On the measurement of socioeconomic benefits of integrated coastal management (ICM): Application to Xiamen, China

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Ocean & Coastal Management 49 (2006) 93–109 www.elsevier.com/locate/ocecoaman

On the measurement of socioeconomic benefits of integrated coastal management (ICM): Application to Xiamen, China Benrong Penga, Huasheng Honga,, Xiongzhi Xuea, Di Jinb a

Environmental Science Research Center, Xiamen University, Xiamen, Fujian 361005, China Marine Policy Center, Woods Hole Oceanographic Institution, Woods Hole, MA 02543, USA

b

Abstract We develop a systematic approach for the measurement of overall socioeconomic benefits associated with an integrated coastal management (ICM) program. The analytical framework includes multiple marine industry sectors (e.g., ocean shipping and commercial fisheries) as well as environmental sectors (e.g., coastal erosion). The net benefit measure captures both economic and environmental effects. We apply our analytical model to Xiamen, China, using empirical data from 1992 to 2001. Results of the case study show that the implementation of ICM program in Xiamen has led to a significant increase (over 40%) in annual socioeconomic benefit from its marine sectors. Thus, the Xiamen ICM program has been effective in achieving sustainable development. r 2006 Published by Elsevier Ltd.

1. Introduction Integrated coastal management (ICM) has been promoted by scholars and managers for two decades to improve coastal management and to ensure sustainable development in coastal areas around the world [1–4]. Given the significant public investments in environmental protection and resource conservation and potential short-term reduction in output from relevant marine industries, it is important to assess the economic benefit Corresponding author. Tel.:+86 592 218 2216; fax: +86 592 209 5242.

E-mail address: [email protected] (H. Hong). 0964-5691/$ - see front matter r 2006 Published by Elsevier Ltd. doi:10.1016/j.ocecoaman.2006.02.002

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associated with ICM. However, empirical measurement of economic benefits in a multisector coastal system is extremely challenging. Although conceptual framework for ICM benefit–cost analysis has been discussed in the literature (see [5,6]), there has been little attempt in the research community to develop empirical assessment of the overall benefit associated with an ICM program. The case of ICM in Xieman provides an opportunity for developing and implementing a detailed procedure for the assessment. In this paper, we present the results of what we believe the first attempt to systematically quantify the socioeconomic benefits associated with an ICM program. Quantification is an extremely important step toward improved ocean management, since it helps us to transform questions of yes-or-no into questions of more-or-less. According to Solow [7], ‘‘Yes-or-no lends itself to stalemate and confrontation; more-or-less lends itself to trade-offs’’. The study contributes to the literature on ocean and coastal management research in three ways. First, the analytical framework covers multiple marine industry sectors (e.g., ocean shipping and commercial fisheries) as well as environmental sectors (e.g., coastal erosion). We make every effort to develop estimates of both internal and external benefits (i.e., both economic and environmental benefits). The inclusion of multiple uses and environmental and ecological effects is crucial, since it is the essence of ICM.1 Next, we assemble benefit–cost estimates for various sectors in a systematic way and develop an aggregate measure of ICM benefit. Although there is a growing literature on environmental and natural resource valuation, most studies focus on a specific activity or a specific resource [8]. For many ocean management decisions, the aggregate value of a marine ecosystem and its surrounding coastal economy is important. For example, a benefit–cost analysis of a specific regulatory change must consider cumulative effects across all sectors. The study is an important step towards improved ocean system valuation. Finally, the approach and results of the study are useful for both ex post and ex ante ICM program evaluations, especially in developing countries. ICM in Xiamen provides a unique case for program benefit assessment. The Xiamen ICM program was introduced and implemented in 1997. Various economic and environmental indicators from with and without ICM policy regimes may be compared. By contrast, similar programs in the United States have evolved over many years, which makes the comparison (i.e., with vs. without ICM) much more difficult. Although the Xiamen study is an ex post assessment, its results may be useful for the evaluation of proposals to introduce ICM to other locations. For example, our benefit and cost estimates may be used to assess the expected return of ICM. The remainder of this paper is organized as follows. Section 2 provides a review of relevant literature and background of ICM in Xiamen. Section 3 presents the methodology used to develop benefit and cost estimates. Data sources, specific estimation procedures, and results are presented in Section 4. Section 5 discusses limitations of our ICM benefit–cost assessment. Conclusions and summaries are included in Section 6.

1

See classical papers by Underdal [1], Levy [2], Juda and Burroughs [3], and Cicin-Sain [4].

