broodstock/

hatchery/nursery/grow-out. Only cage culture grow-out

techniques were analyzed. The technical production

parameters for the two Epinephelus species were found

to be very similar and the financial analysis does not

distinguish between them. Specific baseline assumptions

for the financial analysis are outlined in the associated

technical report [29].

All four Philippines scenarios (Table 1) and all three

Indonesian scenarios (Table 2) were found to be

financially feasible. However, the capital requirements

for some aquaculture systems may be beyond the

financial means of many small producers. A broodstock

and hatchery/nursery system in the Philippines has

capital investment costs of US$68,400. In Indonesia, thebroodstock system requires capital investment of

US$15,366, a medium-sized hatchery/nursery system

requires US$38,795, and a small hatchery/nursery

system requires US$3258.

Capital investment requirements are lower for grow-

out (US$1470 in the Philippines and US$1010 in

Indonesia, not including purchase of transport boxes)

and are within the financial means of small producers.

The high cost of transport boxes (US$4000 for 200

boxes in both countries) is a potential problem for the

small producer, but could be shared with the fish buyer

(or the fish buyer could provide the boxes).

Enterprise budget results indicate that this culture

production model is feasible as a small-scale operation

(Table 3). Total production costs for fry from the

hatchery/nursery system (US$0.23 for a 6-cm fry in the

Philippines and US$0.26 and US$0.23 for a 5-cm fry

from medium- and small-sized systems, respectively, in

Indonesia) remained lower than the average in-country

ARTICLE IN PRESS

Table 1

Summary of total projected initial capital investment costs across the four grouper (Epinephelus spp.) culture scenarios modeled for the Philippines

(all figures in USD)

Cos t cate gor y Ind ivid ual bro ods toc k I ndi vid ual ha tche ry/nurs ery I ndi vidu al gro w-o ut Inte grat ed syst em

Broodstock

Male specimens 400 (02%) 0 (00%) 0 (00%) 400 (00%)

Female specimens 600 (02%) 0 (00%) 0 (00%) 600 (01%)

Subtotal 1000 (04%) 0 (00%) 0 (00%) 1000 (01%)

Marine operations

Floating net cages 0 (00%) 0 (00%) 1280 (23%) 3810 (04%)

Boat 0 (00%) 0 (00%) 80 (02%) 1500 (02%)

Water quality test equipment 0 (00%) 0 (00%) 70 (01%) 70 (00%)

Holding tanks 0 (00%) 0 (00%) 4000 (73%) 22,000 (22%)

Harvest equipment 0 (00%) 0 (00%) 40 (01%) 40 (00%)

Subtotal 0 (00%) 0 (00%) 5470 (100%) 27,420 (28%)

Land operations

Land 6500 (26%) 6500 (15%) 0 (00%) 9750 (10%)Perimeter fencing 50 (00%) 50 (00%) 0 (00%) 100 (00%)

Tanks and reservoirs 6100 (24%) 11,900 (28%) 0 (00%) 17,200 (17%)

Roofing, framing, and siding 2400 (09%) 3800 (09%) 0 (00%) 6200 (06%)

Buildings/structures 0 (00%) 5800 (13%) 0 (00%) 6600 (07%)

Plumbing 2000 (01%) 4000 (09%) 0 (00%) 5000 (05%)

Electrical 2000 (01%) 3500 (08%) 0 (00%) 4800 (05%)

Air blower 1320 (05%) 1980 (05%) 0 (00%) 2000 (02%)

Sea- and freshwater pumps 1700 (07%) 2600 (06%) 0 (00%) 4200 (04%)

Generator 2000 (08%) 2000 (05%) 0 (00%) 3500 (04%)

Truck 0 (00%) 0 (00%) 0 (00%) 10,000 (10%)

Miscellaneous 200 (01%) 1000 (02%) 0 (00%) 1200 (01%)

Subtotal 24,270 (96%) 43,130 (100%) 00 (00%) 70,550 (71%)

Total capital investment 25,270 (100%) 43,130 (100%) 5470 (100%) 98,970 (100%)



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selling price. The total production cost per market-sizefish from grow-out (US$3.01 in the Philippines and

US$3.18 in Indonesia for a 600-g fish) also remained

below the average selling price in the region (as of 2002)

of US$6.00.

The 5-year cash flow for the grouper grow-out in the

Philippines was positive for each year of production. In

Indonesia, the 5-year cash flow was positive for both

medium- and small-sized hatchery/nursery operations;

for grow-out, cash flow was negative in the first year but

positive thereafter. In both countries, cash flow analysis

shows that loans or other incentives made available to

the small producer could be repaid in the first or second

year of production (Tables 4a and b).

5.2. Marine ornamental fish aquaculture

The ornamental fish industry consists of both fresh-

water and marine fish. Although freshwater species

predominate in international trade, the percentage of

marine species is increasing rapidly. What is more,

marine ornamental fish make up an even faster-growing

percentage of trade by value than by volume, as marine

species are much more valuable on a per-fish basis [36].

The worldwide trade in aquarium fish (including fresh-

water and marine species) is estimated at 350 millionfish, with marine species making up between 6 and 12

percent of the total [37]. The total global import value of

marine ornamental fish (imported primarily into the

United States, European Union, and Japan) is estimated

at US$28 mm to US$44 million [9,37], with a retail value

between US$90 million and US$300 million [9].

International trade in ornamental fish can be traced to

the 1930s. However, only in the last 30 years has trade in

marine ornamentals become popular. By the 1990s, over

45 countries were supplying this multimillion-dollar

industry. The term marine ornamentals refers not only

to numerous species of reef fish used in aquaria, but also

live corals, live rock and live sand (coral rubble/reef rock

and reef sand coated or permeated with organic

materials), and other invertebrates such as giant clams,

sea anemones, sea horses, sea stars, and sea urchins. In

this section we will only be concerned with marine

ornamental fish.

