USAID SEA PROJECT
ECONOMIC RATE OF RETURN ANALYSIS AS AN ECONOMIC PLANNING TOOL FOR MARINE PROTECTED AREAS
October 2020
Prepared by Roderic Hodges, Senior Finance Analyst of Marine Change, USAID SEA Project Partner
DISCLAIMER This report is made possible by the generous support of the American People through the United States Agency for the International Development (USAID) with the close collaboration of the Government of Indonesia (GoI). The contents of this report are the sole responsibility of Tetra Tech and do not necessary reflect the view of USAID or the United States Government
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TABLE OF CONTENTS 1. EXECUTIVE SUMMARY 1 2. INTRODUCTION AND SCOPE OF REPORT 4 3. FINANCIAL AND ECONOMIC FORECASTING TOOLS 5 4. ECONOMIC SECTORS ASSOCIATED WITH MPAS: POLICY CHALLENGES AND THE BENEFITS OF FORECASTING 8 TOURISM 8 ECOTOURISM 9 TOURISM TRENDS 10 TOURISM DRIVERS 12 FISHERIES 36 5. ERR MODEL CASE STUDY: MOROTAI, INDONESIA 37 ERR MODEL DEVELOPMENT: ECONOMIC ASSUMPTIONS 39 ERR MODEL DEVELOPMENT: SCENARIO ASSUMPTIONS 51 MPA-CENTERED TOURISM: SUPPORTING ANALYSIS 52 ERR MODEL DEVELOPMENT: SCENARIO ASSUMPTIONS FOR MOROTAI 57 ERR MODEL RESULTS 59 ERR ANALYSIS: ALTERNATIVE SCENARIO 61 ERR ANALYSIS AND MPA FINANCING 63 HOMESTAYS: STAY RAJA AMPAT AS A MODEL FOR MOROTAI 64 OCEAN EYE: INCENTIVIZING MPA CONSERVATION 67 7. CONCLUSION: FUTURE USES OF THE ERR FRAMEWORK 71
Figure 1. Morotai ERR model scenario comparison...... 2 Figure 2. Tourism arrivals (millions) in select ASEAN countries ...... 10 Figure 3. Tourism as a percentage of GDP in select ASEAN countries...... 11 Figure 4. Tourism arrivals (in millions) from China, ASEAN, and Western countries in select ASEAN countries (Indonesia, Cambodia, Vietnam, Thailand, Philippines) ...... 12 Figure 5. Visitors to Phi Phi islands...... 14 Figure 6. Maya Bay’s beautiful, overcrowded beach ...... 15 Figure 7. Boracay visitors by nationality, 2017 ...... 17 Figure 8. Boracay map ...... 17 Figure 9. Raw sewage draining into the ocean at Bulabog Beach, Boracay ...... 18 Figure 10. Plastic pollution on a beach in Boracay ...... 19 Figure 11. New regulations implemented in Boracay ...... 20 Figure 12. Plastic waste seen while diving off Bali’s coast ...... 23 Figure 13. Komodo National Park visitors 2010-2019 ...... 24 Figure 14. Mandalika project location ...... 26 Figure 15. Zonation of Gili Matra Water Tourism Park ...... 27
Figure 16. Open dumpsite on Gili Trawangan ...... 28 Figure 17. Gili Eco Trust contributions to waste management ...... 29 Figure 18. Location of Bunaken National Marine Park, just outside of Manado ...... 31 Figure 19. Foreign tourist arrivals in North Sulawesi, 2004-2019 ...... 32 Figure 20. Bird’s Head Seascape Map...... 33 Figure 21. Visitors to Raja Ampat 2011-2019, foreign and domestic...... 34 Figure 22. Summary infographic of Morotai carrying capacity study for diving ...... 53 Figure 23. Scenario comparison ...... 62 Figure 24. Sustainable MPA financing scenarios (figures in US$) ...... 63 Figure 25. Figure 25. Screenshot of homestay accommodations on Stay Raja Ampat website ...... 66 Figure 26. Morotai Homestay Association website financial projection scenario ...... 67 Figure 27. Illustration of Ocean Eye application ...... 68 Figure 28. Projected diver days, wildlife sightings, and diver payments in Morotai ...... 69
1. EXECUTIVE SUMMARY In support of the USAID SEA Project, Marine Change has developed this report presenting economic rate of return (ERR) analysis as an economic planning tool for marine protected areas (MPAs). As one of the USAID SEA Project’s primary goals is to establish a network of MPAs in Indonesia, building a compelling case for the long-term value associated with conservation is a key aspect of stakeholder buy- in. An additional and equally important aspect of MPA planning is the creation of sustainable financing and monitoring mechanisms.
ERR modeling is a quantitative planning tool that can help address these twin challenges by providing a transparent, evidence-based forecast of the long-term economic impacts of conservation. It can also inform the development planning process around an MPA by allowing policymakers to consider multiple scenarios based on the potential policies and strategies to be chosen from. The model includes costs of investments that are often externalized by developers, including clean water, sewage, and waste collection, that governments are required to make to keep an MPA in good environmental health. Morotai, North Maluku province, Indonesia was selected by the USAID SEA Project as a test case for the ERR model. This report lays out in detail the assumptions, logic, parameters, and functionality of the ERR model built for Morotai, as well as the results of scenarios considered in the analysis.
The report also illustrates the challenges posed by rapid increases in tourism, highlighting important regional trends and some relevant case studies from Southeast Asia (Phi Phi Islands, Thailand and Boracay, Philippines) and Indonesia itself (Bali, Komodo National Park, Lombok, Gili Islands, Bunaken, and Raja Ampat).
The ERR model developed for Morotai considers the projected economic benefits of tourism (local GDP, including wages, business income, and tax revenue paid to local government) alongside the public and private sector costs of building tourism infrastructure, including MPA establishment and ongoing monitoring and enforcement. Six broad accommodation categories were considered based on the island’s current hotel infrastructure and other common types of hotels in existence elsewhere in Indonesia. Additionally, two types of restaurants, five categories of tourism activity, fishing, and seaweed cultivation were included in the analysis.
Various other economic and cost estimates were made based on desk research and on-the-ground study in Morotai. All assumptions and associated data sources are presented in detail:
● Upfront capital investment, proportion of local ownership, average spend per person per day for each type of accommodation, restaurant, and tourism activity; ● Employment, wages, taxation rate, and profitability for each type of accommodation, restaurant, and tourism activity; ● Solid waste, water usage, and electricity usage for each type of accommodation; ● Capital investments related to waste management, water provision, and electricity generation; ● Upfront investments and ongoing expenses related to the establishment, monitoring, and enforcement of Morotai’s MPA.
Based on our research, the upfront capital investments, solid waste production, water usage, and electricity usage of high-end hotels and luxury resorts are much higher than for other accommodation types. These categories were also found to have higher levels of employment per guest, plus higher
1 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV wages than other categories, though would likely have a higher proportion of workers from outside of the local area. Luxury eco-resorts were found to have employment and wages comparable to the high- end and luxury hotels, though with more local employment and a much lower ecological footprint in terms of solid waste production, water usage, and electricity usage. Luxury eco-resorts were also found to require lower upfront capital investment than high-end and luxury hotels. Homestays and budget hotels were assumed to be 100 percent locally owned, while all other accommodation types were assumed to have owners from outside of Morotai.
With these baseline parameters, data points, and assumptions in place, users of the ERR model are then able to create scenarios to estimate which will have the greatest positive impact on the local economy. The model includes three key decision variable categories that drive scenario analysis:
1. The projected number of visitors, both Indonesian and foreign 2. The proportion of tourists staying in each of the six accommodation categories noted above, and average length of stay by accommodation type 3. The proportion of tourists engaged in activities including diving, snorkeling, island hopping, surfing, trekking, and private yacht docking, with average number of days spent on each activity, plus proportion of tourists purchasing local souvenirs.
During scenario development, it is important to keep in mind the various constraints of the area under consideration: the speed at which additional visitors can be sustainably absorbed by a destination (i.e. carrying capacity), whether a site has the natural endowments to attract significant numbers of the type of tourist desired, whether accessibility is a limiting factor on potential tourism growth, and other natural constraints such as the physical size of the area under consideration or the availability of freshwater resources.
For Morotai, two MPA-centered tourism scenarios are presented. The second scenario is very similar to the first but assumes that the island would be able to attract more high-end tourism than contemplated in the first scenario. The results of the ERR model scenarios are presented in the figure below:
Figure 1. Morotai ERR model scenario comparison
Scenario 1 Scenario 2 Differential
Private sector investment 2.5 million 12 million 4.8x
Annual tourism revenue 14.4 million 32.4 million 2.3x
Local tourism jobs created 1,250 1,600 1.3x
Annual local wages 3.2 million 5.3 million 1.7x
Hotel LGDP as % of total income 56% 32%
Annual tax revenue 1.4 million 3.2 million 2.3x
Annual infrastructure requirement 0.59 million 1.7 million 2.9x
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 2 ERR 350% 370% 1.1x
Despite the significantly higher investment, revenue, employment, and wage figures in scenario 2, the ERR is only slightly higher. This is due to the relatively high solid waste production and water and energy consumption of the luxury resorts and high-end hotels prevalent in scenario 2, which in turn requires higher levels of public sector infrastructure investment. Also note the relatively low differential in local tourism jobs and local wages and the much lower proportion of local GDP as a percentage of total income for the accommodation. This is because the profits of high-end hotels are not expected to accrue to local owners and a higher proportion of wages would be earned by non-local staff.
It is not the goal of the analysis to indicate that one tourism strategy or scenario is “correct”; these side-by-side ERR models simply illustrate the relative costs and benefits associated with even substantially similar tourism strategies. In practice, an unlimited number of different scenarios can be compared and contrasted, giving policymakers a more nuanced view of the expected socio-economic impacts of various strategies.
Finally, the report also presents the work Marine Change has done under the USAID SEA Project to support an MPA-centered tourism strategy in Morotai. This includes an analysis of the homestay association in Raja Ampat as a model for Morotai, the potential to use the mobile fintech software application Ocean Eye as an incentive to conserve charismatic species in the Morotai MPA while benefitting local communities, a reef carrying capacity study for Morotai, a sustainable management and financing strategy handbook for mooring buoys, a ‘Sustainable Tourism Around MPAs’ handbook, and infographics for nine dive sites in Morotai describing the commonly encountered species and the suggested route for each site.
As the USAID SEA Project approaches its end, it is hoped that the successes and learnings from the ERR analysis will be incorporated into the design and implementation of future projects, and the initial achievements described here will be built upon going forward. These lessons include:
● As the ERR framework tends to be more abstract and quantitative than typical arguments for conservation, the ability and willingness to clearly explain (and re-explain) the analysis is essential. ● A close, sustained relationship with potential users of the model is vital, otherwise it will be easy for the target audience to dismiss the framework as too complicated. ● It should be emphasized that the model is not an attempt to predict the future, and that especially for small islands that may lack detailed visitor data it might be necessary to update the model’s assumptions as additional information becomes available. ● The model’s scenarios are not static and should be updated regularly based on new data and new ideas. Considering multiple scenarios side-by-side over time is the most likely way to gain insight into the potential impacts of increased tourism. ● While the ERR output figure itself is valuable in that it allows comparison across scenarios, the employment, wage, infrastructure, and tax projections are equally useful – they are more straightforward metrics that will likely be more readily understood by decision makers and might be linked to government key performance indicators. In this context it may be useful to describe the ERR value as a figure that balances the economic benefits and required investments.
3 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV ● ERR analysis and its associated metrics might be more effective as part of a well-rounded approach in which visual and other media are also used to promote a sustainable tourism vision. ● ERR analysis should not be used as a standalone tool for sustainable planning; as in the case of Morotai, other tools such as carrying capacity studies and spatial planning to ensure biodiversity and habitat protection are also needed.
It is hoped that this analysis inspires other policymakers and their advisors to consider a similar approach. Those wishing to undertake an ERR analysis for sustainable development and meeting conservation and development targets are encouraged to reach out to the authors of this report.
2. INTRODUCTION AND SCOPE OF REPORT On behalf of the United States Agency for International Development Sustainable Ecosystems Advanced (USAID SEA) Project, Marine Change has developed this report presenting economic rate of return (ERR) analysis as an economic planning tool for marine protected areas (MPAs).
While one of the USAID SEA Project’s primary goals is to establish a network of MPAs in Indonesia, the project acknowledges that the existence of an MPA on paper is but the first step to effective management. As MPAs are often adjacent to communities that either directly exploit the resources within a protected area (e.g. fishing and collecting) or indirectly impact the area through other activities (e.g. erecting buildings too close to shore, deforestation, etc.), the challenge of making conservation economically attractive is a critical hurdle for an effective MPA. Thus, a key aspect of MPA design and implementation is the parallel creation of viable economic plans that demonstrate the enduring benefits associated with environmental protection.
While ecosystem services valuation is becoming mainstream globally, few systems currently exist to create monetary value in MPAs beyond tourism, fishing, and (in some cases) carbon sequestration. Even then, building a compelling case for the long-term value associated with conservation can be challenging, especially when aimed at a diverse audience of community members and their leaders, as well as local, regional, and national governments, non-governmental organizations (NGOs), and other stakeholders. When environmental protection is considered onerous and community members’ livelihoods are at stake, a quantitative planning tool can bolster the case for an MPA by providing a transparent, evidence- based forecast of the long-term economic impacts of conservation. A quantitative planning tool can also inform the development planning process around an MPA by allowing policymakers to consider multiple scenarios based on the potential policies and strategies to be chosen from.
An additional and equally important aspect of the SEA project is creating sustainable financing and monitoring mechanisms for MPAs, so they have the required resources and personnel to enforce the boundaries and zones defined in the MPA development process. The expected revenues and costs of these mechanisms can be integrated into the quantitative planning tool, providing additional insight to policymakers.
Morotai was selected by the USAID SEA project as a test case for the ERR model. This report lays out in detail the assumptions, logic, parameters, and functionality of the ERR model built for Morotai, as well as the results of scenarios considered in the analysis. The report also provides context for the
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 4 challenges posed by rapid and poorly planned increases in tourism, highlighting some relevant examples from Indonesia and elsewhere in Southeast Asia.
3. FINANCIAL AND ECONOMIC FORECASTING TOOLS For businesses and financial institutions considering a venture or competing investments, a standard quantitative tool for measuring the expected return on investment is the internal rate of return, or IRR. By considering the initial investment amount and the amount and timing of future profits attributable to that investment, the result is the percentage gain (typically on an annual basis) from the decision to invest.
Consider the following stylized example that illustrates the mechanics of an IRR analysis. A street vendor decides to invest US$ 1,000 in a cart selling fish ball soup. Based on the experience of other vendors, he expects to earn a net profit (revenue less all expenses) of US$ 100 per year. He also expects that he will be able to resell his cart to another vendor after five years for the same price it was purchased for, i.e. US$ 1,000. The resulting IRR of this US$ 1,000 investment is 10 percent per year. Expressed as a series of cash flows, these activities appear as follows:
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Purchase of Operations, Activity: Operations Operations Operations Operations cart sale of cart
Cash flow: -1,000 100 100 100 100 1,100
IRR: 10%
For community leaders and government officials contemplating the optimal policy mix for an MPA, there is a similar quantitative tool known as an economic rate of return (ERR) analysis. Rather than consider the returns on a single project (such as a hotel or fish processing facility) for which an IRR would apply, an ERR measures the expected economy-wide benefits of a policy or set of policies, for example an MPA and associated impacts on tourism and fisheries businesses.
Instead of relying on forecasted business cash flows, an ERR analysis projects overall economic growth, measured as local gross domestic product (LGDP), as well as the associated public and private sector investments required to achieve that growth. LGDP refers to the localized benefits associated with an MPA, including net profit accruing to local business owners and wages earned by local people as a direct result of MPA establishment.
