In order to ensure that the text is as clear as possible and to avoid confusion among the various specialists for whom this Guide is intended, definitions of the concepts used in the Guide are provided below.
Specialists in one field often borrow concepts from other specializations. Frequently, synonyms are used which do not in fact have a specific meaning in the original specialized language.
A definition is a convention which meets with broad acceptance. The definitions adopted here have been kept as general as possible although they are still specific to the concepts used in this Guide.
Instead of being listed in alphabetical order definitions are given in order of their technical importance. They have been divided into three categories: resource conservation; planning; and financial and economic. More than one definition is given for each concept, with accompanying remarks on the Guide's scope and objectives.
"A watershed is an area whose waters all flow into the same river, Iake or sea".
(Garcia Pelayo, R., 1981).
"A watershed is an area whose waters converge at its lowest point in a stream or river which channels them towards a lake, sea or ocean. Its boundary line coincides with the peaks marking the divide between two drainage areas, although in certain special cases it will not necessarily coincide with the orographical basin. The boundary is not fixed, and varies as a result of river capture from more active hydrographic networks". (Salvat, 1975).
"A watershed is a physiographic unit corresponding to the catchment areas of a river system defined by relief. Its boundaries are clear and do not normally coincide with administrative or other limits. Although the watershed concept is important for planners and technical experts involved in a campaign to prevent the degradation of the natural environment, it is much less so for the local communities, authorities and politicians". (FAO/WFP, 1984).
Normally, rehabilitation and conservation programmes in mountain communities take place in a watershed or part of one. As the proceeding paragraph pointed out, technical experts and planners prefer to work in a watershed or in some other less well-defined geographical area (sub-basin, micro-basin), because this allows them to measure all the effects of a specific action.
"This type of destruction affects the landscape. In a degraded landscape the forests have been destroyed, much of the wildlife may have died, the soil may be eroded, river flow may have decreased, or the waters be contaminated. (Contreras, H., 1977).
Landscape degradation includes erosion and implies "the partial or total loss,
whether in quantitative or qualitative terms, of productivity due to wind or water
erosion, increased salinity, nutrient leaching, damage to soil structure
or pollution. (FAO/WFP, 1984).
"Soil erosion is the definitive loss of soil arising from the actions of wind or water". (Contreras, H., 1977).
"Erosion is caused by a number of factors such as climate, soil type and slope, plant cover and cropping methods". (Coujon, et al, 1977).
Plainly, attempts should be made to modify these erosion factors as far as possible and bring about a change in the behavior of the population. This is the value of incentives which form the main theme of this Guide.
"Shifting cultivation or bush fallow farming refers to an agricultural production system in which-land is cleared and cultivated for a short period alternated with long fallow periods for the restoration of fertility". (FAO,1983).
"Shifting cultivation involves shifting of crops from one location to another, as well as relocation of the cultivator's house along with the crops. The system is an extensive form of agriculture which can be successful only if the man/land ratio is low enough to ensure a minimum fallow period of five to ten, or even twenty years." (FAO, 1983).
Mountain conservation programmes are often faced with the problem of shifting cultivation which gives rise to landscape degradation and soil erosions when the man/land ratio is high.
In the context of forest activity for community development the term 'development' is used in the sense of enabling the populations of any rural community to live a "better life" in equilibrium with the environment and natural resources of the target area. The minimum level of a "better life" as used in this study would be at least to supply the basic needs of the population in terms of sufficient produce and/or income to provide adequate food, clothing and shelter to maintain the health of the rural population and a general state of well being". (FAO, 1978).
"Forest development involves bringing about change by improving forests and the conditions of the local population, or by integrating and establishing forest industries. It also involves broadening the economic base of communities or small forest owner groups, by boosting their income through yield increases, price rises and raw material diversification". (Castaņos, L.J. 1978).
"Rural development is the result of a series of quantitative and qualitative changes which occur within a given rural population, with its active participation, the effects of which give rise, in time, to improvements in standard of living and to positive changes in life-style". (Bochet, J., 1983).
"Development sees ecosystems as forming part of an ecological region or ecoregion.
