Editor’s note: The following article is based on a workshop held in September 2003 at the World Parks Congress in Durban, South Africa. Entitled “Building a Complex Portfolio to Sustainably Finance Marine Protected Area Networks”, the workshop was coordinated and chaired by Scott Smith of The Nature Conservancy, a US-based NGO. For more information: Scott Smith, The Nature Conservancy, 4245 North Fairfax Drive, Suite 100, Arlington, VA 22203, USA. Tel: +1 703 841 8175; E-mail: email@example.com
Marine protected areas worldwide suffer from a chronic funding shortage. The ever-rising costs of operating MPAs too often outrun the financial support provided by conventional sources, such as government. As a result, managers often face the need to cut programs and services, making conservation difficult.
To ensure adequate financing levels over the long term, MPA managers must find ways to augment their core funding, such as by diversifying their revenue streams. This month, MPA News examines how managers are adopting an array of innovative financial tools and strategies to ensure their MPA budgets are sustainable for years to come.
Mexico’s Protected Areas Fund: An endowment for national parks
When it comes to financial management, the Mexican national system of protected areas has undergone significant change in the past decade. Into the 1990s, almost all areas in the system could be categorized as “paper parks”, with neither financial support nor personnel. Today, nearly half of Mexico’s national protected areas have government funding, and a smaller subset of these has access to a diversity of other revenue streams as well, including international grants, park entrance fees, and an endowment fund. The aim of officials is eventually to apply this diversified model, now underway at 4 MPAs and 12 terrestrial sites, to all 149 Mexican protected areas.
Perhaps the most noteworthy revenue stream is the endowment, named the Protected Areas Fund, or FANP by its Spanish acronym. Established in 1997 with a US$16.5 million grant from the Global Environment Facility, the FANP annually contributes more than US$300,000 in interest to the four MPA sites as a group. Although direct government funding for these sites outspends the FANP by roughly four times, FANP funds can be used to pay for certain expenses, such as telephone charges and office rent, that are comparatively difficult to pay using federal allocations. FANP funds are also available starting in January of each year. Federal funds, in contrast, typically become available in April or May. With diversified revenue streams like this, the strengths of one can help cover deficiencies of another.
The amount provided from FANP to each protected area varies and is determined according to factors such as previous performance, number of inhabitants, and area. Renee Gonzalez Montagut, FANP director for the Mexican Nature Conservation Fund (FMCN – a private institution that manages the endowment), says the FANP promotes the “graduation” of protected areas by helping them acquire long-term support from other sources. “FANP funds that become available from the graduation of reserves will allow new protected areas to be incorporated into the program,” she says.
The endowment, growing due to contributions from donors and some reinvestment of accrued interest, is now at US$42 million. “Our projections show that we should reach a goal of US$300 million by 2050,” says Gonzalez Montagut.
The FMCN has had to adapt its management of the fund to world financial markets. The global downturn in corporate stock prices in 2000 led the FMCN to change the endowment’s investment mix from 40% fixed-income to 90% to ensure a constant 8% annual return, thereby protecting the capital and stabilizing annual allocations to protected areas. The World Bank supervises the project’s overall development.
Mexican law does not allow FMCN to channel endowment revenue directly to federal staff. As a result, the institution teams up with local conservation organizations to manage the accounting and hiring of protected-area personnel according to annual plans developed by park staffers. These partnerships have the added benefit of helping the protected areas access new funding sources, including private foundations with which the local NGOs already have relationships, says Gonzalez Montagut. A handful of US-based foundations have become major donors to the protected areas system in recent years. With each additional funding source, reliance upon FANP and federal funds lessens, further diversifying the funding portfolio for each protected area.
Gonzalez Montagut points out that having money has attracted more money to the project. The FMCN has leveraged contributions from the Global Environment Facility to secure grants from multiple other donors, she says. And the role of the project as a laboratory for financial self-sufficiency schemes captured the attention of the European Commission, which approved a grant to help develop local financing mechanisms for the four MPAs. To keep the funds coming, she says, monitoring of conservation results is absolutely essential. “A successful track record with demonstrated conservation impact is necessary to attract donors to invest,” she says.
Bunaken National Park: Diverse funding portfolio
In 1999, management of the 8900-km2 Bunaken National Park in Sulawesi, Indonesia, decided the park needed a more diversified financial portfolio. Designated in 1991, the park initially enjoyed five years of strong funding support from the US Agency for International Development. But that money had since decreased, leaving the park with roughly $100,000/year in national government support as its primary funding, enough to pay for salaries and office operational costs but little else. The optimal annual budget for the park is closer to US$500,000, according to a study by park management.
