Malawi Poverty-Environment Malawi Poverty-Environment InitiativeInitiative

Economics Assessment/Valuation of Economics Assessment/Valuation of Environment and Natural ResourcesEnvironment and Natural Resources

Country ExperienceCountry Experience

Presented to the PEI Africa Regional Economic Forum Presented to the PEI Africa Regional Economic Forum 8-11 November 20108-11 November 2010

Government of MalawiUNDP-UNEP Poverty- Environment Initiative

1. PEI Program Objectives

2. Key Achievements related to Economic Valuation of ENRM

3. Objectives and Methodology

4. Key Findings/Recommendations

5. Policy Impact

6. Challenges and Response

7. Lessons Learned

8. Next Steps

OutlineOutline

Government of MalawiUNDP-UNEP Poverty- Environment Initiative

The UNDP-UNEP PEI supports Government to:The UNDP-UNEP PEI supports Government to:• Include environmental sustainability as a core objective in Include environmental sustainability as a core objective in

national development planning (e.g. Malawi Growth and national development planning (e.g. Malawi Growth and Development Strategy) & implementation so that poverty Development Strategy) & implementation so that poverty reduction and other economic development objectives are reduction and other economic development objectives are not undermined by the unsustainable use of natural not undermined by the unsustainable use of natural resources.resources.

• Build capacity so that decision-makers know:Build capacity so that decision-makers know: How environmental sustainability contributes to How environmental sustainability contributes to

development; and development; and How to include environmental sustainability in How to include environmental sustainability in

development planning & implementation.development planning & implementation.

BACKGROUNDBACKGROUND

Government of Malawi UNDP-UNEP Poverty- Environment Initiative

• Draft report presented to and approved by the PEI Technical Committee

• Draft report presented to a national consultative workshop

• Consultants currently incorporating comments• Report yet to be presented to the Steering

Committee for vetting

KEY ACHIEVEMENTSKEY ACHIEVEMENTS

Government of Malawi UNDP-UNEP Poverty- Environment Initiative

• The report has been used in drafting the socioeconomic chapter for the Environmental Outlook Report

• The draft report has already generated a lot of debate in the media

KEY ACHIEVEMENTSKEY ACHIEVEMENTS

Study Context

• About 80% of Malawians depend on renewable natural resources for subsistence and income

• Dependence on rain-fed agriculture implies significant role of natural resources

• Sustainable management of key natural resources is crucial

Study Context• Attainment of MGDS targets could be threatened

by unsustainable use and degradation of natural resources

• Hence “conservation of natural resource base” is an MGDS sub-theme under Theme 1

• This buttresses Goal 7 of MDGs

• The MPEI complementing Government efforts

• The Economic Study seeks to support evidence-based policy-making and resource allocation

Objectives of the Economic Study

• Provide evidence on the costs and benefits of natural resource management

• Examine the link between natural resource management poverty reduction, economic well-being & development

• Assess net benefits of key interventions that encourage sustainable natural resource use

Study Design and General Methodology

• Desk reviews and interviews– Characteristics– Significance– Threats/loss– Policies

• Case studies in 3 catchments– Linthipe– Lower Shire– Middle Shire

Visits Analyses of satellite images for 1994-2008

Key Findings

National GDP figures are understated:

NR Sector Official Statistics

Additional contribution identified

Total share of GDP

Sources of new evidence

Forestry 1.8% 4.3% 6.1% BEST (2009) – charcoal & firewood Fisheries 4.0% - 4% Wildlife - 2.7% 2.7% WTTC (2009) – nature-based tourism Total 5.8% 7.0% 12.8%

Malawi losing $191m (5.3%) of GDP annually!

MPEI Economic Study Report #1

Annual cost (2007 prices) NR sector & source of cost – base case MK Million US$ Million % of

GDP Soils: 8,988 65 1.9% On-site impact on agriculture 7,540 54 1.6% Off-site impact on hydropower 1,433 10 0.3% Off-site drinking water treatment 15 0 0.0% Forests: 12,983 93 2.4% Unsustainable roundwood (excl fuelwood) 3,100 22 0.4% Unsustainable fuelwood 6,089 44 1.2% Flood prevention (indicative only) 232 2 0.2% Indoor air pollution 3267 23 0.7% Outdoor air pollution - WB 2002 327 2 0.2% Fisheries: 3,906 28 0.8% Unsustainable use (lower bound) 3,906 28 0.8% Wildlife: 665 5 0.1% Poaching loss (indicative only) 665 5 0.1% Total 26,573 191 5.3%

