Economic Impacts of Protected Area Tourism on Local Communities in Nepal Heng Zhu, Anubhab Gupta, Edward Whitney, Elisabeth Earley, Urvashi Narain, Hasita Bhammar, Tijen Arin, Sindhu Prasad Dhungana, Siddhartha Bajra Bajracharya, Sagar Raj Sharma, Phoebe Spencer and J. Edward Taylor © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. RIGHTS AND PERMISSIONS The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. editor Mark Mattson designer Sergio Andres Moreno Tellez cover photo Nico Adriaan Kelder / Shutterstock.com SUPPORTED BY: acknowledgements The Nepal case study was financed by the Wealth Accounting and the Valuation Ecosystem Services (WAVES) which is a part of the broader World Bank Global Program for Sustainability (GPS). We are grateful for the support, encouragement, and overall guidance of Karin Kemper, Iain Shuker, Christian Peter, Garo Batmanian, Raffaello Cervigni, Christophe Crepin, Charlotte De Fontaubert, Lada Strelkova, Ann Jeannette Glauber and Valerie Hickey. The team is also grateful for the valuable assistance provided by Akash Babu Shreshta, Saneer Lamichhane, Umesh Paudel, Tek Bahadur Gurung (National Trust for Nature Conservation); Annu Rajbhandari and Sailja Shrestha, Stephen Danyo, Bigyan B. Pradhan, Donna Raj Ghimire (from the World Bank). We are also thankful to Mimi Kobayashi, Shaun Mann, Maurice Rawlins, and who conducted a peer review of the report. This project would not have been possible without the dedicated and enthusiastic work of our Nepal survey team: Animesh Shrestha, Saujan Khapung, Jeena Maharjan, Shikha Neupane, Pragya Joshi, Aashruti Tripathy, Pema Sherpa, Muna K.C., Rijan Upadhyay, Sonu Gurung, Pralita Rana Magar, Hrijata Dahal, Bidur Poudel. In addition, we would like to thank the team from Kathmandu University Rikesh Prasain, Sagar Raj Sharma, and Siddhartha Bajra Bajracharya and the team from the Government of Nepal Sindhu Prasad Dhungana. Gyanendra Mishra, and Prakash Lamsal. Contents Executive Summary....................................................................................................................... 7 1. Introduction.................................................................................................................................. 12 2. Background ................................................................................................................................. 18 2.1 Policy and Institutional Context ............................................................................................. 19 2.2 Study Site ..................................................................................................................................20 2.3 Government Expenditures and Revenues.......................................................................... 21 Methodology....................................................................................................................................22 3.1 Pathways for Economic Impacts of Protected Areas....................................................... 23 3.1.1 Direct Impacts................................................................................................................ 23 3.1.2 Indirect Impacts Through Production Linkages.................................................. 24 3.1.3 Indirect Impacts Through Income and Consumption Linkages...................... 24 3.2 LEWIE Model.............................................................................................................................25 3.3 Data Collection.........................................................................................................................26 Data Summary ................................................................................................................................28 4.1 Tourists ........................................................................................................................................29 4.2 Tourism Businesses................................................................................................................. 30 4.3 Households................................................................................................................................ 30 4.4 User Committee Groups.......................................................................................................... 31 4.5 Local Businesses...................................................................................................................... 32 LEWIE Model Findings.................................................................................................................34 5.1 Impact of an Additional Tourist on the Local Economy................................................... 36 5.2 Impacts of Nature-Based Tourism on the Local Economy ........................................... 38 5.3 Impacts of Complementary Investments and Outside Shocks.................................... 39 5.3.1 Local Economy-Wide Costs of Human-Wildlife Conflicts ................................. 39 5.3.2 Local Economy-Wide Impact of a 5 Percent Increase in Local Input Purchases by Businesses ...................................................................................................................... 40 5.3.3 Local Economy-Wide Losses Due to COVID-19................................................. 40 Conclusions and Policy Recommendations.........................................................................42 Protect Natural Assets........................................................................................................ 44 Grow and Diversify the Tourism Sector.......................................................................... 45 Sharing Benefits with Local Communities..................................................................... 48 References........................................................................................................................................ 50 Annexes Annex 1. Summary of Data Collection Methodology............................................................. 52 Annex 2. Summary Statistics........................................................................................................ 54 6 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL Co n te n ts Executive Summary Nepal is endowed with a wealth of natural development is yet to be fully realized. This resources including snow-capped mountains, situation mirrors that of many countries in abundant rivers, sub-tropical forests, significant which governments value protected areas in biodiversity and wildlife, and pristine, diverse conservation strategies but overlook them in landscapes. A part of the Himalayan biodiversity economic development plans. This oversight is hotspot, the country is recognized for its high of great concern, as countries, globally, struggle endemicity and intact forest habitats. With less to contain unprecedented biodiversity losses than 0.1 percent of global land area, Nepal is while trying to address development setbacks home to 9.3 percent of global bird species. inflicted by COVID-19. Awareness is growing that these two challenges – precipitous declines Nepal’s biodiversity is managed within a in global biodiversity, and the imperative for network of 20 protected areas, including 12 a green recovery from the pandemic – must National Parks, covering approximately 23 per- be addressed as one: neither problem can be cent of the country’s land area; in addition, over solved without solving the other. 40 percent of the country is classified as forest land. Over 45 percent of tourists to Nepal visit Additionally, these challenges must be met these protected areas, which play a significant in the poor and often isolated rural regions in role in driving tourism, and contribute to the which many of Nepal’s protected areas are country’s economy. Visitors, however, predom- found. Through the economic benefits it gen- inantly visit only four parks, and thus, there is erates, protected area tourism is often one of much potential for protected areas in Nepal to the few means through which governments can further contribute to development goals while support livelihoods, stimulate economic devel- maintaining the country’s rich biodiversity asset opment, and cultivate local community support base. This combination of protected areas and for conservation. In this context, the importance rich biodiversity is equally a major tourism asset of protected area tourism cannot be overstated, in an industry which attracts eight billion visitors because of its potential to address losses to a year to protected areas. economies, promote development, and support biodiversity conservation. The potential of Nepal’s protected area network, and its contribution to the country’s economic This study therefore sets out to strengthen the economic case for the Government of Nepal to promote sustainable and inclusive tourism in its protected areas by estimating the direct and indirect benefits to local economies from protected area tourism. 8 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL How was the study done? The study focused on Chitwan National Park, general equilibrium model for local econo- declared a UNESCO World Heritage Site in my-wide impact evaluation (LEWIE) was used to 1984, and an important tourist attraction. Chitwan describe direct and indirect impacts of tourism has high biodiversity value and iconic species by integrating models of actors (businesses and like the greater one-horned rhino. households) within a local economy, based on the data collected in the survey. Direct impacts The study surveyed communities from the refer to monies spent directly by tourists in Khairahani, Ratnanagar and Bharatpur munici- protected areas; indirect impacts describe the palities surrounding the park, with data gathered knock-on effects of this spending, via produc- from tourists, lodges, resorts, and local busi- tion linkages which grow to support expanding nesses and households on production, income, tourism markets, and consumption linkages, expenditures, and the locations of transactions through which wages and profits trigger fresh (i.e., inside or outside the local economy). rounds of spending which ripple through local These data were used to quantify and trace the economies (Figure ES-1). economic pathways through which protected area tourism stimulates local economies. A figure es-1. Economic Impact Pathways of Protected Area Tourism Revenue sharing, community projects Environmental Impact b PARK AUTHORITY, Businesses pay GOVERNMENT taxes and fees b a Pay non-consumptive a Pay a Park and consumptive fees Entrance Fee and taxes b Park hires guards or employs households for PA activities Protected Areas a Natural Parks a Purchase goods Spend money on and services lodging, tourist TOURISM, HOUSEHOLDS LODGES AND OU activities G N BUSINESSES RIST S VISITI T Ex ecu tiv e Summary Wages paid to Purchase food, a workers employed b,c goods and in tourism activities Local incomes services c increase; b Source goods households spend and services their income to source goods LOCAL FARMS AND BUSINESSES a Trade with outside/ non-local markets Direct Impact Legend of Pathways of Influence a. Direct impacts Indirect impact through b. Production linkages production linkages c. Income and consumption linkages E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 9 What did the study find? Investment in protected areas pays off, and the multiplier share per resident going to poor is good not only for biodiversity conservation residents in both Bharatpur and Khairahani/ but for the development of the local economy. Ratnanagar. In Chitwan National Park, the economic return Tourism also generates a significant number of per rupee is conservatively estimated as 7.6 jobs, directly and indirectly. The study estimates rupees per 1 rupee of government spending. that national park tourism generates a total of This spending infiltrates local economies, and 4,309 full-time equivalent jobs around Chitwan establishes Chitwan as a source of revenue, National Park, equivalent to 2.8 percent of the rather than a financial burden. working-age population in this area. Jobs are Expenditures by tourists in protected areas created directly through tourism activities, and generate significant household income multipli- additional jobs arise when businesses such ers, defined as the change in local household as tourism operators and tourism employees incomes per rupee of tourist spending on local purchase supplies and services from other local retail, services, and transport. The study esti- businesses, thus creating indirect effects of mates that a rupee spent by visitors at Chitwan visitor spending. National Park raises the income of households While the economic benefits of protected areas around the park by 1.78 rupees, reflecting the are considerable, the costs to local communities penetration of tourist spending into local econ- must be managed. Human-wildlife interactions omies. These multipliers benefit households around protected areas occur mostly in the form directly involved in the tourism sector and those of crop losses, and have negative impacts on not, and both poor and non-poor households. household incomes; according to the surveys, An additional rupee spent by tourists at the animal incursions onto farms around Chitwan Chitwan National Park raises the real income of reduced crop production by 9 percent. These non-poor households by 1.60 rupees, and that direct impacts, coupled with indirect impacts of poor households by 0.18 rupees. Despite the through production and income linkages large amount of the multiplier going to non-poor amount to income losses to households and households, the economic contribution to local the local economy of around NPR 333 million communities appears to benefit poor residents (US$2.92 million) annually. Such figures are im- more than non-poor residents, and normalizing portant in that they underpin arguments in favor multiplier shares by these populations, as shown of compensation, which both mitigates these in figure ES-3, shows that multiplier shares per losses, and retains the needed support of local resident are comparable between poor and communities. non-poor populations, with 8 percent more of figure es-2. Income Multiplier for an figure es-3. Distribution of Multiplier Across Poor and Non-poor Additional Rupee of Tourist Spending Populations 2,00 20% E xe cu t iv e Summary 1,80 Khairahani/ 30% 1,60 Ratnanagar Bharatpur Poor Non-poor 1,40 1,20 1,00 1,78 0,80 0,60 28% 0,40 Khairahani/ 22% Ratnanagar Bharatpur 0,20 Poor Non-poor 0,00 10 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL The study also points to the need to address suffer significant losses too. Each month without losses suffered by the sector due to the tourism reduces the income of poor households COVID-19 pandemic. While tourism grew rapidly by NPR 9.55 in one study area (US$80,000) in Chitwan National Park and surrounding areas and NPR 33.3 million in the other (US$290,000). in recent years, in 2020, the COVID-19 pandem- Local retail revenues contract most, followed ic brought Chitwan tourism to a standstill, and by services and other production and livestock the study shows that a complete loss of tourism activities. These impacts indicate the extent revenue in this region reduces household real to which support for protected areas will be income by NPR 427.7 million (US$3.76 million) needed to offset these losses and to realize the per month. While these losses accrue mostly potential of protected areas to support a green to non-poor households, poor households economic recovery. what lessons can policy makers draw from the study? With over 23 percent of its land area under commercial services/concessions program some form of protection, including 12 national will be needed to develop the new sites, parks, there is great potential for protected ar- attract tourists and generate revenue. eas in Nepal to contribute to development goals 3. Share benefits with local communities. while maintaining the country’s biodiversity. To Nepal’s protected area regulations require realize this potential, the report recommends sharing of revenues with local communi- enhanced protection of Nepal’s natural assets, ties and buffer zone user groups. While growing and diversifying the tourism sector, and tourist-spend income multipliers for local sharing benefits with local communities. These households are significant, opportunities approaches form the three pillars of a strategy exist for Nepal’s government to raise these to jointly address biodiversity loss, development multipliers through their policies; and these challenges, and a green, post-COVID recovery. opportunities, such as strengthening linkages 1. Protect the natural asset base. To support between tourism value chains and stake- conservation and secure the natural assets holders in the local economy, need to be that draw visitors to Nepal, the protected explored. area network needs to be better managed. In conclusion, and in the wake of the COVID-19 To achieve this, specific recommendations pandemic, Nepal needs to address losses to its from the study are to (i) increase public protected area tourism sector in order to regain investment in protected area management; benefits to buffer zone and local communities (ii) build capacity of protected area manag- and to secure the conservation status of its ers; (iii) manage the environmental footprint significant natural assets. To do this, Nepal of