REGIONAL TECHNICAL ASSISTANCE FOR COASTAL AND MARINE RESOURCES MANAGEMENT AND POVERTY REDUCTION IN SOUTH ASIA (ADB RETA 5974)

PRE-FEASIBILITY STUDY – Component

Asian Development Bank

IUCN – The World Conservation Union Sri Lanka

MAY 2003

Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

CONTENTS

1. INTRODUCTION …… …… …… ..…. 02 1.1 Specific Objectives …… …… …… ..…. 02

2. MANGROVE RESTORATION …… …… …… ..…. 03 2.1 Background …… …… …… ..…. 03 2.2 Project Description …… …… …… ..…. 04 2.3 Project Impacts …… …… …… ..…. 04 2.4 Financial and Economic Analysis…… …… …… ..…. 05

3. COMMUNITY FORESTRY …… …… …… ..…. 07 3.1 Background …… …… …… ..…. 07 3.2 Project Description …… …… …… ..…. 07 3.3 Project Impacts …… …… …… ..…. 07

4. ECO-TOURISM …… …… …… ..…. 10 4.1 Background …… …… …… ..…. 10 4.2 Project Description …… …… …… ..…. 11 4.3 Project Impacts …… …… …… ..…. 11

5. DEVELOPMENT OF FISHERIES: INFRASTRUCTURE AND CREDIT ..…. 13 5.1 Background …… …… …… ..…. 13 5.2 Credit facilities for purchasing theppam boats …… …… ..…. 14 5.3 Project impacts …… …… …… ..…. 15 5.4 Financial and economic analysis…… …… …… ..…. 15

6. PROVISION OF AN OPENING FOR SEA FISHING …… ..…. 16 6.1 Background …… …… …… ..…. 16 6.2 Project description …… …… …… ..…. 17 6.3 Project Impacts …… …… …… ..…. 17

REFERENCES …… …… …… ..…. 19

ANNEXURE …… …… …… ..…. 20

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

1. INTRODUCTION

This report presents pre-feasibility of selected interventions under the Coastal and Marine Resource Management Project. Selection of the projects was based on the information collected in six previous studies. These studies produced reports on Mangrove Vegetation and Biodiversity, Status of Poverty, High Priority Area Analysis, Status Report on Fisheries, Situation Analysis of Institutions, and Economic Valuation of Mangrove Vegetations and Economic Analysis on Harmful Fishing Methods. Summary of the above reports were synthesized at the Integrate Coastal Zone Management (ICZM) strategy. The ICZM strategy states its vision statement as ‘A productive, and high quality lagoon environment with healthy ecosystems and sustainable livelihoods for local communities’. The following mission statement was adopted for implementing the above-mentioned vision.’ Conserve, use sustainably and enhance, the rich lagoon ecosystem through an Integrated Coastal Zone Management approach, with a special focus on the poor and vulnerable social groups who made it their own living habitat’. These vision and mission statements provide the overall guidelines for selection and analysis of projects at pilot stage. The vision and mission statements were further detailed with the following specific objectives, which also serve as guidelines in selecting and formulating the projects described in this report1.

1.1 Specific Objectives

• Conservation of marine and coastal fauna and flora associated with the lagoon and estuarine ecosystems. • Improve the fishing industry through minimization of destructive forms of fishing (push nets). • Decreasing fishing pressure on the lagoon by diversification of fish catch, development of anchorage facilities for sea fishing fleets and increasing incomes from land based activities. • Manage the extraction of natural resources at sustainable levels. • Enhance the resource base as well as the household economy of poor and disadvantaged social groups through diversification of livelihoods. Improve common amenities such as drinking water, electricity and road access. • Advancement of education and awareness among the local communities while encouraging cooperative action. • Development of least harmful eco-tourism to provide additional income and employment for the poor particularly during lean periods. • Improving the technology of salt production.

The specific objectives provide alternative ideas of projects. Among these alternatives five projects were selected for the pre-feasibility analysis. The selected five projects are, Mangrove Restoration, Community Forestry in Mined Areas of the Cement Factory, Supportive Activities, Anchoring Facility for Fishermen and Removal of San Dune to Facilitate Fishermen Movements. Selection of these five projects out of the alternative ideas were based on the stakeholder consultation, expert opinion and field observations. Recommendations given in different situation analysis reports also were very helpful in selecting these five projects.

The investment plans were developed only for the pilot stage interventions. However, the pilot stage interventions were a subset of the overall project for development/conservation of Puttlam Lagoon. One of the objectives of the pilot stage interventions is to examine the project impacts by implementing them. If these projects are successful, they will be repeated for the whole lagoon. Therefore, these projects were developed as small-scale project to minimize the cost of failures. The rest of the report describes these projects.

1 Prepared by Dr. H.M. Gunatilake in association with IUCN

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

2. MANGROVE RESTORATION

2.1 Background

The situation assessment report on Mangroves and Biodiversity shows that a significant amount of mangrove vegetation has been destroyed during the period of 1981 to 1992. Table 1 provides the details of mangrove vegetation destruction.

Table 1: Change in mangrove and salt marsh cover around Lagoon and Dutch bay from 1981 - 1992

Area Mangrove extent (ha) Salt marsh extent (ha) 1981 1992 Change 1981 1992 Change ha % ha % Puttalam lagoon Eastern shore 829.4 465.9 -363.5 -43.8 1051.0 470.4 -580.6 -55.2 Western shore 346.1 248.3 -97.8 -28.3 383.9 230.3 -153.6 -40.0 Total Dutch 1175.5 714.2 -461.3 -39.2 1434.9 700.7 -734.2 -51.2 bay Kala Oya 1837 1837 0.0 0.0 - - - - Other areas 304.1 274.0 -30.1 -9.9 70.3 71.3 +1.0 +1.0 Total extent 3316.6 2825.2 -491.4 -33.2 1505.2 772.0 -733.2 -48.8 Source: Amarasinghe et al. (2003)

Interpretation of aerial photographs taken in 1992 revealed that nearly 44% of the mangroves on the eastern shore had been lost during the period from 1981 to 1992. About 28% of the on the western coast have been converted to other land uses, especially shrimp farms. It is also noteworthy that more salt marshes (734.2 ha) than mangrove areas (461.3 ha) have been lost during this time. This is primarily due to the better recognition of the mangrove areas had for their ecological significance in relation to fisheries, against salt marshes, that encouraged the prospective shrimp farm developers to avoid mangrove areas. These figures provide destruction of Mangroves between 1981 –1992. If the similar trend has continued, at least the same amount of mangrove vegetation must have been destroyed during the last decade. Thus, during the last two decades the lagoon may have lost about 2000 ha of mangrove forests. As the consultancy reports of the Coastal Zone Management Project show that area of Puttlam lagoon has the largest area of pristine mangroves in the country. One way to protect this area is to declare it as a protected area. The pure legislative approaches however, fail to achieve conservation goals effectively. Another way to protect this area of pristine mangroves is to afforest some selected areas with selected mangrove species.