In 2000, under the leadership of a new collaborative management system representing all primary park stakeholders, the park moved to establish a broad and balanced set of finance options. Among the first was the establishment of an entrance fee system. Although Indonesian law dictates that all user fees from Indonesian parks go to the central government, Bunaken management obtained a special waiver to implement a decentralized fee system as a “pilot project”: 80% of revenues would be retained by the park management advisory board (MAB), and 20% would be divided among local and central governments. (This agreement was enabled by the massive government decentralization process that began in Indonesia in 1999.)
The MAB set the entrance fee for locals at Rp 2500 (US$0.29) per day, and for foreign tourists at Rp 75,000 (US$8.50) per year. (There was little interest among locals for a yearly pass; in contrast, dive operators viewed daily passes as a hassle for their international clients on vacation.) Although the local fee has remained unchanged, the fee for internationals was doubled in 2002 to Rp 150,000 (US$17), with no decline in visitation occurring as a result. Mark Erdmann, marine protected areas advisor for the park, says that the initial low level had the benefit of keeping the overall revenue projection quite low and hence “off the radar screen” of many government officials – an important consideration in negotiating an allocation scheme favorable to park management.
The entrance fee generated nearly US$110,000 in 2002 from 25,000 paying guests, about one-third of whom were internationals. It is now the primary source of conservation funding for the park. The MAB has set a goal of US$120,000 in entrance-fee revenue for 2003. In the long run, it is targeting up to US$250,000 a year, with the increase in revenues stemming from a combination of higher visitor numbers and eventual fee raises for both local and international visitors.
While the use of entrance fees as a funding source provides stakeholders with an incentive to attract more and more visitors, Erdmann says the MAB and tourism sector are working to set visitor carrying-capacity limits. “Bunaken will provide fewer economic benefits if it moves toward mass tourism and the subsequent drop in environmental quality and prices,” he says. Notably, dive operators fear that government will encourage the establishment of new dive centers to make more money in licensing fees, with the indirect effect of diluting business for existing centers. The dive operators have offered to pay higher annual licensing fees if the government goes along with limits on new dive centers, as well as on divers.
Support for Bunaken among the local dive industry has been strong, particularly in the form of in-kind donations, which allow the park to stretch its available funding. The 14 dive operators in the North Sulawesi Watersports Association (NSWA) have sponsored a wide array of programs to assist park management, including beach and reef cleanups, free SCUBA certification for park rangers, donations of materials for conservation education programs in local schools, and a handicrafts program for village men and women to earn extra, reef-friendly income. The NSWA, comprising a mix of Indonesians and expatriates, even pays for lodging and meals for visiting coral-monitoring scientists. “The environmentally concerned marine tourism sector is an often-overlooked source of support for the MPA community,” says Erdmann.
The multistakeholder MAB – whose members include representatives from local government agencies – has been used to leverage government funding for villages within the park, including for health care, road construction, schools, and job training. The MAB is beginning to focus on non-member governmental agencies as well, including at the national level, using its clout as an effective multistakeholder board. Again, the more the MAB can make use of other entities to pay for services in the park, the more operations its own funds will be able to support. “The co-management arrangement of the board is key for spreading the burden of responsibilities,” Erdmann says.
The park also makes use of volunteer opportunities, particularly involving formal volunteer organizations like the UK-based Voluntary Service Overseas (VSO) and US-based Volunteers in Asia (VIA). Volunteers from these organizations receive intensive Indonesian language training prior to placement, making them a huge asset to park management in a number of functions. In addition to drawing volunteers from these formal programs, the MAB targets a wide range of informal volunteers as well. Interested candidates – who are primarily young university graduates seeking experience in conservation – can download information on the program and brief application forms from the MAB website (http://www.bunaken.or.id). The board tries to match applicants’ interests, skills, and available time with park needs. While this takes effort to set up, it is worth it, says Erdmann. These volunteers can participate in entrance fee checks, make presentations to tourists, and update educational materials for visitors, among other tasks – all without Indonesian language training. In fact, their use of their native languages is helpful in communicating with the park’s international visitors. The MAB envisions eventually sponsoring up to 10 volunteers at a time.
In future plans, the MAB would like to develop merchandising at its visitor information center, taking care to avoid competing with local vendors in villages. It would also like to establish an endowment akin to Mexico’s Protected Areas Fund. Overall, says Erdmann, the park aims to avoid dependence on national and international grants, aside from donor support for new program start-up costs, training, and some procurement. “We are trying to lessen our reliance on major grant support, due to its ultimate unsustainability,” he says.
Chumbe Island: Single revenue stream, but diversity in tactics
Just a few kilometers southwest of Zanzibar, Tanzania, is tiny Chumbe Island. The island and its western fringing reef comprise a reef- and forest-conservation project, operated by a private, not-for-profit company, Chumbe Island Coral Park Ltd. (CHICOP). Established in 1992, CHICOP aims to create a model of sustainable protected area management where ecotourism supports conservation and education. Profits from the tourism operations, on which the company is almost wholly dependent for its US$150,000 annual budget, are reinvested in conservation area management and island excursions for local schoolchildren.