tourism; and (iii) assess and monitor the should champion sustainable and inclusive impacts of visitor spending. tourism in protected areas. It should increase 2. Diversify and grow the tourism sector. public and private investment in protected areas Nepal’s tourism sector needs to expand and on the growing evidential basis for attractive diversify beyond the four parks currently vis- and far-reaching returns which support both Ex ecu tiv e Summary ited by tourists, and this will require policies, conservation and sustainable development programs, and investments that go beyond strategies. Finally, in response to a pandem- protected areas to address challenges faced ic which has caused development setbacks, by the tourism sector. Nepal’s protected Nepal’s protected area tourism sector should areas need to be assessed, and ranked by enact mechanisms to distribute its benefits fairly their tourism potential to select priority sites in the face of poverty and losses incurred by for development and diversification. A strong local communities. E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 11 E xe cu t iv e Summary 12 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL 1 Introduction In tro duc tio n E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 13 Nepal is a lower-middle income country with approximately 23 percent of the country’s a significant agriculture and forestry sector total land (see Map 1), surpassing the Aichi contributing 19.7 percent of GDP (Government Biodiversity Target 11 which requires countries of Nepal, 2019). It is at the same time endowed to set aside 17 percent of their land area for with a wealth of natural resources including biodiversity conservation. The protected area snow-capped mountains, abundant rivers, network includes twelve national parks, one sub-tropical forests, significant biodiversity and wildlife reserve, six conservation areas, one wildlife, and pristine, diverse landscapes. The hunting reserve, and thirteen buffer zones (see country is part of the Himalayan biodiversity Box 1 for definition of protected area catego- hotspot recognized for its high endemicity and ries) (DNPWC, 2020; Dudley & Stolton, 2008). intact forest habitats. With less than 0.1 per- In addition, over 40 percent of the country cent of global land area, Nepal is home to 9.3 is classified as forest land. As a result, Nepal percent of global bird species (Government of ranks third in the percentage of land area under Nepal, 2018). protected areas in South Asia, after Bhutan and Sri Lanka. Nepal’s biodiversity is managed within a network of twenty protected areas covering map 1. Nepal’s Protected Area Network In t ro duc tio n Source: World Bank Staff using information from Government of Nepal, Department of National Parks and Wildlife Conservation website. 14 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL box 1. Definition Protected Area is a clearly defined area, recognized, dedicated, and managed through legal or other of protected area means to achieve the long-term conservation of nature with associated ecosystem services and cultural categories values (Dudley and Stolton, 2008). They range from Category I to Category VI on a declining scale of regulation. National Parks are Category II protected areas. They are defined as large natural or near-natural areas set aside to protect large-scale ecological processes, species, and ecosystems characteristic of the area, and to provide environmentally and culturally compatible spiritual, scientific, educational, recre- ational, and visitor opportunities. In Nepal, these areas are defined under the National Parks and Wildlife Conservation Act, 2029 (1973) (NPW Act [1973]) as “an area set aside for the conservation, management and utilization of flora, fauna and scenery along with the natural environment.” Buffer Zones lie between core protected areas and the surrounding landscape, and are created to enhance the protection of a specific conservation area. Within buffer zones, resource use may be legally or customarily restricted, often to a lesser degree than in the adjacent protected area to form a transition zone. In Nepal, buffer zones were formally established in 1998, and 12 protected areas now have buffer zones (Budhathoki, 2004). Buffer zone user committees are groups formed after the fourth amendment of the NPW Act (1973) was passed in 1991 (2048 - Nepali Year) to support local communities and wildlife conservation. The law states that up to 30–50 percent of the earnings from “a national park, reserve or conservation area may be expended, in co-ordination with the local authorities for community develop- ment of local people,” often in coordination with user committees. Conservation Areas are defined under the NPW Act (1973) as “an area to be managed according to an integrated plan for the conservation of natural environment and balanced utilization of natural resources.” User rights are granted by Local Conservation Area Management Councils (CAMC) to Consumer Group(s) representing households residing under the Village Development Committee within a Conservation Area. Wildlife Reserves, defined under NPW Act (1973) as “an area set aside for the conservation and manage- ment of wildlife resources and their habitats,” have a fee system enforced for regulated use of resources by local communities. User rights are granted to community and indigenous groups for controlled access to resources (e.g., fishing rights and collection of fallen trees, wild vegetables, grass etc.). Hunting Reserves are areas “set aside for the management of wildlife for allowing hunters to hunt them,” (NPW, 1973), usually in high-value ecosystems set aside for multi-use management and conservation of flora and fauna, and used for sports hunting. Controlled wildlife hunting is allowed for Nepalese and foreign hunters. There is only one hunting reserve in Nepal. Protected areas are also the backbone of contributing to the country’s economy. Visitors, Nepal’s tourism sector, a key contributor to however, predominantly visit only four protect- Nepal’s economy. Contributions to the economy ed areas: in 2017–2018, about 85 percent of are direct in the form of visitor spending on park Nepal’s 700,000 protected area tourists visited fees, hotels, transport, leisure and recreational Shivapuri-Nagarjun National Park (close to services. This results in local job creation and Kathmandu), Annapurna Conservation Area, employment. Additional jobs and economic Chitwan National Park, and/or Sagarmatha activity are supported when businesses such National Park, where Mount Everest peak is as tourism operators and tourism employees located (World Bank, 2020). purchase supplies and services from other local Protected areas in Nepal face a number of chal- businesses, thus creating indirect effects of lenges, despite their popularity among visitors. visitor spending surrounding the park. The gov- Large infrastructure projects – be it expansion ernment of Nepal reports that direct earnings of the national highway network, or hydropow- from tourism amounted to the foreign equiva- er projects and related distribution lines – are lent of 67.09 billion rupees (US$590 million) in encroaching on protected areas. Because over In tro duc tio n FY 2017/18, representing 2.2 percent of GDP a million people are dependent on resources (Government of Nepal, 2019). Accounting for in buffer zone community forests, conflicts arise both direct and indirect economic contributions, over land use and contribute to the degradation the World Travel and Tourism Council (WTTC), of protected areas. Local communities that have estimates that the contribution of travel and historically used these lands often collect fire- tourism to Nepal’s GDP in 2019 was US$2.1 wood and graze animals in them. This happens billion, representing 6.7 percent of GDP and 334 in part because boundaries of protected areas million jobs (WTTC, 2021). are not always clearly demarcated (Bhattarai et Over 45 percent of the tourists to Nepal visit al., 2017; Thakali et al., 2018). Greater partici- the country’s protected areas (Government pation of local communities in management of of Nepal, 2018). Thus, protected areas play a buffer zones, as established through succes- significant role in driving tourism to Nepal and sive legislation, has reduced the scale of this E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 15 challenge. This community-centric management development opportunities, as noted above, approach has produced measurable results: in and generate returns on public investments that 2011, Nepal became the first country to record a far exceed the amounts spent. In the United year in which no rhino were poached, a record States in 2019, an annual investment of US$3 which was upheld over the following three years billion of public resources in the National Parks (Acharya, 2016). System resulted in an estimated contribution to GDP of US$41.7 billion through visitor spending Although community-centric protected area (Cullinane, Thomas & Koontz, 2020). Similarly, management has improved conservation out- in 2018, Parks Canada generated a contribution comes, human-wildlife conflict poses a threat to GDP of US$3.1 billion, and tax revenues of al- to wildlife and community livelihoods. Crop most US$0.4 billion through a public investment damage is the most common consequence of approximately US$1 billion (Parks Canada, of human-elephant interactions in Nepal, but 2019). Moreover, investments in protected human fatalities also occur (Acharya et al., 2016; areas can generate significant benefits for local Pant et al., 2016). These conflicts are increasing, economies through job creation and income particularly outside protected areas, due to generation, lifting households out of poverty wildlife habitat fragmentation and degradation, and providing them with incentives to support encroachment, and livestock predation, among conservation. US Parks are estimated to support others (Acharya et al., 2016). A recent study of 329,000 jobs in gateway communities, and Chitwan National Park reported 4,014 incidents Parks Canada 40,469 jobs. of wildlife attacking humans and livestock, and damaging property between 1998 and 2016 However, governments often lack evidence on (Lamichhane et al., 2018); over US$400,000 the economic impacts of protected area tourism was paid to victim’s families as compensation on local and national economies, making it over this period.1 Continued focus on community difficult to argue for public expenditure on engagement in protected area management, conservation and development. The objective and programs to increase the benefits derived of this study is to make the economic case from protected areas, particularly from tourism, for public investment in protected areas by will be critical to increase local support for con- estimating the total direct and indirect benefits servation and to achieve development goals. to local economies from tourism in protect- ed areas in Nepal. Such an estimate of total Another challenge to protected areas is economic impacts can strengthen the economic insufficient funding and human resources for case for public investment in protected areas, protected area management. Protected area much like public investments in roads and other managers do not have enough funds to main- forms of infrastructure and assets. The study tain and enhance the effectiveness of protected also estimates the benefits to local communities, areas, or to implement management activities and poor and non-poor households, to under- such as targeted removal of trees to maintain stand the impact of tourism in protected areas grasslands for herbivores, fire management, and on the incentives of communities to support removal of invasive species. Protected areas conservation programs, and the potential of pro- also lack infrastructure such as visitor centers tected areas to improve household incomes. and well-maintained trails for staff and visitors. Although the number of protected area man- This study includes a careful assessment of agers is growing, their experience pertains to the full range of impacts to the local econo- wildlife management and biodiversity conserva- my, including through expenditures made by tion, and not the challenges related to tourism households and firms who benefit from tourism In t ro duc tio n services and impacts (Bhattarai et al., 2017). through employment or local tourism-related Protected areas that lack visitor management business endeavors. It estimates the income strategies have contributed to a growing issue created around protected areas per visitor and of solid waste management. per dollar spent by visitors (the income multiplier from tourism in protected areas), and the rate of The challenges facing Nepal’s protected areas return per rupee invested by the government are not unique. Globally, governments fail to in protected areas like national parks. The prioritize investments in protected areas, in part study also provides estimates of the econom- because these investments are seen to gen- ic impacts of human-wildlife conflict and the erate conservation benefits but not to further COVID-19 pandemic, and quantifies the possible development goals. Scarce public resources effects of government policies to increase local are instead allocated to competing develop- benefits from protected-area tourism. ment needs. But protected areas can provide 1 Elephants, leopards and rhinoceros were the top three species involved. 16 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL In tro duc tio n E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 17 In t ro duc tio n 18 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL 2 Background Bac kg ro u n d E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 19 2.1 Policy and Institutional Context Nepal has established a comprehensive leg- and 10 percent on administration (Budhathoki, islative, policy and institutional framework to 2004).2 support biodiversity conservation. Protected By endorsing the concept of conservation and area management formally began in 1973 with development, DNPWC involved communities the enactment of the National Parks and Wildlife in integrated planning for protected areas, and Conservation Act (NPWCA). The Department in some cases even allowed NGOs to manage of National Parks and Wildlife Conservation protected areas, as in the case of the King (DNPWC) was subsequently established in Mahendra Trust for Nature Conservation (now 1979 under the Ministry of Forests and Soil called National Trust for Nature Conservation). Conservation (MFSC) (now known as the This decentralization changed the paradigm Ministry of Forest and Environment - MoFE) and from “fortress conservation” to a people-centric made responsible for the overall management approach to conservation in Nepal. of protected areas in Nepal. The MoFE and the DNPWC also play key roles During the early years of conservation, Nepal in the development of tourism in protected enforced strict laws that denied local people areas, which is strictly regulated. The NPWCA access to resources within protected areas provides, in very general terms, guidance on the (Budhathoki, 2004). With changing socio-po- operation and regulation of tourism concessions litical and economic conditions, and growing under Section 6 of the Act. The MoFE issues conflicts with local communities, participation of permits to the private sector to establish hotels local communities in protected area manage- at certain sites in protected areas. These agree- ment was gradually increased. ments are typically for 10–15 years. Similarly, In 1979, the Himalayan National Parks according to the Forest Regulations of 1995, the Regulations were introduced to allow settle- MoFE can hand over leasehold forests to the ments inside parks and to give local households private sector for tourism activities.3 regulated access to timber and fodder resourc- However, in recent years many of these con- es. Subsequently, in 1989, conservation areas tracts were either not renewed, or rescinded, were permitted, enabling multiple land uses following a Cabinet Committee decision that within protected areas. Moreover, 100 percent hotels inside the park posed a threat to wildlife.4 of the revenue from tourism and other activities Locally owned and operated lodges do not was allocated to conservation area managers operate in buffer zones, and while there is basic for conservation and community development accommodation (e.g., hostels), these facilities do activities (Thakali et al., 2018). not appeal to mid- and high-value visitors. In 1994 the government amended the NPWCA Tourism is allowed and encouraged in com- to authorize park authorities to declare buffer munity forests in buffer zones, and many of zones on the peripheries of protected areas, them offer a variety of activities. For example, with fewer restrictions on natural resource use, in community forests, user groups may develop and with mechanisms for benefit sharing of tour- activities such as elephant walks, which are ism revenues. The Buffer Zone Management often outsourced to operators that charge an Regulations (1996) allowed for 30–50 percent of entrance fee. The Buffer Zone Management park income to be channeled to local com- Regulation (1996), however, prohibits land munities living in buffer zones for community occupation and tree cutting, which limits the development and natural resource manage- development of tourism infrastructure, such as B ac kg ro u n d ment. The Buffer Zone Management Guidelines lodges, by local communities within forest areas. (1999) allowed user committees to spend 30 The Forest Act also prevents community forest percent of their annual funds on community user groups from mortgaging or otherwise development, 30 percent on conservation, 20 transferring their use rights, which precludes percent on internal income and skills develop- partnerships with private sector concession or ment, 10 percent on conservation education, lodging operators. 