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2. Background 2.1. Literature on measuring ICM benefits ICM is an accepted management framework to address coastal and marine environmental problems and to achieve sustainable use of coastal resources. Scholars agree that one indicator for assessing the success of an ICM program is its socioeconomic benefits [9]. However, there has been no well-developed framework for identifying specific benefits associated with an ICM program and for quantifying these benefits. Bower and Turner [6] present a general framework for the assessment of net social benefits to be gained from the implementation of ICM. Their approach involves costbenefit analysis of two scenarios with and without ICM. There are other models for socioeconomic impact assessment for ICM programs (see [10]). However, these frameworks are guidelines and do not include any empirical measurement of overall benefit of an ICM program. Tol et al. [5] describes the complexity of benefit–cost analysis of ICM, including many theoretical and empirical difficulties. Specifically, the concept of ‘‘integrated’’ has not yet been clearly defined. The roles of many important variables (e.g., the discount rate) in the analytical framework and their interactions are not well understood. Furthermore, extensive empirical information is needed on the positive and negative external effects, their costs and benefits over time, as well as the investments and operational costs of coastal zone management strategies, whether integrated or not. Although systematic assessment of overall ICM benefits has not been developed, there have been many studies on the socioeconomic benefits of specific components within an ICM program. For example, Pendleton [11] measures the benefits associated with protecting coral reefs in terms of the savings from avoided losses in reef value that would result in the absence of protection, net of any costs of protection. Spurgeon [12] examines coastal habitat rehabilitation and creation. Lakshmi and Rajagopalan [13] discuss the importance of economic development in coastal environmental protection and resource conservation using a case study in India. Kawabe [14] describes nutrient reductions in the context of ICM in the Tokyo Bay region. The author examines the costs and physical effects of several management options to reduce nitrogen and phosphorus loading at different levels including the control of food waste disposal at individual homes, nutrient removals at sewage plants, and the creation of artificial tidelands. Kawabe’s study also discusses the benefits associated with nutrient reduction, which may be realized through improvements in recreation sites; fishing quality or success; navigation; reductions in the costs of water withdrawals; and increases in property values. 2.2. ICM in Xiamen Located at the southeastern coast of China’s Fujian Province, to the west of Taiwan Strait, Xiamen covers a land area of 1565 km2 and a sea area of 340 km2 with a coastline of 234 km. Its land area consists of the Xiamen Island proper, Gulangyu Islet and the coastal part of the north bank of Jiulongjiang River (see Fig. 1). Xiamen’s economy depends heavily on its surrounding seas for natural resources, goods and services. The well-being of Xiamen’s residents is closely linked to effective management of its marine ecosystem.

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Fig. 1. Xiamen and coastal waters.

Prior to the 1980s, the local economy was heavily reliant on agriculture and fisheries with limited industrial activities. Marine pollution from land-based sources was not a major problem, and waters in the Xiamen region were generally considered clean. In 1980, the State Council of the People’s Republic of China declared Xiamen as a Special Economic Zone (SEZ). In the next two decades, the average annual growth in regional GDP reached 18.4%. The rapid economic development was characterized with industrialization, urbanization, and population growth. With many people migrated from other parts of China to Xiamen, the local population increased from less than one million in 1980 to about two million in 2001. The economic development resulted in more diversified and intensified utilization of natural resources. Coastal and marine space competition was severe among different users. There were sharp increases in resource-use conflicts and marine pollution.2 In addition, large-scale land reclamation significantly altered the coastal environment. Pollution and erosion destroyed or altered natural habitats of various living resources. With the deterioration of environmental and resource conditions, the development in Xiamen was not sustainable. Traditional single-sector oriented management3 and relevant rules and

2 For a national overview of marine environmental and resource impacts associated with economic development in China, see Yu [15]. 3 There were 12 agencies at the central, provincial, and local government levels engaged in different aspects of coastal management. Without integrated planning and coordination among these agencies, the policy-making process in Xiamen was fragmented, resulted in ineffective management and coastal use conflicts.

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Table 1 Xiamen ICM Program Legal framework Regulations governing Marine environmental protection Sea area utilization Mariculture in shallow waters and shoal Yuandang lake administration Port operation Nature reserves Integrated management Leading Group for ICM Coordinating mechanism Scientific supporting system Integrated enforcement mechanism Sustainable financing Financial mechanism with multiple funding sources Government budget Other public, private, domestic, and foreign funds Public participation Public awareness champion Marine environmental monitoring network by professionals and general public

regulations were inadequate. There was an urgent need for improvement in coastal management. The ICM system was established in Xiamen as a part of the Xiamen Demonstration Project. The Xiamen Demonstration Project was launched in 1993 under the auspices of the Global Environment Facility/United Nations Development Program/International Maritime Organization (GEF/UNDP/IMO) Regional Program for the Prevention and Management of Marine Pollution in the East Asian Seas (MPP-EAS) (see [16,17]). As shown in Table 1, the ICM system in Xiamen includes a local marine legal frame under China’s national legal system,4 an integrated management and coordination mechanism,5 a scientific supporting system, and an integrated enforcement mechanism [20]. In addition, a sustainable and reliable financing mechanism is crucial for Xiamen’s integrated coastal management. Government budget for environmental protection has increased from 0.8% of local GDP in 1994 to over 2% since 1997. Other sources of funding include international loan, donation, foreign investment and domestic private capital. In addition to institutional changes, ICM was implemented in Xiamen through a set of management instruments and actions designed to address a number of specific issues, such as marine pollution prevention and mitigation, clean-up of polluted areas, implementation 4

