Stakeholder-Oriented Valuation To Support Water Resources Management Processes

Stakeholder-oriented FAO
WATER
REPORTS
valuation to support water 30

resources management
processes
Confronting concepts with local practice
by
Leon Hermans
Daniel Renault
FAO Land and Water Development Division
Rome, Italy
Lucy Emerton
Danièle Perrot-Maître
World Conservation Union
Gland, Switzerland
Sophie Nguyen-Khoa
International Water Management Institute
Colombo, Sri Lanka
and
Laurence Smith
Imperial College London
United Kingdom of Great Britain and Northern Ireland
FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS

Rome, 2006
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iii
Contents
Acknowledgements vi
Summary vii
List of acronyms xi
Part I – Introduction and literature 1
1. Introduction 3
Water resources management and the need for valuation 3
Water valuation as a means to support stakeholders 4
Aim and scope of the report 6
2. Challenges for using valuation to support water resources

management 7
Water resources management as a stakeholder process 7
Existing approaches to water valuation 9
Challenges for linking water valuation and stakeholder processes 12
Part II – Cases 15
3. Valuation to support local water resources management in the

United Republic of Tanzania 17
Introduction 17
Water valuation approach 19
Overview of main outcomes 20
Potential contribution to stakeholder decision-making 25
4. Valuation for improved management of irrigation and fisheries

in Sri Lanka 27
Introduction 27
5. Valuation of aquatic resource use at the Stoeng Treng Ramsar site,

Cambodia 39
Introduction 39
Part III – Towards a stakeholder-oriented valuation process 51
6. Responses to the challenges for stakeholder-oriented water

valuation 53
Challenges and practical responses 53
iv
Analytical challenge 54
Adaptive challenge 56
Participatory challenge 59
7. Towards a framework for stakeholder-oriented water valuation 63

Redefining water valuation as a stakeholder process 63
Critical elements for stakeholder-oriented valuation 64
Conclusions and directions for future work 69
References 73
v
List of figures
1. IWRM as an ongoing process 7

2. The strategic planning cycle for water resources management 8
3. GWP framework for full economic cost and value of water use 10
4. Framework for integrated assessment and valuation of ecosystem functions,
goods and services 13
5. Location map of the Mkoji subcatchment 18
6. Economic crop water productivity in different zones of the Mkoji subcatchment 21
7. Economic water values for different sectors in the Mkoji subcatchment 21
8. Map of the Kirindi Oya watershed and the KOISP irrigation system 28
9. Stages of the valuation approach for fisheries in the Kirindi Oya catchment 30
10. Location map of the Stoeng Treng Ramsar site 40
11. Web diagrams for Stoeng Treng 44
12. Relative ranking of wetland values for Stoeng Treng 46
13, Household problems in Stoeng Treng 47
14, Stakeholder-oriented water valuation process 64
List of tables
1. Main stakeholders involved in water resources management in the MSC 18

2. Seasonal water availability in the Mkoji subcatchment 20
3. Overview of different value components in the project area 20
4. Percentage of income derived from water-related production activities 22
5. Food security in the Mkoji subcatchment 23
6. Water-related conflicts in different zones of the Mkoji subcatchment 23
7. List of workshop participants and their respective affiliations 31
8. Impact of the KOISP on production potential and monetary value of fisheries 33
9. Value of fishing as a livelihood activity: proportion of households in surveyed
villages engaged in fishing, 2002 33
10. Estimates for income from fishing and alternative male employment 34
11. Community fisheries management: summary of key actors 41
12. Participatory valuation methods used 43
13. Seasonal calendar of activities for men’s group, Stoeng Treng 45
14. Seasonal calendar of activities for women’s group, Stoeng Treng 45
15. Wealth ranking for Stoeng Treng 46
16. Fish value to households 48
17. Wetland values in Stoeng Treng 48
18. Challenges and observed responses 53
19. The stakeholder-oriented valuation process in the cases 65
20. Critical elements in stakeholder-oriented valuation processes 66
vi
Acknowledgements
This publication reports on some first exploratory steps in using water valuation to move
from a sectoral to a functional perspective on water resources management, recognizing
the role of water resources as components of a more extensive set of interrelated
systems. As such, it builds on FAO Water Report No. 27 Economic valuation of water
resources in agriculture and the outcomes of the FAO/Netherlands Conference on
Water for Food and Ecosystems. Stakeholders are central in this publication, exploring
how water valuation can support stakeholders in managing their local water resources.
The empirical core of the present report is formed by three case studies in which a
stakeholder-oriented approach to water valuation has been explored.
The Tanzania case study is based on the written publications and fieldwork carried out
for the project “Water productivity for vulnerable groups in the Mkoji subcatchment”,
funded through the FAO–Netherlands Partnership Programme. This project was
implemented by FAO–AGLW and Sokoine University of Agriculture through the work
done by Professor Henry Mahoo and the other members of the Soil Water Management
Research Group. FAO’s input was coordinated by Gerardo van Halsema, who also
provided useful comments on earlier drafts of this publication.
The chapter on the Sri Lanka case was written by Laurence Smith and Sophie
Nguyen Khoa. It presents findings of the research on “Impacts of irrigation on inland
fisheries and their role in rural livelihoods” that both authors conducted together with
Kai Lorenzen. This research was made possible by the Department for International
Development (DFID) of the United Kingdom of Great Britain and Northern Ireland and
support from the Comprehensive Assessment of Water Management in Agriculture.
The chapter on the Cambodia case was written by Lucy Emerton. It is based on the
written publications and fieldwork carried out by Joanne Chong of IUCN’s Regional
Environmental Economics Programme for Asia. It reports on a study carried out
between August 2004 and January 2005 as part of the DFID-funded project “Integrating
wetland economic values into river basin management” and the UNDP/GEF funded
project “Mekong River Basin wetland biodiversity conservation and sustainable use
programme”, which IUCN is implementing in conjunction with the Mekong River
Commission.
Thanks are due to the external reviewers, who took the time to read through an earlier
version of this report and provided useful feedback and constructive comments: Bruce
Lankford from the University of East Anglia (United Kingdom of Great Britain and
Northern Ireland), Petra Hellegers from the Agricultural Economics Research Institute
(LEI, Netherlands), and Hartmut Brühl, international consultant with the Technical
Committee of the Global Water Partnership. Any mistakes or omissions in the final text
remain solely the responsibility of the authors.
vii
Summary
Growing pressures on water resources, increasing interdependencies between users,