Note that LGDP does not include profits and wages accruing to “outsiders”, i.e. foreign and non-local domestic investors and laborers. This is not to say these constituencies do not make valuable contributions – they most certainly do. Rather, the purpose of ERR analysis is to measure the benefits to local communities as economic benefits to them are more likely to result in greater long-term support for an MPA.
5 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV Measuring the expected benefits of investments must then be weighed against their costs. An ERR analysis considers investment costs from both the public and private sector to capture the full picture. These figures include the costs associated with MPA management as well as the tax income received by local government paid by MPA-related businesses.
By comparing the overall costs and benefits to the local economy from MPA-related businesses, an ERR can be calculated. As with IRR, consider the following stylized example: A remote island in East Indonesia decides to implement an MPA. Assured that the beautiful beaches and corals surrounding the island will be protected, investors decide to build an integrated hotel and dive center on the island. Local fishers are permitted to continue their activities in most areas, but, with local community leaders, agree to not fish in certain coral-rich areas.
MPA establishment is expected to cost US$ 500 in the first year, with US$ 100 in annual monitoring and enforcement costs thereafter. The new hotel/dive center will require US$ 1,000 to build, with net income increasing from US$ 200 to US$ 400 over time as more visitors arrive. Hotel ownership adjacent to the MPA is projected to be 50 percent local, 50 percent Javanese (i.e. non-local domestic). All staff will be local, with total expected salaries of US$ 300 per year. The hotel is expected to pay US$ 50 in tax to local government annually. As for fisheries, the inability to fish in certain areas will decrease total income by US$ 100 in the first three years after MPA implementation. However, these no-take areas allow fisheries to rebound, and by year 4, spillover effects from the no-take areas within the MPA are expected to generate additional income of US$ 60 per year, increasing to US$ 100 per year in year 6. Finally, to accommodate the new arrivals, public infrastructure investment in new roads, wasted management, and other public services is expected to total US$ 500 in the first two years, and US$ 50 thereafter.
These benefits and costs are aggregated, and ERR calculated, as follows:
Year: 0 1 2 3 4 5 6 7 8 9 10
MPA costs -500 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100
Hotel/dive center:
Net income (50% local ownership) 100 150 200 200 200 200 200 200 200 200
Local wages 300 300 300 300 300 300 300 300 300 300
Taxation 50 50 50 50 50 50 50 50 50 50
Hotel LGDP 0 450 500 550 550 550 550 550 550 550 550
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 6 Net change: fisheries profit & wages -100 -100 -100 60 60 100 100 100 100 100
Infrastructure (roads, waste management) -500 -500 -50 -50 -50 -50 -50 -50 -50 -50 -50
Total MPA economic cost/benefit -1,000 -250 250 300 460 460 500 500 500 500 500
ERR 23%
Private investment -1,000
Though the analysis here appears somewhat more complicated than the IRR example above, the concept is the same: the upfront and recurring costs of investment and conservation, considered alongside the amount and timing of the benefits due to increased business activity adjacent to an MPA, result in a return on investment in conservation expressed as a single ERR value.1
Underlying this analysis are multiple assumptions about the type of hotel, the number of employees required and their associated wages, and the size and impact of income of the fishery no-take area. An ERR model allows these assumptions to be adjusted based on context and allows users to compare multiple development scenarios.
In a real-world example in which there would be a mix of hotel types with multiple economic activities taking place in and around an MPA, the analysis can be expected to be much more complex. It is in these circumstances, when the optimal policy mix is uncertain and the intuitions of different constituencies might contradict, that an ERR analysis can be particularly useful. For the tourism sector, it can help inform the desired mix of hotels and resorts and the associated type of visitor at whom marketing efforts will be directed. For example, would a destination prefer to mainly attract investment in all-inclusive resorts in which guests tend to stay onsite or go on organized nature or cultural excursions, or might backpackers that have a lower spend per capita but drive more local investment in homestays and motorbike rentals, etc. generate more economic activity relative to the investment required? For fisheries, the analysis can help policymakers decide the size of a no-take area to limit the
1 Note that private investment is not included in the ERR calculation here as it is often considered a benefit depending on the key performance indicators of local government. In instances where private investment is not necessarily considered an end in itself, it may be included in the ERR calculation.
7 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV upfront economic losses and/or maximize the longer-term spillover effects (assuming there is sufficient underlying data).
While the characteristics of the MPA and surrounding areas will drive these strategic decisions, an ERR analysis provides a framework in which underlying assumptions are made explicit and competing policies can be compared side by side and more effectively assessed and debated.
4. ECONOMIC SECTORS ASSOCIATED WITH MPAS: POLICY CHALLENGES AND THE BENEFITS OF FORECASTING
TOURISM Most tourism within Indonesia, especially for international arrivals, can be considered as marine or coastal tourism. With more than 17,508 islands, Indonesia presents ample diving, water sports, and cruising opportunities. While activities such as surfing, diving, and liveaboard tourism are well developed in some parts of the country, it is considered that the marine tourism sector, especially when it comes to both cruise and yachting tourists, is still largely undeveloped.
With 20 percent of the world's coral reefs, over 3,000 different species of fish and 600 coral species, deep water trenches, volcanic sea mounts, and an endless variety of macro life, scuba diving in Indonesia is both excellent and relatively inexpensive,2 and the archipelago is considered one of the world’s top diving destinations.3
Although there are excellent diving spots all over the country, the most popular diving tourism hotpots have been developed around MPAs; Bali and Nusa Penida (although many other sites are also popular in Bali, e.g. Tulamben), Komodo, Bunaken, Wakatobi and Raja Ampat National Parks. Diving being a specialist activity requires infrastructure development as well as a skilled local or expat workforce.
In addition, Indonesia has excellent world-class surf breaks and consistent swell conditions. The well- known spots are mostly located on the southern Indian Ocean side of Indonesia with surf breaks found all the way along Sumatra and down to Nusa Tenggara. These sites include Aceh, Bali, Banten, Java, Lombok, the Mentawai Islands, and Sumbawa.
Bali, Indonesia’s most popular tourism destination, was originally discovered and promoted by surfers. With over 33 surf spots, surfing is still one of its main attractions despite mass tourism now mingling among surf tourists and long-term visitors. Surfing is a niche activity that has led to more tourism development in other parts of Indonesia also such as Lombok, Sumbawa and the Mentawai Islands. The majority of surfers come from abroad, especially Australia, the United States, and Brazil.
2 "Scuba Diving in Indonesia: Komodo, Raja Ampat, Bali, Sulawesi and More". Dive-the-world.com 3 http://divemagazine.co.uk/go/7561-the-top-10-diving-destinations-in-the-world
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 8 For the yachting community, Indonesia offers an opportunity for some fine sailing, but the lack of infrastructure, coupled with considerable bureaucracy, has made the archipelagic waters tricky to navigate for sailors. Securing sailing permits and customs and quarantine clearance, as well as limited marina and berthing facilities, discourages many yachts from visiting Indonesia, despite relatively low berthing and mooring rates.4
Similarly, there is currently limited port and other infrastructure for cruise ships to visit Indonesia. Benoa Harbor in southern Bali is among the most developed of the country’s ports. While the port can handle midsized cruise ships catering to as many as 2,000 passengers, vessels that are longer than 300 meters have to drop anchor in the bay and use tenders to get their passengers ashore. There are current improvements under way to cater for larger vessels in Benoa and to open up a further 19 ports for cruise ships in order to encourage ship visits.5
ECOTOURISM Ecotourism is defined as "responsible travel to natural areas that conserves the environment, sustains the well-being of the local people, and involves interpretation and education". Education is meant to be inclusive of both staff and guests.6 The definition is not to be confused with ethical or socially responsible tourism, which have separate focus and less holistic approaches to environmental and social responsibility.7
Given Indonesia’s high marine and terrestrial biodiversity, low level of government infrastructure (including waste management) in many parts of the country, and the need to include communities in development and tourism activities, Indonesia lends itself well for ecotourism activities. Despite this, ecotourism activities are currently both poorly developed and monitored.
In many parts of Indonesia, including its main tourism destinations, there are no ecotourism options available at all or they are of very limited scope and capacity. Some smaller outfits as well as high-end ecotourism resorts and activities exist, especially in relation to marine tourism, but no unified national standard is currently available to measure their scope and impact.
4 https://oxfordbusinessgroup.com/analysis/marine-segment-offers-great-potential-indonesia-targets-better- accessibility 5 https://oxfordbusinessgroup.com/analysis/marine-segment-offers-great-potential-indonesia-targets-better- accessibility 6 http://www.ecotourism.org/what-is-ecotourism 7 http://www.responsibletravel.org/resources/documents/2015%20Trends%20&%20Statistics_Final.pdf
9 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV TOURISM TRENDS The covid-19 pandemic notwithstanding, the tourism industry in Southeast Asia has seen an unprecedented boom since the turn of the century. Travel to the region more than doubled over the past 10 years, from 81 million in 2010 to 133 million visitors in 2019.8 Indonesian tourist arrivals have doubled, reaching nearly 15 million visitors in 2019, up from 7.6 million in 2011.9 Other Association of Southeast Asian Nations (ASEAN) members have experienced similar growth: tourism arrivals in Indonesia and its primary competitors – Vietnam, Thailand, Cambodia, Malaysia, the Philippines are presented in the figure below.
Figure 2. Tourism arrivals (millions) in select ASEAN countries
40
35
30
25
20
15
10
5
- 2011 2012 2013 2014 2015 2016 2017 2018 2019 Indonesia Cambodia Vietnam Thailand Philippines
As a percentage of GDP, tourism in Indonesia continues to increase, from 4.0 percent in 2011 to 4.8 percent in 2019, though as shown in the figure below, still lower than the level on in other key Southeast Asian destinations.
8 https://edition.cnn.com/travel/article/southeast-asia-overtourism-coronavirus-intl-hnk/index.html 9 https://www.bps.go.id/subject/16/pariwisata.html#subjekViewTab5
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 10 Figure 3. Tourism as a percentage of GDP in select ASEAN countries.
16%
14%
12%
10%
8%
6%
4%
2%
0% 2011 2012 2013 2014 2015 2016 2017 2018 2019
Indonesia Cambodia Vietnam Thailand Philippines
Underlying these headline figures are two remarkable trends: the emergence of tourism from China as a major revenue driver, and an explosion in intra-ASEAN travel. Whereas Western countries comprised the highest proportion of tourism arrivals to the selected ASEAN countries as recently as 2017, Chinese and intra-ASEAN visitors both now outnumber Western tourists in these countries.
11 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV Figure 4. Tourism arrivals (in millions) from China, ASEAN, and Western countries in select ASEAN countries (Indonesia, Cambodia, Vietnam, Thailand, Philippines)
25
20
15
10
5
- 2013 2014 2015 2016 2017 2018 2019
Western countries ASEAN China
Finally, there have been major increases in domestic travel across ASEAN. In Thailand and Vietnam, domestic tourists outnumbered foreign arrivals by around 4-to-1 in recent years.10,11 Though Indonesia’s domestic tourism statistics lack detail, this trend has also been documented in the archipelago: domestic tourism grew from 264 million trips in 2016 to 303 million in 2018, dwarfing foreign arrivals.12
TOURISM DRIVERS Convenience, affordability, and increasing incomes have been the key drivers of increased tourism in Southeast Asia. As ASEAN governments have increased regional integration, for example by allowing
10 https://thethaiger.com/coronavirus/thailands-domestic-tourism-provided-4-times-the-number-of-international- travellers-in-2019 11 https://www.ttgasia.com/2019/11/15/vietnams-booming-domestic-tourism-a-growing-market-force/ 12 https://kemenparekraf.go.id/post/statistik-profil-wisatawan-nusantara-2016, https://www.kemenparekraf.go.id/post/statistik-profil-wisatawan-nusantara-2017, and https://www.bps.go.id/publication/download.html. Official statistics include only journeys between provinces.
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 12 visa-free access, travel demand has jumped.13 Private sector companies, particularly ASEAN low-cost carrier brands such as Air Asia and Lion Air, have responded to this demand by opening new routes, helping the region double its airline seat capacity over the last 10 years.14 Budget hotel brands have also increased their offerings to cater to cost-conscious East Asian and Southeast Asian travelers.15 The spread of internet access has amplified this trend, as tech savvy consumers are able to book cheap airline tickets, tours, and hotels via one of the numerous e-commerce travel sites that have been founded over the past decade.16
This trend toward high-growth, mass tourism has not come without consequences. Several case studies are presented below that illustrate the difficulties some destinations have had with rapid increases in tourism. The first two case studies highlight the downsides of unchecked tourism growth in two particularly popular Southeast Asian hotspots: Phi Phi Islands, Thailand and Boracay, Philippines. The remaining case studies consider Indonesian examples (Bali, Komodo, Lombok, Gili Islands, Bunaken, and Raja Ampat) and how tourism growth has been approached in these different areas.
Phi Phi Islands, Thailand Located within Phi Phi Islands National Park, Maya Bay is such a spectacular setting that it was chosen as the backdrop for the 2000 film The Beach,17 bringing the area international recognition. As the islands are conveniently placed between Phuket and Krabi, major tourist destinations in their own right, tourism to the Phi Phi islands and to Maya Bay itself exploded. By 2018, an estimated 200 boats shuttling in 5,000 (mostly foreign) visitors per day had disrupted the marine habitat to such an extent that an estimated 80 percent of the coral reefs around Maya Bay were destroyed18 and “sea life…virtually disappeared”.19 Boats and anchors physically damaged coral reefs, chemicals from motor boats fed algal blooms that inhibit the reef’s ability to absorb sunlight, and sunscreens changed ocean pH and led to coral bleaching.20
13 https://southeastasiaglobe.com/southeast-asia-tourism-increase/ 14 https://centreforaviation.com/analysis/airline-leader/southeast-asia-airline-2019-outlook-in-this-fast-growth- market-low-costs-are-essential-457920 15 https://www.phocuswire.com/southeast-asia-part-1-overview 16 https://www.phocuswire.com/southeast-asia-part-2-investors-entrepreneurs 17 https://www.imdb.com/title/tt0163978/ 18 https://medium.com/willazhou/the-environmental-economic-impacts-of-overtourism-b400ed853493 19 https://apnews.com/c0c652de0f7f4fba883eaa5e83c4a77b/Thailand-to-give-the-beach-from-'The-Beach'-movie-a- breather 20 https://medium.com/willazhou/the-environmental-economic-impacts-of-overtourism-b400ed853493
13 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV Figure 5. Visitors to Phi Phi islands
2,500,000
2,000,000
1,500,000
1,000,000
500,000
- 2011 2012 2013 2014 2015 2016 2017 2018
Sources: https://www.scbeic.com/en/detail/file/product/2953/ekn1rppsq7/EIC_Insight_ENG_Tourism_2016.pdf and https://www.statista.com/statistics/1038782/thailand-number-of-tourists-visiting-noppharatthara- beach-and-phi-phi-islands-national-park/
The environmental damage was so extensive that local authorities took the drastic step of closing Maya Bay to all visitors in June 2018.21 Originally expected to be a four-month closure,22 the area will now be closed until at least 2021.23 Since the shutdown, the ecosystem has bounced back to a certain extent: over 3,000 coral reefs have been replanted and blacktip reef sharks have again been spotted in the area. Once the area reopens, officials reportedly have plans to ban boats from entering the bay itself24 and limit the number of tourists visiting the iconic beach to perhaps 1,200 per day, divided into time blocks.25
21 https://www.vice.com/en_us/article/qvxvxm/tourists-have-officially-ruined-the-beach-from-the-beach-vgtrn 22 https://rappler.com/environment/sharks-return-to-maya-bay-thailand-november-2018 23 https://edition.cnn.com/travel/article/thailand-maya-bay-reopening-date/index.html 24 https://www.forbes.com/sites/melissacristinamarquez/2018/12/26/sharks-return-to-famous-thailand- beach/#7615658a1785 25 http://edition.cnn.com/travel/article/thailand-maya-bay-reopening-date/index.html
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 14 Figure 6. Maya Bay’s beautiful, overcrowded beach
https://www.forbes.com/sites/melissacristinamarquez/2018/12/26/sharks-return-to-famous-thailand- beach/#e2402401785c
Local tour operators have suffered from the closure. Business owners were reportedly not consulted or notified,26 and one tourism operator complained, “it has affected our business dramatically, and we are down 70 percent on last year…We have had to cut staff numbers and salaries. We are not profitable and are in survival mode.”27 A local government official in Krabi noted that "small, long-tail boats that run day trips will suffer the most. There are around 500-600 small boats that take visitors to the bay. Each makes around 2,500-3,000 baht (US$ 80-95) per day, so just imagine their financial losses."28
Prior to the closure, the national park in which Maya Bay is found accounted for THB 555 million (US$ 17.8 million), or one-quarter of all national park entry fees revenues in all of Thailand.29 Though there are numerous other tourism sites in the national park that tourism operators can choose from, visitor
26 https://www.bangkokpost.com/thailand/general/1550938/maya-bay-closure-draws-ire-from-tour-firms 27 https://www.efe.com/efe/english/life/wildlife-recovers-but-tourism-suffers-from-closure-of-the-beach-in- thailand/50000263-3984749 28 https://www.bangkokpost.com/thailand/special-reports/1680332/the-beach-gets-makeover 29 https://www.bangkokpost.com/thailand/special-reports/1680332/the-beach-gets-makeover
15 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV numbers to the park for 2019 have not yet been published at the time of writing, so the economic impacts of the closure are unclear.
