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Economic Value of Bangladesh Wetlands

Paul Thompson
Winrock International, Bangladesh

Luke Colavito
Winrock International, Bangladesh

Abstract/ Executive Summary:

Wetlands in Bangladesh, just as in the rest of the world, were for long regarded as worthless wastelands to be converted to productive agriculture or residential/industrial plots. There is increasing recognition and evidence worldwide that wetlands are highly productive resources important not only for biodiversity but also for directly supporting the livelihoods of local people and indirectly for providing environmental services on which most people depend. This study reviews the valuation methods for different types of benefits and provides the first detailed valuation of a major wetland in Bangladesh. It is based on a “bioeconomic” model which estimates most of the use-related values of Hail Haor through a combination of detailed estimates of land use/habitat areas derived from a GIS with estimates of productivity and values of nine different products from a mixture of surveys and secondary sources. It does not estimate some potentially important non-use values such as groundwater recharge, pollution extraction and existence values. The results indicate that the annual value of wetland products in Hail Haor in 2000 was about Tk 37,000 or US$650 per hectare. This compares with a net return from the alternative of single cropped boro paddy land of Tk 18,250 per ha. The main contributors to this value were fish and other non-fish aquatic products (plants, grazing values etc.). Most of these products are collected by and provide income or food for the poor. The annual return from Hail Haor in its condition at that time was estimated to be just under US$ 8 million. Restoration of fish catches alone in Hail Haor has raised this to about US$ 10.9 million a year in 2005-06. A simplified cost-benefit analysis of the impacts of the MACH project across its three sites was also made. It was assumed that most wetland values were not changed through MACH, and that the directly attributable benefits were from changes in fish catches, the future returns from trees planted through the project, the increments in incomes of poor households that take loans for alternative income-generating activities through the Resource User Groups, and a small amount for incremental incomes of pineapple farmers who adopt contour cultivation. All of these gains were estimated based on project data, in the case of fish catches this came from detailed monitoring undertaken throughout the project period. Other direct benefits from project interventions such as health and sanitation, returns from alternative crops demonstrated by MACH, or reduced irrigation costs where excavation has improved surface water availability, were not counted. It was estimated that as a result of MACH an additional Tk 297 million worth of fish are caught each year and that this is likely to sustain. Considering the period 1999-2022 and a 6% discount rate, the present value of benefits was estimated at about US$ 45 million, and after allowing for project costs this gave a net present value of about US$ 35 million, the benefit-cost ratio of 4.7, and an internal rate of return of 56%. These studies clearly demonstrate that wetland protection and restoration make good economic sense for Bangladesh. The value of resources and services generated by wetlands even when degraded is more than alternative agricultural uses, so further changes in use or drainage of wetlands should be avoided. Moreover, MACH has shown that it is not only possible to enhance and restore the productivity of wetlands, but that this is economically worthwhile, offering a better return than many other public investments. Since MACH was a pilot project that involved learning as it progressed, the unit costs of future wetland management and restoration should be reduced. Public funding is required for this since the many poor wetland users lack the resources or initial incentive to organize or invest in such a dispersed resource without outside help. There is also a need to address watershed land management issues – to generate data on the contribution of different land uses to wetland degradation and to regulate land uses and invest in watershed protection to ensure that wetlands continue to be productive and provide the ecosystem services that Bangladesh depends on.

Keywords: Wetlands, MACH impact, Biodiversity, Benefit-cost

Location: In Bangladesh

Start Date:

End Date:

Program Area: Socio-economic and Policy

Commodity: Haor, Wetland

Objectives:

To quantify the main values of one major wetland area in Bangladesh.

Methodology:

The MACH project is supported by USAID and has been working since late 1998 in three large wetland areas in Bangladesh for their restoration and sustainable management: Hail Haor, Turag Bangshi, and Kangsha-Malijee wetlands. The valuation study covered the deeply flooded and largest of the sites – Hail Haor, while the estimation of benefits from MACH project covered a limited range of uses in all three wetlands. Total economic value is now well established as a framework for defining ecosystem, including wetland, economic benefits (Barbier et al. 1997). This approach was adopted in this study for Hail Haor, but it focused mostly on direct values. Many of even these more readily quantified benefits have tended to be ignored and underappreciated in Bangladesh The approach taken for the estimation of wetland economic values was to estimate the annual value of various economic outputs from the land covered by the wet season water area. The economic output valued was the gross revenue generated by primary activities associated with the wetland resources. An attempt to estimate value added by activity and alternative activities was not attempted. However, it should be noted that since these wetland outputs are either resource extraction or public values the share of value addition will in fact exceed alternative agricultural production activities. This implies that the estimation of relative wetland value is conservative. With the exception of the value of wetland land use for agriculture, all of the benefits valued are derived from the use of common-pool resources (mainly fisheries) and public goods such as flood mitigation. The studies were conducted at the early stage of introducing improved community-based management practices in the two sites, and reflect conditions when the common pool resources were in a degraded condition due to externalities, open access and inappropriate property right regimes, for example, extraction of maximum short term fish catches encouraged by the leasing system, overfishing where there was open access, and siltation of wetlands due to poor soil management practices in nearby hills. Public values refer to positive externalities produced by the wetland. These benefits may well not be fully perceived by beneficiaries. For example, local residents may be unaware that the wetlands are acting to maintain the health of the local aquifer, reduce flood severity, and improve water quality. In Hail Haor to estimate overall fish yield the MACH GIS database was utilized to estimate by month the area of the four water types. Yields were then scaled up by multiplying per ha species results by the area of the water type. The economic valuation was then applied by multiplying the average yearly price by the amount of fish production. In Hail Haor to estimate overall fish yield the MACH GIS database was utilized to estimate by month the area of the four water types. Yields were then scaled up by multiplying per ha species results by the area of the water type. The economic valuation was then applied by multiplying the average yearly price by the amount of fish production.

Source of Information: MACH Technical Paper 6, June 2007

Article Link (Online Journal):

Funding Source:

1.

Budget:

Total Budget (Tk.) :

Achievement/Findings:

Based on this conservative estimate of the value of Hail Haor wetland, and the economic analysis of the benefits from the MACH project, several conclusions and recommendations for policy and future research are made. These are of high importance for Bangladesh policy and development programs given that there are at least 60 similar large wetland systems or areas, and that 20-25% of the country comprises wetlands and regularly inundated floodplains upon which a similar proportion of the population depend.

Knowledge Management: Report/Proceedings