Economic Valuation Study of Batang Gadis Watershed Services

Transcription

Conservation International-Indonesia
Economic Valuation
of Watershed Services
Batang G
adis N
ational P
ar
k,
Gadis
National
Par
ark,
Mandailing N
atal, N
or
th SSumatra,
umatra, IIndonesia
ndonesia
Natal,
Nor
orth
umatra Corridor P
Nor
thern SSumatra
orthern
Prrogram
Lelyana Midora
Dessy Anggraeni
Sugested citation:
Midora,L & D. Anggraeni. 2006
Economic Valuation of Watershed Services
Batang Gadis National Park,
Mandailing Natal, North Sumatra, Indonesia.
Conservation International - Indonesia. Jakarta.
ISBN: 979-25-6294-X
March 2006
CI Indonesia
Jl. Pejaten Barat No. 16 A,
Kemang, Jakarta 12550, INDONESIA
Phone: (62 21) 7883 8626, 7883 8624, 788 32564
Fax: (62 21) 780 6723
http: www. conservation.or.id
i
Table of Contents
Cover –i
Table of Contents –ii
List of Table – iii
Executive Summary –iv
Chapter 1.
1.1
1.2
1.3
Introduction
.......................................................................................................................1
Background
.......................................................................................................................1
Objective of Study
................................................................................................................1
Structure of the Report ..........................................................................................................2
Chapter 2.
2.1
2.2
2.3
2.4
Area Description
.................................................................................................................3
Batang Gadis National Park
..................................................................................................3
Geographical Conditions of Mandailing Natal District
.............................................................4
Socio Economic Conditions in Mandailing Natal District
.......................................................7
Batang Gadis Watershed ..........................................................................................................9
Chapter 3.
3.1
3.2
3.3
3.4
Methodology
.....................................................................................................................12
Component of the Study ........................................................................................................12
General Approach and Methodology
....................................................................................13
Data Collection .....................................................................................................................14
Limitation and Focus Area of Study
.......................................................................................16
Chapter 4.
4.1
4.2
4.3
Ecological Value of Watershed Services
..............................................................................18
The Natural Hydrological Cycle ...........................................................................................18
Relationship Between Land Use Changes and Hydrological Functions ........................................19
4.2.1 Forests and Hydrological Function ..............................................................................19
4.2.2 Impact of Landscape Management Practices on Water Balance .........................................21
4.2.3 Land Degradation and Rehabilitation
..................................................................24
Biodiversity Importance of Batang Gadis Watersheds ..................................................................25
Chapter 5.
5.1
5.2
5.3
5.4
Economic Value of Watershed Services
...............................................................................26
Definition of Economic Value
...........................................................................................27
Economic Valuation Techniques ...........................................................................................28
Assessing the Economic Values of Watershed Services Using Benefit Transfer Techniques ...............30
Net Present Value (NPV) ........................................................................................................32
Chapter 6.
6.1
6.2
Economic Valuation of Watershed Benefits ...............................................................................33
Direct Use of Watershed Services: Water Regulation and Supply ................................................33
6.1.1 Value of Water for Households’ Consumption
...........................................................33
6.1.2 Value of Water for Agriculture ..................................................................................34
6.1.3 Value of Water for Fishery .........................................................................................37
6.1.4 Total Direct Economic Value of Water Supply and Regulation from Batang Gadis National
Park .......................................................................................................................38
In-Direct Use of Watershed Services: Flood, Landslide and Erosion Control ................................38
Chapter 7.
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
Incentive Mechanism for Watershed Services ....... .....................................................................42
The Objectives of Incentive Mechanism .................................................................................42
Type of Benefits from Watershed Services ................................................................................43
Beneficiaries of Watershed Services .........................................................................................44
The Basis of Valuation and Decision Making ...........................................................................45
Sources of Fund
..................................................................................................................47
Type of Incentive Mechanism for Watershed Services ................................................................48
Reviewing Initiatives of Incentive Mechanism for Watershed Services in Indonesia .......................50
Identifying Proposed Incentive Mechanism for Watershed Services in Batang Gadis National Park ...53
Chapter 8.
Conclusion and Recommendation
References
............................................................................................................................................. 60
.........................................................................................57
ii
List of Table
Table 1.
Table 2.
Table 3.
Table 4.
Table 5.
Table 6.
Table 7.
Table 8.
Table 9.
Table 10.
Table 11.
Table 12.
Table 13a.
Table 13b.
Table 14.
Table 15.
Table 15a.
Table 15b.
Table 16.
Table 17a.
Table 17b.
Table 18.
Table 19.
Table 20.
Table 21a.
Table 21b.
Table 22.
Table 23.
Table 24.
Figure 1.
Figure 2.
Figure 3.
Figure 4.
Figure 5.
Figure 6.
Figure 7.
Figure 8.
Figure 9.
Figure 10.
Figure 11.
Figure 12.
Figure 13.
Figure 14.
Figure 15.
Figure 16.
Figure 17.
Report Structure ..................................................................................................................2
Soil Type of Six Main Watersheds in Madina .......................................................................5
Basic of Geographic Profiles of Madina District ...................................................................6
Number of Villages in Each Sub-district in Madina District ..................................................7
Composition of Ethnics in Madina
......................................................................................8
Prioritized Area for Rehabilitation in Batang Gadis Watershed, Madina District (Ha) ...........11
List of Data
.......................................................................................................................15
Distribution of beneficiary communities .............................................................................16
Composition of Vegetation in Batang Gadis National Park .................................................24
Estimates of Forest Ecosystem Value
................................................................................30
Estimates of National Park Ecosystem Value Indonesia .......................................................31
Number of people dependent on water supply from watersheds within the boundary of
Batang Gadis National Park
..............................................................................................33
Variables to estimate household water consumption
.........................................................34
Economic valuation of water resources for household’s consumption
.................................34
Types of land use systems in Madina District .....................................................................35
Variables to estimate water value for agriculture .................................................................36
Water Requirement for Paddies Field .................................................................................36
Economic Valuation of Water for Agriculture
...................................................................36
Fishery Production of Madina District in 2004
................................................................37
Variables to estimate water value for fishery
......................................................................37
Economic Valuation of Water for Fishery
..........................................................................38
Summary of total direct economic value of water supply and regulation from Batang Gadis
National Park
..................................................................................................................38
Portrait of damage cost caused by flood in Riau, West Sumatra (January, 2003) ..................39
Impacts of flood in Madina District (November 2004) .......................................................40
Variables to estimate damage cost caused by flood in Madina District .................................40
Economic valuation of damage cost caused by flood in Madina
........................................41
Beneficiaries of Watershed Services in Some National Parks in Indonesia
.........................44
Examples of Economic Incentives for Conservation
........................................................49
Matrix of Analysis to Identify Incentive Mechanism in Batang Gadis Watershed
...............54
Map of Batang Gadis National Park .....................................................................................3
Map of Mandailing Natal District
.......................................................................................4
Map of Watershed in Mandailing Natal District
..................................................................9
Watershed System in Batang Gadis National Park ..............................................................10
Focus of Study Area
..........................................................................................................17
Hydrological Cycle
...........................................................................................................18
Water Balance on Plot Scale
.............................................................................................20
Spatial Patterninf of Land Use Conversion: Linking Economics, Hydrology, and Ecology to
Evaluate the Effects on Stream Ecosystems
........................................................................21
Impact of Flood in Madina District (November 2004)
......................................................22
Irrigation System in Batang Gadis Watershed
....................................................................23
Total Economic Value of Watershed Ecosystem
.................................................................27
Calculation of Water Price
...............................................................................................46
Determination of Water Value
.........................................................................................46
Types of Incentive Mechanism of Watershed Services
.......................................................48
Incentive Mechanism in Gede Pangrango Watershed ..........................................................51
Incentive Mechanism of Watershed Services in West Lombok ............................................52
Proposed Incentive Mechanism of Watershed Services in Batang Gadis National Park
........55
Chart 1. Contribution of Each Economic Sector to Regional GDP of Madina District (1999-2002)
iii
.............8
Executiv
ummar
ecutivee SSummar
ummaryy
B
atang Gadis National Park is part of larger critical watershed area (with the size of 386,455 ha or about
58,8% of total district). Within Batang Gadis National Park itself, there are 6 important sub-watersheds,
which supply water to the entire Madina district. They are Batang Gadis Sub-Watershed, Batang Natal
Sub-Watershed, Batahan Sub-Watershed, Aek Pohon Sub-Watershed, Hulu Pungkut Sub-Watershed, and Muara
Sada Sub-Watershed. Batang Gadis Sub-Watershed is the biggest and the longest watershed in Madina District. It
flows 137,50 km, with a breadth of of 45,00 meter and average volume of water of 30,937,50 km3. This
watersheds is extremely valuable, supplying water to almost 400,000 people (for domestic needs) and more than
42,100 ha of paddy fields and 108,320.12 ha commercial crops such as coffee, rubber, cinnamon, cacao, palm oil,
clove, ginger, etc. This highlights the function of the national park has significant regional water regulator that
supplies water to support the continuity of living and main economic activities of the society, especially
agriculture.
This economic valuation study limited the analysis of water resource benefits to Madina District only. Although
the benefits of water quantity and quality spread to downstream users in many areas and sectors, we have focused
the calculations for direct value of watershed services originated from domestic needs for people, irrigated and
non-irrigated agriculture and fishery sector solely in Madina District. From the economic valuation, it is found
that the economic value of watershed services in supplying water for domestic consumptions (such as cooking,
washing, bathing, drinking, etc) is about Rp 7 billion per year (net present value Rp 63 billion over 25 years,
discount rate 10%). Meanwhile, the water value for agriculture is Rp. 2.6 billion per year (net present value Rp
23.3 billion over 25 years, discount rate, 10%). This figure could arguable be significantly higher since this study
only calculated on water value for irrigated paddy field, and the production of other crops that would produce
different benefits that are not valued here. In addition to that, the calculation of the water value for fisheries is
Rp. 10.7 billion per year (or net present value about Rp 97 billion over 25 years, discount rate at 10%). Based on
the calculation above, the total values associated with water resources from Batang Gadis National Park are in the
range of 19.6 billion rupiah per year (net present value Rp 184 billion over 25 years, at discount rate as 10%).
Besides direct value of watershed services, the study also tries to estimate the indirect value of watershed services.
It is estimated that indirect value of watershed services in terms of preventing flood, lands slide and erosion that
are generated from particular environmental damage that has already taken place (damage cost) is about Rp 24.8
billion or the net present value is about Rp 225 billion over 25 years (at discount rate at 10%).
However, watershed services provided by Batang Gadis National Park mostly benefit the external stakeholders (in
this case the downstream communities) and there is no market or institutional conditions that allow the local
people living in and surrounding the national park area to benefit from such environmental services. Therefore,
there are no (if not very little) economic incentives from local community to protect their area, especially when
they have alternatives to change land use practices to less environmentally friendly systems (e.g. commercial
plantation, logging, mining, etc).
This study attempted to identify types of incentive mechanism that can possibly be used to provide the benefits
to people living in and surrounding the national park. Such an incentive mechanism is needed to maintain
continuous support for communities living adjacent to the protected area to develop conservation friendly
activities (including promote sustainable utilization of forest resources, improving the management of a protected
area, etc). To manage a conservation fund and implement the program, a Batang Gadis Watershed Forum could
be established to, with the specific tasks to disburse the conservation fund to implement the program based on
agreement from members of the Forum; facilitate fundraising efforts; ensure participation of local community;
perform monitoring and evaluation; and develop accountability reports.
iv
Chapter 1. IIntr
ntr
oduction
ntroduction
1.1 B
ackgr
ound
Backgr
ackground
The Batang Gadis forests were declared as a National Park on December 31, 2003 in a letter signed by local
leaders, the heads of the local government and parliament, the police, and the Ministry of Forestry. Subsequently,
The Ministry of Forestry formally declared Batang Gadis as a National Park on April 29, 2004, which allows it to
receive national government funding. This declaration is significant not only for its immediate impact of
establishing a legal mechanism to protect key habitats in Batang Gadis, but also because it serves as an example of
a new legal framework for local governments to support the creation of a National Park. Most parks in Indonesia
have been declared in a very “top down” process initiated by the national government. This has resulted in
protected areas that lack of support from local government and other stakeholders who often oppose rather than
assist in park management efforts. Demonstrating the success of this model could open up new opportunities for
other local government officials and communities to replicate the Batang Gadis National Park (BGNP) model
and significantly would increase the Indonesian protected area network.
Conservation International Indonesia’s (CII) approach to date has been building strong partnerships to conserve
the forests of Batang Gadis within a new National Park. CI has worked with all levels of governments such as
Mandailing Natal District (Madina) authorities, the provincial government of Northern Sumatra, and the
national government, particularly the Ministry of Forestry (MOF). CII’s preliminary needs assessment of
protected area development identified raising awareness among communities about the BGNP, especially on the
potential benefits of conservation, as a priority. CII believes that the value of ecosystem services provided by the
park is a particularly important message to be conveyed.
The BGNP is part of a larger critical watershed area (with an area of 386,455 ha or about 58,8% of the total
district area) that serves the whole Mandailing-Natal district. This watershed is extremely valuable, supplying
water to almost 400,000 people and more than 42,100 ha of paddy fields (BPS Madina 2002) and 46,817.8 ha of
coffee and rubber plantations (Crops Division 2005). At this moment there is no study that quantifies the value
of this watershed function. This study aimed at addressing this.
tudy
bjectiv
1.2 O
bjectivee of SStudy
Objectiv
The overall objective of this study is: to develop and implement an analytical methodology concerning economic
valuation for the entire forest ecosystem and environmental services, which is provided by the protected area,
especially in watershed services.
Since those environmental services give benefits largely to external stakeholders (in this case downstream
communities), and there is no market institutional conditions that allow local people to obtain benefits from such
environmental services, and there is no economic incentive from local community to protect their area, and can
opt to change land management to less environmentally friendly practices (e.g. plantation, logging, mining, etc),
this study also aimed: to identify the types of incentives mechanism that can possibly be used to provide the
benefits to the people living surrounding the national park, thus giving the people a tangible incentive to
conserve their forest.
In addition, results from this study will be used for conservation awareness by showing the benefits from
conservation to local stakeholders and giving inputs to decision making processes from the values obtained. This
input will hopefully enable a better understanding of the tradeoffs between alternate resource allocation decisions
where competing uses are involved.
1
1.3 SStr
tr
uctur
epor
tructur
ucturee of the R
Repor
eportt
This report contains of 6 chapters, which from each enclosed some outline numbers, those outlines are elaboration
from the main subject. To see what each chapter tells about, the summarized of report structure is provided in Table 1.
Table 1. R
epor
tr
uctur
Repor
eportt SStr
tructur
ucturee
Content
Chapter
Chapter 1:
Describes the background of this study as well as its objectives.
Chapter 2:
Describes the area of study, including site location of Batang Gadis National Park;
geographical and socio economic conditions of Madina District; and Batang Gadis
watershed system.
Chapter 3:
Explains the methodology, including components of study and approaches used;
limitations, focus area of study, and list of data collection.
Chapter 4:
Presents literature reviews concerning hydrological systems and land use change
related to water resources, natural processes and biodiversity issues of the Batang
Gadis watershed.
Chapter 5:
Presents literature reviews concerning economic valuation of watershed services.
Chapter 6:
Presents the results of economic valuation of watershed benefits services in Batang
Gadis watershed.
Chapter 7:
Presents a proposed incentive mechanism that can possibly be applied to provide
benefits to the people living adjacent to the national park.
Chapter 8:
Presents recommendations and conclusions of the study based on the economic
valuation carried out.
2
Chapter 2. D
escription of SStudy
tudy Ar
Description
Area
ea
2.1 B
atang G
adis N
ational P
ar
k
Batang
Gadis
National
Par
ark
Geographically, Batang Gadis National Park (BGNP) is located in between 99° 12’ 45" to 99° 47’ 10’’east
longitude and 0° 27’ 15" to 1° 01’ 57" north latitude. This park is located in Mandailing Natal (Madina) District,
Northern Sumatra Province. There are around 68 villages within 10 sub-district located on the boundary of the
national park. Currently, the border of the national park has not yet designated by the Ministry of Forestry.
The name Batang Gadis originates from the main river that flows and divides Madina District. BGNP covers an
area of 108,000 ha or about 26% of total forest area in Madina District and 16.3% from the total area of Madina
(662,070 Ha).
The park is located at 300 to 2,145 meter above sea level, with the volcanic Mt. Sorik Merapi the highest point.
In terms of forest use, the park consists of protection forest, restricted production forest and permanent
production forest. The production forest is a logged over area of the former PT. Gunung Raya Utama Timber
(Gruti) company and another ± 1,000 ha is also a logged over area of formerly PT. Aek Gadis Timber.