2 Each buffer zone is divided into sectors, and a user committee is established in each sector to manage conservation and development. 3 The concept of leasehold forestry was implemented in 1993 to alleviate poverty and improve ecological conditions. To achieve these objectives degraded forest is leased for 40 years (renewable) to groups of poor households as a resource for their exclusive use. 4 Seven lodges in Chitwan National Park had their permits revoked in 2015 by the MoFE (Basnet, 2016). 20 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL 2.2 Study Site The case study site is the Chitwan National and private lands (DNPWC, 2019). The buffer Park (see Map 3), a key tourist attraction.5 The zone includes seventy community forests cov- Park was declared a UNESCO World Heritage ering approximately 11,000 ha managed by local Site in 1984, and is located on Nepal’s southern buffer zone user committees. Beeshazari Lake, border, where it is contiguous with the Valmiki a Ramsar wetland site and popular tourist des- National Park, a tiger reserve in Bihar, India. The tination inside the buffer zone, is managed by park covers an area of 953 square kilometers, several user committees. Prior to the COVID-19 and the buffer zone covers 729 square kilome- crisis, the number of visitors to Nepal was ters (Government of Nepal, n.d.). To the east of increasing rapidly, rising 2% in 2018 over the Chitwan lies Parsa National Park. Together, the previous year (Government of Nepal, 2020), and three parks are known as the Chitwan-Parsa- contributing to the development of the Chitwan Valmiki Tiger Conservation Unit (TCU), which District. This increase in tourism also led to a provide 2,075 square kilometers of largely con- growing number of hotels, guest houses, and tiguous protected land with a key focus on tiger hostels around the buffer zone. conservation. The Chitwan Valley consists of pri- The study begins with the definition of the “local marily (80 percent) grasslands and subtropical economy” (see Box 2). For this study, three forests. The Park is home to over 700 species of municipalities neighboring Chitwan National wildlife, including species that are endangered, Park constitute the local economy. Bharatpur such as the royal Bengal tiger, the gharial croc- municipality is located to the northeast of the odile and the Asian elephant, and vulnerable park, across the East Rapti River. Khairahani and species including the one-horned rhinoceros Ratnanagar municipalities border the Park at its and sloth bear. Common tourist activities in the main entrance, near the town of Sauraha, and ex- region include wildlife and bird viewing, jeep/ tend northward to Mahendra National Highway. elephant safaris, jungle walks, canoeing, and This area is heavily impacted by tourism, and visits to nearby lakes and the Rapti River. hosts many hotels and guest houses. Bharatpur In 1996, the government established the first municipality has fewer visitors, but community buffer zone around Chitwan National Park, a forests and homestay operations have boosted 750 square kilometer area consisting of forests the region’s tourism in recent years. 2.3 Government Expenditures and Revenues The top panel of Table 1 summarizes the reve- park. Fees paid by lodges in the park, and oth- nue that the Government of Nepal receives from er concession fees generate NPR 37.9 million Chitwan National Park. Park visitor fees, charged (US$0.33 million). to allow visitors to enter the core area of the The lower panel of Table 1 shows park man- park, are the largest revenue source – NPR 205 agement expenses, including payments to million in 2018–2019 (US$1.8 million). This does buffer zone user groups. Notably, the cost not include revenues generated from entrance to the Government of Nepal of running the fees to community forests outside the national Bac kg ro u n d box 2. What is a Local Economy? A local economy could be a village, a collection of villages, a town, region, or even a country. The larger the demarcation, the more economic activity and economic benefits that will likely be captured. How the “local economy” is defined depends on the goals of the study. To be effective, conservation policies that create protected areas also rely on communities around protected areas to act as stewards of biodiver- sity. In Nepal, people living in buffer areas need to see the benefits—including economic benefits—of preserving wildlife. In this study, therefore, the local economy is defined as the villages within the munic- ipalities adjacent to Chitwan National Park, namely, Khairahani and Ratnanagar municipalities. Moreover, because village households and businesses rely on nearby market towns for goods and services, Bharatpur municipality is also included as part of the local economy. 5 Chitwan National Park was selected as the study site after consultation with MoFE, DNPWC, and NTNC. The criteria for selecting the site included formal designation as a protected area, and its importance as a tourist attraction. E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 21 map 3. Chitwan 83°45'E 84°0'E 84°15'E PROTECTED AREAS NATIONAL PARK MAJOR ROADS National Park and NATIONAL PARK BUFFER ZONE MINOR ROADS Buffer Zones Tansen WILDLIFE RESERVE SELECTED TOWNS WILDLIFE RESERVE BUFFER ZONE PROVINCE BOUNDARIES INTERNATIONAL BOUNDARIES LUMBINI G ANDAKI 84°30'E 84°45'E 85°0'E 27°45'N 27°45'N Bharatpur BAG MATI Kawasoti Kasara Resort Jagatpur Sauraha R. apti tR Manahari R. E as G a n d a ki Parāsi Chitwan 27°30'N 27°30'N National Park Hetauda Parsa National Park 27°15'N 27°15'N 0 10 20 Kilometers I N D I A MADHESH IBRD 45350 | MAY 2022 This map was produced by the Cartography Unit of the World Bank Group. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of the World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 84°0'E 84°15'E 84°30'E 84°45'E 85°0'E Source: DNPWC - Chitwan National Park Website park is more than double park revenues. The example), payments to buffer zone user groups, biggest expenditure category is wages for and payments to households which have suf- administrative staff, park wardens, guards, other fered losses from animal incursions. employees, and the Nepalese Army unit posted This analysis of revenues and expenditures pro- in Chitwan to deter poaching. In 2019, the cost vides only a partial assessment of the economic of wages was approximately NPR 380 million impact of the national park on the local econo- (US$3.3 million), of which 75 percent covered my. The next section describes a methodology the costs of army personnel. Other expendi- to estimate these impacts more broadly, by ture categories included investment in tourism including direct and indirect impacts on the local infrastructure and promotion, park maintenance economy and communities. (grassland and landscape management, for table 1. Government Revenue or Expenditure Type NPR US$2 of Nepal Revenues Revenues     and Expenditures in Chitwan National Park visitor fees 205,000,500 1,798,250 Park (2018–2019)1 Fees paid by lodges in the park 35,000,950 307,026 Concession fees 2,964,000 26,000 1 The fiscal year in Nepal starts Other sources 51,501,189 451,765 and ends in June. Total revenue 294,466,639 2,583,041 2 Conversions from NPR to B ac kg ro u n d US$ use an exchange rate Expenditures of NPR 1 is US$0.0088 as of December 1, 2018. Wages* 380,777,939 3,340,157 * This includes wages for the Nepalese Army unit Tourism infrastructure and promotion 74,105,900 650,051 stationed at Chitwan to combat poaching, which Elephant center expenses 25,213,566 221,172 constitute 73 percent of wage expenditures. Grassland and landscape management 32,598,360 285,950 **Other expenses include financial management and Regional Wildlife Conservation Program 10,889,943 95,526 accounting, miscellaneous, and capital expenses of the Buffer zone management program 76,636,000 672,246 army (building construction, infrastructure development, Relief package to wildlife victims 15,913,173 139,589 etc.) Other** 36,441,974 319,666 Source: Study team, Government of Nepal Total expenditure 652,766,855 5,726,025 GoN revenues minus expenditures (358,300,216) ($3,142,984) 22 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL 3 Methodology Me th od o lo gy E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 23 3.1 Pathways for Economic Impacts of Protected Areas As noted, tourism in protected areas can impact user committees. Besides charging entrance local economies through direct (shown by ar- fees to community forests, several villages offer rows a in Figure 1) and indirect channels. Indirect homestays, in which small businesses provide channels can, in turn, be broadly classified into accommodation (a small room/house) to visitors two types: production linkages (shown by ar- inside local villages. Instead of operating sep- rows b in Figure 1) and income and consumption arately, homestay owners often rotate clients linkages (shown by arrows c in Figure 1). so that all villagers offering homestays receive their fair share of customers. Tourists also spend money at hotels and restaurants near the na- 3.1.1 Direct Impacts tional park and buffer zone, partake in activities Protected areas attract tourists who spend such as safari drives, walking safaris, and ele- money on tourism services. Tourists also visit phant walks, and purchase goods and services community forests managed by buffer zone from local businesses and households. Finally, figure 1. Economic Impact Pathways of Protected Area Tourism Revenue sharing, community projects Environmental Impact b PARK AUTHORITY, Businesses pay GOVERNMENT taxes and fees b a Pay non-consumptive a Pay a Park and consumptive fees Entrance Fee and taxes b Park hires guards or employs households for PA activities Protected Areas a Natural Parks a Purchase goods Spend money on and services lodging, tourist TOURISM, HOUSEHOLDS LODGES AND OU activities G N BUSINESSES RIST S VISITI T Wages paid to Purchase food, a workers employed b,c goods and in tourism activities Local incomes services c increase; b Source goods M e tho do logy households spend and services their income to source goods LOCAL FARMS AND BUSINESSES a Trade with outside/ non-local markets Direct Impact Legend of Pathways of Influence a. Direct impacts Indirect impact through b. Production linkages production linkages c. Income and consumption linkages 24 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL tourists pay park entrance fees that accrue to turn used to buy local goods or pay employees the Government of Nepal. A tourism impact from local households. Tourism fees collected analysis based on tourist expenditures would by committees can be substantial. In 2019, the stop here and would only capture a fraction entrance to Beeshazari Lake, which is under of the impact of protected area tourism on the buffer zone community management, recorded local economy. 130,000 visitors and charged NPR25 (US$0.2) per domestic tourist, NPR100 (US$0.8) per However, protected areas also affect the local SAARC6 tourist, and NPR200 (US$1.7) per for- economy directly by restricting resource ex- eign tourist. Around Chitwan, as in other buffer traction—in the case of Nepal’s national parks, zones, user committees are authorized to use by limiting natural resource use, for example, these funds for a variety of programs: cultural for firewood or grazing. By regulating these events promoting conservation, agricultural activities, however, protected areas may have inputs, information materials, infrastructure (such an adverse effect on the incomes of households as fences) and compensation for farmers whose that rely on these resources. When wildlife in crops or livestock are damaged by wildlife. parks is protected, growing populations tend When tourist services, protected area man- to disperse into the buffer zones around them. agement, and the activities of user committees The benefits of larger wild animal populations expand, they create positive indirect impacts include opportunities for tourism in buffer on the local economy. On the other hand, limits zone community forests. Of course, larger wild on resource-extraction may have an opposite animal populations also increase the likelihood effect, especially if resource harvesting gener- of human-wildlife conflicts, as when elephants ates money for local purchases. An input-output raid farmers’ fields or predators attack livestock. (IO) analysis would stop here, and only capture Therefore, the balance of costs and benefits on the direct impacts and the indirect impacts income from the wildlife resource is not always through production linkages.  clear, but these impacts need to be estimated in addition to the direct impacts of tourism. A critical issue when analyzing these production linkages is whether local supplies of goods and services can expand to meet growing demands. 3.1.2 Indirect Impacts Through If not, growth in demand may lead to higher Production Linkages prices, and reduce the real, or inflation-adjusted As tourism expands and resource extraction income gains from protected areas. Estimation contracts, community demands for intermediate of indirect impacts must take these potential inputs will change, producing a first round of inflationary effects into account. indirect effects in the local economy though production linkages. For example, more tourism 3.1.3 Indirect Impacts Through increases demand for hotels and restaurants, and therefore greater demand for everything Income and Consumption Linkages from food and beverages, to more equipment Production in the local economy triggered by and staff. To the extent that hotels, restaurants, tourism in protected areas generates incomes in and other tourism service providers hire workers the form of wages and profits. Wages of workers from local households and purchase goods and employed in tourism potentially have a positive services from local farms and businesses, there indirect effect on the local economy as they trig- will be positive production linkage effects on the ger fresh rounds of spending. Wages and profits local economy. Inputs purchased from outside from locally owned tourist activities, and from Me th od o lo gy the local economy will create positive linkages local businesses that supply the tourism industry for other parts of the country, or potentially in flow into local households which in turn spend other countries, and not for the local economy. this income in the local economy. However, re- strictions on resource use may lead to negative Similar impacts are realized when the park hires indirect income effects from protected areas. local rangers or employs local households in park management, or when the government As local activities expand to supply new house- shares income from entrance fees with buffer hold demands, new rounds of increased input zone user groups. These funds, along with demand, income, and household expenditures tourism revenue from community forests, are in follow, creating knock-on growth in income 6 South Asian Association for Regional Cooperation comprising Afghanistan, Bangladesh, Bhutan, India, the Maldives, Pakistan, Sri Lanka and Nepal. E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 25 and demand in the local economy. Successive met by purchases from other parts of Nepal, or rounds of impacts become smaller and smaller, from abroad. In this case, the income “leaks out” and the total (direct and indirect) effect of the from the local economy to other places, creating expansion in tourism converges to an income benefits there instead. If the supply of goods multiplier, defined as the change in local house- and services in the local economy is respon- hold income per unit of fresh cash infusion into sive or elastic, prices will not change much as the economy through tourist spending. If local local demand increases. Otherwise, rising local market linkages are strong, each dollar of tourist demand could raise prices, causing real, or spending may increase local income by more price-adjusted multipliers to diverge from nomi- than a dollar. Local income multipliers are not nal (cash income) ones. The GE model captures necessarily greater than one, because new all of these effects, the direct impacts and both demands created by tourist spending could be channels of indirect impacts. 