Economic Analysis of Indonesian Coral Reefs

Economic Analysis of Indonesian Coral Reefs

Primary Country: Indonesia
Ecosystem: coral reef
Sample Value Estimates:
  1. $25,410 / km2: Cost of beach erosion (NPV) due to destruction of one kilometer of coral reef under low scenario
  2. $550,000 / km2: high scenario
  3. $108,900 / km2: Economic losses due to overfishing in Indonesia
  4. $81,000 / km2: Economic losses due to sedimentation from logging in Indonesia to fisheries
  5. $192,000 / km2 : Economic losses due to sedimentation from logging in Indonesia to tourism
  6. $273,000 / km2: Economic losses due to sedimentation from logging in Indonesia total net losses
  7. $93,600/ km2: Economic losses due to coral mining in Indonesia to fisheries
  8. $12,000 - 260,000 / km2: Economic losses due to coral mining in Indonesia to coastal protection
  9. $2,900 - 481,900 / km2 : Economic losses due to coral mining in Indonesia to tourism
  10. $175,500 - 902,500: Economic losses due to coral mining in Indonesia total net losses
  11. $86,300 / km2: Economic losses due to blast fishing in Indonesia to fisheries
  12. $8,900 - 193,000 / km2: Economic losses due to blast fishing in Indonesia to to coastal protection
  13. $2,900 - 481,900 / km2 : Economic losses due to blast fishing in Indonesia to tourism
  14. $98,100 - 761,200 / km2: Economic losses due to blast fishing in Indonesia to total net losses
  15. $40,200 / km2 : Economic losses due to poison fishing in Indonesia to fisheries
  16. $2,600 - 435,600 / km2 : Economic losses due to poison fishing in Indonesia to tourism
  17. $42,800 - 475,600 / km2: Economic losses due to poison fishing in Indonesia total net losses
  18. $503,000 - 1 million / km2: NPV per km of reef for 25 years ( 10 % discount ra
  19. for area of high development
  20. $3,000 - 6,000 / km2: NPV per km of reef for 25 years ( 10 % discount ra
  21. for area of medium development
  22. $0 / km2: NPV per km of reef for 25 years ( 10 % discount ra
  23. for area of no tourist development Value of coastal protection per km of coastline in Indonesia
  24. $820 / km: areas that are remote and are sparsely populated
  25. $50,000 / km: less remote and moderately populated area with some stone construction
  26. $1,000,000/ km: areas with major infrastructure
Region: Asia
Data source: NOAA's Coral Reef Valuation Database

Publication information

Cesar, H. “Economic Analysis of Indonesian Coral Reefs” The World Bank, 1996

Addtional Notes

Report

Cesar, Herman

12/1998

Economic Analysis of Indonesian Coral Reefs

Washington, DC: World Bank99 pp.

coral reefs/commercial fisheries/recreational fisheries/tourism/coastal protection/benefits/costs/net benefits

The study was carried out as an independent sector work in support of the World Bank's involvement in the proposed Coral Reef Rehabilatation and Management Program (COREMAP) in Indonesia. The study integrates a social-welfare based economic analysis and a stakeholder analysis with a discussion on options for rational coral reef manangement. Five major threats to the coral reefs are addressed

