In recent years, a number of West and Central African countries began introducing economic
incentives for improved forest management. In the Congo in newly opened areas for logging and in
areas where existing concessions are canceled or returned, concessions are allocated by bidding.
Bidders submit a bid per cubic meter for the annual volume available for cutting (Egli, 1990). Côte d'Ivoire has also introduced bidding for new logging concessions and Ghana has agreed to do the same (World Bank, 1988). The Côte d'Ivoire government in early 1991 auctioned log export rights: 30 out of 40 registered bidders participated, 20 were successful and the average sale price was 25% higher than the administratively set price (Chausse, 1991). When there is sufficient competition, bidding ensures: (a) that concessions go to the most efficient and productive operation; and (b) that the government or community that owns the resource extracts the maximum amount of revenues (rents). The bidding price also provides a market based indicator for adjusting forest fees to their correct levels—even for concessions that cannot be allocated by bidding.
The system could be improved further by: (a) replacing logging concessions with forest management concessions; (b) using sealed tender; (c) including technical competence among the allocation criteria; (d) entrusting the bidding procedure to an independent auctioneer; (e) opening the concession bid to local communities and NGOs as well as local and international firms; (f) auctioning the concessions in small but manageable units and making them transferable; and (g) making concessions sufficiently long to internalize the value of the next crop, with a review every five years to ensure satisfactory performance (Grut et al., 1991).
Economic incentives may also be introduced to support the regulation and management of
concessions. For example, pre-payment of forest fees or deposit of refundable performance bonds
may help avoid logging damage and encourage regeneration. An interesting performance or
compliance incentive is the “interim concession license” (Lettre d'Intention) introduced in Zaire in 1984 to weed out speculators acquiring large concessions without making the necessary investments in forest inventory and efficient harvesting and processing. The interim license requires the satisfactory completion of 20 elements (specified in the application file) before it can be converted into a full concession license. If the concessionaire does not make the necessary investments within three years, the interim license is canceled. Since the applicants are required to pay in advance for inventories of their prospective concession areas, they are more likely to take their responsibilities seriously.
Another innovative incentive is the “deforestation tax” levied on land clearing in public forests by the Central African Republic. It ranges from US $170 to US $500 per ha, depending on the type of public forest land (Egli, 1990). To the extent that the deforestation tax reflects the foregone non-timber values from logging, it acts as an economic incentive to reduce deforestation (Grut, 1991).
Water Resource Management: From Water Pricing in China to Water Rights in Chile From India to Morocco to Botswana, free or heavily subsidized irrigation water obstructs market signals, encouraging farmers to use the resource beyond its economic (or agricultural) optimum and
stifling incentives to invest in improvements and maintenance of existing dams that are often plagued by poor drainage and inefficient distribution systems. In Bangladesh, Nepal, and Thailand, total costs were at least 1000% of revenues collected. Cheap water often becomes a substitute for other inputs. Over-irrigation by farmers nearest to the water source leads to water logging, salinization, and alkalization. Meanwhile, those less conveniently
located are forced to rely on sporadic and sparse water. A study of Pakistan's irrigation systems found that 73% of farmers surveyed complained of insufficient water supplies, while farmers close to the water source of the same system were overwatering. The consequences are reduced crop yields, loss of irrigated lands, and increased salt loadings of return flows and aquifers. Downstream effects include the erosion and siltation of estuaries and deltas.
Water subsidies encourage farmers to treat water as an abundant resource when it is in fact scarce. With no water rights, and no effective water user associations or other mechanisms to allocate water efficiently, water scarcity does not register. Indeed, water charges do not reflect the increasing opportunity cost due to increasing scarcity. As long as farmers do not bear the true cost of water, however, they will be unlikely to appreciate its scarcity or the problems that arise with overuse. Until they receive clear market signals indicating otherwise, they will continue to use water wastefully. Beyond the less apparent economic costs, there is an absence of effective financial cost recovery mechanisms. Even at low maintenance levels only a fraction of operation and maintenance costs are covered by the revenues collected by water users. For example, revenues cover 20% of costs in Bangladesh, 27% in Thailand, and 60% in Nepal. If capital costs are included, water charges often cover only 10% to 20% of costs. It is ironic that capitalist economies such as those of Pakistan and Thailand failed to price irrigation water, while the centrally planned socialist economy of China did not.
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