3.2 LEWIE Model Quantifying the direct and indirect impacts of (fertilizer, seed, and a variety of purchased protected area tourism on local economies inputs) to produce an output (corn, prepared therefore requires an applied GE approach. For meals, a service), which may be consumed this study, a GE method called “local econo- locally, or sold. The household and house- my-wide impact evaluation” (LEWIE) was used.7 hold-farm models describe each household group’s productive activities, income sources, LEWIE uses simulation methods to estimate and consumption/expenditure patterns. In a typ- the direct and indirect (or “spillover”) effects of ical model, households participate in crop and protected area-induced tourism. LEWIE uses a livestock production, resource extraction (e.g., structural approach that integrates models of fishing), retail, and other business activities, as actors (businesses and households) within a GE well as in the labor market. Production functions model of the local economy. Businesses include for each activity are the recipes that turn inputs locally owned firms, and businesses not owned into outputs. by locals but typically employing some local workers and purchasing some locally-supplied Micro-survey data are required as inputs to inputs. There is a rich tradition in economics of the LEWIE model and play two main roles in its using micro-survey data to construct models of construction. They provide initial values for all agricultural households that are both produc- variables in the model (inputs and outputs of ers and consumers of food (Singh et al., 1986). each production activity, household expendi- LEWIE begins by using micro-survey data and tures on each good and service). The data are econometric methods to construct models of also used to econometrically estimate model firms, households, and household-farms within parameters for each household group and pro- local economies. These micro-models are then duction sector, together with standard errors on “nested” within a GE model of the local econo- these estimates. The initial values and param- my, drawing from the literature on GE modeling eter estimates are captured in a spreadsheet in economics (Dixon & Jorgenson, 2013). The designed to interface with GAMS (Generalized models of firms describe how businesses Algebraic Modeling System) software used to combine various factors (e.g., hired labor, family program the LEWIE model. M e tho do logy labor, land, capital) and intermediate inputs 7 A basic reference for this methodology and examples of recent studies using the LEWIE model can be found at http://beyon- dexperiments.org/ (Taylor & Filipski, 2014) 26 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL 3.3 Data Collection To build the LEWIE model, data were gathered The primary survey was conducted in the from surveys of tourists, lodges, resorts, and Khairahani, Ratnanagar and Bharatpur mu- local businesses and households. Surveys in nicipalities. Roughly 50 households were November 2019 obtained information on pro- interviewed from each randomly selected duction, income, expenditures, and the locations village, resulting in a final sample size of 596 of transactions (i.e., inside or outside the local households from 12 villages. Additional details economy). The household and local business on the survey methodology and data collection surveys were entered onto tablets using the methods are provided in Annex 1. Open Data Kit (ODK) platform for Android. A team of 17 Nepalese enumerators were trained to carry out the business and household surveys (see Box 3). box 3. Building Capacity While Doing Research A team of 14 Nepalese students (6 men and 8 women) from the Kathmandu University and three NTNC staff were trained to carry out the fieldwork for this study. This included a one-week, face-to-face course on the LEWIE methodology, and instruction in how to conduct the detailed household and business surveys with questionnaires programmed onto tablets using the ODK platform. After a pilot, the team spent two weeks in Chitwan National Park collecting data. All enumerators were awarded certificates of completion for the LEWIE survey training course and fieldwork. Me th od o lo gy E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 27 M e tho do logy 28 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL 4 Data Summary Data Summary E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 29 4.1 Tourists The Chitwan region has experienced rapid Table 4 provides a breakdown of the average growth in tourism to the national park and sur- Chitwan visitor’s expenditures based on the rounding areas in recent years. While the 2015 survey. Documenting these expenditures is earthquake halved the number of visitors from important not only because they describe how the previous year, tourist numbers recovered tourists spend their money, but also to catego- from 2016–2018 and continued to grow in 2019 rize tourist spending across economic sectors in (see Table 2). In 2020, the COVID-19 pandemic the LEWIE simulations presented below. brought Chitwan tourism to a standstill. Due to disruptions in data collection from International tourism numbers do not include COVID-19 lockdowns, international tourists domestic visitors to the park, who in 2018–19 make up only 12 percent of the sample and accounted for 17 percent of the total number are therefore under-represented. Given that of visitors (study team, Government of Nepal). spending patterns and amounts differ between An estimated 300,000–400,000 additional domestic and international tourists, this presents domestic and foreign visitors went to community a challenge for the study. To correct for this bias, forests managed by buffer zone user commit- a more representative sample was constructed tees, generating revenues for local economies using known ratios of international to domes- (Paudel et al., 2007). Domestic tourists are tic tourists from the previous year (2019) to charged NPR 150 (US$1.3), SAARC citizens NPR increase the weight (or importance) of foreign 1000 (US$8.6) and international tourists NPR tourists in the sample. Weighted results are 2000 (US$17) to enter the national park. presented in the third column of Table 4, which are used as inputs in the LEWIE model. Seventy tourist groups were surveyed, and the data show that, on average, visitors arrived in On average, each tourist spends NPR 3,332 parties of 3.1 and stayed 3.25 nights at Chitwan (US$29.3) per day during their stay in Chitwan, (Table 3). Most—6.5 out of 10—purchased inclu- with a third going to accommodation and food sive packages, at an average cost of NPR 10,187 at a hotel or lodge. They spend an average of (around US$85) per party. The package price NPR 625 (US$5.5) on tours inside and outside primarily reflects costs of tours and guides, and the park each day, NPR 750 (US$6.6) per day on does not include accommodation. local transport, NPR 375 (US$3.3) on retail pur- chases and NPR 148 (US$1.3) on local services. table 2. Number of International Tourists to Chitwan NP by Fiscal Year Year 2014–2015 2015–2016 2016–2017 2017–2018 2018–2019 Tourists 178,000 87,391 139,125 152,671 211,888 Source: Study team, Government of Nepal Data Summary table 3. Tourist Characteristics and Packages Party Size Nights Stayed Purchased Package Transportation Package Cost* Cost to Chitwan Mean 3.11 3.25 0.65 10,187.5 1,785.5 SD (2.52) (1.65) (0.48) (8,831) (2,940) *Note: Package costs only reported for tourists who purchased a package. 30 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL table 4. Chitwan Visitor Expenditures by Category Total Expenditures Expenditures based on Expenditures per tourist Expenditures per tourist tourist survey per night per night (weighted) Nepali Nepali Nepali USD USD USD Rupees Rupees Rupees Mean 10359.0 91.1 3191.8 28.1 3332.0 29.3 SD (9917.3) (87.3) (3055.8) (26.9) (3714.7) (32.7) By Category           Accommodation Mean 4,362.2 38.4 1340.5 11.8 1192.7 10.5 & Food SD (3726.1) (32.8) (1147.4) (10.1) (1101.9) (9.7) Tours Mean 2306.1 20.3 715.7 6.3 624.7 5.5 SD (2680.9) (23.6) (829.3) (7.3) (783.8) (6.9) Transport* Mean 1340.5 11.8 409.0 3.6 749.7 6.6 SD (5861.8) (51.6) (1806.2) (15.9) (2,885.4) (25.4) Retail Goods Mean 1101.9 9.7 340.8 3.0 374.8 3.3 SD (2112.9) (18.6) (647.5) (5.7) (693.0) (6.1) Services Mean 533.9 4.7 170.4 1.5 147.6 1.3 SD (999.7) (8.8) (306.7) (2.7) (284.0) (2.5) Other Mean 715.7 6.3 215.8 1.9 243.0 2.2 SD (670.2) (5.9) (204.5) (1.8) (249.9) (2.2) N   70   70   70   4.2 Tourism Businesses Hotels near Chitwan National Park are mod- of these hotels vary widely, with an average erate in size, with an average capacity of 51.5 around NPR 11.4 million (US$ 100,000). Finally, persons (see Table 5). During the peak tourist just over a quarter (26 percent) of inputs for the seasons, usually autumn and spring, hotels have hotels (by value) are purchased from outside a 56 percent occupancy rate, which falls to 27 the local economy, so leakage from the local percent in off-peak seasons. Operational costs economy is low. table 5. Hotel Summary Statistics Capacity Expenditure Maximum Peak Non-Peak Total Outside guests (proportion) (proportion) (million NPR) (proportion) Data Summary Mean 51.5 0.56 0.27 11.4 0.26 SD (23.6) (0.18) (0.16)   (14.8) (0.08) 4.3 Households The household survey provides rich data on analysis disaggregates households into “poor” household characteristics, economic activities, and “non-poor” groups based on annual expen- and spending, which shape economic im- diture information from the survey. Households pacts in local economies around the park. The with less than US$1.90 (PPP-adjusted) of E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 31 per-capita expenditure per day were classified (52.6 percent of individuals over the age of 40 as “poor”, and based on this criterion, forty reported no formal schooling). Most households households, less than 7 percent of the sample, grow crops and roughly half own livestock. The fell into this category. biggest observable difference in income gen- erating activities between poor and non-poor Socio-demographic characteristics, together households is participation in entrepreneurial with a summary of household participation activities. Twenty-five percent of non-poor in income earning activities are presented in households in both regions own and operate Table 6. On average, the household size for some form of business, compared with 7–8 the sample is just under 5 individuals. Poorer percent of poor households. Roughly half of all households tend to be larger, with slightly older households have at least one wage worker. and less educated heads. Overall education levels are low, especially for older cohorts table 6. Poverty Status and Household Demographics and Activities by Region Location Household Demographics Percentage of Households participating in: Summary Head Head Wage Size Crops Livestock Fishing Business Statistics Age Educ Work Khaira/Ratn Mean 4.76 49.5 4.81 0.85 0.68 0.03 0.25 0.46 Non-poor sd (1.98) (14.1) (4.52) (0.36) (0.47) (0.16) (0.44) (0.50) N 323 325 Khaira/Ratn Mean 8.31 53.5 1.85 0.92 0.62 0.00 0.08 0.38 Poor sd (4.66) (18.1) (2.94) (0.28) (0.51) - (0.28) (0.51) N 12 13 Bharatpur Mean 4.95 49.3 4.15 0.70 0.66 0.04 0.25 0.55 Non-poor sd (1.98) (13.8) (4.33) (0.46) (0.47) (0.19) (0.43) (0.50) N 232 232 Bharatpur Mean 6.70 52.1 2.19 0.81 0.48 0.04 0.07 0.63 Poor sd (3.10) (12.7) (3.73) (0.40) (0.51) (0.19) (0.27) (0.49) N 27 27 Notes: sd is standard deviation of sample and N is the sample size. 4.4 User Committee Groups There are six buffer zone user committee development. The remaining budget is usually groups in the study region, five of which were used to provide compensation payments for surveyed to gather information on hiring human-wildlife conflicts. The surveyed com- Data Summary practices and expenditure patterns. Table 7 mittee groups gave a little over NPR 1,800,000 summarizes spending by these committees.8 (around US$15,700) in compensation for crop damage, livestock and human death resulting Conservation related activities (not including from encounters with wildlife in 2019. A large conservation education) account for 48 percent percentage of labor hired by user committee of expenditures. A substantial percentage of groups is locally sourced, as are most of the the budget (16 percent) is spent on community construction teams and materials. 8 Because the team was unable to gather information on the income that buffer zone community user groups earned directly from tourists, the impacts of this income on the local economy are not captured. Tourist expenditures on hotels and other goods and services is captured, however. 32 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL Table 7. User Committee Expenditure Summary Total Annual Share of Annual Expenditure on: Local % of Labor Expenditure Expenditure (‘000 NPR) Alternative Conservation Community Conserva- Manage- Conservation Conservation Community Income Other Education Developmen tion ment Education Labor Development Generation Mean 16,200 0.02 0.16 0.48 0.05 0.03 0.10 0.92 0.84 0.84 SD (15,600) (0.01) (0.14) (0.26) (0.02) (0.02) (0.16) (0.11) (0.36) (0.26) 4.5 Local Businesses Close to a quarter of households in the survey in Khairahani/Ratnanagar are small retail owned and operated some form of business. (grocery shop/vendor) shops (34.8 percent) Businesses are defined as any kind of entrepre- and hotels, restaurants and bars (14.6 percent), neurial activity, including hawkers, small grocery reflecting the popularity of these services with stalls, market traders, and a variety of roadside tourists. Construction-related businesses are vendors. Table 8 reports the shares of each more prevalent in Bharatpur, constituting 35.9 business type at the two sites. Many businesses percent of firms in the sample. Table 8. Distribution of Business Types Business Type Khaira/Ratn Bharatpur Grocery shop/Vendor 34.8% 20.3% Food Processing 3.4% 4.7% Butchery 5.6% 3.1% Construction 5.6% 35.9% Clothing/Shoe repairs 4.5% 0.0% Mechanic/Elec repairs 10.1% 1.6% Other services 14.6% 25.0% Hotel/Restaurant/Bar 14.6% 9.4% N 91 65 Data Summary E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 33 Data Summary 34 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL 5 LEWIE Model Findings LE WI E M o de l F in di n g s E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 35 As noted above, the LEWIE model can be used Simulations require judgements, based on the to estimate the direct and indirect impacts of survey data, about where and how prices are protected area tourism on a local economy, and determined (that is, market closure, which is not there are many avenues through which direct known with certainty). Sensitivity analysis, com- and indirect impacts manifest. Data availability bined with the Monte Carlo method described determines in large part the extent to which above, was used to test the robustness of simu- these are captured through the LEWIE model. lated impacts to market-closure assumptions. A summary of these avenues and how they are The impact of protected area tourism on a local modeled within LEWIE is provided in Table 9. economy is estimated in two steps. Step one Once built, the LEWIE model can be used to entails simulating the impact of an additional quantify impacts on the local economy. Because tourist on the local economy. This step also the model parameters have been estimated provides an estimate of the income multiplier econometrically, Monte Carlo methods are used of an additional dollar of tourist spending. The to perform significance tests and construct confi- impact is estimated in the second step by multi- dence intervals around the simulated impacts as plying the per-tourist estimate by the number of shown by Taylor & Filipski (2014). For this study, tourists who visit the park. Comparing this value 500 iterations of the simulations for each park with public investment in the park also provides were conducted. Additionally, the LEWIE model an estimate of the rate of return on the public considers nonlinearities and local price effects. investment. Table 9. Avenues of Impact Captured within LEWIE Impact Avenue Included in Comment LEWIE? Direct Tourist spending at Yes local businesses Restrictions on Yes These impacts are built into the base run of the model. It is important to resource extraction note that this version of LEWIE is static, and therefore does not account and positive spillovers for changes in the resource base over time and the resultant impact on from the national park resource use patterns or tourism opportunities in the buffer zone. Impact of human- Yes As per the information provided in the household surveys, crop damage wildlife conflict caused by animals (elephants, rhinos and wild pigs etc.) was between 9.3–9.5 percent of total output. This impact is included in the base run using actual harvest data. User committee groups provide compensation to households which have lost crops, livestock or sometimes even human life. This is also taken into account. Indirect – Hiring and local Yes These linkages are included for hotels, but not for other tourism service production sourcing of providers due to data limitations. Only 2–3 percent of farmers reported linkages goods by tourism selling produce directly to lodges. Most crop sales are through traders establishments and intermediaries who collect from farms and sell on to hotels and other businesses. Hotels, though, source other goods and services from local businesses. Hiring and local Yes Buffer zone user groups receive money from park management L E WIE M o de l F in di n g s sourcing of goods authorities and from tourists who visit buffer zone community forests; by buffer zone user they use this income for conservation and development. Around 30–50 committees percent of ticket fees are transferred to user groups for their activities. Hiring and local Partially Hiring park staff is captured in the household section of the surveys. sourcing of goods by Purchases of goods are in theory captured through the business surveys park managers conducted in key markets nearby. However, the park management is not modeled as an independent agent due to data limitations. Spillover effects Yes of resource use restriction Indirect – Expenditures by Yes consumption households