1) poison fishing, 2) blast fishing, 3) sedimentation/pollution, 4) coral mining, and 5) overfishing. The costs of policy inaction are the losses in the value of the functions of coral reefs such as sustainable fishery, food security, biodiversity, coastal protection, tourism and research. Only a few of these could be quantified. The benefits to stakeholders that could be monetized were the fishery, coastal protection and tourism. Poison fishing. Where cyanide is squirted on coral heads to stun and capture live aquarium and food fish, but killing coral heads in the process. Blast fishing. Whereby small bombs are detonated in shallow reef areas, killing targeted fish, but also killing larvae, juveniles and corals. Coral mining. Where corals are collected and smashed for house construction and lime-production. Sedimentation and pollution. As a result of logging, erosion, untreated sewage and industrial discharges, which smother and kill corals. Overfishing. Does not detroy corals but reduces abundance and diversity of fish and invertebrates. Poison Fishery and Blast Fishery Net Benefits to individuals is calculated as Gross Revenues to fishermen minus costs of production or net profits. Fishery net losses to society are the net profits that could be gained from a sustainable hook and line fishery. Tourism seems to be measured as net profits from tourist operations plus consumer's surplus. Net present values for a 25 year period discounted at 10 % are put on a per kilomenter of coastline basis for areas of high, medium and no tourist development. $0 per kilometer of coastline for no tourism, $6,000 for areas with some tourism and $1 million for areas with major tourism. It is assumed that one kilometer of coastline is associated with one square kilometer of coral reef. Two scenarios are presented for tourism. The LOW scenario is assigned a net present value of $3,000 per square kilometer of coral reef. The HIGH scenario is assigned a net present value of $503,000 per square kliometer of coral reef. For coastal protection, three situations are distinguished: 1) areas that are remote and are sparsely populated $820 per kilometer of coastline, 2) areas that are less remote and moderately populated with some stone construction $50,000 per kilometer of coastline, and 3) areas with major infrastructure (e.g. tourism facilities) $1,000,000 per kilometer of coastline. One kilometer of coastline is assumed to correspond to one square kilometer of coral reef. Destruction of one kilometer of coral reef leads to beach erosion of one kilometer of coastline. The LOW scenario has a net present value of $25,410 per square kilometer of coral reef and the HIGH scenario has a net present value of $550,000 per square kilometer of coral reef. Total Net Losses (including only the three quantifiable losses) are calculated for a 25 year period using a 10% discount rate and reporting losses in thousands of U.S. dollars per square kilometer of coral reef. Total Net Benefits to Individuals derived from a threatening activity are compared to the Net Losses to Society from fisheries, coastal protection and tourism. Ranges of estimates are based on low and high scenarios. Poison Fishing. Total Net Benefits to Individuals $33.3

Net Losses to Society a) Fishery $40.2, b) Coastal Protection $0, c) Tourism $2.6 - $435.6

Total Net Losses $42.8 - $475.6 Blast Fishing. Total Net Benefits to Individuals $14.6

Net Losses to Society a) Fishery $86.3, b) Coastal Protection $8.9 - $193.0, c) Tourism $2.9 - $481.9

Total Net

Benefits and costs of coral reef destruction are compared for Indonesian coral reefs. Not all losses could be quantified. Study quantified commercial fisheries, coastal protection and tourism and evaluated the threats to the coral reefs from the commercial fisheries (poison and blast fisheries), coral mining, sedimentation from logging and overfishing (does not impact corals but reduces abundance and biodiversity of fish and invertebrates).

Indonesia

coral reefs

commercial fisheries, recreational fisheries, tourism, poison fishery, blast fishery, coral mining

various reports and government statistics.Poison Fishing. Total Net Benefits to Individuals $33.3

Net Losses to Society a) Fishery $40.2, b) Coastal Protection $0, c) Tourism $2.6 - $435.6

Total Net Losses $42.8 - $475.6 Blast Fishing. Total Net Benefits to Individuals $14.6

Net Losses to Society a) Fishery $86.3, b) Coastal Protection $8.9 - $193.0, c) Tourism $2.9 - $481.9

Total Net Losses $98.1 - $761.2 Coral Mining. Total Net Benefits to Individuals $121.0

Net Losses to Society a) Fishery $93.6, b) Coastal Protection $12.0 - $260.0, c) Tourism $2.9 - $481.9

Total Net Losses $175.5 - $902.5 Sedimentation (logging). Net Benefits to Individuals $98.0

Net Losses to Society a) Fishery $81.0, b) Coastal Protection $0, c) Tourism $192.0

Total Net Losses $273.0 Overfishing. Total Net Benefits to Individuals $38.5

Net Losses to Society a) Fishery $108.9, b) Coastal Protection $0, c) Tourism Not quantifiable

Total Net Losses $108.9Benefits transfer. Use of existing studies for threats and destruction of reefs and existing studies and government data for different reef uses. All uses are converted to thousands of U.S. dollars per square kilometer of coral reef. Net Losses to Society are calculated as estimated losses in square kilometers of coral reefs times the value of Net Losses to Society for each use dependent on the cooral reefs per square kilometer of coral reef.

2Bob Leeworthy

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