For a national overview of marine environmental protection law in China, see Zou [18]. There was no integrated marine management agency in Xiamen before ICM. In 1996, a high-level coordinating and steering group for ICM with the Executive Deputy Mayor of Xiamen Municipality as chairperson (i.e., Leading Group for Integrated Coastal Management) was set up to plan, develop, and manage the coastal zone of Xiamen Municipality, as well as to organize and to coordinate various departments involved in ocean management (see [19]). 5

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Table 2 Management instruments under ICM Marine pollution prevention and mitigation Ocean use licensing User fee system Total pollutant discharge limit Controlling pollution from ships and ocean disposal of solid waste Cleanup of Yuandang lake Protection of endangered species Establishment of nature reserves for Lancelet (Branchiostoma belcheri) Egret (Egretta spp.) Chinese white dolphin (Sousa chinensis) Mangroves Preservation of scenic spots East coast scenic spots Sandy beaches Cultural sites Maluan Bay scenic spot Ocean use zoning Xiamen Sea area functional zoning scheme was constituted in 1997 for managing multiple use of the ocean and minimizing adverse environmental impacts

of Sea Area Function Zoning Scheme to solve use conflicts, and preservation of endangered species (see Table 2). In summary, the development of ICM in Xiamen involves the establishment of crosssectoral management, implementation of integrated land-sea use planning, and active participation of scientists and stakeholders in resource conservation and environmental protection. The ICM program has led to several beneficial effects, including reductions in multiple-use conflicts, improvements in environmental quality and industrial operations, and enhanced protections of endangered species.

3. Methods Directly and indirectly, coastal economy and ecosystems provide many goods and services to society. The basic idea of measuring the economic value (i.e., net benefit) of a marine economic-ecological system is straightforward in theory. An estimate is made of the present value of goods and services that flow from the use (and nonuse) of the economic-ecological system (net of the inputs used in their production), defined on the basis of its ecological characteristics (see [21]). The traditional categories of consumer and producer surpluses, including in the latter any resource rents for traditionally nonpriced resources, such as fish, comprise this net present value. For natural resource industries, it is important to characterize the institutional framework, as it may affect the extent to which resource rents exist [22]. Consumer and producer surpluses associated with specific uses of the ocean, such as recreation, commercial fishing, marine transportation, or with non-uses,

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Table 3 Benefit and cost sectors, measurement, and data source Sector

Measure

Data source

Net revenue

Xiamen Port Bureau; Xiamen Statistical Yearbook [24]; Xiamen Statistics Bureau; Xiamen Aquatic Industry Association; Xiamen Tourism Bureau; Zhu et al. [25]

Environmental and resource sectors Siltation due to coastal development

Dredging cost

Erosion due to coastal development

Replacement cost and value of lost land

Fujian Port/Sea Route Reconnaissance and Design Institute [26] Integrated Task Team of Xiamen Demonstration Project [27]; Xiamen Environmental Protection Bureau SOA Third Oceanographic Institute; Xie [28]; Chen and Xie [29]

Cost of ICM Cost of regulatory development

Cost

Benefit of ICM Marine industry sectors Port/shipping Fisheries/ aquaculture Tourism

GEF/ENDP/IMO PEMSEA; Xiamen Finance Bureau

such as preservation or species protection, are estimated and aggregated. Surpluses are forecast into the future and discounted back to the present. However, empirical implementation of the above approach for economic valuation in a multi-sector coastal system is extremely challenging. In most cases, resource rents (i.e., shadow prices) are difficult to calculate; economic data for estimating consumer and producer surpluses are unavailable; net benefit aggregation across sectors poses further complication. Thus, in the study benefit refers to socioeconomic benefit, which may not be surplus measures. Our analytical framework involves a systematic quantification of internal and external benefits associated with various activities in the coastal economic-ecological systems, with ICM and without ICM. Specifically, our model is based on annual data and the study period covers T years (t ¼ 1; 2; . . . ; T). The net socioeconomic benefits with and without ICM may be estimated as follows: Pm 1 T Pn T T Px 1 1 X X X j¼1 ejt i¼1 ðbit
cit Þ k¼1 d kt v1 ¼
, (1) t t
ð1 þ rÞ ð1 þ rÞt ð1 þ rÞ t¼1 t¼1 t¼1 Pn 0 T Pn T 0 0 X X j¼1 ejt i¼1 ðbit
cit Þ v0 ¼
, t ð1 þ rÞt ð1 þ rÞ t¼1 t¼1

(2)

where v1 and v0 are the net benefits, as net present values (NPVs) for the two scenarios with and without ICM, respectively; b stands for the benefits (or revenues) from the economic sectors, c stands for the cost associated with the economic sectors, e stands for the external costs; d denotes the costs of implementing ICM program; i ¼ ð1; 2; . . . ; nÞ is the index for