Although its dependence on a single revenue stream – tourism – contrasts with the concept that financial diversity is a virtue, CHICOP is undeniably creative when it comes to finding ways to meet its funding goals. Readers of MPA News may already be familiar with CHICOP from articles describing the company’s efforts to keep overhead costs down (MPA News 2:8) and otherwise make the most of available funding, including by using the internet to attract volunteers and do research on potential donors (3:9). But what has been most impressive has been the company’s ability to continually engage its market of potential visitors, in an age when violent events (including riots in Zanzibar in 2001) have helped cut global travel, and travel to the region, significantly. The 2002 occupancy rate for Chumbe’s accommodations, for example, rose to 43%, its highest ever. Two of the keys to this success have been the project’s garnering of international environmental awards and its targeting of ecotravelers, rather than the mass market.
Chumbe Island Coral Park has been fortunate to win a string of prizes, including the 1999 British Airways Tourism for Tomorrow Global Award, the 2000 UNEP Global 500 Award, the 2001 Green Hotelier of the Year Award of the International Hotel and Restaurant Association, and the 2001 World Award for Ecotourism Destination by Conde Nast Traveler magazine, among others. Each has resulted in extensive media coverage from newspapers, magazines, and television, all attracting the target audiences of CHICOP: up-market, conservation-conscious tourists and their travel agents. Some awards have also paid CHICOP’s way to international travel fairs that would otherwise be prohibitively expensive to attend.
How did this small MPA win so many awards? Aggressive marketing. Sibylle Riedmiller, CHICOP project director, says there is no such thing as an award committee traveling the world in search of worthy candidates. “You have to be proactive, find out about suitable awards on the internet or from contacts and friends, and apply with a well-written presentation and excellent references,” she says. It is not easy, she says: writing skills, good public relations, and strong personal presentation ability all come into play. In the end, you must have an excellent project that stands up to scrutiny. “It is worth the trouble, though, because the benefits that awards give can be decisive for marketing,” says Riedmiller. “International environmental awards have been our single most powerful promotional tool.” She estimates that all the post-award publicity from 1999-2003 would otherwise have cost US$10 million to get.
Riedmiller has been pleased by the resilience of tourism to Chumbe Island, even after the September 11, 2001, bombings in the USA. She credits the awards as being at least partially responsible for the fact that travel agent bookings to Chumbe seemed unaffected by world events: the percentage of agent bookings rose from 20% of all visitors in 1999-2000 to 46% in 2000-2001, and has remained stable at 50% since then. For bookings in general, Chumbe is doing much better than large operators in the region. A travel warning to Zanzibar in January 2003 resulted in immediate flight stoppages of charter planes from Europe, forcing large Italian beach hotels on the Zanzibari coast to close shop for six months. Meanwhile, occupancy at Chumbe increased by nearly 50% over the year before.
Riedmiller says that surge in business did not come from the closures of the beach hotels, which serve a different – non-ecotourist – market segment. “Our experience is that the ecotourism niche market is probably more resilient to market shocks than the mass market,” she says. “Our clients travel individually or through small specialized agents and don’t depend on chartered flights, and they are apparently less deterred by security concerns. We had a number of agents and clients tell us that they considered a small island with only seven bungalows a safer place than crowded tourism centers that appeared more worthwhile targets for determined people wanting to harm tourism.”
Riedmiller admits that perhaps the travel warnings and worldwide slump in tourism have played some role in Chumbe’s not yet reaching full occupancy, despite the awards and five years of operations. “Fortunately, with our frugal annual management budget, we can run the MPA with a 30% occupancy rate, and we’ve been getting that since the year 2000,” she says. “This is why I believe that small-scale eco-tourism can indeed fund management of small parks even during crisis times.”
For more information:
Renee Gonzalez Montagut, FMCN, Hidalgo 94 Centro, Xalapa, Veracruz 91000, Mexico. Tel: +52 22 8841 2670; E-mail: firstname.lastname@example.org
Mark Erdmann, NRM/EPIQ North Sulawesi, Jl. Santo Joseph No. 39, Manado 95116, Indonesia. Tel: +62 431 842320; Email: email@example.com; Web: www.bunaken.or.id
Sibylle Riedmiller, CHICOP, P.O. Box 3203, Zanzibar, Tanzania. Tel: +255 24 2231040; E-mail: firstname.lastname@example.org; Web: www.chumbeisland.com
BOX: Underutilization of user fees
Of the 484 MPAs in the Wider Caribbean, only 34 of them charge user fees. This is a pathetically low number, says Kalli De Meyer, former director of the Bonaire Marine Park. “Fees are a highly underutilized mechanism for funding MPAs,” she says.
