Ecotourism, Debt-For-Nature Dovetail In Nepal, Other Asian Countries

January 23, 2003

GAINESVILLE, Fla. — As ecotourism becomes more popular, poor countries in Asia have a unique opportunity to preserve natural destinations while eliminating part of their debt to other countries or international banks, a University of Florida researcher says.

“Debt-for-nature” swaps first emerged in the late 1980s and have been used predominantly in South and Central America, but the swaps also could work in Asia – particularly in Nepal, the home of the world’s highest mountain, Mt. Everest, says Brijesh Thapa, a UF assistant professor of recreation, parks and tourism and a native of Nepal.

“The idea is that instead of paying part of their debt, these countries could use the money to manage their resources for ecotourism ventures, whether through programs and activities such as, park restoration, personnel training, environmental education, etc.,” said Thapa, who co-authored a paper on the potential for debt-for-nature swaps in Nepal that appears in a recent issue of the International Journal of Sustainable Development and World Ecology. The other author is Thapa’s brother, Srijesh Thapa, of Washington Group International, a consulting firm.

In a typical debt-for-nature deal, a country agrees to devote a chunk of money to conservation programs in exchange for debt relief. In most cases, a so-called non-governmental organization, or NGO, such as the World Wildlife Fund for Nature, buys the debt at a discount on the so-called “secondary” debt market. In exchange, the country agrees to spend money on items such as protecting national parks, environmental education or forestry programs.

The arrangements allow the country to bolster conservation at home while relieving it of some of its debt obligations. The country may be so poor that its debt might have gone unpaid, which means the creditor benefits even if paid only a portion of the original debt.

The first debt-for-nature swap occurred in 1987, with Bolivia receiving $650,000 in debt relief in exchange for spending $100,000 to help protect its Beni Biosphere Reserve within the Amazon Basin. Since then, debt-for-nature swaps have resulted in more than $1.5 billion in transactions in 19 countries, mostly in the Americas and the Caribbean, but also in countries such as Poland and Nigeria, Thapa’s paper says.

With the exception of the Philippines, there have been few debt-for-nature swaps in Asian countries, Thapa said. Melissa Moye, a senior fellow at the World Wildlife Fund, said that’s because Asian countries have until recently not experienced the same kind of debt crises as South American countries. “There was not debt available to swap,” she said.

Thapa contends that Nepal – with its combination of unparalleled climbing and trekking opportunities, unspoiled natural areas and significant debt burden – is a good candidate for debt-for-nature transactions in light of the rise of ecotourism.

“Nepal is already known as an ecotourism destination,” Thapa said. “Debt-for-nature swaps would give them an opportunity to protect more pristine areas for parks or reserves, which at the same time will promote more ecotourism opportunities.”

One of the world’s poorest countries, Nepal currently owes about $2.5 billion, or over 50 percent of its annual gross domestic product. About half the population lives in poverty, while 90 percent live in rural areas and depend on subsistence farming. The country spends more than 8 percent of its budget on interest payments alone, nearly as much as its total expenditure on agriculture, Thapa’s paper says.

If cash poor, Nepal is nature rich, the paper notes. Although it comprises less than 1 percent of the world’s landmass, the country contains 2 percent of the world’s flowering plants, 8 percent of the world’s bird species and 4 percent of its mammal species. Its extreme variations in altitude make it one of the world’s most biologically diverse places, Thapa writes.

Yet much of this environment is threatened. Nepal has designated nearly 20 percent of its landmass as protected, but the country faces serious problems with deforestation, soil erosion and pollution, he said. Debt-for-nature swaps could effectively chip away at Nepal’s debt while helping to turn its natural resources into financial resources through ecotourism, Thapa said.

Moye, the WWF fellow, said that to qualify for swaps, a country must have a relatively stable political system and the ability to make good on its obligations. The WWF has looked at Nepal but is not considering a swap there currently, she said.

“I think you’d have to take a close look at what’s going on there,” she said.