Designation of the park has needed land-use changes. One of the purposes of this land use change (from
production forest to conservation area) is to give opportunity to the forest for habitat recovery.
ational P
adis N
ap of B
atang G
ar
k
Par
Batang
Gadis
National
Map
Figur
iguree 1. M
ark
igur
F
3
Batang Gadis National Park has high biodiversity of flora and fauna. Biodiversity research conducted by CI
Indonesia in 2004 shows that there are at least 225 species of plants, 222 species of vascular plants or almost 1%
from total number of flora in Indonesia (around 25,000 vascular plant species in Indonesia) was found in a 200
square meter plot (CI 2004). These include rare endemic species such as Padma (Rafflesia sp.) and unique
carnivorous “pitcher plants” (Nephentes sp.). There are at least 42 species of mammals in Batang Gadis, 15 of
which are IUCN endangered species (CR, EN and VU) - Sumatran tiger (Panthera tigris), marbled cat (Pardofelis
marmorata), golden cat (Catopuma temmincki), Asian wild dog (Cuon alpinus), tapir (Tapirus indicus), sun bear
(Helarctos malayanus), mountain goat (Naemorhedus sumatraensis), sambar deer (Cervus unicolor), common
barking deer (Muntiacus muntjac) five species of primates and two species of otters
2.2 G
eographical Conditions of M
andailing N
atal D
istrict
Geographical
Mandailing
Natal
District
Madina District was previously a part of Southern Tapanuli District before declared as a new district on the 23rd
of November 1998 under the Indonesian Law No 12, Year 1998. The central governance of Madina District is
located in Panyabungan. It has a strategic position being situated in the middle of Madina and readily accessible.
atal D
istrict
andailing N
ap of M
District
Map
Mandailing
Natal
iguree 2. M
Figur
F
igur
4
Madina District with the size of 6,620.70 km2 or about 662,070 ha (around 9.23% from total area of Northern
Sumatra) is located in the southern part of Northern Sumatra Province. Geographically, the district is located
between 0o10’ – 1o 50’ north latitude and 98o50’-100o10’ east longitude, and bordered by Southern Tapanuli
District in the north, West Sumatra Province in the southeast, and Indian Ocean to the west. Madina District
consists of 17 sub-districts and 335 villages (BPS Madina 2003).
Topographically, Madina District is divided into three parts, namely: 1) low downhill area (with the slope of 0o2o) in the west seashore covering approximately 160,500 ha or about 24.23% of total district; 2) flat area (with
the slope of 2o-15o) covering 36,385 ha or about 5.49% of total district; and 3) highland area (with the slope of
7o-40o) that is divided into hilly and mountainous area. With the area dominated by highlands and mountains,
many river streams are frequently found in the district, the largest being Batang Gadis, Batahan, Batang Natal,
Kunkun, and Parlampungan Rivers. Batang Gadis River is the longest river in Madina with the length of 137,50
km.
The average temperature in Madina District ranges from 23oC to 32oC with an average humidity around 8085%. The maximum rainfall (in 2003) is 2,137 mm (in November) while the minimum one is 50 mm (in
February).
The six main watersheds in Madina contain several soil types. Each type has its own characteristic. The dominant
soil type is latosol covering 310,404.61 ha of 716,652.92 ha total area. The other soil types in the watershed
system in Madina District are complex podzolik, red yellow latosol, latosol and red yellow podzolik, regosol,
organosol and clay organic litter, andosol, red yellow podzolik, alluvial, complex podzolik, brown podzolik. Soil
type in Madina is summarized in Table 2 below.
Table 2. SSoil
oil Types of SSix
ix M
ain Watersheds in M
adina
Main
Madina
Soil Type (Ha)
Watershed/sub-watershed
Batang Gadis
Batahan
Aek Pohon
Ulu Pungkut
Muara Sada
Natal
1,150.79
36,754.50
22,967.84
Total
Complex Podzolik
Red Yellow Latosol
24,772.20
1,335.02
9,420.76
Latosol and Podzolik
Red Yellow
60,110.35
27,251.37
876.76
88,238.48
2,896.43
607.33
1,659.37
5,163.13
28,862.48
26,458.14
6,787.73
15,235.90
Latosol
132,901.18
24,945.63
37,600.98
87,619.17
Andosol
10,782.19
729.19
10,781.87
6,484.80
Red Yellow Podzolik
41,187.26
Regosol
Organosol and clay
Organic Litter
Alluvial
Complex Podzolik
Brown Podzolik
Total
77,344.25
7,679.02
19,658.63
310,404.61
28,778.05
41,187
3,926.67
3,926.67
35,660.52
7,925.64
133.72
5,885.24
15,604.24
341,099.28
81,326.68
54,947.38
99,685.55
57,106.49
Source: Forestry Office of Madina District
96,401.11
5
65,209.36
82,487.54
716,652.92
According to Sitorus (1989) in Hamzah 2003, characteristics of latosol are low in organic matter and react to acid.
Organic matter favors the formation of a stable structure in the soil through a close association of clays with the
organic matter. It increases the water holding capacity as it can absorb water to a ratio of three to five times its own
weight, which is very important in the case of sandy soils. Organic matter increases the retention of soil nutrients in
a form available to the plant due to its capacity to exchange cations (the CEC of humus ranges from some 1 to
5 meq/g).
Other literature says that latosol is characterized by a thin 0 horizon, the presence of a laterite layer, and a deeply
weathered profile. Latosol has profile improvement with size of layer is >2 m, it has brown to red color, the difference
from horizon A to horizon B in latosol stage is not clear, it has pH between 5.5 - 6.5, has smooth texture, and has
loose soil structure, level of fertility is in the average.1 In many of soil studies, latosol type is generally used as rice
field; this condition is also happen in Madina where most of people are farmers and cultivating their land as paddy
field.
Table 3. B
asic G
eographic P
adina D
istrict
Basic
Geographic
Prrofiles of M
Madina
District
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
Sub-district
Batahan
Batang Natal
Bukit Malintang
Kotanopan
Lembah Sorik Merapi
Lingga Bayu
Muara Batang Gadis
Muara Sipongi
Natal
Panyabungan
Panyabungan Barat
Panyabungan Selatan
Panyabungan Timur
Panyabugan Utara
Siabu
Tambangan
Ulu Pungkut
Topography
Flat to undulating
Undulating to hilly
Flat to hilly
Hilly to mountainous
Undulating to hilly
Flat to undulating
Flat to undulating
Flat to hilly
Flat to hilly
Flat to hilly
Undulating to hilly
Elevation
(m above
sea level)
Rainfall
(mm/year)*
0-300
500-700
250-400
400-800
400-600
500-700
0-600
800-1,000
0-500
250-800
400-800
400-800
250-800
250-800
250-800
400-600
600-800
2,294
2,838
3,583
3,899
2,273
2,334
2,386
Distance from
sub-district
capital to district
capital (km)
Area (Ha)
Area % of
Madina
124
48
12
40
20
78
173
61
113
0
16
13
15
4
19
25
65
66,971
65,151
12,744
32,515
3,473
34,539
143,502
22,930
93,537
25,977
8,722
8,760
39,787
17,994
34,536
21,414
29,519
10.12
9.84
1.92
4.91
0.52
5.22
21.67
3.46
14.13
3.92
1.32
1.32
6.01
2.72
5.22
3.23
4.46
Total
662,071
100.00
*Measured based on administrative boundaries prior to 2002 split
Source: Madina in Figure (2003) in Napitupulu (2005)
With mountainous segment covering 36% of total area and considering the characteristic of soil type related to
land use, as well as high rainfall, Madina District is considerably vulnerable from erosion and landslides. Based on
those facts, cutting the forests in the Batang Gadis National Park could increase the risks of disaster with high
impacts. It is possible that the second Bahorok disaster could happen in this area. Bahorok disaster happened in
North Sumatra after heavy rain caused a flash flood that killed hundreds and destroyed infrastructure. The flood
was excerbated by illegal felling of the forests. In Madina District, during the rainy season at the beginning of
November 2004, there was big flood that destroyed main bridge, which transports people from and to West
Sumatra, and damaged several houses. It is very likely that, the Batang Gadis National Park plays important role
in preventing natural disaster caused by landslide, erosion and flood.
1 See more at Dharmawijaya, 1992 at http://www.kerinci.org/ipsp/Bab4.html.
6
2.3 SSocio
ocio E
conomic Conditions in M
andailing N
atal D
istrict
Economic
Mandailing
Natal
District
The total population of Madina (BPS 2003) is 380,546 people, (187,225 male and 193,321 female) with 82,563
households. Population density in the district is 56 people/km2. The population growth reached 1.61% during
1990 to 2000 and slightly declined to 0.96% during 2000 to 2003. About 13% of the population lives in urban
areas where the rest 86% live in rural areas. Almost 81% of people in Madina District work in the agricultural
sector with the remainder working in manufacture (2%) and service sectors (17%).
Madina has been divided into 17 sub-districts, consists of Panyabungan, Kotanopan, Siabu, Muara Sipongi,
Batang Natal, Natal, Batahan, Muara Batang Gadis, Panyabungan Utara, Panyabungan Barat, Panyabungan
Selatan, Panyabungan Timur, Bukit Malintang, Lembah Sorik Marapi, Tambangan, Ulu Pungkut, and Lingga
Bayu. Total number of villages according to BPS data in 2003 is 335 villages. Number of village in each sub
district is presented in in Table 4 below.
istrict in M
adina D
istrict
ub-D
Table 4. N
umber of Villages in Each SSub-D
District
ub-District
Madina
Number
No.
Sub-District
Number of Vilage
No.
Sub-District
Number of Vilage
1.
Lembah Sorik Merapi
9
10.
Ulu Pungkut
13
2.
3.
Bukit Malintang
Tambangan
12
28
11.
12.
Siabu
Kotanopan
23
36
4.
5.
Natal
Panyabungan Timur
25
12
13.
14.
Muara Sipongi
Muara Batang Gadis
19
11
6.
7.
Panyabungan Barat
Panyabungan Utara
9
20
15.
16.
Batang Natal
Lingga Bayu
24
28
8.
9.
Panyabungan Selatan
Panyabungan
9
33
17.
Batahan
Total
24
335
Source: BPS Madina 2003
Bitra Consortium (2005) has carried out a study on socio-economic conditions of Madina in ten key villages
located in the boundary of the national park. The study noted that community livelihoods in Madina heavily
depend on agriculture sector. Most people work as farmers, but few of them work on their own land - most of
them work in rented land and share the harvesting products with the land’s owner. Aside from agriculture, there
are also some economic alternatives being developed in order to find other sources of income for local people.
These include animal husbandry, home industry for handicraft, tourism and “manau” rattan collecting that can be
found in Batahan Village. In other villages such as Sapo Tinjak, Aek Nangali, Roburan Dolok, wild honey
becomes one of the main commodities. Bamboo industries have also been well developed in Sibanggor Julu and
Sibanggor Jae.
The total regional GDP of Madina District has been growing gradually during the period from 1999 to 2002. In
1999, the total GDP was about Rp 1.1 trillion and in 2002 increased to Rp 1.6 trillion (BPS Madina 2003). The
agriculture sector contributed the largest portion (about 57%) of total regional GDP (Gross Domestic Product)
during the period 1999 - 2002.The second most important economic sector is trade, hotel and restaurant with
almost 20% of total GDP. Meanwhile, economic sectors that contribute the smallest portion of total regional
GDP is mining and quarrying (contributing less than 0.3% of total GDP) and electricity, gas and water supply
(also contributing less than 0.3% of total GDP). Chart 1 below shows the contribution of each economic sector
to regional GDP in Madina District during the period 1999 to 2002.
7
istrict
adina D
egional GDP of M
ector to R
conomic SSector
Char
District
Madina
Regional
Economic
Chartt 1. Contribution of Each E
(1999-2002)
Source: processed from BPS Madina District (2003)
There are four languages used in Madina District. This shows that indigenous people of Madina come from
different ethnic groups, including Lubu and Natal Ethnics. Different cultures have very different ways to manage
their land. For example most of people in Siabu Sub-district or about 50,173 people comes from Mandailing
Ethnic and work as farmers. This ethnic is dominant in some other sub-districts in Madina. The main language
used in Madina is Bahasa Mandailing and majority of people in Madina are Moslem. Table 5 shows more
information on the composition of ethnics in Madina.
thnics in M
adina
Ethnics
Madina
Table 5. Composition of E
Sub-district
No. Ethnics
A
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Melayu
Karo
Simalungun
Toba
Mandailing
Pakpak
Nias
Minang
Cina
Aceh
Others
Total
Note:
A) Batahan
B) Batahan Natal
C) Kotanopan
D) Muara Sipongi
4,021
11
26
647
7,700
5
49
3,208
0
4
78
29,018
B
217
7
1
663
42,188
0
395
66
0
32
603
45,817
C
D
E
F
749
8
1
384
66,287
0
15
137
0
49
1,301
69,233
135
15
0
78
12,118
0
15
51
0
8
97
12,565
170
21
7
3,551
104,516
12
76
517
0
92
4,786
115,344
11.357
43
21
498
1,533
3
92
15
0
15
216
18,724
G
7,566
0
0
2
4,094
0
4
0
0
7
137
11,827
H
TOTAL
40
9
1
5,057
50,173
0
291
87
0
37
753
57,324
24,255
114
57
10,880
288,609
20
937
4,081
0
244
7,971
359,849
F) Panyabungan
G) Natal
H) Muara Batang Gadis
H) Siabu
Source: Ethnic and Religion Statistic Data 2000, BPS Northern Sumatra in Bitra Consortium 2005.
8
2.4 B
atang G
adis Watershed
Batang
Gadis
There are large and small rivers flow all the way through districts and villages in Madina. The catchment area,
which is Batang Gadis National Park forest, flow its water resources through Batang Gadis River. The forest has
important function as water catchment area that regularly supplies water to support the continuity of living and
main economic activities of the society, especially agriculture. Batang Gadis Watershed flows to 137.50 km along
way, with length of 45 meter and average volume of water of 30,937.50 km3 (BPS Madina, 2002). It is the
biggest and the longest watershed in Madina. The watershed covers 386, 455 ha or about 58.8% of Madina
District (see Figure 3). More than 400,000 people in Madina District depend on agriculture sector, especially the
71 villages within 13 sub-districts situated in the boundary of the national park. Generally, the rivers in Madina
are used for irrigation, transportation, washing, bathing, and others.
andailing N
atal D
istrict
ap of Watershed in M
Mandailing
Natal
District
Map
Figur
iguree 3. M
F
igur
9
Within Batang Gadis National Park itself, there are 6 important sub-watersheds, which supply water to the entire
Madina district. They are Batang Gadis Sub-Watershed, Batang Natal Sub-Watershed, Batahan Sub-Watershed, Aek
Pohon Sub-Watershed, Hulu Pungkut Sub-Watershed, and Muara Sada Sub-Watershed (See Figure 4).
ational P
adis N
atang G
ystem in B
ar
k
Par
National
Gadis
Batang
iguree 4. Watershed SSystem
Figur
ark
igur
F
This proves that the national park gives a function as regional water regulator. The existence of the national park
also preserves the quality and quantity of water supply for domestic needs (drinking, cooking, washing,),
irrigation for 42,100 ha paddies field and 108,320.12 ha commercial crops such as coffee, rubber, cinnamon,
cacao, palm oil, clove, ginger, etc (BPS Madina, 2002). Other locations outside Madina District, including
Southern Tapanuli District, Pasaman District, Western Sumatra Province and Rokan Ulu, Riau Province also
depend on the forest canopy in Batang Gadis National Park.
As mentioned above the forest canopy in Batang Gadis National Park has important role for some districts in
Sumatra, which means as water regulator Batang Gadis forest controlling the hydrological cycle through its
watershed system. The longest and the biggest watershed called “Batang Gadis” mainly passes by this forest.
Forest canopy reduce the kinetic energy from the rainfall, it is also keep the water (ground water) and flow all the
way down through the surface as runoff or water spring. The main function of watershed system is controlling the
water flow; if the watershed system could not accumulate the water flow it is precariously for the flood to be
happened.
10
The Batang Gadis watershed have been divided into several land uses and Forestry Office of Madina District has
also evaluated and defined prioritized area for rehabilitation (See Table 6).
Table 6. P
rioritiz
ed Ar
ea for R
ehabilitation in B
atang G
adis Watershed, M
adina D
istrict (H
a)
Prioritiz
rioritized
Area
Rehabilitation
Batang
Gadis
Madina
District
(Ha)
NON
FOREST
AREA
FOREST AREA
Forest
Cover
PERMANENT FOREST (PF)
Production
Protected/ Conservation
HL
KSA-KPA
HP
HPT
Total
PF
Conservation
Production
Forest
Total
Forest Area
(HPK)
Total
Prioritized
Area for
Rehabilitation
APL
I
19,021.88
0.00
1,837.48
9,830.11
30,689.47
1,304.59
31,994.06
14,034.79
46,028.85
II
5,397.89
0.00
12,756.47
18,031.16
36,185.52
1,081.53
37,267.05
5,417.29
42,684.34
182.12
0.00
2,548.36
2,731.58
5,462.06
0.00
5,462.06
5,133.39
10,595.45
24,601.89
0.00
17,142.31
30,592.85
72,337.05
2,386.12
74,723.17
24,585.47
99,308.64
III
Total
Note:
Forest Cover
Forest area
I
II
III
HL
KSA-KPA
HP
HPT
HPK
APL
: Bushes area, opened land, dry land farming
: Secondary forest land, secondary swamp area, secondary mangrove forest
: Dry land farming, agriculture land, mining, settlement
: Protection forest
: Conservation Area
: Permanent Production Forest
: Limited Production Forest
: Converted Production Forest
: Area for Other Purposes
Source: Forestry Office of Madina District 2004
From the data above we can see that protection forest in Madina District that need to be rehabilitated covers
49,203.78 hectare or 24.8 % from total prioritized area for rehabilitation. This indicates that protection forest in
Madina has been severely degraded and therefore has to be rehabilitated. In the conservation area there is no
rehabilitation activity suggested. This probably means that these areas are still in good condition. Batang Gadis
National Park fits into the conservation area so this confirms us that the forest condition in Batang Gadis
National Park is still good - therefore it is necessary to keep its sustainability for the future.
