Estimating WTP for a marine park towards buffering climate change impacts and improved management; the case of hikkaduwa marine park of south sri lanka

LIST OF ABBREVIATIONS WTP : Willingness To Pay WTA : Willingness To Accept HMP : Hikkaduwa Marine Park CVM: Contingent Valuation Method DBCV: Double Bounded Contingent Valuation FV: Futu

MINISTRY OF EDUCATION AND TRAINING

NHA TRANG UNIVERSITY

_

ANURADHI DULANGI JAYASINGHE

Estimating WTP for a Marine Park towards buffering climate impacts and improved management; the case of Hikkaduwa

Marine Park of South Sri Lanka

MASTER THESIS

KHANH HOA – 2017

MINISTRY OF EDUCATION AND TRAINING

NHA TRANG UNIVERSITY

_

ANURADHI DULANGI JAYASINGHE

Estimating WTP for a Marine Park towards buffering climate impacts and improved management; the case of Hikkaduwa Marine Park of South Sri

Lanka

MASTER THESIS

Major: Marine Ecosystem Management &

Climate Change Topic Allocation Decision

Decision on establishing the

UNDERTAKING

I undertake that the thesis entitled: “Estimating WTP for a marine Park towards buffering climate impacts and improved management; the case of Hikkaduwa Marine Park of South Sri Lanka ” is my own work The work has not been presented

elsewhere for assessment until the time this thesis is submitted

03.05.2017

ANURADHI DULANGI JAYASINGHE

ACKNOWLEDGMENT

I would like to express the deepest appreciation to the Faculty / Deparment of

Graduate Studies Trang University for helping and giving best conditions me finish

my thesis My special thanks go to Prof Oscar Amarasinghe for the continuous

support of my Master Study and research, for his patience, motivation, enthusiasm,

and immense knowledge His guidance helped me in all the time of research and

writing of this thesis My gratitude is always there with all the Lecturers and the

coordinators of the Norhed Master’s Programme Last but not the least, I would like

to thank my family: my parents and to all my family members for supporting me

spiritually throughout writing this thesis

Thank you!

03.05.2017

ANURADHI DULANGI JAYASINGHE

TABLE OF CONTENTS

Undertaking ……… iii

Acknowledgment ……… iv

Table of contents ……….v

List of abbreviations……….……… vii

List of tables ……… viii

List of figures ……… ix

List of graphs ……… x

Abstract……… xi

Chapter 1 INTRODUCTION………1

The research Question ……… 3

1.1 Objectives of the study……… 7

1.2 LITERATURE SURVEY ………8

1.2.1 The components of TEV……….9

1.2.2 Economic valuation of the ecosystem services……… 9

1.2.3 Findings of Empirical studies ……… 14

1.2.4 New directions in Contingent valuation Method……… 16

Chapter 2 METHODOLOGY……… 16

2.1 Area selection……… 16

2.2 Population and sample……… 17

2.3 Methods of data collection………18

2.3.1 Sources of Secondary Data……… 18

2.3.2 Sources of Primary data……….18

2.4 Data Analysis……….18

2.5 Theoretical Concepts……… 19

2.6 Elicitation method; Bidding game (Double Bounded Contingent Valuation Approach)……….20

2.7 Time Frame……… 23

Chapter 3 RESULTS AND DISCUSSION………24

3.1 Demographic and the economic profile of the respondents……….24

3.2 Results from the logistic regressions to find the factors affecting the WTP values……… 27

3.3 Results from the logistic regressions to find the factors affecting the WTA values………31

3.4 Comparison of the results of the WTP and WTA studies……….33

3.4.1 Calculation of mean WTA and WTP……… 33

3.4.2 Comparing the values of WTA and WTP ……… 34

3.4.3 Comparing the future mindedness of different

stakeholder categories……… 36

3.4.4.1 Perception of diverse stakeholders on the Quality of the Marine Park……….39

3.4.3.2 Comparison of the future mindedness ((EV/TEV) of the different stakeholder categories from the WTA study……… 40

3.4.4.3 Comparison of the future mindedeness from the studies of WTA and WTP for the overall population……….42

Chapter 4 CONCLUSION AND RECOMMENDATIONS……… 43

LIST OF REFERENCES………45

APPENDICES ………50

LIST OF ABBREVIATIONS

WTP : Willingness To Pay

WTA : Willingness To Accept

HMP : Hikkaduwa Marine Park

CVM: Contingent Valuation Method

DBCV: Double Bounded Contingent Valuation

FV: Future Value

TEV: Total Economic Value

this site from degradation as well as to introduce a coral replantation

project in Hikkaduwa……… 26 Table 3.3: Stakeholder’s willingness to pay to develop a people’s fund in initiating an

improved management system (Double-bounded)………28 Table 3.4: Statistics of logistic regression analysis of Willingness to accept study for

total economic value estimation (Double-bounded)……… 32 Table 3.5: Statistics of logistic regression analysis of Willingness to accept study for