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the economic sectors included in the study; j ¼ ð1; 2; . . . ; mÞ is the index for the external cost components; k ¼ ð1; 2; . . . ; xÞ is the index for the cost components associated with ICM program; and r is the discount rate. For parallel comparison, we consider two policy scenarios (i.e., with and without ICM) in the same study period ðt ¼ 1; 2; . . . ; TÞ. For example, b1it and b0it are the benefits of sector i in year t with and without ICM, respectively. The net benefit from ICM may be estimated as v1
v0 . The above approach follows the standard framework for benefit–cost analysis. For measuring ICM benefits, the challenge is to define the n economic sectors and to estimate net benefits (b
c) for each sector. In the study, we define sectors based on management issues, related impacts, and data availability. Coastal resources can be viewed as natural assets that can provide a stream of valuable services (‘‘dividends’’) to people over time, if maintained [23]. Xiamen has extensive development along much of its shoreline resulting from rapid economic and population growths. Coastal waters in Xiamen are utilized for marine transportation, fisheries, mariculture, recreation, and waste assimilation (within discharge limits). There are large number of beaches, public parks, and scenic spots, as well as habitats for commercially valuable fish species and wildlife species along the coast. We specify two sector groups (see Table 3). The first group includes marine industry sectors. The ICM program in general and the Sea Area Function Zoning Scheme in particular have led to improved allocation and usage of ocean and coastal resources among several key marine industry sectors. Direct and indirect economic benefits may be assessed by examining the changes in the net benefits of three marine industry sectors: port and shipping, fisheries and aquaculture, and tourism. The second group is designed to cover other beneficial effects related to several key environmental and resource management issues in Xiamen, including coastal siltation and erosion. We estimate the benefit associated with ICM by observing the change in external costs. Finally, we define a cost sector that covers the cost associated with ICM program development. The implementation of ICM in Xiamen involved a large number of regulations and coordination mechanisms. The expenses associated with regulatory and institutional development are the cost of ICM program development. 4. Empirical estimation In this section, we first discuss data sources of our analysis. We then describe empirical estimations of net benefits for different sectors. We explain the procedures for compiling data and model computation, together with background information related to benefit–cost assessments in each sector. 4.1. Data We assemble data for the study from various sources, including Xiamen municipal government agencies in charge of port, fisheries, tourism, environmental protection, finance, and statistics, as well as industrial organizations, such as Xiamen Aquatic Industry Association and China Ocean Shipping Company. In addition, we collected primary data from industry and public surveys. The last column of Table 3 lists complete data sources for each sector group in the study. We use 20-year government bond rate 4.5% as social discount rate for our baseline calculation.

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Table 4 Benefits in marine industry sectors (unit: million yuan) Year

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Net revenue of port I

Net revenue of sea transportation II

Net revenue of marine fishery III

50.61 61.25 100.56 105.22 107.49 131.72 122.59 148.50 187.12 209.56

20.5 35.71 57.15 54.08 29.11 72.17 111.28 152.99 574.21 719.51

135.08 146 146.9 150.48 84.17 103.50 104.40 87.02 92.29 100.50

Net revenue of tourism IV

Net revenue of property sector V

Total net revenues

I+II+III+IV+V

866 904 956 1072.00 976.50 1099.50 1132.50 1936.50 2086.50 2371.50

— — — — 1109.12 2307.64 3396.80 4428.34 5987.96 5897.60

1072.19 1146.96 1260.61 1381.81 1197.27 1406.89 1470.77 2325.01 2940.12 3401.07

4.2. Benefit of ICM 4.2.1. Marine industry sectors In 1997, Sea Area Function Zoning Scheme, the key component of Xiamen’s ICM program, was implemented. The zoning scheme has rationalized the utilization of marine and coastal waters, which leads to a significant reduction in use conflicts. As a result, major marine industry sectors have grown rapidly. In the study, we compare the net revenues under two policy scenarios with and without ICM from three economic sectors: port and shipping, fisheries and aquaculture, and coastal tourism. Prior to ICM, there were serious conflicts between marine transportation and mariculture and fisheries. The expansion of mariculture operation demanded larger ocean space, which took over parts of shipping channels. During the peak of fish harvest season,6 fishing vessels were interfering cargo shipping operations. Although there was no report of shipping accidents due to the conflicts, mariculture and fishing operations caused significant delay in shipping traffic. Under ICM, the ocean zoning scheme has allocated specific area (i.e., the coastal waters western of Xiamen) to port development. The arrangement has ensured normal shipping operation and has reduced the cost of delay to the shipping industry.7 After the implementation of ICM and with increases in domestic and foreign investments, the port has experienced rapid expansion.8 Both cargo throughput and port revenue have increased considerably. The annual net revenue9 in the port and shipping sectors from 1992 to 2001 are shown in Columns I and II of Table 4.