Each ecoregion therefore needs to be treated in accordance with its specific ecosystem.
All human activities within the ecoregion are aimed at conserving its characteristics and
particularly what we have called the conditions for ecosystem equilibrium. The potential
of such an ecosystem is harnessed to produce food and other materials without degrading
the environment and the quality of life. Ecodevelopment consists in optimizing the
potential of an ecosystem and exploiting its natural and human resources through
appropriate technology for the benefit of the population so as to bring about the maximum
possible improvement in the quality of life". (Contreras, H., 1977).
These definitions have been selected with rural communities in mind since the concept of
treating development in macroeconomic and international terms, which can be a source of
serious error, is not used.
"The term "multiple use" implies the employment of a common pool of resources for the simultaneous production of a number of outputs. The common pool of resources consists of the land itself and the human and financial capital available for investing in that land. The outputs from forest and range lands may include timber, forage for use by domestic livestock and wildlife, agricultural crops, water and recreation". (Beattie, W.D., 1977).
"The term "multiple use" implies the management of renewable resources in such a way that they produce water, wood, wildlife, forage and recreation in a combination which best satisfies the economic, social and cultural needs of the population while also minimizing damage to the basic soil resources and other environmental factors". (Beattie, W.D., 1977).
It is easy to see that multiple use is not only compatible with, but is a condition for ecodevelopment. It is equally easy to see that shifting cultivation can succeed only to the extent that it makes diversified use of the resources nature offers. As specialization increases in a bush fallow farming system, multiple use declines and the ecosystem's potential is overloaded. This situation is defined by McArdle (1960): "When increasingly large numbers of people must rely on an unchanging or diminishing resource base, they must make the most effectiveness of the resources they have. Multiple use of renewable land resources thus is a necessity born of scarcity of resources and abundance of people who need these resources. Multiple use is not a passive practice; rather it involves the carefully, deliberately and planned integration of the different uses to try and ensure that as far as possible they complement rather than conflict with one another".
The concept of integrated management of upland areas is also used: "managing the duration and extent of natural resources in a particular territory, so as to ensure the survival of renewable resources and satisfy the social and economic needs of both local and national communities, while at the same time reconciling the conservation of a region's natural resources with improving the quality of life of the populations concerned". (de Abreu, J.M., 1978). Although "management'' in general refers specifically to concepts such as duration and extent, it can be used in a more general sense to cover usage aspects as well. In any event, the concepts of ecodevelopment, multiple use and integrated management are in fact, perfectly complementary. Finally, the concept of the rational or appropriate use of land and natural resources is consistent with ecodevelopment and multiple use as understood in the following definition: the rational "or appropriate use of land involves trying to conserve and improve its fertility and production potential to the extent possible". (Michaelsen,T., 1977).
A community confronts two basic situations with respect to soil or a natural resource.
Either soil and natural resources are not degraded, because they are not being
overexploited, or else the landscape and soil are degraded (i.e. partially or totally
destroyed) and this destruction is progressive. Each situation requires a different type
of action: the former, conservation; the
latter, rehabilitation.
Soil conservation "is a means of preserving a natural resource for potential agricultural production, and is essential for the survival of certain groups of people given demographic and social trends. Soil conservation is preventive and relatively inexpensive". (FAO/WFP, 1984). The concept of soil conservation should be extended to cover all natural resources - for example, the aim for watersheds might be to "maintain the productivity of the watershed and associated land, productivity being taken to cover water quality, soil maintenance, pollution levels or any combination thereof". (Gregerson,H., 1977).
A broader and more dynamic definition sees conservation as covering "improvement" as well, developing natural resources rationally and thus enabling maximum benefit to be obtained while production capacity is preserved indefinitely". (Bochet, J., 1983).
The above definitions cover the most important points: i.e. conservation of an area's natural resources involves maintaining or optimizing their productivity as far as capacity and present technology allow, and preserving them indefinitely.
