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The costs associated with the establishment and management of protected areas include direct, indirect and opportunity costs. Direct costs are budgetary outlays to establish and manage a protected area. Indirect costs are beyond the day-to-day running of the park and include things like compensation for damages indirectly caused by the existence of the protected area such as damage to property by wildlife. Opportunity costs are the costs of lost economic development, including the resources currently on-site that could be harvested and the foregone benefits from a change in land use (Dharmaratne et al., 2000; Dixon & Sherman, 1990; Groom et al., 2006). Care must be taken to avoid double counting.

Financial Costs

Financial costs fall into two categories: capital costs, and operations and maintenance.

Capital Costs

The initial capital costs associated with establishing protected areas are not relevant to this research as it is concerned with protected areas that have already been established. However, capital costs for new facilities within existing national parks are relevant costs.

Operations and Maintenance

Ongoing direct costs to maintain and manage a protected area include:

Staff salaries and general administration costs (Carret & Loyer, 2003; WCPA-IUCN, 2000);

Maintenance of roads and facilities – visitor facilities may include walking tracks, visitor centres, camping areas, car parks, and signage. Other infrastructure that requires maintenance may include offices, staff accommodation, power supply equipment, transport systems and telecommunications facilities (De Lacy et al., 2006)

Conservation management activities – including habitat restoration, pest control, monitoring, and research (Carret & Loyer, 2003; WCPA-IUCN, 2000); and,

Enforcement – developing countries in particular need to enforce the protection of the area to prevent the poaching of wildlife and timber products, and the clearing of vegetation for agriculture (Dixon & Sherman, 1991).

Compensation

The PAMA may also be responsible for the following compensation costs:

Compensation for damage – people need to be compensated for any damage occurring outside the protected area boundary that is caused by wildlife that live in the protected area. Damage could include harm to people, livestock or materials; or crops trampled or eaten by wildlife (Dixon & Sherman, 1991); and,

Compensation for foregone rights – some protected areas may be associated with payments to local communities to prevent them from extracting resources from the park. Payments may also involve the provision of alternative sources of products, income, or social benefits like schools or clinics as a means of encouraging communities to cooperate with biodiversity objectives (Dixon & Sherman, 1991).

Compensation payments protect the park from resource extraction and poaching by local communities. The debate about the best incentives for changing behaviour has focused on the ‘directness’ of payments. Ferraro and Kiss (2002) argue that indirect payments, which have been used widely, prove inadequate in the majority of cases. People generally do what is in their own best interest, particularly in the short-term. If it is more beneficial in monetary terms to clear a habitat than it is to protect that habitat it will be cleared. Thus, biodiversity payments need to become more direct.

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Costs to the Local Economy

The costs to the local economy may include inflationary effects, risk, or dependency on one industry, leakage, and opportunity costs.

Inflation

Development for the purposes of tourism can create inflationary effects on local economies, increasing the cost of land, property, and goods. Increased land prices benefit sellers, but can disadvantage local people who find it difficult to purchase property. In comparison, tourism development interests are often capable of paying higher prices (Page et al., 2001).

Risk/Dependency

It is risky in the long-term for a region to rely heavily on a single industry. International tourism is a fickle business that is influenced by fashions, the economy of the visitor’s country, the economy, and political stability of the host country, the cost of travel, and perceptions about the pristine condition of a destination. These variables are impossible for a host destination to control and potentially have large impacts on a destination. It is best if a destination attracts a diverse range of tourists so if a market in a particular country experiences a downturn, the risk is spread and the consequences are less severe (Page et al., 2001).

Leakage

If tourist infrastructure like accommodation, restaurants, and tour organisation are owned by foreign investors, the local economy will not benefit from tourist activity. Instead, tourist spending is leaked to foreign investors (Page et al., 2001). However, the benefits accruing to the local economy will depend far more on the level of integration between the park and local economy, and benefits to the local community are likely to depend more on the amount of local values added, than on the ownership of the enterprise.

Opportunity Costs

The opportunity costs associated with a protected area are the foregone benefits from the area under the best alternative land use. If the area was not protected its resources could be harvested and it could be converted to a land use such as

agricultural production. Opportunity costs are area specific and dependant on the nature of potential alternative land uses and the restrictions on allowable uses (Dixon & Sherman, 1991). For example, Norton-Griffiths and Southey (1995) estimated the opportunity costs of foregone revenue from agriculture and livestock production on conservation land in Kenya to be US$203 million in 1989 dollars. These opportunity costs were found to far exceed the direct1 benefits from tourism and forestry on conservation land (net revenues of US$42 million), giving an indication of the extent to which the Kenyan government subsidises conservation. The paper indicates that Kenya, at considerable cost to itself, is providing wildlife services with high existence values to the rest of the world (including developed economies), little of which accrues to Kenyans.

A summary of economic criteria that could be used in the proposed model is given in Table 3.9.