based linkages on wages and profits earned through tourism sector linkages 36 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL 5.1 Impact of an Additional Tourist on the Local Economy Table 10 presents the estimated impacts of an and many of the services purchased by local additional tourist on household incomes around households and businesses come from outside the park. Simulations find that one additional the local economy. Generally, income spillovers tourist adds NPR 19,299 (US$ 169.3) to total are greater for non-poor than poor households, real (inflation-adjusted) income in the local because non-poor households are more likely economy. This income effect is larger than the to have the assets, including physical, financial, amount of money the average tourist spends and human capital, to run businesses and in oth- (Table 9). Most of the income gains, NPR 7,558 er ways benefit from tourist spending. Though and 9,294 (US$66.3 and US$81.5) in Khairahani/ the impacts are smaller, poor households still Ratnanagar and Bharatpur, respectively, go to benefit; these impacts are mostly indirect (few non-poor households. Incomes of poor house- visitors transact directly with poor households), holds increase modestly, by NPR 432 (US$3.8) and are thus unlikely to be picked up by stud- in Khairahani/Ratnanagar and by NPR 1,506 ies that do not consider GE impacts on local (US$ 13.2) in Bharatpur. Resources transferred to economies. buffer zone user committees under benefit shar- As described earlier, tourist spending creates ing agreements have a positive, though small, these income impacts by stimulating local impact on households, of around NPR 508 demand for goods and services, either direct- (US$4.5) per tourist. User committee groups’ ly (as when tourists or hotels buy goods and revenues come from government transfers from services from local businesses and households) Chitwan National Park ticket fees, and their own or indirectly (as when hotels pay wages to local ticket fee collections from user forests. Lacking households, who in turn spend this income on information on aggregate revenue from user locally-supplied goods and services). Table 11 forests, it is not possible to further disaggregate summarizes the impacts of an additional park the impacts between official (government) and visitor on production (in value) by local farms other sources. and businesses. The largest impact is on sales Local income multipliers are shaped by tour- by local retail establishments, including small ist expenditures and the openness of local shops and supermarkets, which increase by economies. A significant percentage of goods NPR 8,470 (US$74.3). Tourists do not spend a large share of money at local retail businesses (Table 4); however, households’ single largest table 10. Local Income Impacts of an Additional Tourist expenditure is on retail. Thus, the impact of an additional tourist on local retail revenue is most- ly indirect. The same is true for other sectors. Income Effects of an Additional Tourist Values in NPR Values in US$ Revenue to service activities increases by NPR 4,761 (US$41.8). The demand for livestock and Average amount spent by 10,825 95.3 agricultural products rises by NPR 259 (US$2.3) an additional tourista and NPR 279 (US$2.5), respectively, even Changes in local economy incomes though tourists buy little, if anything, directly LE WI E M o de l F in di n g s from local farms. Hotel revenues increase by Real (inflation-adjusted) Income 19,299 169.3 NPR 1,622 (US$14.2), mostly a direct effect of 95% CIs [18,086, 20,706] [159.2, 182.3] tourist spending. The value of local production rises by NPR 15,393 (US$135) per additional Changes in Household Real Incomes visitor. Khairahani/Ratnanagar Poor 432 3.8 Figure 2 shows the income multiplier, that is, the Khairahani/Ratnanagar Non-Poor 7,558 66.3 impact on local household income of each ad- ditional rupee that visitors spend. The multiplier Bharatpur Poor 1,506 13.2 captures the direct and indirect effects of tourist Bharatpur Non-Poor 9,294 81.5 spending on local income. It is adjusted for price inflation and thus represents a real-income User Committee Group 508 4.5 effect. An additional rupee spent by visitors at a These are amounts spent on lodging and meals, park entry and tours, out-of-pocket spending Chitwan National Park raises the total income while visiting the park, and transport to and from the park, which consists of bus fares and other of households around the park by 1.78 rupees. costs paid outside the local economy. E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 37 table 11. Production Impacts (in Value) of One Additional Tourist This includes a multiplier of 1.73 directly from tourists, and an additional 0.05 from ticket rev- Production Effects (in   enue transfers to local user committee groups. Monetary Value) of One The vertical line at the top of the bar gives a 95 Additional Tourist Values in NPR Values in US$ percent confidence interval around the multipli- Agricultural Crops 259 2.3 er, and is obtained by running 500 iterations of the simulation. The line is short, indicating high Livestock 279 2.5 confidence in the estimate. The full confidence Retail 8470 74.3 interval lies well above 1.0, indicating that each Services 4761 41.8 rupee spent by nature tourists creates signifi- Hotel 1622 14.2 cantly more than one additional rupee of new income in communities around the park. Total 15393 135.0 Figure 3 shows how much of the multiplier ben- figure 2. Real Income Multiplier of Tourist Spending efits poor versus non-poor households near the (bar shows 95% CI) park. An additional rupee spent by tourists at the Chitwan National Park raises the real income 2,00 of non-poor households by 1.60 rupees and that 1,80 of poor households by 0.18 rupees. Households around Bharatpur benefit marginally more than 1,60 households around Khairahani/Ratnanagar: 1.02 1,40 rupees per additional rupee of tourist spending, versus 0.76 rupees. 1,20 Despite the higher amount of the multiplier 1,00 1,78 going to non-poor households, the economic 0,80 contribution to local communities appears to benefit poor residents more than non-poor 0,60 residents. Normalizing multiplier shares by 0,40 these populations (i.e., dividing the share of the 0,20 multiplier by the share of poor or non-poor pop- ulation; see Figure 4) shows that 8 percent more 0,00 of the multiplier share per resident goes to poor residents in both Bharatpur and Khairahani/ Ratnanagar. figure 3. Share of Real Income Multiplier By Household figure 4. Distribution of Multiplier Across Poor and Non- Group poor Populations 0,14 20% L E WIE M o de l F in di n g s Bharatpur Poor Khairahani/ 30% Ratnanagar Bharatpur Poor Non-poor 0,72 Khairahani/ 0,88 Ratnanagar Bharatpur Non-poor Non-poor 28% Khairahani/ 22% Ratnanagar Bharatpur 0,04 Poor Non-poor Khairahani/Ratnanagar Poor 38 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL 5.2 Impacts of Nature-Based Tourism on the Local Economy The impact of nature-based tourism on the local spending (Table 12). Based on the LEWIE economy can be estimated by multiplying the analysis, we estimate an economic return of 7.6 number of tourists, domestic and internation- rupees per 1 rupee of government spending al, who visit the national park by the income on Chitwan National Park. High rates of return each additional tourist generates for the local result from large economic benefits relative to economy. The total number of tourists who government spending on protected areas. visit Chitwan annually is approximately 256,511 The impact of tourism on employment around (211,888 international and 44,623 domestic). the park includes employment by tourism op- Given that each tourist generates additional erators and indirect employment impacts from income of US$169.3, the total contribution of tourism. These employment effects can be esti- tourism to the local economy of Chitwan is mated by dividing the labor value-added by the estimated to be approximately US$43.4 million average local wage.9 Based on this method, we annually. This is a significant amount, driven by estimate that national park tourism generates the high number of tourists who visit Chitwan 4,309 full-time equivalent jobs around Chitwan National Park. Lack of reliable data on the National Park.10 To put this employment impact number of visits to user committee forests in into perspective, this figure is equivalent to 2.8 the buffer zone means that this is a significant percent of the working-age population around underestimate of the economic impact likely to the park. be attributable to the park. Governments can create additional benefits for Despite high tourist-spending multipliers, the local populations by hiring community mem- impact of nature-based tourism on the local bers to work at parks as guards, guides, game economy around Chitwan National Park is low wardens, etc. Local hiring would increase labor compared to the number of park visitors. This income in and around Chitwan National Park reflects the low-value, high-volume nature of tour- and generate multipliers through increased ism in Nepal. While the economy around Chitwan demand and spending. Hiring park guards benefits from tourism, it is important to consider will also strengthen wildlife management. The that this low-value, high-volume tourism gener- model estimates that an additional worker hired ates a large environmental footprint which may by the park generates an increase in local real degrade the very asset which draws tourists. income of NPR 775,050 (US$6,799). The cost Dividing the economic impact of tourism by the to government of hiring an additional worker is sum of the government’s wage and non-wage NPR 278,343 (US$2,442),11 which is consider- expenditures on the park provides an estimate ably less than the local income gains from hiring of the economic returns from government the additional worker (see Table 13 below). table 12. Estimated Impact of Tourism A B C D LE WI E M o de l F in di n g s Estimated Economic Expenditure on Expenditure on Wages Rate of Return Impact of Tourism Non-wages (park (US$)* (US$) maintenance) (US$)* 43,427,312 2,384,201 3,340,157 7.6 *Expenditure based on 2018/19 fiscal year. Expenditures include costs to garrison army base. 9 The effect of labor value-added is estimated in the LEWIE model as the returns to labor, a productive asset, and represents the total wage income gains to the local economy. Dividing by wages allows us to estimate the extra employment generated through tourist spending. 10 For these calculations, we used average local tourism industry (lodge, restaurant and tour operator) daily wages of NPR 853 and NPR 792 per day, and average full-time equivalents of 211 and 198 days/year at Khairahani/Ratnanagar and Bharatpur, respectively. Average wages are slightly lower in the tourism industry than in other economic sectors, though differences are not statistically significant. 11 The average wage rate is derived from Chitwan National Park expenditure information. The estimated wage is averaged across employment types i.e., administration, research staff, park wardens, guards and all non-administrative staff functions. E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 39 This park-hiring impact can also be expressed multiplier is higher than the tourist-spending in terms of an income multiplier. An additional multiplier, because all wages paid to locally hired rupee spent by the government on park wages park personnel go directly to local households, creates a local economy real (inflation-adjusted) whereas a fraction of tourist spending does. multiplier of 2.78 rupees. This park employment table 13. Impact of One Hire by Chitwan National Park Local hiring increase 1 additional CNP employee, hired locally Income effects Results in NPR Results in US$ Changes in local economy incomes     Real (inflation-adjusted) Income 775,050 6,799 Changes in household incomes by location     Khairahani/Ratnanagar Poor 38,477 338 Khairahani/Ratnanagar Non-poor 314,344 2,757 Bharatpur Poor 65,414 574 Bharatpur Non-poor 356,815 3,130 Change in labor supply* 415,486 3,645 5.3 Impacts of Complementary Investments and Outside Shocks Besides estimating the economic impacts of conflict is already reflected in the base model, tourism in a protected area, the LEWIE model along with the compensation from user commit- can also be used to simulate the local economic tees, which is captured in the transfer income impacts of government interventions and eco- section of the household survey. A human-wild- nomic shocks. life conflict simulation which returns the lost crops to households while subtracting compen- sation payments was conducted to estimate 5.3.1 Local Economy-Wide Costs of the loss to the local economy (i.e., it estimates Human-Wildlife Conflicts the counterfactual of no human-wildlife conflict, Living close to a national park brings house- which when subtracted from base income gives the local-economy impact of the human-wildlife L E WIE M o de l F in di n g s holds into conflict with wildlife, often in the form of losses to crops and sometimes livestock. conflict that actually occurred). Crop losses can The analysis suggests that over 9 percent of have major impacts on households suffering crops (in value) are lost to wildlife, with 9.5 these losses. They also send negative ripple percent lost in Khairahani/Ratnanagar and 9.3 effects through local economies. Table 14 pres- percent in Bharatpur municipality. Buffer zone ents the impact of animal-inflicted crop losses user committee groups compensate farmers on income around the park. Simulations indicate for a portion of these losses through cash that these losses are substantial, at around NPR transfers. Surveys from the six buffer zone 333 million (US$2.92 million) annually. This far user groups indicate payments totaling NPR exceeds the direct losses to crops, estimated at 2,191,151 (US$18,782), which is a small propor- NPR 165 million (US$ 1.45 million), indicating that tion of the estimated losses. indirect costs of wildlife incursions are con- siderable. Non-poor households bear a larger The base LEWIE model uses actual harvests brunt of the loss, inasmuch as they have a larger reported at the time of the survey. Thus, the 9 capacity to grow crops. percent loss of crop value from human-wildlife 40 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL table 14. Estimated Losses from Human-Wildlife Conflict (step1) Human-wildlife Conflict 9.4% reduction in crop production Income effects Results in NPR Results in US$ Changes in local economy incomes     Real (inflation-adjusted) Income -333,074,456 -2,921,706 Changes in household incomes by location     Khairahani/Ratnanagar Poor -6,772,109 -59,404 Khairahani/Ratnanagar Non-poor -148,100,558 -1,299,128 Bharatpur Poor -15,703,504 -137,750 Bharatpur Non-poor -162,498,285 -1,425,424 Change in Crop Production Value -165,129,367 -1,448,503 Change in labor supply* -192,502,787 -1,688,621 5.3.2 Local Economy-Wide Impact of municipalities increase their incomes by NPR a 5 Percent Increase in Local Input 174 million (US$1.53 million) and NPR 166 million (US$1.46 million), respectively. Poor households Purchases by Businesses see substantially fewer benefits due to their Governments can increase local benefits from lack of productive capacity to take advantage of tourism by encouraging businesses to source such an intervention. more inputs locally. The LEWIE model was used to simulate the impact of a 5 percent increase in the amount of goods sourced locally 5.3.3 Local Economy-Wide Losses Due by businesses. This was done by increasing to COVID-19 local purchases by businesses (both services Just as increases in tourism and tourist spend- and retail) by 5 percent while holding outside ing have positive multiplier effects, negative purchases constant. The results are shown in shocks produce negative income multipliers in Table 15. local economies. The COVID-19 pandemic has A 5 percent increase in local purchases boosts resulted in substantial losses in tourism income local incomes by NPR 344 million (US$3.0 for Chitwan businesses. The LEWIE model can million), a sizeable increase. However, most simulate the impact of a one month loss of benefits accrue to non-poor households. Non- tourism on the local economy around Chitwan poor households in Khairahani and Ratnanagar table 15. Impact of a 5 Percent Increase in Local Input Purchases by Businesses LE WI E M o de l F in di n g s   Local business input purchase 5% increase in the amount purchased locally Income effects Results in NPR Results in US$ Changes in local economy incomes     Real (inflation-adjusted) Income 343,962,364 3,017,214 Changes in household incomes by location     Khairahani/Ratnanagar Poor 750,483 6,583 Khairahani/Ratnanagar Non-poor 174,441,807 1,530,191 Bharatpur Poor 2,600,586 22,812 Bharatpur Non-poor 166,169,488 1,457,627 E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 41 National Park. Tables 16 and 17 present the esti- NPR 33.3 million (US$290,000) in Bharatpur. mated impacts on income and production. Local retail revenues contract most, followed by services and other production and livestock The simulations show a reduction in real income activities. The loss to these local production of NPR 427.7 million (US$3.76 million) per month sectors is considerably larger than the loss to without tourists. Non-poor households lose local hotels. the most from this pandemic-induced shock, but poor households suffer significant losses All production activities contract, with