Experiences from PEI in Asia and the Pacific
Economic Assessments
PEI Africa Regional Economic Forum, Nairobi, 8-11 Nov 2010
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PEI Countries in Asia-Pacific

6 countries with core PEI
country programmes:
Bangladesh, Bhutan, Lao PDR,
Nepal, Thailand, Timor Leste

Regional Advisory Support to
several countries: Philippines,
Papua New Guinea

Regional PEI team based in
Bangkok, supported by Poverty
Environment Facility based in
Nairobi. Activities implemented
by Country Offices.
Environment - related issues that
affect the poor
Bangladesh: Impacts of climate on development plans and the poor
Bhutan: Human wildlife conflict; fuel wood use by HH; unsustainable rural
roads; benefits from environmental conservation for the poor
Lao PDR: Foreign investment and concessions affecting rural ecosystems and
socio-economic conditions of the poor
Nepal: Unsustainable rural infrastructure with high opportunity cost; equity
and sustainability considerations of revenue from natural resource extraction
Philippines: Revenues from extractive industries and ecosystem services not
reaching communities
Thailand: Communities’ role in local development planning and ecosystem
management;
Timor-Leste: High unemployment but potential to generate livelihoods from
natural resources not tapped
Expected Outcomes of PEI
Bangladesh: Climate proof investments to protect the poor
Bhutan: Communities able to sustain rural livelihoods, benefit sharing to
compensate for wildlife damage and restricted access; appropriate HH cooking
and heating energy options
Lao PDR: Negative social and environmental impacts of foreign investments
minimized and sustainable investment promoted
Nepal: Sustainable rural infrastructure with livelihood benefits; Revenue from
NR increased while discouraging over-extraction of NR and funding poverty
and environment measures
Philippines: Communities share benefits from responsible extractive
industries and ecosystem services
Thailand: Communities influence development decisions and share benefits
from ecosystem services
Timor-Leste: Livelihoods and employment from natural resources
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Bhutan
Bhutan: Analysis of Public Environment Expenditure
Objective
Analyze the trends in public expenditure in environment sector and review
expenditure against policy priorities during the 9th Five Year Plan period
Key findings of the Analysis
•High level of Public Environment Expenditure (PEE) in Bhutan compared to OECD
and other countries: almost an average of 7% of the total public sector expenditure
and around 2.8% of GDP during the 9th Five Year Plan (FYP) period
•Declining trend of the proportion of PEE as % of total expenditure and GDP due to
competing demands for budgetary resources from other economic sectors (10% to
5-6%):
•Lower performance of environment expenditure in public sector institutions:
average 81% of total expenditure performance but 67% in environment related
expenditure
Bhutan: Analysis of Public Environment Expenditure
Key findings of the Analysis
•Main institutions responsible for almost 50% of the total expenditure:
–Ministry of Agriculture
–Ministry of Economic Affairs
–Ministry of Works and Human Settlement
•Low level of public expenditure in soil and water conservation sectors due to the
shift in RNR sector policy focusing on production, access and marketing
•Low level of environment expenditure at decentralized units despite high level
expenditure performance of their total budgetary allocation
•High percentage of donor financing of environment expenditure comprising
average 34% of annual environmental expenditure
Bhutan: Analysis of Public Environment Expenditure
Conclusions and Recommendations
•Maintain the same level of PEE since the high level of PEE led to the country’s
strong ability to sustainably manage natural resources and environment
•Under-expenditure of budgetary resources in the environmental sector could be
one of the reasons for the decline in PEE thus the need for effective monitoring
of project implementation and measures to improve the rate of utilization of
budgetary resources
•Ensure adequate investment in soil and water conservation for sustainable
agricultural production and land productivity
•Expand PEE by introducing new economic sectors into the environmental sphere
and implementing innovative measures without depending on direct budgetary
funds, e.g. eco-tourism, public environmental corporations
Bhutan: Public Environment Expenditure Review
Next step
More comprehensive public environment expenditure review to influence the
budget allocation and planning of sectors and local governments for the 11th
FYP
•As part of the overall public expenditure review (PER)
•More in-depth analysis of efficiency and effectiveness of environmental
expenditures providing information on cost-effectiveness
•Examine resource gaps and assess potential sources of revenue for sustaining
the required level of environmental service delivery
Towards green accounting
Study of the potential for green accounting by the Ministry of Finance
Lao PDR
Lao PDR: Economic valuation of ecosystem services
Land use changes in study cases in Oudomxay
Primary
Forestry
Rubber
Second
Forestry
Agriculture
Assess the ecosystem service values across the four land use options
•Provision of non-timber forest products
•Soil maintenance (erosion and quality)
•Health services
Study sites in Oudomxay
12
Study sites in Oudomxay
13
Lao PDR: Economic valuation of ecosystem services
Methodology
• A National Experts group established with representatives from the
Ministry of Agriculture and Forestry, National Land Management
Authority, Water Resources and Environment Administration, and National
University of Laos
• Land use options selected for this study are based on development
priorities identified in the 5-year National Socio-Economic Development
Plan for 2011-2015
• Extended cost-benefit framework integrating the ecosystem services to
assess their trade-offs from each of the different land use change
scenarios
• Examine the distribution of the ecosystem services and financial costs and
benefits
Lao PDR: Economic valuation of ecosystem services
Targeted Policy impact
The study led by the National Economic Research Institute (NERI), under the
Ministry of Planning and Investment. NERI is the designated lead for
carrying out feasibility assessments for all medium and large-scale
investment projects in the country.
