Financial incentives and agreements

These are economic instruments that influence the behaviour of enterprises by providing them with specific financial support or commercial opportunities provided that they act in a certain way.

Government action may involve:

• Providing financial support and opportunities themselves.

• Influencing and working with development assistance agencies whose policies in recipient countries are increasingly influenced through priorities and programmes agreed with governments.

• Influencing the financial decision making policies and actions of commercial sources of finance.

Positive financial incentives

Various forms of financial assistance can be used to influence behaviour and support change. They can be directed at existing tourism enterprises or new projects. Where positive subsidy is used, principles of economic sustainability suggest that the type and amount of assistance should be such that it encourages and supports self- sufficient enterprise and avoids dependency.

Box 5.11: Examples of charges supporting conservation Belize: In 1996, the Protected Areas Conservation Trust (PACT) was established, to provide funding for the conservation, awareness, sustainable development and management of protected areas. In excess of US$1.75 million have been disbursed (1997−2004) through more than 70 grants to over 30 organizations. Funds are raised by a compulsory US$3.75 conservation fee charged to visitors on their departure from Belize. PACT also receives 20 per cent of the cruise ship passenger head tax and of the recreational licence and concession fees in protected areas. Corporations and individuals also donate voluntarily to PACT.

Madagascar: The government national park service has a policy of distributing 50 per cent of the admission revenue from all parks to local conservation and community development projects. The latter, proposed by special committees made up of elders from individual villages, tend to be very practical (such as fruit growing schemes, bee keeping, construction of grain stores) supporting sustainable livelihoods as an alternative to slash and burn agriculture. The funding link with the local park

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Three ways in which financial assistance can be used to effect change are: • Leveraging action by placing conditions on financial assistance.

This can apply to all kinds of projects. A lead is being taken by the World Bank and other development assistance agencies. The jointly agreed Equator Principles lay down a wide range of social and environmental sustainability conditions for large projects which must be the subject of assessment before assistance is approved. Conditions may relate to minimizing impacts or supporting conservation or social projects such as providing clean water. The approach is very relevant for national as well as international assistance schemes and for small as well as large projects. Micro-credit can, for instance, be used to influence sustainable livelihood decisions.

• Assisting specific forms of tourism that relate to sustainability goals. Rather than seeking to influence all types of tourism project, well tailored financial assistance can be provided, as required, to particular types of project that are in line with specific sustainable development priorities. Examples might be small scale community-based projects in poor areas, or certain ecotourism projects. The economic instruments might be closely related to capacity building (see Section 5.5.2), with financial assistance given to such aspects as building market access.

• Funding specific, direct investments that will improve sustainability.

Financial assistance may be provided for actions that will improve sustainability, such as the installation of environmentally efficient new technology. Assistance may also be given with the costs of establishing environmental management schemes. It is important for governments to avoid simply paying for the

improvements that are sought, thus diminishing commitment to them. There are therefore advantages in using soft loans or tax credits. Often, such schemes can be most effective if combined with other instruments such as certification and capacity building, as shown by some of the examples in Box 5.12.

Exerting influence through other financial agreements

Governments may also have an opportunity to influence the behaviour of enterprises by reaching other kinds of financial agreement with them. This may entail conveying some form of property or trading right on the enterprise. Conditions can be attached to this process that require compliance with a sustainability agenda. Examples include: • The granting by governments of concessions or contracts to enterprises. This has

proved to be an effective vehicle for imposing conditions on selected enterprises— for example those providing services in national parks.

• Introducing tradable licenses for water extraction, with basic protection of rights for the poorest communities.

• Developing public-private partnerships with selected enterprises for the

provision of certain facilities, such as transport infrastructure, public amenities or information services.

• Government procurement policies—for example, only accommodation certified as meeting sustainability criteria could be used for government business.

In one region of Scotland, all tourism projects receiving assistance from the development agency must participate in an environmental certification scheme. (see Case Studies, p 172).

In Ghana, financial assistance is available to community tourism projects that meet specific sustainability criteria. In order to avoid dependency and encourage enterprise efficiency, grants are given only for infrastructure, with enterprise support being in the form of loans (see Case Studies, p 149)

In South Africa, the government has established conditions and guidelines for the operation of public- private partnerships on state land, and has disseminated these in the form of a toolkit (see Case Studies, p 162)

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