6

Such as eel fry gathering (for aquaculture) in spring. According to statistics from Xiamen Port Bureau, both the number of delayed vessels and hours delayed per vessel have dropped sharply. 8 In 2001, there were more than 250 vessel departures per month for more than 60 ports in 40 countries. The port service industry included more than 100 domestic and foreign firms covering more than 10 types of services, such as warehouses, shipping agents (according to survey data from Xiamen Port Bureau). 9 All monetary values in the study are in RMB yuan (US$1.0 equals about RMB 8.2 yuan). 7

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Marine fisheries and aquaculture was a major industry sector in Xiamen before 1997. The coastal water west of Xiamen was traditionally a major mariculture region. The ocean zoning under ICM has been designed to cut back the area for mariculture. According to the zoning regulation, the dominant functions of coastal waters east and west of Xiamen are tourism and marine transportation, respectively. Thus, contrary to port and shipping, net revenue from the fisheries and aquaculture sector has declined since ICM (see Column III of Table 4).10 Not explicitly shown in the column is that pollution damage to fisheries and aquaculture11 has also decreased after ICM, resulting in only a moderate reduction in net revenue from the sector. The environmental management program under ICM includes four components designed to improve the management of municipal and industrial wastewaters and solid wastes;12 to clean up polluted water bodies, such as Yuandang Lake;13 to improve and expand public recreation sites (e.g., natural and cultural scenic spots, parks, and beaches);14 and to establish nature reserves for endangered species, such as Lancelet (Branchiostoma belcheri), Egret (Egretta spp.), and Chinese White Dolphin (Sousa chinensis). With the implementation of ICM, environmental quality in Xiamen has improved considerably. The rising trend of water pollution has been halted,15 and good air quality has been maintained.16 With improvements in environmental quality and natural resource management, the tourist industry has developed quickly in Xiamen. A growing number of domestic and international tourists are attracted to Xiamen

10

Output has increased slightly, but profitability went down. Hence, the decline in net revenues. Including oil and chemical spills from vessels and industrial facilities, as well as wastewaters from aquaculture operations. 12 As part of the program, five sewage treatment plants were constructed for urban sewage. Although the amount of urban sewage doubled from 1993 to 2001, the treatment rate increased from 42.3% in 1993 to 60% in 2001. Through source reduction and recycling, the volume of industrial wastewater did not increase significantly with growing industrial output. In 1991, only 32% of discharged industrial wastewater met environmental standard. With increased pollution control measures, almost all industrial wastewaters (99.3%) were in compliance with discharge standard in 2001. At the same time, various efforts were made to improve the management of growing volumes of solid waste through recycling. By 1995, all hazardous wastes were treated [30,31]. 13 Yuandang Lake was a bay of Xiamen before 1970s. With the construction of a causeway, it became a lake. Because of reduction in natural flushing rate and increased wastewater discharge, the water quality of Yuandang Lake seriously deteriorated during the1980s. The integrated treatment of Yuandang Lake began in 1991. Upon completion, the water quality of the lake improved significantly. The area is now a famous garden surrounded by business and financial districts [32]. 14 The number of nature-based public recreational sites has increased greatly since the implementation of ICM. From 1993 to 2001, the number of public gardens increased from 20 to 36; the total area of gardens increased from 168 to 451.4 ha; and the number of sandy beaches increased from 4 to 14 [24]. The expansion of total beach areas was a result from the integrated treatment and development of the east coast of Xiamen Island [33]. 15 The main pollutants in Xiamen coastal waters are inorganic nitrogen, activated phosphorus and total lead. The level of pollutants in Xiamen sea area peaked in 1998 and started to decline in 1999 [31]. 16 To measure the economic benefit associated with improvements in environmental conditions and resource protection, a contingent valuation (CV) study was conducted in 1998 to assess the willingness to pay (WTP) for water quality, beaches, and endangered species (see [34]). The present study excludes the WTP results to avoid possible double counting, as tourism revenue is affected by environmental quality and captures partial environmental benefit. 11

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Table 5 External costs (unit: million yuan) Year

1992 1993 1994 1995 1996 1997 1998 1999 2000

Dredging cost

Coastal retreat

Illegal fishing

Total

I

Beach nourishment cost II

III

IV

V

24.5 24.5 24.5 24.5 24.5 24.5 17.2 17.2 17.2

0.3 0.3 0.3 0.3 0.3 0.16 0 0 0

0.48 0.48 0.48 0.48 0.48 0.42 0.3 0 0

0.24 0.51 0.11 0 0 0

25.28 25.28 25.28 25.52 25.79 25.19 17.5 17.2 17.2

each year.17 The annual net revenue of the tourist industry18 is shown in Column IV of Table 4. The property sector benefited from the improved environmental quality in Xiamen, especially the area around the Yuandang Lagoon. As a result of the improvement in the lagoon environment, more investments came in as investors chose Yuandang Lagoon as the site of their business for aesthetic reasons, thus, investment and development of real estate accelerated, and land and house prices in the vicinity of the lake rose tremendously. The net revenue of this sector is shown in Column V of Table 4. The total benefit from the three marine industry sectors (last column in Table 4) has grown substantially since the implementation of ICM. Tourism has been the dominate sector. The port and shipping sector has passed fisheries and aquaculture as the second largest sector. Although the fishery sector has shrunk after ICM, the loss in net revenue may be justified by less over-fishing and much greater growths in tourism and marine transportation. 4.2.2. Changes in external costs To capture other effects of ICM, we examine the external costs associated with the major marine management issues in Xiamen. These costs cover environmental and resource damages associated with various industrial operations. It is necessary to include this sector group in our assessment, since a decrease in external cost is indeed a benefit to the society, and vice versa. The results are summarized in Table 5. The first column reports the damage associated with siltation in coastal waters due to coastal construction, land reclamation, and 17