The study’s methodology and approach will be a template for future
investment feasibility assessments.
The capacity building as an integral part of the study to ensure that
environmental and poverty concerns are properly accounted for within
investment decisions and management processes.
Nepal
Nepal: Economic Analysis of Local Government Investments
in Rural Roads
Study sites
A Heavy Equipment Based Road at Bhainse, Makwanpur
District
Common Landslide Events in Equipment Based VDC Roads
Nepal: Economic Analysis of Local Government Investments
in Rural Roads
Objective of the analysis:
Inform policy makers of the costs and benefits of alternative road construction
approaches
Scope of analysis:
Stocktaking of overall local government expenditure on rural road construction
through decentralized budgets
Cost-benefit analysis of two different rural road construction approaches
•Select two districts (in the Hills and Terai) with both approaches
•Identify, measure and compare the economic benefits and costs of the two
rural road construction approaches including:
oEconomic benefits (e.g. local employment, transport cost savings,
access to market and public services)
oEconomic opportunity cost of local government funds
oEvaluation of social and environmental externalities
oEvaluation of distribution of benefits and costs among stakeholders
Nepal: Economic Analysis of Local Government Investments
in Rural Roads
Scope of analysis (continued):
Review local governments decision making process related to approving and
financing rural road construction with specific attention to the poor and
marginalized groups
Provide recommendations on enhancing policy coherence and revision of
relevant key policy and guidelines targeting National Planning Commission,
Ministry of Finance and the Ministry of Local Development and other relevant
sector agencies
Provide practical guidance to DDCs, VDCs and communities
Nepal: Economic Analysis of Local Government Investments
in Rural Roads
Methodology:
•Literature review
•Field enquiry
•Focus group discussions
•Evaluation tools and indicators:
oFinancial analysis taking market prices of inputs and outputs
oThe same prices are converted to societal or country terms (shadow
pricing) using Standard Conversion Factor (SCF) and unemployment
compensated labour wage rates.
oIn both financial and economic analyses, the Net Present Value (NPV),
Benefit/Cost Ratio (B/C) and Internal Rate of Return are calculated taking 30
year life of the road
Limitations of the draft study:
Data on costs and benefits were unavailable and, where available, not
sufficiently disaggregated by the appropriate cost heads
Nepal: Economic Analysis of Local Government Investments
in Rural Roads
Main findings of the study so far (as of Aug 2010)
Planning and Decision Making Process at Local Levels
•Late disbursal of budgetary grant funds to local bodies (less than 2 months
before the end of the fiscal year and budget freezing)
•Local people’s craving and political incentives for quick construction of
roads, lack of local awareness of full cost and benefits
•Opportunities for rent seeking is higher in unplanned heavy equipment
based roads
Nepal: Economic Analysis of Local Government Investments
in Rural Roads
Main findings of the study so far (as of Aug 2010)
Distribution of the benefits
•Benefits from road construction to the poor is mainly from the
employment during construction, operation and maintenance
•Roads which are operational benefit the rich more than the poor
Conditions of rural roads
•About 35% of all local roads are not functioning. Almost all of these are
VDC heavy equipment based roads
•Chances of landslides are about 5 times higher in equipment based roads
than in labour based roads (local observations)
Nepal: Economic Analysis of Local Government Investments
in Rural Roads
Selected road analysis:
1) Environment friendly Labour based construction
• Per km cost of construction (Rs) = 722390.6
• Social benefits:
– About Rs.9 million worth of food and cash was distributed to the local
labourers who had less than 6 months of food security.