Rehabilitation, on the other hand, is defined as "restoring the productive potential of degraded natural resources to their original level or one approaching it; in other words, "corrective action". (FAO/WFP, 1984). The rehabilitation concept goes hand in hand with restoration and normally dominates projects involving upland communities. Only in rare instances has society had the foresight and the vision to conserve its natural resources dynamically, i.e. by using them wisely and well. Whilst the rehabilitation of natural resources tends to rely on artificial rather than natural methods, in conservation the reverse is true. (Contreras, H., 1977).
In planning it is quite common for the same terms to be used with different meanings, resulting in communication problems between specialists and, in extreme cases, the break-up of work teams. This is not an exaggeration and difficulties of this type have probably occurred in all countries.
Policy is usually defined as "the art of governing" but for the purpose of this
Guide it is something more. It may be defined as a combination of "orientations or
guidelines determining the action of a person or body in a particular field or
matter". (Salvat, 1975). Defining state policy - more specifically, a policy on
renewable natural resources - presupposes a specific doctrine or ideology of the governing
group. All economic-political systems have definitions, orientations and guidelines
inspired by doctrine or ideology and which take many different forms when applied to
problems relating to renewable natural resources or involving direct intervention in
upland communities.
Planning is subordinate to policy and may be defined as "taking decisions and preparing to implement decisions". (Speidel, G., 1972). Decisions obviously depend on what policy in a certain area is. Decision-making may be defined as "making a rational choice between alternatives which appear appropriate in specific circumstances in order to achieve an objective within a definite period of time". (Speidel,G., 1972). It also implies "preparing to implement decisions", as well as developing, coordinating and taking measures to apply a decision, or rather the best solution". (Speidel, G., 1972).
The planning concert may be applied at a very general level (National Plan) or a very specific one (individual project, Annual Programme), since at all levels it is necessary to make choices and develop, coordinate and act to achieve a given objective within a given time span.
" Plan" tends to be used as an umbrella word to cover not only long term national planning activities but short term local ones as well. One therefore finds national natural resource plans, forest management plans for a particular unit, annual reforestation plans, individual farm plans, etc. This Guide conceives a Plan as the product of macro-economic, regional planning in the form of a full-length document setting out options for achieving an objective within a given time span (normally medium to long term). The Plan develops those options, and suggests how they are to be coordinated; it also identifies the measures to be applied as well as addressing their implementation, control and adjustment.
A project is "any activity to which resources are dedicated for the purpose of obtaining benefits", or "a particular method adopted for achieving a specific purpose" (Contreras, A., 1976). Another, complementary, definition is one in which the word "Project" "refers to a particular use of resources that is to be evaluated. A project involves inputs (costs) and outputs (benefits), and the measures and activities which transform the inputs into outputs. The project becomes something concrete which can be identified with specific purposes. The process of project planning involves identifying alternative means for achieving a given purpose or objective, narrowing down the alternatives to the one which best seems to meet this purpose, detailed design of that chosen alternative and then appraisal of the chosen alternative in terms of the relevant criteria for acceptance which relate to how the project affects society in terms of its objectives". (Gregersen, H., Contreras, A., 1978).
Projects usually focus on a self-contained geographic unit (catchment, sub-catchment, microcatchment, forest reserve, management unit) with clearly defined economic, institutional or technical constraints, enabling it to be analysed, evaluated and operated as an independent investment unit.(Contreras, A., 1976).
Forest Management Plans or Watershed Management Plans for a specific watershed are a frequent topic in forestry literature. Such plans are, in terms of the above definitions, really nothing more than specific investment projects. Nonetheless, until a few years ago it was not unusual for watershed and forest management plans to concern themselves more than the project's duration and extent than with any kind of cost/benefit analysis (evaluation), nor were specific plans compared.
The Programme concept is difficult to define, since it has been applied to different levels (national, regional and specific) and different time spans (annual and long term). Since the usual definitions are so diverse, the one given here is conventional and relates specifically to this Guide.
The Salvat dictionary (1977) states that programme and programme definition "involves, at the very least, preparing preliminary adjustments to plant production and capacity forecasts and detailed programming of production rates. The main aim of the initial programme is to give a rough indication of how the various inputs and factors of production can be combined, and ensure that planning takes due account of actual manufacturing capacity".