Meanwhile, Koh Phi Phi Don, adjacent to Maya Bay, has its own environmental challenges due to overcrowding. The driest months of the year correspond to the tourism high season, when there is a surge in demand for freshwater. During this time, there’s no rain to refill the two ponds that supply the island’s only piped freshwater. This in turn has driven up the price of water, and local hotels, often located right along the coastline, have resorted to pumping water out of unregulated ground wells. The multitude of wells has caused seawater to seep into the underground freshwater aquifer, which if unchecked could permanently contaminate the island’s freshwater system.
In addition, the island's wastewater treatment facilities are inadequate to keep up with the volumes generate during the high tourism season. The untreated water is instead pumped directly into the ocean, where it can then seep back into the underground aquifer. Local government officials recognize these problems but lack the funds for the necessary infrastructure improvements. They are now reportedly considering capping the number of tourists until additional infrastructure is put in place.30 Like the Maya Bay closure, a sudden change in tourism policy could have considerable socioeconomic impacts.
Boracay, The Philippines Boracay, home to a famously long and beautiful white sand beaches, has also been the victim of its own success. From 2000 to 2017, tourism on the 10 square-kilometer island grew from 260,000 to over 2 million per year. For an area that had only fishing villages and lacked electricity and running water as recently as the 1980s, the island has been completely transformed.31 In 2017, Boracay was home to an estimated 40,000 residents and many thousands more temporary workers serving the tourism industry.32
The nationality of visitors as of 2017 is included in the graphic below. In line with regional tourism trends, domestic and East Asian visitors have accounted for the vast majority of visitor growth.33
30 https://www.vice.com/en_asia/article/bjey5m/thailand-ko-phi-phi-tourism-ruining-running-out-of-water 31 https://www.cntraveler.com/story/boracays-big-tourism-problem 32 https://www.nytimes.com/2018/04/04/world/asia/boracay-philippines-tourists-closed.html 33 https://pia.gov.ph/news/articles/1003886
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 16 Figure 7. Boracay visitors by nationality, 2017
Other 15%
Korea Domestic 18% 48%
China 19%
https://pia.gov.ph/news/articles/1003886
Figure 8. Boracay map
https://www.nytimes.com/2018/04/04/world/asia/boracay-philippines-tourists-closed.html
17 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV The development of the tourism industry created many thousands of jobs and the industry as a whole generated PHP 56.1 billion (US$ 1.1 billion) in revenue in 2017. However, the island’s infrastructure was never properly developed to accommodate the huge influx of tourists and the accompanying growth in the local population. Underground sewerage and wastewater treatment were insufficient to meet the island’s needs: 18.2 million liters of wastewater were generated daily, though the island’s two sewage treatment plants had a capacity of only 12 million liters per day.34 A study found that 716 of 834 residential and business properties were found to have no discharge permit at all and were presumed to be draining wastewater directly into the sea,35 as evidenced by pipes pumping sewage at Bulabog Beach (see photo below).36 The result of this pollution was algal blooms which, among other unregulated activities, led to a 70 percent decrease in coral coverage, plus e. coli bacteria counts high enough to cause skin infections and stomach aches.37
Figure 9. Raw sewage draining into the ocean at Bulabog Beach, Boracay
https://www.nytimes.com/2018/04/04/world/asia/boracay-philippines-tourists-closed.html
34 https://www.denr.gov.ph/index.php/speeches/1059-speech-of-secretary-roy-a-cimatu-love-boracay-sustainability- week-on-26-april-boracay-island 35 https://www.cnn.com/2018/04/04/asia/philippines-duterte-boracay-shutdown-intl/index.html 36 https://www.nytimes.com/2018/04/04/world/asia/boracay-philippines-tourists-closed.html 37 https://www.cntraveler.com/story/boracays-big-tourism-problem
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 18 Similarly, the island’s solid waste management system was equipped to handle 30 tons per day, a fraction of the 115 tons of waste produced.38 This resulted in polluted streets and beaches, and widespread plastic leakage into the ocean. Per capita solid waste generation in Boracay is estimated to be perhaps three times the level in Manila.39
This environmental destruction culminated in the Philippine government declaring an official “State of Calamity” on the island in April 2018 and ordering Boracay closed to all tourism activities for six months. Apart from waste management problems, the closure order noted beach erosion and disappearance of wetlands. 40
Figure 10. Plastic pollution on a beach in Boracay
https://mashable.com/2018/04/05/boracay-philippines-garbage-closure/
It seems that not only the number of tourists in Boracay, but also the type of tourist, drove these negative impacts. While the area is home to some high-end resorts, Boracay hosts mostly budget
38 https://mashable.com/2018/04/05/boracay-philippines-garbage-closure/ 39 https://waste4change.com/sustainable-tourism-a-tourism-that-does-not-cost-the-earth/ 40 http://www.ocd.gov.ph/news/press-release/444-ndrrmc-issues-resolution-on-boracay-island-state-of- calamity.html
19 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV tourists interested in the island’s party scene and cheap accommodations rather than nature-based activities.41
The impacts of the closure on the local economy were expected to be stark. Numerous unauthorized waterfront hotels were bulldozed, thousands were temporarily unemployed, and the equivalent of hundreds of millions of dollars in revenue was foregone. When Boracay reopened in October 2018, tourism numbers were reportedly limited to 6,000 per day, down from 19,000 that could be accommodated previously.42
Figure 11. New regulations implemented in Boracay
https://www.cnn.com/travel/article/boracay-reopening-restrictions-intl/index.html
41 https://www.cntraveler.com/story/boracays-big-tourism-problem 42 https://www.cnn.com/travel/article/boracay-reopening-restrictions-intl/index.html
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 20 Once Boracay reopened in 2019, tourism figures once again reached 2 million.43 However, with the same number of visitors as before the closure, it was unclear whether the environmental issues that led to the closure have been fully remedied.
Current sewerage currently covers just 61 percent of the 1,032-hectare island. Since the closure, at least 70 individual or clustered sewage treatment plants (not connected to the central sewage system) have been installed, and a third sewage treatment plant on Boracay will reportedly break ground at the end of 2020 and be operational by 2023.44 However, it is not clear whether this will be sufficient to close the 6 million liter per day gap in treatment capacity.
As for solid waste management, though single-use plastics were banned, enforcement will be of paramount importance. Even if fully enforced, it is far from clear whether the island’s waste production would decrease from 115 tons per day to the current capacity of 30 tons. Boracay has a “no segregation, no collection” policy, which is certainly helpful with recycling, but reports of uncollected waste have continued even after the reopening.45
These continuing challenges notwithstanding, positive steps have been taken. The Boracay inter-agency task force, comprised of the Department of Environment and Natural Resources, the Department of Tourism, the Department of Interior, and local government, have demolished over 300 unauthorized structures on wetlands and beaches.46 Officials who were alleged to have misused funds from tourism environmental fees have been censured or removed from office pending a full investigation.47
The future of Boracay’s tourism economy is particularly uncertain due to the disruption caused by the closure and the environmental degradation that has taken place to date and that may still be ongoing. The combination of a lack of infrastructure investment, no sustainable tourism growth plan, and lax oversight of basic environmental regulations led to the drastic measures adopted by the government. With a cap on visitors, economic growth in Boracay will have to rely on increasing the value from each tourist rather than simply bringing in additional visitors. While the closure undoubtedly led to some short-term pain, it gives the island a chance to reset its primary industry and redefine the way forward.
Bali, Indonesia The attractions of the beautiful and culturally unique island of Bali have made it one of the most popular tourism destinations in the world. Home to 4.4 million people, the island was visited by 6 million foreigners and 10 million Indonesian tourists in 2019. More than three-quarters of the island’s economy
43 https://malay.gov.ph/index.php/for-visitors/tourist-arrival 44 https://newsinfo.inquirer.net/1181929/cesspool-problem-hounds-boracay 45 https://newsinfo.inquirer.net/1047729/as-boracay-visitors-reach-more-than-6000-trash-starts-to-pile 46 https://cnnphilippines.com/news/2020/5/28/duterte-extends-term-boracay-rehab-task-force.html 47 https://newsinfo.inquirer.net/1181929/cesspool-problem-hounds-boracay
21 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV is reliant on tourism.48 While the tourism industry has made Bali one of Indonesia’s most affluent regions and has driven a reduction in the poverty rate from 13 percent to 4 percent over the last 20 years,49 it is estimated that 85 percent of tourism businesses are owned by non-Balinese.50 Apart from concerns over the social impacts of tourism, which are not discussed here, there are numerous environmental challenges associated with the island’s popularity.
Bali’s water consumption has become unsustainable. The tourism industry has been found to use water at 5 times average municipal levels51 and a series of studies has found that two-thirds of the island's groundwater being used by the tourism sector.52 Over half of the island’s 400 rivers have now run dry due to overconsumption, and the water level at Lake Buyan, deep in the island’s interior, has dropped 3.5 meters in recent years. As in Koh Phi Phi Don, water is being drawn out of the underwater aquifer faster than it can replenish, drawing in seawater and potentially contaminating the whole freshwater system. Saltwater has already been found to have leached into the water supply one kilometer inland.53
Bali also has a waste management problem. It is estimated that 40 percent of the island’s daily production of 3,800 tons of waste is uncollected.54 The rest is either burned or leaks into the environment, especially during the rainy season when it is washed into rivers and flows en masse into the ocean. As much as 100 tons of waste is removed daily from Bali’s southern beaches during the rainy season.55
48 https://www.nytimes.com/2020/07/20/world/asia/bali-tourism-coronavirus.html 49 https://www.vice.com/en_asia/article/9kmxyd/how-balis-tolak-reklamasi-movement-emboldened-by-victory-is- trying-to-tackle-the-rest-of-the-islands-woes 50 https://theconversation.com/beneath-the-surface-of-tourism-in-bali-64673 51 https://pata.org/store/wp-content/uploads/dlm_uploads/2015/12/PATA-VE-Bulletin-November-2015- compressed.pdf 52 https://www.vice.com/en_asia/article/qvexem/balis-tourism-is-sucking-the-island-dry 53 https://www.vice.com/en_asia/article/9kmxyd/how-balis-tolak-reklamasi-movement-emboldened-by-victory-is- trying-to-tackle-the-rest-of-the-islands-woes 54 https://travel.kompas.com/read/2019/11/20/181500727/3-alasan-bali-tidak-layak-dikunjungi-pada-tahun-2020- versi-fodor 55 https://beritagar.id/artikel/gaya-hidup/dampak-buruk-pariwisata-bagi-lingkungan
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 22 Figure 12. Plastic waste seen while diving off Bali’s coast
https://www.abc.net.au/news/2018-03-06/diver-films-wave-of-plastic-pollution-off-bali-coast/9508662
In response to these challenges, single use plastics have been banned in Bali56 (though compliance has been uneven)57, and the local government in Bali has considered implementing a tourism tax to help cover the costs of tourism infrastructure,58 though at the time of writing this had not been implemented.
Labuan Bajo / Komodo National Park, Indonesia Komodo National Park, one of the five “super-priority” tourism sites designated by the Indonesian government, lies at the center of the Indonesian archipelago, between the islands of Sumbawa and Flores. Established in 1980, initially the main purpose of the park was to conserve the unique Komodo dragon (Varanus komodoensis) and its habitat. However, over the years, the goals for the park have expanded to protecting all of its biodiversity, both terrestrial and marine. In 1986, the Park was declared a World Heritage Site and a Man and Biosphere Reserve, both indications of the park's significance.59
56 https://www.straitstimes.com/asia/se-asia/bali-bans-single-use-plastics-targets-70-per-cent-reduction-in-2019 57 https://www.scmp.com/lifestyle/travel-leisure/article/3036927/bali-ban-single-use-plastics-widely-ignored-small 58 https://www.cnn.com/travel/article/bali-tourist-tax/index.html 59 https://www.komodonationalpark.org/
23 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV Tourism to Komodo and the small city adjacent to the park, Labuan Bajo, has exploded over the last decade, increasing more than four-fold. Whereas nearly all visitors to the park were foreign as of 2010, domestic tourists accounted for nearly half of all visits in 2019.60
Figure 13. Komodo National Park visitors 2010-2019
200,000 100% 180,000 90% 160,000 80% 140,000 70% 120,000 60% 100,000 50% 80,000 40% 60,000 30% 40,000 20% 20,000 10% - 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Total park visitors Foreign proportion
Source: Komodo National Park Authority
Management of the park itself has historically been somewhat tumultuous, including the failed US$ 16.8 million61 Komodo Collaborative Management Initiative that was responsible for monitoring and enforcement between 2005 and 2010, and violent protests against fishing ground closures in 2012.62 The latest management arrangement for the national park is referred to as a “concurrent policy” – whereas typically management of the national park is done at the national level and adjacent areas managed at the local level, this arrangement, reportedly the only of its kind in Indonesia, also includes provincial-level oversight.63 At the time of writing, the roles and responsibilities of different government agencies, as well as implications of the new policy, were not clear.