11
Chapter 3. M
ethodology
Methodology
3.1 Component of the SStudy
tudy
This study consists of 4 components as follows:
vices
wing the ecological literatur
evie
Component 1. R
services
literaturee of watershed ser
eviewing
Revie
The study began with a brief literature review of the impacts of land use change on hydrological function such as
sedimentation, water yield, seasonal flows, flooding, etc. On this hydrological overview, a simple theoretical
presentation would formally present the linkages between land use, hydrology and individual utility. In addition,
this section included a review of the biodiversity importance of Batang Gadis, in particular, to highlight the key
species that depend on the watershed or hydrological system for their survival.
vices
wing economic literatur
evie
Component 2. R
services
literaturee of watershed ser
eviewing
Revie
This study continued by reviewing types of economic values provided by watershed services and economic
impacts from changes hydrological services that are, in turn, related to changes in land use (conservation vs. other
land use types). The literature was used to demonstrate the range of impacts that can be caused by land use on
hydrological functions, and discuss the magnitude of these impacts. This also included economic valuation
techniques or approaches that can be used to estimate benefits from watershed services.
Component 3. Estimating watershed benefits fr
om B
atang G
adis F
or
ests
from
Batang
Gadis
For
orests
The study was based on secondary environmental statistic data that describe the hydrological situation in Batang
Gadis Forests and also socio economical survey data from the Batang Gadis society. In this component some data
were required to evaluate the economic benefit from the watershed services, which included;
a. Forest hydrology, species richness and soils data to index the watershed service.
b. Technical production data to link to the index of watershed services in economic activities
(including domestic water needs; such as drinking, cleaning, cooking, etc, for agriculture; such as
irrigation, livestock husbandry sector, fishery, and for industry).
c. Economic preference and price data are necessary to quantify the changes in production possibilities
and the value of watershed services.
Component 4. IIdentifying
dentifying the types of incentiv
incentivee mechanism
This study was trying to identify types of incentive mechanisms that can be used to provide benefits to people
living surrounding the national park. This could also be tangible incentive to conserve the forest.
In as far as was possible, the study highlighted how the proposed incentive mechanisms would be able to catalyze
local stewardship of the watersheds and how this could contribute towards maintaining the watershed functions
upon which the critical species are dependent. The study would also identify potential risks and challenges
associated with these incentive mechanisms, and existing institutional and policy barriers to implement these
incentives.
12
3.2
Specific Valuation M
ethodology
Methodology
2.
Estimation of watershed benefits:
This study only estimate the environmental benefits derived from the ‘use value’ of watersheds. Use value of
watershed is divided into direct use (outputs directly consumable) and indirect use (functional benefits). Direct
use includes water supply and indirect use includes flood control, landslide, erosion resistant, etc.
Dir
ect use of watershed ser
vices:
irect
services:
The role of Batang Gadis NP as a water catchment area for surrounding villages should be categorized as a service
provided by the park and expressed in monetary terms. Although not all of these water use values can be
attributed to the continuing presence and management of the national park, the values derived here help to
provide some perspective on the environmental services secured by the forest cover and natural area preserved in
the park. The basic environmental services and their value to downstream users, to households, and to
agricultural production needs to be better recognized and understood so that the protected areas of the upper
watershed are properly managed and protected. This analysis also helps to highlight some of the impacts and
costs that might occur if the forest and ecosystem of the park were somehow damaged or reduced in size.
Components to be analyzed for calculating direct use value of watershed services (water supply) are:
1.
Value of water to domestic use (households)
• Number of people (primary and secondary beneficiary villages)
• Volume of water treated annually
• Value per unit of water provided
2.
Value of water for agriculture (irrigated and non irrigated land)
• Area of land irrigated by waters arising from Batang Gadis Watershed
• Production levels and economic value of crops and plantation
• Level of benefits derived annually from irrigated and non irrigated agriculture
3.
Value of water for livestock and other animal protein sources
• Level of annual benefits derived from fish stock and value of livestock inventories
The characteristics of hydrological cycles observed in this study were concentrated on the physical attributes of
flow rather than water quality. The annual flow, for instance, will indicate the change of Batang Gadis watershed
and land use in the river basin.
Indir
ect U
se of Watershed SSer
er
vices:
ndirect
Use
ervices:
This is to estimate the indirect use values of watershed benefit services in terms of their contribution to watershed
protection for erosion prevention, flood and landslide control.
For ecological function value such as erosion, sedimentation, flood control and watershed protection, Benefit
Transfer Method was used in this study in order to get estimated value. The value was estimated based on the
data, which is available in other areas that have similar characteristics to the research area.
13
3.2
Data Collection
Based on approach and methodology described above, some data were needed to elaborate the study. The data
was divided in two categories; primary data and secondary data. Primary data is a data which is collected directly
due to its importance in this study, and it has not been collected before in another study. Secondary data is a data
that is available to be accessed through the institution or any other research organizations and it has been
collected before this study. Some data was collected through interview and used to strengthen the statistic data
from BPS, for instance data about people perceptions in conservation, nature, forest, and ecosystem services.
Table 7 below shows list of data to be collected in this study.
14
Table 7.
List of D
ata
Data
Session
Subject SStudy
tudy
I
II
III
Backgr
ound IInformation
nformation
ackground
of SStudy
tudy Ar
ea
Area
Linkage betw
een land
between
esour
ces
esources
use and water rresour
Dir
ect U
se of watershed
irect
Use
vices
services
ser
IV
Indir
ect U
se of Watershed
ndirect
Use
vices
services
ser
Note:
Primary data searched by CI
Data N
eed
Need
Map of Batang Gadis Watershed
(size of watersheds, hydrological delineation)
Biophysical Setting:
1.
Hydrological system
2.
Contour/slopes
3.
Elevation
4.
Land suitability
5.
Erosion rate
6.
Sedimentation rate
7.
Vegetation cover
8.
Forest cover
9.
Annual precipitation
10.
Temperature
11.
Potential and actual evapotranspiration
12.
Run off
13.
Nutrient and chemical Outflows
14.
Seasonal Flow
15.
Annual Rainfall
16.
Grown Water Recharge
17.
Surface Debit
General Condition of Study Area
Socio Economic Setting:
1.
Land Use
2.
Economic activities
3.
Population distribution
4.
Agricultural land (productivity,
5.
Livestock
6.
Number of industries
7.
Income per capita
Data Collection
Techniques
Primary data
Secondary data
Secondary data
Interview
Floods impact (floods impact in term of money value)
Domestic Water Needs (drinking, cleaning,
cooking,etc):
1.
Number of population
2.
Number of households
3.
Population distribution
4.
Water consumption/households(m3/year)
5.
Water price (Rp/m3)
Secondary data
Irrigation/consumption/benefit fishery
1.
Agriculture area (ha)/number of HH
2.
Water requirement for agriculture area
(m3/ha)/consumption (m3/HH)
3.
Water price (cost for providing water)
Secondary data
Water price PDAM standard
Water Consumption PDAM standard
Secondary data
Secondary data
Sediment control
Flood control
Erosion Control
Enhanced soil quality
Increase in total water yield
Stabilization in stream flow distribution
Benefit transfer
Replacement Cost
Method
15
3.4 Limitation and F
ocus Ar
ea of SStudy
tudy
Focus
Area
The study was limited by the following factors:
1. The study was limited to focus on the analysis of water resource benefits to Madina District only. Although
the benefits of water quantity and quality spread to downstream users in many areas and sectors, we have
focused the calculations on irrigated and non-irrigated agriculture in Madina District only.
2. To provide an estimate of the benefits of good quality water to households, we have dividend the households into:
• Primary beneficiary communities: communities that fully depend on Batang Gadis NP as water sources
• Secondary beneficiary communities: communities that partly depend on Batang Gadis NP as water sources.
Table 8. D
istribution of beneficiar
Distribution
beneficiaryy communities
Type of beneficiary communities
No of villages
No of people
No of households
Primary beneficiary communities
71
54,926
11,814
264
314,765
68,398
335
369,691
80,212
Secondary beneficiary communities
TOTAL
Source: BPS Northern Sumatra (2003)
Assumptions:
Followings are some critical assumption in this study:
• No overlap of primary and secondary beneficiary communities
• Household level water consumption and agricultural production are relatively uniform across the study
area.
16
ocus of SStudy
tudy Ar
ea
iguree 5. F
Focus
Area
Figur
17
Chapter 4. E
er
vices
cological Value of Watersheed SSer
ervices
Ecological
This chapter presents some key components and theories extracted from literature study, focusing on the
relationship between hydrological function and the ecological value of watershed services. These basic theories
were used as assumptions for the valuation of the local condition in Batang Gadis Sub Watershed and other main
sub watersheds in Madina District.
atural H
ological C
4.1. The N
Natural
Hyydr
drological
Cyycle
The presence of forests in watersheds generally result in higher quality water when compared to other land uses
(such as agriculture, industry and settlement- which are likely to increase the amount of pollutants entering
headwaters. In some cases forests also help to regulate soil erosion and hence reduce sediment load, although the
extent and significance of this will vary (Aylward 2000 in IUCN 2004). Loss of forests has been blamed for
everything from flooding to aridity and for catastrophic reductions in water quality. In fact, the hydrological role
of forests is complex and the precise impact on water supply varies dramatically between places and can also vary
in one place depending on such factors as the age and composition of the forest.
The hydrological cycle (system of water circulation) is the main key to the balance nature within any one place.As
important as total water is constancy of flow, the amount of water in this earth does not change but its role could
be changed by uncontrolled nature process, mostly caused by human being, e.g. over cutting, over mining, land
conversion, etc. Figure 6 pertains to simplified illustrative cases - the real conditions in any given river basin may
be much more complex (Tognetti et al, 2003).
Figur
ological C
iguree 6. H
Hyy dr
drological
Cyycle
Source: Tognetti, et. al (2003)
18
In a natural system, (as illustrated in Figure 6 above), meteorological water flows from the atmosphere to the fresh
and saline water resource and to the land resource carrying dissolved gases, dust particles, smoke particles,
bacteria, salt nuclides and dissolved solids. Water returns to the atmosphere through evaporation from water
bodies and the soil and other surfaces (carrying salt nuclides) or through evapotranspiration from vegetation,
(carrying dust and organic particles). Silt, organic debris, soluble and particulate products of biodegradation of
organic matter, silica, mineral residues of earth materials, bacteria, dissolved gases and soil materials are carried
from the land resource to the surface water resource by surface runoff. Likewise, dissolved minerals from surface
debris and primary rocks and dissolved gases are carried from the land resource to groundwater by infiltration.
Flood waters and springs return silt and other materials and minerals from the surface and groundwater resource
to the land resource. The interchange between tidal water and continental saline water and freshwater increases
the salinity of the latter. At the same time, this interchange carries dissolved gases, dust particles, smoke particles,
bacteria, salt nuclides, dissolved solids surface debris and primary rocks and dissolved gases and surface debris,
primary rocks, dissolved gases plus organic debris from the freshwater resource to the saline water resource
through river and groundwater discharge. Saline water intrusion increases salinity of the land resource and beach
erosion carries soil and vegetation from the land resource to the saline water resource. Finally, biochemical
unstable matter from life processes of animals and from death of plants and animals are accumulated as solid
residues on the land resource and may again find their way to the water resources, both fresh and saline.
One of the main components in hydrological cycle is rainfall. Rainfall is one of the most important climatic factors
influencing soil erosion. Runoff volume and velocity depend on the intensity, duration and frequency of the rainfall.
Of these factors, the intensity is the most important. Erosion losses increase with higher rainfall intensities. The
duration of the rainfall is a complementary factor. The rainfall frequency also influences the soil erosion losses.
4.2
unctions
ological F
se Changes and H
een Land U
etw
Functions
drological
Hyydr
Use
etween
Betw
Relationship B
4.2.1
For
ests and H
ological F
unction
orests
Hyydr
drological
Function
Forests and other habitats play important roles in the hydrological cycle; the structure of the habitat greatly
infuences water flow through its vegetation in a number of ways.The vegetative cover of forests shelters soil from
the force of rain (thus reducing its kinetic energy) while roots help hold soil in place and reduce soil erosion
(Myers in Krieger 2001). Forests and vegetaion help rainwater to inflitrate down into the ground water body.
Forests also contribute to water quality by filtering pollutants from water. The interaction of vegetation and soils
also filters other contaminants from water. Clean water from forest ecosystems is particularly important to the
many municipalities that obtain their water from forested watersheds (Krieger 2001).
Therefore, land use conversion may influence the stability of the soil, for instance if forest land has converted to
other land use such as agriculture, mining, etc and appropriate measures have not been been taken or resources
are over exploited soil degradation will result such as floods, landslides, erosion, abrasion, salination intrusion and
many others.
Forests also influence water quantity – both total quantity and seasonal variation in flows – through a number of
interrelated processes. Whilst the forest itself uses water and releases it to the atmoshere through
evapotranspiration, forests can also increase rainfall through the so-called ‘albedo’ effect. This refers to the process
by which forest vegetation increases evaporation of water from the earth’s surface to cause increased cloud
formation and rainfall locally. Forest ecosystems also act as sponge, soaking up and storing water when it is
abundant and releasing steadily from the ground water even during drier periods. This process serves to even out
annual water flows from forested watersheds and reduce impacts of downstream flood/drought cycles (Myers in
Krieger 2001). Therefore, land use practices in limited areas upstream can have a significant impact on
downstream areas.
19
Specifically, to understand water balance on vegetation as the basis later flow it is a required to know its process in
the first pace. The water balance at the plot scale, embedded in a landscape context that provides run-on and sub
surface lateral in flow is shown in Figure 7.
alance on P
lot Scale
iguree 7. Water B
Balance
Plot
Figur
Source: Ranieri, et.al (2004)
The water balance at the plot scale can be represented by equation:
∆S = P – (I + R + L + E + T + D)
Where ∆S = change in water storage in the soil (mm/day), P = precipitation (mm/day), I = interception by plant
canopies followed by evaporation (mm/day), R = runoff – run on (mm/day), L = subsurface lateral flows (out-in)
(mm/day), E = evaporation from the soil surface (mm/day) and D = drainage below the root zone (mm/day). The
term R and L above represent lateral flows at plot scale and can modify the T and E terms (and hence plant
production).
At the landscape scale, the drainage term D eventually generates a lateral flow. Water moves vertically through the
unsaturated soil layers at a rate determined by the soil’s hydraulic conductivity. When water reaches an impermeable
or low-conductivity layer, the soil becomes saturated above that layer. At this point the water moves laterally down
slope in or below rooted soil layers of adjacent (down slope) vegetation and may emerge at the soil surface in valleys
in the form of springs.
Forests and partial tree cover in agricultural landscapes have important implication for the water balance of a
catchment. Trees, on average, use more water than any other form of land cover and intercept more rainfall on their
canopies than shorter plants. Many studies have shown a strong often linear, relationship between the clearing of
trees and an increase in total river flow and recharge to groundwater (George et al. 1997 in Ranieri 2004). In
Indonesia, even though there has been no research yet, the bamboo plant suspected as potential plant to increase
water debit in the river. People in Madina believe if the Bamboo grows well the water debit in the surrounded area
will be increased. Therefore, a research about this myth is recommended to carry out in order to proof the fact.
20
4.2.2
anagement P
ractices on Water B
alance
Management
Practices
Balance
IImpact
mpact of Landscape M
To be able to estimate the value of watershed services, it is important to have correct expectations of impacts of
landscape management practices on the water balance. UN FAO (2002) in Tognetti, et al (2003) suggested
categories of land use impacts on aquatic ecosystem and processes as follows:
1. Impacts of land use on the hydrological and sentiment-related processes:
• Mean surface runoff
• Peak flow/floods
• Base flow/dry season flow
• Groundwater recharge
• Soil moisture recharge
• Erosion and sediment load
2. Impacts of land use on water quality:
• Nutrients and organic matters
• Pathogens
• Pesticides and other persistent organic pollutants
• Salinity
• Heavy metals
• Changes in thermal regime
Another review of the literature (Aylward 2002 in Tognetti, et.al in 2003) generally confirms that land use
change, especially the loss of forest cover, results in: increases in sediment yield as well as the flow of chemicals
and nutrients; increases in water yield and peak flows; either increases or decreases in dry season base flow and
also groundwater recharge, depending on the outcome of interactions among site specific processes that
determine the net effect of changes in evapotranspiration and infiltration. Figure 8 below shows the linkages
between hydrological function and land use change.
