Economic valuation of environmental goods or services is important for developing countries despite the kind of argument that “the type of information provided is designed to answer the questions not relevant to developing countries; especially in rural areas where environmental goods and services are important inputs into family production functions. Given poverty levels in developing countries, and limitations on government expenditures, the estimation of non-use values may not be appropriate” (Hearne 1996, p:256). To some extent, valuing the environment is more important in developing countries in that there needs to be a balance between the goals of economic development and environmental protection or conservation.
Many countries are still engaged in achieving economic objectives (e.g. growth and employment generation) by destroying their natural environment. For instance, over the past two decades, carbon emissions grew fastest in developing countries such as China, Brazil, South Korea, and India, primarily because of high growth rates in electricity production (Hill, 2004).
Destruction of the natural environment may be very costly when the loss for future generations is considered. Seen in that line, economic valuation of non-market benefits is more important in developing countries than the other parts of the world. Ignoring such benefits may provide support for flawed policy choices and under-estimate the significance of environmental improvements, particularly in the context of perverse corruption and lack of good governance. Therefore, use of economic valuation techniques can make an important contribution to policy making and can result in better resource allocation and outcomes in the protection and development of natural resources. In this context, the issues that arise with the application of economic valuation techniques, particularly the contingent valuation method (CVM), in developing countries is considered. It is argued that contingent valuation (CV) can be a useful tool in valuing environmental changes in developing countries; however, special care needs to be given on designing and framing issues taking into account local cultural, institutional and economic factors (Alam, 2005)
The use of the Contingent Valuation Method is quite well established in the context of industrialized countries with highly developed market economies where people are used to dealing with market prices reflecting their preferences for goods and services. Things are more complicated in developing countries where people have low incomes and obtain only part of the goods needed from markets while they barter for the rest or live on self-sufficient agriculture. The importance of money as a means for expressing the value of things is much lower there than in developed countries which might be a problem for the application of CVM for assessing the social value of environmental changes. Another problem might arise from the fact that the level of education and of general information is lower than in the developed world. Therefore, CVM must be adjusted to the special features of the country and society where it is used (Whittington, 2002).
According to research done by Navrud and Mungatana on “Environmental valuation in developing countries: The recreational value of wildlife viewing” shows that the Travel Cost (TC) and the Contingent Valuation (CV) methods can be successfully applied to value natural resources in developing countries. These two independent methods were used to estimate the recreational value of wildlife viewing Lake Nakuru National Park in Kenya. However, the challenge for the developing countries is to find ways to realize this economic potential, which also secures the preservation of wildlife.
Alam, 2005 done a Extended Contingent Valuation survey on the Buriganga River, which passes through Dhaka City, the capital of Bangladesh, to estimate residents’ willingness to contribute money and willingness to contribute time. It is revealed that the standard valuation techniques developed in the industrialized economic setting have some limitations when applied in developing countries. Many of these techniques assume conditions which may not be met in developing countries. The application of CVM reveals that in case of benefit estimation in developing countries, local cultures and socio-economic conditions matter. It is not enough, or may even be misleading, to import methods from developed countries without taking into consideration specific settings of local culture and economic conditions. It also suggests that economic valuation is important because policy making about maintaining environmental resources and on resource allocation is particularly a daunting task, while fiscal resources are finite and often making choices involves trade-offs among competing preferences. Therefore, there is substantial potential for economic valuation techniques like CVM in developing countries in shaping policy decisions and providing inputs in resolving conflict among resource uses and its allocation for their sustainable economic development. This is more prominent than the other parts of the world in the context of poor accountability of bureaucracy and political regimes and often strong influence of coterie and personal interests in policy making.
Alam, K. (2005). Valuing the environment in developing countries: Problems and potentials. Centre for Environmental Management, Central Queensland University, North Rockhampton, Queensland 4702, Australia.
Hearne, R. R. (1996). ‘Economic valuation of use and non-use values of environmental
goods and services in developing countries’, Project Appraisal, vol. 11, pp. 255-60.
Hill, L. (2004). ‘Power to the people: Integrated resource planning in developing
countries’, Working Paper, Energy Division, Oak Ridge National Laboratory, USA.
(http://www.ornl.gov/info/ornlreview/rev28_2/text/irp.htm#hill; accessed 18 August
Whittington, D., (1998). ‘Administering contingent valuation surveys in developing
countries’, World Development, vol. 26, pp. 21-30.
Whittington, D. (2002). ‘Improving the performance of contingent valuation surveys in
developing countries’, Environmental and Resource Economics, vol. 22, pp. 323-67.