Some other major changes to the park might be coming. After initially announcing that Komodo Island would be closed to visitors for one year due to adverse impacts on Komodo dragons, after further
60 Komodo National Park Authority. 61 https://www.thegef.org/project/komodo-national-park-collaborative-management-initiative 62 https://www.researchgate.net/publication/271725411_Exit_the_Dragon_Collapse_of_Co- management_at_Komodo_National_Park_Indonesia 63 https://republika.co.id/berita/qcmji3328/ntt-dapat-kebijakan-konkuren-kelola-taman-nasional-komodo
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 24 study found no impacts from tourism, the closure was cancelled.64 The government is now considering a fee of up to US$ 1,000 per foreign tourist visiting Komodo Island, though it is unclear when or if such fees would be imposed and whether Indonesian tourists would be subject to a similar increase. The uncertainty has caused some consternation among tour operators, leading one to quip, “I am, like probably everyone else, profoundly confused with this current situation.”65
Apart from management controversies, Komodo faces some real environmental challenges. Despite the protections in place, illegal and destructive fishing reportedly occurs regularly within the park.66 With the significant increase in visitors in recent years, solid waste management has also become a challenge for Labuan Bajo. In 2018 a new landfill was developed for the area that is capable of handling all the waste produced by the area’s residents and tourism industry, including the islands within the national park. However, leakage of waste into the sea continues to be “a major problem” according to the head of the Labuan Bajo regency government, which is responsible for waste management.67 To help remedy the situation, the Ministry of Environment and Forestry recently provided eight waste collection vehicles and 60 waste bins to the Labuan Bajo regency government,68 and the Ministry of Marine Affairs and Fisheries has also provided budget assistance.69 As the waste issue in Komodo has received so much attention from both government and the media, hopefully its waste management challenges will be remedied soon.
Mandalika, Lombok, Indonesia Another one of the five “super-priority” tourism sites designated by the Indonesian government, Mandalika is a 1,250-hectare, US$ 3 billion tourism development, the largest project of its kind in Southeast Asia. The development targets over 10,000 luxury hotel rooms, an international street circuit (it is slated host Moto Grand Prix in 2021), retail, golf courses, spas, parks, hiking trails, and a yacht marina. Designed to raise the profile of Lombok and take advantage of its proximity to Bali, the development seeks to “learn valuable lessons as it re-writes the pages of Bali’s success and stays up to date with contemporary practices in sustainable architecture and design.”70
64 https://www.theguardian.com/world/2019/oct/01/indonesia-cancels-komodo-island-closure-saying-tourists-are- no-threat-to-dragons 65 https://skift.com/2019/10/02/indonesias-komodo-island-will-stay-open-but-new-fee-could-be-as-high-1000/ 66 https://www.theguardian.com/environment/2018/apr/18/destroying-the-worlds-natural-heritage-komodo-is- reaching-a-tipping-point 67 https://kumparan.com/florespedia/sampah-jadi-persoalan-utama-di-labuan-bajo-1quc0PkOjAJ/full 68 https://www.antaranews.com/berita/1339846/pemerintah-dukung-pengelolaan-sampah-di-labuan-bajo 69 https://www.merdeka.com/uang/pemerintah-siapkan-rp-65-t-tangani-masalah-sampah-di-labuan-bajo.html 70 https://invest-islands.com/about-us/portfolio-properties-in-indonesia/why-invest-real-estate-in-lombok/kuta- mandalika-lombok/
25 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV Figure 14. Mandalika project location
Sustainable development is a key aspect of the project’s marketing. The project has dedicated green space of 51 percent, and areas of high biodiversity will be open only to activities such as cycling and hiking.71 The master plan also includes an allocation of US$ 458 million, funded by Asian Infrastructure Investment Bank (AIIB), for infrastructure needs, including roads, landscaping, drainage, water supplies, sewerage, wastewater treatment, solid waste management, information technology, electricity distribution, and other public facilities. Infrastructure investments in water supply, sanitation, and solid waste management for neighboring communities are also part of the master plan. Protection of indigenous peoples is also prominently mentioned. 72 Other eco-friendly development aspects are planned, including an electric train and a cable car for local transport, as well as renewable energy sources such as solar and tidal power.73
Based on the materials disseminated by the AIIB and Invest Islands Indonesia,74 Infrastructure and technology implementation are the major focal points of the project. While these are very important aspects, conservation of water and energy, as well as waste reduction, do not appear prominently. Some
71 https://www.seagoinggreen.org/blog/the-new-technological-aspects-of-eco-sustainability-the-mandalika-project 72 https://www.aiib.org/en/projects/approved/2018/_download/indonesia-mandalika/Indigenous-Peoples- Development-Plan.pdf 73 https://www.seagoinggreen.org/blog/the-new-technological-aspects-of-eco-sustainability-the-mandalika-project 74 https://invest-islands.com/about-us/portfolio-properties-in-indonesia/why-invest-real-estate-in-lombok/kuta- mandalika-lombok/
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 26 community leaders have also voiced criticism, alleging that a project the size of Mandalika is disruptive to social and cultural traditions on the island.75,76 Having a detailed plan for tourism growth is a very positive step for Indonesia, though as the project is developed and construction continues, proper execution will be important to ensuring that negative environmental and social impacts are minimized.
Gili Islands, Indonesia Located just off the northwest coast of Lombok, the three Gili Islands (Gili Air, Gili Meno, and Gili Trawangan) have become a major tourism destination in Indonesia. Though detailed visitor data is not available, tourism to the islands has increased from approximately 10,000 to 1 million visitors per year over the last 15 years. As of 2018, there were approximately 4,000 permanent residents on the islands.77 The rapid expansion of tourism, especially on Gili Trawangan, has contributed to adverse environmental impacts. The islands’ coral reefs have been particularly hard hit by blast and poison fishing, though “pollution, waste, and non-sustainable touristic practices” were also factors.78
Figure 15. Zonation of Gili Matra Water Tourism Park
Source: http://hdl.handle.net/10097/00122001
75 https://www.kataknews.com/2018/12/pengembangan-mandalika-diduga-tak.html 76 https://e-journal.unair.ac.id/MKP/article/download/9279/7204 77 https://www.thejakartapost.com/travel/2018/04/13/gili-trawangan-spoiled-by-garbage.html 78 http://hdl.handle.net/10097/00122001
27 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV With the overall goal of improving coral reef conditions around the islands, dive shops and other private sector tourism operators banded together to establish the Gili Eco Trust (GET) in 2001. The GET initially contributed to fisheries monitoring, coral reef rehabilitation, mooring buoy installation, and onshore plantings of vetiver grass to avoid beach erosion.79 To date, GET has installed more than 120 steel structures around the Gili islands and planted corals on them to foster new coral growth.80
With mass tourism now on Gili Trawangan, waste management has become a major challenge. As Gili Air and Gili Meno are sparsely populated, less visited, and closer to the Lombok mainland, their waste is shipped out and disposed of on Lombok. However, as home to 200 hotels and 150 restaurants and the lion’s share of the islands’ tourism industry, Gili Trawangan produces 10-30 tons of waste per day (2018 data), making waste shipment to Lombok cost prohibitive. As a result, Gili Trawangan’s end-of-life waste was disposed of at a temporary dumpsite.81
Figure 16. Open dumpsite on Gili Trawangan
https://www.thejakartapost.com/travel/2018/04/13/gili-trawangan-spoiled-by-garbage.html
79 http://hdl.handle.net/10097/00122001 80 https://thegreenshoestring.com/2017/08/07/how-the-gilis-are-going-green/ 81 https://www.thejakartapost.com/travel/2018/04/13/gili-trawangan-spoiled-by-garbage.html
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 28 GET has evolved to play a major role in Gili Trawangan waste management, operating an intermediate waste processing facility in which recyclable materials (cardboard, high value plastics, aluminum and glass) are sorted and compressed for recycling on Lombok. As of 2017, this facility shipped 10 tons per week to Lombok for recycling. GET also operates a “glass brick” manufacturing facility on the island, where crushed glass, cement and water are combined to create low-cost (IDR 3,500 / US$ 0.25 per brick), durable building materials. These glass bricks are reportedly commonly used on the island. GET also upcycles waste into souvenirs, including fishing line bracelets and drinking glasses made from used bottles.82
Figure 17. Gili Eco Trust contributions to waste management
Source: https://panorama.solutions/en/solution/waste-management-very-touristic-area-gili-trawangan- innovation-and-education-towards-zero
To further address the waste management issues, budget of IDR 4 billion (US$ 300,000) has been allocated by the provincial government for additional waste management infrastructure, and a new regulation was enacted to provide the legal basis for the collection of fees from businesses and
82 https://thegreenshoestring.com/2017/08/07/how-the-gilis-are-going-green/
29 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV residences for waste management.83 Though the Gili islands face challenges from high growth tourism, the long-term stewardship of GET and government efforts have put the islands on a more sustainable path.
Bunaken, Indonesia Located just offshore from the provincial capital of Manado in North Sulawesi, Bunaken is one of Indonesia’s most famous scuba diving destinations. Bunaken National Marine Park was established in 1991, designating nearly 90,000 hectares as an MPA and encompassing five inhabited islands. The Bunaken MPA was thoughtfully designed as an ecotourism destination and a sustainable financing mechanism was put in place to fund park management activities, monitoring and enforcement, and community improvement projects.84
However, despite these efforts, the relationship between the residents of the islands within the park (numbering at least 30,000) and park management has sometimes been strained. Much of the private investment in Bunaken’s hotels has reportedly been made by outsiders, primarily those from the Sulawesi mainland and foreign nationals. This has in turn caused consternation among local communities, who feel they have been marginalized. Zoning within the MPA has reportedly pushed local artisanal fishers to less productive grounds and negatively impacted their livelihoods. A homestay owner on Bunaken, who might otherwise be expected to be supportive of the MPA and tourism on the islands due to the economic benefits, summarized the local sentiment: “The park only uses Bunaken people to collect the bins and pick up garbage. We’re only staff – we don’t have a say! We aren’t leaders! Bunaken people don’t work for the [park management board]. The salaries for all these people come from Bunaken but Bunaken people don’t get anything!”85
These community conflicts date back at least to the 2000s: in January 2004, there were violent protests against the park authority in one island community. While a study of the economic benefits of tourism were found by one study to be “dramatic and positive”, clearly there were problems with community perception of the park.86 These negative perceptions are at cross purposes with the park’s attempts to reduce blast and poison fishing, as well as coral mining.87
83 https://www.thejakartapost.com/travel/2018/04/13/gili-trawangan-spoiled-by-garbage.html 84 https://data.nodc.noaa.gov/coris/library/NOAA/CRCP/project/1395/EconImpactsDivingBunaken.pdf 85 https://www.insideindonesia.org/eco-tourism-for-whom 86 https://data.nodc.noaa.gov/coris/library/NOAA/CRCP/project/1395/EconImpactsDivingBunaken.pdf 87 https://rmportal.net/library/content/tools/environmental-policy-and-institutional-strengthening-epiq-iqc/epiq- environmental-policy-and-institutional-strengthening-cd-vol-1/epiq-cd-1-tech-area-biodiversity- conservation/indonesian-mpa2019s-an-overview-with-case-study-on-bunaken-national-park-co- management/at_download/file
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 30 Figure 18. Location of Bunaken National Marine Park, just outside of Manado
http://hotelinvestmentstrategies.com/tourism-potential-in-north-sulawesi-province-indonesia/
More recently, other challenges have arisen. Coral reef coverage in the park has diminished due to poorly regulated tourism activities that likely exceed the sustainable carrying capacity limits of the coral reef ecosystems and construction and coastal reclamation in Manado, a city of 400,000.88 Poor waste management has also become a major threat to the MPA. In the first three months of 2016, 3 tons of waste were removed from the park, the majority of which reportedly leaked into the environment from Manado.89 The “Save Bunaken” campaign was spearheaded by the provincial government, encouraging beach cleanups and urging tour operators to ensure their snorkeling guests do not stand on coral reefs.90,91
Since 2015, Bunaken has undergone major change. Foreign tourist arrivals to North Sulawesi province, where Bunaken is one of the major destinations, increased from 20,000 that year to over 120,000 in 2018. There were also approximately 1 million domestic tourist arrivals to North Sulawesi in 2018. The increase in foreign arrivals coincided with the introduction of direct flights to Manado from multiple
88 https://www.jstage.jst.go.jp/article/galaxea/11/2/11_2_219/_pdf 89 https://www.thejakartapost.com/travel/2018/04/06/3-tons-of-trash-removed-from-bunaken-since-january.html 90 https://bisniswisata.co.id/laut-taman-nasional-bunaken-tercemar/ 91 https://en.antaranews.com/news/104612/saving-bunaken-from-garbage-pollution
31 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS USAID.GOV Chinese cities: Hong Kong, Macau, Shenzhen, Chongqing, Wuhan, Shanghai, Changsa and Guangzhou. 92,93
Figure 19. Foreign tourist arrivals in North Sulawesi, 2004-2019
http://hotelinvestmentstrategies.com/tourism-potential-in-north-sulawesi-province-indonesia/
The impact of this huge influx of tourists include damage to reefs, seagrass, and mangroves from increased boat traffic to resorts all around the islands, destructive reef anchoring from dive boats, and continued damage of coral reefs from poorly managed snorkelers and divers.94 The combination of proximity to a large city with the attendant pollution, resentment among MPA residents, and high- growth tourism will likely pose substantial challenges for Bunaken National Marine Park going forward.
Raja Ampat / Bird’s Head Seascape, Indonesia Located in “the global epicenter of marine biodiversity”, the Bird’s Head Seascape (BHS) is a network of 20 MPAs comprising more than 225,000 square kilometers in West Papua, Indonesia, including the areas of Raja Ampat, Cenderawasih Bay, Kaimana, and Triton Bay. Established in 2004, the BHS initiative's aim is to secure the long-term effective management of the area’s marine resources, ensuring food security and sustainable economic benefits for the indigenous population while preserving its very significant biodiversity.95
92 https://en.antaranews.com/news/127760/north-sulawesi-eyes-boosting-tourist-arrivals-through-bunaken-festival 93 http://hotelinvestmentstrategies.com/tourism-potential-in-north-sulawesi-province-indonesia/ 94 https://www.toposmagazine.com/bunaken/ 95 https://birdsheadseascape.com/about-the-birds-head-seascape/
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 32 Figure 20. Bird’s Head Seascape Map
Source: Atlas of Marine Protection, http://www.mpatlas.org/campaign/bird-s-head-seascape/
Prior to the establishment of the BHS, local governments (provincial and regency level) were largely reliant on tax income from extractive industries such as mining and fishing. The income-generating options for the local populace were similarly constrained: fishing, hunting, and farming were the primary economic activities. Once the high biodiversity of the area was discovered and recognized, one of the core goals of the BHS initiative was to increase tourism, engage and bolster the (indigenous) private sector, and ultimately boost incomes for communities and local governments. These additional revenues were in turn expected to increase government and community incentives for environmental stewardship, creating a virtuous cycle in which both people and biodiversity can thrive.
At the time BHS was established and tourism arrivals were relatively low, there was only a single land- based resort and a handful of liveaboard dive vessels operating in the area on a seasonal basis. Resorts and liveaboards are capital intensive investments requiring a high level of operational knowhow. Local governments, BHS management, and local communities recognized that owning these businesses was out of reach of the indigenous people, and the benefits of such ownership would accrue to outsiders. It was collectively decided that a homestay sector, whereby tourists stay in or near the homes of local community members, would be established to build a locally owned hospitality sector and provide additional accommodation options for visitors.
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This ecotourism strategy has proven highly successful. The number of visitors to the region has increased significantly, from 6,400 in 2011 to over 46,000 in 2019,96 with accommodations spread between homestays, liveaboard dive vessels, and land-based hotels and resorts. Like other destinations considered here, domestic tourism has increased especially quickly, and now comprises nearly half of all tourist arrivals.
Figure 21. Visitors to Raja Ampat 2011-2019, foreign and domestic
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More detail on the development of the BHS homestay sector in included in the section “Homestays: Stay Raja Ampat as a model for Morotai” later in this report. Though Raja Ampat has widely been hailed as a successful example of sustainable nature-based tourism, there are still challenges to be overcome.
Homestays A key hurdle for the homestay sector will be to continually improve the standards of hospitality, including infrastructure, service, food safety, and English communication.