total sales too. Each month without tourism reduces the losses ranging from NPR 5.7 million (US$50,000) income of poor households by NPR 9.55 million in the agricultural sector to NPR 187.6 million (US$80,000) in Khairahani and Ratnanagar and (US$1.65 million) in retail. table 16. Monthly Income Loss from No Tourism Income loss per month of lost tourism Values in Millions Values in Millions of NPR of US$ Loss in Local Economy Incomes Real (inflation-adjusted) Income 427.7 3.76 95% CIs [400.9,458.9] [3.53, 4.04] Loss in Household Real Incomes Khairahani/Ratnanagar Poor 9.55 0.08 Khairahani/Ratnanagar Non-Poor 167.6 1.47 Bharatpur Poor 33.3 0.29 Bharatpur Non-poor 206.0 1.81 Loss in User Committee Group Real Incomes 11.3 0.10 table 17. Monthly Production Losses from No Tourism Monthly Production Loss (in Monetary Value) Values in Millions Values in Millions of NPR of US$ Crops 5.7 0.05 Livestock 62 0.05 Retail 187.6 1.65 L E WIE M o de l F in di n g s Services and Other Production 105.6 0.93 Hotel 36.1 0.32 42 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL 6 Conclusions and Policy Recommen- dations ConclusionsandPolicyRecommen-dations E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 43 This study set out to make the case for greater of government spending. Furthermore, data investment of public resources in protected area limitations detailed in the report have meant management by estimating the local economic that not all mechanisms through which tourist impacts – direct and indirect – of tourism in spending benefits the local economy have been Nepal’s biodiversity-rich Chitwan National Park, considered. Local economic impacts of park through the application of the LEWIE model. Its management spending were not captured, and focus is on the local economy, defined as the buffer zone visits have not been included in the collection of households and businesses in the estimates, due to lack of reliable data on their buffer zone around the park and in the main numbers. Also, as with other ex-post econom- nearby market town. This focus was chosen in ic impact evaluations, we do not know with order to understand the potential of protect- certainty what the local economy looked like ed areas to benefit local households, which before the national park existed or before there often suffer negative effects of restrictions on was tourism. As tourism expands, economies natural resource use within protected areas, around protected areas evolve. Private and and human-wildlife conflict, and whose coop- public investments stimulate and transform local eration is critical to maintain the protected area economies in ways that the model is not able to by discouraging encroachment, poaching, and capture. Because of this, it is possible that this other threats. Economic development of the study understates the full economic impact of local economy is also a goal in and of itself, an nature-based tourism around Chitwan National additional reason to have a local focus. Park. On the other hand, it is also important to consider that large-scale tourism may degrade One of the key findings of the study is that the the natural asset which draws visitors, reducing local economic return per rupee of government economic impacts in the long-run. Finally, this spending on Chitwan National Park is about 7.6 study is not representative of the economies to 1. Public investment in protected areas not around other protected areas in Nepal, nor the only helps to conserve biodiversity, it also helps country’s protected area system as a whole. to make these protected areas more attractive Caution should be taken in extrapolating these to tourists – for example, by securing wildlife results, and studies of additional park contexts through anti-poaching measures or providing may be necessary to produce park-specific well-maintained safari trails. When tourists visit recommendations. protected areas, they not only spend money on park entry fees but also on hotels, meals, Government revenues from tourism in the na- transportation, souvenirs and other tourism tional park – gathered through park visitor fees, services. These expenditures directly benefit concessions, etc. – are significantly less than the tourism sector, but the benefits do not stop the expenditure on park protection and mainte- there. Tourism service providers hire labor nance, which also includes expenses incurred Co n clusi on s a n d Polic y Re co mme n - dati on s and source goods and services from the local by the army. This may give rise to the percep- economy, triggering a chain of benefits for tion that biodiversity conservation is a financial local businesses and households that are not burden, and not a source of revenue for Nepal. directly connected with the tourism sector. It is However, as noted above, the broader impacts the sum of these direct and indirect benefits that of the park on the local economy are more than produce the high economic return per rupee of seven times greater than the government’s park investment by the government. Investment expenditures on the park, making the park a in protected areas is therefore good for biodi- valuable development asset. versity conservation and for the development Expenditures by tourists visiting Chitwan NP of the local economy. generate significant income multipliers for It is important to note, however, that this is a households in the local economy, benefiting conservative estimate of the economic return households directly involved in the tourism per rupee of government spending on Chitwan sector, those who do not have contact with National Park. Only benefits to the local econ- tourists, and both poor and non-poor house- omy have been estimated. Tourists who visit holds. The study estimates that an additional protected areas also spend money outside the rupee spent by visitors at Chitwan National Park local economy – for example, while traveling to raises the total income of households around the protected area – and businesses around the the park by 1.78 rupees. Of this, 1.60 rupees go park source goods and services from outside to non-poor households and 0.18 rupees to poor the local economy, as well. Both these channels households. add to the economic return to Nepal per rupee 44 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL The large indirect impacts of Chitwan tourism with local communities are the three ingredients on local incomes suggest that studies which needed to meet the twin goals of development only consider tourism expenditures will under- and biodiversity conservation. estimate total impacts on the local economy, while over-emphasizing leakages from tourism activities outside the local economy. Protect Natural Assets Tourism generates a significant number of jobs, To promote biodiversity conservation and directly and indirectly. The study estimates that secure the natural assets which attract visitors, national park tourism generates 4,309 full-time it is critical that protected areas be conserved, equivalent jobs around Chitwan National Park. enhanced to reverse degradation, and gener- To put this employment impact into perspective, ally well-managed. This requires addressing it is equivalent to 2.8 percent of the working-age underlying factors contributing to the poor population around the park. performance of Nepal’s protected areas. The following actions are identified: The study also estimates the effects of hu- man-wildlife conflict on the local economy. Crop Increase public investment in protected area losses from wildlife incursions can result in large management: As indicated by this study, fund- losses in real income. The household surveys ing for protected areas results in high returns on revealed that animal incursions into farms investment. Public funding for park management around Chitwan National Park reduce crop is especially important, as well managed parks output by 9 percent. The direct and indirect attract tourists, strengthening the tourism sector impacts of these losses are valued at approxi- and providing livelihoods for local communities. mately NPR 333 million (US$2.9 million) to the Build capacity of protected area managers: local economy annually. Non-poor households It is important that protected area managers bear a larger brunt of this loss, as they have a are trained and have the experience to be larger capacity to grow crops. Although signifi- effective. To manage commercial and busi- cant, particularly to those who lose crops, total ness operations, managers should understand income losses from wildlife incursions are con- both protected area laws and policies, and the siderably less than income gains from tourism in business needs of tourism operators, and must Chitwan National Park. The value of tourism to manage commercial entities in accordance with the local economy of Chitwan is estimated to be protected area needs. While these needs may US$43.4 million annually. Moreover, since the vary depending on the protected area, educa- base run of the LEWIE model includes damages tion, experience, and training in certain fields from human-wildlife conflict, the impact of tour- will be helpful to support a commercial services ism is net of these losses. Households that incur program regardless of location, including: un- losses from animal invasions may or may not derstanding the legal framework for operators; also benefit from tourism in the protected area, developing contracts, authorizing instruments and therefore may need to be compensated for and solicit bids if applicable, monitoring and these losses. evaluating operators; data collection and ConclusionsandPolicyRecommen-dations In summary, the report finds that Nepal’s analysis; business acumen; negotiation skills, Chitwan National Park, an important tourist and asset management training if government attraction, not only protects biodiversity but aug- facilities are used by operators. By developing ments the local economy, providing income and training and on-the-job education in a commer- jobs for poor and non-poor households. Tourism cial services program, managers can develop to the park benefits those directly involved in these skills in their staff. the tourism sector, and those who are not. Manage the environmental footprint of tour- With over 23 percent of its land area under ism: While high tourist numbers generate a some form of protection, there is great potential high impact on the local economy, estimated for protected areas in Nepal to contribute to at US$43.4 million at Chitwan, these numbers development goals while maintaining the coun- may increase the environmental footprint of the try’s rich biodiversity asset base. Protected area tourism sector and degrade natural assets (see management challenges need to be addressed, Box 4; World Bank, 2021,for example). Thus, the tourism offerings promoted and diversified, and net benefit to the economy may be lower than benefits shared fairly with local communities. the net increase in incomes brought about by Protecting natural assets, growing and diversi- tourism. Conversely, the costs of mitigating the fying the tourism sector, and sharing benefits negative impacts of tourism (e.g., solid waste and wastewater management) are higher for E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 45 box 4. Solid Waste Management in Tourism in Nepal’s mountainous areas is crucial to local livelihoods, yet the waste generated by tourists threatens the natural areas that draw visitors from around the world. Solid waste management systems Nepal’s Mountain in Nepal are largely underdeveloped, particularly in rural areas, and mountainous landscapes add a Areas further challenge to processing waste. Collecting, transporting, treating, and disposing of waste requires system-wide investments. A recent World Bank study, Nepal: Sustainable Solid Waste Management in Mountain Areas (World Bank, 2021), examines solid waste management and stakeholder mindsets in the Annapurna Conservation Area. The study recommends a phased approach to solid waste management which strengthens local institutions, improves services and capacity, provides innovative waste collection in remote and rugged areas, and boosts the sustainability of waste management practices. Much of this strategy relies on local community participation and leadership. large numbers of low-spending visitors than for surveys are needed to understand the impacts low numbers of high-spending tourists. of tourism and how they may change over time. Information on the number of visitors to each Undertake regular Visitor Spending Effects park, and their spending habits, is important for Assessments at the national level: This study policy planning. Visitor surveys would ideally presented a methodology to assess the eco- be conducted on a rolling basis to capture nomic impacts of protected area tourism on seasonal trends in tourists’ behavior and be the local economy of a national park in Nepal. administered at the end of a visitor’s trip, such To argue for public resources, and to support as in the waiting lounge of outbound flights from planning and program design, for example, to Kathmandu. identify where tourism services can be im- proved, it is important that such assessments are conducted by the government regularly, and Grow and Diversify the Tourism at the national level. This will require systematic Sector collection of data on tourists, tourism business- es, local economies, and park management. Nepal has attracted growing numbers of tourists Therefore, a complementary recommendation to its protected areas; however, the country is to: implement regular visitor surveys for lags behind some of its neighbors in terms monitoring and evaluation. A key challenge for of numbers of visitors. Based on the World this study was the lack of tourist information, and Economic Forum (WEF) 2019 Travel and Tourism figure 5. Nepal Travel and Tourism Competitiveness Index Profile Co n clusi on s a n d Polic y Re co mme n - dati on s Performance Overview Key Score International Openness Price competitiveness 2.7 6.0 101st 15th Prioritization of Travel & Tourism Environmental sustainability 5.0 3.5 48th 134th ICT readiness Air transport infrastructure 3.5 2.3 108th 93rd Human resources Ground & port & labour market infrastructure 4.4 2.0 83rd 131st Tourist service Health & hygiene infrastructure 4.3 2.2 106th 126th Safety & Natural security resources 5.2 3.9 3.3 91st 33rd Cultural Business resources & environment business travel 4.0 113rd Overall Score 102nd 1.3 7 6 5 4 3 2 1 Score 1-7 (best) 1 2 3 4 5 6 7 Source: World Economic Forum (WEF, 2019) 46 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL Competitiveness ranking, Nepal scored 3.3 Growing and diversifying tourism beyond the out of a maximum of 7 points, and ranked low four parks that tourists currently visit will require overall: 102 out of 140 countries (WEF, 2019); policies, programs, and investments that go see Figure 5 below. Categories in which Nepal beyond protected areas. It will also be important scored poorly, and significantly below the global to assess Nepal’s protected areas and prioritize average include infrastructure (air and ground sites with potential to be developed in order transport and tourist service) and international to diversify Nepal’s tourism offerings. A recent openness. On the other hand, Nepal scored World Bank publication provides guidance to high for its natural resource assets: 33rd out of identify opportunities for the private sector and 140 countries. to select parks for development on this basis (see Box 5; World Bank, 2020). box 5. Selection of Protected Area Nepal boasts several destinations with potential to attract high-end to mid-range tourists to areas other than current popular destinations. A tourism destination is a physical space with tourism attractions and Destinations for resources in which a visitor spends at least one night. It has physical and administrative boundaries Phased Development defining its management, and images and perceptions defining its market competitiveness. According to this definition, and in consultation with stakeholders, the WBG has identified twelve destinations from the seven newly-formed administrative provinces (see Map 4). Smaller destinations have been regrouped into a single package with potential to link them as an integrated circuit and/or to brand them as a unified destination. map 4. Twelve Potential Tourism Destinations in Nepal ConclusionsandPolicyRecommen-dations These twelve destinations can be ranked by strong private sector development impacts. Opportunities for private sector investment are based on the desirability for growth in key sectors and the feasibility of overcoming constraints. Desirability and feasibility equate roughly to social returns (desirability) versus risk-adjusted private returns (feasibility) of investments, respectively, in each sector. A site needs to score highly on both criteria for the private sector to contribute meaningfully to development objectives—even if social returns are high, the private sector will not participate without attractive profit margins. By lever- aging the private sector and optimizing the use of scarce public resources, financing for development and growth can be maximized. Based on desirability/feasibility criteria, provinces 4 and 5 offer the best opportunities for private sector participation in tourism development. These provinces can improve and develop destinations which will diversify tourism toward high-end and mid-range markets. Mid-West (province 6), and