The number of tourists to Xiamen reached 9.09 million in 2001, which almost doubled than that in 1996. Among them, international tourists grew by about 50% from 1996 to 2001 (according to statistics from Xiamen Tourism Bureau). 18 Including various tourism related services, such as hotels, travel agencies, parks, and transportation companies. The revenue data are from Xiamen Tourism Bureau. Profit estimates were based on our survey of relevant industries. Also see the study by Zhu et al. [25].

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intensified mariculture. We use the cost of dredging as a proxy for the damage.19 Increased siltation in navigation channels before ICM was caused by various development activities, including causeway construction, land reclamation, intensified mariculture, and sand mining. To keep the shipping channels open, the maritime industry had to dredge a growing volume of sediments. Since the implementation of ICM, the siltation rate has been in decline.20 The reduced sedimentation is a result of effective regulation of mariculture and fishing activities affecting the hydrology and flushing capability of the coastal waters, as well as active control of sand mining and construction activities harming the coastal environment. The next two columns in Table 5 show the external costs associated with coastal erosion. Coastal erosion in Xiamen was very serious before 1997 due to unregulated sand quarrying and beachfront construction. About half of Xiamen’s shoreline was more or less eroded [27]. After ICM, serious erosion has been halted through construction of revetments and termination of quarrying [35]. For sandy beaches, we use the costs of beach nourishment21 as a measure of external cost. For the cliff coast erosion, we use the value of lost land as an indicator of external cost.22 Column IV shows the damage to fish stock due to illegal fishing methods, using the fine collected by the Xiamen Fisheries Bureau as a measure of the level of destruction. From the last Column in Table 5, we see that the aggregate external cost has declined notably since the implementation of ICM. 4.3. Cost of ICM The costs of the Xiamen ICM program consist of the cost of regulatory development.23 The regulatory development for the program was funded through two sources. The first one was GEF/UNDP/IMO MPP-EAS which organized the Xiamen Demonstration Project from 1994 to 1999 (see Section 2.2). About one million US dollars was invested in Xiamen to explore and develop the ICM framework. The second source was the counterpart funding by the local government. Xiamen government funded various activities to identify key management issues, to formulate relevant regulations, and to establish ICM management institutions. The detailed information on regulatory development cost is provided in Table 6. These costs are ICM specific and should all be included in the ‘with ICM’ net benefit calculation (see the last term in Eq.(1)). 4.4. Net benefit of ICM and sensitivity analysis As noted in the methodology section, we develop a parallel comparison of two policy scenarios with and without ICM from 1997 to 2001. The Xiamen ICM program was 19

This is a lower bound of the total damage cost of siltation since there may be other ecological damages that may cost more than the dredging cost. The annual dredging cost was estimated using the siltation volume (m3) multiplied by the average dredging cost of 20 yuan per m3 [26]. 20 The rate of siltation in Xiamen area is estimated based on data from on-site surveys of 1993, 1997 and 2000 by the Fujian Port/Sea Route Reconnaissance and Design Institute [26]. 21 The cost is estimated as the product of total sand volume and corresponding unit cost, using data from Xiamen Environmental Protection Bureau. 22 The value is calculated as the product of total lost land area and corresponding unit value. See Xie [28] and Chen and Xie [29] for detailed estimation method and data. 23 All cost data are from Xiamen Finance Bureau.

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Table 6 Costs of ICM regulatory development (unit: million yuan) Year

GEF/UNDP/IMO funding

Government funding

Total

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

0.00 0.00 1.00 2.02 2.79 1.76 1.50 0.12 0.00 0.45

0.00 0.00 3.00 4.20 5.70 13.50 10.50 12.00 3.00 3.80

0.00 0.00 4.00 6.22 8.49 15.26 12.00 12.12 3.00 4.25

Table 7 Comparison of net present value of two policy regimes (unit: million yuan) Year

Without ICM Economic sectors

1997 1998 1999 2000 2001

2836.85 3489.32 4291.87 5279.00 6493.16

With ICM Externalities

Economic sectors

Externalities

ICM program costs

25.52 25.52 25.52 25.52 25.52

3714.53 4867.57 6753.35 8928.08 9298.68

25.19 17.5 17.2 17.2 17.2

15.26 12.00 12.12 3.00 4.25

Discounted value in 1995 yuan (r ¼ 4.5%) 1997 2597.79 23.37 1998 3057.68 22.36 1999 3598.99 21.40 2000 4236.14 20.48 2001 4986.07 19.60