Some effort has already been taken in the recent past to afforest certain parts of the lagoon with mangroves. Mandalakudah is one such location where Rhizophora mucronata propagules have been planted in a sheltered corner of Puttalam lagoon. Besides, the same species has been planted at Thannikudah and Etalai. At Etalai, the Forest Department has planted mangroves and at Etalai it is the villagers who plant R. mucronata at the waterfront boundary of their homesteads. Unlike at Mandalakudah, seedlings in the latter areas appear healthy and established well. Thannikudah is an ideal location to reinforce these mangrove-planting activities, perhaps with the help of the local community (Amarasinghe, et al. 2003). Also it is ideal to be set-aside as a mangrove refuge for its high biodiversity. Mangrove replanting can also be done along the banks of the estuary at Gange Wadiya, leaving space appropriate for fish landing sites.

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

2.2 Project Description

This project proposes to afforest 1000 ha with selected species of Mangroves. At the pilot stage, the re-forestation project will be undertaken in Purana Eluwankulama. The pilot project will afforest 100ah. There are two options available for implementing this project. First is to assign the responsibility of reforestation to the Forest Department, which has already undertaken a similar project in the study area. The second is to work with local community under the supervision of the Forest Department. If the reforestation activities can be undertaken in the lean periods of fisheries, this will provide much needed employment and income for the poor sectors of the community. Therefore, the second option is preferred. Expert opinion should be seek in selection the appropriate species; the selected species should in the one had should enhance or maintain the ecological functions of the lagoon system. On the other hand these species should provide some direct benefits to the local communities so that local communities have incentives to look after the Mangrove vegetation.

The project activities include collection of seeds, nursery preparation and planting. Replanting should be carried out for few years until the required planting density is reached. Since replanting is necessary this project activity should be undertaken over a period of 03 years. The Forest Department will be the line agency of implementation of this project. It will develop the nurseries and hire the local labor for planting and re-planting activities.

2.3 Project Impacts

Following the Asian Development Bank (ADB) requirements the project impacts are described under the following headings

Environmental Impacts This project will have a major positive impact on the environment, particularly, on biodiversity. As the trends clearly show, the Mangrove vegetation in the Puttlam Lagoon is declining. Some of the remaining Mangroves are in one large track and undisturbed. As some scientist argue, these remaining pristine mangroves are the only such in the country. Therefore, their protection is a priority. Declaration of this area as a protected area is the first step towards this end. However, just legal enactment is inadequate for effective conservation. Conservation should go along with the developmental needs. The afforested area and some other mangrove areas serve as a buffer for developmental or sustainable use area while protected area should be left for nature to take its evolutionary process. Thus augmenting the total mangrove area will certainly provide a room for developmental activities while reducing the pressure on the proposed protected area.

Social Impacts There are no any negative social impacts of mangrove reforestation. The project will provide some temporary employment and income during the lean period of fisheries. As the estimates of the economic benefits of mangrove shows, over 50% of the benefits of mangrove vegetation is related to fish production. Since about 40 % of the population in the study area is fishermen, augmenting the mangrove vegetation will certainly have positive social impacts.

Gender Effects The project may provide some specific benefits to women. Generally, women collect the firewood for household needs. Although concrete evidence is not available, declining mangrove vegetation will increase the time requirement of collection activities. Augmenting the mangrove area that is allocated for sustainable use will certainly reduce the women’s time requirement for collection of firewood and other Non-timber forest products.

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

Poverty Economic study on mangroves by the IUCN team shows that only about Rs. 498/ha/year is provided to the community as direct use value. Although this is relatively small, generally the poor segments of the community depend on these direct benefits. Therefore, augmenting the total mangrove area in the face of some resource use restriction due to forthcoming declaration of a protected area will safeguard the poor people against the possible adverse impact of conservation.

Financial Benefits According to the ADB classification, this project is to a large extent a non-revenue generating type project. Hence, the financial benefits will confine to direct use values extracted from the mangrove vegetation such as non-timber forest products, including firewood. These financial gains are quite small compared to the economic benefits of the project

Economic Benefits Economic Study by the IUCN team has estimated the economic benefit of Mangrove vegetation is Rs109583/year (US $ 1115/year). Although one can question this number on various grounds, in my view the estimate is reasonable and adequately indicative for practical purposes. In comparison to most of the land uses such as paddy lands, tea lands etc, this is much higher. This provides a basic economic justification for establishment of mangrove based on economic efficiency ground. About 54% of the economic benefits of mangrove are due to enhancing and facilitating the fish production. Another 36% is due to other ecological services such as protection of riverbanks etc. Given that the cost of establishment of one ha is Rs. 18,0002, this project will undoubtedly will have positive NPV and higher IRR value, as shown below.

In addition to the above-mentioned direct economic benefits, there will be other benefits of the project. For example, augmented mangrove vegetation improve amenity values and may further increase opportunities for eco-tourism potential in the area.

2.4 Financial and Economic Analysis

Replanting cost is assumed to spend on first (Rs. 9000) second (Rs. 6000) and third (Rs. 3000) years. The Forest Department cost are the overtime payments and transport cost involved in implementing the mangrove restoration project. The total Forest Department cost is Rs. 6000 per ha and it is spread in the first three years as Rs. 3000, Rs. 2000, Rs. 1000. The total project cost is expected to cover from the foreign funds. A foreign loan at the rate of 7.5% interest rate without a grace period is expected to cover the cost. It is assumed that loan is re-paid in the first ten years of project implementation. No tax is involved. Since the proposed project costs only comprises of labor costs, transport costs, overtime payments, and nursery preparation cost the ADB cost component table is not included. Table 2 presents the distribution of the costs.