uncertain impacts of climate changes, the use of modern precision technology and
an associated increase in demands for reliable water services are some of the factors
underlying an ever-increasing complexity in water resources management. As a result,
one of the main questions today is how to best support stakeholders in managing
their water demands in a context of increasing competition and interdependency. This
question is especially significant for agriculture as it is the largest water user globally and
faces increasing difficulty in securing a share of water resources that is sufficient to meet
the needs of a growing world population and in managing the impacts of its activities
on the resource base.
Supporting stakeholders in managing their water resources means supporting
stakeholders to make choices and to reach a common understanding on the necessary
arrangements for sharing and allocating water-related goods and services. Valuation is
implicit to this process as making a choice for one use implies valuing that use over
other possible uses. Therefore, assessing and communicating the values associated with
different water-related goods and services is the basis on which stakeholders have to seek
a well-informed decision. This explains the growing focus on water valuation as a means
to support water resources management.
Water valuation means expressing the value of water-related goods and services in
order to inform sharing and allocation decisions. It covers both use and non-use values,
extractive and in situ use values and consumptive and non-consumptive use values. The
notion of scarcity is central and this can refer to aspects of water quantity and quality
and can have both temporal and spatial dimensions. This scarcity may be induced by
limitations of the physical water resources, the means to access them, or by inadequate
management of the resource base.
Various methods have been developed that help to express the value of water-related
goods and services in quantitative, monetary units. Although potentially very useful,
these methods are complicated and demanding in terms of the expertise, time and data
required for their application. This hinders their widespread application, especially in
developing countries, which often face more constraints on the availability of expertise,
data and resources for the execution of value assessments. As a result, their development
in the field of water valuation has been mainly academic and there is a need to apply
valuation results and processes to support water resources management and decision-
making effectively.
This report explores how to improve the connection between analytical efforts to
place a value on water resources and the actual water resources management processes.
It does so by comparing concepts from literature on integrated water resources
management (IWRM) and water valuation with practical experiences from three recent
cases where an effort was made to embed existing valuation tools and methods into
ongoing decision-making processes by stakeholders. Using the lessons from these three
cases, it provides a first outline for a stakeholder-oriented water valuation process that
could support the integration of valuation into ongoing and adaptive processes of water
resources management.
A review of the existing literature on water valuation indicates that several water
valuation frameworks are available to provide stakeholders with an explicit, transparent
and scientifically sound valuation of water resources. These frameworks enable one
to compare and integrate the different components that make up the value of water,
viii
building on concepts such as total and full economic value, water accounting and the
water value flow concept. The total economic value and the similar full economic
value concepts are often used. The advantage of these frameworks is that they offer a
relatively straightforward procedure for aggregating different value components into
one overarching value. However, although the social and environmental values can be
captured conceptually in these frameworks, the emphasis in their use in practice is on
monetary expressions of producer and consumer values.
Furthermore, there are additional factors that complicate an accurate use of
valuation methods in practice. Among these are the cognitive, information and
knowledge constraints, which are an important factor in valuing interrelated and
partially overlapping water-related goods and services. Determining what it is that
stakeholders care about in a particular situation is already difficult, but assessing how
this is supported or impaired by different activities or policy alternatives is often almost
impossible. Causal relationships between interconnected and interdependent water uses
are difficult to establish, while the need to establish how values are affected by small
changes in dynamic water systems further complicates matters.
Thus, water valuation is difficult and fraught with uncertainties and results in value
estimates that are necessarily crude and inexact. Combining the analytical complexity
with the complexity caused by the involvement of different stakeholders in political
decision-making processes, clarifies why a comprehensive, complete and undisputed
valuation is virtually impossible to achieve. Therefore, valuation should use whatever
partial information is available or affordable to take forward processes of multiobjective
decision-making. In practice, it may be better to reach an agreement based on imperfect
value estimates rather than continuing theoretical disputes over the “real” value of water
resources.
This means that valuation should be viewed in a broader perspective, not solely
as an objective or neutral means to place a quantitative value on water resources.
Valuation may be biased and partial, but it can make an important contribution to
water resources management by offering a structured and transparent mechanism that
supports a multistakeholder dialogue, helping stakeholders to express their values and
to reach jointly a certain level of agreement on the use and management of scarce water
resources.
Realizing such a stakeholder-oriented approach to water valuation is not self-
evident. It requires stakeholders and experts to overcome several challenges throughout
the valuation process. Some of these challenges are related to strengthening the links
between water valuation as an analytical activity and water valuation as it is being done,
implicitly or explicitly, by stakeholders as part of their water resources management
process. These are central to this report, and three of these are identified here:
¾An analytical challenge, to broaden the scope of valuation to include economic,
social and environmental values, to provide insight into stakeholder-specific values
as well as relevant trends and dynamics. Transparent and valid assessments of a
diverse range of values are required, while still providing insight into the overall
picture.
¾An adaptive challenge, to adapt to the working conditions for local water resources
management in developing countries, requiring one to adapt valuation to the
existing institutional setup and to the available data, knowledge, expertise, time
and resources (and to the limitations thereof).
¾A participatory challenge, to embed water valuation in local stakeholder processes,
combining stakeholder judgement, local knowledge and scientific inputs, through
a process that is driven by stakeholders.
The practical implications of these challenges are explored through the use of three
cases in which valuation practitioners and stakeholder confronted these challenges
ix
and developed some practical responses to address them. As these cases were done
independently from one another by different organizations, there are substantial
differences between them. The first case is located in the Mkoji subcatchment in
the United Republic of Tanzania and focuses on the value of water resources to
support different local livelihood activities in different locations while also meeting
environmental requirements. The second case concerns the Kirindi Oya basin in Sri
Lanka and focuses on the value of water resources to support different functions that are
potentially conflicting: irrigation and fisheries. The third case discusses water valuation
for the Stoeng Treng Ramsar site in Cambodia, focusing mainly on the in situ value of
water resources for the provision of various wetland goods and services that support
local livelihoods. The methodological approaches used in the three cases show a strong
convergence as they all emphasize the use of water valuation to support local stakeholders
in the context of IWRM, but their point of departure is somewhat different.
The differences in the cases reduce the possibilities for a detailed comparative
review of the valuation approaches used. However, the independence of the cases
makes a strong argument for the common elements and strategies that nevertheless
appear in them. Therefore, in-depth descriptions of these three cases are used to learn
about the strategies developed in practice and to extract some of the common features
and practical responses that were considered useful by those involved to address the
threefold challenge for water valuation. This is not to say that the lessons learned from
the cases offer the final answer to all valuation problems. Rather, they serve a purpose in
highlighting recent attempts in moving towards a more stakeholder-oriented valuation
approach. The observed responses have been framed as recommendations to consider
for future water valuation efforts:
¾Differentiate, providing insight in different value components and for different
stakeholders, within a loose overarching framework.
¾Focus on livelihoods as a driving force and integrating element.
¾Link valuation to possible solutions/alternatives.
¾Combine various methods, indicators and data to build a more complete picture.
¾Use an adaptive and learning approach, building confidence to take action.
¾Ensure links with existing institutions while building social capital.
¾Use tools and techniques for participatory analysis, with specific attention for
stakeholder representation.
¾Mix expert and stakeholder inputs.
¾Focus on use of participatory valuation to build agreement on actions.
¾Use methods with a certain degree of simplicity to facilitate participatory efforts
among broad groups of stakeholders.
These responses are based on an underlying perspective of water valuation as an
intrinsic part of a water resources management process. Together with the conceptual
approaches to IWRM and water valuation from literature, they can be moulded into
an outline of a stakeholder-oriented water valuation process. This process consists of
seven elements, which are linked to one another in a more or less logical sequence of
activities:
1. Identification of the main triggers for the process, problems to be addressed and
key stakeholders involved.
2. Identification of values at stake through a structured overview of stakeholders’
objectives.
3. Assessment of values associated with these objectives for current practices.
4. Identification of possible solutions and the stakeholders that control them (or do
so in part).
5. Assessment of values associated with expected impacts of solutions.
6. Evaluation, refinement and negotiated choice of preferred set of solutions.
x
7. Implementation, monitoring and evaluation by involved stakeholders.

