" A Proposed Methodology for. Measuring the

Economic Value or Cultural Monuments

Thilan Wijesjnghe Engineerfng Consu/tant

Introduction : While devising a methodology, for Weil known historical monuments.such measuring the economic value of as the pyramids of Egypt, Taj Mahal of cultural monuments would be a complex India, Borobudr Temples of Indonesia exercise and involve mathematical and the Sigiriya frescoes and palace modelling and econometric techniques. complexes of Sri Lanka, while being It is by no means an impossible task. This symbols of national pride, demonstrate paper does not attempt to venture into the rich and complex civilisation which detailed quantitative techniques, but existed during ancient times. intends to emphasise the need to devise a Furthermore, they are of vital methodology for the above prupose and importance to the economic of presents a rough approach for carrying developing nations on account of such out this task. The next few paragraphs cultural sites becoming nodal points of describe two examples of quantitative tourist travel, both local and foreign. techniques used to highlight one significance of cultural sites in Sri While it is accepted that the Lanka. contribution from cultural tourism to the economies of countries boasting unique historical monuments and sites is National Return From Cultural Tourism significant, national Governments have -The Sri Lanka Experience neglected to quantify these benefits due ln order to highlight the usefulness of to one or more of the following reasons : quantitative techniques in estimating (a) lack of reliable data on national the economic value of cultural sites, this revenue generated on account of section presents a simple analysis carried cultural tourism and/or inability out on data maintained by the Tourist to interpret available data. Board of Sri Lanka. For example, the (b) a perception that cultural following information is maintained by monuments and sites are low in the Statistics Division of the Tourist the priority list of attractions for Board. business and leisure travellers. (c) non-availability of a Total annual taurist (international) mathematical model capable of arrivaIs. measuring the economic value of .Total taurist receipts per annum. cultural monuements. .Total Number of tickets sold to If one were to value cultural tourists visiting cultural sites within monuments in terms of merely building the "Cultural Tringle" (e.g. material or any other tangible material Anuradhapura, Polonnaruwa, used in its creation, it would indeed be a Sigiriya and Kandy), and revenue meaningless exercise. A more pertinent there from received by the central means of valuing a monument would be Cultural Fund (CCF). to answer the hypothetical question - .Average du ration of stay io Sri Lanka what would be the loss of national per tourist. revenue in the event of the total destruction or, decay of a weil known .Average number of days spent at the monument or, stated another way bad Cultural Sites (based on periodic the monument not existed in first place ? random surveys of toutists).

13- 152 Economics of Conservation

The available data is sufficient to A Methodology for Justifying Additional analyse the relationship between Investments in Restoring and Preserving , cultural and national tourism. For Cultural Sites -The Sri Lankan example, by using a basic formula one Experience can estimate the "National Return from ln 1981, Sri Lanka embarked on the Cultural Tourism", which is an estimate Cultural Triangle Programme under the of total tourist receipts attributable to administration of the CCF to carry out, the cultural sites. The formula used for in~er alia, a systematic archaeological this computation is as follows : investigation of sites by field National Return from Cultural Tourism (Rupees per annum) = Total receiptsfrom tourism (Rs. x Proportion of tourists visiting x No. days spental cultural sites per annum) cultural sites as a proportion of avg. duration of stay An analysisshowing the respectiveannual national returns from cultural tourism between 1984 and 1990 is given below : Computation of National return from Cultural Tourism