2 In a previous project, mangrove restoration has cost Rs 12,000 per ha. Given the current wages in the country, restoration cost was considered as Rs.18,000 per ha

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

Table 2: Base costs of mangrove re-forestation for 100 Ha

Activity Cost (US $)3 Year 1 Year 2 Year 3 Total Planting, replanting costs 9375 6250 3125 18750 Forest Department costs 3125 2083 1041 6249 Total 12500 8333 4166 24999

Total project cost for mangrove forestation of 1000 ha. follows:

Activity Cost Us $ Year 1 Year 2 Year 3 Total Planting, Replanting 93750 62500 31250 187,500 F.D Cost 31250 20830 10410 62,490 Total 125000 83330 41660 249,990

Since this project is basically a non-revenue generating type project, which provides very limited direct financial benefits to the community, only economic analysis was conducted for this project. It was assumed the project benefits would occur after the 15th year. From 15 to 20 year only half of the benefits are realized and afterwards the total benefits will be realized (see Appendix table A1). The project benefits and costs were discounted using the recommended social discount rate of 6%. Replanting costs were converted to shadow costs using the conversion factor of 0.785, recommended by the Ministry of Plan Implementation. Forest Department costs the benefits were considered as shadow costs and benefits respectively. A thirty-year time horizon was considered for the project. As shown in the Table 3 the proposed project generates a very high net present value4, 21% internal rate of return and 31.07 benefit cost ratio.

Table 3: Results of the economic analysis- mangrove restoration project

Case NPV $ IRR B/C ratio Base case 326,578 21% 31,07 5% cost increase 325,995 21% 29.59 10% cost increase 325,412 21% 28.25 5% benefit decrease 308,885 21% 12.32 10% benefit decrease 291,191 20% 11.67 7% discount rate 258,498 21% 29.44 9% discount rate 161,550 21% 26.57 12% discount rate 77,810 21% 23.06

3 The exchange rate at the time of cost calculation is SL Rs. 96 =1 US $. 4 The project’s extraordinarily high performance is due to the very high benefit estimates. Since the benefit transfer methods have been used in estimating the benefits, the absolute values of benefits should be read with some cautious.

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

3. COMMUNITY FORESTRY

3.1 Background

The Cement Factory in the area has taken over a large extent of dry monsoon forestland for mining of limestone for cement production. The quarried areas are subsequently handed over to outside contractors, to be refilled with soil and restored with easily growing alien species such as Pinus. In addition to quantitative and qualitative destruction of habitats, this has also lead to social issues. For instance, while the Cement Factory hires menial labor from the area, no other benefit from the factory goes to the villagers. There is a deep sense of unhappiness among the villagers with regard to this. As they feel, these outsiders are mining a resource that is their heritage and the community does not get anything. Villagers frequently quote the example of only Rs. 1000 per year is being paid in royalties to the District Secretary’s Office from this muli-million operation. Restoration of the mined area can be done as a rural development activity with the objective of poverty alleviation.

3.2 Project Description

This project proposes restoration of the dry monsoon forest patches subjected to quarrying by the Cement Corporation as a community forestry activity. Limited specific property rights of the land should be given to local people. Selected poor households receive the property right to cultivate recommended forest/crop species in the given land. The given deed is conditional up-on cultivation and maintaining the land with given specific species and practices. The given right to the land is not transferable initially. Benefit of the crop yields or wood harvest will be obtained by the households. This project should undertake the following activities:

• An assessment of the land suitability for tree cash crops like Cashew nuts, mango and short to medium term timber species such as teak. • Negotiation with the Cement Corporation for acquiring the mined lands. Once they take the limestone, they are not interested on the lands. Therefore, land acquisition may not be a major problem. • Development of scientific method of restoration with details of species and practices. • Selection of poor households and awarding the conditional deeds for aforestation/agroforestry activities • Institutional arrangement with Forest Department to provide technical and material (such as seedlings) assistance and to monitor the land use activities. The monitoring agency should be given the authority to cancel the deed and take the land back if the deed holder does not follow the specific recommendations of restoration activities.

There are about 1000 ha of already mined lands needing immediate restoration. Under the overall Coastal Zone Management project the total area can be subjected to re-forestation. At the pilot stage 100 ha will be reforested with cashew and teak. Fifty percent of the one ha plot allocated to a household will be planted with teak while the reset will be planted with cashew.

3.3 Project Impacts

Environmental This project will restore a vast track of forests destroyed as a result of mining limestone. A combination of timber (teak) and cash crop (Cashew) will be grown. The cash crop is introduced in order to provide income in the early stages of the project. Over time, as timber trees grow, the area will become an agro-forestry system. Increasing the vegetation cover in the area has positive impact on the environment. Community forestry project’s impact on the environment of the area will magnify by the fact that deforestation continue as long as the Cement Factory is in operation

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

Social Impacts As mentioned earlier, there is some resentment among the local population on Cement Factory’s lack of contribution to their livelihood. The community feels that natural resources in the area are their heritage and they should have a fair share of the benefits of any development. Given this resentment, the proposed project brings some harmony to the community. Since people get deeds and the benefits of their reforestation activities, they may feel that they are a part of the overall development process. Currently they feel that they have been excluded from development activities.

Gender Issues There is no differential gender impacts of the proposed project. Males and females can equally participate in the proposed project. However, women can actively participate the cashew crop cultivation activities

Poverty Impacts This project can be made to a pro-poor development activity by selecting the poorest households living around the Cement Factory.

Financial Benefits This project is a revenue-generating project. At the initial stages the cash crops will generate revenue and towards the end timber will provide the major part of revenue.

Economic Benefits This project generates direct economic benefits in terms of Cashew crop and timber. In addition it will generate watershed benefits, climate moderating benefits, carbon sequestration benefits. Moreover, it increases the scenic and esthetic value of the area. Since we plan for an agro-forestry system its impact on biodiversity may not be significant. However, the proposed system will enhance the habitat for wild life, especially for the birds.

