THE ROLE OF ECONOMIC INSTRUMENT
IN MEDITERRANEAN COASTAL ZONE MANAGEMENT IN EGYPT
BY
DR. AHMED BARRANIA
SENIOR ECONOMIST
INSTITUTE OF NATIONAL PLANNING
CAIRO, EGYPT
JUNE, 1999
I. Introduction
The coastal zone of great environmental and economic significant to Egypt. Most of the Egyptian coast has a diversity of natural coastal subsystems and habitats. These are: the coastal lakes, salt marches, mud flats, beaches and dune complex along the Mediterranean coast; the mangroves and coastal reefs in the Red Sea; and the related coastal and marine biodiversity (population of coastal migrating birds, turtle, and great variety of fish species).
The population of Egyptian coastal urban agglomeration amounts to about 8 million, living no more than 60 km inland. The present estimations are that 15 million Egyptians will be living in the zone under the influence of the sea, by the year 2000. The coastal zone encompasses more than 40% of the Egyptian industry and is subject to extensive urban and tourism development. Other important development related irrigation and land reclamation, infrastructure and harbors. Hence, from an economic point of view the coastal zone of Egypt is very important area, containing substantial capital investments.
Coastal zone is under severe and increasing pressure. A number of factors contribute to this situation: population growth and related urbanization; polluting industrial and transport activities, tourism and recreation development; intensified of coastal waters for fishing and other uses and conflicting uses of coastal resources.
Much attention has been paid lately to the monitoring the current state of coastal zone, especially to environmental trend monitoring. In spite of that, these areas are suffering from sever degradation.
One of the major questions for management of sustainable development is: what types of instruments, regulatory and economic, are needed to implement policies. Regulatory instruments have been used as basic equipment for carrying out coastal zone management. However, they are most often considered in effective or with small effect.
Modern management approach to the environmental protection is based largely on the use of economic instruments. The application of economic instruments in many countries proved to be effective, promotive, stimulative and restrictive, or in other words, they help to achieve quick change of actual situation.
The present paper deals with the state of the application of economic instruments in Egypt, as well as action to be taken to improve the practice therein.
II. Main natural and economic characteristics of the Egyptian Mediterranean coastal zone
To understand specific context of the application of economic instruments and their efficiency, it is worth to give a brief on the nature and economic characteristics of the area in concern.
Based on the definition that coastal area is an ecosystem with strong interaction between the sea and the land, the Mediterranean coastal zone of Egypt consists of the coastal strip extends from Sallum in the west to Rafaa in the east and littoral lakes and lagoons (Mariut, Idku, Burullus, Manzala, Port Fuad and Bardwill) with the land surrounding them. Accurate estimate of this coastal zone area is not available at present.
The Egyptian coast line is about 1100 km. long which may divided into three geographic sub-zones, each of them with different geographic, economic, social and cultural properties:
i. Western sub-zone, has a length of about 600 km. most of the population are nomadic tribes and population density is low (0.76 person/sq. km.)
ii. Central zone has a length of about 300 km. most of which extend a long the Nile Delta. This sub-zone is over populated (about 2632 persons/ km2.).
iii. Eastern sub-zone has a length of 200 km. The population density is relatively low (3.3 person/ km2.).
The total population of the coastal zone was estimated at about 9 million in 1997. The Central sub-zone alone had about 95% of the total population.
The Western and Eastern sub-zones are located in an arid and semi-desertic area where the rainfall is very scarce. The average is 100 mm yearly. While in the Central sub-zone the rainfall range between 28-124 mm.yearly.
The Western and Eastern sub-zones are less developed comparing with Central sub-zone. The main economic activities in Western and Eastern sub-zones are recreation, tourism, fishing and grazing. Agricultural is of marginal importance. As for Central sub-zone activities are agriculture, industry, recreation, tourism, transportation and commerce. About 35% of Egyptian industry are concentrated in Alexandria region only.
The leading industries are textile, chemical, paper, metal, cement, construction materials, petroleum and oil & gas extraction, food, tannery and plastic industries. Economic development plans for the coastal area give priorities to develop tourism, agriculture and fisheries (capture and culture).
The rural-urban migration process proofed to be dangerous, as the urban coastal governorates are not developed to absorb the population increase. Thus many problems such as increasing of living costs, pollution, crowding, higher population density and insufficient of services become evident.