The United States is the largest market for marine

ornamental fish, making up an estimated 60 percent of

global demand [38]. Western Europe, Japan, Taiwan,

and Australia are responsible for most of the rest

[9]. While marine ornamental fish are being collected

and exported from coral reefs around the world,

ARTICLE IN PRESS

Table 2

Summary of total projected initial capital investment costs across the four grouper (Cromileptes altivelis) culture scenarios modeled for Indonesia (all

figures in USD)

Cost category Individual

broodstock

Individual hatchery/

nursery (medium)

Individual hatchery/

nursery (small)

Individual

grow-out

Broodstock

Male specimens 660 (04%) 0 (00%) 0 (00%) 0 (00%)Female specimens 1320 (09%) 0 (00%) 0 (00%) 0 (00%)

Subtotal 1980 (13%) 0 (00%) 0 (00%) 0 (00%)

Marine operations

Floating net cages 0 (00%) 0 (00%) 0 (00%) 825 (16%)

Boat 0 (00%) 0 (00%) 0 (00%) 60 (01%)

Water quality test equipment 0 (00%) 0 (00%) 0 (00%) 80 (02%)

Holding tanks 0 (00%) 0 (00%) 0 (00%) 4000 (80%)

Harvest equipment 0 (00%) 0 (00%) 0 (00%) 45 (01%)

Subtotal 0 (00%) 0 (00%) 0 (00%) 5010 (100%)

Land operations

Land 4850 (31%) 4850 (13%) 728 (22%) 0 (00%)

Perimeter fencing 50 (00%) 50 (00%) 20 (01%) 0 (00%)

Tanks and reservoirs 3080 (20%) 8760 (23%) 1110 (34%) 0 (00%)

Roofing, framing, and siding 1000 (07%) 1835 (05%) 230 (07%) 0 (00%)

Buildings/structures 650 (04%) 1850 (05%) 250 (08%) 0 (00%)

Plumbing 1000 (07%) 2000 (05%) 210 (06%) 0 (00%)

Electrical 1000 (07%) 1700 (04%) 135 (04%) 0 (00%)

Air blower 250 (01%) 600 (01%) 100 (03%) 0 (00%)

Sea- and freshwater pumps 900 (06%) 1800 (05%) 315 (10%) 0 (00%)

Generator 450 (03%) 450 (01%) 0 (00%) 0 (00%)

Truck 0 (00%) 14,000 (36%) 0 (00%) 0 (00%)

Miscellaneous 150 (01%) 900 (02%) 160 (05%) 0 (00%)

Subtotal 13,380 (87%) 38,795 (100%) 3258 (100%) 0 (00%)

Total capital investment 15,360 (100%) 38,795 (100%) 3258 (100%) 5010 (100%)



8/20

ARTICLE IN PRESS

Table3

Summaryofannualenterprisebudgetsov

erasingleproductioncycleacrossthevariousgrouperculturescenariosmodeledforthePhilippines(Epinephelusspp.;

12-month

grow-outperiod)and

Indonesia(Cromileptesaltivelis;18-month

grow-outperiod)(allfiguresinUSD)

Costcategory

Philippiness

cenarios(12-monthgrow-outperiod)

Indonesiascenarios(18-monthgrow-outperiod)

Individual

broodstock

Individualhatchery/

nursery

Individual

grow-out

Integrated

system

Individualbroodstock

(12months)

Individual(med)

hatchery/nursery

(12months)

Individual(small)

hatchery/nursery

(12months)

Individual

grow-out

Variablecosts

Eggs

875

(04%)

4365

(13%)

575

(14%

)

Fingerlings

1320

(18%

)

5535

(53%)

Feed

1848

(11%

)

6900

(29%)

1800

(25%

)

21378

(34%)

2400

(22%)

5780

(18%)

730

(18%

)

1519

(14%)

Vitamins/medication

480

(03%

)

50

(007

%)

288

(03%)

100

(009%)

Chemicals

500

(02%)

700

(01%)

1500

(04%)

200

(05%

)

Electricity

4752

(28%

)

685

(03%)

5000

(08%)

1620

(15%)

1350

(04%)

160

(04%

)

Laborandconsultants

3840

(22%

)

1600

(07%)

1280

(18%

)

5680

(09%)

1824

(17%)

2070

(06%)

880

(21%

)

750

(07%)

Fuelandoil

240

(01%

)

500

(02%)

800

(01%)

240

(02%)

500

(01%)

Marketing/packing/harvest

300

(02%

)

2250

(09%)

50

(007

%)

300

(005%)

480

(04%)

2000

(06%)

250

(06%

)

50

(005%)

Supplies

480

(02%

)

300

(01%)

20

(002

%)

900

(01%)

600

(05%)

375

(01%)

50

(01%

)

40

(004%)

Repairs

564

(03%

)

1820

(07%)

127

(02%

)

2969

(05%)

468

(04%)

5670

(17%)

490

(12%

)

125

(01%)

Miscellaneous

624

(04%

)

465

(002%)

139

(02%

)

1132

(02%)

240

(02%)

715

(02%)

100

(02%

)

244

(02%)

Subtotal

13,1

28

(76%

)

15,8

95

(67%)

4786

(67%

)

38859

(61%)

8160

(75%)

24,3

25

(74%)

3435

(84%

)

8363

(80%)

Fixedcosts

Depreciation

2364

(14%

)

4416

(19%)

1807

(25%

)

16468

(26%)

1716

(16%)

5175

(16%)

440

(11%

)

1657

(16%)

InterestPayments

1689

(10%

)

3297

(14%)

492

(07%

)

8030

(12%)

946

(09%)

3060

(09%)

228

(05%

)

451

(04%)

Miscellaneous

0

(00%

)

0

(00%)

0

(00%

)

0

(00%)

0

(00%)

0

(00%)

0

(00%

)

0

(00%)

Subtotal

4053

(24%

)

7713

(33%)

2299

(32%

)

24498

(38%)

2662

(25%)

8235

(25%)

668

(16%

)

2108

(20%)

Totalexpenses

17,1

81

(100

%)

23,6

08

(100%)

7085

(100

%)

63357

(100%)

10,8

82

(100%)

32,7

10

(100%)

4103

(100%

)

10,4

71

(100%)

Totalincome

23,5

03

45,0

45

14,4

00

98984

83,7

84

106,270

12,5

05

20,2

50

Balance

6322

21,3

47

7315

35627

72,9

02

73,5

60

8402

9779



9/20

approximately 85 percent of the marine aquarium fish

exported to the United States and Europe are captured

from reefs in the Philippines and Indonesia [9]. Brazil,

Maldives, Vietnam, Thailand, Sri Lanka, Puerto Rico,

Australia, and Hawaii also supply significant quantities[9]. Many collecting countries and localities are limiting

the number of species and the volume of fish that can be

taken; however, some island-states in the Western

Pacific, such as Fiji and Palau, are supplying growing

amounts of marine ornamental fish, especially to the

United States [9]. Although about 25 species are

cultured, only 17 are commercially feasible, and the

other 8001200 species of fish in the trade are harvested

from the wild, primarily from coral reefs [9,39].