96 http://kkp.go.id/an-component/media/upload-gambar- pendukung/bkkpn%20kupang/Foto%20WEB%20BKKPN/Profil%20Kawasan%20Konservasi%20Perairan%20NasiNasi. pdf and https://rajaampatkab.bps.go.id/indicator/16/217/2/jumlah-kunjungan-wisata.html
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Liveaboards Most liveaboards reportedly do not yet make any special effort to contribute to the local economy by hiring indigenous staff, buying homegrown produce, and bringing visiting onshore for local cuisine, performances, and handicrafts. In addition, the ever-increasing numbers of liveaboards reportedly tends to create risks such as the carrying capacity of certain dive sites being exceeded, engine oil spills, and ship strikes to coral reefs. Additionally, as BHS waters have gotten more crowded with visitors, conflicts have arisen between land-based resorts and outside dive operators (including liveaboards) over access to dive sites. As the region sees more visitors, these conflicts are likely to become more common without some sort of agreement or dispute resolution mechanism.
Moorings Another key area for improvement is the need for increased infrastructure to protect the reefs from dive boats – less than 10 percent of recorded dive sites are reportedly equipped with moorings.
Shipping lanes Following the 2017 accident in which a 4,000 GT cruise ship ran aground off Waigeo Island in Raja Ampat, damaging approximately 1,600 square meters of coral reef,97 it became apparent that additional efforts were required to avoid a recurrence of this calamity. The Indonesian government introduced regulations in 2015 requiring maritime pilots on vessels greater than 500 GT,98 but it appears that monitoring and enforcement has been imperfect. There have also been some actions to establish shipping lanes, but to date no marker buoys have reportedly been deployed.
In late 2019 and early 2020, there were three additional reports of cruise ships and liveaboard vessels running aground in BHS. In response, the Raja Ampat regency government announced that it would introduce new rules to limit the number of vessels visiting the area and require local guides to be onboard during visits.99 While it is unclear what exactly the new regulations will be, this is a remarkable step. The local government has effectively signaled its intention to limit tourism activities that threaten the environment. This issue will require ongoing vigilance: as more vessels visit the BHS area, such incidents are likely to continue without some sort of intervention.
Fee structures Another emerging issue requiring resolution is the numerous fees charged both to liveaboards and to tourists themselves. Depending on where liveaboards visit, they are required to pay fees to various local governments, village heads, local kings, and communities for the right to operate in certain areas. While this provides income to indigenous groups and helps increase the incentives for conservation, paying such fees can sometimes be very time consuming, reportedly requiring hours of travel and meeting time, which is far from ideal for a tourism business.
97 https://news.mongabay.com/2017/03/cruise-ship-wrecks-one-of-indonesias-best-coral-reefs/ 98 http://ditjenpp.kemenkumham.go.id/arsip/bn/2015/bn390-2015.pdf 99 https://en.antaranews.com/news/139711/raja-ampat-to-reduce-liveaboard-boats-operating-in-its-waters
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Unfortunately, tourists themselves also face a confusing fee structure. Foreign visitors are required to purchase a Raja Ampat Marine Park entry permit100 and a Raja Ampat visitor entry ticket,101 and are subject to 45 official fees102 and various unofficial fees103 depending on the areas visited. Creating a simplified, centralized systems for fee payments would streamline this convoluted process for businesses and visitors alike.
Evolving Challenges The nature of the threats to the BHS is evolving. When BHS was established, the key challenges were related to blast fishing, shark finning, overall fishing pressure, destruction of mangrove habitat, government capacity, and the ability to monitor such large, dispersed MPAs. Increased numbers of patrol and tourist vessels have greatly improved monitoring, which, along with alternative livelihoods, has greatly decreased the incidence of illegal fishing practices. However, these threats have not disappeared as increases in biomass make illegal activity more financially rewarding.
While continued vigilance related to fisheries is required, new challenges associated with increased tourism have emerged. Government, civil society, and private sector within the BHS will confront the same choices faced in the other areas considered in this report, including Bali, Bunaken, Komodo, Lombok, and elsewhere: how to manage increased visitor numbers while ensuring that local people benefit, indigenous culture remains intact, and the marine and terrestrial environments are conserved for future generations.
These examples underscore the challenges faced by policymakers. Increased tourism spurs private investment and job creation, leading to growth in tax revenue and public investment. As word spreads and infrastructure improves, more tourists arrive, leading to more investment, and so on. While tourism can be a powerful driver of economic growth, if left unchecked it can lead to overcrowding, adverse impacts on local culture, waste management challenges, and environmental degradation, all of which can negatively impact the tourism experience and hinder the sustainability of the local tourism industry as a whole. Policymakers are wise to incorporate lessons from other travel destinations and consider the tradeoffs when developing a strategic plan for the tourism industry. Comparative analysis of competing visions for destinations with a developing tourism industry is integral to strategic planning.
FISHERIES By contrast, fisheries policies and economics associated with MPAs tend to be more straightforward as they mainly pertain to local management measures. These measures could include defining the size of a no-take area, the gear types and number of vessels allowed to operate within designated areas, size limits, total catch limits, closure periods, and others. In Indonesia, fishing operations within and adjacent
100 https://www.stayrajaampat.com/ultimate-raja-ampat-guide/information/raja-ampat-marine-park-entry-permit/ 101 https://www.stayrajaampat.com/ultimate-raja-ampat-guide/information/raja-ampat-visitor-entry-ticket/ 102 https://www.stayrajaampat.com/wp-content/uploads/2019/12/tourism-dept-fees.pdf 103 https://www.stayrajaampat.com/ultimate-raja-ampat-guide/information/raja-ampat-entry-fees/
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 36 to an MPA are often for subsistence or the harvest supports local food security and incomes. Thus, though these decisions are perhaps less complex than those related to tourism strategy, they are no less consequential as they have real impacts both on local communities and on the viability of the MPA itself.
An ERR analysis can make the assumptions associated with specific fisheries policies explicit, help policymakers forecast the expected impacts of these policies over time, and inform programs designed to mitigate any potential negative impacts – e.g. subsidies to enable switching to other fishing grounds or transfer payments to encourage older fishers to retire.
5. ERR MODEL CASE STUDY: MOROTAI, INDONESIA Morotai regency, North Maluku province, Indonesia was selected by the USAID SEA project as a test case for the ERR model. The economic development of Morotai has received considerable attention from the Indonesian national government as the island’s strategic location at the archipelago’s northern periphery has national security implications. As the site of a significant battleground during World War 2, the island is home to historic artefacts, as well as untouched beaches, extensive coral reefs, a lush rainforest interior, excellent surfing, and a charmingly rustic atmosphere.
Morotai’s natural endowments, history, and strategic importance, along with runways (built by the US Army during the war) on which large commercial aircraft can land, make it an obvious candidate for tourism development. Like many remote islands, there is limited economic opportunity for local residents beyond resource extraction such as fishing, hunting, logging, and perhaps mining. Tourism has the potential to create a new economic sector and new employment opportunities for the community. When a baseline tourism study was undertaken in 2018, the island had just 5,255 domestic and 537 international visitors annually, though a large proportion of domestic arrivals were likely government officials or business travelers. Regular flights to Morotai commenced only in 2016 and at the time of the study tourism capacity included just 154 hotel rooms and two dive shops.
Given Morotai’s significance, the USAID SEA project, in coordination with Indonesian government at the national, provincial, and regency levels, worked to establish an MPA along the southwest coast of the island, covering nearly 66,000 hectares overall. This MPA is now one of the island’s key assets in driving tourism growth.
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With such a small tourism sector on a virtually unknown island, there is an opportunity for strategic development and positioning of Morotai’s tourism industry – exactly the type of situation where a quantitative planning tool such as an ERR analysis can be beneficial. The regency government of Morotai, outside of a land concession awarded to a private company, has the sole authority to approve all developments on the island, and so has the rare ability to define the tourism landscape for years to come.
In addition to its tourism potential, Morotai has a small reef and demersal fishery selling primarily into local markets. This fishery overlaps with the MPA, and so was also considered in the ERR analysis.104
ERR MODEL DEVELOPMENT: ECONOMIC ASSUMPTIONS As noted above, the projected economic benefits of tourism (LGDP: wages, business income, tax revenue) considered alongside the public and private sector costs of building tourism infrastructure, including MPA establishment and ongoing monitoring and enforcement, comprise the central analysis of an ERR model.
The parameters of the model depend on the site in question. These include the potential classes of hotel and restaurant that might operate adjacent to the MPA, various types of activities (e.g. diving, snorkeling, surfing, trekking105) and shopping available to tourists, other economic activities taking place within or adjacent to the MPA (e.g. fishing, fish or seaweed cultivation), etc.
For the Morotai ERR analysis, six broad accommodation categories were considered based on the island’s current hotel infrastructure and other common types of hotels in existence elsewhere in Indonesia:
1. Homestay: the most basic level of accommodation in which tourists stay with a local family in their home. There are several of these currently operational in Morotai. 2. Budget hotel: basic, inexpensive accommodation, currently the most common class of hotel on the island. 3. Midrange hotels: based on D’Aloha Resort currently operational in Morotai. 4. High-end hotel: these include international hotel chains, such as those found in Bali and elsewhere. Amenities include restaurant(s), pool(s), perhaps a spa, and other attributes to keep guests entertained on premises. 5. Luxury eco-resort: this class is based on based on examples in Raja Ampat, such as Misool Eco Resort and Papua Explorers. Amenities include restaurant but no pool, assumes that guests will go on diving, trekking, or other nature-based/cultural excursions during their stay.
104 A sizeable yellowfin tuna export industry off the island’s east coast was not considered in the ERR analysis as this fishery has no impact on the MPA and vice-versa. 105 While an activity such as trekking may not take place inside an MPA’s boundaries, tourists seeking out nature- based activities are expected to be attracted to the island due at least in part to the MPA’s existence.
39 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOL FOR MPAS USAID.GOV 6. Luxury resort: based on high-end, all-inclusive resorts in the Maldives, average cost per room of US$700, amenities include restaurant, pool, etc. designed for guests that stay on-site throughout their stay.
Two types of restaurants were assumed for the analysis: mid-range and budget. It was assumed that only guests staying in hotel categories 1-3 would dine here as stays at higher-end hotels and resorts would include full board. Prices at these establishments were based on the small number of restaurants currently operating in Morotai.
Based on Morotai’s natural endowments and the stated objectives of the regency government, the following categories of tourism activity were included:
● Scuba diving ● Snorkeling ● Surfing ● Island hopping, including overnights at island homestays ● Yacht docking
The final category of activity considered in the analysis was non-tourism MPA-based activities: fishing and seaweed cultivation.
Underpinning the model are various other economic and cost estimates based on research conducted on the ground in Morotai, along with desk research:
● Upfront capital investment and proportion of local ownership for each type of accommodation; ● Price per night and average party size for each type of accommodation; ● Employment, wages, taxation rate, and profitability for each type of accommodation; ● Solid waste, water usage, and electricity usage for each type of accommodation; ● Upfront capital investment and proportion of local ownership for local restaurant, diving, snorkeling, island-hopping, trekking, local souvenir, and seaweed businesses, plus yacht docking infrastructure managed by local government; ● Average spend per person per day for local restaurants, diving, snorkeling, island hopping, surfing, trekking, and docking private yachts; ● Employment, wages, taxation rate, and profitability for local restaurant, diving, snorkeling, island- hopping, trekking, local souvenir (cottage industry), and seaweed businesses, and employment and wages for yacht docking; ● Capital investments related to waste management, water provision, and electricity generation; ● Upfront investments and ongoing expenses related to the establishment and enforcement of Morotai’s MPA.
These various economic inputs are itemized below alongside the data source for each assumption and narrative of the research process where applicable.
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 40
Tourism - Accommodation Source Average price per room per night: Luxury resorts 700 Assumed same as luxury eco-resort Luxury eco-resorts 700 Industry interviews High-end hotels 300 Comparable to hotels in Bali Mid-range hotels 63 Industry interviews Budget hotels 22 Industry interviews Homestays 11 Industry interviews
Percentage local ownership: Luxury resorts 0% Industry interviews Luxury eco-resorts 0% Industry interviews High-end hotels 0% Industry interviews Mid-range hotels 0% Industry interviews Budget hotels 100% Industry interviews Homestays 100% Industry interviews
The Luxury eco-resort pricing was based on Misool and Papua Explorers, both in Raja Ampat. They charge US$300-400 per person per day, full board. The selected figure assumes double occupancy. All assumptions for mid-range hotels, budget hotels, and homestays were based on interviews with accommodations currently operational in Morotai. Hotel ownership was based on current typical hotel ownership rates in Morotai, Raja Ampat, and Bali.
Average Indonesian party 2.0 Industry interviews size per room Average foreign party 2.0 Industry interviews size per room
Average party size figures were based on interviews with accommodation operators in Morotai.
Number of international employees per room-night: Luxury resorts 0.002 4 staff per guest, 10% foreign Luxury eco-resorts 0.001 Industry interviews High-end hotels 0.002 3 staff per guest, 10% foreign Mid-range hotels 0 n/a Budget hotels 0 n/a Homestays 0 n/a
Number of national employees per room-night: Luxury resorts 0.002 4 staff per guest, 10% national Luxury eco-resorts 0.003 Industry interviews
41 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOL FOR MPAS USAID.GOV High-end hotels 0.002 3 staff per guest, 10% national Mid-range hotels 0.001 Industry interviews Budget hotels 0 n/a Homestays 0 n/a
Number of local employees per room-night: Luxury resorts 0.018 4 staff per guest, 80% local Luxury eco-resorts 0.016 Industry interviews High-end hotels 0.013 3 staff per guest, 80% local Mid-range hotels 0.008 Industry interviews Budget hotels 0.002 Industry interviews Homestays 0 Owner-operated
Average monthly wage by employee type: Luxury resorts International 1,348 Assumed same as luxury eco-resort National 741 Assumed same as luxury eco-resort Local 296 Assumed same as luxury eco-resort Luxury eco-resorts International 1,348 Industry interviews National 741 Industry interviews Local 296 Industry interviews High-end hotels International 1,348 Assumed same as luxury eco-resort National 741 Assumed same as luxury eco-resort Local 296 Assumed same as luxury eco-resort Mid-range hotels International 0 n/a National 593 Industry interviews Local 148 Industry interviews Budget hotels International 0 n/a National 0 n/a Local 93 Industry interviews
Staffing assumptions for the top three hotel classes were based on interviews with Raja Ampat luxury eco-resorts, though luxury resorts and high-end hotels were assumed to have a higher proportion of international employees, similar to operations in Bali.
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Operating expenses excluding labor as a percentage of revenue: Luxury resorts 50% Estimate Luxury eco-resorts 50% Estimate High-end hotels 50% Estimate Mid-range hotels 50% Industry interviews Budget hotels 30% Industry interviews Homestays 25% Industry interviews
Tax as a percentage of revenue: Luxury resorts 10% Statutory rate Luxury eco-resorts 10% Statutory rate High-end hotels 10% Statutory rate Mid-range hotels 10% Statutory rate Budget hotels 10% Statutory rate Homestays 0% Statutory rate
Solid waste per guest per day, kilograms: Luxury resorts 0.7 Indonesian average: 0.7 kg/day Luxury eco-resorts 0.2 Eco: 55% less organic waste, 10% less plastic High-end hotels 0.7 Indonesian average: 0.7 kg/day Mid-range hotels 0.7 Indonesian average: 0.7 kg/day Budget hotels 0.7 Indonesian average: 0.7 kg/day Homestays 0.7 Indonesian average: 0.7 kg/day
Based on interviews with luxury eco-resorts in Raja Ampat, they intentionally reduce their plastic and organic waste to lessen their ecological footprint. All other hotel types were assumed to have the same level of solid waste as the average Indonesian household, a figure which was confirmed via interview with a large international hotel chain operating in Bali.