The cost of establishment of cashew is Rs 25,000 per ha. This cost is spread in two years; first year Rs 20,000 and second year Rs. 5000. The total teak cultivation cost (Rs 18,000) was spread for three years; first year Rs. 12,000, second year Rs. 4000 and the third year Rs. 2000. In both cases the second third year costs are replanting costs. Forest Department is paid Rs. 5000 per ha for supporting and monitoring activities. This money is expected to be used for paying overtime and to recover the transport costs. After the third year, the monitoring cost of the Forest Department should be borne by local sources. Both cashew and teak need only labor for maintenance. From the third year onwards, 40 man-days for cashew and 20 man-days for teak were allocated for maintenance. Table 4 presents the distribution of the cost of the community forestry project.

Table 4A: Base costs community forestry project

Activity Cost (US $) Year 1 Year 2 Year 3 Total Cashew cultivation costs 10417 2604 - 13021 Teak cultivation cost 6250 2083 1041 9374 Forest Department costs 2083 2083 1041 5207 Total 18750 6770 2082 27602

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

Table 4B: Base costs community forestry project for 1000 ha

Activity Cost (US $) Year 1 Year 2 Year 3 Total Cashew cultivation costs 104170 26040 - 130210 Teak cultivation cost 62500 20830 10410 93740 Forest Department costs 20830 20830 10410 52070 Total 187500 67700 20820 276020

Financial benefits of the project start in the fourth year from cashew yields. A twenty -five year time horizon was considered. Given the current yield levels, one cashew tree provides 10-12 kg of wet cashew and the market price of cashew is Rs. 275 per kg. Assuming 0.25-conversion rate for dried cashew, one ha of cashew provides about Rs. 83,187.5, as gross revenue. When cost of harvesting (40 man days of labor) is deducted from this the net revenue is Rs. 69,187.5.

Given the poverty focus of this project, it is assumed that the project is finance with a grant. The project costs in the above table does not include the labor involved in maintenance and harvesting of the crop and timber. Since the project involves only labor, overtime payment and planting material costs the cost break downs are not presented.

Teak provides fuel wood at the ages of 7, 14, 22. Generally teak rotation is considered as 40-45years. Given the severe wood scarcity in the country , however the practice is to cut the trees much earlier. In this analysis I assume a 25-year rotation. The final yield of time was adjusted accordingly to accommodate early harvest. Market price of teak timber (Rs 12800/m3) and fuel wood (Rs. 450) were used in the analysis (see Pitigala and Gunatilake, 2002 for details). Financial cash flow of the project is given in the appendix table A2. Table five shows the results of the financial analysis. Note that a discount rate of 12.5% was used in the base case scenario. Results clearly show that the proposed project generate greater financial benefit in comparison to financial costs. Therefore, the households have incentives to be involved in this project.

Table 5: Results of the financial analysis- agro-forestry project

Case NPV $ IRR B/C ratio

Base case 116845 42% 2.22 5% cost increase 112055 40% 2.11 10% cost increase 107266 38% 2.02 5% benefit decrease 106213 40% 2.11 10% benefit decrease 95581 38% 2.00 10% discount rate 165055 42% 2.32 15% discount rate 84571 42% 2.04 20% discount rate 46348 42% 1.74

Financial analysis is conducted from the individual perspective whereas the economic analysis is conducted from the society’s perspective. Therefore, in the economic analysis one has to use the social discount rate, shadow prices instead of distorted market prices and disregard the transfer payments. In addition economic analysis should incorporate the externalities into the analysis. In the present analysis, the recommended social discount rate for Sri Lanka (6%) was used. A very high proportion of the cost of the project is labor, therefore the costs were converted the shadow costs using the conversion factor of 0.785. Benefits of the project include crop yields and timber. They were converted to shadow values by using the relevant conversion factor (0.785). There are many positive externalities of the project. Given time and data limitations, however, the analysis includes only Carbon sequestration benefits only. Following Pitigala and Gunatilake (2002) $ 8/ha/year was used as

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

Carbon sequestration benefits. Table 6 presents the results of the economic analysis. Results show that the social benefits of the project significantly exceeds the social opportunity cost, therefore, the project is economically feasible.

Table 6: Results of the economic analysis- forestry project

Case NPV $ IRR B/C ratio

Base case 245489 43% 2.92 5% cost increase 239103 41% 2.78 10% cost increase 232718 34% 2.66 5% benefit decrease 190009 36% 2.76 10% benefit decrease 173287 33% 2.62 7 discount rate 207871 42% 2.79 9 discount rate 153290 42% 2.57 12% discount rate 100395 42 2.29

Critical Information Gaps: Project feasibility depends largely on the soil conditions. As the expert opinions suggest, if holes need to be dug and soil need to be imported, the project cost may go up significantly.

4. ECO-TOURISM

4.1 Background

The Wanathavilluwa Division spreads partly into the Wilpattu National Park, which is rich in wild life including elephants, dear and sloth bear. While this has led to some problems created by roaming animals, it has also led to poaching not only by the residents near the Park but also by the outsiders who occasionally visit the area illicit hunting and timber extraction. Thus, currently Wilpattu national Park in the one had cause some problems in terms of crop damages etc. by roaming animals. On the other hand, it provides some income for local people through hunting. Thus resource management is not properly regulated and therefore likely to be unsustainable. Poverty in the study area and consequent dependence on wildlife resources in the Wilpattu Park create management problem in the National Park too. Presence of the park at one end of the study area opens up more sustainable and non-consumptive resource use opportunities through eco-tourism.

Very attractive tourist packages for both local tourists and foreign tourist can be developed combining the Wilpattu National Park and the Puttalam Lagoon system. Tourist may spend one or two days in the National Park and on their way to Colombo, or to the other parts of the country, they can spend a day or two in the study area if the infrastructure facilities are developed. Natural resources in the study area provide variety of opportunities for eco-tourism. For example, in areas such as Gangewadiya, the nature of the lagoon acts as an ideal spot for water sports (boating, diving) camping, and bird watching etc. There is also a high degree of aesthetic value as a result of the surrounding lagoon, mangrove strips, islands, soil formations, natural forests, lakes etc. (note - an immensely beautiful strip is that from Ralamaduwa in the Wilpattu area, to Anthonimaduwa, along Kala-oya to Pothana). The villages in Gangewadiya area possess a good knowledge on the elephant pathways, crocodile inhabiting areas and bird rookeries in mangrove islands. The coastal areas of the Division are also rich in marine life and avifauna that find refuge in sparsely populated coastal habitats.