5.2.1. Culture techniques for marine ornamental fish

This analysis focuses on clownfish as a representative

species for the culture of marine ornamentals in the

Philippines. Several other marine ornamentals, such as

orchid dottybacks (Pseudochromis fridmani), also utilize

a similar culture system.

Common clownfish or anemone fish (Scientific Name:

Amphiprion ocellaris. Family: Pomacentridae) are the

most commonly kept clownfish in aquaria. They

originate in the Indo-Pacific region and reach a

maximum size of 8 cm in the wild and 5 cm in an

aquarium. The common clownfish is omnivorous and is

compatible with invertebrates. The common clownfish

has a symbiotic relationship with the anemone, among

whose tentacles it lives. Clownfish can live in excess of

18 years and are best kept in a 114-liter (30-gallon)

aquarium tank.

Full-cycle aquaculture for clownfish consists of four

stages: broodstock, hatchery, larval rearing/nursery, andgrow-out (Fig. 3). Clownfish are relatively easy to breed

in captivity. Since it is often difficult to obtain adult

wild-caught fish in good condition, many aquarists grow

their own clownfish broodstock. This may take 618

months depending on the size of the fish when breeding

begins. Two clownfish, unknown to each other when

first put into the tank, will readily progress to a bonded

pair that endures for life. Eggs are laid on a flat surface

(ocean rock, live rock, slate, clay pots, tile), close to or

under the protection of the host anemone. Eggs are

mainly cared for by the male and hatch in 710 days

depending upon water temperature. Clownfish spend the

first 23 weeks of their lives as pelagic larvae. Adult

behavior begins to be seen when fish settle on the

bottom in association with anemones. When the young

clownfish are fully colored and about 0.51.5 cm long,

they are moved to a tank with a sponge filter [40]. The

fish are fed dry foods and/or brine shrimp [40]. When

properly fed, the clownfish develop to a length of 5 cm in

4 months.


The financial analysis focused on an integrated system

of broodstock, hatchery, larval rearing/nursery, and

ARTICLE IN PRESS

Table 4

Broodstock Hatchery/nursery Grow-out Integrated

Year 1 Year 5 Year 1 Year 5 Year 1 Year 5 Year 1 Year 5

(a) Summary of cash flow (years 1 and5) across the four grouper (Epinephelus spp.) culture scenarios modeled for the Philippines (all figures in USD)

Beginning cash balance 32,032 31,443 49,288 93,274 10,256 32,143 138,995 85,791

Cash receipts/Income 11,751 23,503 18,018 45,045 14,400 14,400 98,984Cash outflow/costs: operating expenses 6762 13,524 6358 15,895 4786 4786 40,025 40,025

Net cash income 4989 9979 11,660 29150 9614 9614 (40,025) 58,959

Capital equipment purchase 25270 200 42,930 5470 98,970 1200

Long term/capital loan payment 14909 25,329 3227 58,392

Operating loan 3381 3179 2393 20,013

Operating loan payment 3990 3751 2824 23,615

Ending cash balance 2106 41,222 7224 122,424 8691 41,757 (52,534) 143,550

(b) Summary of cash flow (years 1 and 5) across the four grouper (Cromileptes altivelis) culture scenarios modeled for the Indonesia (all figures in

USD)

Broodstock Hatchery/nursery

(medium scale)

Hatchery/nursery

(small scale)

Grow-out

Beginning cash balance 19,446 256,564 48,585 270,595 4672 27,247 10,530 11,358

Cash receipts/income 41,352 82,704 42,508 106,270 5002 12,505 20,250

Cash outflow/costs: operating expenses 4080 8160 9790 24,475 1414 3535 5520 5520

Net cash income 37,272 74,544 32,718 81795 3588 8970 (5520) 14,730

Capital equipment purchase 15,366 1570 38,795 2300 3258 350 5010

Long term/capital loan payment 9066 22,890 1922 2956

Operating loan 2040 4895 707 2760

Operating loan payment 2407 5776 834 3259

Ending cash balance 35,522 329,538 28,345 350,090 832 35,867 (6468) 26,088



10/20

grow-out in the Philippines. This is an indoor system

located in a coastal area with access to both salt and

fresh water and transportation to markets.

The analysis shows that production of clownfish in

the Philippines can be profitable. The total cost of

production per clownfish is US$0.53 (Table 5), with a

producer price of US$2.50 per fish. Gross receipts for a

full production year are US$114,108. Cash flow is

negative in the first year due to start-up costs, but

positive in subsequent years (Table 6).

However, capital investment requirements and oper-

ating costs are too high for clownfish culture to be an

alternative or supplemental livelihood for small-scale

fishers, who are often poor and lack investment capital

(Table 7). Total capital investment costs are US$20,212

in the first year and annual variable costs are

US$27,060. Moreover, culturing marine ornamental fish

requires a level of management skill and technology that

are beyond the capacity of most small-scale fishers

without training and extension services.

5.3. Ornamental invertebrates aquaculture

The most popular live invertebrate species in the

marine ornamental trade are hard corals (Scleractinia),

soft corals (Alcyonacea), live rock (i.e., encrusted or

sessile invertebrate species or assemblages attached to ahard substrate, such as dead coral, reef rubble, or rock),

and reef-dwelling crustaceans and bivalves (e.g., orna-

mental shrimps and giant clams). Other reef inverte-

brates, including anemones, starfish, sea urchins, and

beche-de-mer (holothurians), are becoming increasingly

popular products, with approximately 300 species

traded internationally as live organisms.

The United States is the key global market for these

products. Between 1992 and 1997, more than 90 percent

of corals traded globally were sold in the US. At present,

the US imports 5680 percent of all live coral traded

globally. In the late 1990s, the US states of Hawaii and

Florida legislated bans on live rock harvesting; since

then, nearly all (95 percent) live rock sold in the country

has been imported. While exact figures are unknown,

US imports of live rock are estimated to total millions of

kilograms annually. More than 50,000 tons of live rock

are thought to be currently held within US aquaria.