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Water usage per guest per day, liters:106 Luxury resorts 1,000 High-end resorts with pools etc. reportedly use ~5x as much water as municipal rates Luxury eco-resorts 200 Equal to municipal use High-end hotels 1,000 High-end hotels with pools etc. reportedly use ~5x as much water as municipal rates Mid-range hotels 200 Equal to municipal use Budget hotels 200 Equal to municipal use Homestays 200 Equal to municipal use
Electricity usage per guest per day, kWh: Luxury resorts 43 450 kWh/m2/year107 Luxury eco-resorts 11 Jakarta: 110 kWh/m2/year average108 High-end hotels 31 450 kWh/m2/year Mid-range hotels 5 110 kWh/m2/year Budget hotels 2 110 kWh/m2/year Homestays 2 110 kWh/m2/year
Based on our research, luxury resorts and high-end hotels are energy and water intensive operations, largely due to the swimming pools and other on-site amenities for these accommodation classes. The other hotel types were assumed to consume the average for Jakarta
Average room size in square meters: Luxury resorts 70 Industry interviews Luxury eco-resorts 70 Industry interviews High-end hotels 50 Industry research Mid-range hotels 30 Industry interviews Budget hotels 15 Industry interviews Homestays 12 Industry interviews
Construction costs per square meter:
106 https://pata.org/store/wp-content/uploads/dlm_uploads/2015/12/PATA-VE-Bulletin-November-2015- compressed.pdf 107 http://www.hotelexecutive.com/feature_focus/4324/introducing-tools-for-energy-sustainability-in-indonesian- hotels 108 http://www.plea2014.in/wp-content/uploads/2014/12/Paper_6C_2731_PR.pdf
44 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOL FOR MPAS USAID.GOV Luxury resorts 536 Industry research109 Luxury eco-resorts 317 Industry interviews High-end hotels 510 Industry research110 Mid-range hotels 222 Industry interviews Budget hotels 119 Industry interviews Homestays 99 Industry interviews
Cost of additional amenities as a percentage of construction cost: Luxury resorts 50% Estimate Luxury eco-resorts 25% Industry interviews High-end hotels 50% Estimate Mid-range hotels 25% Industry interviews Budget hotels 20% Estimate Homestays 20% Estimate
Local labor as percentage of construction cost: Luxury resorts 10% Estimate Luxury eco-resorts 10% Estimate High-end hotels 10% Estimate Mid-range hotels 10% Estimate Budget hotels 10% Estimate Homestays 10% Estimate
Construction costs for high-end hotels and luxury resorts were also found to be considerably higher than other hotel types. In addition, their on-site amenities were assumed to be substantially higher as they offer an all-inclusive experience to their guests. The luxury eco-resorts we interviewed constructed their hotels out of local materials and do not have pools or other amenities on-site, bringing the cost of construction down.
109 https://www.hvs.com/article/7852-india-2016-hotel-development-cost-survey 110 Ibid.
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Current installed capacity, room-nights: Luxury resorts 0 Industry interviews Luxury eco-resorts 0 Industry interviews High-end hotels 0 Industry interviews Mid-range hotels 9,125 Industry interviews Budget hotels 68,701 Industry interviews Homestays 3,650 Industry interviews
These figures were based on operational hotels as of the time of the baseline study in 2018.
Maximum occupancy prior to new capex: Luxury resorts 50% Estimate Luxury eco-resorts 50% Estimate High-end hotels 50% Estimate Mid-range hotels 50% Estimate Budget hotels 50% Estimate
These assumptions reflect the overall hotel class occupancy at which a new hotel of that category would be built. In practice, hotels are often not fully occupied except during peak times, and often target an overall occupancy level of 60-70 percent. Additionally, it would not in reality transpire that when one hotel hits maximum occupancy then another hotel would immediately open and accept any spillover. This assumption takes these industry dynamics into account, anticipating that new construction would take place as greater visitor numbers are anticipated.
Key takeaways: Based on our research, the upfront capital investments, solid waste production, water usage, and electricity usage of high-end hotels and luxury resorts were much higher than for the other accommodation types. These categories were also found to have higher levels of employment per guest, plus higher wages than other categories, though would likely have a higher proportion of workers from outside of the local area. Employment and wages at mid-range hotels, budget hotels, and homestays were assumed to be at the same respective levels as currently observed in Morotai, and lower than the high-end hotels.
Luxury eco-resorts were found to have employment and wages comparable to the high-end and luxury hotels, though with more local employment and a much lower ecological footprint in terms of solid waste production, water usage, and electricity usage. Luxury eco-resorts were also found to require lower upfront capital investment than high-end and luxury hotels. Homestays and budget hotels were assumed to be 100 percent locally owned, while all other accommodation types were assumed to have owners from outside of Morotai.
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Tourism - Restaurants Daily meals per customer eaten onsite: Luxury resort 3 Full board included in room rate; all waste, water/energy usage restaurants included in hotel figures Luxury eco-resort 3 Full board included in room rate; all waste, water/energy usage restaurants included in hotel figures High-end hotel 3 Full board included in room rate; all waste, water/energy usage restaurants included in hotel figures Mid-range restaurants 2 Breakfast included in hotel room rate; lunch and dinner assumed here Budget restaurants 2 Breakfast included in hotel room rate; lunch and dinner assumed here
Average spend per customer per meal: Mid-range restaurants 10 Industry interviews Budget restaurants 4 Industry interviews
Number of national employees per customer: Mid-range restaurants 0.0001 Industry interviews Budget restaurants 0 n/a
Number of local employees per customer: Mid-range restaurants 0.0004 Industry interviews Budget restaurants 0.0003 Industry interviews
Average monthly wage: Mid-range restaurants National employees 593 Industry interviews Local employees 148 Industry interviews Budget restaurants National employees 0 Industry interviews Local employees 93 Industry interviews
Operating expenses excluding labor as a percentage of revenue: Mid-range restaurants 25% Estimate Budget restaurants 25% Estimate
Tax as a percentage of revenue: Mid-range restaurants 10% Statutory rate Budget restaurants 10% Statutory rate
47 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOL FOR MPAS USAID.GOV It is assumed that mid-range hotel guests will dine in mid-range restaurants for lunch and dinner, while budget hotel and homestay guests will patronize budget restaurants. All employee and spend assumptions for these restaurant types are based on current operations in Morotai. For the three highest hotel classes, guests are assumed to eat all meals onsite, their meals included in their room rate.
Tourism - Diving and Snorkeling Percentage of local 50% Industry interviews ownership
Average spend per customer per day: Diving 130 Industry interviews Snorkeling 37 Industry interviews
Number of national employees per: Diver day 0.0063 Industry interviews Snorkeler day 0.0031 Industry interviews
Number of local employees per: Diver day 0.0063 Industry interviews Snorkeler day 0.0031 Industry interviews
Average monthly wage: National employees 556 Industry interviews Local employees 361 Industry interviews
Operating expenses 20% Estimate excluding labor as a percentage of revenue
Tax as a percentage of 10% Statutory rate revenue
Current installed capacity: Diver days 3,650 Industry interviews Snorkeler days 3,650 Industry interviews
Tourism – Island Hopping and Island Homestays: Percentage of local ownership: Island hopping 100% Industry interviews Island homestays 100% Industry interviews
Average price:
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Island hopping (per 19 Industry interviews day) Island homestay (per 19 Industry interviews night)
Number of local 0.0016 Industry interviews employees per customer
Average monthly wage: Local employees 296 Industry interviews
Operating expenses excluding labor as a percentage of revenue: Island hopping 50% Industry interviews Island homestays 25% Industry interviews
Tax as a percentage of revenue: Island hopping 10% Statutory rate Island homestays 0% No tax paid in practice
Current installed capacity: Island hopping trips 3,650 Industry interviews Island homestays 7,665 Industry interviews room-nights
All diving, snorkeling, island hopping, and island homestay industry assumptions were based on interviews with current operators in Morotai.
Infrastructure Solid waste management: Cost per ton of waste 200 Estimate based on current Jakarta costs (10x)
Fresh water supplies: Cost per kL of water 3 Industry interviews, similar to costs of desalination
MPA establishment and enforcement Investment 244,361 SEA Project estimates Operations 264,662 SEA Project estimates
Fisheries Total catch, reef fish 469,987 NGO data Average price per kg 2 NGO data
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Seaweed Current number of 1 Industry interviews farmers Potential number of 50 Industry interviews farmers
Total current production 2 tons Industry interviews Total potential 200 Industry interviews production tons
Ramp up period (years) 4 Industry interviews
Sale price per ton 370 Industry interviews
Upkeep costs per ton 0.74 Industry interviews Transport costs per ton 1.85 Industry interviews Seed costs per ton 4.63 Industry interviews
Percentage local 100% Industry interviews ownership
Tax as a percentage of 0% No tax paid in practice revenue
Several years ago, seaweed was commonly farmed in Morotai, but was mostly abandoned after disease reduced yields. Such disease can be effectively controlled with proper farming techniques in place, making it an excellent alternative source of income for fishing communities. The figures here contemplate community training in improved seaweed farming and reestablishing the sector in Morotai at its previous level. This will in turn augment fishing incomes and offset any reduction in catch due to the imposition of no-take zones within the MPA.
Cottage industry Average monthly wage 120 Industry interviews Earnings per visitor 3 Industry interviews
Cottage industry refers to local handicrafts such as woven baskets and mats, and various other trinkets that are sold to tourists. These figures are based on current industry in Morotai.
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Nature-based activities Average monthly wage 278 Assumed the same as dive guides As a proportion of diving 30% Estimate
Surfing Daily fee assessed 10 Estimate, starting in Year 3
Nature-based activities in Morotai refer to trekking, bird watching, and other terrestrial activities that tourists would be able to do adjacent to the MPA in Morotai. Surfing would also not take place within the boundaries of the MPA, but, like trekking and bird watching, this sector will also benefit from the MPA and the positioning of Morotai as a nature-based destination.
Yachting Average nights per yacht 3 Estimate based on other Indonesian destinations Fee assessed per night 70 Estimate based on other Indonesian destinations
Private yachts commonly stopover on Indonesian islands, and as Morotai becomes more recognized as a destination and is known to have the required amenities for yacht docking, it is expected that more guests will arrive over time.
ERR MODEL DEVELOPMENT: SCENARIO ASSUMPTIONS With these baseline data points and assumptions in place, users of the model are able to then create scenarios to estimate which will have the greatest positive impact on the local economy. The model includes three key decision variable categories that drive scenario analysis:
1. The projected number of visitors, both Indonesian and foreign 2. The proportion of tourists staying in each of the six accommodation categories noted above, and average length of stay by accommodation type 3. The proportion of tourists engaged in activities including diving, snorkeling, island hopping, surfing, trekking, and private yacht docking, with average number of days spent on each activity, plus proportion of tourists purchasing local souvenirs.
By adjusting these key variables, users of the model can estimate the potential economic impacts of different types of tourism development. For example, would it make sense for Morotai to maximize the number of visitors and emulate Bali? Or would it make sense to take a more niche tourism approach and focus on attracting visitors interested in natural beauty rather than, for example, a resort experience? The model allows for the formulation of discrete scenarios and every permutation in between.
As a scenario is developed, it is extremely important to keep in mind the various constraints – which can take many forms – of the area under consideration. Policy makers should keep in mind the examples described above detailing the downsides of rapid, high-volume tourism growth: this acts as a constraint on the speed at which additional visitors can be absorbed by a destination. Alternatively, it should be
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soberly assessed whether a site has the natural endowments on the same level as, for example, Raja Ampat to attract significant numbers of backpackers or high-end eco-tourists. Another constraint is accessibility: the longer it takes to travel to the destination, by air, overland, by sea, or a combination of these, the more difficult is to attract guests, and visitor projections should take this into account.
Other constraints may include the physical size of the island and the number of hotels, restaurants, and shops could be built there without causing overcrowding. Or perhaps natural resources such as fresh groundwater might be relatively scarce and unable to sustain a large population, especially hotel guests that tend to use large quantities of water, without major investments in desalination technology.
MPA-CENTERED TOURISM: SUPPORTING ANALYSIS The size of an MPA will drive the number of daily visitors that can sustainably visit its reefs for diving and snorkeling activities. This is otherwise known as the MPA’s carrying capacity. Marine Change, with other USAID SEA partners, recently completed an MPA carrying capacity study that entailed physically measuring the size of each major dive site and determining how many people could reasonably fit on the reef. The analysis found that approximately 1,000 divers per day could sustainably visit the Morotai MPA’s nine most popular dive sites. This was an important exercise as it provides an upper bound on the long-term arrivals for an MPA-centered tourism strategy.
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Figure 22. Summary infographic of Morotai carrying capacity study for diving
53 | ERR ANALYSIS AS AN ECONOMIC PLANNING TOOL FOR MPAS USAID.GOV Based on the carrying capacity study, the Morotai regency government installed mooring buoys at the 13 most popular sites within the MPA in order to reduce coral reef damage from dive boat anchors. Mooring buoys typically have a maximum life of just a few years due to normal wear-and-tear and are often stolen or tampered with if adjacent communities are not aware of their purpose or do not support their installation. To promote the long-term viability of these moorings, Marine Change and the USAID SEA project developed a sustainable management and financing strategy handbook for mooring buoys. This analysis includes a summary of management mechanisms used in Indonesia, highlighting the strengths and weaknesses of each approach and providing recommendations. For Morotai, the recommended mechanism is a direct partnership structure in which the responsibilities are shared between various stakeholders.
Under this approach, the partner dive centers would be assigned management responsibilities over the buoys, such as periodic surveillance and reporting the status, damage or disappearance of buoys on a rotating schedule. As the dive centers are the main users of the buoys and will travel to them as part of their business operations, it would not be necessary to compensate them for this activity. Instead, it relies on their willingness to protect the MPA and jointly maintain the buoys using existing resources. The structure and participant roles and responsibilities are summarized in the figure below.
Party Roles
North Maluku Provincial DKP ● Create a partnership agreement with the MPA Management Unit and participating dive centers on the collaborative monitoring of the mooring buoys within the MPA. ● Allocate budget for replacement buoys, as needed.
MPA Management Unit ● Monitor the buoy surveillance rotation schedule. ● Serve as the main data hub to collect data on misuse, damage or disappearance of buoys. ● Communicate with local community on the importance of the proper use of mooring buoys.
Morotai District DKP ● Assign monitoring of the mooring buoys to the partnership, under the guise of MPA Management Unit. ● Allocate budget for replacement buoys, as needed. ● Communicate to the local community on the importance of the proper use of mooring buoys.
Private sector ● Allocate its existing resources (boats and staff) to monitor and report the status, misuse, damage or disappearance of mooring buoys on a periodic basis. ● Communicate with local community on the importance of the proper use of mooring buoys.
Galo-Galo, Kolorai, Ngele- ● Reports to the MPA Management Unit on the status, misuse, Ngele villages damage or disappearance of mooring buoys on a voluntary basis.
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This approach is considered the best option for Morotai as such a partnership would not require any formal legal structure, just a memorandum of understanding between the relevant parties, and could therefore be put in place relatively quickly. As legal and monitoring costs would be minimized, this was also considered to be the most cost-effective management option.