Future value estimation (Double-bounded)……….33

Table 3.6: Mean values of the ratio of Future value to total economic value, from WTA

and WTP studies……….36

LIST OF FIGURES

Figure 2.1; Components of Total Economic Value………9 Figure 2.1; Study Area……… 17 Figure 2.1 Methodology of the study……… 23 Figure 3.1: Total number of visits sites other than Hikkaduwa Marine Park……… 29 Figure 3.2: Average visits to sites other than HMP by stakeholder category……… 30 Figure 3.3: Purpose of the visits by the respondents in percentage wise………31 Figure 3.4: Aggregated demand curves for the second bound of the DBCV……… 35 Figure 3.5: Stakeholder categories of Highest and minimal future mindedness of the

WTP Study ……… 37 Figure 3.6: Perception of respondents on the quality of the

Marine Park (WTP study)……… 39 Figure 3.7: Perception of the respondents on the quality of the Marine Park - (WTA

study)……….40 Figure 3.8: Stakeholder categories of Highest and minimal future mindedness of the

WTA Study ……… 40 Figure 3.9: Knowledge of the stakeholders on coral replantation……… 41

Estimating WTP for a marine Park towards buffering climate impacts and improved management; the case of Hikkaduwa Marine Park of

South Sri Lanka

ABSTRACT

Tourism is being rapidly developing throughout the tropics where the natural features

of the sandy beaches and the coral reefs invite masses of travellers Besides the substantial economic benefits driven through coastal tourism the degradation of the ecosystem has now being found to be the worst-case scenario Inefficient environmental management and conservation practices are the usual causes The study examines the case of Hikkaduwa Marine park of Southern Sri Lanka where the ecosystem has already been degraded outstanding to tourism developments A double bounded contingent valuation approach was carried out to survey a total sample of

156 tourists viewing the Marine Park Estimating the Total Economic Value together with the consumer willingness to pay for the coral conservation which measures the future value, as a component of future mindedness of different stakeholder categories were the key objectives of the study Both, willingness to pay and willingness to accept studies were conducted separately when estimating the Total Economic Value and the Future Value With respect to the willingness to pay values of the stakeholders, the highest future mindedness was for the foreign tourists while fishermen being the least future minded category The results revealed that the stakeholder’s willingness to pay and the willingness to accept values are almost identical The minimal Willingness to Pay Value for the Hikkaduwa Marine Park was estimated as Rs.4,897,295.04 justifying the need to invest on management projects so

as to protect the reserve for the future generations also It was further recommended that priorities should be given to protect and enhance the management practices of the Hikkaduwa beach since the majority of visitors are attracted to the Hikkaduwa beach compared to Hikkaduwa corals

1 INTRODUCTION

As one of the most productive, diversified and most valuable in the sense of economy, coral ecosystems are providing an array of vital ecosystem services and moreover coral ecosystems are acting as the hotspots of marine biodiversity and not only that corals are of a great importance in many regions around the world (NOAA, 2015) Various goods and services provided by the coral ecosystems are nested in the Table 1.1 , Hikkaduwa marine park is also endowed with all these services

Out of main ecosystems, coastal ecosystem has gained significant concern due to its higher productivity as well as the goods and services provided for the wellbeing of the people Generally these coastal ecosystems are high in productivity.All these factors combined with nutrients, ample light and shelter have made these ecosystems diverse and rich in productivity (Life on an Ocean Planet, 2006)

In essence, coastal ecosystems are valuable since both people who live near coast as well as far away depend on them for their wellbeing (IUCN, 2007) There is a sheer motive to invest more on coastal ecosystems, and many of the products and services generated by these ecosystems are not given the proper consideration as the products and services are not traded in the market (IUCN, 2007) Together with these values and the significance in investing on coastal ecosystems, focus is turning gradually towards conservation of these ecosystems together with better management

Apart from the well-known value of fisheries that is provided by the coastal ecosystems, there are other several activities which generate noteworthy revenues such as “Tourism” According to the Global Coral Reef Monitoring Network’s

(GCRMN) tourism is considered as the fastest growing major industry in the world ( Riley, Northrop, Esteban.,2006 2006) Due to damages and pollution which are caused by tourist facilities and supporting infrastructures, tremendous pressure is exerted on these ecosystems in various areas which mainly attract tourism (GESAMP, 2001a) Out of all the tourist attractions of the coastal ecosystems ‘coral reefs’ are unique marine habitats which provide key resources for coastal pupolations (Ahmed, 2010)

Coral reefs, also known as the ‘rainforests of the sea’, are some of the most productive and diversified ecosystems on earth which occupy only 2% of the ocean and providing home to nearly one fourth of all species in the ocean (Renee, 2011)

At present Sri Lanka is in a rapid post war recovery process together with a rapid boom in the tourism sector too (Senevirathna and Perera, 2013) Tourism sector has contributed 2.7% to the country’s GDP in the year 2009 , which rose to 3% in the year

2010 (ICRA, 2011) Being an island, Sri Lanka possesses an implausible scenic uniqueness with considerable weight attached to coral ecosystems present in many coastal waters around the country Tourism based on the coast deemed to be the basic pillar of Sri Lankan economy (White et al., 1997) Among the number of precious and pronounced beaches renowned in Sri Lanka “Hikkaduwa” rank at top due its scenic beauty, especially due to the stunning coral reefs found along its coastline