During the 1990s, global production of live coral and

live rock for the marine ornamentals trade increased at

an average annual rate of 1530 percent. Since 1992,

Indonesia and the Fiji Islands have been the leading

exporters of these invertebrates. Approximately 2000

species of live coral are traded worldwide, with about 60

ARTICLE IN PRESS

Table 5

Summary annual enterprise budget for an integrated productionsystem for common clownfish (Amphiprion ocellaris) in the Philippines

(all figures in USD)

Cost category

Variable costs

Feed 4200 (16%)

Medication 600 (02%)

Electricity 1500 (05%)

Labor 5400 (20%)

Marketing and packing 1200 (04%)

Supplies 2640 (10%)

Repairs 5052 (19%)

Miscellaneous 468 (02%)

Subtotal 21,060 (79%)

Fixed costs

Depreciation 3854 (14%)

Interest Payments 1729 (06%)

Miscellaneous 0 (00%)

Subtotal 5583 (21%)

Total expenses 26,643 (100%)

Total income 114,108

Balance 87,465

Fig. 3. Clownfish culture production and marketing chain in the Philippines.



11/20

species making up the majority of consumer imports.

Indonesia is a leading source country, exporting around900,000 stony corals per year. In 1997, the US imported

US$5 million in live coral. For live rock, the Fiji Islands

are a principal producer for the global ornamental

trade, with exports from the Fijian and Tongan islands

tripling between 1996 and 2001. The price of Fijian live

rock averages between US$1.25 and US$2.00 per kg.

Between 1992 and 2000, the total value and volume of

live rock sales in the US was an estimated US$14 million

and 2.5 million kg of live rock. This amounts to an

average selling price of US$5.60 per kg, reflecting a

250450 percent increase in value over the Fijian

producer price.

5.3.1. Culture techniques for live rock and live coral

The asexual propagation of hard and soft corals

through fragmentation began in the 1960s [41]. During

the late 1980s, the international conservation commu-

nity began raising concerns about the sustainability of

the trades reliance on wild harvest. Conservation

organizations then launched an ad hoc exploration of

culture technologies as an opportunity for both altera-

tive income generation and coral reef rehabilitation in

Indo-Pacific coastal communities. By the mid-1990s,

numerous small-scale private culture operations for

profit and research commenced throughout the Indo-

Pacific and on the US mainland (including basement

hobbyists using home aquaria).

For live rock, the preferred culture technique is based

on the seeding of porous, calcareous substrate (e.g.,

quarried limestone) that is placed on the seafloor

(typically at a depth of between 4 and 16 m) [42,43].

Culture generally takes 27 years, depending on site

placement and target coverage and quality. Inverte-

brates are allowed to recruit and become established on

the substrate as live rock that can then be harvested and

held for sale (Fig. 4).

For live corals, the preferred culture technique is

based on coral fragmentation (Fig. 5). Either nubbins

(pruned pieces from tips or middles) of branching

parent-colony hard corals or pie-sliced segments ob-

tained through parent-colony soft coral biopsy areaffixed to a base (substrate) using epoxy, string, wire,

or mesh or hung from monofilament line suspended in

the water column. These are grown to a marketable size

(i.e., approximately fist-sized). Other forms of asexual

coral reproduction (e.g., encouraging polyp exclusion or

polyp ball formation) are still being researched and are

currently prohibitively costly on a commercial basis.

At the time of study, culture of a few other

invertebrate reef speciesmost notably giant clams

(e.g., Tridacna crocea) and ornamental pinnaeids such

as the fire shrimp (Lysmata debelius)was done mostly

under experimental or opportunistic production techni-

ques not yet regarded as cost-effective options for

private culture operators.


A financial analysis for cultured live rock and/or live

coral was conducted comparing a small-scale produc-

tion model in the Indo-Pacific and a medium-scale

production model in the US. Both models were

examined as stand-alone operations, with no supple-

mental income generated from the harvest and sale of

wild organisms. The analysis assumed minimum re-

quired expenses and production period, as well as the

ARTICLE IN PRESS

Table 7

Summary of total projected initial capital investment costs for

common clownfish (Amphiprion ocellaris) in the Philippines (all figures

in USD)

Cost category

Building and equipment 5915 (29%)

Broodstock 5192 (26%)

Nursery 1365 (07%)

Grow-out 5175 (25%)

Mi cro alga e a nd Roti fer cu ltur e sys tem 2 565 (13%)

Total capital investment 20,212 (100%)

Table 6

Summary of cash flow (5 years) for an integrated production system for common clownfish ( Amphiprion ocellaris) in the Philippines (all figures in

USD)

Year 1 Year 2 Year 3 Year 4 Year 5

Beginning bank balance 33,742 (7058) 78,420 165,030 249,809

Cash receipts/income 9509 114,108 114,108 114,108 114,108

Cash outflows/costs: operating expenses 13,530 27,060 27,060 27,060 27,060Net cash income (4021) 87,048 87,048 87,048 87,048

Capital equipment purchase 20,212 300 438 2269 3005

Long term/capital loan payment 11,925

Operating loan 6765 7058

Operating loan payment 7983 8328

Ending cash balance (7058) 78,420 165,030 249,809 333,852



12/20

existence of certain optimal conditions such as stable

demand, ideal biotic site conditions, secure access to

coastal waters and the seafloor, etc. [31].

Both production models are highly technology-

dependent and require significant capital investment,

particularly the US medium-scale model. The capital

investment needs of a small-scale Indo-Pacific operation

(Table 8) are only 68 percent of US capital costs

(Table 9), because the small-scale model does not

require a commercial workboat, on-land grow-out and

holding facilities, or SCUBA equipment. However, at

US$20,000 to US$30,000, capital costs are relatively

ARTICLE IN PRESS

Fig. 4. Live rock culture production and marketing chain in the Indo-Pacific region.

Fig. 5. Live coral culture production and marketing chain in the Indo-Pacific region.

Table 8

Summary of total projected capital investment costs for the live rock, live coral, and mixed rock and coral culture scenarios under the small-scale

developing country (Indo-Pacific) production model (all figures in USD)

Cost category Live rock (only) Live coral (only) Mixed live rock and live coral

Marine operations (seeding, grow-out, and collection)

Ocean transport 12,834 (46%) 12,834 (62%) 12,834 (39%)

Collection and holding 2353 (09%) 2585 (13%) 2585 (08%)

Coral grow-out stations N/A 4498 (22%) 4498 (14%)Diving equipment 660 (02%) 660 (03%) 660 (02%)

Subtotal 15,847 (57%) 20,577 (100%) 20,577 (63%)

Initial substrate Subtotal 12,000 (43%) N/A 12,000 (37%)

Total capital investment 27,847 (100%) 20,577 (100%) 32,577 (100%)



13/20

high for a rural village producer in the Indo-Pacific

region.