Langtang and Gaurishankar (province 3) could also develop priority destinations. Far West Nepal (province 7) and Eastern Nepal destinations (province 1) are not considered top priorities considering access limitations for mid-range and high-end segments. Finally, Kathmandu valley (province 3), Everest (province 1), and Chitwan (province 3) are relatively mature markets with little diversification potential at the country level. Source: Sustainable Tourism Development in Nepal (World Bank 2020) E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 47 Another intervention to promote tourism in » Protection of concessioner investment – protected areas relates to concessions policies. There are no laws or regulations to stipulate The enabling legislation for biodiversity conser- the legal status of concessioner investments vation in Nepal is the National Parks and Wildlife upon contract termination, or when con- Conservation Act, 1973. The Act is strong, par- tracts come to the end of their natural term. ticularly regarding natural and cultural resource Investments are typically amortized over the protection, but does not provide for tourism term of the contract, or the next concessioner development in the park, visitor amenities, or may be required to assume any debt. the kinds of concessions and activities that will » Franchise fees – these provisions are absent generate public enjoyment of and support for from the current draft and are necessary the park. This is critical for economic develop- to explain and proscribe how fees to the ment in the park and surrounding communities. government will be determined. In many Furthermore, the Act only provides very general countries, franchise fees are established terms for the operation and regulation of tourism using an Internal Rate of Return or Return on concessions, and does not, for example, provide Investment process. for how these services are to be contracted. » Community award of concession – if the In 2018, the government drafted regulations Government desires to award contracts to lo- and guidance for establishing commercial cal community groups or peoples, then these activities: Procedures Relating to Operation and provisions and processes need to be stated, Regulation of Tourism Services in Protected and should be included in the draft. Areas (“Guidance”). The Guidance remains » Reasonableness of rates to visitors – current in draft and has not been finalized. Also, the guidance on rates is very prescriptive. Best Guidance falls short of providing clear steps practice recommends that the Guidance for the solicitation, award and management of provide the methodology for rate setting – commercial services/concessions in parks. The but not the rates themselves. Rates should Guidance does not contain any of the following vary based on market forces and the financial provisions that are generally accepted as best requirements of the investment. practices by countries with high performing concession programs: » Annual and periodic reviews – Guidance fails to describe how concessioners will be re- » Contract term limit provisions – the Guidance viewed. Guidance should require at least one should stipulate the maximum length for annual review based on the requirements and which a contract may be awarded in any standards in the contract. given circumstance. » Dispute Resolution – Guidance needs to » Methodology to determine appropriate clearly state how the government and the activities in a particular park – laws, regu- Co n clusi on s a n d Polic y Re co mme n - dati on s concessioner will resolve disputes. lations or guidance must clearly define how a park manager will determine whether or The regulatory components of protected not a particular activity is appropriate for the area concession regulations and policy in park area. Though the Act does require parks Nepal can be strengthened by finalizing the to have General Management Plans (GMPs) draft “Procedures Relating to Operation and which should include appropriate commercial Regulation of Tourism Services in Protected activities, many parks do not have GMPs. Areas” and ensuring that the document contains the necessary provisions to plan for, award, and » Solicitation, selection, evaluation & award manage concession contracts: procedures – the draft Guidance does not describe in detail how the contracting 1. Clearly state and define laws used to process should be conducted. Without these authorize and procure tourism concession provisions, neither the public nor potential contracts. concessioners can understand the process, 2. Consider basing guidance and policy com- and this may lead to a lack of transparency ponents on international best practices in and/or perceptions of unfairness. tourism concession management. » Standard concession contract provisions 3. Make it a high priority within the DNPWC to – concessions contracts need to be stan- finalize tourism concession guidance. dardized, and published, in the interests of transparency, and so that concessioners 4. Provide broad level guidance regarding the understand them. types of activities that are appropriate in parks and specific guidance for how parks 48 EC ONOMI C IM PACTS O F P ROTE C TE D A RE A TO URI S M ON LO CAL CO M M U N IT IES IN NE PAL may determine what activities are appropriate removal of threatening individual animals to un- for their particular protected area/location. inhabited areas, and planting crops that wildlife 5. Develop standardized concession contract species find unpalatable as a deterrent (Acharya provisions, contract term limits and types of et al., 2016; WWF, n.d.)therefore, may undermine contracts to be offered. public support for conservation. Although Nepal, with rich biodiversity, is doing well in its con- 6. Define the process DNPWC will use to solicit, servation efforts, human-wildlife conflicts have select and award concession contracts. been a major challenge in recent years. The a. Develop a detailed description of the lack of detailed information on the spatial and feasibility process; temporal patterns of human-wildlife conflicts at b. Determine the process for developing the national level impedes the development of the request for proposals (prospectus, effective conflict mitigation plans. We examined tender, etc.) and selection procedures; patterns of human injury and death caused by large mammals using data from attack events c. Develop contract award processes. and their spatiotemporal dimensions collected 7. Obtain public input and comment on the from a national survey of data available in Nepal regulatory requirements. over five years (2010–2014. Projects like WWF 8. Ensure transparency by publishing all regula- Nepal’s Terai Arc Landscape Project take the tions and guidance. idea of deterrent crops one step further: they work with communities to plant mentha as a crop fence against wildlife. Animals are de- Sharing Benefits with Local terred by the crop, and communities can gain Communities income from the use of mentha for menthol oil production. Enhancing public awareness As noted, development of local communities and protecting livelihoods by compensating around protected areas is a goal in and of itself. damages also reduces human-wildlife conflict Sharing the benefits from tourism to protected while allowing for conservation (Pant et al., areas with local communities furthers this goal. 2016)through household questionnaire surveys, Moreover, when local communities benefit from key informant interviews, site observations, tourism to protected areas, they are incen- and analysis of the reported cases of damage tivized to support conservation efforts and to during January 2008–December 2012. During discourage encroachment, poaching, and other this 5-year period 290 incidents of damage by activities that lead to the degradation of protect- elephants were reported, with a high concen- ed areas. tration of incidents in a few locations. Property While the income multiplier for local households damage (53%. from visitor spending at Chitwan is significant, Strengthen linkages between the tourism value there are opportunities for government poli- chain and local economy: The government can cies and programs to further enhance impacts strengthen linkages across the tourism value of tourism to protected areas on the local chain and improve benefit-sharing mechanisms ConclusionsandPolicyRecommen-dations economy. to enhance existing multipliers. The methodol- Mitigate and compensate for human-wildlife ogy used in this study simulates other methods conflict impacts: The government can strength- that the government could adopt to improve en its existing compensation policy for wildlife benefits reaching communities. damages. The policy was introduced in 2009 » Supporting local producers and households and prioritizes compensation for human death to provide more of the goods and services and injury, followed by livestock loss, crop needed by tourism businesses. Most hotels destruction, stored grain loss, and housing (74 percent) purchase inputs locally. However, damage. This compensation scheme is seen the study finds that an additional 5 percent as cumbersome and inconsistent with other increase in local purchases would increase government compensation for life loss, e.g., in local incomes by US$3.0 million (NPR 344 cases of riots or traffic casualties. Beyond com- million). Most of these benefits accrue to pensation, species-specific conservation actions non-poor households. Poor households see are needed to reduce human-wildlife conflict. substantially less benefit due to their lack of Strategies to mitigate losses from human-wildlife productive capacity to take advantage of such conflict include electric fencing to limit wildlife an intervention. movement, use of predator-proof livestock corrals, wildlife monitoring from watchtowers, E C ONOMI C I M PACTS O F PROTE CTE D AR E A TOU R IS M ON LO CAL CO M M U N IT IES IN NEPAL 49 box 6. A Green Recovery Initiative On September 23, 2021, the Government of Nepal and development partners endorsed the landmark ‘Kathmandu Declaration to develop a strategic action plan for Nepal towards Green, Resilient, and for Nepal Inclusive Development (GRID). The Declaration was endorsed by the Ministry of Finance on behalf of Government of Nepal, Asian Development Bank, Australia, European Union, Finland, France, Germany, International Monetary Fund, Norway, Republic of Korea, Switzerland, United Kingdom, United Nations, United States, and the World Bank at a high-level roundtable event Nepal’s Transition to Green, Resilient, and Inclusive Development (GRID) for Sustainable Recovery, Growth, and Jobs. Under the Kathmandu Declaration, Nepal’s develop- ment partners have identified up to $4.2 billion in potential future support, in addition to the $3.2 billion in previously committed resources to support GRID. The GRID Strategic Action Plan will coordinate international and domestic financing for priority invest- ments in Nepal’s recovery from the crisis caused by the COVID-19 pandemic. The government and development partners intend to scale up support for such areas as sustainable tourism, renewable energy, cleaner transport and resilient roads, integrated solid waste management, sustainable forest man- agement, watershed protection and water supply, biodiversity conservation, adaptive social protection, climate-smart agriculture, and sustainable cities. » Additionally, training women could support Khairahani and Ratnanagar and NPR 33.3 million increased labor productivity and inclusivity. In (US$290,000) in Bharatpur. All production activi- Nepal, women represent 20 percent of the ties lose, with sales losses ranging from NPR 5.7 tourism labor force compared to the global million (US$50,000) in agriculture to NPR 187.6 average of 61 percent (IFC, 2017). Moreover, million (US$1.65 million) in retail. As the pan- they generally perform low-skilled, menial demic continues, losses will continue to accrue, tasks. Providing formal training to women to and the future of tourism-dependent livelihoods participate in community-level committees remains uncertain. and to attain management positions in the As the government pursues economic recovery, tourism industry will help them to earn higher there is a unique opportunity for the country to incomes. ‘build back greener and better’ (see Box 6). This Finally, as shown in the previous section, the entails continuing efforts on wildlife, forest and COVID-19 pandemic has resulted in substantial PA management to protect natural assets. losses in tourism incomes at Chitwan National Creating jobs through labor-intensive civil works Park. The study finds that a complete loss to establish green infrastructure around national of tourism to Chitwan National Park reduces parks and provide alternative livelihoods for peo- household real income by NPR 427.7million ple who have lost their jobs or businesses would (US$3.76 million) per month. Each month stimulate economic activity while improving Co n clusi on s a n d Polic y Re co mme n - dati on s without tourism reduces the income of poor environmental outcomes – a green recovery. households by NPR 9.55 million (US$80,000) in References Acharya, K. P. (2016). A walk to zero poaching for rhinos in Nepal. Department of National Parks and Wildlife Conservation. http://www.rhinoresourcecenter.com/index. php?s=1&act=refs&CODE=ref_detail&id=1491549313 Acharya, K. P., Paudel, P. K., Neupane, P. R., & Köhl, M. (2016). Human-Wildlife Conflicts in Nepal: Patterns of Human Fatalities and Injuries Caused by Large Mammals. PLOS ONE, 11(9), e0161717. https://doi.org/10.1371/journal.pone.0161717 Basnet, S. (2016, April 1). Restoring resorts: The debate about whether or not to allow wildlife resorts inside national parks flares up again. http://archive.nepalitimes.com/article/ Nepali-Times-Buzz/More-trouble-in-Chitwan-National-Park,2956 Bhattarai, B. R., Wright, W., Poudel, B. S., Aryal, A., Yadav, B. P., & Wagle, R. (2017). Shifting paradigms for Nepal’s protected areas: History, challenges and relationships. Journal of Mountain Science, 14(5), 964–979. https://doi.org/10.1007/s11629-016-3980-9 Budhathoki, P. (2004). Linking communities with conservation in developing countries: Buffer zone management initiatives in Nepal. Oryx, 38(3), 334–341. https://doi.org/10.1017/ S0030605304000584 Cullinane Thomas, C., & Koontz, L. (2020). 2019 National Park Visitor Spending Effects: Economic Contributions to Local Communities, States, and the Nation (Natural Resource Report NPS/ NRSS/EQD/NRR—2020/2110). National Park Service. https://www.nps.gov/subjects/social- science/vse.htm Dixon, P. B., & Jorgenson, D. W. (Eds.). (2013). Handbook of computable general equilibrium model- ing. Elsevier. DNPWC. (2019). Chitwan National Park Brochure. http://www.dnpwc.gov.np/media/publication/ Chitwan_brochure_2019.pdf DNPWC. (2020). Department of National Parks and Wildlife Conservation. http://www.dnpwc.gov.np/ en/ Dudley, N., & Stolton, S. (Eds.). (2008). Defining Protected Areas: An international conference in Almeria, Spain, May 2007. IUCN. https://portals.iucn.org/library/sites/library/files/docu- ments/2008-106.pdf Government of Nepal. (n.d.). Chitwan National Park. Ministry of Forests and Environment. http://dnp- wc.gov.np/en/conservation-area-detail/78/ Government of Nepal. (2018). 