Among the existing areas of mangroves in Puttalam lagoon and Dutch bay, Kala Oya mangals form the largest and undisturbed stretch, which covers an extent of 1800 ha. It also supports a majority of mangrove species that have been encountered in the study area. Besides it is of high scenic beauty it

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

provides a valuable resource base for ecotourism. This Mangrove area will be ideal for the school children and scientist for their educational and research activities.

Variety of fresh seafood available in the coastal ecosystem will be another attraction for tourists. Tourists who are interested in natural resources and environment would generally like to eat local food prepared in local manner. Seafood restaurants, which use fresh items, will certainly enhance the demand for eco-tourism in this area. Discussions with the local communities indicate that these communities possess valuable indigenous knowledge, about plant and animals in the study area. Their knowledge about Elephant paths, and birds are of special use for eco-tourism development. Overall, there is a very good potential for eco-tourism development in the Wanatha Willuwa area.

4.2 Project Description

Coastal and Marine Resource Development Project should only play a facilitating role for eco-tourism development. It should act as a coordinator among the different stakeholders of eco-tourism; private sector, local community and relevant government agencies. Project activities should include:

• Development of a profile of natural resources of the study area emphasizing eco-tourism potential (carrying capacity) and critical infrastructure gaps. • An assessment on the indigenous knowledge that can be used for eco-tourism activities. • Assessment of the training needs of the local people to take part in ecotourims activities. • Facilitating the provision of training for local people to serve as tourist guards, hotel workers etc. • Conducting seminars, workshops to develop an eco-tourism master plan for the area together with the private sector. • Facilitate private sector investment in eco-tourism activities by provision of relevant information etc.

4.3 Project Impacts

Environmental Impacts Tourism may have positive and negative impact of the environment. As already mentioned, some of the unsustainable resource use pattern such as poaching can be reduced if the eco-tourism is promoted in the area. However, a proper assessment about the carrying capacity of the area should be done and tourist congestion should be avoided. The proposed master plan for eco-tourism should undertake a thorough environmental impact assessment on the eco-tourism activities.

Social Impacts In many situations, tourism brings minimum benefits to the local communities. A major portion of the tourists’ money is spent on air transportation and hotels and a minimum amount is spent on the local sites. Therefore, the local communities are the least benefited from eco-tourism in many cases. Therefore, it is of paramount importance that the community is strengthened sufficiently to participate and benefit from ecotourism. Otherwise it will end up another tragedy like shrimp farming, which deprived the local community, even the right to access their own resource base, for living. There should be contractual arrangement to purchase local produce to hotels, recruit local people as guides and other hotel workers so that considerable amount of benefits of eco-tourism trickle down to the local communities. Otherwise, the local community will not have incentives to conserve the natural resource base on which the eco-tourism depends.

Tourism some times bring undesirable social impacts such as drugs, prostitution etc. In order to avoid such effects this area should target high-income nature loving tourists. Hotel can use pricing mechanisms to avoid low-income foreign tourist who generally associated with the above-mentioned problems.

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

Gender Issues If designed appropriately, eco-tourism development may enhance certain employment opportunities for females

Poverty Impacts Currently, fisheries and agriculture serve as the means of livelihood of the people. Both these activities are successfully carried out by resource-endowed households. For Example, fisheries require considerable amount of capital and agriculture require land and other resources. Ecotourism provides avenue for poorly endowed households to make a living. Therefore, a properly designed eco-tourism package may enhance the employment and incomes of the poor people in the study area.

Financial Benefits Tourism is revenue-generating activity. However, the Coastal and Marine Resource Management Project undertakes only a facilitating role by generating some basic scientific and socio-economic information and by coordinating the eco-tourism development activities. The major investment should come from the government, (in terms of basic infrastructure) and the private sector (in terms of investments in hotels, recreation activities etc.). This investment should be subject to both economic and financial benefit cost analysis. The project component comes under Coastal and Marine Resource Management Project should be viewed as a non-revenue generating project.

Economic Benefits Eco-tourism generates a variety of benefits. However, the Coastal and Marine Resource Management Project can attribute only part of the tourism benefits. From the overall objective of the project, a regulated and well-planned eco-tourism will enhance the conservation and sustainable use of natural resource in the Puttlam Lagoon. It will increase the employment opportunities and may help reducing poverty in the area. Developing a master plan for eco-tourism and allowing a regulated eco-tourism development will avoid spontaneous and haphazard expansion of tourism activities, which may have detrimental effects on the natural resource of the area. Avoiding such undesirable development is the direct benefit of the proposed eco-tourism development component of the Coastal and Marine Resource Management Project.

While the activities identified under section 4.2 need adequate planning and further studying it is proposed that adequate funds earmarked for this purpose. It is estimated that approximately US $ 30,000 will be required to undertake special studies on Eco-tourism planning.

However, as a sub-project of eco-tourism, 200 young people will be trained on various eco-tourism activities, at the pilot stage. These people are selected from the fishermen who use destructive fishing methods. The training will cost 25,000 per person and it will be a three-month training. It is expected that each person will have an incremental increase in monthly income equal to Rs. 1500 month after the training. The project cost is US $ 52080. Financial analysis of the project is carried out with the 12.5% interest rate. Results are given in the Table 7. Financial cash flow is given in the Appendix table A3. Since economic analysis of this project does not differ much from the financial analysis, no economic analysis was carried out.

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

Table 7: Results of the financial analysis- eco-tourism training project for 50 persons

Case NPV $ IRR B/C ratio

Base case 22718 54% 3.08 5% cost increase 22172 51% 3.08 10% cost increase 21625 49% 3.08 5% benefit decrease 21035 51% 3.08 10% benefit decrease 19353 48% 3.08 10% discount rate 27187 54% 3.4 15% discount rate 19009 54% 2.8 20% discount rate 13318 54% 2.34

Information Gaps: The project activities mentioned above describes the major information gaps.

5. DEVELOPMENT OF FISHERIES: INFRASTRUCTURE AND CREDIT

5.1 Background

Fishery related infrastructure plays an important role in reaping optimum benefits from the fisheries in Puttlam Lagoon. Puttlam lagoon has a surface area of 32,700 ha and it has been reported that annual fish production is around 3,800 mt. According to the official reports of the District Fisheries Extension Officer of Puttlam (Assistant Director of Fisheries), there are altogether 4105 fishing crafts in the entire Puttlam District of which some fishing crafts are entirely engaged only in sea fishing where as others are engaged only in lagoon fishing (see Table 8). Some boats are engaged in both lagoon and sea fishing depending on the seasonality of fisheries, which depends on the changes of the two monsoons.