Within the projected enterprise budget, variable costs

account for the majority of total expenses: 75 percent of

all costs under the medium-scale (US) model and 95

percent of all costs under the small-scale Indo-Pacific

model (Table 10). The medium-scale (US) production

model performs best with culture of both live rock and

live coral (rather than just one or the other), due to a

higher income levels. The small-scale Indo-Pacific

production model performs best with culture of live

coral only, because costs are lower.

Projected 10-year cash flows indicate poor financial

performance for both small- and medium-scale produc-

tion models of live rock and/or live coral culture

(Tables 11a and b). Both models operate at a loss

ARTICLE IN PRESS

Table 9

Summary of total projected capital investment costs for the live rock, live coral, and mixed rock and coral culture scenarios under the medium-scale

(US) production model (all figures in USD)

Cost category Live rock (only) Live coral (only) Mixed live rock and live coral

Marine operations (seeding and collection)

Ocean transport 190,712 (43%) 73,013 (28%) 190,712 (37%)

Collection and holding 24,185 (05%) 807 (01%) 24,185 (05%)Diving equipment 12,650 (03%) 6915 (02%) 12,650 (02%)

Subtotal 227,547 (51%) 80,735 (30%) 227,547 (44%)

Initial substrate Subtotal 34,000 (08%) N/A 34,000 (07%)

Land operations (grow-out, holding, and shipping)

Holding/grow-out facility 140,178 (32%) 141,667 (54%) 212,666 (41%)

Packing and shipping 1480 (01%) 1480 (01%) 2265 (01%)

Administration 5395 (01%) 5395 (02%) 5640 (01%)

Land transportation 32,375 (07%) 35,500 (13%) 32,375 (06%)

Subtotal 179,428 (41%) 184,052 (70%) 252,946 (49%)

Total capital investment 440,975 (100%) 264,787 (100%) 514,493 (100%)

Table 10

Projected summary enterprise budget for live rock, live coral, and mixed rock and coral culture operations for both medium- (US) and small-scale

(Indo-Pacific) models over a 2-year production cycle (all figures in USD)

Cost category Live rock (only) Live coral (only) Mixed live rock and coral

Medium-scale model Small-scale model Medium-scale model Small-scale model Medium-scale model Small-scale model

Variable costs

Cost of goods 71,748 (06%) 6000 (08%) 21,286 (03%) 432 (01%) 73,286 (05%) 6432 (08%)

Cost of sales 66,240 (05%) 6180 (09%) 66,240 (08%) 6180 (09%) 96,960 (07%) 8100 (10%)

Ocean transport 88,880 (07%) 12,540 (17%) 4747 (01%) 12,540 (19%) 88,880 (06%) 16,060 (19%)

Land transport 30,000 (02%) 0 (00%) 30,000 (04%) 0 (00%) 30,000 (02%) 0 (00%)

Advertising/sales 10,080 (01%) 0 (00%) 10,080 (01%) 0 (00%) 10,080 (01%) 0 (00%)

Payroll 504,000 (39%) 43,776 (61%) 274,008 (33%) 43,776 (65%) 554,000 (38%) 49,920 (59%)

Supplies/repairs 126,960 (10%) 288 (00%) 126,960 (15%) 288 (00%) 151,440 (11%) 288 (00%)Utilities 77,280 (06%) 0 (00%) 77,280 (09%) 0 (00%) 98,160 (07%) 0 (00%)

Miscellaneous 2640 (00%) 0 (00%) 2640 (00%) 0 (00%) 2640 (00%) 0 (00%)

Subtotal 977,828 (76%) 68,784 (95%) 613,241 (73%) 63,216 (94%) 1,105,446 ( 77%) 80,800 (95%)

Fixed costs

Insurance 83,352 (06%) 0 (00%) 65,712 (08%) 0 (00%) 88,800 (06%) 0 (00%)

Rentals 53,980 (04%) 0 (00%) 46,720 (06%) 0 (00%) 53,980 (04%) 0 (00%)

Licenses 9200 (01%) 150 (00%) 1100 (00%) 150 (00%) 9200 (01%) 150 (00%)

Depreciation 54,598 (04%) 3406 (05%) 1 8,116 (02%) 4144 (06%) 6 6,627 (05%) 4144 (05%)

Interest Payments 103,500 (08%) 0 (00%) 85,320 (10%) 0 (00%) 108,000 (07%) 0 (00%)

Miscellaneous 8880 (01%) 0 (00%) 8880 (01%) 0 (00%) 8880 (01%) 0 (00%)

Subtotal 313,510 (24%) 3556 (05%) 225,848 (27%) 4294 (06%) 335,487 (23%) 4294 (05%)

Total expenses 1,291,338 (100%) 72,340 (100%) 839,089 (100%) 67,510 (100%) 1,440,933 (100%) 85,094 (100%)

Total income 1,055,144 14,250 527,892 15,200 1,352,636 29,850

Balance 236,194 58,090 311,197 52,310 88,297 55,244



14/20

during a single production cycle of 2 years. Positive

cash flows are generated by the fourth or fifth

production cycle, in Years 810, of the medium-scale(US) model.

The medium-scale US model is sensitive to higher

price structures, with capture of a 10 percent green

premium (a price premium for goods produced using

environmentally sustainable methods; e.g., labeling

through Marine Aquarium Council certification) in-

creasing financial performance to the point of profit-

ability (Table 12). However, the small-scale Indo-Pacific

model remains unprofitable even with a green pre-

mium.

5.4. Socioeconomic dimensions of aquaculture as a

solution to destructive fishing

A common strategy to address the problem of

destructive fishing and over-fishing is to provide fishers

with alternative employment opportunities, such as

aquaculture. The implicit assumption behind this

strategy is that fishers will willingly and happily settle

into a new way of making a living. Opinions are mixed

regarding aquacultures potential as an alternative

livelihood for small-scale fishers. Some suggest that

many small-scale fishers would resist shifting from

capture fishing to aquaculture because of social and

economic difficulties [25,26]. While this is probably true

in some cases, several studies have reported success in

implementing aquaculture projects among small-scalefishers [4446]. The design and implementation of

successful aquaculture projects must reflect an under-

standing of and be compatible with the social, economic,

and technical structure of the fishing community. As

noted by Pollnac [47], if care is taken, and the need is

clearly present, aquaculture activities can be successfully

introduced into fishing communities.

As noted above, two studies provided data for this

analysis. The first was a study of job satisfaction in 23

fishing communities in Indonesia, the Philippines, and

Vietnam [27]. The second was a quantitative national

survey of 700 fisherfolk from 16 provinces in the

Philippines, which was conducted to learn about the

current level of knowledge and concerns on coastal

issues, attitudes, and practices in the country [28].