Located in the Southwestern coast in the Galle District, Hikkaduwa is a multiple use marine sanctuary Hikkaduwa is the first marine park in Sri Lanka, established in the year 1979, which is located in one of the hottest tourist’s sites in Sri Lanka (White et al., 1997) This Marine Protected Area was first declared as a nature reserve in the year 1998 and then it become a national park with an area up to 104 ha in the year

2002 (Destination Sri Lanka, 2015)

Hikkaduwa national park is rich with its most diverse coral cover which forms an integral part of Hikkaduwa’s identity Moreover, it has also played an important role

in protecting the coast from sea erosion Among the recorded species of corals in this site, 60 species are hard corals along with 170 species of reef fish One could even find cabbage like Montipora corals together with Acropora corals, which are the most famous out of all (Destination Sri Lanka, 2015)

Until the grave El Nino hit Hikkaduwa corals in 1998 the reserve was well known for its array of colorful corals (Monagurusamy and Dhanasiri, 1999) Erosion on the south and west coasts from the damage to the coral reefs by the 1998 El Nino was estimated

as 40 cm per year on an average Moreover the cost incurred to protect the coast in the absence of corals estimated as $246,000 to $836,000 per kilometer (Berg et al., 1998; Conservation International, 2008)

1.1 The research Question

Goods and services provided by coral ecosystems do not have perfect property rights

In fact, such goods are called ‘Public Goods’ which are characterized by non-rivalness and non-exclusiveness Thus, such goods are not allocated efficiently through the market system, causing “market Failures” (Peruman et al, 2003) (Peruman et al, 2003) In the absence of perfect property rights, and under conditions of market failure, where true prices cannot be established in the market, such public goods tend

to be over-used and degraded a market price it really is difficult to value the services rendered by the particular public or environmental good (Pascual and Muradian, 2010) Environmental Valuation studies address this issue by using an array of techniques to establish values for non-market or public goods Through such valuation efforts, it is possible to assess the contribution of a particular environmental good towards fulfilling the goals of a particular system

Table 1.1; Goods and services obtained from coral reef ecosystems

Source; F Moberg, C Folke : Ecological Economics 29 (1999) 215 – 23

In simple terms valuing an ecosystem (as the study focused on Hikkaduwa coral reefs), could inform us about the differences that relative changes in these services make to human welfare (Noralene and Shaw, 2012) As described in Costanza et al., (1997) the change in the quality of the ecosystems services could make changes in the benefits or costs associated with human activities

Over the time people have brutally damaged the balance between the human system and the ecosystem showing weighty requisites in the field of environmental conservation and management Human beings are provided with uncountable goods and services by the nature for their wellbeing improvements What the nature gets in return is the loss of time for its replenishment as human beings are voraciously consuming the goods and services from the environment This is the point where almost all the conflicts tend to begin, consequently conservation and management of the environment is gaining much deserved attention (Srikanth, 2011) In the meantime environmental management comes emerges as an aspect of the art of developing and implementing environmental policies to ascertain the sustainable utilization of environment

With the increase in the occurrence of threats such as climate change, anthropogenic pollutants, coral ecosystems are degrading at a frightening rate (NOAA Coral Reef Information System, n.d.)

As described in the notes of Coral Reefs of the World (2008), “19 percent of the world's reefs are effectively lost, 15 percent are seriously threatened with loss in the next 10-20 years, and 20 percent are under threat of loss in the next 20-40 years” Not only that it was further stated in the reports of NOAA (2015) and Haggag (n.d.) that this declining would surely affect the social, cultural, economic as well as ecological aspects of people and communities in the whole world Therefore, there is an urgent need for effective management Proper valuations of these ecosystems would bring the opportunity to provide valuable insights in effective management practices through proper cost-benefit analyses

There exist numerous benefits to be achieved through improved management; shielding the corals, regulate the activities within the marine park, coastal development, supporting alternative livelihoods within the sector, etc (White et al.,1997) This will ensure continued supply of these valuable services to both current and the future generations

Many MPAs in the developing countries are referred as unprotected, and they are merely ‘paper parks’ (Cesar, 2000) While the long standing beaches and the purist marine water and the diversified biodiversity from the coral reefs attracts large number of visitors to Hikkaduwa, this attraction itself holds to be the misfortune of damaging the corals as a consequence of irresponsible tourism According to Perera (2015) the crucial causes of reef damage are, collision of glass bottom boats with the reef as well as by visitors walking on the reef All these have led the reefs themselves

to lose their prestigues qualities

Recent studies conducted on the coral reefs of Hikkaduwa provide evidence to a decline in the coral cover by 8.5% from year 1985 to 1994 (Nakatani et al., 1994) According to the UNDP (2014) the situation of degrading coral cover would be

worsened with “Climate Change”

As coral reefs are severely sensitive to climate change, the increased sea temperature together with ocean acidification tend to reduce the growth of hard corals together with destroying the habitats for number of reef creatures who are particularly dependent on corals (Australian Government, 2016)

El Nino, which occurred in 1998 reduced the coral cover in Hikkaduwa by 34% which was further stressed by increased human activities causing damage to the remaining coral cover further (Alahakoon, n.d.) Poor planning together with less acquaintance towards the impacts of the resources of the coast from development, are now showing the need for of proper management, to prevent a decline in tourist attraction to the national park (Smith, 1994)