Key Findings

• Malawi is losing significantly!– 5.3% of GDP annually ($191m) at 2007 prices– More than allocation to key ministries in 2009

• Education: $175.3 million• Health: $163.6 million

– 28% of this ($54 million) is due to reduced yields from soil loss

– $600m over 10 years @ 10% discount rate• $200 per household

Key FindingsAdjusted Net Savings (ANS) = green accounting rate of national wealth creation

= national saving + human capital formation – unrenewed NR useoWB estimate = 12.24% of GNIoWB/Authors = 7.14% of GNI

o Thus, environmental and natural resource degradation implies that wealth is being created more slowly

o At 4.87% of GNI, educational expenditure is outweighed by natural resource degradation (5.1% of GNI)

Some implications: yield losso Recall: Yield loss due to soil degradation = $54m p.a.o Conservatively, this reduces agricultural yields by 6%

o Other studies document higher losses• 4-11% p.a. (WB, 1992)• 8-25% p.a. (Bishop, 1995)

o Benin et al (2008) argue:o 6% improvement in agricultural yields during 2005-2015,

would increase overall GDP growth from 3.2% to 4.8% p.a. proportion in poverty falling to 34.5% by 2015 i.e. the

incidence of poverty falls 12.5% resulting in 1.88 million people being lifted above the poverty line by 2015

Some implications: Overall

• Benin et al (2008) consider GDP growth of 4.2% p.a. above the baseline case. – Over 2004 – 2015, the proportion in poverty would be

halved from its 1990 level – to 25.2%

– i.e. sustainable NR use could have enabled the MDG1 target to be reached

• If the lost economic value from unsustainable resource use each year across all ENRM sectors (5.3% of GDP) is converted into economic growth, the impact on poverty would be much larger

Government of MalawiUNDP-UNEP Poverty- Environment Initiative

Policies likely to be affected/adjusted. • Review of the Malawi Growth and

Development Strategy (MGDS)• Review of the Policy Forestry 1996• Budget Guidelines• Public Environmental Expenditure Review

(PEER) in the offing• Incorporation of ENRM into the Guide to

Executive Decision Making• Fisheries and Aquaculture Management Act

POLICY IMPACTPOLICY IMPACT

Government of Malawi UNDP-UNEP Poverty- Environment Initiative

CHALLENGES AND RESPONSECHALLENGES AND RESPONSE

• The study has taken unnecessarily long due to lack of capacity to conduct such detailed analysis

• There is a temptation and interest by stakeholders to cover all natural resource sectors. This can make the study loose focus and unmanageable

• Hybridisation of local and international consultants• Continuous negotiations and consultations with the

consultants• Concise TORs and agreement by TC on the areas

to be covered

Government of Malawi UNDP-UNEP Poverty- Environment Initiative

• The consultative process requires heavy investment and patience

• The need to involve all stakeholders especially those that may challenge the results

• There is great interest to mobilise evidence for the cost of sustainable use of natural resources in Malawi

• The analysis should be quite instrumental in convincing decision makers to invest in ENRM

LESSONS LEARNEDLESSONS LEARNED

Government of MalawiUNDP-UNEP Poverty- Environment Initiative

• Vetting of the report by the Steering Committee• Capacity building for research institutions• Capacity building for Cabinet and Parliamentary

Committee• Capacity building for journalists• Advocacy using media and CSOs• Monitoring on the use of the report

NEXT STEPSNEXT STEPS

Government of MalawiUNDP-UNEP Poverty- Environment Initiative

• Based on the results of the study, the PEI Country Team is improving its work in order to help promote behavioral change and improved plans, policies, budgets and monitoring frameworks

• Involvement of different stakeholders to deliberate on the report

• Inclusion of the academia on the use of the report• Moving in to position issues of ENRM in all current

developments e.g. ASWAp, MGDS• Using the report to lobby for incorporation of ENRM in

Government Policies and Planning including in Budgetary frameworks

NEXT STEPSNEXT STEPS

Government of MalawiUNDP-UNEP Poverty- Environment Initiative

Thank you for listening

http://www.unpei.org/programmes/country_profiles/malawi.asp