25 Years of Achievements on Biodiversity Conservation in Nepal. Ministry of Forests and Environment. Government of Nepal. (2019). Economic Survey 2018/19. Ministry of Finance. https://mof. gov.np/uploads/document/file/compiled%20economic%20Survey%20english%20 7-25_20191111101758.pdf Government of Nepal. (2020). Nepal Tourism Statistics 2019. Ministry of Culture, Tourism & Civil Aviation. https://www.tourism.gov.np/files/NOTICE%20MANAGER_FILES/Nepal_%20tour- ism_statics_2019.pdf Lamichhane, B. R., Persoon, G. A., Leirs, H., Poudel, S., Subedi, N., Pokheral, C. P., Bhattarai, S., Thapaliya, B. P., & Iongh, H. H. de. (2018). Spatio-temporal patterns of attacks on human and economic losses from wildlife in Chitwan National Park, Nepal. PLOS ONE, 13(4), e0195373. https://doi.org/10.1371/journal.pone.0195373 Pant, G., Dhakal, M., Pradhan, N. M. B., Leverington, F., & Hockings, M. (2016). Nature and extent of human–elephant Elephas maximus conflict in central Nepal. Oryx, 50(4), 724–731. https:// doi.org/10.1017/S0030605315000381 Parks Canada. (2019). Parks Canada Agency—Development Plan. Paudel, N. S., Budhathoki, P., & Sharma, U. R. (2007). Buffer Zones: New Frontiers for Participatory Conservation? Journal of Forest and Livelihood, 6(2), 44–53. Singh, I., Squire, L., & Strauss, J. (Eds.). (1986). Agricultural household models: Extensions, applications, and policy. Johns Hopkins University Press. https://documents.world- bank.org/en/publication/documents-reports/documentdetail/621291468739297175/ Agricultural-household-models-extensions-applications-and-policy Taylor, J. E., & Filipski, M. J. (2014). Beyond Experiments in Development Economics: Local Economy- wide Impact Evaluation. Oxford University Press. Thakali, S., Peniston, B., Basnet, G., & Shrestha, M. (2018). Conservation and Prosperity in New Federal Nepal: Opportunities and Challenges. The Asia Foundation. https://asiafoundation.org/publication/ conservation-and-prosperity-in-new-federal-nepal-opportunities-and-challenges/ US NPS. (2019). National Park Visitor Spending Contributed $40 Billion to U.S. Economy—Office of Communications (U.S. National Park Service). https://www.nps.gov/orgs/1207/nation- al-park-visitor-spending-contributed-40-billion-to-u-s-economy.htm WEF. (2019). Country Profiles: Travel & Tourism Competitiveness Index2019 edition. Travel and Tourism Competitiveness Report 2019. https://reports.weforum.org/ travel-and-tourism-competitiveness-report-2019/country-profiles/#economy=ZMB World Bank. (2020). Sustainable Tourism Development in Nepal. World Bank. World Bank. (2021). Nepal: Sustainable Solid Waste Management in Mountain Areas. World Bank Group. WTTC. (2021). Nepal 2021 Annual Research: Key Highlights. World Travel & Tourism Council. https:// wttc.org/Research/Economic-Impact/Data-Gateway WWF. (n.d.). The Terai Arc Landscape Project (TAL)—Human Wildlife Conflicts. https://www.wwfnepal. org/about_wwf/where_we_work/tal/project/human_wildlife_conflicts/ 52 BA NK I NG ON PROTE C TE D A RE A S ANNEX 1 Summary of Data Collection Methodology Households and local businesses was voluntary; 3) that not all members of the surveys household needed to be present; and 4) that information given by participants would be Sites for the primary survey were located in the confidential. In cases where master lists of Khairahani, Ratnanagar and Bharatpur munic- households were available, the first and second ipalities. Four to five villages were randomly visits were combined into a single visit whenev- selected from each municipality from a master er possible. Once households consented to the list of roughly 20 villages per municipality. interview, they were confirmed on the list. If they Roughly 50 households were interviewed from declined to be interviewed, a nearest neighbor each randomly selected village, resulting in a household was contacted as a replacement. final sample size of 596 households across 12 On the third and final visit, the guides took the villages. enumerators to the designated households to Three supplemental questionnaires were conduct the survey. One village (or village clus- administered independently: (i) a survey of in- ter) was visited daily, allowing field supervisors dependent businesses operating in the nearby to be available when questions arose. Overall, main market (including Bharatpur; the question- an average of 50 households were sampled naire was identical to the business module of each day from each village/village cluster, giving the household survey questionnaire); (ii) a user a sample of 338 households in Khairahani and committee survey of the six user committees Ratnanagar and 259 households in Bharatpur. in the two municipalities; and (iii) a survey of Table A1.1 gives the number of sampled house- hotel owners in the Khairahani, Ratnanagar and holds and estimated populations from each of Bharatpur municipalities. the two study sites. Access, permission and enumeration of villages During the enumeration process, additional were addressed over three visits. In the initial business-specific surveys were conducted in vil- visit, members of the team spoke with village lages and nearby market towns. Lacking access leaders, and four members of the communi- to a master list of businesses, an every-oth- ty were hired as guides. During the first visit, er-business approach was adopted, a simple team members carefully explained the purpose procedure, given that businesses typically were of the study and sought permission for the lined up along the main street. As with the survey. Another reason for this visit was to list household surveys, owner-operator participa- households in the community. Upon receiving tion in the business surveys was voluntary. A N N EX ES permission from village leaders to conduct the surveys and list households, a random selec- tion method was used to identify households table A1.1. Sample Sizes and Estimated for the survey. This list was returned to village Populations leaders and guides on the second visit, with the 50–60 randomly selected households marked Khairahani/ Bharatpur (based on number of households in the village). Ratnanagar The leaders and guides were asked to explain • Population 68,854 83,476 the following to the participating households: 1) the purpose of the study and rough length • Sampled 337 259 of the survey; 2) that participation in the study Households 53 User committee surveys were administered by a Tourism Businesses Survey local guide who was hired for the duration of the study. The survey instrument for user commit- Key tourism nodes are the lodges inside and tees was developed with assistance from the outside national parks which provide visitors guide, who was subsequently trained on the with accommodation, meals, transport, and questionnaire prior to data collection. activities such as elephant riding, visiting the crocodile breeding center, cycling, and other local activities. Tourist Survey Data on lodge incomes and expenditures are Tourists staying at hotels in the Chitwan region proprietary, and difficult to obtain. For this study, were surveyed by National Trust for Nature hotel surveys were administered by trained Conservation (NTNC) staff after the primary field- NTNC staff. All hotels near Chitwan National work had concluded. The survey was designed Park were approached for the survey. to capture information on how much money tourists spent during their stay, and where they spent it, as an input for the LEWIE model. Sixty- seven tourist groups were surveyed. A N N E XE S 54 BA NK I NG ON PROTE C TE D A RE A S ANNEX 2 Summary Statistics Tourists and Tourism Businesses survey). Diverse ethnicities exist within Chitwan; Khairahani and Ratnanagar have a higher per- Table A2.1 summarizes visitor activities at centage of Tharu (30.6 percent) and Brahman Chitwan. The most popular activity was jeep sa- (19.0 percent) residents than Bharatpur (9.7 faris, followed by elephant safaris, Tharu dance percent and 13.5 percent, respectively). events and other cultural programs. Smaller numbers of visitors took canoe trips, went bird Table A2.4 presents the distribution of wage watching, or took walking safaris. work types. Overall, the distribution of employ- ment types is similar at the two sites, though Tourists were asked whether they would re- a slightly higher percentage of workers in visit the park and recommend Chitwan to their Bharatpur work in agriculture, construction, and friends and family. Ninety-four percent answered services, including hotels, restaurants, and tour that they would revisit the park, and 95% stated operation. that they would recommend it. Forty-two per- cent rated the quality of facilities as average, 35 Most workers employed in Chitwan work full- percent as excellent, and 16 percent as above time, with over half employed for more than average. 150 days in 2019 (Table A2.5). Very few workers have a second job. Annual wages for residents Animal sightings vary depending upon the time in Khairahani/Ratnanagar and Bharatpur, re- of year, the time of day, and chance. Most visi- spectively, are NPR 168,732 (US$1,400) and NPR tors (96 percent) spotted rhino at Chitwan (Table 133,533 (US$996), corresponding to an average A2.2); 45 percent sighted gharial, approximately daily wage of NPR 853 (US$7.5) and NPR 791 a quarter saw elephant, and smaller percent- (US$6.9). At both sites, workers in tourism-re- ages spotted the more elusive sloth bear, tiger, lated industries earn slightly below the average and leopard. wage. The difference between average and tourism-sector wages is statistically significant in Households Bharatpur but not in Khairahani/Ratnanagar. Table A2.3 reports the distribution of survey Crop production is relatively small-scale and respondents’ ethnicities (self-identified in the carried out largely on family farms. Local labor table a2.1. Activities of Chitwan Visitors table a2.2. Animal Sightings at Chitwan Activity % Participating Animal % Sighting while at Chitwan A N N EX ES Jeep safari 72% Rhino 96% Elephant safari 45% Tiger 6% Tharu dance 39% Leopard 1% Other cultural programs 32% Elephant 27% Canoeing 19% Gharial 45% Sloth bear 6% Bird watching 16% Walking safari 13% is hired to plant and harvest. Figure A2.1 shows Temple excursion 4% 55 table a2.3. Distribution of Ethnicities in the table a2.4. Distribution of Employment Type Household Sample Ethnicity Khairahani / Bharatpur   Khairahani / Bharatpur Ratnanagar Ratnanagar Tharu 30.6% 9.7% Domestic 0.08 0.07 Bot 3.0% 9.7% Agriculture 0.13 0.20 Majhi 0.0% 1.5% Store/Factory/Food Processing 0.09 0.11 Tamang 0.6% 3.5% Construction 0.16 0.18 Darai 6.5% 1.5% Beauty/Transport 0.11 0.11 Brahman 19.0% 13.5% School 0.12 0.03 Magar 0.9% 5.4% Government 0.04 0.04 Kumal 0.0% 13.5% Private Sector Office Work 0.08 0.08 Pariyar 0.3% 3.1% Hotels/Restaurants/Tour Operators 0.13 0.15 Mahato 1.8% 3.5% Other Services 0.06 0.03 Other 37.4% 35.1% table a2.5. Wage Income and Employment Survey Site Days Share Annual Average Share Share Hotel/ Worked Working > Wage Wage Per with Working Restaurant/ 150 Days Income Day (NPR) Second in Hotels/ Tour Operator (NPR) Job Restaurants/ Wage Tour Operation Khaira/ Mean 211.1 0.70 168,732 853.0 0.021 0.14 811.0 Ratn N = 503 SD (108.7) (0.46) (142,625) (990.5) (0.14) (0.35) (482.4) Bharatpur Mean 198.4 0.59 133,535 791.6 0.016 0.13 579.64 N = 473 SD (113.4) (0.49) (105,063) (976.4) (0.13) (0.34) (293.8) figure a2.1. Crops Grown by Plot 3% Fruit/Vegetables 2% Lentils 3% Lentils 1% Tubers 3% Tubers 3% Fruit/Vegetables 15% Other Cereals 16% Mustard Khairahani/ Ratnanagar 51% Rice Bharatpur 44% Rice A N N E XE S 26% Mustard 32% Other Cereals 56 BA NK I NG ON PROTE C TE D A RE A S table a2.6. Crop Acreage, Production and Input Use (Plot Level) Survey Site Average Plot Size Average Family % Hired Labor Inputs (Square Meters) Harvest Value Labor days Pesticides Fertilizer Khaira/Ratn Mean 3,743 37,398 81.2 0.94 0.78 0.90 N = 529 SD (7,858.6) (43,500) (84.8) (0.25) (0.41) (0.31) Bharatpur Mean 3,195 32,138 64.5 0.95 0.43 0.82 N = 320 SD (3,937.1) (94,497) (47.8) (0.22) (0.50) (0.38) table a2.7. Crop Use and Sales Share Share of Lodge Share Spoilage Share Share Wildlife Selling  Crop Sold§ Sales§ Consumed to Stored Damage* Gifts Khaira/Ratn Mean 0.68 0.30 0.03 0.45 0.05 0.01 0.17 9.50% N=376 SD (0.47) (0.35) (0.17) (0.36) (0.12) (0.05) (0.26) (0.2) Bharatpur Mean 0.48 0.18 0.02 0.57 0.04 0.01 0.15 9.30% N=86 SD (0.50) (0.31) (0.13) (0.38) (0.13) (0.06) (0.26) (0.19) Source: World Bank Survey § Share sold and Share selling to lodges conditional on sales * Percentage loss in harvest attributable to wildlife the share of household plots cultivated for is lower, at 43 percent and 82 percent of plots, each crop in the year prior to the survey. The respectively. most commonly grown crop at both sites is rice: Table A2.7 reports sales and other uses of crops 52 percent of household plots in Khairahani/ at the two sites. Sixty-eight percent of house- Ratnanagar and 48 percent in Bharatpur. Other holds in Khairahani/Ratnanagar and 48 percent common crops include mustard in Khairahani/ in Bharatpur sold a portion of their crops during Ratnanagar and other cereals (maize, millet and the 12 months prior to the survey. Farmers wheat) in Bharatpur. Rice and cereals are pro- selling their crops sold around 30 percent of the duced mainly for home consumption, whereas value of their harvests in Khairahani/Ratnanagar mustard is an important cash crop. and 18 percent in Bharatpur. Only a small Table A2.6 reports crop acreage, production, percentage of households sold their produce labor, and other input demands at the plot directly to hotels or resorts. Households re- level. The average plot size is slightly larger in ported losing around 5 percent of their harvest Khairahani/Ratnanagar (0.92 acres, 3,743 m2) values to spoilage, and having approximately than Bharatpur (0.79 acres, 3,195 m2). Families 15 percent in storage at the time of the survey. spend 81.2 and 65.4 person-days per year The survey asked households to estimate how tending to their crops in Khairahani/Ratnanagar much, if any, of their crop production was lost to and Bharatpur, respectively. Use of pesticides damage from wildlife (mostly boars, elephants, and fertilizers is fairly common: Khairahani/ and rhinos) in the 12 months preceding the A N N EX ES Ratnanagar households apply pesticides to 78 survey. On average, households reported losing percent of plots and fertilizer to 90 percent of 9.3–9.5 percent of their production to wildlife plots. In Bharatpur, pesticide and fertilizer use encroachment. 57 Livestock from markets or other households inside the municipalities are 88 percent and 90 percent Figure A2.2 shows species shares for live- for Khairahani/Ratnanagar and Bharatpur, stock at the two sites. Livestock holdings differ respectively. substantially between the sites. Livestock in Khairahani/Ratnanagar consists mainly of cattle (buffalo) and pigs, which together constitute Local Businesses 78 percent of livestock holdings. In Bharatpur, On average, retail businesses are open around large livestock are less important, but chickens, 11 months of the year and services close to ducks and other birds account for 52 percent of year-round (Table A2.9). Services in the sample livestock. have higher average asset values than retail figure A2.2. Composition of Total Value Table A2.8 summarizes establishments (NPR 3,256,000, or US$ 28,500, of Livestock Holdings the value, uses, and input compared with NPR 1,618,000, or US$ 14,200). expenditures on livestock However, monthly revenues are higher for retail: in the two municipalities. NPR 299,404 (US$ 2,626), compared with NPR 3% Doves/Pigeons/Ducks 5% Goats While many residents in 196,986 (US$1,728) in services. Thirty-eight 7% Chickens Khairahani/Ratnanagar own percent of retail businesses and 48 percent buffalo and other large of services hire labor. On average, rent and 7% Horses livestock, the average size, transport costs are similar for the two business Khairahani/ 40% and hence value of their types. Average monthly profits are higher for re- Ratnanagar Cattle herds is limited. Livestock tail: NPR 46,000 (US$404), versus NPR 38,000 owners in Bharatpur, on (US$333) for services. average, have close to Businesses, like households, can stimulate local 38% Pigs three times the herd values incomes through their expenditures. Table A2.10 of farmers from Khairahani/ summarizes input purchases by businesses at Ratnanagar. Annual ex- the two sites. Both retail and service operations 3% Goats 1% Horses penditures on veterinary purchase crops, and over 95 percent of these 15% Doves/ care and feed are much purchases are local—that is, within the same Pigeons/Ducks higher in Bharatpur (NPR municipality. Retail businesses that sell livestock 27,000, or US$236) than and aquacultural products (e.g., butchers and Khairahani/Ratnanagar supermarkets) buy 83 percent of their livestock (NPR 5,800, or US$51). Bharatpur 37% and 89 percent of their aquacultural products Chickens Around a quarter of house- from producers inside Chitwan; while restau- holds sold livestock in 21% Pigs rants source 100 percent and 90 percent of the 12 months prior to the these products locally. Much of the merchandise survey. Among Khairahani/ sold by retail establishments originates out- Ratnanagar residents 23% Cattle side Chitwan, but a large share of services are selling livestock, 13 percent non-tradables procured locally. Overall, Chitwan sold to local lodges/hotels, businesses purchase a significant amount of compared with 30 percent their inputs locally, and their expenditures create of households in Bharatpur. income-growth linkages with other production Most livestock trading hap- activities in the region. pens locally: percentages of livestock purchased table A2.8. Livestock and Inputs A N N E XE S Survey Site Total Value Share Sales Purchase Input Expenditure Consumed Share Local Share Pen/Cage Local Share§ Vet & Feed Selling Share§ Buying Maintenance Khaira/ Mean 29,005 0.06 0.28 0.13 0.10 0.88 66.20 5,759.0 Ratn SD (122,515) (0.12) (0.45) (0.39) (0.30) (0.33) (198.4) (51,272) Bharatpur Mean 88,066 0.04 0.21 0.3 0.07 0.9 26.24 27,306.1 SD (197,383) (0.12) (0.41) (0.60) (0.25) (0.31) (99.7) (178,276.9) Source: World Bank Survey § Share of sales/purchases within the municipality 58 BA NK I NG ON PROTE C TE D A RE A S table A2.9. Business Operations Sector Months Labor Monthly Monthly Asset Monthly Monthly Operated Rent Transport Value Revenue Profit # Family Cost % Hiring Members Retail Mean 10.99 38.2% 1.62 10,899 7,589 1,617,857 299,404 45,563 SD (2.41) (49%) (1.14) (16,757.7) (32,438) (2,975,636) (599,283) (96,366) Service Mean 11.54 47.5% 1.95 9,703 8,743 3,255,814 196,986 37,569 SD (1.18) (50%) (1.53) (12,532.6) (51,123) (7,688,241) (390,556) (48,057) table A2.10. Business Input Purchases Sector Monthly Purchases Aquacultural Crops Livestock Products Services Retail Goods Products NPR % local NPR % local NPR % local NPR % local NPR % local Retail Mean 17,919 95.0% 1,362 83.0% 26 89.0% 3,849 86.5% 30,652 80.7% N = 93 SD (54,871) (14%) (6,881) (31%) (173) (19%) (12,474) (19%) (101,932) (37%) Service Mean 4,137 97.2% 3,828 100.0% 764 80.0% 1,578 93.0% 17,540 83.0% N = 63 SD (14,777) (12%) (10,857) - (2,523) (42%) (5,380) (26%) (45,721) (33%) Figure A2.3 presents the number of businesses in Khairahani/Ratnanagar, a finding consistent started per year in Khairahani/Ratnanagar and with increasing tourism to the region over the Bharatpur. These data show an increasing rate same period. of business startup in recent years, particularly figure A2.3. Number of Businesses Created Per Year Businesses Created Per Year, Khairahani/Ratnanagar Businesses Created Per Year, Bharatpur 20 8 7 15 6 Businesses Created Businesses Created 5 10 4 3 A N N EX ES 5 2 1 0 0