Just as the descriptions of the IWRM process, this stakeholder-oriented valuation
process should not be seen as a blueprint but rather as pointing to useful directions
for subsequent actions in a participatory and iterative valuation process. Although a
valuation process as outlined here may rarely be found in practice, its internal logic
makes it a useful tool for practitioners who seek to support stakeholders by adding
an analytical and rational component to the essentially political water resources
management processes. By using this approach, efforts are made to bring valuation
in line with stakeholders’ needs, providing insight into disaggregated value estimates
to reflect differences among stakeholders, and using valuation to identify and evaluate
possible measures to improve water resources management.
An adaptive and learning approach is an important element of this process, in which
the absence of complete data sets is not taken as an excuse for not starting improvements.
This reflects the view that the aim of valuation is not to find the “right” answer to the
question of what the value of water is, but to help stakeholders to reach a point at which
they feel confident to take action. It requires a collaborative effort between experts and
stakeholders, where stakeholder ownership of the valuation process is central from the
outset, asking them to bring forward their problems and their perceived needs/solutions.
The outlined approach has the further advantage of leading the process to the key
problems and the underlying values of stakeholders.
Although the cases described cover mainly the first part of the outlined process,
the evidence suggests that stakeholder-oriented valuation provides a promising means
to take account of the broad range of values related to water resources and their uses,
to deal with uncertainty and practical constraints, and that it can become part of an
integrated, participatory and adaptive approach to water resources management.
Such stakeholder-oriented valuation processes are likely to have benefits in terms of
improved outcomes, i.e. better decisions, implementation, etc., and benefits in terms of
the establishment of processes and capacity within local civil society to participate in
water resources management.
While stakeholder-oriented valuation helps to improve the transparency and fairness
of water resources management processes, it does not offer an easy solution. The case
material in this report offers a useful basis to build an argument for the stakeholder-
oriented valuation approach presented here. However, it does not offer the broad basis
of experiences that would be needed to validate the stakeholder-oriented valuation
approach beyond its initial elements. Therefore, several challenges remain, partly owing
to the scope and focus of this report, which leave several important questions open for
future work.
Among these questions are those related to the implications of upscaling the
stakeholder-oriented participatory approaches to national or international level and
replicating valuation processes over time. The analytical details of valuation methods
have not been at the core of this report and there remains a need to further improve the
analytical tools for assessing social and environmental values and to examine the use of
multicriteria decision-making tools to support the analysis of trade-offs between values.
In addition, stakeholder-oriented water valuation puts a whole new demand on the
professionals traditionally involved in water valuation as it requires them to embed their
activities in multistakeholder processes. This requires a new set of tools and skills for the
facilitation of participatory processes, conflict management, adaptive management and
dealing with existing power structures and inequalities. In short, more experience with
the stakeholder-oriented valuation approach is needed. This requires a broader sample
than the three pilot cases discussed here and one covering a longer period in order to
better evaluate the impacts of the approach on policy processes and decisions.
xi
List of acronyms
CBO Community-based organization

CEPA Culture and Environment Preservation Association (Cambodia case)
EIA Environmental impact assessment
FFS Farmer field school
GDP Gross Domestic Product
GEF Global Environment Facility
GWP Global Water Partnership
IUCN World Conservation Union
IWMI International Water Management Institute
IWRM Integrated water resources management
KOISP Kirindi Oya Irrigation and Settlement Project (Sri Lanka case)
MRC Mekong River Commission
MSC Mkoji subcatchment (Tanzania case)
MWBP Mekong Wetlands Biodiversity Conservation and Sustainable Use
Programme
NGO Non-governmental organization
NTFP Non-timber forest product
PfD Partners for Development (Cambodia case)
PRA Participatory rural appraisal
RRA Rapid rural appraisal
UNDP United Nations Development Programme
WUA Water users association
1
Part I
Introduction and literature
One of the main questions today is how to best support stakeholders in managing their
water demands in a context of increasing competition and interdependency. This question
is especially significant for agriculture as it is the largest water user globally.
Chapter 1 introduces the role of water valuation in addressing this question. It takes
stock of existing approaches to water valuation, identifying the need to complement these
existing approaches with one where stakeholders have a more central role.
With this in mind, Chapter 2 reviews the relevant concepts from literature on water
resources management and water valuation. This results in the identification of three main
challenges that need to be addressed in order to embed water valuation more effectively in
the water resources management processes that are driven by stakeholders.
3
Chapter 1
Introduction
WATER RESOURCES MANAGEMENT AND THE NEED FOR VALUATION