As an answer to the identified threat of foreigners being moving away from this mere accessible coral reef in the whole south, several management approaches had been initiated for improved management of the coral reefs in Hikkaduwa within the past

decade (Bezaury & Mccann 1998) Implementing proper management practices would definitely enhance the quality of the reef ecosystem particularly with respect to all the services it provides and there by the quality of life of all the stakeholders of that particular ecosystem All these facts stress the urgent need of protecting the Hikkaduwa coral reefs by improving and strengthening its management strategies The present study is undertaken to contribute towards this important need, by attempting at estimating ecosystem values aiming at improved management of this ecosystem

1.2 Objectives of the study

The major objectives of the project are as follows

1 To identify diverse values generated by Hikkaduwa Marine Park and

to estimate its Total Economic Value

2 To estimate the stakeholders’ willingness to pay for the coral ecosystem conservation basically through coral re plantation to buffer the effects from climate change

3 To find out as to how WTP values so generated would help to

improve the management of the Hikkaduwa Marine Park

1.3 LITERATURE SURVEY

The concept of Total Economic Value was came out in 1980s in an essay with the title

of “Towards the measurement of total economic value” by Peterson and Sorg in the year 1987 cited in Shammi and Yew (2013)

As illustrated in Figure, there exist five categories of values, namely; Direct use values, Indirect use values, Option values, Bequest values, Existence values According to Barton (1994) there exists another value called quasi-option value, making it total value count in to six According to Cesar (2000) both extractive and non-extractive uses are reflecting under direct use values, where as indirect use values are coastal protection and biologal supportings Cesar further describes option value

as the current value of potential future direct and indirect uses of the reef ecosystem

Furthermore option values are sometimes categorized under the use values as well as sometimes as non-use values (Fawcett, Konda and Mathis 2003) The utility gained from simply knowing that something is existing, without any personal intention explains the Existence value (Hargreaves-allen 2004), For example many people are very happy with the idea that endangered species are protected against extinction

(Mumby et al., 2014) According to Cesar (2000) Bequest values mean preserving the

natural heritages for next generations to come, where the current values is derived from the perceptive that existing reef ecosystem can be used by the future generations

1.3.1 The components of TEV

Total Economic Value

Direct Use Indirect Use Option Bequest Existence

that can be Benefits Indirect and leaving use Knowledge of consumed enjoyed Direct Use and non-use continued

values to directly indirectly

1.3.2 Economic valuation of the ecosystem services

Among the literature on environmental economics, an array of methods are presented for economic valuation of certain natural ecosystems, goods and services (Table 2), particularly marine parks General Economic valuation is done to assess the benefits embraced with environment conservation projects as well as nature tourism activities Nevertheless, such valuation shows the net benefits attached to the environmental goods and services, which is a tool that decision makers can use; for example, marine reserve creation (Langford et al., 2000) Some research studies which focus on economics analysis of the MPA s in developing countries, have taken into account

only the park users, without taking in to account the potential users (Hoagland et al., 1995; Boyle, 2003) Standard techniques used in micro-economics and welfare economics which rely on market information to estimate values cannot be used for valuation of non-economic goods due to the externalities inherent in environmental issues (Cesar and Chong, 2005) In a situation like this, which means in the absence of both direct and indirect price information on ecosystem services, so as to elicit the values markets needs may have to be created hypothetically (Pascual and Muradian, 2010; Boyle, 2003)

Table 1.2: Valuation techniques used for valuing goods and services offered by the coral reef ecosystems

Type of Value Valuation Method

Direct Use Values

Tourism (Consumer Surplus) Travel Cost (TC)

Tourism (Producer Surplus) Effect on Production (EoP)

Fisheries Effect on Production (EoP)

Indirect Use Values

Coastal Protection Replacement costs (RC); Damage Costs (DC)

Option Values Contingent Valuation Method (CVM)

Quasi-option Values Contingent Valuation Method (CVM)

Bequest Values Contingent Valuation Method (CVM)

Existence Values Contingent Valuation Method (CVM)

Source: Dixon (1988), Barton (1994) cited in Cesar (2000)

Following Dixon (1988) and Barton (1994), cited in Cesar (2000), the most commonly used techniques for valuing the coral reef ecosystems are presented in table

1 Basically one can distinguish three categories of valuation methods;

1 Direct market valuation approaches

This is again divided in to three categories; cost-based approaches, market price-based approaches and finally approaches based on production function As the aforementioned methods of valuations are engaged in collecting data from real

markets, it gives an supplementary advantage of reflecting actual favorites or else the costs of the individuals (Pascual and Muradian, 2010; Ellis and Fisher, 1987)

It is believed that cost based approaches have an advantage because they require less data and resource intensive which may arise as main barriers in other approaches (Danièle Perrot-Maitre, 2005)

Other than these advantages there exist several disadvantages too For instance, some direct market valuation approaches have certain specific limitations For example, the replacement cost method has to be used with good attention, especially under certain uncertainties (barbier 2007) Nevertheless it is also quite difficult to figure out the exact replacement for the ecosystems goods and services, henceforth this creates the risk of undervaluing the ecosystems values (Danièle Perrot-Maitre, 2005)