As far current economic activities are based on development of industry, agriculture, tourism and transportation, certain conflicts occur between development and nature resources. These include: unrational use of valuable land for other uses, discharge of only primary treated waste water into the sea and lakes, inappropriate solid waste disposal, and over fishing. The conflict between agriculture and urbanization from one hand and fishing from the other is the most serious problem.
Remarkable changes in the hydrographic and ecological conditions of the coastal area have been occurred after the construction of the Aswan High Dam. Fishing industry was affected.
(III) Coastal resources management:
Responsibilities, objectives and implementation policies are defined on national level. It is the responsibility of central government to provide funds for environmental protection. In fact, the protection of coastal natural resources is the responsibility of various ministries within their original legislative competencies in that particular segment. All management operations are exercised on ministerial level. Poor coordination between different bodies is the main obstacle hamper management of conflicts and synergy occur between activities to assure the most appropriate use of coastal zone in whole.
Recently Egypt has an established coastal resources management system based on general management systems and their characteristics are the following:
· they are centralized
· most of them are structured by territory
· they operate through local level.
There are two categories of instruments applied in the field of environmental management: regulatory and economic. However, the majority of these instruments are of general nature and not necessarily specific of coastal zones.
(i) Regulatory instruments;
Regulatory instruments can be described as institutional measures aimed at directly influencing the environmental performance of the polluters-through licensing, setting of standers, zoning.
Laws, by-laws, regulations, decisions, governmental decrees, etc. are usually called "regulatory instruments". In Egypt, regulatory instruments have been used as basic equipment for carrying out coastal zone management.
Regulatory instruments often have a monetary component attached to them which are either fines or disciplinary measures. Fines are applied in many spheres, the major ones are:
q Fines for water protection, this fine are collected in accordance with water River Nile and other water channels protection law no. 48 / 1982. These fines are paid by all firms, institutions and individuals, who discharge wastewater, sewage or any low standard water. The fines proceeds are used to provide financial assistance for establishment of waste water treatment plants, to cover the cost of pollutants removal and to reward the inspectors
q Fines for water resources management, this fines are based on the articles no. 157-159 included in the law no. 48 / 1982. The purpose of the fines is to insure the proper use of water resources. The fines proceeds are used for the same purposes mentioned for water protection.
q Fines for rezoning of agricultural land, this fines are based on the law no. 53 /1966. The purpose of the fines is to stop the process of loosing of furtile land. The law does not indicate the use of the fines" proceeds.
Despite fines have been used as the basic mean for carrying out resources management, they are most often considered with small effect and the use of their proceeds is very doubtful. (ii) Economic instruments:
Economic instruments could be labeled "economic" insofar as they affect estimates of cost and benefit. Economic instruments leave actors free to respond to certain stimuli in away they themselves think most beneficial.
Charges and resource pricing, subsides, deposit-refund system, market creation and financial enforcement incentives are all types of economic instruments. Most often used economic instruments in practice are charges, while other types of instruments are not well known and they’re not often applied in Egypt. Charges are applied mostly in the field of water protection, solid urban waste disposal, conservation 0f fisheries, land and petrol. It is estimated that economic instruments will have great importance in the future.
IV. The role of economic instruments in coastal zone management in Egypt
The above-mentioned discussions have been indicated that the management of coastal zone of Egypt is not efficient, and that the natural resources are being excessively exploited, polluted and destroyed.
One of the major questions for management of sustainable development is what type of instruments is needed to implement policies?
From the above analysis, the regulatory instruments were found inefficient particularly in their role to promote technological progress in clean technologies or in new pollution control process. There was enhancement with the relative speed of their effectiveness. This was the case with northern lakes where the rehabilitation of ecosystems is particularly difficult and time consuming. Furthermore, the regulatory instruments are not generating funds, which could be used for achieving environmental and resource management objectives. In other words, regulatory instruments are not bring sufficiently effective, their fund-raising component is weak and their role in encouraging polluters to change their behavior towards the environment is insignificant.
The application of economic instruments in many countries in the Mediterranean region proved to be efficient as they to achieve quick change of the actual situation.
Experiences gained so far suggest that economic instruments provide a number of advantages when used in a mixed approach with regulatory instruments: (pap-4/1992/em.1)
q They can produce substantial cost saving either by allowing polluters to select the most appropriate way of meeting standers or equating the marginal cost of pollution control with emission charges;
q They offer an ongoing incentive to reduce pollution below the level required by regulations; they encourage new technologies in pollution control and production process;
q They provide flexibility: easy and fast to modify by the authorities and offer the polluter the freedom to choose;
q They, together with resource pricing, provide incentive for resource conservation;
q They provide a source of finance that can be used for specific environmental programs.