3401.51 4265.44 5663.10 7164.35 7140.42

23.07 15.34 14.42 13.80 13.21

13.98 10.52 10.16 2.41 3.26

Total 18,476.67 107.21 v0 ¼ 18; 476:67
107:21 ¼ 18; 369:46

27,634.81 79.84 40.32 v1 ¼ 27; 634:81
79:84240:32 ¼ 27; 514:65

introduced and implemented in 1997. Thus, the benefit estimates from 1997 to 2001 in P net 1 1 Table 4 are those associated with ICM (i.e., ðb
Eq. (1)). In estimating the net Pit 0 cit Þ in benefits without the ICM program in place (i.e., ðbit
c0it Þ in Eq. (2)), the following steps were undertaken. The average growth rate of net benefits in the marine industry sectors from 1992 to 1996 (see Table 4) was estimated as 23%. Assuming that these industry sectors would have grown at this rate without ICM, the net revenues from 1997–2001 for the alternative policy scenario were projected using 1996 as the base year and 23% as annual growth rate. Similarly, actual external costs from 1997 to 2001 were used for the policy scenario with ICM. The pre-ICM external costs from 1992 to 1995 (Table 5) were projected into the 1997–2001 period for the alternative policy scenario without ICM.

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Table 8 Sensitivity analysis with respect to discount rate (unit: million yuan) Discount rate

Without ICM

With ICM

Difference

Growth

2% 4.50% 9%

20,408.94 18,369.46 15,334.16

30,608.46 27,514.65 22,912.98

10,199.52 9145.19 7578.82

49.98% 49.78% 49.42%

We estimate the net benefits with and without ICM using Eqs. (1) and (2), with sectorlevel results and costs of ICM program in Tables 4, 5, and 6. Specifically, the net benefits are calculated as the sum of net benefits from marine industry sectors, subtracting external costs, as well as ICM specific costs (see Table 7). As noted, all present values (NPVs) are in 1995 RMB yuan. As shown in Table 7, the ICM program in Xiamen has led to an increase in the net socioeconomic benefit from its marine sectors and reduction of external costs. For the five-year period (1997–2001), the total socioeconomic benefit was 27.51 billion yuan, 49.78% higher than that of the alternative policy scenario (18.48 billion yuan). Tol et al. [5] suggest that ICM net benefit measure may be sensitive with respect to discount rate. To address the concern, we develop a sensitivity analysis with respect to discount rate. As shown in Table 8, we re-calculate the net benefits using two alternative discount rates, 2% and 9%, respectively. Although the benefit growth rate changes as expected, the results clearly indicate that our estimation is robust with respect to discount rate. 5. Discussions Although the present study contributes to research in ICM benefit measurement, several limitations should not be ignored. These limitations may be viewed as topics for future studies. First, for lack of data, benefit estimates for some sectors in our analysis are proxies of theoretically correct measures. Specifically, for the marine industry sectors, we use industry-wide net revenue as benefit measure. While this is the best we can do at this point, future analysis should construct consumer and producer surpluses for these industry sectors,24 when data are available. Next, our treatment of marine fisheries in the study is quite weak. Future studies ought to explore the feasibility to construct a bioeconomic model (e.g., Schaefer model) for Xiamen to estimate the level of sustainable yield and the shadow price for fish stock (for example, see [37]). Perhaps, aquaculture should be treated as a separate component in the study. It is practically impossible to include all effects of ICM. Omissions of certain effects may result in over or under estimation of the net benefit. For example, environmental and natural resource benefits to local residents and associated investment and clean-up costs are excluded from our calculation to avoid double counting. In addition, environmental quality benefit associated with improvement in human health is also not included for lack of data. These exclusions may lead to under-estimation of ICM benefit. 24

Indeed, accurate surplus measures may involve much more complex calculation than that for revenue estimation. For example, see Shneerson [36] for measuring benefits from shipping services.