Additional support for MPA-centered tourism on Morotai has come in the form of a ‘Sustainable Tourism Around MPAs’ handbook developed by Marine Change on behalf of the USAID SEA project. This handbook was written as a practical guide for the tourism industry to minimize their environmental impacts. The guidebook covers each of the following key topics in detail:
● Business operating licensing in MPAs ● How to be an eco-tourist ● Selecting a snorkeling tour operator ● Being an environmentally conscious snorkeler ● Hosting environmentally conscious snorkeling tours ● Installation of mooring buoys ● Code of conduct for divers and dive operators ● Minimum safety standards for dive operators ● Viewing marine animals ● Interactions with whale sharks, manta rays, sea turtles, and turtle nesting sites ● Underwater clean-ups ● Understanding MPA zones, e.g. no-take, sustainable fishing zones, and other use zones ● Creating guidelines for tourists ● Buying from local communities ● Selecting sustainable fish, shrimp, and octopus ● Reducing energy usage ● Efficient water usage ● Managing wastewater ● Managing municipal solid waste ● Reducing single-use plastics ● Reducing the threat of microplastics ● Small-scale composting ● Recycling ● Reducing fuel consumption of small tourism boats
Finally, the USAID SEA Project and Marine Change also developed infographics for nine dive sites in Morotai describing the commonly encountered species and the suggested route for each site, as well as highlighting proper diving techniques. These were developed to aid and support dive centers on Morotai in describing the sites and well as promoting best practices among divers. One of these infographics is included below.
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ERR MODEL DEVELOPMENT: SCENARIO ASSUMPTIONS FOR MOROTAI In line with an MPA-centered tourism strategy, the first scenario selected for ERR analysis focused on the benefits of such a strategy. The assumptions made for the scenario are described in detail below.
Year 1 Year 2 Year 3 Year 4 Year 5 Beyond Indonesian visitors 12,000 16,000 25,000 35,000 50,000 10% growth Foreign visitors 1,000 2,000 4,000 6,000 8,000 15% growth
These visitor numbers are based on the most recent tourism targets of the regency government.111 Note they are well within the limits set out in the carrying capacity study. Projections such as these will almost certainly require updating every year, and as a “living document”, the ERR model should in turn be updated regularly as new information becomes available.
Percentage of Indonesian visitors staying in: Luxury resorts 0% 0% 0% 0% 0% 0% Luxury eco-resorts 0% 0% 2% 2% 2% 2% High-end hotels 0% 0% 0% 0% 0% 0% Mid-range hotels 25% 25% 25% 27% 29% +2% Budget hotels 70% 70% 68% 66% 64% -2% Homestays 5% 5% 5% 5% 5% 5% Percentage of foreign visitors staying in: Luxury resorts 0% 0% 0% 0% 0% 0% Luxury eco-resorts 0% 0% 10% 10% 10% 10% High-end hotels 0% 0% 0% 0% 0% 0% Mid-range hotels 94% 94% 84% 84% 84% 84% Budget hotels 5% 5% 5% 5% 5% 5% Homestays 1% 1% 1% 1% 1% 1%
Under this MPA-centered tourism scenario, it was assumed that the only luxury class hotels or resorts developed would be luxury eco-resorts as these have a lower environmental footprint than conventional resorts and hotels, including electricity and usage, and waste production. Due to their high cost however, it was assumed that only 2 percent of Indonesians and 10 percent of foreign visitors would stay in such accommodations once they are operational in Year 3 of the projections. The proportion of
111 These projections were developed by the Morotai regency government in 2017 and correspond with actual tourism arrivals through 2019.
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Indonesian visitors staying at mid-range hotels is expected to increase at the expense of budget hotels, while homestays are projected to remain flat at 5 percent. Baseline figures for Year 1 are based on current tourism patterns on the island.
Average stay of Indonesian visitor, days 3.0 3.0 3.0 3.0 3.0 3.0 Average stay of foreign visitor, days 4.0 4.0 4.0 4.0 5.0 5.0
As biomass within the MPA increases, foreign visitors are (conservatively) expected to extend their stay in Morotai from 4 to 5 days, with Indonesian visitors holding steady at 3 days.
Percentage of: Indonesian visitors diving 7.7% 7.7% 7.7% 7.7% 15.4% 15.4% Foreign visitors diving 25.1% 25.1% 25.1% 25.1% 50.3% 50.3% Indonesian visitors snorkeling 0.0% 0.0% 10.0% 10.0% 10.0% 10.0% Foreign visitors snorkeling 0.0% 0.0% 20.0% 20.0% 20.0% 20.0% Indonesian visitors surfing 0.0% 2.0% 2.0% 2.0% 2.0% 2.0% Foreign visitors surfing 0.0% 5.0% 5.0% 5.0% 5.0% 5.0% Average days: Diving, Indonesian visitors 3.0 3.0 3.0 3.0 3.0 3.0 Diving, foreign visitors 2.0 2.0 2.0 2.0 4.0 4.0 Snorkeling, Indonesian visitors 0.0 0.0 1.0 1.0 1.5 1.5 Snorkeling, foreign visitors 0.0 0.0 1.0 1.0 1.5 1.5 Surfing, Indonesian visitors 3.0 3.0 3.0 3.0 3.0 3.0 Surfing, foreign visitors 4.0 4.0 4.0 4.0 5.0 5.0
Similarly, as the underwater ecosystem improves and Morotai builds a reputation for dive tourism, a higher proportion of visitors is expected to go diving and snorkeling, with visitors progressively spending more time on these activities. This effect is expected to extend to surf tourism as well – as word spreads about Morotai and infrastructure improves, this sector is expected to grow rapidly.
Percentage of: Indonesian visitors island hopping 19.7% 19.7% 19.7% 19.7% 25.0% 25.0% Foreign visitors island hopping 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% Indonesian island hoppers staying on the 0.0% 0.0% 4.0% 4.0% 10.0% 10.0% islands Foreign island hoppers staying on the 10.0% 10.0% 10.0% 10.0% 20.0% 20.0% islands Number of local tourists island 1,872 5.0% 7.0% 7.0% 10.0% 5.0% hopping/growth rate Average days: Island hopping, Indonesian visitors 1.0 1.0 1.0 1.0 1.0 1.0 Island hopping, foreign visitors 1.0 1.0 1.0 1.0 1.0 1.0
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At island homestays, Indonesian visitors 0.0 0.0 1.0 1.0 1.0 1.0 At island homestays, foreign visitors 2.0 2.0 2.0 2.0 2.0 2.0
Finally, as more nature-based tourists visit Morotai, they will want to go island hopping within the MPA and a growing portion of them will stay overnight on the islands. As more visitors arrive, it is expected that more homestays will open, with standards rising as local people gain hospitality experience. (More information about the development of the homestay sector is included in the Stay Raja Ampat discussion in a later section of the report.)
It is important to note that the assumptions here are not meant to be static or definitive. Tourist arrivals over time and the mix of hotels and activities will depend on numerous factors, many of them out of the control of the Morotai regency government. This model is meant to illustrate the tradeoffs between competing visions for the development of the island’s tourism industry and provide a framework for strategic assessment.
ERR MODEL RESULTS With the economic and scenario inputs in place, the model calculates the wages by business and employee type, plus business profits attributable to local owners, i.e. LGDP, plus the tax income associated with these businesses.
These benefits are then considered alongside private and public sector investment requirements, plus MPA-related expenses.112
112 Incremental differences in fisheries income is also included in the analysis. For the case for Morotai, it was unclear at the time of writing what the exact MPA impacts on fisheries would be, so no change in fisheries income was assumed.
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Year 1 2 3 4 5 6 7 8 9 10 MPA costs -533,023 -267,062 -267,062 -267,062 -267,062 -267,062 -267,062 -267,062 -267,062 -267,062
Public infrastructure investment: Solid waste management -2,502 -5,589 -7,640 -12,385 -18,179 -25,609 -28,422 -31,556 -35,046 -38,935 Fresh water supplies -10,589 -23,656 -33,016 -53,619 -78,912 -111,093 -123,349 -137,005 -152,223 -169,189 Power generation 0 -118,553 -116,092 -224,631 -294,542 -354,859 -152,227 -171,522 -188,570 -222,499
LGDP: Accommodation 143,263 273,261 431,948 718,194 1,089,806 1,541,165 1,722,738 1,928,881 2,157,613 2,414,466 Restaurants 71,562 160,993 214,090 336,739 478,438 669,930 732,854 802,850 878,130 962,269 Diving, Snorkeling 56,547 124,822 171,869 284,640 1,050,096 1,456,97 1,632,885 1,830,871 2,053,916 2,305,197 Island Hopping and Island Homestays 23,439 35,597 46,847 68,615 113,679 153,119 169,105 186,862 206,654 228,675 Nature-based Activities 0 7,489 51,561 85,392 315,029 437,092 489,866 549,261 616,175 691,559 Cottage Industry 0 7,800 54,000 87,000 123,000 174,000 192,600 213,240 236,151 261,591 Surfing 0 57,926 99,230 167,815 262,667 364,815 408,593 457,843 513,294 575,678 Seaweed 736 736 18,711 36,916 55,121 73,326 73,556 73,556 73,556 73,556
Tax Revenues 76,926 165,284 300,397 507,073 1,012,541 1,416,102 1,595,326 1,797,584 2,025,968 2,283,698
Total MPA economic cost/benefit -173,641 419,047 964,843 1,734,687 3,841,684 5,527,899 6,446,462 7,233,803 8,118,558 9,099,005 ERR 350%
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This scenario results in a very high ERR of 350 percent, with the following key metrics for the tourism industry around the MPA by Year 5:
● US$ 2.5 million in private sector investment ● US$ 14.4 million in annual tourism revenue, ● 1,250 local tourism jobs created ● Local wages of US$ 3.2 million ● Accommodation LGDP as percentage of total income: 56% ● Annual tax revenues above US$ 1.4 million ● Annual public infrastructure requirements of US$ 590,000
ERR ANALYSIS: ALTERNATIVE SCENARIO As the scenario above assumed that tourism would increase significantly in the next 5 years, the result was a high ERR. However, this is a relative measure, so it is important to consider an alternative scenario. Let’s assume that Morotai still follows a MPA-focused tourism strategy, but that the island is able to attract more high-end tourism than contemplated by the first scenario. This entails a change in the following assumptions, with all else held equal.
Scenario 1 Accommodation assumptions
Percentage of Indonesian visitors staying in: Luxury resorts 0% 0% 0% 0% 0% 0% Luxury eco-resorts 0% 0% 2% 2% 2% 2% High-end hotels 0% 0% 0% 0% 0% 0% Mid-range hotels 25% 25% 25% 27% 29% +2% Budget hotels 70% 70% 68% 66% 64% -2% Homestays 5% 5% 5% 5% 5% 5% Percentage of foreign visitors staying in: Luxury resorts 0% 0% 0% 0% 0% 0% Luxury eco-resorts 0% 0% 10% 10% 10% 10% High-end hotels 0% 0% 0% 0% 0% 0% Mid-range hotels 94% 94% 84% 84% 84% 84% Budget hotels 5% 5% 5% 5% 5% 5% Homestays 1% 1% 1% 1% 1% 1%
Scenario 2 Accommodation assumptions
Percentage of Indonesian visitors staying in: Luxury resorts 0% 0% 10% 10% 10% 10% Luxury eco-resorts 0% 0% 15% 15% 15% 15% High-end hotels 0% 0% 15% 15% 15% 15% Mid-range hotels 25% 25% 25% 25% 25% 25% Budget hotels 70% 70% 30% 30% 30% 30%
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Homestays 5% 5% 5% 5% 5% 5% Percentage of foreign visitors staying in: Luxury resorts 0% 0% 10% 10% 10% 10% Luxury eco-resorts 0% 0% 25% 25% 25% 25% High-end hotels 0% 0% 25% 25% 25% 25% Mid-range hotels 94% 94% 34% 34% 34% 34% Budget hotels 5% 5% 5% 5% 5% 5% Homestays 1% 1% 1% 1% 1% 1%
Scenario 2 assumes a much higher proportion of visitors staying in the top three classes of hotel/resort. This translates into higher levels of investment on the island and a higher accommodation spend, and a slightly higher ERR at 370 percent.
● US$ 12 million in private sector investment ● US$ 32.4 million in annual tourism revenue, ● 1,600 local tourism jobs created ● Local wages of US$ 5.3 million ● Hotel LGDP as percentage of total income: 32% ● Annual tax revenues above US$ 3.2 million ● Annual public infrastructure requirements of US$ 1.7 million
As illustrated in the figure below, despite the significantly higher investment, revenue, employment, and wage figures in this scenario, the ERR is only slightly higher. This is due to the relatively high solid waste production and water and energy consumption of luxury resorts and high-end hotels, which in turn requires higher levels of public sector infrastructure investment. Also note the relatively low differential in local tourism jobs and local wages and the much lower proportion of LGDP as a percentage of total income for the accommodation. This is because the profits of high-end hotels are not expected to accrue to local owners and a higher proportion of wages will be earned by non-local staff when compared to the lower three classes of hotel.
Figure 23. Scenario comparison
Scenario 1 Scenario 2 Differential Private sector investment 2.5 million 12 million 4.8x Annual tourism revenue 14.4 million 32.4 million 2.3x Local tourism jobs created 1,250 1,600 1.3x Annual local wages 3.2 million 5.3 million 1.7x Hotel LGDP as % of total income 56% 32% Annual tax revenue 1.4 million 3.2 million 2.3x Annual infrastructure requirement 0.59 million 1.7 million 2.9x ERR 350% 370% 1.1x
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This is not to say that one strategy is “correct”; these side-by-side ERR models simply indicate the relative costs and benefits associated with even substantially similar tourism strategies. In practice, an unlimited number of different scenarios can be compared and contrasted, giving policymakers a more nuanced view of the expected economic impacts of various strategies.
ERR ANALYSIS AND MPA FINANCING Apart from the key economic outputs summarized above, the ERR model can also inform sustainable MPA financing. The model considers three scenarios for MPA funding in Morotai, allowing policymakers to decide the most expedient process for collecting MPA-related fees and set the fee level accordingly. In the first MPA funding scenario, an Island Entry Fee would be assessed on all visitors. This could be added to the price of each plane ticket (assuming an agreement with the airlines) or collected at the airport at landing or departure. The second fee option would be a daily visitation fee that could be added to the price for each night spent at a hotel. The third fee option, a daily MPA usage fee, would target tourists engaged in diving, snorkeling, island hopping, and other MPA-related activities. The fees can also be calibrated so that, for example, foreign guests are charged a higher fee than Indonesians, or guests in high-end hotels and resorts are charged a higher fee.
The difference in these fees is their specificity: the first is a blanket fee charged to all visitors regardless of how long they stay, the second is based on length of stay in Morotai, and the third is purely based on usage of the MPA. When deciding on a fee regime, relevant policymakers should consider the costs and benefits of each of these options, including ease of implementation and collection, as well as the amount of revenue that would be generated.
The figure below summarizes the required fee level for the three fee structures described above. These scenarios assume a US$ 100,000 contribution annually from local government and the same tourism growth figures as the ERR analysis itself. Year 1 MPA establishment costs are not included in this analysis as they are significantly higher than annual operating costs and distort the implied fee requirements.
Figure 24. Sustainable MPA financing scenarios (figures in US$)
Year 2 3 4 5 6 MPA expenses - - - - - 267,062 267,062 267,062 267,062 267,062 Regency government contribution 100,000 100,000 100,000 100,000 100,000 Funding requirement - - - - - 167,062 167,062 167,062 167,062 167,062
Scenario 1: Island Entry Fee
Indonesian visitors 12,000 16,000 25,000 35,000 50,000 Foreign visitors 1,000 2,000 4,000 6,000 8,000
Implied fee level per visitor 13 9 6 4 3
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Scenario 2: Daily Island Visitation Fee
Average stay per Indonesian visitor 3.0 3.0 3.0 3.0 3.0 Average stay per foreign visitor 4.0 4.0 4.0 5.0 5.0
Implied daily fee level per visitor 4 3 2 1 1
Scenario 3: Daily MPA Usage Fee
Annual diving and snorkeling days113 3,278 4,705 7,791 28,252 39,210 Annual island-hopping days 4,731 6,056 8,777 13,625 18,299
Implied daily fee level per MPA 21 16 10 4 3 user
The implied fees in Years 2 and 3 for Scenarios 1 and 3 especially are prohibitive and it is highly unlikely they would be set at these levels in practice. For Scenario 2 the fee doesn’t exceed US$ 4 per night, which is more likely to be palatable to visitors. Thus, it might be beneficial to adopt the Scenario 2 fee payment system so that visitors do not experience sticker shock.