Table 8: Distribution of fishing vesels in Wanathawilluwa

Out Board Engine Boats Non mechanized crafts FRP Oru Vallam Theppam Oru Vallam Theppam Boats 1. Gangewadiya 12 - - - 11 - 16 2. Serakkuliya 62 - - - - - 39 3. Pubudugama 07 - - - 34 - 12 4. Karativu (Serakkuliya) 52 - - - 02 - 31 5. Karativu (Odekare) ------24 6. Karativu (Palamkare) 28 - - - - - 26 7. Sudugala 03 - - - - 3 06 8. Thirikkapallam ------08

The fishing villages considered under this study comes under the Wanathavilluwa Fisheries Inspector’s area reveals that there are 376 crafts. Distribution of different fishing vessels types is given in the Table.. Fisherman in the area do not have sufficient storage, anchorage and marketing centers in spite of their primary livelihood based on fishery. They are unable to keep stocks of fish with them in cool storage. There seem to be no common fish storage facilities available other than the arrangements made by fish vendors to stock the fish in boxes waiting to be transported by the respective private sector dealers. Lack of common storage compels the fishermen to dispose the catch as early as possible. Another key issue faced by the boat owners is the lack of proper anchorage facilities to their boats.

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

In terms of landing facilities easy access to ice and cool room facilities can help fishermen to fetch a reasonable price for their catch, as they tend to dispose the catch at whatever the price due to inadequate storage. Provision of auction hall facilities, improved access roads and free availability of fishing gear can contribute to ensuring the fishermen to make the best possible opportunity to reduce marketing issues that have been highlighted in the several studies.

Fish landing sites There are two major fish landing centers at Serakkuliya. One is mostly used by Christian fishermen where as the other is by Muslim fishermen. Large number of motorized FRP fishing boats were recorded from Serakkuliya and all boats had the beach landing facility. The general practice of the fishermen at Gangewadiya, Serrakuliya, Karative and Pubudugama is to anchor their fishing crafts along the bank of Kala Oya estuary or on the bank of the lagoon. As there is no peer or Jetty for regular use, riverbank and the fringing vegetation is under constant threat as fishermen use this vegetation to tie their fishing crafts. Improvements are needed for boat anchoring if development of sea fishing is identified as a priority requirement. Despite that there is a felt need for an anchorage facility, it is not possible to conduct cost benefit analysis on this component due to lack of information. A proper engineering design and technical feasibility study has to be carried out before the economic analysis.

Auction Halls No auction hall could be found in any of the fish landing sites in the study area.

Ice and Cool Room facilities Currently other than in Kalpitiya, no Ice and Cool room facilities are available in any of the coastal villages in Vanathawilluwa. Due to transport difficulties, there is no good market for prawns and fish at Gangewadiya. Few dealers dominate the purchasing of fish and providing ice to fishermen.

Boat repair facilities There is no formal boat repair facility

Access Roads The new road constructed joining Eluwankulama junction and Puttlam Cement Company soil extracting premises is now in good condition. Still there is a 3 km by-road joining this main road and Gangewadiya fish-landing site, which is in a very bad shape. Improvements are needed for this stretch of road as this act as an impediment for smooth transportation of items to develop a good fishing market at Gangewadiya. Because of this short fall, people are compelled to go to Kalpitiya by boat for their domestic and commercial requirements.

Due to the lack of information on the benefits of the above interventions, no economic analysis was conducted. However it is estimated that civil works, planning and pre-feasibility will cost around US $ 100,000.

5.2 Credit Facilities for Purchasing Theppam Boats

Under this project, low interest loans are given to the poorest fishermen who currently use the push- nets. In order to operate this credit scheme, Rs. 4 million will be provided to a local bank under concessionary rates. The local bank will charge only the administrative cost on top of the rate at which it get the money. Push-net operators will get credit at 10% interest with a ten-year pay back period. At the pilot stage 50 fishermen will be selected for the project.

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

5.3 Project Impacts

Environmental Impacts The proposed project is aimed at preventing the destructive practice of using push-nets. Reports show that this method of fishing destroy the sear grass bed and juvenile fish and other species. Provision of credit facilities to purchase boats with non-destructive type of nets will avoid the on-going destruction.

Social Impacts As revealed in the discussions with the people involved in push-net operations, it is believed that this method of fishing cause health problems. Fishermen have to stay in the water for hours to catch reasonable quantity of fish. Many believe that this long stay in water is a causal factor of Asthma, which is common among the push-net operators. Therefore, changing this destructive fishing method will provide social benefits in terms of prevented health problems.

Poverty Impacts The proposed project belongs to the pro-poor development approach. Push-net operation requires the minimum capital cost. Therefore, the poorest people who cannot afford to purchase other expensive type of gears will remain as push-net operators. Since push-nets provide the lowest returns compared to other type of gears, these people remain as poor. Thus they are quote in a vicious cycle. The proposed project is aimed at breaking this vicious cycle.

Gender Impacts The project does not have any gender specific impacts.

Financial Benefits This project will provide higher income for the fishermen. The incremental increase in income is the direct financial benefit.

Economic Benefits The avoided destruction of sea grass bed and juvenile fish are the main economic benefits in addition to the financial benefits. Avoided health cost is another category of benefits. However, due to lack of information the avoided health costs were not taken into account in the economic analysis.

5.4 Financial and Economic Analysis

Financial and economic analysis is based on the findings of the report on economic analysis on destructive fishing methods. The revolving fund was not subjected to analysis because it is supposed to provide loans for various other activities other than fishing. Theppam boat cost Rs. 27,500 and this project provide Rs. 41500 to cover the cost of the boat and the nets for the first year. Altogether the project will cost US $ 22,554. Financial benefits of the project is the catch. On average one theppam boat spends about 6 hours for fishing and catches about 04 kg of prawns. Average price of 1 kg of prawns is Rs. 225. The difference between the push-net income and the income from the Theppam were taken as the incremental net benefits. In addition to the cost of the boats and nets opportunity cost of the labour was also considered as a cost. Interest payments (at 10%) were also included as a financial cost. Appendix table A4 shows the financial flow of costs and benefits. A ten-year time period and 12.5% discount rate were considered for the analysis. Table 9 shows the results of financial analysis.