Figur
patial P
atterning of Land U
se Conv
ersion: Linking E
conomics, H
ology
cology to E
iguree 8. SSpatial
Patterning
Use
Conversion:
Economics,
Hyydr
drology
ology,, and E
Ecology
Evvaluate
the E
ffects on SStr
tr
eam E
cosystems
Effects
tream
Ecosystems
Land Use Change
agriculture suburban urban
impervious surfaces
Sediment regime
Vegetation (channel resistance)
Geomorphology
Hydrology
Peak flow
Base flow
Flow variability
Water quality
Light levels
Riparian Vegetation
Suspended sediments
Nutrient regimes
Ecology
Species Diversity
Nutrient consentration
Nutrient uptake
Stream metabolism
OM dynamics
Source: Palmer (2004)
21
Particle size
Channel form
Bad mobility
The linkages between expected changes in the water balance and common points of interest that are regarded as
watershed services is also described as follows:
lo
w Yield:
Flo
low
1) Total F
Key parameters that affect Total Flow Yield are Actual Evapotranspiration and Precipitation. Actual
Evapotranspiration is linked to the type of landscape vegetation, and the seasonal fluctuations of the energy and
water budget in the system. Precipitation on a river catchment depends on continental scale factors but
deposition volumes may be impacted at the local scale by interception or condensation of rain or cloud water by
vegetation cover. Although associations between presence of forests and total rainfall at the local scale cannot be
entirely ruled out, even if and when these exist, they are likely to be exceeded by increased evaporation from the
vegetation in tropical climates. It is also possible that the presence of forests can have impact on regional climatic
patterns and therefore on total rainfall at continental scales.
2) R
egulation of SStr
tr
eam flo
w:
tream
flow:
Regulation
Regulation of stream flow implies managing for dry season flow (base flow component of stream flow) or storm
flow (runoff component of stream flow). Base flow and runoff also have linkages to actual evapotranspiration and
precipitation.
w: Watershed services play role in sustaining stream flows during the dry season, that is,
eason F
lo
a. Dr y SSeason
Flo
low:
prolonging the base flow. It is a period when water is scarce and is often the limiting factor for production
to small-scale irrigators (who have limited hydraulic structures for water storage), and other users. A
sustained dry season flow is also generally the key to managing the biological health of a stream. Base flow,
which comes from shallow ground water storage, depends on the geomorphology and land use of the
catchment. Therefore, land use management in aquifer recharge areas is the principal variable, which can
be targeted so as to improve the recharge of the shallow aquifer that contributes to stream flow, while
minimizing losses to evapotranspiration.
b. Storm flo
w: Storm flow (or storm runoff ) produces peaks in the stream that can result in flooding or
flow:
erode stream banks, and is dependant on rainfall intensity and duration, land use, and geomorphology of
the catchment. In the case of Madina District, the catatrophic flood that occurred during the rainy season
in November 2004, destroyed local facilities such as mosques, school buildings, bridges, houses, and
irrigation system. The flood caused heavy sedimentation and destroyed the fertility of farming land
especially for paddy fields. This was a several long-lasting negative impact for agriculture sector in the area.
Figure 9 shows the impacts of this disaster.
Foto: © CII/Diah Sulistiowati (2004)
Figur
mpacts of F
lood in M
adina D
istrict (N
ovember 2004)
iguree 9. IImpacts
Flood
Madina
District
(No
22
ol:
edimentation Contr
uality and SSedimentation
3) Water Q
Control:
Quality
The water quality constituent for stream impairment is sediment. Sedimentation or flooding problems caused
by degradation in an upstream watershed may affect a country downstream. Batang Gadis NP plays an important
role in sediment control and protection in the upstream areas because slopes with a 40-60% steepness dominating
the terrain within Batang Gadis Watershed with an area of in 99,247.96 Ha (Forestry Office of Madina, 2004)
this area has a high potential for erosion that could create sedimentation problems downstream in the lower
Batang Gadis River.
As the most important watershed in Madina, Batang Gadis Sub-Watershed should be protected. Erosion and
sedimentation in Batang Gadis Sub-Watershed needs serious attention. According to the measurement in Erosion
Level Risk (TBE), annual sedimentation in Batang Gadis watershed is 0.08 to 2,695 ton/ha/year, this compared
to the Level 5 of TBE (heavy) with average Risk Erosion Index (IBE) of about 458.71 ton/ha/year (Forestry
Office of Madina, 2004). This condition proves that conserving the Batang Gadis forests, which is the heart of
the Batang Gadis watershed, is required.
4) P
ersity and living aquatic rresour
esour
ces:
Prrotection of biodiv
biodiversity
esources:
Natural flow regimes are critical to the protection of biodiversity and living aquatic resources at the level of
ecosystems, which are associated with landscape processes. Components of the flow regime are the natural
patterns of variation in the quantity and timing of the flow of a river, including natural disturbances, which are
associated with basin climate, geology, topography, soils and vegetation. For example, wetlands, riparian habitats,
mangroves, and coastal zones, which also support many direct uses, may all rely on regular flood pulses and
transport of normal sediment loads for their maintenance.
There are some kinds of fish in Madina that have become main commodities. Most of these fishes live in
freshwater ecosystem, such as ikan mas (carp / goldfish), ikan nila/sepat,iIkan jurung/mera (garfish), and ikan lele
(freshwater catfish). The Fishery Office of Madina District has also developed cultivated aquatic resources. The
local government has built a weir for irrigation system and it is has also help to cultivate fish in the river and
swamp system created. In 2004, the fish harvest in the river, swamp, and irrigation system was 531.1 tons, and
730.8 ton from cultivation in the pond, Minapadi, and Keramba. The aquatic resources are not only enriching
the biodiversity in Madina but also contributes for economic life in Madina. Figure 10 below shows the irrigation
system in Batang Gadis watershed.
Foto: © CII/ Lelyana Midora (2005)
Figur
rrigation SSystem
ystem in B
atang G
adis Watershed
iguree 10. IIrrigation
Batang
Gadis
23
ehabilitation
egradation and R
4.2.3 Land D
Rehabilitation
Degradation
According to Pagiola (1999) land degradation can cause problems at three levels:
• At field level, land degradation can result in reduced productivity.
• At the national level, land degradation can cause problems such as flooding and sedimentation.
• At the global level, land degradation can contribute to climate change, and to damage to biodiversity and
international waters.
The forest vegetation in Batang Gadis National Park contributes to regulate water supply in some rivers in
Madina. These rivers are linked to one another through the watershed system, which means that degradation
happening in the Batang Gadis forest could impact other areas in the corridor as well. Based on satellite imagery,
forest covers almost 93 % from total area of Batang Gadis National Park. The 93% forests within Batang Gadis
National Park have to be conserved since it acts as a beneficial water regulator and suppler to the whole of
Madina and its surrounding districts. The comparison between forest and other land uses is that the forests have
to be larger than other land uses because it is balancing the hydrologic cycle through its vegetation.
Detail of vegetation cover in Batang Gadis National Park can be seen on Table 9 below.
k
adis N
ational P
ar
atang G
Table 9. Composition of Vegetation Co
Par
ark
National
Batang
Gadis
Covver in B
No.
Vegetation Cover
1
2
3
4
5
6
Primary Dry Land Forest
Secondary Dry Land Forest
Dry Farming Land
Mixed Dry Farming Land
Shrubs Land
Opened Land
Total
Size (Ha)
87,970.77
18,513.69
3,698.38
1,776.92
3,001.73
53.41
115,014.90
Source: Forestry Office of Madina District (2005)
The Forestry Office of Madina District has been designing a program in forest rehabilitation and soil
conservation namely RTKL (Rencana Teknik Konservasi Lahan) or Land Conservation Technical Plan. This is a
conservation program that aims to improve the forest function as a controller of erosion, sedimentation, and
flooding, and to also increasing watershed debit during the dry season, and develop a healthy, balanced
environment. This program will address some recommendations for conservation treatment that should
implemented through a one-year program. The recommendation itself is based on the data analysis including
forest slope, rainfall intensity, rainfall density, erosion level, soil type, etc. Area to be addressed in this program is
critical land (heavily degraded and open lands, formerly forested), which is vulnerable to soil erosion. This is
shown by the Erosion Level Risk (TBE) that consists of average, heavy, and very heavy level TBE. Batang Gadis
Sub-Watershed is considered as heavy level TBE, which means that forest rehabilitation and soil conservation is
urgently needed to protect Madina from the floods and erosion.
24
4.3
tance of B
atang G
adis Watersheds
iodiversity
importance
Batang
Gadis
Biodiv
ersity impor
Natural flow regimes in watershed ecosystem, which are critical to the maintenance of biodiversity at the
landscape ecosystem level, support a number of direct and indirect values. These include maintenance of critical
habitats for both freshwater and marine fisheries and wildlife that may be important for both subsistence and
commercial purposes, shoreline stabilization which can reduce coastal storm damage, recreational and aesthetic
values important for ecotourism, and biodiversity, which is linked to direct uses and may justify provision of
funding from external sources based on global benefits that cannot be captured locally.
For the case of Batang Gadis, the watershed is very important in maintaining habitats for wildlife such as
Sumatran tiger (Panthera tigris), marbled cat (Pardofelis marmorata), golden cat (Catopuma temmincki), Asian
wild dog (Cuon alpinus), tapir (Tapirus indicus), sun bear (Helarctos malayanus), mountain goat (Naemorhedus
sumatraensis), and sambar deer (Cervus unicolor), common barking deer (Muntiacus muntjac), five species of
primates and two species of otter.
Cattle farming such as buffalo, cows and other livestock are also dependent on the watershed system. Batang
Gadis watershed as the longest watershed in Madina flowing and passing many villages where most of the people
work as farmer and they utilize cow and buffalo to cultivate their farming land.
Previous survey done by CI Indonesia in the Batang Gadis National Park found about 42 species of mammals,
247 bird species, 16 Dipterocarp, 168 Non Dipterocarp, and 1,500 species of endofitic microbe which are
potential for medicine materials. It is believed that more species could be found in Batang Gadis National Park.
CI Indonesia is currently observing the richness of biodiversity in Batang Gadis, particularly for Sumatran tiger
using Camera Trapping Method. All these animals are dependent on water resources from watershed.
25
Chapter 5. Economic Value of Watershed SSer
er
vices
ervices
This chapter presents some key components and theories extracted from study literature, focusing on types of
economic values provided by watershed services. This also included economic valuation techniques or approaches
that can be used to estimate benefits from watershed services that can be applied for Batang Gadis National Park.
Some estimates of economic values of watershed services in some national parks in Indonesia are also presented
here for comparison.
5.1
Definition of E
conomic Value
Economic
Economists contend that unreliable information regarding the value of services from tropical forest can partly
cause the rapid disappearance of the world’s natural forest cover and therefore endanger the flow of useful goods
and services. Mitigation of floods, droughts and soil erosion can be provided by protection of tropical forests and
an examples of unpriced and undervalued life support services’ resulting from natural ecosystem functions
(Freeman 1996 in Pattanayak 2004) that can serve as beneficial inputs to economic livelihoods in the tropics
(Dixon 1997 in Pattanayak 2004).
The mainstream environmental economics literature broadly classifies the benefits of environmental and natural
alues and non-use vvalues
alues. The use values are further classified
resources into two major categories, namely, use vvalues
ect use vvalues
alues and indir
ect use vvalues
alues (Turner, et. al 1993).
direct
indirect
into two categories namely, dir
In the case of watersheds, direct use values include provision of freshwater for consumptive uses (drinking,
agricultural and industrial) and non-consumptive uses (hydropower generation, cooling water and navigation).
Apart from these direct use values, watersheds generate indirect use values such as erosion control, enhanced soil
quality, and improved water yield, regulation of stream flows. It should be noted that the size and the
composition of these two forms of values might differ among different watersheds.
The scope of environmental benefits in the environmental economics literature expanded after the concept of
option value, bequest value and existence value were introduced and are now important components of
environmental benefits.
Option vvalue
alue refers to the amount that the individuals would be willing to pay for using a particular resource in
future, in addition to the their expected consumer surplus (Smith 1987 in Venkatachalam 2000). Option value is
equal to the premium that the individuals would be willing to pay to ensure the future availability of an amenity.
Bequest vvalue
alue refers to values of leaving uses and non-use values to future generation (an environmental legacy).
Existence vvalue
alue refers to individuals’ willingness to pay for the mere existence of a resource irrespective of their
use - including the possible future use (Krutilla 1967 in Venkatachalam 2000).
Figure 11 below shows the components of Total Economic Value of Watershed Ecosystem.
26
cosystem
conomic Value of Watershed E
Figur
Ecosystem
Economic
iguree 11. Total E
Total E
conomic Value of Watershed E
cosystem
Economic
Ecosystem
USE VALUES
NON USE-VALUES
se Value:
irect
Use
Dir
ect U
Outputs/services
that can be
consumed directly
Indir
ect U
se Value:
ndirect
Use
Functional benefits
enjoyed indirectly
O ption Value:
Future direct and
indirect Use
Bequest Value:
Use and Non-use
value of
environmental
legacy
Existence Value:
Value from
knowledge of
continued
existence
Examples:
Timber, fuel wood,
non-timber forest
products (rattan,
nuts, resin, etc),
agricultural
production,
recreation,
tourism, water
supply
Examples:
Flood control,
absorption of
waste, recycling
nutrients,
protecting soil
quality, erosion
resistance,
carbon fixing,
climate
regulation
Examples:
Biodiversity,
conserved habitat
Examples:
Habitats, species,
climate regulation,
‘way of life’
connected to
traditional use
Examples:
Habitats, genetic
pool, source of
scientific data,
habitat for flora
and fauna
Source: adopted from Pearce, et.al (1995)
Total Economic Value will be then calculated by sum up all use and non-use value of selected goods and services
produced in the Batang Gadis watershed ecosystem as follows.
Total Economic Value = Use Value + Non Use Value
TEV = (DUV + IUV + OV) + (BV + EV)
Where:
TEV
DUV
IUV
OV
BV
EV
= Total Economic Value
= Direct Use Value
= Indirect Use Value
= Options Value
= Bequest Value
= Existence Value
27
It is also important to note that the “value” of watershed ecosystem services depends on stakeholder confidence in
access to benefits, without which they cannot properly be considered “services”. Ecosystem processes cannot be
considered “services” unless they also have economic significance, directly or indirectly, which also implies actual
access to benefits (Tognetti, et al 2003).
The challenge for the environmental economist now is how to value the benefits discussed above, in monetary
terms. In the case of marketed goods and services, the economic value is reflected through the market price
determined mainly by the demand and supply of the goods and services concerned. However, many of the
environmental goods and services are either “non-marketed” in nature or traded in imperfect markets and
therefore, their true opportunity cost has to be estimated properly for efficient resource allocation (Barbier 1998).
Barbier (1998) also argued that neglecting the importance of non-market values would result in depletion,
degradation and overexploitation of the environmental resources and eventually lead to loss of social welfare since
these resources form the basis for the basic livelihood of a considerable number of households in developing
countries. This has larger implications for the re-distribution of income as well. This is one of the major reasons
why economic valuation of environmental resources assumes paramount importance especially in developing
countries.
5.2
Economic Valuation Techniques
The extensive literature on economic valuation techniques – classified into revealed preference and stated
preference methods “ that are being applied in the area of non-market economic valuation (Bateman 1993)
suggests that using different methods for a specific environmental good/service would lead to different kinds of
answers consequently leading to the central question of which is the true economic value. The implication is that
the economic values derived from different valuation techniques lack precision (Turner 1993), even though
considerable amount of progress has been made and is being made to improve the sophistication of the economic
valuation techniques in estimating the non-market values of environmental resources.
1. R
ev
ealed pr
efer
ence methods
Rev
evealed
prefer
eference
The revealed preference methods basically rely on the information about the individual preferences for the
environmental and natural resources that are revealed either through direct market or through surrogate markets.
Some of the important revealed preference methods are (Bateman 1993):
(a)
Trav
el cost method:
ravel
The travel cost method is a revealed preference method by which the consumer’s preferences for
environmental amenities are estimated on the basis of the travel cost incurred in relation to enjoying
the benefit of a natural resource. This method, though widely used for valuing the improved amenities
of national parks, could be used to estimate the opportunity cost of time spent on collecting fuel wood
and fodder in the watershed areas and this value would be used as a lower-bound value of benefits/costs
of change in the watershed management.
(b)
Hedonic pricing method:
The hedonic pricing approach is based on the assumption that the environmental factors are attributes
of goods or factors of production that are traded in the market. Based on this assumption, the
improvement in economic benefits of say, improved watersheds, could be captured through the market
prices of the related goods.
28
2.