Description Year Ended December 31 1984 1985 1986 1987 1988 1989 1990 Total tourist arrivais 317,734 257,456 230,106 182,620 182,662 184,732 297,888 Total tourist receipts (Rs. 2,670 2,233 2,300 2,415 2,438 2,750 4,903 million) Total revenue to CCF from 16,348 13,496 18,878 13,787 !4,!77 19,065 44,722 sale of tourist tickets (Rs. thousands) No. tourist tickets sold 149,600 133,632 93,884 76,645 74,062 79,683 117,751 Percentagevisiting cultural 47.1% 51.9% 40.8% 42.0% 40.5% 43.1% 39.5% sites Average duration of stay 8.9 0.2 10.9 13.2 12.6 10.7 10.8 (nights) Average No. of days at 3 3 3 3 3 3 3 cultural sites National return from 424 3?8 258 230 235 333 538 cultural tourism (Rs. million) .Source: Ceylon Tourist Board. the following important facts are excavations, preservation of excavated noted ftom thé data presented areas through accepted conservation (a) A very significant portion -on norms and an integrated approach for average 44% of alI tourists the presentation of monuments. This US arriving in Sri Lanka between $ 50 million Programme, originally 1984 and 1990 -visited the estimated to conclude by 1990, remains Cultural Triangle sites. (This does only a third completed, primarily due to not count tourists visiting sites a shortfall in funding and domestic elsewhere for which tickets are inflation. not sold). ln order to address the issue of (b) Based on the formula cited above, justifying additional investments in the National Return from restoring and preserving existing Cultural Tourism is estimated at cultural sites, it is important to present a Rs. 538 million for 1990 a/one. (It quantitative analysis to show is noted that this amount is Governments and international donor greater than the Rs. 424 million agencies that funds spent on cultural actually spent on developing the preservation are essentially Cultural Triangle over a ten year developmental in nature, with tangible period). economic returns. Therefore, based on the above For the purpose of rationalising the interpretation of published data, the additional Rs. l ,650 million required to economic benefits from cultural sites, in complete the Cultural Triangle its present ruined state, havebeen shown Programme by 1996, an increment cost - to be significant in quantitative terms. benefit analysis can be adopted.

