CHAPTER 5 DEVELOPING COUNTRY EXPERI

CHAPTER 5 DEVELOPING COUNTRY EXPERIENCE
Contrary to conventional wisdom, economic instruments are neither foreign to non-Western cultures nor new to developing countries. Traditional societies, especially in developing countries, have a wealth of customary use rights, communal management systems, and customs that provide incentives for efficient use and management of natural resources. These range from water rights in India, to communal forests and land rights in Papua New Guinea, to customary fishing rights in Brazil, Sri Lanka, and the Cote d'lvoire.
These systems, far from being outdated, contain valuable lessons and essential elements for the
design of effective modern systems of managing natural resources in developing countries.
Customary communal rights over resources is a dynamic balance between the diseconomies of
collective management and the gains from internalization of externalities. While many of these
traditional systems did not withstand the test of time and others are undergoing intense pressure from population growth, new markets, and modern technologies, they nevertheless act as prototypes of management systems that are attuned with the local cultures and provide insights into the design of modern systems of natural resource management in non-Western societies.
The developing country experience is not limited to customary use rights for communal resources.
Private water rights in India provide incentives for efficient management of increasingly scarce water resources. Concession bidding, forest fees, timber taxes, and environmental bonds are employed in West and Central Africa to promote sustainable forest management. As early as the mid-seventies Malaysia introduced a system of effluent charges for its palm oil and rubber industries, and Singapore, still a developing country at the time, instituted marginal cost pricing of access to the city center to combat traffic congestion. More recently, China introduced industrial discharge permits and emission charges, which double or triple when the allowable discharge standard is exceeded. Turkey has effectively used relocation incentives for urban-based industry. Chile has instituted both tradeable emission permits and tradeable water rights, and Puerto Rico used transferable development rights for coastal conservation. Costa Rica introduced biodiversity prospecting rights and tradeable reforestation tax credits and is currently experimenting with internationally tradeable development rights and carbon offsets. Virtually all Eastern European countries introduced pollution charges, and some of them (Poland and Lithuania) are in the process of experimenting with tradeable emission permits for industrial pollutants. The rapidly accumulating experience of these countries in the use of
economic instruments is of particular relevance to other developing or transitional economies
contemplating the introduction of a more market-based approach to environmental management. In
this chapter we review developing country applications of economic instruments in a number of
sectors.
Fisheries Management: The Experiences of Brazil, the Cote d'Ivoire and Sri Lanka with Customary
Fishing Rights Efforts to regulate fishing and prevent overfishing have ranged from quantitative controls (such as catch quotas) to area controls (such as closed areas and seasons) to economic instruments (such as taxes on catch or effort and fishing licensing schemes). Traditional fishing communities in a number of developing countries have solved the problem of over-fishing through customary territorial rights, which combine economic incentives and internally imposed quantitative controls sanctioned by the community's social organization.
Resource allocation through territorial rights—such as leasehold arrangements, franchises, or
allocations of ownership over an area or a stock—aims at creating the appropriate environment for self-management through the establishment of private or community “ownership” over common
property resources. The “owners” of the resource having an interest in its current and future
productivity would be inclined to control fishing effort so as to maximize the net benefits from the resource in much the same way as farmers regulate their farming activities to maximize the returns from their land. For such a system to be workable, however, those allocated rights to the resource should not only be in a position to deny access to others, but they should also clearly perceive that their actions have a direct and pronounced effect on the state and productivity of their portion of the resource (and hence on their future profits).