The increasing complexity of water resources management
Water resources are increasingly under pressure with demands that are growing in
volume and with different uses and activities affecting their quality and quantity as
well as the timeliness of their availability. Water resources provide multiple goods and
services that are essential to human development, such as water for food production,
drinking-water and sanitation, conservation of natural ecosystems, recreation and
hydropower. These goods and services are interrelated and partially overlapping,
e.g. water reservoirs that may benefit power generation, irrigation, drinking-water
supply, fisheries and recreation, depending on their location, design and operation.
Furthermore, externalities are often involved where the use of water resources by one
group of users affects the possibilities for water use by other users; upstream uses may
lead to reduced quality or quantity of water resources at downstream locations.
Interdependencies exist between riparian users in a river basin, between groundwater
users that extract their water from the same aquifer and even between users in different
water systems. In this last case, the interdependencies may be caused by the migration
of wildlife or cattle, by interbasin water transfers and by virtual water trade, through
the trade of goods that consume water as part of their production process. Finally,
although surrounded with uncertainties, climate change impacts add further complexity
to the management of fresh water resources and their availability over time.
Mounting pressures on water resources, increasing interdependencies between
users, uncertain impacts of climate changes, the growing use of modern technology and
increasing demands for reliable water services are only some of the factors that drive
the ever-increasing complexity of water resources management. These developments
have a significant impact on agricultural water management because agriculture is the
largest water user globally and faces increasing difficulty in securing a share of water
resources that is sufficient to meet the needs of a growing world population and in
managing the impacts of its activities on the resource base.
Stakeholders and managing competing demands for water

Water resources management involves various stakeholders with multiple objectives.
In this context, stakeholders are considered to include all individuals, groups or
organizations that have some interest (stake) in the use or the management of water
resources. This means that stakeholders include water users such as households,
farmers and industries but also government agencies on different administrative
levels that have an interest based on their official mandates. These stakeholders
have to find ways to cope with the increasing complexity and to manage the various
competing demands for water resources. Potentially, everyone is a stakeholder in
water resources management. Public health concerns may be the main driver for water
quality improvements, environmental grounds may trigger investments in wastewater
treatment, and agricultural interests may drive the development of water control
infrastructure. While not everyone may be able to participate in decision-making on
water resources management, ongoing trends towards democratization, privatization
and globalization are leading to expansion of the network of involved stakeholders to
include local households, local companies, transnationals, international organizations
and a multitude of other stakeholders.
4 Stakeholder-oriented valuation to support water resources management processes
Stakeholders can be regarded as part of a network, being linked to one another

through the same basis of shared water resources. In these stakeholder networks, none
of the stakeholders is generally powerful enough to realize its objectives without the
support of others. Consequently, different stakeholders have to reach an agreement on
the measures and arrangements to allocate and manage their shared water resources.
Top-down regulation of water resources is not sufficient, it has to be complemented
by bottom-up approaches and stakeholder processes, adaptive management and an
increasing reliance on market-based approaches. Today, water resources management
is seen as an ongoing process and different stakeholders as an essential part thereof
(GWP, 2000).
In the context of increased competition and interdependency, a major issue is how
to best support stakeholders in managing their water demands. Where additional
water resources can be developed, this will offer a relatively easy strategy. However,
in the more frequent situations of limited water resources, water productivity gains
are likely to be a necessary part of the solution, generating water savings for beneficial
use elsewhere. Water productivity gains, producing more with less water, have been
common practice in agriculture in recent decades. For example, it is possible to estimate
that the water needs for food per capita in Europe decreased between 1961 and 2001
from about 5.4 m3/day to 3.6 m3/day (Renault, 2003). Such water savings, in the
example almost 2 000 litres/day/capita, have enabled the world – at a global level – to
accommodate the food demands of an almost doubled world population.
Nevertheless, water productivity gains will not always be sufficient to meet the rising
water demands. Therefore, very real and particularly harsh choices will also be inevitable
in a growing number of cases. As these are often likely to benefit some stakeholders at
the expense of others, conflict looms and there is a need to support negotiation, conflict
prevention and conflict resolution. There is a need for tools and approaches that
help stakeholders to reach agreement on the necessary arrangements for sharing and
allocating water-related goods and services, particularly in the face of scarcity.
Valuation is implicit to the process of making choices on the use and allocation of
water-related goods and services, as making a choice for one use implies valuing that use
over other possible uses. Therefore, assessing and communicating the values associated
with different water-related goods and services is the basis on which stakeholders
will have to seek a well-informed decision. This explains the growing focus on water
valuation as a means to support water resources management.
WATER VALUATION AS A MEANS TO SUPPORT STAKEHOLDERS
Terms and definitions

Values are generally considered to define what stakeholders care about in water
resources management. Therefore, understanding what drives stakeholders means
understanding the values that water resources represent to them (Keeney, 1994a;
Pearce, 2002). This report uses a basic definition of the concept of value as a starting
point, here defining values as the principles for evaluating the desirability of an existing
situation or any possible alternatives and consequences (Keeney, 1994b).
Valuation is the process of expressing the value of a particular action or object
(Farber, Costanza and Wilson, 2002). This is important because these values determine
whether stakeholders consider an existing situation to be problematic and whether
they regard a certain solution as favourable. In water resources management processes,
stakeholders value certain actions or objects depending on their contribution to the
goals and objectives (here including economic, social and political objectives, as well
as objectives that are culturally defined, related to tradition or religion). Therefore,
valuation requires insight into stakeholders’ objectives and how certain actions or
strategies affect them (Keeney, 1994b).
Chapter 1 – Introduction 5
Water valuation means expressing the value of water-related goods and services in
order to support their allocation and sharing. It covers both use and non-use values,
extractive and in situ use values, and consumptive and non-consumptive use values
(NRC, 1997; FAO, 2004). The notion of scarcity is central and this can refer to aspects
of water quantity or quality and can have both temporal and spatial dimensions. This
scarcity may be induced by limitations of the physical water resources, the means to
access them (related to financial, infrastructural and legal aspects), and by inadequate
management of the resource base (as may be the case for pollution affecting water
quality).
Water valuation in practice