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On the other hand, the implementation of ICM zoning regulations has resulted in tradeoffs, such as fishing and aquaculture. The net revenue measure in our study does not account for any social cost related to growing unemployment in these industries. These accounting discrepancies may cause over-estimation of the net benefit of ICM. Finally, the study does not address equity issues regarding how benefits and costs are distributed across different industry sectors and social groups. 6. Conclusions Integrated coastal management (ICM) is an accepted management framework to address coastal and marine environmental problems and to achieve sustainable use of coastal resources. Scholars agree that one indicator for assessing the success of an ICM program is its socioeconomic benefits [9]. Empirical measurement of economic benefits in a multi-sector coastal system is a challenging task. The analytical framework developed in the study covers multiple marine industry sectors as well as environmental and resource sectors. Our empirical benefit measurement captures both direct and externality effects (i.e., both economic and environmental benefits). The inclusion of multiple uses and environmental and ecological effects is vital in our case, since it is the essence of ICM. Although there is a growing literature on environmental and natural resource valuation, most studies focus on a specific activity or specific resource [8]. For many ocean management decisions, the aggregate value of a marine ecosystem and its surrounding coastal economy is important. In the study, we demonstrate a systematic approach for assembling benefit–cost estimates for various sectors to develop an aggregate measure of ICM benefit. Albeit there are limitations in our assessment, the study represents an important step towards quantitative measurement of socioeconomic benefit associated with ICM. In addition, data assembled in the study show the need for gathering more information that would be essential in green accounting and environmental policy analysis (see [38,7,39]). Our results indicate that the ICM program in Xiamen has led to an impressive increase in net socioeconomic benefit from its marine sectors. The difference in the present values of total net benefit from 1997 to 2001 between the two policy regimes amounts to around 9 billion yuan (see Table 8). Thus, the introduction of ICM to Xiamen has been a sound policy decision. The improved management system has resolved major use conflicts, promoted growth and enhanced efficiency in marine industry sectors. The efforts to improve environmental quality and to conserve natural resources have resulted in a notable increase in environmental benefits. Furthermore, various external costs have declined in the Xiamen area. It must be noted, however, that developing and implementing an ICM program requires significant financial investment as well as institutional commitment. In our case, besides ICM program costs (40.32 million yuan in Table 7), Xiamen made a substantial investment (a total present value of 1.3 billion yuan25) in environmental infrastructure and preservation of endangered species during the study period (1997–2001). Investment at this level may pose a major obstacle to the implementation of ICM in developing countries. 25

Based on data from Xiamen Statistics Bureau [30].

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Although the Xiamen case study is an ex post assessment, its results may be useful for the evaluation of proposals to introduce ICM to other locations. For example, our benefit and cost estimates may be used to assess the expected return of ICM. This will guide policy- and decision-makers in other local governments that are opting for the implementation of ICM. Acknowledgements We would like to express our appreciation to Dr. Chua Thia-Eng, Dr. Huming Yu, Ms. Maria Corazon Ebarvia-Bautista, Ms. Catherine Frances Corpuz, Dr. Giselle PB. Samonte-Tan at PEMSEA, and to Prof. Luoping Zhang of XMU, for beneficial discussions and refinements regarding various aspects of this study. The study was funded by GEF/UNDP/IMO Regional Programme on Partnerships in Environmental Management for the Seas of East Asia (PEMSEA). Dr. Di Jin’s participation was supported by PEMSEA, and in part, by the Marine Policy Center of the Woods Hole Oceanographic Institution (WHOI Contribution no. 11109). References [1] Underdal A. Integrated marine policy: what? why? how? Marine Policy 1980;4(3):159–69. [2] Levy J. Towards an integrated marine policy in developing countries. Marine Policy 1988;12(4):326–42. [3] Juda L, Burroughs RH. The prospects for comprehensive ocean management. Marine Policy 1990;14(1):23–35. [4] Cicin-Sain B. Sustainable development and integrated coastal management. Ocean and Coastal Management 1993;21:11–43. [5] Tol RSJ, Klein RJT, Jansen HMA, Verbruggen H. Some economic considerations on the importance of proactive integrated coastal zone management. Ocean and Coastal Management 1996;32:39–55. [6] Bower BT, Turner RK. Characterizing and analyzing benefits from integrated coastal management (ICM). Ocean and Coastal Management 1998;38:41–66. [7] Solow R. An almost practical step toward sustainability. Resources Policy 1993;19(3):162–72. [8] Freeman III AM. The benefits of water quality improvements for marine recreation: a review of the empirical evidence. Maine Resource Economics 1995;10:385–406. [9] Chua T-E. Lessons learned from practicing integrated coastal management in Southeast Asia. Ambio 1998;27:599–610. [10] MPP-EAS (Regional Program for the Prevention and Management of Marine Pollution in the East Asian Seas). Socioeconomic assessment framework and guidelines for integrated coastal management. MPP-EAS/ info/99/199. GEF/UNDP/IMO. Quezon City, Philippines; 1999. [11] Pendleton L. Valuing coral reef protection. Ocean and Coastal Management 1995;26:119–31. [12] Spurgeon J. The socioeconomic costs and benefits of coastal habitat rehabilitation and creation. Marine Pollution Bulletin 1998;37:373–82. [13] Lakshmi A, Rajagopalan R. Socioeconomic implications of coastal zone degradation and their mitigation: a case study from coastal villages in India. Ocean and Coastal Management 2000;43:749–62. [14] Kawabe M. To enhance the environmental values of Tokyo Bay—a proposition for integrated coastal zone management. Ocean and Coastal Management 1998;41:19–39. [15] Yu H. China’s coastal ocean users: conflicts and impacts. Ocean and Coastal Management 1994;25:161–78. [16] Chua T-E, Yu H, Chen G. From sectoral to integrated coastal management: a case in Xiamen, China. Ocean and Coastal Management 1998;37:233–51. [17] Hong H. Assessment of ecological and socioeconomic impact of economic development in Xiamen. In: Xiamen Demonstration Implementation Office of GEF/UNDP/IMO Programme for Prevention and Management of Marine Pollution in East Asia. Integrated coastal management. Beijing, China: Marine Publishing Company; 1998.

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