(a)
Production function appr
oach
approach
The production function approach, another variant of revealed preference method, basically establishes
a relationship between the environmental input and resulting output and then utilizes the (current)
market price of the output to value the environmental input (Markandya 1998). More precisely,
estimating the economic value of change in the environmental resource input is to quantify the change
in the output due to change in the input of environmental resource while other priced inputs remain
the same, and multiply this change in output with the market price of that output (Maler 1991 in
Venkatachalam 2000). This approach is valid only if the change in the input of environmental resource
is such that it cannot allow the entire production function to alter.
(b)
Defensiv
efensivee expenditur
expendituree method:
The defensive expenditure method or averting behavior approach is a simple valuation technique used
mainly for estimating economic value of environmental damage costs (Hueting 1990 in Venkatachalam
2000). This method basically looks at the amount of expenditure required for either averting a
particular environmental damage or restoring a damage that has already taken place and treat that level
of cost as the damage cost. Nowadays, this method is being widely used in developing countries to
estimate the economic damages at the macro-level. One of the problems with this method is that since
it is only a cost based method, the estimated value could be used only as a lower-bound value.
Stated pr
efer
ence methods
prefer
eference
In the case of stated preference method, the Contingent Valuation Method (CVM) is the one, which is being
widely used for estimating the non-market economic values of natural resources.
The contingent valuation method, according to Portney (1994), is an economic valuation method that utilizes
sample surveys or questionnaires to elicit the respondents’ willingness to pay for hypothetical projects or
programs. The value elicited through this method is dependent on the nature of the hypothetical or simulated
market conveyed to the respondents.
Using Willingness To Pay (WTP) for the tangible aspects of watershed services is sufficient to justify the added
cost of conservation actions when they are compared with opportunity costs of foregone land uses. These refer to
services that have more direct use values, that are more likely to motivate local action and that can be somehow
captured in market transactions. Examples would include water for direct consumption of water, flows needed to
support ecotourism and recreational uses, differences in property values that can be attributed to aesthetics or,
insurance against potential damages.
Finally, valuation of watershed services ultimately implies the consideration of trade-offs among multiple uses,
interests and objectives, so as to inform a process of conflict resolution and negotiation among stakeholders
regarding land use options. It provides stakeholders with an opportunity to reconsider their values and priorities
in light of new information and to reconcile conflicting objectives.
This study also considers watershed services as producer goods, the values of watershed services are calculated in
terms of increases in user incomes or savings (for households, industries and agricultural sector). In the case of
Batang Gadis watersheds, water is one of the most important services perceived by the people in Madina District.
Interviews with people in some villages in Madina District regarding National Park status discovered that most of
people recognize the importance of the park for ensuring the sustainability of water supply. Most of water resources
used by local for agriculture activities and domestic needs (such for drinking, washing, and cooking) come from
springs and rivers in the watershed area.
Meanwhile, less tangible values, such as those associated with non-use values of biodiversity, tend to rely on policy
measures and on external funding sources, e.g., NGOs, governments and multilateral donors. Watershed functions may
also benefit from complementary values, such as maintenance of existing forested areas for purposes of carbon storage.
29
5.3 Assessing the E
er
vices U
sing B
enefit Transfer
conomic Values of Watershed SSer
ervices
Using
Benefit
Economic
Techniques
Under certain conditions, value estimates for ecosystem goods and services in one location or setting can be used
to estimate value in other location or setting. This approach is called benefit transfer. The validity of the benefit
transfer approach depends on the quality of the original estimation and how closely the valued good and
valuation setting match the new setting (Boyle and Bergstor, 1992 in Krieger, 2001). Benefits transfer is widely
used approach because it is relatively easy and inexpensive to apply. As an example, Table 10 below shows
estimation of tropical forest ecosystem values
cosystem Value
Table 10. Estimates of F
or
est E
For
orest
Ecosystem
Ecosystem good or services
Market nature of servicea
Climate regulation
Disturbance regulation
NM
NM
Water regulation
Water supply
NM
M, NM
Erosion control and sediment retention
Soil formation
NM
NM
Nutrient cycling
Waste treatment
NM
NM
Biological control
Food production
NM
M
Raw materials
Genetic resources
M
M, NM
Recreation
Cultural
M, NM
NM
TOTAL
Global values ($/acre)b
90.2
2.0
2.4
3.2
99.1
4.0
373.1
35.2
n.a
12.9
127.5
16.6
45.3
0.8
812.2
Note:
a
b
“NM” denotes a good and service that is primarily non-market in nature. “M” denotes a primarily market good or service. “M, NM”
denotes a good and service that has significant market and non market characteristics
Calculated from the $/hectare estimates of Constanza et al. (1997) based on conversion factor of 2.471 acres/hectare. All values are in
US. 1994 dollars.
Source: Adopted from Krieger, 2001.
As for the case of Indonesia, Table 11 below shows economic values of some selected functions of watershed in
different study sites.
30
ational P
ar
kE
cosystem Value IIndonesia
ndonesia
National
Par
ark
Ecosystem
Table 11. Estimates of N
Functions
Source of
Value
Estimates
Economic
Valuation
Techniques
Research Site
Size of the
Site
Total Economic
Value
Tourism
Wiratno, Virza S,
Harry, et.al. (2003)
CVM (WTP) –
travel expenditure
Gunung Gede
Pangrango
National Park
15,000 ha
Rp 1.76 billion/year
Water Regulation(for
irrigated agriculture and
households consumption)
Wiratno, Virza S,
Harry, et.al. (2003)
Productivity
approach and
benefit transfer
Gunung Gede
Pangrango
National Park
15,000 ha
Tourism
Achmad Rahardjo
(2001)
Travel Cost
Methods and
Contingent
Valuation Methods
(WTP)
Tawangmangu
Forest Park
64.30 ha
US$ 7.51 million/year
Tourism
Widada (2002)
Travel Cost
Methods and
Contingent
Valuation Methods
(WTP)
Gunung Halimun
National Park
40,000 ha
Rp 1.2 billion/year
Water Supply
Widada (2002)
Travel Cost
Methods and
Productivity
Approach
Gunung Halimun
National Park
40,000 ha
Rp 5.2 billion/year
Carbon Storage
Widada (2002)
Benefit Transfer
Gunung Halimun
National Park
40,000 ha
Ecological Function
Effendi, et al
(2001)
Assumptions
Kerinci Seblat
National Park
27 ha
Rp. 955.8 billion/year
Biodiversity
Effendi, et al
(2001)
Assumptions
Kerinci Seblat
National Park
27 ha
Rp. 477.9 billion/year
Water Supply
Pieter J.H van
Beukering, et al
(2002)
Empirical
Assumptions
Leuser National
Park
792,695 ha
US $ 699 million/year
Tourism
Pieter J.H van
Beukering, et al
(2002)
Contingent
Valuation Methods
(WTP)
Leuser National
Park
792,695 ha
US$ 171 million/ year
Hydro-power
Pieter J.H van
Beukering, et al
(2002)
Empirical
Assumptions
Leuser National
Park
792,695 ha
US$ 252 million/year
Reduce Sedimentation
Emily Fripp, et al
(2002)
Hedonic Pricing
Method
Manapeu-Tanadaru
National Park
87,984 ha
Rp. 415 million/year
Protection of watershed
and water quality
Emily Fripp, et al
(2002)
Assumptions
Manapeu-Tanadaru 87,984 ha
National Park
Rp. 2,992 million
Protection of fresh fish
habitat
Emily Fripp, et al
(2002)
Assumptions
Manapeu-Tanadaru 87,984 ha
National Park
Rp 107 million
31
5.4 N
et P
(NPV))
Net
Prresent Value (NPV
Natural resource use and management involves decision making over time. Net Present Value is used in economic
valuation study to estimate the value in the future since economic analysis tends to assume that a given unit of
benefit or cost matters more if it is experienced now than if it occurs in the future. The lowering of the
importance that is attached to gains and losses in the future is known as discounting. Many environmentalists,
and some economists, regard discounting as immoral simply because it does appear to be inconsistent with the
ideas of conservation and sustainability because the higher the discount rate the lower the importance attached to
the future, and hence the less likely we are to honor the idea of conserving the natural capital stock. Yet
discounting turns out to be an everyday occurrence. We therefore need to understand its basis (Pearce 1990).
One of the main purposes of obtaining the economic value of Batang Gadis watershed ecosystem and using cost
benefit analysis (CBA) is to get some numbers on the table for policy discussions. This analysis is used to
compare and finally decide which projects or options (in this case conservation vs. other land use option) that
give higher rate of return than the alternative.
According to Curry, et al (2000) the total costs and benefits of a project can be added up over the full project life;
however, this would assume that all resources used up or generated in different years are valued equally so that the
investment resources committed in the first year are of equal value to the benefits generated in the 20th year, for
example. Conventionally, resources used up or generated in earlier years are valued more highly than resources in
later years. The process of discounting applies a weight to the resources in different years to convert them to a
common basis. Usually, the base year to which they are related is the period in which the investment decision is
being made, denoted year 0, at the beginning of the project statement. The weight applied in different years is
known as the discount factor, and it depends upon a chosen rate of discount, which measures the fall in value of
net benefits over time. If the same levels of costs incurred in two years will be given a lower value relative to the
same costs in the first year. This lower value can be specified by multiplying the second year’s costs by a factor of
the following form:
Discount factor = 1/ (1 + r)
Where r is the rate of discount expressed in decimals
The costs and benefits of a project can be weighted to give an equivalent value in the base year. Costs and benefits
in subsequent years are weighted by the discount factor relevant to each year, where:
General discount factor = 1/ (1 + r) t
And it is the number of years after year 0
The discounted net benefits are smaller in later years and for a higher rate of discount. This follows from the
character of the general discount factor. The discount rate has only to be moderately high, say 15 per cent, for the
discount factor to become very small after a few years, and hence for discounted costs and benefits to be reduces
to a negligible value. When discounting is applied so that all resources are valued relative to year 0, the re-valued
resources are called present values
Net pr
esent vvalue
alue is a valuation method based on discounted cash flows. NPV is calculated by discounting of a
present
series of future cash flows, and summing the discounted amounts and the initial investment (a negative amount).
Net Present Value can thus be calculated by the following formula, where t is the amount of time (usually in
years) that cash has been invested in the project, N the total length of the project (in this case, five years), i the
weighted average cost of capital and C the cash flow at that point in time.
N
NPV =
Ct / (1+ i) t – Initial Investment
t=0
32
Chapter 6. Economic Valuation of Watershed B
enefits
Benefits
As mentioned in the methodology, this study only estimated the environmental benefits derived from the ‘use
value’ of watersheds. Use value of watershed is divided into direct use (outputs directly consumable) and indirect
use (functional benefits). Direct use included water regulation and supply and indirect use included flood
control, and erosion resistant.
6.1
egulation and SSupply
upply
ect U
er
vices: Water R
Dir
ervices:
Regulation
irect
Use
6.1.1
Value of Water F
or H
ouseholds
For
Households
ouseholds’’ Consumption
Most of the world’s drinking water comes from surface waters (rivers, lakes, or artificially constructed reservoirs)
or from underground aquifers (IUCN 2004). The study found out that most of households in Madina District
directly depend on water springs located in nearby mountain to meet their domestic water needs such as for
drinking, washing, cooking, and many other uses. Different village has different source of water, depending on
the distance from the village to the source of water available. People living close to the mountain transport water
from the hill to their villages using long pipelines directly linked to the housings. Other people living further
from the mountain use water resource from the closest source, such as river, artesian wells. Bamboo is also
commonly used to transport water from the sources to the villages. Activities such as washing and bathing are
done in the rivers, so it is difficult to estimate water consumption for these specific needs.
To provide an estimation of the value of water for households’ consumption, we divided the households into:
1. Primary beneficiary communities: communities that fully depend on Batang Gadis NP as water sources.
2. Secondary beneficiary communities: communities that partly depend on Batang Gadis NP as water
sources.
Table 12. N
umber of people dependent on water supply fr
om watersheds within the
Number
from
G
adis N
ational P
ar
k
Gadis
National
Par
ark
boundar
atang
boundaryy of B
Batang
No of
villages
No of
people
No of
households
71
54,926
11,814
Water spring in the watershed/
sub watershed
Secondary beneficiary communities
264
314,765
68,398
Watersheds/sub watershed
TOTAL
335
369,691
80,212
Type of beneficiary
communities
Primary beneficiary communities
Access to
clean water
Note: Based on the available data, the average number of people in one household in Madina District is above is 5 people per household.
33
Table 13a Below shows variables to estimate households’ water consumption in Madina District.
Table 13a. Variables to estimate household water consumption
Variable
Data
Unit
Source of Data
Liter/day/person
Ministry of Internal Affairs
Instruction No. 8 Year 1998
300
Liter/day/household
Ministry of Internal Affairs
Instruction No. 8 Year 1998
Total water consumed by
primary beneficiaries
1,293,633,000
Liter/year/household
Calculation
Total water consumed by
secondary beneficiaries
7,489,581,000
Calculation
Total water consumed per year
8,783,214,000
Calculation
Rp/m3
Rp/liter
Based on PDAM data (2003): clean
water distributed in Madina District
was 191,000 m3 with the value of
Rp. 153,124,000.
Average of water consumption
per person per day
60
Average of water consumption
per household per day
Water price
802
0.8
Using these estimates, we then calculated the economic value of water resources for households’ consumption in
Madina District as shown on Table 13b.
Table 13b
conomic vvaluation
aluation of water rresour
esour
ces for household
13b.. E
Economic
esources
household’’s consumption
Figure
Water demand
Calculation
Result
Average of water consumption per day/household
x number of household x 365 days
Water price
8,783,214,000 litre
0.8 Rp/ litre
Value of water
Water demand x water price
7,026,571,200 Rp/year
NPV
Over 25 years, 10% discount rates, constant price
63,780,467,873 Rp/year
The economic value of watershed services in supplying water for domestic consumptions (such as cooking, washing,
taking a bath, drinking, etc) is about Rp 7 billion per year or the net present value is about Rp 63 billion over 25
years (at discount rate as 10%). This number could possibly be higher since the quantity of water for households’
consumption in Madina District is predicted to be more than what officially estimated by the government.
6.1.2
or Agricultur
For
Agriculturee
Value of Water F
Based on survey with local community in the boundary of the national park, it is noted that the farmers use water
from the watersheds to irrigate their land. Watersheds provide water supply to agriculture system in Madina
District. Farming areas especially the ones located in the border of river bodies depend on water supply from
watershed system in Batang Gadis. At present, farmers distribute water from the river streams to their agricultural
land by using bamboo pipelines. This method, namely “village irrigation” is widely used for irrigation system in
Mandailing Natal. As a result of continuous water supply from surrounding watersheds, most of farmers plant
paddy in two seasons. Table 14 presents type of irrigation and agriculture systems in Madina District.
34
Table 14. Types of land use systems in M
adina D
istrict
Madina
District
No.
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
2
a.
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
b.
2.1
2.11
2.12
Land Use
In One year (Ha)
Two seasons cultivated One season cultivated
Paddy F
ield
Field
Technical Irrigation
Partly Technical Irrigation
Basic Irrigation
Village Irrigation/Non PU
Rainfall
Tide
Lebak
Polder and other fields
Total
Non P
addy F
ield
Paddy
Field
Dr y Land
Yard land
Dry Land Cultivation/garden
Unirrigated agriculture field/Huma
Savanna
Non cultivated
Social Forest
National Forest
Plantation (crops)
Others
Others
Swamp
Fishpond/embankment
Pond/tebat/dam
1,240
1,744
4,152
8,730
299
16,165
29
2,467
791
3,287
Total
1,240
1,744
4,152
8,759
2,766
791
19,452
15,738
17,346
4,562
3,112
21,344
41,551
353,616
61,842
72,769
50,003
743
Total Ar
ea of M
adina
Area
Madina
662,070
642,617
Source: Agriculture Office, Madina (2004)
According to the GIS analysis, farming land located within Batang Gadis NP boundary is about 5,475 ha (consist
of 3,698 ha of dry land farming and 1,777 ha of mixed dry land farming), covering only 5% of total park area.
Total farming land located outside the park is 19,452 ha. Total farming land in Madina District is around 24,927
ha or covering only 4% of total district. Irrigated farm land both within the park and outside the park is 21,370
ha. Table 16a below presents some data on water resources used for agriculture.