In agriculture, the growing focus on water valuation has led to the development of
various water productivity indicators in order to assess whether water is being used in
a productive way, i.e. contributing to a valuable output. Commonly, water productivity
is expressed in terms of yield per unit of water (in kilograms per cubic metre) or “crop
per drop”, or using the economic equivalent of the yield, as in monetary units per cubic
metre (Molden et al., 2003). Social benefits of agricultural water use are also receiving
increasing attention through indicators such as “nutrition per drop”, “jobs per drop”
and “sustainable livelihoods per drop” (Renault and Wallender, 2000; FAO, 2003).
To date, water valuation in a systematic way has mainly been the domain of
economists. They have developed various methods that help to express the value of
water-related goods and services in quantitative, monetary units (Gibbons, 1986; NRC,
1997; Rogers, Bhatia and Huber, 1998; Pearce, Pearce and Palmer, 2002; Emerton and
Bos, 2004). Although potentially very useful, these methods are quite complicated
and demanding in terms of the expertise, time and data required for their application.
This hinders their widespread application, especially in developing countries, which
often face more constraints on the availability of expertise, data and resources for the
execution of value assessments (FAO, 2004). As a result, development in the field of
water valuation has been mainly academic and there is a need to improve the connection
with the actual water resources management processes (WWDR, 2003).
The insight is emerging that valuing water should go beyond its current focus
on economic efficiency and also take into account social and environmental values
(e.g. GWP, 2000; Moss et al., 2003; FAO/Netherlands, 2005). However, the available
methods for water valuation focus predominantly on the economic benefits from
direct and indirect uses. Only recently has attention shifted to methods to address
environmental values, such as environmental base-flows (Dyson, Bergkamp and
Scanlon, 2003; World Bank, 2003). Methods for assessing social values remain largely
absent, with perhaps the exception of the Water Poverty Index. The Water Poverty
Index represents an attempt to develop an integrated water management measure that
goes beyond hydrological considerations. It has its limitations and is not confined to
social aspects of water management, but it does have a principal focus on the value of
water resources as a critical asset for sustainable livelihoods. It is composed of different
indicators, similar to the Human Development Index, based on five key components of
resources, access, capacity, use and environment (Sullivan and Meigh, 2003).
Water valuation: beyond economics and embedded in the decision-making

process
There is a need to complement the existing mainly economic approach to water valuation
with an approach that places stakeholders more at the centre. Such a stakeholder-
oriented approach would need to view water valuation in a broader perspective, not
solely as a means to put a monetary value on water resources, but rather as a structured
and transparent mechanism to help stakeholders express the values that water-related
goods and services represent to them. It differs from classic economic valuation
approaches in that it is embedded in the water resources management process, of which

it forms an intrinsic part, rather than being an outcome of external analysis brought
into the process by outside experts. Water valuation should become a means for conflict
resolution and decision-making, informing stakeholders, supporting communication,
sharing insight and joint decision-making on priorities and specific actions through a
combination of expert knowledge and scientific method with stakeholder judgement.
AIM AND SCOPE OF THE REPORT

This report explores the question of how to improve the connection between analytical
valuation efforts and actual water resources management processes. It does so by
taking stock of lessons learned from recent efforts to embed existing valuation tools
and methods into ongoing processes of decision-making by stakeholders. Using the
lessons from three pilot cases, it provides a first outline for a stakeholder-oriented
water valuation process that could support the integration of valuation into ongoing
and adaptive processes of water resources management.
The literature on water resources management processes and water valuation is
compared with the local practice of using water valuation to support these water
resources management processes in three cases in Cambodia, Sri Lanka and the United
Republic of Tanzania. These cases cover very different situations and processes but
they have in common the fact that in all of them an effort was made to link valuation
and stakeholder processes. In-depth descriptions of these cases provide the practical
insights that help to outline a direction for a more stakeholder-oriented approach to
water valuation that can usefully complement the existing suite of economic valuation
methods.
The focus of the report is less on further improving water valuation analytically
and more on using the existing suite of valuation tools and methods to support real-
world water resources management processes. As the current state of the art in this area
leaves significant scope for learning, the report has an exploratory character, exploring
emerging trends and approaches rather than testing specific guidelines. The three case
studies that provide the empirical basis for the findings are all concerned with water
resources management on the local level. Therefore, the extrapolation of the findings to
the national or international level is not warranted without additional research.
7
Chapter 2
Challenges for using valuation
to support water resources
management
WATER RESOURCES MANAGEMENT AS A STAKEHOLDER PROCESS

Water resources management processes and planning cycles
One of the most widespread definitions of integrated water resources management
(IWRM) is that provided by the Global Water Partnership (GWP). It defines IWRM
as “a process which promotes the coordinated development of water, land and related
resources, in order to maximize the resultant economic and social welfare in an
equitable manner without compromising the sustainability of vital ecosystems” (GWP,
2000). In this process, the involvement of all concerned stakeholders is universally
recognized as a key element in obtaining a balanced and sustainable utilization of
water. More recently, the GWP (2004) has described IWRM as an ongoing process that
is long-term and forward moving but iterative rather than linear in nature (Figure 1).
The IWRM process is described as an iterative cycle, building on previous conceptions
of policy development and strategic planning by adding commitment building and
stakeholder dialogue to the steps outlined in earlier publications, e.g. World Bank,
1994 (Figure 2).
These conceptions of water resources management as a process are appealing
because they offer a logical sequence of steps to follow in the development of policies
and strategies. However, seminal studies in policy sciences have long indicated that
reality rarely meets the expectations raised by this “textbook process” (Nakamura,
FIGURE 1
IWRM as an ongoing process
Establish status and

overall goals Build commitment to
•Water resources issues reform process
•Goals and progress •Political will
toward IWRM •Awareness
Monitor and evalute progress framework •Multistakeholder
•Indicators of progress •Recent international dialogue
toward IWRM and water developments
infrastructure development
framework Analyse gaps
•WR management
functions required
•Management
potentials and
constraints
Implement frameworks
•IWRM framework
•Framework for water Build commitment to Prepare strategy and
infrastructure development actions action plan
•Build capacity •Political adoption •Enabling environment
•Stakeholder •Institutional roles
acceptance •Management
•Identify financing instruments
•Links to national policies
Source: GWP, 2004.