The two studies indicate that, contrary to conven-

tional assumptions, most fishers would not leave fishing

for an alternative occupation. Fishers enjoy fishing and

the income and lifestyle, it provides. However, there is

evidence that fishers would consider aquaculture as a

supplemental source of food and income, especially if

the cost of the technology was low, income was good,

and other family members could be involved in the

operation.

ARTICLE IN PRESS

Table 11

Cycle 0 (yr 0) Cycle 1 (yrs 12) Cycle 2 (yrs 34) Cycle 3 (yrs 56) Cycle 4 (yrs 78) Cycle 5 (yrs 910)

(a) Projected cash flow for a medium-scale (US) mixed live rock and live coral culture operation over five production cycles (all figures USD)

Beginning cash balance 0 514,493 730,931 819,227 719,083 474,952

Cash receipts/income 0 0 1,352,636 1,541,077 1,685,063 1,822,056

Capital equipment purchase 514,493 197,150 335,487 335,487 335,487 335,487

Cash outflow/operating expenses 0 19,288 1,105,445 1,105,445 1,105,445 1,105,445Ending cash balance 514,493 216,438 88,296 100,145 244,131 381,124

(b) Projected cash flow for a small-scale (Indo-Pacific) mixed live rock and live coral culture operation over five production cycles (all figures USD)


Cash receipts/income 0 0 29,850 39,425 46,787 54,863

Capital equipment purchase 32,577 3556 4294 4294 4294 4294

Cash outflow/operating expenses 0 6232 80,800 80,800 80,800 80,800

Ending cash balance 32,577 9788 55,244 45,669 38,307 30,231

Table 12

Projected cash flow for a medium-scale (US) mixed live rock and coral culture operation over five production cycles with a 10% green premium being

paid on all products (all figures in USD)

Cycle 0 (yr 0) Cycle 1 (yrs 12) Cycle 2 (yrs 34) Cycle 3 (yrs 56) Cycle 4 (yrs 78) Cycle 5 (yrs 910)


Cash receipts/income 0 0 1,446,130 1,689,477 1,847,023 1,997,296

Capital equipment purchase 514,493 197,150 335,487 335,487 335,487 335,487

Cash outflow/operating expenses 0 19,288 1,105,445 1,105,445 1,105,445 1,105,445

Ending cash balance 514,493 216,438 5198 248,545 406,091 556,364



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6. Conclusions and recommendations

This section addresses a critical and timely question

for the trade in live reef organisms:

Can aquaculture be a solution to reduce fishing

pressure on coral reefs?

Below we present conclusions drawn from the results

of our study, as well as recommendations for policy

initiatives and economic incentives concerning the

development of small-scale aquaculture of coral reef

organisms in the Indo-Pacific region.

6.1. Live food fish

6.1.1. Conclusions

According to the financial feasibility analysis we

conducted for the culture of three species of grouper

(E. coioides and E. malabaricus in the Philippines andCromileptes altivelis in Indonesia), all four scenarios

examinedindividual broodstock, hatchery/nursery,

and grow-out stages and an integrated broodstock/

hatchery/nursery/grow-out systemare financially fea-

sible. However, the capital requirements for the brood-

stock, hatchery/nursery, and integrated system may be

beyond the financial means of many small producers.

These stages of grouper culture may need to be

developed as a larger project by private investors or

government or be subsidized by government.

Grouper grow-out appears to be a technologically

and economically feasible alternative livelihood for

small producers in the Indo-Pacific region. Capitalinvestment requirements (excluding the purchase of

transport boxes) are within the financial means of small

producers, and the results of our 10-year cash flow

analysis should encourage small producers and lenders

to consider investments in grouper grow-out systems. To

achieve these results, however, producers will need to

maintain high levels of management and have access to

markets, and prices will need to be stable.

6.1.2. Recommendations

If small-scale aquaculture of live food fish is to be an

economically and environmentally sustainable liveli-hood in the Indo-Pacific region, several problems will

need to be overcome:

The export of wild-caught grouper seed should be

regulated or prohibited. The collection of wild-caught

grouper seed often involves wasteful by-catch, is

damaging to other species, and is unsustainable in the

long term. The future of the industry depends on the

use of hatchery-raised seed and fry.

The harvest of postlarval reef fish should be limited.

One option to increase the productivity of high-value

coral reef fishes is to capture a proportion of the

settling juveniles from predation and culture them for

market or for return to the sea. Such harvesting

should not be allowed to jeopardize natural rates of

replenishment or to destabilize coral-reef food webs.

Hence, conservative levels of harvest will be required

pending the results of relevant research.

Stronger regulations should be established to addressreal and potential problems of coastal pollution from

aquaculture operations, including nutrients and organic

matter, medications, and other chemicals. Most South-

east Asian countries lack regulations to site and

manage coastal aquaculture, both pond and cage

culture. Mariculture development can be managed

with regulations and a legal framework to reduce

environmental impacts. One example is the Maricul-

ture Park project in the Philippines. Mariculture

parks are developed as an industrial zone with

infrastructure and services to support cage culture.

Standards should be established to certify cultured

grouper for quality and good culture practices. Such

certification and production standards should distin-

guish between grouper grown from hatchery-reared

seed and those raised from wild-caught seed and

fingerlings.

The marketing system for cultured food fish should be

improved. Government support and intervention may

be necessary to strengthen the marketing system, for

example, through the establishment of a cooperative

to organize small producers, render technical assis-

tance, and provide credit and inputs.

Small-scale producers should be provided with technical

assistance. Success in small-scale aquaculture willrequire that producers master financial, marketing,

and management skills as well as production ability.

One model for providing technical assistance is to

establish a central hatchery/nursery to supply fry to

small producers who do grow-out in the area. This

central facility, whether governmental or private, can

also supply technical assistance to the small produ-

cers.

Supporting infrastructure for grouper culture should be

addressed, including credit, productive inputs (feed,

chemicals), and markets. A regular supply of necessary

inputs (seed, feed) is an essential but often overlooked

component of grouper culture development.

A critical mass of small-scale producers should be

included in aquaculture project development so that

producers can exchange information and learn from

each other.

Producers should shift from using trash fish as feed.

Cost-effective formulated feed should be developed

and made available to producers.

Producers should adopt improved health management

methods to curtail the disease problems afflicting the

grouper industry. Vaccines will also need to be

developed.