35
Table 15. Variables to estimate water vvalue
alue for agricultur
agriculturee
Variable
Water requirement for paddy field
Irrigated area of paddy field
Cost of providing water
Data
Units
125,000
21,370
0.48
Source of Data
m3/ha/season
Dumairy (1992), Widarti (1995), Wiratno (2003)
predicted that water requirement for paddy field is
125,000 m3/hectares/season
ha
Irrigated Farming land outside the park (15,895 ha)+
Farming land within the NP (5,475 ha)
Rp/m3
Widarti (1995), Wiratno (2003) predicted Rp 0.27m3
in 1999. Taking 10% growth in expenditure 10% per
year, the water price would be Rp 0.48/m3
Table 15a. Water R
equir
ement for P
addies F
ield
Requir
equirement
Paddies
Field
Variable
Data
Units
Water requirement for paddy field
125,000
m3/ha/season
One season cultivation
29
Ha
Two seasons cultivation
21,370
Ha
Cost of providing water
0.48
Rp/m3
Note: Assumed that farming land inside the national park (5,475 ha) using two seasons cultivation system.
conomic Valuation of Water for Agricultur
15b.. E
Economic
Agriculturee
Table 15b
Figure
Calculation
Result
Annual Water Demand
Area of paddy field x season (s) x water requirement
(21,370 x 2 x 125,000) + (29 x 1 x 125,000)
5,346,125,000 m3
Annual value of water
Water demand x water price (5,346,125,000 x 0,48)
2,566,140,000 Rp/year
NPV (10%)
Over 25 years, constant price
23,292,955,472Rp
From the calculation the water value for agriculture is Rp. 2.6 billion per year or the net present value is about Rp
23.3 billion over 25 years (at discount rate as 10%). This number could possibly be higher since this study only
calculated water value for irrigated paddy field. Production of other crops would produce other benefits that are
not valued here.
36
6.1.3
Value of Water F
or F
isher
For
Fisher
isheryy
To estimate the value of water for fishery, we used Hedonic Pricing Method, based on the assumption that the
environmental factors are attributes of goods that are traded in the market. Based on this assumption, the benefits
due to improvement in economic benefits of improved watersheds could be captured through the market prices
of the related goods, in this case fishery products.
There is a unique traditional fishery system in Madina District called “Lubuk Larangan”. Lubuk Larangan is a
traditional system where local people are not allowed to catch fishes from the river for some period of time. They
believe that doing this, the sustainability of fishery resources can be maintained and that over fishing can be
avoided. Areas for Lubuk Larangan system are marked with wires. After some period, the chief of village will
legally open this area for fishing. Local people also agree that they should pay certain amount of money to catch
and sell the fishes to the market. Unfortunately, there is no data yet on total catch and income from this fishery
system over the years. Therefore calculating the value of watershed benefit service in fishery sector, this study used
an approach from the fishery production data in 2004 provided by the Fishery Office of Madina District as
presented on Table 16 below.
Table 16. F
isher
adina D
istrict in 2004
Fisher
isheryy P
Prroduction of M
Madina
District
Sources
Quarter I
Quarter II
Quarter III
Quarter IV
Total
ultivation
Cultiv
ation
((T
Ton)
((T
Ton)
((T
Ton)
((T
Ton)
( Ton)
Pond
Minapadi
Keramba
General Waters
River
Swamp
Irrigation channel
Sea Catch
105.6
30.3
19.5
99.5
33.6
18.4
158.4
42.1
32.6
105.3
56.2
29.3
468.8
162.2
99.8
99
59
1.6
3,635
58.2
52
1.9
3,204
54.6
65
1.8
3,768
98
39
1
3,922.90
309.8
215
6.3
14,530
Source: Fishery Office of Madina District,(2004)
From this table, it is obvious that fishery sources that heavily depend on watershed service include pond, minapadi,
keramba (basket put in the river), river, swamp and irrigation channel. From these sources, total fishery production
in 2004 was 1,261.9 ton. Using official average fish price from Trading and Industry Office of Madina District (July
2005) for freshwater category – i.e. ikan mas (golden fish), ikan lele (freshwater catfish), ikan nila/sepat and ikan
jurung/mera- also applied in this study was Rp 8,500 per kg as the lowest average of fish price.
Table 17a. Variables to estimate water vvalue
alue for fisher
fisheryy
Variable
Data
Total Fishery Production
per year
1,261,900
Fish Price
Annual revenue from fishery
Units
8,500
Total fishery production
per year x fish price
1,261,900 x 8,500
= 10,726,150,000
37
Source of Data
kilograms
Fishery Office of Madina District
(2004)
Rp/kilogram
Trading and Industry Office of
Madina District (2005)
Rp/year
Calculation
Table 17b
conomic Valuation of Water for F
isher
17b.. E
Economic
Fisher
isheryy
Figure
Calculation
Results
Annual Revenue from Fishery
Total fishery production per year x fish price
1,261,900 x 8,500
10,726,150,000 Rp/ year
NPV
Over 25 years, 10% discount rates,
constant price
97,361,692,792 billion Rp
6.1.4 Total D
ir
ect E
conomic Value of Water SSupply
upply and R
egulation fr
om B
atang G
adis N
ational P
ar
k
Dir
irect
Economic
Regulation
from
Batang
Gadis
National
Par
ark
The results from calculation above can be summarized on Table 19 below.
Table 18. SSummar
ummar
ect economic vvalue
alue of water supply and rregulation
egulation fr
om B
atang G
adis N
ational
ummaryy of total dir
direct
from
Batang
Gadis
National
k
ark
Par
No.
Functions
Total Value Per Year
(Rp/year)
Total Value/ha
(Rp/ha)*
Users
1.
Water for households’
consumption
7 billion
64,814
People in Madina District,
government
2.
Water for irrigated
agriculture
2.6 billion
24,074
Farmers in Madina District,
government
3.
Water for fishery
10 billion
92,592
Fisherman in Madina District,
government
TOTAL
19.6 billion
181,481
Note: * total value per ha was obtained by dividing total value per year with the size of Batang Gadis National Park.
Based on the calculation above, the total values associated with water resources from Batang Gadis National Park
are in the range of 19.6 billion rupiah per year or the net present value is about Rp 184 billion over 25 years (at
discount rate as 10%).
6.2
er
vices: F
lood, Landslide and E
ol
Indir
ect U
Use
ervices:
Flood,
Errosion Contr
Control
ndirect
For the purpose of this study, the indirect use of watershed services will be limited on ecological functions of
watersheds for flood, landslide, and erosion control. These three components are considered to be related to each
other and in this study they are integrated to one function, namely flood control. Soil erosion can be defined as a
process of soil detachment and movement by mass flows of air or water (i.e. flood). In the latter case, raindrop
impacts that overcome the coherence of aggregates at the soil surface are the main cause of detachment (Ranieri,
et al., 2004).
38
As mentioned in previous chapter, with more than 70% of the areas dominated by highlands and mountains, the
40-60% land slope covers 46,400 ha of the district, and also considering the characteristic of soil type related to
land use, and high rainfall, Madina District is considerably vulnerable from flood, erosion and landslides.
Therefore, good forest condition in Batang Gadis National Park plays important role in preventing natural
disaster caused by landslide, erosion and flood.
To estimate the indirect value of watershed services in terms of preventing flood, lands slide and erosion, the
defensive expenditure method or averting behavior approach is used in this study. This method is a simple
valuation technique used mainly for estimating economic value of environmental damage costs (Hueting 1990 in
Venkatachalam 2000). This method basically looks at the amount of expenditure required for either averting a
particular environmental damage or restoring a damage that has already taken place and treat that level of cost as
the damage cost.
Given that floods are often followed by landslide and erosion, for the purpose of this study the damage cost
caused by flood also assumed to include the damage cost by landslide and erosion. To give example of damage
cost caused by flood in Sumatra, WALHI (2003) has presented the following data based on flooding that
occurred in Riau, Sumatra as shown on Table 19 below.
umatra ((JJanuar
trait of damage cost caused bbyy flood in Riau, SSumatra
Table 19. P
or
anuaryy, 2003)
Por
ortrait
No
Type of impact
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Paddy Field
Corn field (Ha)
Chili field (Ha)
Fish Pond (unit)
Keramba (unit)
Chicken
Goat
Cow
House
Road (km)
Bridge (unit)
School building (unit)
Public Health Clinic (unit)
Religious building (unit)
Harbor (unit)
Number of damage
(ha)/unit
5,104
195.5
66
350
479
80,000
332
107
5,993
62
63
74
5
77
7
Total Cost
(Rp million)
Cost per ha/unit
(Rp million)
23,000
513.19
239.25
175
359.25
1,000
166
200
90,000
7,700
393.75
2,200
50
770
7
4,51
2.63
3.63
0.50
0.75
0.01
0.50
1.87
15.0
124
6.25
29.7
10
10
1
Note: This Figure has not included the multiplier effect
Source: WALHI Riau (2003)
As mentioned on previous chapter, during a rainy season in November 2004, there was big rain caused terrible
flood occurred in Madina District that destroyed local facilities (bridges, houses, school buildings, etc).
Unfortunately, the damage caused by this disaster is not well documented. Interview with local authority and
community has revealed some data on impacts of that flood as presenting from Table 21a.below.
39
Table 20. IImpacts
mpacts of flood in M
adina D
istrict (N
ovember 2004)
Madina
District
(No
No
Types of infrastructure
Impacts
Total Damage (unit or km)
A
1
2
3
4
Building
Bridge
House
House
School
Washed away
Washed away
Affected
Washed away
2
2
12
1
B
1
2
3
Land
Paddy field
Other crops
Road
Washed away
Washed away
Damaged
Unknown
Unknown
Unknown
Source: Interview with local authority and local community
Based on these very rough data, we attempted to estimate the damage cost by using some assumption and data of
damage cost per unit generated by WALHI (2003). Table 21a. below shows some variables to estimate damage
cost caused by flood in Madina District.
Table 21a. Variables to estimate damage cost caused bbyy flood in M
adina D
istrict
Madina
District
Variable
Data
Units
Source of Data
Total bridges damaged
2
unit
Interview with local
community/authority
Total houses damaged
14
unit
community/authority
Total schools damaged
1
unit
community/authority
Total paddy field damaged
Total other crops damaged
Total road damaged
Damage cost of bridge
5 % x total paddy field
5% x 24,927 = 1,246.35
ha
Assuming that only 5% of total
paddy field was affected by flood
5% x total other crops
5% x 61,842 = 3,092.1
ha
Assuming that only 5% of total
other crops was affected by flood
5% x length of road
5% x 1,495 = 74.75
74.75
Assuming that only 5% of total road
was affected by flood
6.25
million Rp/unit
WALHI (2003)
Damage cost of houses
15
million Rp/unit
WALHI (2003)
Damage cost of schools
29.7
million Rp/unit
WALHI (2003)
Damage cost of paddy field
4.51
million Rp/ha
WALHI (2003)
Damage cost of other crops
3.13
million Rp/ha
Average damage cost of corn and
chili field from WALHI (2003)
million Rp/km
WALHI (2003)
Damage cost of road
124
Note: It is assumed that there is no difference in term of damage cost for all damage conditions (washed away, damaged or affected).
40
Based on variables above, the economic value of environmental damage costs caused by flood is presenting on Table
21b. below.
Table 21b
conomic vvaluation
aluation of damage cost caused bbyy flood in M
adina
21b.. E
Economic
Madina
Figure
Calculation
Results
Total damage cost of bridges
2 unit x 6.25 million Rp/unit
12.5 million Rp
Total damage cost of houses
14 unit x 15 million Rp/unit
210 million Rp
Total damage cost of schools
1 unit x 29.7 million Rp/unit
29.7 million Rp
Total damage cost of paddy field
1,246.35 ha x 4.51 million Rp/ha
5.6 billion Rp
Total damage cost of other crops
3,092.10 ha x 3.13 million Rp/ha
9.6 billion Rp
Total damage cost of road
74.75 km x 124 million Rp/km
9.2 billion Rp
Total damage cost of
infrastructure and land
NPV
24.8 billion Rp
Over 25 years, 10% discount rates,
constant price
225 billion Rp
From the results above, it is estimated that indirect value of watershed services in terms of preventing flood, lands
slide and erosion that are generated from particular environmental damage that has already taken place (damage
cost) is about Rp 24.8 billion or the net present value is about Rp 225 billion over 25 years (at discount rate as
10%). This number is just based on the amount of expenditure required for restoring a damage that has already
taken place and treats that level of cost as the damage cost. Therefore, this number is considerably lower than the
real economic value of ecological functions of watersheds for flood, landslide, and erosion control.
41
Chapter 7. Incentiv
echanism for Watershed SSer
er
vices
ncentivee M
Mechanism
ervices
Watershed services provided by Batang Gadis National Park mostly benefit external stakeholders (in this case the
downstream communities) and there is no market or institutional conditions that allow the local people living in
and surrounding the national park area to benefit from such environmental services. Therefore, there are no (if
not very little) economic incentives from local community to protect the area, especially when economic
incentive to exploits the natural resources exist (e.g. commercial plantation, logging, mining, etc). This chapter
tries to identify types of incentive mechanisms that can possibly be used to provide the benefits to people living
in and surrounding the national park so they will have tangible incentives to conserve the forest. This chapter
also presents and reviews some incentive mechanisms that have been planned or performed in some other areas in
Indonesia such as West Lombok, Singkarak Lake, Mt. Gede Pangrango, Mt. Halimun, etc.
7.1 The O
bjectiv
es of IIncentiv
ncentiv
echanism
Objectiv
bjectives
ncentivee M
Mechanism
The fundamental problem in conservation is that more people earn greater immediate benefits from exploiting
natural resources than they do from conserving them. To the extent that resource exploitation is governed by the
perceived self-interest of various individuals or groups, behavior affecting maintenance of biological diversity can
best be changed by providing new approaches to conservation which alter people’s perceptions of what behavior is
in their self-interest. Since self-interest today is defined primarily in economic terms, conservation needs to be
promoted through the means of economic incentives (McNeely, 1988). In other words, local people will support
conservation effort if the benefits to them outweigh the costs of conservation to thenm personally.
What follows are several observations that support the basic idea of providing incentives for the people live in and
surrounding the protected area:
• Increases in threats, especially from extractive activities (e.g. logging, mining, large scale plantation, etc)
provide more tangible benefits in short run compared to ecological benefits provided by watersheds.
• Social and environmental benefits of conserving natural resources are often intangible, widely spread, and
not fully reflected in market prices. The environmental benefits provided by protected area are mostly
enjoyed by external stakeholders, who may be downstream users of water, and in the case of carbon
storage, humanity as a whole.
• Despite attempts to establish market mechanisms that place financial value on environmental services,
most environmental goods such as clean air, fresh water and biodiversity remain principally public goods –
and often international public goods. In most cases, there is no market mechanism to provide benefits to
the local people who maintain these goods.
• Governments seldom have sufficient capital or labor to manage the protected area in an optimum way.
Therefore, additional innovative funding mechanism for supporting incentives including charging of entry
fees to protected areas, implementing water use charges for the water produced by protected areas and
seeking support from international conservation organization, etc are needed.
A major objective of using incentives mechanism is to smooth the uneven distribution of the costs and benefits of
conserving natural resources. They improve the status quo by rewarding the local people who assume externalities
through which the larger public benefits. In correcting market failures, incentives provide a policy tool for
overcoming the major constraints to conservation activities such as reforestation and protected areas
management. This incentive for conservation is intended to incite or motivate governments, local people and
international organization to conserve biological biodiversity (McNeely, 1988). In other words, an incentive is a
specific inducement designed and implemented to influence government bodies, business, non-governmental
organization, or local people to conserve biological diversity or to use its component in a sustainable manner.
Incentive measures usually take the form of a new policy, law or economic or social program’ (UNEP/CBD/
COP/3/24 in EU et.al).
42
Forest conservation by local people in Batang Gadis National Park benefits people in Madina District by
providing hydrological services and potential ecotourism revenue. It also benefits the planet by providing carbon
fixation and by preserving biodiversity. Therefore, a mechanism should exist that allows national and
international beneficiaries to compensate local people for the benefits they safeguard. The purposes of such an
incentive mechanism for people living in and surrounding Batang Gadis National Park can be described as
follows:
• to maintain continuous support from communities adjacent to protected area to develop conservation friendly
activities (including promotion of sustainable utilization of forest resources, improve management of the
protected area, etc);
• to insure delivery of watershed services;
• to create a steady flow of funding for management of the park to ensure the conservation effectiveness
7.1 Type of B
enefits fr
om Watershed SSer
er
vices
Benefits
from
ervices
McNeely (1988) suggested that water resources development could often provide effective incentives for
conserving biodiversity. By identifying types of benefits provided by watershed services, a water services payment
mechanism can be designed. Watershed services are products of ecosystem functions or processes that provide
direct and indirect streams of benefits to humans. Watershed services encompass soil protection and regulation of
water flows. Therefore, conservation of a dense vegetation cover is needed in the upper parts of a watershed to
avoid erosion and sedimentation, as well as to store water from rains and to regulate its flow to the lower parts of
watershed, limiting the incidence of extreme droughts and floods.
According to Tognetti, et.al (2003), services that are provided by watershed processes associated with:
• Total water yield
• Maintenance of dry season flows;
• Attenuation of peak runoff of storm flow;
• Protection of water quality – through reduction of inputs of nutrients and salinity levels, and allowing normal
rates of sediment flow;
• To protect biodiversity
• To protect wildlife habitat
In the case of Batang Gadis National Park, we can use determination of main benefits derived from protected areas
by MacKinnon, et. al (1986) in Mc Neely (1988) as follows:
• Stabilizing hydrological functions
• Protecting soils
• Contributing to stability of climate
• Conserving renewable harvestable resources
• Protecting genetic resources
• Preserving breeding stocks, population reservoirs and biological diversity
• Maintaining the natural balance of the environment
• Supporting tourism and recreation
• Creating employment opportunities
• Providing facilities for research, education and monitoring
43
7.3
er
vices
ervices
Beneficiaries of Watershed SSer
Tognetti, et.al (2003) suggested that access to benefits provided by watershed services is primarily determined by
various forms of property rights, which define rights to particular streams of benefits as well as responsibilities for
their provision. Thus they determine who has access to particular resources, and whether those who pay the costs
of management practices have access to any of the benefits, and therefore have an incentive for conservation.