FIGURE 2
The strategic planning cycle for water resources management
Where do we want to be?

Development objectives
and key water policies
How do we ensure arrival at goals? Where are we now?

Implementation and control Assessment and analysis
of issues
How can we get where

How will resources be allocated? we want to be?
Investment plan Options and choices
Which way is best?

STRATEGY
Source: World Bank, 1994.
1987). Cognitive, knowledge and information constraints limit the possibilities to

determine “which strategy is best” and, therefore, it is usually more realistic to strive
for a satisfactory rather than the best or optimal solution (Simon, 1945). Furthermore,
actual decision-making processes are often characterized by capriciousness and
unpredictability and may be described more accurately as incremental processes of
“muddling through” (Lindblom, 1959). Problems are not obvious, precise or singular
and neither are solutions; rather, the art is to identify and formulate problems worth
solving (Wildavsky, 1992). Thus, it is necessary not to minimize the difficulties
involved in combining a rational planning approach with capricious political decision-
making.
In IWRM literature, this issue has become increasingly clear as more experience has
been gained with the implications of viewing IWRM as a process. Within the literature
on IWRM, some strategies have been identified for better dealing with the complex
process aspects, such as: the need to recognize and mobilize relevant stakeholders; the
need to understand competing needs and goals; the need to take time and go through
several rounds to bring politicians and stakeholders to agreement on trade-offs, realistic
planning with resource requirements that stay within reach of government (Cap-Net,
2005); the need for a problem-based approach triggered by specific challenges that can
be linked to broader development goals; and the need to mix top-down and bottom-up
approaches in order to ensure broad participation by a diverse range of stakeholders in
a well-organized and time-bound fashion at appropriate stages of the process, two-way
communication among stakeholders, sharing knowledge, etc. (GWP, 2004). Although
these strategies are not easy to implement and need to be translated to specific actions
for each particular case, they convey the best available knowledge. Thus, the message is
not to do away with the rational planning approaches or IWRM cycles, but to realize
their limitations in practice and to use them in a flexible way.
Problems and solutions

Both the ideal-type textbook processes as well as the other descriptive theories of
policy processes point to two main elements that stakeholders juggle with in any
decision-making situation:
¾ Problems – perceived gaps, now or in foreseeable future, between actual and
desired situation. Problems are connected to stakeholders. Different stakeholders
Chapter 2 – Challenges for using valuation to support water resources management 9
may have different problems and they may differ about the nature and importance
of problems. Water-related problems feature aspects of quantity, quality and
availability at specific times and at specific locations.
¾ Solutions – measures, strategies and actions to solve problems by closing the
perceived gaps. Solutions relate to problems and, thus, to stakeholders. Different
stakeholders will exercise control or partial control over different solutions.
Solutions may include: the construction and operation of physical structures
such as irrigation channels, weirs and sluices; the adoption of economic measures
such as charging for water use or pollution; and the putting in place of legal and
institutional arrangements.
Problems and solutions are the most basic substantive elements in a water resources
management process and there is likely to be a continuum between problems
and solutions. Solutions may turn into problems after they are implemented, or a
solution for one stakeholder may constitute a problem for another. For example, a
dam and reservoir might have been constructed as a solution to a past problem of a
lack of power-generating capacity and a need for improved irrigation water control.
However, once in place, some negative impacts, e.g. on fisheries, may also have become
apparent, triggering a new process to identify mitigation measures and possibilities
for improvement. Something similar can be said for solutions to establish protected
areas that benefit nature conservation but that may create livelihood problems for local
communities.
Ultimately, water resources management should help stakeholders to address their
specific problems and to identify solutions that can help to improve their situation.
At any given point in time, a stakeholder may perceive certain problems and certain
solutions. These need to be articulated in the stakeholder process in order to win
sufficient recognition of perceived priority problems and support for the implementation
of favoured solutions. Both problems and solutions will be evaluated and prioritized,
selecting which problems to tackle first or which solution to implement. The main
stakeholders involved do this through a process of implicit or explicit valuation.
EXISTING APPROACHES TO WATER VALUATION

Frameworks to assess the value of water
In order to provide stakeholders with an explicit, transparent and scientifically sound
valuation of water resources, several water valuation frameworks have been developed.
These frameworks enable stakeholders to compare and integrate the different
components that make up the value of water, building on concepts such as total and
full economic value (Georgiou et al., 1997; NRC, 1997; Rogers, Bhatia and Huber,
1998; FAO, 2004), water accounting (Molden, 1997) and the water value flow concept
(Hoekstra, Savenije and Chapagain, 2001). The total economic value and the similar full
economic value concepts are often used for water valuation. These fairly straightforward
frameworks consist of a careful summation of the different components of the value of
water, which together constitute its full or total economic value.
One of the full economic value frameworks often cited in relation to water valuation
is that developed by Rogers, Bhatia and Huber (1998) for the GWP. Underlying this
framework is the notion that at the margin, i.e. for the last unit of water used in a given
use, the full economic costs of water supply per unit of water should equal the full
economic value per unit in order to achieve economic equilibrium and maximize social
welfare. Figure 3 illustrates the full economic cost and full economic value concepts
from this framework.
Complicating economic valuation: marginal values

The advantage of the full and total economic value frameworks is that they offer
a relatively straightforward procedure for aggregating different value components
into one overarching value. However,