This description assumes that a programme forms part of a plan or project, with specific aims and with clearly identified inputs and financial resources for achieving those aims. Seen in these terms, a programme may be conceived as annual, and yet be the short-term expression of a national plan or individual project. A national reforestation plan can, therefore, have a programme for 1984, whilst a specific watershed management project can have its own 1984 streamed protection programme.
Both these concepts are frequently used in formulating and implementing plans, programmes and projects; however, they are sometimes used incorrectly or as synonyms.
Strategy "covers everything relating to the planning, preparation and direction of battles aimed at attaining precise objectives". "It is the art of planning and directing military operations". (Salvat, 1977).
Tactics is "the art of ordering things". "The set of rules governing military operations". "The art of deploying and using troops on the battlefield". (Salvat, 1977).
Both concepts have their origins in military science and, like many other concepts,have been subsequently applied to politics, economics, planning and marketing etc.
Strategy relates to war, or general problems, tactics to battles, or specific problems. Strategy, therefore, is part of policy making and planning, whilst tactics comes under programmes and projects.
Figure 2.1 represents a planning system showing the relationship between level, amount of detail, and time span at various parts in the system (adapted from Von Malmborg, 1976; de Camino, R., 1977). The relationships between policy, plan, project and programme conform to the definitions given here.
This is the last concept to be defined from the planning point of view. This Guide sets out to review the subject of community incentives, and communities are a form of organization. Organization here is taken specifically to refer to rural organizations in the forest sector and "refers to an orderly body or structure performing certain vital functions. An organization is described as a system made up of sub-systems, and embedded in a larger system. It serves to shape and limit the decision-making environment in such a way that it simplifies problem-solving and ensures general coordination of all related activities". (Chandrasekharan, G., 1984).
The term "organziation" implies that its members share the same ideas, objectives and problems so that decision-making is confined to those areas in which it can really be effective.
The definitions below, particularly the earlier tones, refer specifically to the Guide's main theme - incentives and related matters.
An incentive is that which incites or motivates. For the purposes of this Guide, an incentive is that which incites or motivates upland communities to participate in reforestation and conservation projects.
More broadly, an incentive is "any inducement on the part of the State
which will allow the peasant to absorb additional investments and gradually
substitute income because of the works he has to carry out on his farm, to change
the traditional methods with techniques and methods which will ensure the sustained
yield of renewable natural resources within his farm and in its area of influence
which will also contribute to the latter's higher productivity". (Botero,
S., 1979) (FAO/SIDA, 1980) (FAO, 1980).
"Incentives attempt to temporarily divert land, capital and labour resources towards certain ends, or to encourage the integration of certain activities into the community, or to facilitate the participation of certain groups or agents in work which will revert to the benefit of a region or country". (Larrobla, R., 1983).
In other words, an incentive is a form of state assistance to encourage a particular form of behavior; it is a temporary stimulus, directly or indirectly financial to encourage behavior which benefits either the individual or society, or both, the usual aim being the latter. (Bombin, L., 1975) (Michaelsen, 1., 1983).
For Flinta (1983), "the real incentive lies in giving the peasant the opportunity to improve his source of production, put his work to the best use, and increase his productivity".
A number of measures, which will be analysed later, come under the heading of incentives. For the sake of clarity, however, a distinction will be made between two main concepts which are often wrongly treated as being the same: grants and subsidies.
Grants are defined as "a benefit paid by a body to make up the income of a individual or family" (Garcia-Pelayo, R., 1981), or "an income supplement, usually temporary, which the State gives to assist large families" (Salvat, 1977).
These definitions point clearly to grants as emergency income support measures for use at particularly difficult times - unemployment, natural disaster, etc.