2 Revealed preference approaches

This method is particularly based on the observations of the individual choices that could

be found in the existing market and moreover those that related to the ecosystem services subjected to valuation (Pascual and Muradian, 2010) There exist two main methods used

in this approach; Travel Cost Method and Hedonic Pricing Approach

a) Travel cost method

The value that a good environment location would obtain by people is based on the time and the cost they spent in travelling on it (Danièle Perrot-Maitre, 2005 ; Cesar, 2000) With an argument that the cost of travel is parallel to an entry price, this method has vastly been used to public recreation sites with minimal entry charges The relationships which are taken in to account are the cost of travel and the visitation rate Once these basic relationships are established it then provides the indication of the value placed on the environmental quality (Bateman et al., 2002; Kontoleon and Pascual, 2007)

Despite of how often and how far this method has been used there exist some limitations too For example, this method has been used most of the time with domestic visitations, yet when it comes to ecotourism in low latitude countries it has

to be extended to capture international travel that is largely by planes This has raised certain issues in measurements as the cost of air travel is not soundly correlated with distance (Carr and Mendelsohn 2003)

b) Hedonic Pricing approach

The basic principle relies underneath this method is that, valuing the environmental quality through the prices of surrogate goods most commonly Property and labour in the absence of direct market prices The most common application is the “Property Value Approach” (Thambapillai, 1993) The most ideal example for Property value approach is the price differences of the houses according to their locations The next method of Hedonic Pricing approach is the application of “Wage differentials” which are assumed to be depend on the factors such as – skills, age, education , environmental risk and etc The extra wage needed to compensate the environmental risk is represent by the residuals when the above mentioned factors are controlled Here also by estimating the demand function of the property it can reveal the value of

a change in the non-marketed environmental benefits (Pascual and Muradian 2010) Methods like Hedonic Pricing are well suited in estimating the cost of air/noise pollution on the residential environment

Revealed preference methods are time consuming and expensive as they require large data sets with complex statistical analysis in the absence of perfect markets Apart from this, the main drawback is the failure in estimating the non-use values and depending solely on the estimated values of technical assumptions of relationships between the environmental goods and the proxy market good (Kontoleon and Pascual, 2007)

3 Stated preference approaches

One of the key features of these kinds of approaches is their ability to estimate both use and non-use values of ecosystems even with the absence of surrogate markets

Three main types of techniques comes under this approach, as given below

a) Choice Modeling (CM)

This method attempts in modeling the decision process of an individual in a given context where they are faced with two or more alternatives with shared attributes of the particular service to be valued (Hanley and Wright, 1998; Philip and

MacMillan, 2005)

b) Group Valuation (GV)

According to Spash (2001) with Wilson and Howarth (2002) group valuation is a kind

of a combination of stated preference techniques with some aspects from political science This method is being increasingly used as a mean of capturing value types that may escape individual based surveys (Spash, 2008)

c) Contingent Valuation (CV)

Contingent valuation technique could be used to measure various values comprising welfare estimates embraced with spiritual, recreational and cultural values as well as bequest values Nevertheless, it is one of the most commonly applied stated preference technique (Hargreaves-allen, 2004;Pearce and Turner, 1990) This technique of valuation pursuits the values of Willingness To Pay (WTP) or Willingness To Accept (WTA) over hypothetical markets or imaginary markets (Mitchell and Carson, 1989) There exist certain considerable differences between WTP and WTA measures.Usually, the measure of WTA is much higher than WTP as humans are more sensitive to loss thus WTP is more a conservative measure (Hargreaves-allen, 2004 cited in Pearce and Barbier, 2000) TEV can be calculated from the net sum of all relevant WTP or WTA and moreover CV is much vital to this study as it is the only technique available to measure non-use values and capture individual utility (Bateman et al., 2002; Hargreaves-allen, 2004)

To be simple the benefits of CVM can be described as follows

First, is a method that can be used to estimate both use and non-use values, Second, through CVM useful information can be obtained, where data on past consumer behavior had not been collected, Third, “CVM allows measurement of the desired Hicksian consumer surplus rather than Marshallian approximation” and Finally CVM can be used for the reliability and validity checking of the data (Hoevenagel, 1994 cited in Shammi and Yew 2013)

There exist some problems inherent in stated preference approaches The questions raised on the hypothetical nature of the market, give rise to uncertainties with regard

to the validity of the estimates (Kontoleon and Pascual, 2007) Mainly, it is questionable whether answers given are truly correspondent to the hypothetical market

or not? Moreover, this method will results in irrelevant answers from the respondents which might not reflect their actual behavior, which is called the hypothetical Bias (Champ and Bishop, 2001) Another issue is the difference between WTP and WTA, which will be discussed in the section on “empirical evidence” These biases can only

be controlled through careful and well-planned survey designs (Akhter and Yew, 2013)