FIGURE 3 behind the apparent simplicity of the
GWP framework for full economic cost and value of
frameworks, there are some factors that
water use
complicate an accurate use in practice.
The first of these is the distinction
between marginal and average values,
Environmental which is particularly relevant for water
externalities SUSTAINABLE valuation.
VALUE IN USE
Marginal values assess the value of
incremental changes in the available
Economic units of water for a certain use. This
externalities FULL COST
is useful when considering different
options for re-allocation of water
FULL resources, making more or less water
Opportunity ECONOMIC
cost COST available to different uses. Marginal
values generally differ significantly
Capital
from average water values (Ward and
charges Michelsen, 2002) and they are much
O&M more difficult to assess. Difficulties
cost increase even further when dealing
with the links between water and
ecosystems, as ecosystems may have
sudden threshold levels. This means
that an ecosystem may be stable up to
Intrinsic value
a certain point after which a boundary
is passed and some irreversible changes
may occur (Daily et al., 2000; FAO,
Adjustment for 2004). Similar problems can also apply
societal objectives
to the assessment of marginal costs of
provision of water services, particularly
FULL VALUE
where there is a strong indivisibility
Net benefits from
indirect uses ECONOMIC
(“lumpiness”) in costs, e.g. for water
VALUE storage and supply infrastructure.
It may not always be possible
Net benefits from to assess the values associated with
return flows incremental changes. However, if
water valuation intends to support
water resources management
Value to users
of water processes, it should at least be able to
assess the values associated with the
changes that are to be expected from
different possible policy alternatives.
Source: Rogers, Bhatia and Huber, 1998.
Stakeholders and policy-makers
should use valuation as a means for
evaluating the trade-offs involved in policy choices; that is, an assessment of benefits
and costs should be part of the information set available to stakeholders in choosing
among alternatives. In particular, it should value the changes in water-related good or
services attributable to a policy change (NRC, 2004).
Complicating economic valuation: the time dimension

The time dimension adds further complexity to attempts to assess the values of water-
related goods and services. This time dimension manifests itself in at least three ways:
(i) assessing short- and long-term values; (ii) dealing with periodic fluctuations in water
values; and (iii) making valuation outcomes available at the right time to be of use in
the water resources management process.
The aspect of short-term versus long-term values manifests itself in trade-
offs between short-term economic gains at the expense of long-term ecosystem
conservation. Generally, economists have dealt with this aspect through the use of
discount rates, which help to express values at a future time in terms of values at the
present time (FAO, 2004; NRC, 2004). However, this does not differentiate between
stakeholders’ values. Certain stakeholders may perceive risks and uncertainties in a
different way. Some stakeholders avoid risks in order to ensure that current values are
maintained for the future and are not jeopardized by their actions. Other stakeholders
are willing to take certain risks in order to have a potentially higher value in the future,
and still others deliberately opt for a “mining” approach, maximizing current values
at the expense of future values with a shift of activities in mind (e.g. farmers mining
non-renewable groundwater resources anticipating that future generations will work
outside the agriculture sector). These dimensions may be incorporated into water
valuation in different ways, including methods such as the use of a maximin rule
(this means maximizing minimum values when choosing between alternative policy
options and dealing with an uncertain future – it entails selecting the alternative
with the highest minimum value when expecting the worst case scenario for each
alternative), safe minimum standards or the application of the precautionary principle
(NRC, 2004).
Water values tend to fluctuate over time. Water systems are dynamic systems
in which the availability and demand for water fluctuates over time, resulting in
corresponding fluctuations in associated values. In areas characterized by a wet season
and a dry season, the value of a small amount of water may be very high in periods of
scarcity, while this value may be much lower at other times of the year. Moreover, for
agriculture, marginal values for crop growth or livestock production may be very high
when the available water resources are close to the minimum amounts of water needed
to avoid the loss of a harvest or cattle. This is what is called the short-term or tactical
value of water, which is usually much higher than the strategic value of water that
refers to the value of water on the moment prior to sowing, when farmers decide on
their cropping strategies (Tardieu and Préfol, 2002). The time dimension also relates to
periods when water is abundant, when floods add value periodically to floodplains or
when floods cause damage to infrastructure and agricultural land. Finally, fluctuations
in water values are also caused by the fact that the objectives of stakeholders (and their
relative importance) may change over time, e.g. in relation to economic cycles.
The perspective on water resources management as a process introduces a third
element of time. Valuation results need to be available at the right time in order to
help stakeholders in making the trade-offs they are facing, which may sometimes
require acute decision-making and urgent action. Valuation needs to be adaptive and
flexible, to meet the needs of the decision-making processes, which may sometimes be
unpredictable and capricious.
Inclusion of social and environmental values

A socially optimal allocation requires a maximization of the social welfare function that
represents what society wishes and that includes social and environmental objectives,
such as equitable income distribution, food security and healthy ecosystems. This is
included in the valuation framework in Figure 3 through the components of economic
and environmental externalities, intrinsic value and adjustment for societal objectives.
However, the assessment of costs and values in Figure 3 becomes progressively more
complicated as one moves further away from the elements at the bottom that are
concerned with the direct water uses. The assessment of the societal and environmental
values requires the use of more complicated methods to provide crude proxies. These
methods require considerable expertise and are quite difficult for ordinary users to
comprehend.
Thus, the social and environmental values can be captured conceptually in the
existing economic valuation frameworks through a certain “adjustment for societal
objectives”, as for the framework shown in Figure 3, or a “stage 2 policy impact
analysis” that examines the impacts of an economically efficient allocation on welfare
distribution, market failures and institutional aspects (Groom, Koundouri and
Swanson, 2003). However, the practical applications of these frameworks focus mainly
on the consumer and production values of direct and indirect uses to analyse economic
efficient allocation. The social and environmental values of water are treated as a
secondary step of, or an added component to, this economic valuation. The emphasis
is on the development and use of methods to assess the economic costs and benefits
of direct and indirect uses. The valuation of components related to social equity and
environmental sustainability receives much less attention even though it may well be
much more complex.
Furthermore, most practical applications of the existing economic valuation
frameworks seek to express all value components in a common unit of measure and,
generally, monetary units are used for this. This enables aggregate values or value
functions to be determined and relatively easy comparative analyses of the different
value components and water-using sectors. However, it can also put unnecessary
limits to water valuation, suggesting that ultimately the achievement of all objectives
can be measured meaningfully with a common denominator. For example, it ignores
the fact that food security and social equity refer to social objectives that are usually
considered important regardless of their virtual monetary value. While sometimes
closely related, social and economic values may also be fundamentally different. A
monetary expression of values is one aspect of valuation, useful to address objectives
of economic efficiency and producer and consumer values. However, water valuation
should also include values related to social and environmental objectives, expressed
in their own appropriate standards and units. Ultimately, the value of water valuation
may be to reframe a water resources management problem in terms of a multicriteria
decision-making problem rather than one of economic optimization.
Although social and environmental values can be included in the existing economic
valuation frameworks, the emphasis in practice is still on monetary expressions
of producer and consumer values. Therefore, it may be useful to complement
these economic valuation frameworks with valuation frameworks that recognize
environmental values and social values more clearly as separate values alongside
economic values. Such frameworks would: (i) recognize total economic value as one
element of total systems value (FAO, 2004); (ii) consider the total value to be a function
of ecological values, sociocultural values and economic values (De Groot, Wilson and
Boumans, 2002); or (iii) recognize the equal importance of economic, social and
environmental values as a triple bottom line (Christen et al., 2005). Figure 4 shows an
example of such a framework. Although developed for ecosystem functions, goods
and services, and, therefore, broader than just water resources management, it helps
to illustrate the points made in this section. In many cases, the result of applying such
frameworks is more likely to provide a picture of the diversity of values, resulting in
a “basket of value components” rather than one aggregated value or function (Burrill,
1997).
CHALLENGES FOR LINKING WATER VALUATION AND STAKEHOLDER