The project was analyzed from the society’s point of view too. In the economic analysis costs and benefits were converted to shadow values using appropriate conversion factors. In addition to the direct benefits of fishing, avoided destruction of juvenile fish and sea grass bed were added as benefits. This cost has been estimated in the economic analysis report. It shows that on average, a push-net fisherman destroy species worth of Rs. 13204 per year. When people give up using the push-nets, this cost will be avoided, hence a benefit of the project. As usual the economic analysis

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

was carried out using 6% discount rate. Table 10 presents the results. Results show that the proposed project is financially as well as economically feasible.

Table 9: Results of the financial analysis- change to non-destructive fishing gear

Case NPV $ IRR5 B/C ratio

Base case 207355 - 1.94 5% cost increase 196297 - 1.85 10% cost increase 185239 - 1.76 5% benefit decrease 185929 - 1.84 10% benefit decrease 164504 - 1.74 10% discount rate 231557 - 1.98 15% discount rate 186805 - 1.93 20% discount rate 154125 - 1.90

Table 10: Results of the economic analysis- change to non-destructive fishing gear

Case NPV $ IRR B/C ratio

Base case 330692 - 2.14 5% cost increase 316213 - 2.04 10% cost increase 301773 - 1.95 5% benefit decrease 299678 - 2.03 10% benefit decrease 268663 - 1.93 7 discount rate 314928 - 2.14 9 discount rate 273813 - 2.12 12% discount rate 250736 - 2.11

6. PROVISION OF AN OPENING FOR SEA FISHING

6.1 Background

Fishing is the most important economic activity in the area with around 40% of the people depending directly or indirectly on fishing for a livelihood. Low productivity in fishing as well as in agriculture is a key causative factor of poverty but in terms of lagoon fishing, fish production has reached the maximum sustainable yield. For example, the maximum sustainable yield (MSY) of fisheries in the Puttlam Lagoon is estimated to be 5,536 MT per year and the maximum economic yield is estimated to be 4,945 MT. Recent estimates show that annual harvest is slightly below the maximum economic yield (4,800 MT). Although the current catch is within the MSY, fishermen complains declining catch and fisheries experts are of the opinion that there is possibility for increasing effort in the lagoon fishery. Thus, the only available option for expansion of fisheries activities is sea fishing.

Consultation of stakeholders indicates that people with motorized FRP boats are willing to deviate from the traditional lagoon fishing practices and to enter into sea fishing during the non-monsoonal months (September to March). As they have to travel a long way through Dutch Bay & Portugal Bay

5 This project generates positive net benefits from the first year on wards. Therefore, net benefit will be zero at very high discount rate.

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

to enter into the sea, it consumes lot of time & fuel for up & down traveling and hence it becomes un- economical for single day fishing operations. Opening up of the thin sand bar at " Anawasal area" (Mohottuwarana) will make easy for fishermen to enter into sea fishing within half an hours time from Serakkuliya. Opening up of the sand bar has to be determined only after a proper scientific investigation.

6.2 Project Description

This is a straightforward project with its activities confining to removal of the thin san bar at Mohottuwarana area. The project can be completed within one-year period.

6.3 Project Impacts

Environmental Impacts A comprehensive technical feasibility and environmental impact assessment study should be undertaken prior to the implementation of this project. The available information on the technical feasibility and environmental impacts is minimum and do not warrant any conclusions. The technical feasibility study should pay attention to the impacts at the alternative site where removed sand is deposited.

Social Impacts This project is one of the most demanded by the local community. In fact, the local political leadership is very enthusiastic about this project and one political leader has prepared a project feasibility document. Therefore, the perception of the community on this project in positive and implementation of this project may act as a catalyst for the community participation in the other components of the Coastal and Marine Resource Management Project.

This project will also have a positive social impact in terms of reduced or avoided conflicts within the fishing communities. In the recent times the number of conflicts among fishing villages have increased mainly due to increase number of fishermen in the fixed lagoon system. Community leaders are of the view that the proposed opening will reduce the number of fishermen in the lagoon and that reduce the “source” for conflicts among fishing villages.

Gender Issues There are no major gender issues involved with this project

Poverty Impacts This project can be considered as a pro-poor development strategy. Currently the lagoon fishery is congested with the big vessels capable of going to the sea together with small boats and other manual fishing operations. Provision of the sea opening will remove some of the big boats from the lagoon fishery. This allows small boats and other manual operators to have better catch and higher incomes. However, some community management system or regulatory system should be in place to prevent the increase of number of fishermen in the lagoon fishery as big boats divert their efforts to the sea.

Financial Benefits This project is also a non-revenue generating type project. However, there are some financial benefits to the big boat owners in terms of saved fuel costs and perhaps increased income from better catch from the off shore fishery. There can be financial benefits for the small-scale fishermen operating in the lagoon fishery in terms of better catch.

Economic Benefits Major economic benefits of the project are saved time and fuel to reach the sea fishery. The available estimates show that entry and exit to the sea on average require 08 and 12 liters of diesel,

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

respectively. Once the proposed opening is available, entry and exit will utilize only 02 and 03 liters of diesel, respectively. The saved fuel per one-day trip is equal to about Rs. 450 per boat. If the number of boats going to sea through the new opening is known, to the economic value total savings of fuel can be estimated. This value is one of the direct benefits of the project.

The other major benefit of the project is the saved time. This opening will save about 2 hours per day for a fisherman. This saved time could be used for leisure activities, repair and maintenance of fishing equipments. Moreover, the saved time improve the quality of fish and the fishermen can come to the market early and sell their products to higher prices.

The proposed opening may increase the income from sea fishing. However, it is not clear whether this can be considered as an economic benefit. If the off shore fishery is underutilized or currently utilized by un-authorized foreign vessels (as claimed by the local community), increase income will be an economic benefit of the project.

Another potential benefit may be use of sand for construction. Currently there is a growing scarcity of sand for construction purposes. If the sand in the project site is suitable for construction purposes and selling sand may generate considerable amount of financial benefits to the project.

Project Cost: Project cost cannot be calculated without the results of the technical feasibility study. However it is estimated that technical studies, civil works and planning will cost around US $ 200,000.