Meanwhile Gouyon (2002) proposed several cases to be considered as regards the beneficiaries of environmental
services, as follows:
• A limited, well-defined number of stakeholders benefiting directly from the service. This often occurs in
watershed conservation: a bottled mineral company reaps direct benefits from watershed conservation services
resulting from conservation friendly practices in the upward part of the river basin (case of well-identified
individual beneficiaries of the service).
• A more loosely defined group of stakeholders, who may benefit in varying degrees and in a non-obvious
way from environmental services. For example, all the population and industries in the downstream part of
the basin are likely to benefit from resulting conservation of water flow and quality (case of public goods or
services).
• An even more indirect case is when the beneficiaries are the whole of mankind, as is the case in carbon
sequestration (case of international public goods).
• Table 22 below presents examples of beneficiaries of watershed services in some conservation area in Indonesia.
Table 22. B
eneficiaries of Watershed SSer
er
vices in SSome
ome N
ational P
ar
ks in IIndonesia
ndonesia
Beneficiaries
ervices
National
Par
arks
No
Location
Type of Services
Beneficiaries
1
Gunung Halimun Salak NP
Water Regulation and
Water Supply
Society in Bogor, Sukabumi,
Lebak, and Jakarta
2
Gunung Gede Pangrango NP
Water Supply
PDAM, society and
private sector
3
Ciremai NP
Water regulation for
agriculture, fishery, drinking
water, and industries
PDAM, society and
private sector
4
Bromo Tengger Semeru
Water supply for dam/
reservoir for drinking water
Society, PDAM, hotels
5
Baluran NP
Water regulation
Bottled water company,
hotels, society
6
Leuser NP
Water regulation
Society
7
Danau Sentarum
Water regulation
Society
8
Rinjani NP
Water regulation
Society
9
Bukit Tiga Puluh NP
Water regulation
Society
10
Bukit Baka Bukit Raya
Water regulation
Society
Note: PDAM is Perusahaan Daerah Air Minum or Water Enterprise
Source: Director of Environmental Service and Ecotourism Utilization (2005)
44
It has been noted from Table 19 in Chapter 6 that there is no well-defined number of stakeholders benefiting
directly from the watershed service provided by Batang Gadis National Park (e.g. bottled mineral company). In
fact, beneficiaries of watershed services provided by the park are considered to be more loosely defined group of
stakeholders, such as society (people in Madina District, including farmers and fishermen) and local government.
The study has not found any industries in downstream that use water supply from Batang Gadis NP. More
indirect beneficiaries are the global community, as is the case in carbon storage and biodiversity.
asis F
or Valuation and D
ecision M
aking
7.4 The B
Basis
For
Decision
Making
In order to develop incentive mechanism of watershed services, one has to be clear on:
• Who will pay for the services?
• How much is the price of the services?
• How to calculate?
• To whom the payment is done?
• What can we get from the payment?
Faced with uncertainty about costs and benefits of watershed protection, Tognetti, et.al (2003) suggested that
establishing actual value of protecting the services provided by watersheds becomes in part of value judgment and
a matter of policy, as are most decisions of a public nature. Trade-offs tend to be evaluated and prices paid based
on:
• the opportunity costs of forgone land uses;
• cost of implementing management plans;
• individual wiliness to pay in the form of user fees and purchase of products;
• political willingness to pay as indicated by national budget allocation of tax revenue.
In the case of Indonesia, Director of Environmental Services and Ecotourism Utilization (2005) proposed an approach
to estimate the price of watershed services, which is by using management cost needed to maintain sustainability of
the services. In order to ensure delivery of watershed services, the following conditions must be obtained:
• No logging in catchment area
• Rehabilitation of catchment area – reforestation (if already degraded)
• No destructive activities in the upstream catchment area
• No commercial infrastructure development in catchment area
To achieve the above conditions, there is the need to develop and implement effective management of the watershed
area (protected area). Inevitably, this initiative will cause significant management costs to implement, including:
• Management plan of conservation area
• Effective protection of conservation area from illegal poaching, logging, etc
• Community development
• Development of supporting infrastructure (e.g. ecotourism, etc)
As an illustration, MacKinnon (1986) in McNeely (1988) examined conditions of water catchments of 11
irrigation projects in Indonesia for which development loans were being requested from the World Bank. By
using standard costings for the development of the protected area, reforestation if necessary, and any resettlement
of families required, the costs of providing adequate protection for the catchment was estimated. These ranged
from less than 1 per cent of the development costs of the individual irrigation project in cases where the
catchment was more or less intact to 5 per cent where extensive reforestation were required. Overall these costs
were trivial compared to the estimated 30 percent to 40 percent drop in efficiency of the irrigation system
expected if catchments were not properly safeguarded. In addition, economic incentives in the form of water
pricing or allocation of water rights would clearly improve efficiency and equity of water use as well as generate
funds to maintenance of the irrigation system and protection and management of the watershed, with additional
45
environmental benefits in terms of conservation of tropical forests and endangered species (Panayotou 1987 in
McNeely 1988).
Another approach to estimate the price of water supply proposed by ESP (2005) can be seen on Figure 12 below:
rice
iguree 12. Calculation of Water P
Price
Figur
Conser
Conservvation
Cost
Operational
Cost
PRICE =
Rehabilitation
Cost
Production Cost
----------------------------------Total Volume of Water
Number of
Water Users
Total Yield of
Water
Note: In Medan, there is also a suggestion to allocate Rp 10/m3 of water produced for conservation cost.
Source: ESP (2005)
Up until now, PDAM has to pay ground and surface water taxes to local government, which is 20% of water value.
Figure 13 below shows the existing condition of estimating water value by PDAM (local water enterprise).
etermination of Water Value
iguree 13. D
Determination
Figur
Rp =
20%
X
Volume of Water
Produced
Water Value
Fixed Water
Price
X
Raw Water Price
Factors of Water Value
• Water resource component
• Compensation for Recovery
• Compensatiuon for management
Exploitation and investment coast
to produce the water (determined
by local government)
Source: Decree af Minister of Mineral and Energy Resources No 1451/10/MEM/2000 in ESP (2005)
46
7.5
unds for E
nvir
onmental SSer
er
vices ((Who
Who P
ays?)
ources
Funds
Envir
nvironmental
ervices
Pays?)
Sour
ces of F
Ideally, in a perfect market theory, each stakeholder should pay for the share of environmental services used that is
derived from protected areas or conservation activities. Yet, given the general difficulties in valuing environmental
services and the lack of related property rights and markets, the present situation is very far from reality.
Gouyon (2002) suggested that in practice for the moment, direct and indirect payments for that environmental
services are likely to originate from four types of sources, going from the more public to the more private:
1. Public budgets
In most cases, payments originate from public budgets. This is the case when the externalities of particular
environmental damage or service are borne by the whole regional, national or even international community
of inter-government donors. In this case, the payments originate from the community of regional, national or
international tax-payers, as well as international financial institutions. They are supposedly channeled to the
rural poor such as through community development projects.
2. Polluters
A particular case is the one where the payments originate from polluters, i.e. from stakeholders wanting to
conserve the right to emit waste of harmful gases, and ready to pay other parties to compensate for their
emissions, at lower cost that if they had to reduce their own. This is the case of tradable emission permits and
the Clean Development Mechanism.
3. Concerned individuals and institutions
There are many concerned individuals and institutions, especially in rich countries, who consider that
public expenditures, as of now, are not sufficient to meet the costs of a number of environmental targets.
They place a sufficient value on environmental services to be ready to contribute to the cost of promoting
them beyond their tax-payers duty. This is also the case of all projects financed through private donations
to environmental NGOs. A related case is when private companies finance environmental and povertyalleviation scheme to improve their image.
4. Directly affected stakeholders
There is the case where payments originate from directly affected stakeholders or group of stakeholders,
who have a direct interest because they directly bear the externality cost or benefit of the environmental
practices of other parties. This is typically the case in watershed conservation: for example in Indonesia, the
Aqua mineral water group finances community development and environmental conservation activities in
the watersheds which are needed to sustain mineral water flow.
Meanwhile, Tognetti (2003) suggested sources of funds as follows:
• User fees – these usually works best when it is possible to limit benefits to those who pay. Examples
include fees added to existing charges for water delivery that are specifically designated for financing
conservation activities, and licensing of activities that reduce stream flow.
• Taxes – these may be necessary when benefits cannot be limited to a specific group of beneficiaries as a way
to overcome free-riding, or for policy reasons, it is considered fair that payments be made mandatory
and responsibility be more widely shared; examples might include reduction of flood damages and
protection of biodiversity and indirect uses associated with it. For example, in Colombia, watershed
management is funded through a 6% tax on the revenue of large hydroelectric plants, of which 3% is
transferred to autonomous regional corporation who have authority for catchment management, and
3% to municipal government, partly for the purposes of basin protection and sanitation projects.
• Donations – these may be more appropriate for more globalized benefits, such as protection of biodiversity,
to address root causes of problems that are beyond the control of local stakeholders, such as those
associated with hydropower infrastructure and commercial logging concessions driven by national and
international level interest. However, external sources of funding will be harder to sustain and may be
more appropriate for sponsoring activities needed to develop an initiative.
47
In the case when the externalities of particular environmental service are borne by the whole international
community of inter-government donors, then the environmental, conservation or trust funds could be considered
as blunt financial instruments. They can be valuable where environmental services (especially biodiversity or
natural habitats) contribute a great deal to the public good, and where the core for economic incentives or
regulation is limited. International funding instruments are an important mechanism to capture the global
‘willingness to pay’ for conservation and sustainable use approaches, and to ensure that global benefits arising
from biodiversity are met with global funding. One of best-known case of international treaties that is paying for
the “global commons” is the Global Environmental Facility (GEF). Created in 1991 and funded mostly by
voluntary contribution from rich countries GEF mandate is to support developing countries’ provision of global
commons. The GEF is also the permanent or temporary financing mechanism for international agreements on
biodiversity, climate change, protection of ozone layer and persistent organic pollutants (Gutman, 2003). Figure
14 shows type of incentive mechanism of watershed services.
Benefit from the Ecosystem (US$ or US$/ha)
er
vices
ncentiv
echanism of Watershed SSer
Figur
Mechanism
ervices
ncentivee M
iguree 14. Types of IIncentiv
Conservation Grants
Increased biodiversity conservation
Payments for Water Services
Increased downstream water services
Visitor Fees
Increased Recreation
Reduced Extraction of Forest Products
Conser
Conservvation
Fund
Cost of Conservation
Sources: Pagiola at al. (1999)
As mentioned before, there is no well-defined number of stakeholders benefiting directly from the watershed
service provided by Batang Gadis National Park. Thus, it is not easy to introduce a user fee mechanism (payment
for water services) since we cannot limit stakeholders benefits at present from specific services provided by the
park. Beneficiaries of watershed services provided by the park is considered to be a more loosely defined group of
stakeholders, such as the society in Madina District and even global community for the case in carbon storage
and biodiversity. Therefore, public budgets (originated from government budget, as well as international
financial institutions), donations (originated from concerned individuals or institutions) and visitor fees
(originated from ecotourism and park entrance fee) are considered to be appropriate funding sources for the case
of Batang Gadis National Park. These sources of fund could possibly be managed through conservation fund.
48
7.6
ncentiv
er
vices
ncentivee M
Mechanism
ervices
Types of IIncentiv
McNeely (1988) suggested incentives can be divided into: 1) direct incentives – either in cash or in kind – that
are applied to achieve specific objectives, such as improving management of protected area; and 2) indirect
incentives – that do not require any direct budgetary appropriation for biological resource conservation, but apply
fiscal, service, social and natural resource policies to specific conservation problems. Table 23 below shows
examples of economic incentives for conservation.
es for Conser
xamples of E
conomic IIncentiv
ncentiv
Table 23. E
ncentives
Conservvation
Examples
Economic
No
Type of Incentive
To Local Community
To Local Government
I
DIR ECT INCENTIVES
1
In Cash
Wages from working in the
park, subsidies for
reforestation
Direct contribution to
government revenue, investing in
national park management
2
In Kind
Goods (seedlings,
equipment, vehicles, etc) to
promote sustainable
livelihoods options
Small scale
infrastructure or utilities
to promote sustainable
development options – mostly
interest to local communities
(e.g. ecotourism, etc)
II
INDIRECT INCENTIVES
1
Fiscal Measures
Micro finance (sources of
loans for small scale
enterprise/business),
marketing support
Promote investment,
production and employment
related to sustainable use of the
biological resources (e.g. through
debt swaps, foreign assistance, etc)
2
Provision of Services
Community development
(education, healthcare, etc),
training, etc
Capacity building for
government staff
3
Social Factors
Improve quality of life,
support spiritual and cultural
value, conservation education
Source: modified from McNeely (1988 )
49
Meanwhile, Conservation Stewards Program of CI (2005) proposed a different type of incentive mechanism that
will result in benefits to local people, including:
• Direct payments for biodiversity conservation (financial rewards)
• Payment for ecosystem services
• Investment in development (health, education, improved access to resources and markets, infrastructure, etc)
• Assistance in protecting locally valuable resources
er
vices in
evie
wing IInitiativ
nitiativ
es of IIncentiv
ncentiv
7.7 R
ervices
Revie
eviewing
nitiatives
ncentivee M
Mechanism
Indonesia
The Government of Indonesia has initiated some policies and efforts to protect and manage watershed area in
Indonesia (Director of Environmental Service and Ecotourism Utilization, 2005). These include:
• Declaring prioritized and super prioritized watershed to be managed;
• Developing GNRHL (land rehabilitation) program to rehabilitate prioritized and super prioritized critical
watershed throughout Indonesia;
• Issuing Act No.7 2004 concerning water resources and following this up by developing drafts of
government regulation concerning irrigation, rivers, watershed management financing, etc;
• Working with other institution in conducting research to design environmental services payment (for
examples with RUPES/ICRAF in PDAM Mataram NTB, Management of Jasa Tirta I in Brantas, East Java
and Jasa Tirta II in West Java and PT. Krakatau Steel in Cidanau Dam, Serang).
The Director of Environmental Services and Ecotourism Utilization (2005) also noted that until recently, there is
no single formal regulation concerning incentive mechanisms for environmental services in conservation areas in
Indonesia. However, there are some existing basic laws and regulations that can be used to support this kind of
mechanism including:
• Law No.5 1990 concerning Natural Resources and Ecosystem Conservation;
• Law No. 41 1999 on Forestry;
• Government Regulation no. 68 1998 concerning Conservation and Nature Reserve Area;
• Government Regulation no. 34 2002 concerning Forest Landscaping and Forest Planning, Forest
Management and Forest Use.
Based on the above mentioned laws and regulations, the strategic directions of utilization of services provided by
watershed area are as follows:
1. Initiate funding sources for sustainable development through effective management of watershed services;
2. Promote the improvement of people welfare through effective management of watershed services;
3. Maintain the availability of water resources in the forested watershed areas, especially in conservation area.
Followings are some examples of incentive mechanism of watershed services that have been initiated or
implemented in some sites in Indonesia, including Gede Pangrangro watershed, West Lombok (Rinjani and Gili
Matra), Cidanau (Banten Province), and Gunung Ciremai National Park.
angrango Watershed
ede P
Gunung G
Pangrango
Gede
Gunung Gede Pangrango Watershed is one of the prioritized areas for Environmental Service Program (ESP)
under USAID. ESP (2005) defined environmental services payments as a payment to producers or sellers of
environmental services by users or buyers that enjoy the provided services through practices and efforts to ensure
the ecosystem sustainability and its recovery. The existing condition is that PDAM has to pay tax for ground
water to the local government (maximum of 20% of total value of water). The payment mechanism proposed for
Gede Pangrango Watershed can be seen on Figure 15 below.
50
Figur
ncentiv
echanism in G
ede P
angrango Watershed
iguree 15. IIncentiv
ncentivee M
Mechanism
Gede
Pangrango
CO2
Industries, PLTA, PDAM,
plantation, hotels, downstream
communities
Carbon,
Water,
scenic
beauty
Rp
Forest
WSM Forum
US$
MOU,
Perda,
Perdes,
Perbup
Owner/ Forest
Management Unit/
BTNGP, villages networks
Source: ESP (2005)
West Lombok (Rinjani and G
ili M
atra)
Gili
Matra)
In the case of West Lombok (Rinjani and Gili Matra), the initiative has been to develop a payment system
through the district revenue mechanism (PAD/APBD) by creating an incentive to local stakeholders
(Government of West Lombok, et.al, 2005). This mechanism is then presented in the Local Regulation (Perda).