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6.2. Live ornamental fish

6.2.1. Conclusions

While several marine ornamental species currently are

being commercially cultured, our analysis focused on

clownfish as a representative species in the Indo-Pacific.

A financial feasibility analysis for the culture of commonclownfish in the Philippines shows that the enter-

prise can be profitable. However, the capital investment

costs and operating costs are too high for clownfish

culture to be an alternative or supplemental livelihood

for small-scale fishers. Moreover, the level of manage-

ment skills and technology to culture marine ornamental

fish are beyond the capacity of most small-scale

fishers.

The most important factors affecting profitability of

clownfish culture are consistent production of market-

able fish, market price, and sales volume. Feed costs are

not a major factor affecting economic return, althoughthe unit cost of feed for marine ornamental fish is much

higher than commercial diets for food-fish. At this point,

culture is only commercially viable under conditions of

substantial technical capacity and operating capital, as

well as a very high pricing structure.


Before culture of marine ornamentals can be a viable

solution to relieve fishing pressure on coral reefs, a

number of actions must be taken:

Research programs must be supported to investigate

aquaculture of other high-demand marine ornamentalspecies and to make current technologies more easily

accessible to small-scale backyard culture operations.

Research must be supported on how to close the cycle

with high-value, high-volume fish (including angel-

fish). Research on full-cycle aquaculture must be done

to expand technology from the current approach

involving grow-out of recruits/juveniles.

Trade data on marine ornamental fish should be

collected and analyzed systematically to direct man-

agement and research.

Effective extension must be provided to transfer

aquaculture technology for marine ornamental fish

to nearshore tropical fishing communities.

Best practices in marine ornamental aquaculture should

be instituted to foster economically and environmen-

tally sustainable operations.

Subsidies may need to be made available to mitigate

the high capital investment costs and operating costs

of marine ornamental culture.

Market systems must be amenable to regulation (e.g.,

export/import controls, certification) for aquaculture

to become viable. In addition, a price premium may

be needed to enable sustainably cultured products to

compete with wild-harvest products.

6.3. Live ornamental invertebrates

6.3.1. Conclusions

A financial analysis of small-scale culture of live rock

and/or live coral in the Indo-Pacific region showed that

the enterprise can, under certain conditions, be a

technologically and economically feasible alternativelivelihood for small producers in the Indo-Pacific region.

The culture of live rock and live coral uses low

technology and yields a high-demand product. How-

ever, given current market prices, live coral and live rock

products have a low per-unit value and generate

insufficient returns to offset high capital investment

and operating costs.

The establishment of stand-alone culture systems for

live rock and live coral will require adequate start-up

capital; moderate to high prices and/or green premiums

for sustainably cultured products; adequate technology

transfer; ideal market conditions, particularly demand

for cultured products; and in-country or overseaswholesalers who give preference to cultured products

over wild-harvested organisms.


The culture of live rock and live coral could be an

important alternative to wild harvest, assuming that the

following conditions are addressed:

The marine ornamental industry, particularly whole-

salers and end-consumers, must preferentially trade

cultured live rock and live coral products over wild-

captured products, increasing the demand for them inthe marketplace.

Government subsidies, small business loans, and private

donor investment may need to be available to small-

scale farmers for start-up and operational costs.

Standards for sustainable aquaculture must be estab-

lished and best management practices must be used.

Centers of small-scale farming expertise and extension

support should be developed to build capacity for

sustainable invertebrate culture in the Indo-Pacific

region and transfer technology from developed to

developing countries.

National governments must provide culturists with clear

property rights and access to the seabed. Clear andsimple legislation must be implemented to protect

these rights.

Third-party certification must be established to improve

marketability and profitability of cultured products.

Price increases associated with green premiums for

sustainably cultured product would also be helpful.

In addition, the following ideal conditions should be

sought for small-scale reef invertebrate culture application.

Venture capital for eco-friendly private invest-

ment for small-scale reef invertebrate culture

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must be encouraged, particularly for exporting whole-

salers.

Financial incentives must be available (e.g., exemption

from sales or export taxes) to attract overseas

investors and encourage them to make necessary in-

country investments in infrastructure to hold, pack,

and ship cultured products. Commercial insurance against diving accidents and

natural disasters must be available to reduce the risk

liability to culturists.

Laws for monitoring farmed seafloor areas must be

strengthened and enforced to reduce poaching of

cultured products as well as illegal wild-harvest of reef

invertebrates.

Additional research should be undertaken on ideal

seeding and propagation locations, vertical and

horizontal placement in the water column, and

ecological impacts of culture. Culture of live rock

and live coral culture should be encouraged in

conjunction with coastal management activities.

6.4. Social and economic aspects of aquaculture

development: policy recommendations

The success of small-scale aquaculture as a partial

solution to the problem of overfishing and destructive

fishing depends on the recognition of potential social

and economic problems and taking steps to address

them.

Aquaculture development must be integrated withincomprehensive rural development programs, as well as

conform to the overall national development process.

Aquaculture development programs, especially those

targeting small-scale fishers, should be participatory

and have the interest and cooperation of the target

group. The project should be designed to complement

existing household and community economic activ-

ities. Women need to be included at all levels of the

project, since they may play an important role in the

aquaculture activity.

The choice of technology should reflect appropriate

levels of management intensity, complexity, risk, and

capitalization. Simple technologies requiring low

levels of capitalization and extensive, as opposed to

intensive, levels of management are preferable for

many rural communities. A labor-intensive operation

is better-suited to many communities where labor is

abundant, wage rates are low, and capital is relatively

scarce. At least initially, technologies that reliably

produce acceptable yield levels through simple opera-

tion are preferable to those emphasizing high yields

through intensive or complex management.

Aquaculture development must pay particular attention

to the issue of risk. Fish farming is inherently risky

because the individual producer has little or no

control over the physical or economic environment.

A project with a low-gain, low-risk strategy in which

the burden of risk is shared by others may be more

attractive to the target group than one that offers high

gain and high risk.

Projects must be designed so that the target group canmaintain and operate them over the long term. All too

often, once project sponsors leave, small-scale farmers

have problems generating adequate capital and cash

flow for operations, such as purchasing feed or

making repairs to the facility. Local businessmen or

others with sufficient capital may take over the

operation, and the small-scale fish farmer may

become nothing more than hired labor on what was

originally their own operation.

Successful aquaculture development must make suffi-

cient credit available to small-scale producers. The

government will need to provide low-interest loans to

fish farmers who are unable to obtain credit from

lending institutions due to risk, lack of collateral, high

interest rates, or lack of commercial lenders. Fish

farmers should be provided with basic training in

business and financial management as a condition of

credit approval so as to assure proper use of the

funds.