1.3.3 Findings of Empirical studies

Among the literature on valuation of coral ecosystems quite a few studies have been carried out on the theme of non-use values, among which CV is the most commonly used valuation technique According to Bateman et al., (2002) and Arabimary et al.,(2013) TEV is the net sum of all the relevant WTP or WTA As Wright (1994) figured out in the study, a WTP of $31 per visitor per year was calculated, to maintain the Nigril coral reefs and another WTP of $49 per visitor per year to restore the reef to

an excellent condition As Seenprachawong found in 2003 at Ko Phi Phi reefs, the mean WTP for domestic visitors and international visitors were quite similar; yet from the divergent travel costs has meant that there was a significant difference in between

locals and foreigners in respect of total values A meta-analysis on the recreational value of coral reefs in the year 2007, found that majority of the coral reef valuations were carried out in the regions of; Southeast Asia, United States, and the Caribbean (Brander et al, 2007)

Comparison of WTA with WTP is quite interesting One could express without any hesitation that WTA values would be much higher than WTP Yet certain studies carried out in the developed countries have shown very interesting results on this issue According to Navrud and Mungatana (1994) the response for the WTA question

is much lower than the response rate of the WTP question More over the same study has further revealed that the value for WTA is 1.65 times larger than the value obtained as WTP

When using CVM approach in eliciting the economic value of a public good, valuation literature highlight several factors which would affect the decision of the respondent As described by Eleveld, Wagtendonk &Van Der Woerd (2016) Respondents Awareness of the public good being discussed is the crucial factor which

is mostly influenced by the survey instrument

All in all it is quite evident that most of the research works` have been carrying out in search of the value of benefits from a particular public good, and less on the potential loss of coastal resources as well as polluting of such resources (Akhter and Yew, 2013) Also literature is scarce in respect of welfare loss caused by pollution and reductions of certain vital living resources provided by certain environmental goods

Nonetheless, quite a small number of research studies had been carried out in search

of use values other than the recreational values (Seenprachawong, 2002; Pham et al., 2005; Ayob et al., 2002; Seenprachawong, 2001; Van der Ploeg, R.S de Groot, 2010)

1.3.4 New directions in Contingent Valuation Method

In earlier work, the initial step of eliciting Willingness To Pay was in the form of a biding game format, which came up as a Single Bounded Dichotomous Choice (SBDC) approach In the SBDC approach, only one choice is given to the respondent keeping that value as the threshold (If the value is higher than perceived value by the respondent he/she will answer “yes” and if not “No”), though this is seen somewhat easier it requires a larger sample to get a higher precision level (Hanemann et al 1991)

In order enhance the statistical efficiency of the dichotomous choice CVM was improved by asking the respondent to engage in two rounds of bidding which is called the Double-Bounded Dichotomous Choice (DBDC) approach (Lee et al 2004)

Hanemann and Carson (1985) proposed this approach together with “Follow up Question” for the first time (Jerop et al., 2013) The follow up is dependent on the initial bid; if the respondent say no to the offered price a lower bid is offered and similarly a yes response is followed by a bid higher than the initial bid (UGC, n.d; Hanemann and Carson, 1985) According to Haab and McConnell (2002) Double Bounded Dichotomous Choice provides efficient WTP assessments than SBDC in three ways; first, as the number of responses is increased a given function is fitted with more data points; Second, the series of bid offers for yes-no and no-yes responses giving clear bounds on WTP

2 METHODOLOGY

2.1 Area Selection

In order to estimate the consumer Willingness To Pay towards improved management

of the Hikkaduwa Marine Park, Two Grama Sewa Niladari divisions were selected purposively where the Hikkaduwa Coral reef was overextended The three village divisions were; Handala, Hikkaduwa,

Figure 2.1; Study Area

2.2 Population and sample

The total population was divided into two for two different studies; WTP and WTA, with the help of convenient sampling The two samples consisted of 78 individuals each and 156 in total Each sample was consisted of five different stakeholder categories, where categorization was done using convenient sampling The stakeholder categories included, “Government Officers”, “Private sector workers” (this consisted of all the hoteliers, glass bottom boat owners as well as officers from the private sector institutions in Hikkaduwa), “Local tourists”, Foreign tourists”, and

“Fishermen” Categorization of the stakeholders was done purposively assuming same weightage for each category and with respect to the role attached with the stakeholder

to the Hikkaduwa Marine Park

17

Galle District

Hikkaduwaa

In order to conduct the valuation with double bounded contingent valuation approach bidding values were selected purposively in consideration to the glass bottom boat fees to the Hikkaduwa Marine Park Bidding values were different for the locals and for the foreigners; this value for the foreigners was also converted to USD with respect to the glass bottom boat fees to the Marine Park

2.3 Methods of data collection

Data was collected through both primary and secondary sources

2.3.1 Sources of Secondary data

Journal articles written basically on the Contingent Valuation studies based on Coal ecosystems Text books illustrating detailed analyses of the theories such as dou ble bounded contingent valuation approaches Dissertations on the experimental and empirical results of the valuation of the coral ecosystems Online articles related to the developments and the trends of the tourism in the Hikkaduwa area and the articles describing the resources of the Hikkaduwa Marine Park Books from the divisional secretariet of Hikkaduwa on the population of the study area

2.3.2 Sources of Primary data

Field observations, Key informant discussions, Questionnaire Survey (what questions, how the interviews done,,etc) The details regarding to the interview directed to run the main analyses was given in the section 2.6 below

Primary data collection was done by pre tested structured questionnaires Three resource persons were there to collect the samples, including the author