Subsidies differ from grants in both meaning and application. A subsidy "is a sum of money granted to a body or individual by the State to encourage works in the public interest" (Garcia-Pelayo, 1981). In broader, and more legalistic terms, a subsidy is "government economic assistance granted directly or indirectly to individuals or administrative bodies. State subsidies are a tool for encouraging activities designed to satisfy the needs of the public. Subsidies, which in this broad sense also include prizes, bonuses, fellowships, grants and other forms of personal assistance, can be subjected to stricter legal controls than the other forms of direct financial assistance mentioned. The subsidy is an outright grant of financial assistance by the Government for a particular purpose in the public interest. It is discretional and revocable, and is conditional upon certain rules being observed. Special funds are normally set aside for the purpose. Subsidies may be granted unilaterally, or by agreement, and may be optional or compulsory, as the law determines". (Salvat, 1977).
In contrast to grants, subsidies are usually much more institutionalized and are primarily aimed less at alleviating the situation of a particular individual following some economic or natural disaster than at encouraging works of public interest. As will be seen later, both these terms are often used interchangeably or with different meanings in national incentive policy and legislation.
There is an increasingly obvious need for multidisciplinary teams to work on natural resource rehabilitation and conservation projects - renewable natural resource economists can play a crucial role here. Their inclusion stems from the need to show the State and the local populations involved the benefits of the plans and projects from a national, regional, community and individual standpoint.
a) Analysis
Gregersen and Contreras (1979) see analysis as involving reviewing a project to ascertain its components and the relation of the parts to the whole. During the project planning process, different types of analysis based on different points of view are needed to identify the best methodology for achieving objectives. The objectives of a project and its associated constraints have a bearing on the type of analysis performed - technical, budgetary, environmental impact, financial and economic. (Gregersen, Contreras, 1979) (Contreras, 1976).
However, there are two essential types of plan and project analysis, particularly where community involvement in upland and mountain watershed is concerned: financial analysis and economic analysis. Attention is focussed on these types of analysis because there are at least two interest groups in a project: the participating community of individuals, and society as a whole (represented by the region or the country). Financial analysis identifies the net return to owners involved in the project, whether or not they are organized. Economic analysis helps identify the net benefits from the project to society as a whole.
b) Financial analysis
One of the objectives of private, collective or individual bodies is usually to obtain pecuniary benefits from an investment or activity. The techniques of financial analysis are used to determine the relationship between inflows and outflows of goods and services - in other words, commercial profitability. (Gregersen, H. and Contreras, A., 1979). Financial analysis is done from the standpoint of those bodies specifically involved in the project. It analyses the expected monetary return from the investment of funds (resources) in a project. It also provides information on when resources will be required and when a return can be expected.
In the concrete instance of mountain watershed projects, communities and individuals will wish to know the "commercial rate of return" obtainable by investing cash, land or labour resources, and whether a particular incentive (in cash or in kind) will better the project situation, thereby making active involvement more attractive. (Gregersen, H. and Contreras, A., 1979).
Financial analyses have two parts; a global analysis covering all the entities involved in the project, and partial analysis covering, for example, state participation and the involvement of peasants, owners and other members of the community.
c) Economic analysis
Economic analysis is an extension of financial analysis, although it is carried out from the perspective of society as a whole instead of a specific entity within society (Gregersen, H. and Contreras,A., 1979). Economic analysis also looks at the rate of return, from the point of view of society, to be obtained from a given use of limited resources (Gregersen, H. and Contreras, A., 1979).
As regards the type of project envisaged by this Guide, it is mainly the State which is interested in knowing the net benefits for society of a particular project (its "economic feasibility"). in addition it will also want to know whether a particular incentive increases, the economic feasibility of a project.
The planning horizon of a plan or project is the period for which it is covered by economic and financial cost/benefit analysis. It needs to be chosen carefully to allow time for all possible effects of the proposed investments to be considered. If this period is very short (a soil conservation project for example) production revenues will probably be insufficient to cover the high cost of works such as terraces, dykes or stone walls. Similarly, the planning horizon for a reforestation project should run until the last hectare planted is harvested. Mountain watershed reforestation and conservation projects usually have long planning horizons because all the investments mature late.
The financial cost of a plan, project or programme equals the direct inputs employed multiplied by the market price actually paid, or to be paid, for these inputs. An input is direct if it is paid for by the body or group for whom the financial analysis is being undertaken. In an upland soil conservation project for example, direct costs for the individual peasant or for the community include inputs, contracted labour (where applicable), transport, water rights, etc.