Critical Information Gaps: Technical feasibility of the project, environmental impacts of the project (on-site as well as the site where sand is deposited), suitability of sand for construction purposes.

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

REFERENCES

• Ranaweera Babda, R.M.A (2003). Socio-economic Assessment of the Puttalam Lagoon Area. A report submitted to the regional technical assistance project for coastal and marine resources management and poverty reduction in south Asia.

• Amarasinghe, M. et al., (2003). Assessment of biodiversity in Puttalam lagoon with Special Reference to Poverty alleviation in Coastal Villages of Vanathavilluwa. A report submitted to the regional technical assistance project for coastal and marine resources management and poverty reduction in south Asia.

• Dayananda, L.P.D. (2003) Coastal Resources Management &Poverty Alleviation. A report submitted to the regional technical assistance project for coastal and marine resources management and poverty reduction in south Asia.

• IUCN, Sri Lanka, (2003). Institutional, Policy and Legal Reform Report. A report submitted to the regional technical assistance project for coastal and marine resources management and poverty reduction in south Asia.

• IUCN, Sri Lanka, (2003). An Integrated Coastal Zone Management Strategy for the Puttalam Lagoon and its Environs. A report submitted to the regional technical assistance project for coastal and marine resources management and poverty reduction in south Asia.

• IUCN, Sri Lanka, (2003). Special Study on Assessment of Fisheries Related Livelihoods and Infrastructure in Puttalam Lagoon. A report submitted to the regional technical assistance project for coastal and marine resources management and poverty reduction in south Asia.

• IUCN, Sri Lanka, (2003). An Economic Evaluation of Mangrove Ecosystem and Different Fishing Techniques in the Vanthavilluwa Divisional Secretariat in of Sri Lanka. A report submitted to the regional technical assistance project for coastal and marine resources management and poverty reduction in south Asia.

• Pitigala, G.H. and H.M. Gunatilake (2002). An Assessment of Financial and Economic Feasibility of Selected Forest Plantation Species. Sri Lankan Journal of Agricultural Economics, 4: 121-135.

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

ANNEXURE

Table A1: Flow of costs and benefits: base case of mangrove restoration project

Year Costs FD costs Interest Total cost Benefits Net Benefits 1 7359 3125 1875.0 12359.0 -12359 2 4906 2083 1687.5 8676.5 -8676.5 3 2453 1041 1500.0 4994.0 -4994 4 1312.5 1312.5 -1312.5 5 1125.0 1125.0 -1125 6 937.5 937.5 -937.5 7 750.0 750.0 -750 8 562.5 562.5 -562.5 9 375.0 375.0 -375 10 187.5 187.5 -187.5 11 0 12 0 13 0 14 0 15 0 16 55750 55750 17 55750 55750 18 55750 55750 19 55750 55750 20 55750 55750 21 111500 111500 22 111500 111500 23 111500 111500 24 111500 111500 25 111500 111500 26 111500 111500 27 111500 111500 28 111500 111500 29 111500 111500 30 111500 111500 NPV $326,578.58 IRR 21%

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

Table A2: Financial costs and benefits of teak, cashew forest plantation

Year Cost, Cost Cost Total Benefit Benefit Total Net Cashew Teak For. Dept Cost Cashew Teak Benefits Benefits 1 10417 6250 2083 18750 0 -18750 2 2004 2083 2083 6170 0 -6170 3 7291 1041 1041 9373 0 -9373 4 7291 3646 2083 13020 36035 36035 23015 5 7291 3646 2083 13020 36035 36035 23015 6 7291 3646 2083 13020 36035 36035 23015 7 7291 3646 2083 13020 36035 4688 40723 27703 8 7291 3646 2083 13020 36035 36035 23015 9 7291 3646 2083 13020 36035 36035 23015 10 7291 3646 2083 13020 36035 36035 23015 11 7291 3646 2083 13020 36035 36035 23015 12 7291 3646 2083 13020 36035 36035 23015 13 7291 3646 2083 13020 36035 36035 23015 14 7291 3646 2083 13020 36035 7031 43066 30046 15 7291 3646 2083 13020 36035 36035 23015 16 7291 3646 2083 13020 36035 36035 23015 17 7291 3646 2083 13020 36035 36035 23015 18 7291 3646 2083 13020 36035 36035 23015 19 7291 3646 2083 13020 36035 36035 23015 20 7291 3646 2083 13020 36035 9375 45410 32390 21 7291 3646 2083 13020 36035 36035 23015 22 7291 3646 2083 13020 36035 36035 23015 23 7291 3646 2083 13020 36035 36035 23015 24 7291 3646 2083 13020 36035 36035 23015 25 7291 3646 2083 13020 36035 400000 436035 423015 NPV 116845 B/C 2.22 IRR 42%

Table A3: Cash flow of eco-tourism training project

Year Costs Benefits Net Benefits 1 6510 0 -6510 2 6510 4687.5 -1822.5 3 4687.5 4687.5 4 4687.5 4687.5 5 9375 9375 6 9375 9375 7 9375 9375 8 9375 9375 9 9375 9375 10 9375 9375 NPV 22718.0673 IRR 0.53815556 B/C 3.07843527

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Regional Technical Assistance for Coastal and Marine Resources Management and Poverty Reduction in South Asia (ADB RETA 5974) – PRE-FEASIBILITY STUDY : Sri Lanka Component

Table A4: Financial cash flow for changing to non-destructive fishing gear

Capital Interest Labor Repair Total Benefits Net Cost Cost Cost Cost Benefits 22554 2255.4 22500 6250 53559.4 77400 23840.6 7292 2029.9 22500 6250 38071.9 77400 39328.1 7292 1804.3 22500 6250 37846.3 77400 39553.7 7292 1578.8 22500 6250 37620.8 77400 39779.2 7292 1353.2 22500 6250 37395.2 77400 40004.8 7292 1127.7 22500 6250 37169.7 77400 40230.3 7292 902.2 22500 6250 36944.2 77400 40455.8 7292 676.6 22500 6250 36718.6 77400 40681.4 7292 451.1 22500 6250 36493.1 77400 40906.9 7292 225.5 22500 6250 36267.5 77400 41132.5 NPV 207355.8 IRR - B/C 1.937566

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