Now executive director of Coral Resource Management, a not-for-profit corporation based on Bonaire, De Meyer is encouraging more MPAs to follow the lead of Bonaire Marine Park, where a US$10 entrance fee has been in place since 1992. She points to studies that show visitor fees for parks are often set lower than visitors’ willingness to pay, when they are set at all. Why? “There is a strong perception on the part of the tourism industry, particularly the dive industry, that visitors are unwilling to pay for conservation,” she says. “And the industry frequently sees fees as unfairly targeting their clientele.”
Opposition from industry causes park management to scale back their fee plans or stop them altogether. “Since the parks that see fees as a significant potential source of revenue are frequently tourism-dependent, many end up compromising over the level of the fee to make it more palatable to the dive industry,” she says. In fact, she adds, this is what happened with Bonaire Marine Park, where initial plans for a higher fee were scaled back. Since then, she has sought a fee hike in light of evidence that visitors would be willing to pay more, with no success so far.
For more information:
Kalli De Meyer, Fundashon Pa Bon Koral (Coral Resource Management), Bara di Karta z/n, Bonaire. Tel: +599 788 9080 or +599 790 0721; E-mail: email@example.com
BOX: The cost of operating an MPA
The 2700-hectare Bonaire Marine Park costs roughly US$100 per hectare to operate each year, estimates former park manager Kalli De Meyer. Other nearby marine parks, with similar regulations and visitation profiles, are about the same. But elsewhere around the world, the cost of managing MPAs can vary significantly due to each site’s unique combination of natural and social factors.
Pippa Gravestock, an environmental consultant in London, UK, surveyed the income needs of 79 MPAs worldwide, from some of the largest, most well-funded sites in the world to some of the smallest, least-funded ones. She examined incomes, revenue sources, expenses, and the minimal and ideal levels of income necessary to manage each MPA effectively. Although some MPAs reported receiving adequate funding to address their needs, the majority of sites – including relatively well-funded ones in developed nations – reported shortfalls.
Gravestock found that of the array of factors associated with MPAs, only two correlated regularly with current income and required income: the size of an MPA and its number of visitors. In other words, the bigger an MPA was and the more visitors it had, the greater its income needs. “Studies so far have tended to concentrate on area and gross domestic product (GDP) levels as explanatory factors for funding requirements,” says Gravestock. But relating visitor numbers to funding levels, she says, helps explain why some MPAs in rich countries like the USA, which receive a comparatively large amount of government funding, still complain about being financially strapped – they have the greatest numbers of visitors. Visitors often act not only as a source of income but also as a drain, she says. Resources are required to provide toilets and car parking areas as opposed to providing for conservation needs.
Gravestock found that national GDP did not correlate with income needs. “Very often the point is made that MPAs in low GDP countries have low incomes,” she says. “This might be the case, but it does not automatically mean that they are the most under-resourced. As the survey shows, they have the fewest visitors.” Gravestock conducted her MPA income survey in 2002 as part of her Master’s thesis in Environmental Management for Business by Research, at Cranfield University at Silsoe, UK.
For more information:
Pippa Gravestock, 60 Howards Lane, Putney, London SW15 6QF, UK. Tel: +44 208 788 6946; E-mail: firstname.lastname@example.org
BOX: Guide available – Business planning and conservation finance for protected areas
Managers looking for an all-in-one guide to business planning and finance mechanisms for their MPAs may find what they need in the new Conservation Finance Guide, available for free online at http://guide.conservationfinance.org. Launched in September at the World Parks Congress in Durban, South Africa, the guide presents a host of potential financial opportunities for protected area management, from bilateral donor arrangements and debt swaps to fees on tourism and resource extraction. It is a product of the Conservation Finance Alliance, a broad coalition of NGOs and governmental organizations.
The guide stresses the importance of having a business plan in place before implementing any finance mechanisms, and assists managers in forming such a plan. A business plan for a protected area identifies potential revenue sources by valuing the environmental goods and services produced by a site, and lays out projected costs related to management. “In addition to helping protected area managers with their planning, a business plan makes presentation of need more appealing to investors and funders, and more enticing to collaborative efforts and partnerships with business and industry,” says the guide.
Featuring a section on the special financing needs of MPAs, the guide will soon be translated into Spanish and is also available on CD-ROM. It is the centerpiece of a comprehensive program by the Conservation Finance Alliance to build the financial capacity of protected area managers and other conservation practitioners. Other elements of the program, including workbooks, workshops, and a curriculum, are expected to be available within the next several months.
For more information:
Alain Lambert (Chair, Conservation Finance Alliance), Ramsar Convention Bureau, 28, rue Mauverney, 1196 Gland, Switzerland. Tel: +44 22 999 0181; E-mail: email@example.com