Financial benefits correspond to the quantity of direct outputs obtained as a result of the plan, project or programme, multiplied by the price actually obtained or which it is hoped to obtain. Financial benefits are derived by the peasant or community from the sale of direct outputs such as wood, maize, beans, small animals, vegetables, etc.
Economic costs fall into two categories: direct inputs, which are paid for by those involved in the project: and indirect inputs, the cost of which is met by society.
a) Economic cost of direct inputs
In traditional models of the economy, with free competition and a large number of sellers and buyers of inputs and outputs, market prices give a true indication of the relative scarcity of inputs and outputs so that their free market price does in fact reflect their social value.
However, in most cases nether competition nor prices are free. In most markets the equilibrium situation does not exist and monopolistic or monopsonistic tendencies usually prevail; sometimes State intervention is needed to regulate prices especially for essential commodities and basic inputs. In the latter case, the market price does not reflect the social value of the input. For example, there may be a minimum legal wage which the project has to pay its workers, irrespective of the fact that they would normally be unemployed and unproductive. Thus, although the unit cost of direct labour inputs is equivalent to the minimum wage, the economic cost (or cost to society) is zero, since society has lost nothing by shifting the worker from his previous state of inactivity (zero output) to a job on the project workforce.
Thus the economic cost of direct inputs is equal to the quantity of inputs multiplied by their economic cost (shadow price, opportunity cost). It represents what society forgoes by diverting an input from some other use to the project.
b) Economic cost of indirect inputs
In addition to direct inputs which are borne directly by the project, there are also indirect inputs. The costs of indirect inputs rather than being paid for directly by a specific activity or project, are borne by society as a whole. An example is soil loss in shifting cultivation: fully-cleared cultivation on steeply sloping land "consumes" from a few milliliters to several centimeters of soil each year, although the peasant himself pays nothing.
The economic cost of this soil loss can be calculated (where data exists) as the cost of dredging the reservoir downstream, or as increased hydraulic energy production costs due to the heavier maintenance required. In other words, society pays the cost through taxes or through dearer services.
c) Economic benefit of direct outputs
The same reasoning that was applied to the economic cost of direct inputs is valid for direct outputs too; their market price differs from the price which society as such is prepared to pay. Suppose that project produces wood which was not produced before and that this wood takes the place of electricity or imported fuel. The value of each cubic metre of wood for society is equal to the cost of the electricity or imported fuel it replaces. In other words, the economic benefit is equal to the amount of the direct output multiplied by its economic cost.
d) Economic benefit of indirect outputs
A mountain watershed conservation project not only produces direct outputs such as
fuelwood, maize, and vegetables, but indirect outputs as well; these are not received
directly by peasants involved in conservation actions, but
by people lower down the basin. Indirect benefits include civil protection works, reduced
flood damage risk, lower energy generating costs, fewer rural/urban migration costs, etc.
It is the indirect benefits of mountain watershed
conservation projects which are, generally speaking, the most important, and they
constitute the prime goal of incentives.
Assessing indirect benefits is not easy unless all the necessary technical information is available. The usual method is to measure how much the project has saved society or how much damage has been avoided.
This chapter has attempted to define several concepts which appear frequently in the text, so as to clarify their meaning and avoid misunderstanding. To go into greater detail, particularly concerning financial analysis, economic analysis, costs and benefits, would have exceeded its scope, and is, in any case, unnecessary, since a much more thorough treatment of the subjects dealt with in this chapter may be found in FAO Forestry Paper No. 17 entitled "Economic Analysis of Forestry Projects", and its two supplements (Gregersen, H., Contreras, A., 1979) (FAO, 1980).
As a result of degradation in mountain areas, streams become loaded with suspended sediment and flow becomes irregular and variable, with periods of low water followed by flooding due to the silting up of river-beds. This can cause serious damage to downstream populations, works and crops, necessitating heavy infrastructural investment on irrigation and energy.
