The nature of watershed management requires that special attention be paid to methods of performing economic analyses and to institutional capabilities and limitations.
The paper by Brooks and Gregersen discussed the aspects of economic analysis of watershed management practices/projects that place it outside the more conventional types of economic analysis. Economic analysis requires a comprehensive evaluation of benefits and costs in both upland (onsite) and downstream (offsite) areas. Technical relationships between upland practices and downstream sites are often not well known, particularly in developing countries. A multidisciplinary team of experienced professionals can partially overcome such problems but research and particularly the development of predictive models are needed. The authors suggest that the benefits derived from watershed practices need to be better quantified and presented to decision makers.
A panel discussion on the "Economics of Watershed Management" by Arnold, Axinn, Brooks and Gupta followed the first paper. Brooks opened the panel discussion by indicating that the people who pay for upland conservation practices (farmers) may not be the same as the ones who benefit, even though the overall project may be economically justifiable. In such instances, and as pointed out by others, some form of incentives are needed.
Axinn followed up on this theme, pointing out that analysts must sort out social costs and benefits from individual costs and benefits. Similarly, short term and long term benefits need to be sorted out. In the short term, individual upland farmers may find themselves paying the costs of implementing watershed practices (which may be short term losses) to provide social benefits for downstream communities. The perspective of local farmers and their financial situation must be recognized in any analysis. Such a perspective is particularly important in countries like Nepal, where farming is occurring in the upland areas that are targeted for watershed management.
Arnold emphasized that economists must consider individuals, both upstream and downstream, but should not expect the individual in upland areas to be concerned about downstream effects. Dealing with communities within a watershed may be more appropriate than directly dealing with individuals; communities represent an intermediate level between society in general and the individual. The fact that future generations are affected by today's actions (or by doing nothing) needs to be emphasized at all levels;
Gupta stressed that economists should be involved in project design and implementation from the start to tell managers what information is needed for analysis. A socioeconomic profile plus both financial and economic analyses are needed to help resolve the above stated problems. He also indicated that watershed management as an activity may not stand alone.
Other points made by the panelists were:
The idea that if we have the "correct" information, the corresponding "correct" course of action(s) will be taken is not necessarily true (Axinn). Political and other factors sometimes override economic considerations.
Some considerations like preserving genetic material, unique man-made objects and national ecosystems may be worth conserving "at almost any cost" (Gupta). The cost of doing nothing in a country like Nepal may have national or irreversible consequences such as the loss of species. Sometimes projects with a benefit/cost ratio less than one may still be desirable if they have other attractive features, e.g., not having to move (relocate) people.
Downstream effects of watershed management projects are often difficult to evaluate economically (Arnold).
Careful economic evaluation requires that several breakdowns are needed apart from the total cost, including shadow price of labour, proportion of imported equipment, foreign exchange, etc. (Gupta).
Employment generated by a project is not always a "blessing." In fact, labor may be in short supply depending on the time of the year -- whether it is the on-farm or off-farm season (Gupta).
Planning of projects should be controlled and should not become so costly that it exceeds the expected benefits. Approaches are needed which allow a quick assessment, using minimal data and information. If an activity is obviously beneficial, no further analysis is needed. More complete and detailed analyses should only be carried out if needed (Arnold).
High investment projects with large structures and/or "irreversible" consequences should be developed carefully. It is sometimes better to "try out" (demonstration/pilot projects) certain practices before proceeding (Gupta).
An example of using incentives to offset the inequities that arise from watershed management was mentioned; in Colombia, legislation enables hydropower agencies to collect 40% of the revenue from the sale of energy for rural electrification and upland conservation.
Better economic analyses are needed for watershed management projects; the longterm benefits derived from watershed management must be quantified and better explained to all levels of society and government to achieve needed support.
Apandi concluded this session with a comprehensive discussion of institutional strengthening and development that has accompanied Indonesia's program in watershed management. Beginning with a description of national policy and legislation, he then discussed how the watershed management program is structured and the specific institutional arrangements that have been made. The planning of watershed rehabilitation is accomplished centrally by Soil Conservation Planning. Implementation, however, is carried out by different agencies according to the main task to be performed. The paper represents an excellent case study of a rather complicated bureaucratic mechanism that has to date been quite effective.