– A total of 1,793 workers from 1,372 households benefited from the
construction work
– A total of 72% of the workers from the disadvantaged tribal
communities
– The ratio of women beneficiaries was 55%
• Environmental benefits:
– Environmental measures put in place decreasing maintenance cost as
well as cost of environmental damage and natural disasters
Nepal: Economic Analysis of Local Government Investments
in Rural Roads
Selected road analysis
2) Heavy equipment based construction
• Per km construction cost (Rs) = 521825.4
• Limited realization of economic potential of roads:
– Poor road conditions making it almost impossible for vehicles to reach
villages
– Very limited job opportunities for the local communities
• Social and environmental costs:
– No water draining facilities, unacceptably high gradient, indiscriminate
disposal of the debris, lack of soling causing huge environmental and
social cost
– Many landslides, e.g. one stretch of road putting 36 households at
great risk
– Heavy losses of vegetation, trees, farmed land, infrastructure
Nepal: Economic Analysis of Local Government Investments
in Rural Roads
Conclusions and recommendations
Road is a number one priority at the local level considering the spatial nature
of poverty in rural areas
The poor will benefit significantly only when the road construction conditions
favour the choice of labour-based technology
• Labour based roads are more pro-poor, can provide employment to the
poor and sustainable road access without negative environmental cost
Equipment based technology is financially cheaper and faster but not
necessarily associated with high returns
• Most of the non-functioning and seasonal roads are constructed using
equipment based technologies
Nepal: Economic Analysis of Local Government Investments
in Rural Roads
Conclusions and recommendations
Design and Effectively Enforce Local Road Standards and Strategies
Reform the Existing Budgetary Process that Compels Road Works to be Done
during Monsoon season and at about the Fiscal Year End
• Change the fiscal calendar to make development funds available for use at
the local level in November
• Expedite the budget release process
• Stop the budget freezing process at the FY end for development works
• Public audit to be made an integral part of a rural road project to prevent
corruption
Tailored Social Mobilization for Better Road Maintenance
• Assume local ownership of the public goods for their responsible use and
maintenance
Nepal: Economic Analysis of Local Government Investments
in Rural Roads
Conclusions and recommendations
Meeting the Technical Manpower Deficit
• Resource availability with the VDCs have increased by up to 10 times but
the availability of the technical manpower remains the same
• Set aside a portion of the increased resources within the VDCs for the
necessary technical manpower
Compensation to the Loss of Private Property
• Ensure compensation in case of unavoidable acquisition of private
property from the poor, landless and vulnerable groups
Align rural infrastructure development with the promotion of social services
to the local communities with particular attention to countering elite
capture
Thailand
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Thailand: Valuation of ecosystem services for human wellbeing
Millennium Ecosystem Assessment Sub-Global Assessment (SGA)
for Nan, Thailand
Policy Questions:
At the community level: What ecosystem services do maize, rubber
and community forest use and provide, and how do changes in
land-use practices influence the well-being of different social
groups?
At the provincial level: How can the Provincial Development Policy
better integrate agricultural development centered on commercial
crops with conservation efforts to enhance well-being and maintain
ecosystem services?
National level: Expansion of commercial crops in many provinces in
Thailand. How to gear development towards an environmentally
friendly economy? .
Thailand: Valuation of ecosystem services for human wellbeing
Analytical framework
•What are key drivers and trends on land-use changes to maize, rubber and
community forestry?
•What are the relationships between different ecosystem services in maize and
rubber plantations, community forestry and people’s well-being in the study area?
•What are options for local and provincial development strategy that maintains
ecosystem services and people’s well-being?
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Thailand: Valuation of ecosystem services for human wellbeing
Critical areas to be assessed in terms of upland
development and ecosystem services
•Upland cultivation impacts on soils
•Expansion of maize causing higher run off and
sediment generation
Study site
•Conversion of swidden cultivation to permanent
mono-cropping, i.e. rubber
•Community or State managed forest
Thailand: Valuation of ecosystem services for human wellbeing
The economic assessment tools will be used for 3 aspects;
o Household analysis for valuing the ecosystem services and livelihood impact
o Cost-benefit analysis for assessing trade-offs between key ecosystem services
o Trend analysis for forecasting the trend of maize and rubber plantation area
Initiating dialogues on Environmental Fiscal Reform in PEI
countries in Asia Pacific
Bhutan (Ministry of Agriculture and Tax Administration): Payments and
benefit sharing for natural resources - watersheds, hydropower and tourism
Thailand, (Ministry of Finance and Trade/Agriculture Ministry): Managing
environmental and social impacts of agricultural subsidies
Nepal (Ministry of Local Development): Natural resource taxes at local
government level
Lao PDR (Ministry of Planning and Investment): Social and environmental
impacts of investment fiscal incentives and charges, Sustainable financing
options for Environmental and Social Impact Assessment
Thank you
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