2.4 Data Analysis

In order to calculate the total economic value and the future value, two separate study approaches were undertaken Total economic value was calculated using WTP and WTA To be clearer of the concept, the value for “Willingness to Pay is the maximum amount that an individual states they are willing to pay for a good or a service” (DFID

1997, cited in Wedgewood & Sansom, 2003) Furthermore the meaning of Willingness to Accept describes the minimum amount of money that a person is

willing to accept for a change or else the amount that he/she is willing to forego for a change (Nyborg, 1996) In order to find out the proportion of the total economic value which represented the future values, it was also taken in to account the two approaches of WTP and the WTA values The aim of calculating the proportion of the TEV which represented the Future Value was use to describe the Future Mindedness

of the stakeholders Benefits from coral replantation could rationally be obtained in the future only since the growth of the corals is very slow Coral replantation has the Value for the option of preserving the asset for future use (Option Value) Despite of the individual’s own use values, Coral replantation would certainly bring value from the knowledge that others (most probably the offspring) will be benefitted in the future from these resources of growing corals (Bequest Values) Finally there is an existence value attached to this choice simply because people want ‘corals to be there’, which would be derived from the new coral replantation program Here, one of the basic assumptions is that HNP is basically a coral park and that all goods and services attached to the site is related to the presence of the coral cover The beautiful beach, clamer waters, etc, will be absent if the coral cover is destroyed This was made quite clear to the respondents durig the field studies Since the conservation of corals through initiating a coral replantation represents all three values; Option Value, Bequest Value and Existence Value, the latter values are commomly clubbed in this

study as “Future Values”

To ensure that the respondents were not confused with the hypothetical questions on valuation, they were shown figures, photos of the site to illustrate more the recreational site and its services The analysis was done through several analytical tools such as; descriptive statistics, inferential statistics, regressions and etc

2.5 Theoretical Concepts

Double Bounded Contingent Valuation approach which comes under the Contingent Valuations was key theoretical concept used in study Basically CVM aims at measuring the willingness of individuals to pay for environmental services, nature

protection, etc and is used for over 30 years which was originated from an economic theory; consumer theory (Jantzen, 2006) When briefing again on the method of Contingent valuation, CVM assesses by using questionnaires and some other interviewing techniques, how much in maximum they are willing to pay to conserve

or to improve the environment (Beder, 2002)

As one of the most used and advanced techniques for environmental valuation, precise questionnaires have to be developed to acquire answers from the individuals

2.6 Elicitation method; Bidding game (Double Bounded Contingent Valuation Approach)

In order to increase the efficiency of the elicitation of WTP, repeated questions were used This is by way of bidding game format; respondents had to state their maximum WTP for repeatedly asked questions For instance it can be illustrated as given below

Would you be willing to pay $A for this particular good/commodity?

With the Double Bounded Contingent Valuation Approach it can finally be ended up with either four options if follow up the technique correctly For the same question mentioned above; if the answer is positive (Yes) a new question is asked secondly with a value higher than A If the answer is Negative (No) the new question is asked with a lower value for A Likewise the bidding game is ended when the respondent changes his/her mind from “Yes” to “No” or from “No” to “Yes” This Double

Bounded format has been proposed so as to enhance the econometric precision (Hanemann and Kanninen, 1999)

The questionnaire administered to the Smple respondents consisted of four main sections;

1st section - questions regarding information about the respondents and the household

2nd section – Knowledge of the tourist towards the rules and regulations of the national park visiting

rd

4th section – Socio economic level of the respondents, attitude towards

the present monitoring practices of the national park

The essential part of the questionnaire was the information about “Willingness To Pay” for a certain environmental benefit; here the study focused on the aspects given below,

• In order to fulfill the objective of calculating the TEV of Hikkaduwa Marine Park, stakeholders’ were asked to indicate their willingness to pay towards initiating a People’s Fund to protect this site from degradation, which generate so many values for now and for future Also they were asked for the amount they Willing To Accept (WTA) as

a compensation for the loss of benefits in the absence of not initiating specific management practices

• The value of the coral ecosystem is also a part of TEV of Hikkaduwa Marine Park, and therefore, with the aim of finding the proportion of TEV that the stakeholders are willing to allocate for coral ecosystem conservation was assessed by asking the respondents their willingness to pay for a coral replantation project The concept of such a replantation project was raised mainly due to the impact of climate changes, especially unexpected increases in temperature (El Niño) recently The same theory was applied to the second sample of the study, asking that the amount they are Willing To Accept (WTA) in the absence of not initiating such a conservation practice so as to compensate the loss of benefits in the future