As far there are many types of economic instruments, the question again is; what type of instruments are most proper to be applied in the Egyptian coastal zone. To answer this question a brief review of the types of economic instruments at the beginning may be useful. Economic instruments may include the following types:
(i) Charges and Resource Pricing
These include:
q Effluent or pollution charges: They are imposed in accordance with discharges into the environment and are based on the quality and/or quality of pollutants released. They are most widely applied to control water pollution.
q User charges: They are mostly used in pollution control as well as resource management. For pollution control, they are applied as payments for the cost of collective public treatment of effluent and waste, as in the case of collection and disposal of solid waste. As for resource management; the are applied as payments for the use of the resource, such as for fresh water uses.
q Produce charges: They are added to the price of products that are polluting in the processing or utilization phase or their disposal requires organized system. Examples are; charges on various types of fuel, containers, pesticides and fertilizers.
q Administrative charges: They are payments for authority services such as enforcement and implementation of regulations and registration such as fees for certain kinds of chemicals.
q Tax differentiation is a tool to determine more favorable prices for environmentally friendly products or vice versa. In this context, tax differentiation can be considered as negative or positive product charges.
(ii) Subsidies
They are financial assistance from the government to assist polluters to undertake pollution control expenditures. They include the following types:
q Grants are repayable straight out financial transfers of government funds to polluters.
q Soft loans are repayable loans with favorable terms such as low rate of interest or relatively long repayment period.
q Tax allowances they are considered as incentives aiming at reducing pollution control expenditures.
(iii) Deposit-refund systems
They are applied to impose refundable charge on potentially polluting products such as food and drink containers. These systems are usually used by private firms accordance with government regulations.
(iv) Market creation
This include:
q Emission trading: this means that the discharger can sell his pollution “rights” if he is discharging less than its allowable discharges and the buyer has the right to discharge more than its allowable discharge. This type is found few applications in the case of water resources.
q Market intervention aims at maintaining or establishing markets for residuals such as low freight for transporting waste material and assistance provided by local municipalities for a waste exchange markets.
(v) Financial enforcement incentives
Non-compliance fees are the common forms of this type. The are applied for failing to comply with regulations. The fees are determined in accordance with the financial benefit gained through non-compliance.
V. Conclusion and recommendations
q The concept of sustainable development should be the framework of coast zone management, and the application of relevant instruments.
q At present, in Egyptian Mediterranean coastal area, resources are used in an unsuitable manner. This mainly due to inappropriate management practice and insufficient applied policy instruments and tools.
q Consequently, the present policy instruments could be enlarged through application of proper economic instruments.
q The potential for application of economic instruments in Egyptian coastal zone is significant. This mainly due high population density, high level of economic includes touristic and industrial activities and consequently higher level of per Capita incomes. This will allow forcing polluters/users and/or potential beneficiaries to pay for control and conservation.
q For a systematic application of economic instruments certain perquisites are necessary. This include:
i- Integration and harmonization with the development and planning policy as well as with other relevant instruments.
ii- A proper market system within which economic instruments can operate effectively.
iii- A sufficient level of environmental knowledge.
iv- Institutional and enforcement mechanism for calculating, imposing, collecting and efficiency spending the proceeds.
v- The money collected is paid into environmental/ conservation fund(s) and earmarked for specific environmental expenditures in the area of collection.
References
1. A. Barrania, The Egyptian northern lakes, fisheries development versus agriculture development, Institute of national planning. Cairo, Egypt. 1985.
2. A. Barrania, Economic and social impacts of pollution of water bodies in Egypt, Institute of National Planning, Cairo, 1992.
3. PAP economic instruments and tools for coastal zone management applicable in Mediterranean countries. Paris, 1992. (PAP-4/1992/EM.1)
4. PAP, Analysis of the Application of economic instruments in coastal management in Mediterranean region, Split, 1994. (PAP-4/1994/W.1/1)
5. Integrated management of coastal zone, FAO Fisheries Technical Paper no. 327, Rome, 1992.
6. Framework Program for the Development of the national ICZM plan for Egypt, EEAA, Cairo, Egypt, 1996.
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