HOMESTAYS: STAY RAJA AMPAT AS A MODEL FOR MOROTAI Homestays can help garner valuable support for MPAs as they enable community members to participate directly in the tourism industry and reap the resulting economic benefits. Raja Ampat is probably Indonesia’s most successful example of building a locally owned hospitality sector, a model that could potentially be replicated in Morotai.
Raja Ampat’s first homestays were established in 2010. For communities unaccustomed to interacting with foreign tourists, homestay businesses presented challenges for such issues as quality of housing, bedding, toilets, food, communications, and general hospitality. To address these and other issues, the Raja Ampat Homestay Association was established in 2012, charged with the following:
• Establishing of a strong, locally owned ecotourism economy;
113 Annual diving, snorkeling, and island-hopping days correspond to the scenario assumptions: proportions of Indonesian and foreign visitors opting for each activity, and average number of days spent on each activity.
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• Sharing learnings and best practices shared among homestay owners; and • Setting minimum standards for homestay facilities, ensuring member compliance with those standards, and providing a channel for guest feedback.
There are currently 160 homestays operational in Raja Ampat regency, demonstrating the remarkable success of the local community and the Homestay Association in building a strong group of indigenous businesses. As of 2016, when there were 80 homestays, the sector employed 600 people and generated US$ 1.5 million in annual revenues. In October 2018 the Association committed to generate US$ 3 million in annual revenues and employ 1,000 staff in 50 villages on 25 islands by 2023.114
To spread the word about BHS and its homestays, a website, www.stayrajaampat.com was developed to allow tourists to learn more about the various attractions and activities available and to research, read reviews, and directly book their desired homestay. Only Association members that are verified to meet the standards and requirements are entitled to list their business on the website. At the time of inspection, Association staff inspects and photographs each property for the online listing, later adding descriptions based on their findings. Once listed, homestays on the website can be filtered by price, island group, and amenity, such as type of beach, proximity to a village, and natural features such as coral, mangroves, and seagrass. The owners themselves are responsible for setting prices, which range from IDR 350,000-550,000 (US$ 25-40) per person per night (typically double occupancy). In order to promote fairness, the homestays are by default displayed at random and rotated daily so that no business has the advantage of always appearing at the top of the webpage. See the figure below for a screenshot of the website’s accommodation page.
114 https://ourocean2019.no/commitments/bali-2018/
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Figure 25. Figure 25. Screenshot of homestay accommodations on Stay Raja Ampat website
As tourism arrivals and website bookings grew, it became clear that the website could self-finance its operational costs of US$ 5,900 per month previously covered by project funding. For the sake of fairness, it was decided that fees would be assessed on each website booking rather than included in the Homestay Association membership fee. However, guests paid their hosts in cash upon arrival, making it impractical to collect booking fees. To overcome this issue and improve the user experience, an online payment platform was added to the website. The online payment system went live in October 2019, assessing a 15 percent fee on revenue. Within just one month the website raised sufficient fees to cover an entire year’s operational expense.
A key aspect of the community’s learnings over time has been understanding the link between quality of accommodation and service to the success of their business. Like other online platforms such as TripAdvisor, Airbnb, Google Maps, and others, Stay Raja Ampat guests are able to rate each homestay experience on a 5-star scale and write a review. These ratings appear on each homestay’s individual listing and, unsurprisingly, play a major role in the respective popularity of different homestays.
Homestays could similarly be promoted in Morotai as part of an overall MPA-centered tourism strategy. As noted above, a higher proportion of wages, employment, and business profit accrues to locally owned businesses compared to upscale hotels, and these establishments can play an outsized role in building grassroots support for an MPA. In addition, a thriving homestay sector provides additional accommodation options to guests for whom expensive hotels are not an option but value nature-based
USAID.GOV ERR ANALYSIS AS AN ECONOMIC PLANNING TOOLS FOR MPAS | 66 activities. This same mix of upscale accommodations and community owned business has worked well in Raja Ampat and could serve Morotai and similar destinations well.
The figure below estimates the potential financial viability of a future Morotai Homestay Association to cover the costs of a booking website, assuming the same costs and fee structure as Stay Raja Ampat and the number of visitors and proportion of homestay guests as the ERR scenarios above.
Figure 26. Morotai Homestay Association website financial projection scenario
Year 1 2 3 4 5 6 Homestay website costs -6,000 -6,000 -6,000 -6,000 -6,000 -6,000
Homestay annual room-nights 405 920 1,240 1,955 2,775 3,950 Average cost per night 11 11 11 11 11 11 Website fee per night 15% 15% 15% 15% 15% 15%
Total website fees generated 675 1,533 2,067 3,258 4,625 6,583
Under this scenario, a future Morotai Homestay Association could cover its website costs within six years. If the average price per night were increased to US$ 20 – less than half of what Raja Ampat homestays typically charge – breakeven would be achieved in Year 4. Keep in mind this does not include the considerable costs of establishing the association or website development, but these expenses were also subsidized in Raja Ampat. Whereas it took the Raja Ampat Homestay Association nearly nine years to become financially independent, that experience can be built upon to accelerate self-sufficiency in other areas such as Morotai.
OCEAN EYE: INCENTIVIZING MPA CONSERVATION Ocean Eye is a mobile financial technology (fintech) application used by the marine tourism industry, enabling dive centers and tourists to report sightings of charismatic species in MPAs and other areas. These reports are linked to small payments from tourists that go directly to coastal communities in order to incentivize the protection of these species. Rather than receiving income only when harvesting marine life, the app allows communities to instead be paid for conservation.
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Figure 27. Illustration of Ocean Eye application
With this application in use in Morotai, projections for tourism payments to the community can be integrated into the ERR model – the model already includes projections of overall tourism numbers and numbers of divers, so wildlife sightings and payment per sighting are a relatively simple addition.
The species of interest in Morotai are included in the table below alongside the indicative payment per sighting. Payments for highly endangered or rare species such as dugongs, whale sharks, manta rays, and Halmahera walking sharks are higher due to their scarcity in the wild and a higher willingness to pay by divers. As for current sightings, these figures were based on wildlife sightings logged during the carrying capacity study.115
The ERR model assumptions for Indonesian and foreign tourist numbers, proportion of divers, and number of days per diver results in projections for total diver days. As for future sightings of underwater wildlife, modest increases in frequency are projected due to the protections afforded by the MPA as well as community incentives for protection. As more tourists dive in the MPA and pay for sightings of charismatic species, this will drive a virtuous cycle in which more sightings result in more protection, and so on.
115 Over a 4-day period, 12 dives were done at 10 dive sites and the observed species logged. To determine an average sightings per day, total sightings from the study were divided by 6, conservatively assuming 2 dives per day per diver.
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For more common reef animals, it was conservatively assumed that sighting frequency would increase by 0.05 per year, or one additional sighting per 20 dive days. Sightings of highly endangered dugongs, which despite their overall scarcity are reported to be fairly common in Morotai, were projected to increase by 0.05 every two years. For rarer megafauna such as whale sharks and manta rays, an annual sighting frequency increase of 0.01, or one additional sighting per 100 dive days, was assumed. The results of the analysis are presented below.
Figure 28. Projected diver days, wildlife sightings, and diver payments in Morotai
Year 1 2 3 4 5 6 US$
Diver days 1,485 3,278 4,705 7,791 28,252 39,210
Price per sighting: Average daily sighting frequency:
Nudibranch 0.00 0.05 0.10 0.15 0.20 0.25 0.50
Cuttlefish 0.00 0.05 0.10 0.15 0.20 0.25 0.50
Lobster 1.33 1.38 1.43 1.48 1.53 1.58 0.50
Green turtle 2.50 2.55 2.60 2.65 2.70 2.75 0.50
Hawksbill sea turtle 0.00 0.05 0.10 0.15 0.20 0.25 1.00
Blue spotted stingray 0.67 0.72 0.77 0.82 0.87 0.92 0.50
Eagle ray 0.17 0.22 0.27 0.32 0.37 0.42 0.50
Mobula ray 0.50 0.55 0.60 0.65 0.70 0.75 0.50
Manta ray 0.00 0.01 0.02 0.03 0.04 0.05 10.00
Grey reef shark 0.17 0.22 0.27 0.32 0.37 0.42 0.50
White tip reef shark 0.83 0.88 0.93 0.98 1.03 1.08 0.50
Black tip reef shark 2.50 2.55 2.60 2.65 2.70 2.75 0.50
Halmahera walking shark 0.00 0.05 0.10 0.15 0.20 0.25 5.00
Whale shark 0.00 0.01 0.02 0.03 0.04 0.05 10.00
Other shark species 0.00 0.05 0.10 0.15 0.20 0.25 1.00
Bump head parrotfish 0.50 0.55 0.60 0.65 0.70 0.75 0.50
Dugong 0.00 0.05 0.05 0.10 0.10 0.15 10.00
Annual sightings:
Nudibranch 0 164 471 1,169 5,650 9,803
Cuttlefish 0 164 471 1,169 5,650 9,803
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Lobster 1,980 4,535 6,744 11,557 43,320 62,083
Green turtle 3,713 8,359 12,233 20,646 76,280 107,828
Hawksbill sea turtle 0 164 471 1,169 5,650 9,803
Blue spotted stingray 990 2,349 3,607 6,363 24,485 35,943
Eagle ray 248 710 1,255 2,467 10,359 16,338
Mobula ray 743 1,803 2,823 5,064 19,776 29,408
Manta ray 0 33 94 234 1,130 1,961
Grey reef shark 248 710 1,255 2,467 10,359 16,338
White tip reef shark 1,238 2,896 4,391 7,661 29,194 42,478
Black tip reef shark 3,713 8,359 12,233 20,646 76,280 107,828
Halmahera walking shark 0 164 471 1,169 5,650 9,803
Whale shark 0 33 94 234 1,130 1,961
Other shark species 0 164 471 1,169 5,650 9,803
Bump head parrotfish 743 1,803 2,823 5,064 19,776 29,408
Dugong 0 164 235 779 2,825 5,882
Annual payments:
Nudibranch 0 82 235 584 2,825 4,901
Cuttlefish 0 82 235 584 2,825 4,901
Lobster 990 2,267 3,372 5,778 21,660 31,041
Green turtle 1,856 4,179 6,117 10,323 38,140 53,914
Hawksbill sea turtle 0 164 471 1,169 5,650 9,803
Blue spotted stingray 495 1,175 1,804 3,181 12,243 17,971
Eagle ray 124 355 627 1,234 5,180 8,169
Mobula ray 371 901 1,412 2,532 9,888 14,704
Manta ray 0 328 941 2,337 11,301 19,605
Grey reef shark 124 355 627 1,234 5,180 8,169
White tip reef shark 619 1,448 2,196 3,831 14,597 21,239
Black tip reef shark 1,856 4,179 6,117 10,323 38,140 53,914
Halmahera walking shark 0 820 2,353 5,843 28,252 49,013
Whale shark 0 328 941 2,337 11,301 19,605
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Other shark species 0 164 471 1,169 5,650 9,803
Bump head parrotfish 371 901 1,412 2,532 9,888 14,704
Dugong 0 1,639 2,353 7,791 28,252 58,815
Total payments 6,806 19,368 31,680 62,782 250,972 400,269
Payments per diver day 4.58 5.91 6.73 8.06 8.88 10.21
Even with these conservative estimates, community payments are projected to reach US$ 400,000 by Year 6. On a daily per-diver basis, payments are projected to more than double over the discrete period, from US$ 4.50 in Year 1 to US$ 10.20 in Year 6, reflecting increased wildlife sightings. Like the ERR analysis, this result is contingent upon numerous factors, but demonstrates a realistic future scenario for the Morotai MPA in which coastal communities are paid significant sums for environmental conservation
7. CONCLUSION: FUTURE USES OF THE ERR FRAMEWORK The purpose of this report is to guide sustainable tourism advocates on the development and presentation of ERR analysis. As the end of the USAID SEA project approaches, it is useful to consider how the ERR model and this legacy document can be leveraged going forward.
The existing literature on ERR analysis is in fact quite thin. The organization that appears to utilize ERR modeling most commonly is the Millennium Challenge Corporation (MCC)116. Their ERR analysis is primarily an internal tool for determining whether to move forward with specific projects, which is an entirely different purpose than has been contemplated here. The Food and Agriculture Organization of the United Nations (FAO) also has some limited literature117 on ERR analysis, though it also relates to project implementation and overall is quite theoretical and abstract. Apart from these two organizations, there is little readily available literature on ERR analysis for purposes of environmental conservation policy. In this context, a report such as this could make a valuable contribution.
In theory, ERR analysis could be used by any policymaker as a way to quantify the costs and benefits associated with a particular decision or competing strategies. Though tourism development as it relates to MPA implementation is the backdrop for this discussion, this analysis could surely apply in other contexts. Within the realm of environmental conservation, ERR analysis could apply to MPAs, national parks, and other areas, marine and terrestrial, considering environmental protections. Tourism strategy development could also benefit from ERR analysis regardless of whether environmental protection is a
116 https://www.mcc.gov/our-impact/err 117 http://www.fao.org/3/t0718e/t0718e07.htm
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consideration. ERR is simply an expanded IRR analysis in which the quantifiable costs and benefits extend beyond a specific private sector investment decision.
Based on the Morotai case study, the key takeaways regarding ERR development and advisory include the following:
• The parameters of each ERR analysis will be specific to the situation or place under consideration; this might include the potential types of hotels that might operate in a given area, the relevant tourism activities, or other considerations. • Include the target audience in the model development process as early as possible and keep an open channel of communications. Expect that the concepts might need to be explained multiple times to stakeholders. • Gathering data for the economic assumptions of the ERR model is critical – unless there is sufficient reason to use general figures, only site-specific inputs are meaningful. • When developing scenario assumptions, ensure the target audience is involved in the process so they have some ownership of the scenarios. Pre-formulated scenarios might resonate less. • Once the ERR model is complete, an extended socialization period will most likely be required. Again, expect that concepts might need to be explained multiple times. If the target audience is familiar with MS Excel, walk them through the analysis, ensuring it is fully understood. This is when a working relationship with the audience is critical. • Explain that ERR is not a static analysis but becomes richer and allows for deeper insight when multiple scenarios are considered and compared. Ideally the target audience would be able to manipulate the model themselves – if not, demonstrating in real-time how the outputs change based on the assumptions can be an important step. • Frame the ERR outputs in terms of employment, wages, investment, and taxes. These concrete concepts are more likely to resonate with policymakers and align with their KPIs. • Complement the ERR analysis with other techniques such as lessons learned from similar areas that faced a comparable situation, or the creation of a positive vision of what the area in question could look like. • Engagement with the target audience should extend for as long as is feasible. Even when it appears that recommendations have been accepted and internalized, the audience’s interpretation of the advice might be based on pre-existing notions that are not compatible with conservation. It might therefore be necessary to make more specific recommendations. In this instance, parallel initiatives such as the development of a carrying capacity and the “Sustainable Tourism around MPAs” handbook can be critical to ensuring full alignment.
It is hoped that this analysis inspires other policymakers and their advisors to consider a similar approach. Those wishing to undertake an ERR analysis for environmental conservation are encouraged to reach out to the authors of this report.
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