The marketing system should be examined to identify

opportunities and constraints, such as product form

requirements, species acceptability, price, physical

infrastructure improvements, or conflicts with existing

market intermediaries. Government support and

intervention may be necessary to improve the market-ing system, for example, through the establishment of

a cooperative to organize fish farmers, render

technical assistance, and provide credit and inputs.

Aquaculture development must ensure a reliable supply

of necessary inputs, such as seed and feed. Hatcheries,

for example, may need to be developed to ensure a

consistent supply of fry.

Clear property rights to land, water, and species used in

culture must be established. Aquaculture sites

whether land-based ponds or located on the water

surface, in the water column, or on the seafloorare

often traditionally viewed as communal property.

Conflicts between aquaculture and more traditional

water-related activities and uses of land and water

resources are among the most serious constraints to

expanding aquaculture activities.

Legal measures to promote and protect aquaculture

may be needed. There is a widely perceived need to

formalize the process for securing sites and water,

obtaining various licenses, furnishing legal protection

against theft, and the like. Legislation is also needed

to protect the water rights of fish farmers against

upstream pollution and damage to coastal environ-

ments.

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Effective extension and research programs should be

undertaken to improve the rate of technology transfer

and adoption. Specialized training and technical

assistance for the fish farmer is a priority in the

development process. Aquaculture is a multidisciplin-

ary science and many kinds of research are needed to

develop and support it.

6.5. Overall conclusions

Two important overall conclusions arise from this

study concerning the potential of aquaculture as a

solution to reduce fishing pressure on coral reefs.

First, cautionary evidence indicates that, under

certain conditions, some forms of small-scale aquacul-

ture of live coral reef organisms can be a useful solution

for reducing fishing pressure on coral reefs. However,

technical capacity, operational management challenges,

high capital investment and operating costs, access tocredit and markets, prices, high production risk levels,

access to technology, and regulatory issues may limit the

expansion of these culture operations among small

producers.

Second, and more specifically, the study concludes

that grouper grow-out is currently both technologically

and economically feasible for immediate transfer to small

producers in the Indo-Pacific region. Although some

technical and marketing problems (such as ensuring

availability of seed) remain, the development of grouper

culture looks promising. Grouper culture is an option

that can be used to manage and protect grouper

populations in the wild, and at the same time provide

an alternative source of livelihoods for fishers now

engaged in wild capture of grouper. The development of

small-scale grouper culture could significantly reduce the

markets dependence upon wild stocks. However, for the

industry to grow, economic incentives will need to be put

into place. Coastal pollution from aquaculture opera-

tions as well as the use of wild-caught trash fish for feed

also raise concerns about sustainability.

6.6. What should come next for culture of live reef

organisms?

In order for aquaculture to become a viable solution

for reducing the pressures on coral reefs in the Indo-

Pacific region, the following actions need to be carried

out on a priority basis:

Further research on full-cycle aquaculture of live

coral reef organisms targeted by international trade.

Identification of ideal site conditions for propagation

of selected species.

Assessment of the ecological impacts of aquaculture

and use of these assessments to help inform manage-

ment decisions.

Quantification of the ecological contributions of

reduced fishing pressure on reef restoration and fish

stock replenishment.

Demonstration of aquaculture as an alternative

livelihood for small-scale fishing households, rather

than just supplemental income.

Collection of information on consumer preferences. Consumer outreach to increase the demand for

culture-certified products.

Improved monitoring of imports and exports of live

reef organisms and more timely efforts to collect and

incorporate accurate data in trade statistics.

Systematic analysis of trade data to help direct

management and research.

Price analysis in both producing and consuming

countries.

Our analysis of the financial, biological, technologi-

cal, and social feasibility of small-scale aquaculture innearshore tropical waters provides a realistic basis for

cautious optimism about its potential to be part of the

solution to destructive and over-fishing of live reef

organisms in the Indo-Pacific. In some circumstances,

small-scale aquaculture can be successful; in others, it

will need substantial help in the form of subsidies for

start-up costs and technology transfer. In all cases,

several conditions must be met in order for small-scale

aquaculture of live reef organisms to be a successful,

sustainable industry:

Economic conditions that feature necessary infra-structure and provide credit and market incentives to

reduce the investment risk for aquaculture operations.

Financial conditions that enable cultured products to

compete with wild-caught products, including me-

chanisms to reduce high start-up and operational

costs and provide necessary technology.

Legal conditions that include clear, enforceable

zoning and property rights to encourage the use of

best practices and foster multiple uses of resources

while limiting user conflict.

Social conditions and programs that are sensitive to

the needs and desires of potential fish farmers while

also educating consumers and encouraging a pre-ference for cultured products.

Research to refine current aquaculture technology, to

apply current technologies to other high-demand

species, to better understand and monitor the trade,

and to create a consumer preference for cultured

organisms.

Is aquaculture a solution for reducing fishing pressure

on coral reefs? The results of this study provide a clearer

idea about what it would take to make aquaculture the

priority solution. For the first time, we know the

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conditions necessary to make farming the reef successful

and sustainable.

Acknowledgments

This study was made possible through the generoussupport of the Western Pacific Conservation Program of

the David and Lucile Packard Foundation; the Fisheries

Working Group of the Asia-Pacific Economic Coopera-

tion (APEC); and the Oak Foundation. The host

organizations for the study were the World Resources

Institute and the Community Conservation Network.

The authors would like to thank the following people

for their review comments and suggestions on the

studys findings: William Aalbersberg, Austin Bowden-

Kirby, Lauretta Burke, Don Doering, Suzie Green-

halgh, Yumiko Kura, and Karen Holmes. The authors

would also like to thank all the people, too numerous toname here, who provided their time, knowledge and

experience to the Farming the Reef project.

References

[1] Corbin JS. Marine Ornamentals 99: conference highlights and

priority recommendations. Aquarium Sciences and Conservation

2001;3(13):311.

[2] Graham TR. A collaborative strategy to address the live reef food

fish trade. Honolulu, HI: The Nature Conservancy; 2001.

[3] Burke L, Revenga C, et al. Pilot assessment of global ecosystems:

coastal ecosystems. Washington, DC: World Resources Institute;

2001.[4] Burke L, Selig E, Spalding M. Reefs at risk in Southeast As

1-s2.0-S0308597X04000983-main_coral reef

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