Development Nepal

Development and Stability

Research Abstract

Abstract

The current study attempts to estimate the opportunity cost of establishing the Royal Chitwan National Park (RCNP). It also calculates the current direct use value of the park and provides an approximate value of its indirect use and non-use values to estimate the total economic value (TEV) of the RCNP, and calculates the net benefit of conservation using an economic valuation framework and a financial analysis. 

 

Using a tourist market survey, it is estimated that the current gross direct use value of the park is US$ 10.1 million annually. Of this, approximately US$ 8.87 million is attributed to tourism revenue, US$ 0.08 million DNPWC non-tourism revenue, and local benefits from utilization of minor forest products in the tune of US$ 1.15 million annually. However, performing a sensitivity analysis on tourism revenue it is found that tourism revenue in the RCNP may fluctuate between US$ 4.88 million to US$ 11.98 million per year depending on the number of visitors. Nevertheless, for calculations of direct use benefits, a five-year average visitation rate is used. The direct cost of biodiversity conservation in the RCNP is the maintenance cost of the park, which is the expenses of the DNPWC/ RCNP, and the annual economic loss in agricultural production due to wildlife depredation, which would not occur if the park was not there. Combining the maintenance cost of the park and the economic loss due to wildlife depredation it is estimated that the direct cost of conservation is US$ 705,616. Subtracting this from the gross direct use value of the park it is found that the net direct use value of the park is equal to US$ 9.4 million annually. Extrapolating on per unit values of watershed function, carbon sequestration, and biodiversity from a study conducted by Verma (2000) in Himachal Pradesh, India the TEV of the RCNP is estimated to be US$ 1.06 billion annually. Using a sensitivity analysis assuming that TEV is only 25% of the above still results in an annual TEV of US$ 265.8 million.

 

The opportunity cost of the park is taken to be utilizing the current park and bufferzone forest area for commercial Sal forestry upto an altitude of 250 m. and leaving the areas above that for conservation. The annual potential returns from such an operation, which is the opportunity cost of establishing the park, would be US$ 43.5 million. 

 

Using an economic valuation framework, the net benefits of conservation in the RCNP are calculated to be in the tune of US$ 1.02 billion annually. However, using a financial analysis framework, results in a net loss of US$ 34.1 million per year, which may be considered to be the subsidy for biodiversity conservation in the RCNP. 

 

 

 

The Opportunity Cost Of Biodiversity Conservation In Nepal 

-Arun Shumshere Rana

Kathmandu University, Nepal

epn@mof.gov.np

Sunday, October 30, 2005