Seventy percent of total revenue collected from payment system will be given back to implement conservation
activities which agreed by key stakeholders.
An independent organization (consists of supervisory board and executive board) manages this conservation fund.
The special tasks of this organization are:
• The disbursement of conservation funds based on detailed needs assessment;
• Conducting relevant studies;
• Performing monitoring and evaluation; and
• Developing accountability reports.
There are two types of environmental services that have to be paid by the users, namely: ecotourism and water
supply. The mechanism is as follows:
• An additional entry fee in several potential ecotourism areas (from Rp 25,000 to Rp 35,000 for foreign
visitors and from Rp 2,500 to Rp 3,500 for local visitors).
• Agreements for water payment (initiated by WWF, PDAM, and Customer Association in West Lombok).
51
Figure 16 below shows the incentive mechanism of watershed services in West Lombok.
Figur
ncentiv
er
vices in West Lombok
iguree 16. IIncentiv
ncentivee M
Mechanism
ervices
Perda (Local Regulation) on
Environmental Services
Payments - Rp
Social Service
Independent Body
Users of
Environmental
Services (downstream
communities)
Compaign and Awareness
Upstream
community
Quality Control
Conservation
Activities
Natural
Resources
Functions of the Forest
Ecosystem
Source: Government of West Lombok, et.al (2005)
Cidanau (B
anten P
(Banten
Prrovince)
Cidanau Watershed is one of the important watersheds in Banten Province, covering an area of 22,042 ha. The
Cidanau River collects water from 17 large and small streams, and flows into the Sunda Strait that separates the
islands of Java and Sumatra. The Cidanau watershed is home to an active farming community and 30% of the
area has been converted to paddy rice fields.
The area has two main roles in the economic development of the western area of Banten Province, specifically
Cilegon city. Firstly, it is the only water reservoir with adequate discharge in this area to provide water for heavy
industrial activities and domestic uses, and secondly, Cidanau watershed includes the Rawa Danau Nature
Conservation Area (2,500 ha – 9% of the total catchment area), which is the only remaining mountain swamp
conservation site in Java and contains several endemic species of plants and animals.
PT. Krakatau Tirta Industri, a water company, is authorized to manage distribution of the water to the all
industries in Cilegon and for domestic use in Serang and Cilegon. It supplies 1,000 liter per second and pays a
water tax to Government and Cilegon. This company also conducts various works for rehabilitation of Cidanau
River.
52
In the newly created province of Banten integrated management of the Cidanau watershed is a priority. Decree
Number 124.3/Kep.64-Huk/02 of the Banten Governor, dated May 24th 2002, formally established the Forum
Komunikasi DAS Cidanau – FKDC (Cidanau Watershed Communication Forum). FKDC as the intermediary
is now in the process of establishing an alternative financial institution, which will collect all the ‘rewards’ and
channel them to the providers of the environmental services. The FKDC intends to develop a proper reward
mechanism through collaboration among capable stakeholders and to integrate various stakeholders both internal
and external that potentially have capabilities in conducting RUPES mechanisms (quoted from http://
www.worldagroforestry.org/sea/Networks/RUPES/mapsite_indonesia.htm#singkarak)
k
emai N
ational P
ar
Gunung Cir
Par
ark
Ciremai
National
Gunung Ciremai National Park with the size of 15,500 ha is the highest mountain in West Java (3,078 m above
sea level). Besides its high biodiversity, this area also acts as catchment area for downstream areas, including
Kuningan, Majalengka and Cirebon Districts. The watershed in Gunung Ciremai National Park also has
significant contribution to provide water supply for domestic consumption, fishery, agriculture, drinking water
(PDAM) and industries. In addition to that, this area is also potential for ecotourism. There are two private
companies that have been utilized water supply from Gunung Ciremai watershed, they are:
1. PT. Indocement Tunggal Prakarsa Tbk
This company has developed reservoir using water supply from Telaga Remis and distributes the water by
using pipe. Currently, this company has to pay compensation fund to government of Kuningan District as
much as Rp 400 million per year.
2. PDAM (Local Water Enterprise)
Water utilization by PDAM has been conducted by using horizontal pipe producing water supply as much as
700-liter water/second. PDAM has to pay Rp 1.75 billion for compensation fund plus Rp 420 million for tax
per year to the government of Kuningan District (Hamzah, 2005).
In addition to above initiates, currently, Environmental Services Program (ESP)-USAID also has been developing
a five year environmental services program (started from December 2004 to September 2009) covering West
Sumatra, North Sumatra, DKI Jakarta, West Java, East Java, Balikpapan-East Kalimantan, Manado- North
Sulawesi, Manokwari and Jayapura-Papua. This program consists of:
1. Watershed management and biodiversity conservation (to protect the water resources)
2. Environmental services (to improve the access to clean water and sanitation)
3. Environmental services financing (to mobilize funding and improve efficiency and funding for new connection)
er
vices in B
atang
ncentiv
7.4 Identifying P
ervices
Batang
ncentivee M
Mechanism
Prroposed IIncentiv
ational P
ar
k
Gadis N
National
Par
ark
In order to develop such an effective and achievable incentive mechanism, there should be:
• Clear boundaries of watershed areas and stakeholders in the area
• Identifiable and quantifiable type of services provided by the watershed area
• Identifiable beneficiaries/users of those services
• Identifiable benefits resulting from the incentive mechanism
• Identifiable beneficiaries of the incentive mechanism
• Incentive that are relatively easy to implement
• Incentive scheme that are financially affordable
53
Table 24. M
atrix of Analysis to IIdentify
dentify IIncentiv
ncentiv
echanism in B
atang G
adis Watershed
Matrix
ncentivee M
Mechanism
Batang
Gadis
No
Type of Services
Beneficiaries
Potential Incentive
Mechanism
Constraints/Opportunities
1
Water supply for
households’
consumption
Society (local people):
• Primary beneficiary
communities (11,814
households)
• Secondary beneficiary
communities
(68,398 households)
2
Water supply and
regulation for
agriculture
Society (farmers)
User fee
Lack of awareness of
ecosystem services and
conflicting land use
options No market
mechanism No
regulation
3
Water supply and
regulation for
fishery
Society (fishermen)
User fee
No market mechanism
4
Biodiversity
Global community
Conservation Grants
Limited funding
opportunity
5
Carbon storage
Global community
Subsidies for
reforestation
Limited funding
opportunity
6
Supporting
tourism and
recreation
Local, regional, national
and global community
Visitor Fee
Undeveloped tourism
sector
7
Non Timber
Forest Products
Local community
Retribution from
non timber forest
products
Undeveloped NTFPs
Lack of awareness of
ecosystem services and
conflicting land use
options No market
mechanism No
regulation
Based on the above conditions in Batang Gadis National Park, it seems that conservation or trust funds could be
considered as potential financial instruments for implementing incentive mechanism of watershed services in the
park. The funding sources of this conservation fund could be originated from various sources, such as:
• Allocation from government budget to implement the park management
• Visitor fee from ecotourism activities
• Payments from non timber forest products
• International/global funding
54
A Batang Gadis Watershed Forum could be established to manage conservation fund and implement, with the
specific tasks as follows:
• disbursing the conservation fund to implement the program based on agreement from members of the Forum;
• facilitating fundraising efforts;
• ensuring participation of local community;
• performing monitoring and evaluation; and
• developing accountability report.
Figur
ncentiv
er
vices in B
atang G
adis N
ational P
ar
k
iguree 17. P
Prroposed IIncentiv
ncentivee M
Mechanism
ervices
Batang
Gadis
National
Par
ark
Maintain sustainability of
watershed services
Watershed Services from Batang Gadis National Park
Biodiversity
Conservation
Water Supply
and Regulation
Conservation
Grant from
government
budget, interested
individuals/private
sectors or
conservation
organizations
User Fees from
water users,
government
budget
Carbon
Storage
Tourism and
Recreation
Conservation
Grant from
interested
individuals/
private
sectors
Entry Fee
NTFPs
Payments
Conservation Fund
Batang Gadis Watershed Forum
• Park management
• Forest rehabilitation
• Community
Development
• Land and Water
Conservation
• Conservation
Campaign Awareness
• Sustainable Use Options
• Fundraising: identify
other innovative funding
sources
• Monitoring and
Evaluation
55
Park management units,
local community, local
government, etc
Rp/US$
Although an incentive mechanism of watershed services has advantages for conserving biodiversity and improving
human welfare, they are not easy to implement. There are several principal issues to be considered to implement
this initiative, such as: policy and legal framework, institutional design, financing and strategic behavior by
potential beneficiaries. The following are some of the factors the help to ensure enabling conditions for effective
incentive mechanism of watershed services that need to consider for the development of an incentive mechanism
in Batang Gadis National Park:
1. Available Data. In the process of developing incentive mechanism, there is the need to reliable data on:
definition and quantity of services, beneficiaries of those services, distribution of costs and benefits, etc.
2. Effective laws and regulation. To function effectively, incentives require some degree of regulation, enforcement
and monitoring. There should be clear policy that avoids different perception among stakeholders. Local
agreement or regulation needs to be set up to manage the process of incentive mechanism.
3. Stakeholders awareness and involvement. In the development phase of incentive mechanism, the key challenge
is to gain confidence and collaboration of stakeholders. Stakeholders need to be aware of ecosystem services,
including awareness of conflicting land use options and implications of their loss for livelihoods and quality
of life if the watershed ecosystem damaged.
4. Sufficient and reliable sources of funding. One of the biggest challenges in developing such an incentive
mechanism is sources of funding.
5. Effective management plans. Effective management plan (including monitoring and enforcement) is needed
to insure the effectiveness of park management and insure stakeholder access to benefits, and equitable payment
arrangements as an incentive for implementation
6. Strong and effective intermediary institution. Given the large number of stakeholder involved in watershed
protection, payments need to be channeled through intermediaries for pooling funds from a group of
beneficiaries and/or collecting user fees.
7. Effective coordination among sectors: there should be effective coordination among sectors from developing
the regulation, planning, and implementation to monitoring stage. Coordination among sectors are also
needed to refine of fee/tax/retribution/sharing benefit
8. Capacity of local community to benefit from incentives. The effectiveness of a package of incentives aimed at
a specific community depends on number of factors, including: capacity of community to absorb the incentive
(villages with well-developed institutions will usually be able to absorb incentives more effectively than poorly
organized villages), level of motivation of the community (communities which are eager to cooperate and
take advantage of opportunities such as tourism are quite different from communities which need to be
convinced that cooperation is in their own best interest; in the latter case, an initial promotion campaign may
be required.
The proposed incentive mechanism for watershed protection and services in Batang Gadis National Park above is
still a preliminary draft that needs to be discussed and refined by broad range of stakeholders involved in Batang
Gadis watershed use and protection.
56
Chapter 8. Conclusion and R
ecommendation
Recommendation
Conclusion:
The economic valuation aims to provide adequate information and justification to stakeholders and decision
makers to be considered in land use and development decision making process in certain area. One of the
approaches to obtain this information is by assessing the Total Economic Value (TEV) of ecosystem goods and
services currently derived from the area and see their distribution among the different stakeholders that share the
ecosystems. For this study, the economic valuation is limited on analysis of water resource benefits to Madina
District only. The study has successfully revealed the direct and indirect economic value of watershed services
derived from Batang Gadis National Park.
From the study, it is very obvious that Batang Gadis National Park plays important role in supporting the
sustainable economic activities and development in the surrounding areas. The watershed in this area provides
the environmental benefits derived from the ‘use value’ of watersheds that divided into direct use (outputs directly
consumable) and indirect use (functional benefits). Direct use includes water supply and indirect use includes
flood control, landslide, erosion resistant, etc. This watershed is extremely valuable, supplying water to almost
400,000 people (for domestic needs) and more than 42,100 ha of paddy fields and 108,320.12 ha commercial
crops.
The study also revealed that watershed services provided by Batang Gadis National Park mostly benefit the
external stakeholders (in this case the downstream communities) and there is no market or institutional
conditions that allow the local people living in and surrounding the national park area to benefit from such
environmental services. Therefore, there are no (if not very little) economic incentives from local community to
protect their area, especially when they have alternatives to change land use practices to less environmentally
friendly systems (e.g. commercial plantation, logging, mining, etc).
This study therefore also attempted to identify types of incentive mechanism that can possibly be used to provide
the benefits to people living in and surrounding the national park so they will have tangible incentives to
conserve the forest resources and it watershed protection function. Such an incentive mechanism is needed to
maintain continuous support for communities living adjacent to the protected area to develop conservation
friendly activities (including promote sustainable utilization of forest resources, improving the management of a
protected area, etc); to insure delivery of watershed services; and to create a steady flow of funding for
management of the park to ensure the conservation effectiveness.
It has been noted that there is no well-defined number of stakeholders benefiting directly from the watershed
service provided by Batang Gadis National Park (e.g. bottled mineral company). In fact, beneficiaries of
watershed services provided by the park are considered to be more loosely defined group of stakeholders, such as
society at large (people in Madina District, including farmers and fishermen) and local government. The study
has not found any industries in downstream that use water supply from Batang Gadis National Park.
Indirect beneficiaries include the society in Madina District, to the global community. Thus, it is not easy to
introduce user fee mechanisms (payment for water services) since we cannot limit stakeholder benefits from
specific services provided by the park. Therefore, public budgets (originated from government budget, as well as
international financial institutions), donations (originated from concerned individuals or institutions) and visitor
fees (originated from ecotourism and park entrance fee) are considered to be appropriate funding sources for the
case of Batang Gadis National Park. These sources of fund could possibly be managed through conservation
fund. The funding sources of this conservation fund could originate from various sources, such as: allocation
from government budget to implement the park management; visitor fee from ecotourism activities; tax
payments from non-timber forest products harvested; and international/global funding.
57
To manage a conservation fund and implement the program, a Batang Gadis Watershed Forum could be
established to, with the specific tasks to disburse the conservation fund to implement the program based on
agreement from members of the Forum; facilitate fundraising efforts; ensure participation of local community;
perform monitoring and evaluation; and develop accountability reports. The proposed incentive mechanism for
watershed protection in Batang Gadis National Park in this study is still a preliminary draft that needs to be
discussed and refined by broad range of stakeholders involved in Batang Gadis watershed use and protection.
Therefore several next steps are proposed as follows.
Next steps:
1. Conduct technical focus group meeting to:
- fully utilizes the data and knowledge of local decision-makers and stakeholders;
- maximizes the involvement and feedback from partners and counterparts to develop and improve the
resource valuation analyses and approach;
- raises awareness among all valuation participants of: the need for economic valuation of resource use; the
kind of information that valuation can provide; and the way in which valuation can be carried out.
2. Conduct stakeholders workshop to:
- present the result of the economic valuation study to decision makers
- discuss and agree upon types of incentive mechanism for watershed services
3. Refine the final report based on inputs from above series of meeting
Recommendation:
• Such an incentive mechanism is needed to maintain continuous support for communities living adjacent
to the protected area to develop conservation friendly activities (including promote sustainable utilization
of forest resources, improving the management of a protected area, etc); to insure delivery of watershed
services; and to create a steady flow of funding for management of the park to ensure the conservation
effectiveness.
• Indirect beneficiaries include the society in Madina District, to the global community, as is the case in
carbon storage and biodiversity. Thus, it is not easy to introduce user fee mechanisms (payment for water
services) since we cannot limit stakeholder benefits from specific services provided by the park. Therefore,
public budgets (originated from government budget, as well as international financial institutions),
donations (originated from concerned individuals or institutions) and visitor fees (originated from
ecotourism and park entrance fee) are considered to be appropriate funding sources for the case of Batang
Gadis National Park. These sources of fund could possibly be managed through conservation fund. The
funding sources of this conservation fund could originate from various sources, such as: allocation from
government budget to implement the park management; visitor fee from ecotourism activities; tax
payments from non-timber forest products harvested; and international/global funding.
• To manage a conservation fund and implement the program, a Batang Gadis Watershed Forum could be
established to, with the specific tasks to disburse the conservation fund to implement the program based
on agreement from members of the Forum; facilitate fundraising efforts; ensure participation of local
community; perform monitoring and evaluation; and develop accountability reports. The proposed
incentive mechanism for watershed protection in Batang Gadis National Park above is still a preliminary
draft that needs to be discussed and refined by broad range of stakeholders involved in Batang Gadis
watershed use and protection.
58
Next steps:
1. Conduct technical focus group meeting to:
- fully utilizes the data and knowledge of local decision-makers and stakeholders;
- maximizes the involvement and feedback from partners and counterparts to develop and improve the
resource valuation analyses and approach;
- raises awareness among all valuation participants of: the need for economic valuation of resource use; the
kind of information that valuation can provide; and the way in which valuation can be carried out.
2. Conduct stakeholders workshop to:
- present the result of the economic valuation study to decision makers
- discuss and agree upon types of incentive mechanism for watershed services
3. Refine the final report based on inputs from above series of meeting
59
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62

Economic Valuation Study of Batang Gadis Watershed Services

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