The payment vehicle was taken as the value that the respondents are willing to pay as

an annual payment or else willingness to accept as an annual gain, so as to build up a fund to run a project to enhance the management practices and to initiate a coral replantation project Before asking the question directly, the respondents were first given a clear description of the environmental good that he/she is consuming Which means the questionnaire has defined the environmental good that has to be valued by the respondent him/herself, institutional contest of its consumption (about the externalities consumed by the respondents) and finally the mode of paying for it Although the questions asked were related to a hypothetical situation, the respondents expected to behave as if they were in a real marketplace Respondents stated the preferences in a form of a bidding game (Papandrea, 1999) The study used the Double bounded Contingent Valuation approach (which was described previously) to obtain quantitative data on diverse stakeholders’ Willingness To Pay by stakeholders

of the Hikkaduwa marine park

Total Economic Value

WTP Study

Future value DBCV YES – YES

3 RESULTS AND DISCUSSION

3.1 Demographic and the economic profile of the respondents

Certain selected demographic characteristics of the surveyed samples are given in Table 3.1 The age of the WTA surveyed sample ranged between 19-64 years and the average age was estimated as 36.8 years In the WTP survey sample, the age of the sample varied from 19-75 years with an average age of 38.9 years old In the WTP study sample, the majority of the respondents were males while in the WTA study sample, the majority were females Educational achievement among the respondents varied significantly, but the majority of the respondents have completed secondary education

Since the ultimate aim was to calculate the Total Economic Value of the Hikkaduwa Marine reserve, the study took into account all the users of the reserve Consequently, five stakeholder categories were identified; “Government employees”, “Private sector employees” which included all the hoteliers as well as Glass bottom boat owners together with other private sector employees, “Fishermen” stakeholders which included both fishermen and their families, “Local Visitor” stakeholder category, who are the visitors from various parts of Sri Lanka and the final stakeholder category of

“Foreign visitors”, those who come from all over the world The study population belonged to a number of religions, with a large majority of Buddhists

Table 3.1: Socio demographic and economic profile of the respondents

Individual level information WTP Study WTA Study (%)

Table 3.2: Respondents WTP and WTA towards initiating a People’s Fund to

protect this site from degradation as well as to introduce a coral replantation

Bids) Bids) (Second Bid)

two columns of the table represent the percentage of the respondents for each bidding category (Upper and Lower bids) In order to calculate the total economic value and the Future value, the different initial bidding values were taken Such initial bidding values included those indicated by both foreign and local samples As the study was conducted with separate initial bidding values for the locals and the tourists, each and every row of table 3.2 show two different starting bids for these two categories For example, in the row of WTP - Total Economic Value, the first bid of Rs 1500 is the initial bid for the locals while Rs 2820 is the initial bid for the foreigners And third column of the table show the percentage of participants for different categories of the WTA and WTP studies For example, the first value of the third column “63” represents the number of locals interviewed while 15 is the number of foreigners interviewed

The percentage of respondents who is in the category of upper bids in the Total economic value estimation is 65% and 50% for the WTP and the WTA studies respectively The percentage of the respondents in the category of upper bids in the TEV estimation was descriptively illustrated given below

Percentage of the total upper bids for the WTP study = 24+18+5+4 =

51 = [51/(63+15)]*

100 = 65%

With respect of the Future Value estimation, 69% and 58% of the surveyed population fell into the category of upper bids for the WTP and WTA studies respectively From table 3.2 it is clear that there is a higher response rate (higher percentage of respondents reporting) for the upper bids with respect to Future Value estimation than with the Total Economic Value estimation

3.2 Results from the logistic regressions to find the factors affecting the WTP values

A logistic regression was then conducted for WTP study to find out the factors affecting for the respondent’s willingness to pay values

27

The regression equation for the Future value estimation through WTP analysis is given below

Formula 3.1; Future Value (WTP) = 1.035 Visitation Rate + 0.816 Other sites

Table 3.3: Stakeholder’s willingness to pay to develop a people’s fund in initiating

an improved management system (Double-bounded)

WTP For total Future value

Binary Logistic Regression estimation

Parameter Estimate Standard Error p< 0.05

In order to estimate the Future Value of the Hikkaduwa Marine Park, the respondents

were informed about a hypothetical program of coral replantation undertaken with the key objective of conserving the Hikkaduwa Coral cover for the future generation Then the respondents were asked to show their willingness to pay (double-bounded)

to raise a fund to initiate a coral replantation program at Hikkaduwa As it is evident from the results of the logistic regression presented in table 3.3, only the variables of

“other places” and “visit rate” were found to be significant

The variable of “other places” indicates the number of other touristic sites that have been visited by the respondents in the study area of Hikkaduwa The respondents were given the choice of eight attractions in Hikkaduwa, including lagoons and certain religious sites Since the variable shows a positive relationship with the WTP value, it

is evident that other visiting sites do add a significant value to the Hikkaduwa marine

park and especially towards conserving the marine park for the future generations It

is quite interesting to see how an individual’s presence in a particular touristic site would enhance his/her perceived value of conservation of another touristic site which

is located nearby Evidently, higher the opportunity of visiting ‘other sites’, the higher would be the value attached to the site under concern Hikkaduwa is a world renowned marine park, yet the values attached to that site, are also derived from those

of other visiting sites around the marine park, adding further value to the Hikkaduwa marine park The majority of the people interviewed have visited only four places, and the results are presented in Figure 3.1

When the results were categorized by stakeholders, the foreign tourists recorded the highest totaled number of visits while the least visits were recorded by the locals This has to be taken in to consideration when management approaches are initiated because our results point to the importance of raising awareness of the presence of these touristic places and popularizing them among the foreign visitors and especially local visitors, which would reduce the pressure on the marine park

Total number of visits to other sites

Figure 3.1: Total number of visits sites other than Hikkaduwa Marine Park