, ~ ~ This methodology assumes that the Thereforeit can roughly be stated that completion of the Cultural Triangle on a basis of discounted incremental Programme would result in incrementa/ national returns, the pay back for the tourism arrivaIs and incrementa/ envisaged investments within the income, direct/y attributab/e to the Cultural Triangle is 5 years from the restored sites. The argument here is that year of completion ( 1996). typically, restoration means a larger number of visitors spending longer The Benefits of a Quantitative Approach periods, and importantly, more The above paragraphs describe two basic sophisticated tourists in higher income models for quantifying : bracket, often with specific cultural (a) the national returns from cultural invests visiting these sites. Hence, the. tourism, which is an indicator of average tourist after completion of the gross annual national income Programme, can be assumed to spend derived from cultural sites. significantly more time and more money (b) the payback from incremental than the visitor before restoration. investments in archaeological While an inevitable degree of excavation, conservation and site arbitrariness is attached to the above presentation. assumption, in the context of past trends A quantitative approach can therefore in cultural tourism in Sri Lanka, it would provide national Governments and seem reasonable to assume that the Donor Agencies the basis for measuring conclusion of the planned scope of work the economic value of cultural within the Cultural Triangle Programme monuments and deciding whether grants can result in the following : or loan funds are appropriate for (a) an increase in the proportion of maintenance, restoration, excavation, tourists purchasing tickets to visit conservation, layout and infrastructure the sites from the present average development within and around the site. of 44% to say 60%. (A rate Stated another way, quantitative achieved prior to the ethnic techniques provide the me ans for disturbances of 1983) evaluating the financial feasibility of (b) An increase in the number of days investments in cultural development, spent at cultural sites from the utilising similar methods used in present average of 3 to say 5. evaluating the viability of development (c) An increase in total tourist projects. arrivaIs, over and above the normal arrivat rate, say by 40,000 Approach for Developing a per year, directly attributable to Comprehensive Model for Measuring this project. economic Value If the above assumptions are As stated previously, the examples cited quantified for 1997, the year in this paper for estimating national immediately following the completion of returns fromcultural sites is a very basic the Programme, the incremental model utilising only readily available National Return from Cultural Tourism data. This approach does not necesarily attributable to the Cultural Triangle can measure the true economic impact of be estimated at about Rs. 1,300 million. cultural sites. This section attempts to If the Net Present Value (NPV) of present an approach to designing a more incremental returns from cultural comprehensive mathematical mode! for tourism is computed for projected period measuring economic value. of 5 years from 1997 to 2001, discounted at 18% to 1991 (the risk-free cost of It is first necessary to define what is capital in Sri Lanka), the NPV figure meant by "economic value" of a cultural obtained is approximately Rs. 1500 site and then define the parameters/ million. This is roughly equivalent to the variables that determine this value. total investment within the Cultural Arguably, a logical definition can be Triangle for the 1991-1996 period. given as follows, based on the theory that Economics of Conservation - if a "product" bas no "market" it bas no .time spent in and around the value. Thus the value of a cultural cultural site. monument must necessarily be direct/v proportiona/ to its, "marketability" or its .private direct and indirect relative standing as a "marketable investment impacts around the product". Accordingly the economic cultural site. value of a cultural monument would be a .distance and accessibility to site function of its archaeological/historical from other tourist attractions and significance, relative degree of major business districts. patronage by visitors as weIl its potentia/ .other . for attracting visitors. Potential Economic Benefits The above definition does not consider the value of a monument in terms of lt is inevitable that most cultural sites of economic factors of production the world have nat reached its optimum (materials, labour etc., bu't primarily as tourist absorbtion level. This refers to the a determinant of its present economic optimum tourist traffic per given time benefit and its potential economic period that the site can accommoda te benefit to the country. without causing da mage to the site and causing inconvenience to visitors. The The paragraphs below briefly ex mine computation of the optimum absorption the determinants of economic value : level would depend great I y on the physical characteristics of the site itself. Relative Arcbaeological/Historical Once this level is determined, it would th en be possible to estimate any Significance incremental investments that would be This yardstick of measurement is needed to reach the optimum absorption intangible and pertains to the relative level and the incremental economic global standing of a given monument in benefits therefrom. lncremental terms of its : investments to reach desired absorption * historical significance and context. levels could be incurred for one or more .age. of the following : * design. .road network (approach from .visu al impact and size. business district and vicinity of site ) .architectural and engmeenng .rest, recreation areas and other sophistication. amenities. * Other. .lighting. .Landscaping. ln mathematically modelling the above, .excavation. a uniform rating scheme can be adopted to rank each attribute. .conservation. .presentation and layout of Present Economic Benefits monuments. This would be a measure of the site's .marketing. benefit to the national in ils presenl .other. slale. in terms of economic values. The parmeters which can be included in this measurement are : The above incremental investments , . .number ()f tourist visits per defined would th en naturally lead to incremental time period. revenue generation, indirect investment, .number of hotels in the viciDity of employment and other economic the site. benefits. This can lead to the computation of an appropria te rate of .employment impacts, direct and return on the incremental investment as indirect. an indicator of project viability. Derivation of Total Annual Economic monuments is marketing. Although the Value market potential of each cultural site It should be noted that for obvious and nation would vary, common factors reasons modelling techniques can vary which need to be incorporating cultural from country to country and site to site. tourism includes : Nevertheless, the approach outlined in (a) research and data collection on Section 5.0 would result in the local and global tourism trends, computation of a total of 4 broadly (b) itemising country-wise and defined indicators useful for respective monument-wise comparative Cultural Ministries of various countries, advantages, economic planners and Donor Agencies. (c) tourism target market analysis. These indicators are: (d) rationalisation of prices charged (a) A global standard for numerically for tourist tickets. ranking significant historical monuments. (as described in (e) determination advertising and paragraph 5.1) promotion strategies. (b) Economic returns per annum to a Conclusion nation from cultural sites in their present state (paragraph 5.2) As stated previously, quantitative techniques provide the means for (c) The Economic Rate of Return evaluating the financial viability of (ERR) from incremental investments in cultural development. investments to reach desired Such techniques become essential in tourist absorption levels negotiating for grant or loan funding for (paragrpah 5.3) investments in cultural projects. In the (d) The TOTAL ANNUAL case of /oan funding. the revenue ECONOMIC V ALUE of a generation capacity and debt service Cultural site can then be derived capacity of specia/ cu/tura/ by appropriately aggregating deve/opment projects can be shown (utilising mathematical using quantiative methods. It should be modelling techniques) the values noted here that investments in cultural from (a), (b) and (c) above, net of development not only encompass incremental investments, archaeological works and site layout, but maintenance, debt service also include construction of access marketing and other running highways, hotels and recreation costs. facilities.

Marketing Strategy for Cultural ln concluding it is pointed out that this Monuments would most I y outlines à basic approach Increment investments on infrastructure for measuring the economic value of alone is insufficient for cultural sites to cultural sites. It is proposed that this reach optimum visitor absorption levels. approach be further refined and A very important element in maximising developed into a globally accepted economic retums from cultural methodology.