PROCESSES
Potential of water valuation to support stakeholders despite limited accuracy
Values define what stakeholders care about. This indicates that valuation is indeed key
to the process of water resources management. It helps to assess the importance of
FIGURE 4
Framework for integrated assessment and valuation of ecosystem functions, goods and services
Ecological
values
Ecosystem Based on
structure ecological
& process sustainability
Decision-
Ecosystem Sociocultural making
goods values process to
Ecosystem & Based on equity Total determine
functions services and cultural value policy
perceptions options &
1. Regulation management
2. Habitat measures
3. Production Economic values
4. Information Based on
efficiency and
cost-effectiveness
Source: De Groot, Wilson and Boumans, 2002.
problems as well as the desirability of alternatives to solve these problems. In the water
resources management process, where different stakeholders have to reach agreement
on joint management strategies and actions, expressing values helps individual
stakeholders to evaluate different courses of action and supports communication and
negotiations among stakeholders.
Cognitive, information and knowledge constraints are often an important factor in
dealing with interrelated and partially overlapping water-related goods and services.
Expressing values is useful but also difficult. Determining what it is that stakeholders
care about in a particular situation is already difficult, but assessing how this is
supported or impaired by different activities or policy alternatives is often close to
impossible. Causal relations between interconnected and interdependent water uses
are difficult to establish, while the need to establish marginal values in dynamic water
systems further complicates matters.
Thus, water valuation is difficult, fraught with uncertainties (Costanza et al., 1997)
and results in value estimates that are necessarily crude and inexact (Gibbons, 1986,
Pagiola, von Ritter and Bishop, 2004). Combining the analytical complexity with
the complexity caused by the involvement of different stakeholders in capricious
decision-making processes clarifies why a comprehensive, complete and undisputed
valuation is virtually impossible to achieve. Therefore, valuation should use whatever
partial but accurate information is available or affordable to take forward processes of
multiobjective decision-making. Sometimes, it may be better to reach an agreement on
imperfect value estimates rather than continuing theoretical disputes over the “real”
value of water resources.
This means that valuation should be viewed in a broader perspective, not solely
as an objective or neutral means to put a quantitative value on water resources.
Valuation may be biased and partial, but it can make an important contribution to
water resources management by offering a structured and transparent mechanism that
supports a multistakeholder dialogue, helping stakeholders to express their values and
to jointly reach a certain level of agreement on the use and management of scarce water
resources (Moss et al., 2003).
A stakeholder-oriented approach to water valuation is proposed, one which is

embedded in the water resources management process of which it forms an intrinsic
part, rather than a result of an external analysis that is brought in by outside experts. In
this way, water valuation is part of a process of social learning and of the development
of a shared frame of reference among stakeholders, while also contributing to
stakeholders’ capacity building and empowerment. Experts will continue to play a
role in such a stakeholder-oriented approach as it will need to draw on a large set of
potentially suitable analytical tools to combine stakeholder and scientific knowledge,
to support stakeholder judgement with scientific inputs, and to facilitate the water
resources management process where necessary. However, they should recognize that
they are involved jointly with local stakeholders in a learning process (Pretty, 1995) and
that, ultimately, stakeholders rather than experts are driving the process.
Three specific challenges for stakeholder-oriented water valuation

Realizing a stakeholder-oriented approach to water valuation as proposed above is
not self-evident. It requires stakeholders and experts to overcome several challenges
throughout the process. Some of these challenges relate to further improvements of the
validity and analytical accuracy of existing water valuation approaches. Others relate
to strengthening the links between water valuation as an analytical activity and water
valuation as it is being done implicitly or explicitly by stakeholders as part of their
water resources management process. The latter challenges are central in this report,
and three of them are identified here.
Analytical challenge
Water valuation needs to provide transparent and reliable assessments of values that
are of importance to stakeholders. This requires that valuation cover economic, social
and environmental values. Values may differ between stakeholder groups and it will be
useful to complement insight into aggregated values for society as a whole with values
that are stakeholder specific. The time dimension is also important in expressing values,
dealing with long- and short-term values and periodic fluctuations. The challenge is
to address this need for diversity while still enabling stakeholders to comprehend the
overall picture, which is necessary for IWRM.
Adaptive challenge
Water valuation needs to be practically feasible. This means that it should be able
to cope with limits in available data, expertise and time as well as uncertainty and
knowledge gaps. Valuation should be able to cope with these gaps and limitations while
still supporting processes of multiobjective decision-making. Here again, there is an
important time dimension, as the timing of valuation processes should ideally match
that of the, at times unpredictable, stakeholder process. The challenge is to cope with
these various limitations while adapting to ongoing processes, incorporating a certain
degree of flexibility through the use of adaptive approaches that stress iteration and
learning.
Participatory challenge
Water valuation needs to be embedded in stakeholder processes. This means that it
needs to be participatory, combining subjective stakeholder judgements with scientific
inputs and more objective knowledge. It should cater to stakeholders’ information
needs, leaving them to decide which aspects of water resources and related goods and
services should be valued. The challenge is to implement valuation in a participatory
fashion to better support deliberation and learning, but also negotiating and making
harsh choices, confronting the full complexity of multiple uses, numerous stakeholders,
different perceptions, conflicting objectives and delicate power relations.
15
Part II
Cases
The next three chapters each present one case in which the people involved confronted
the three challenges identified in Part I and developed some practical responses to address
them. As these cases were done independently from one another and by different people
and organizations, there are substantial differences among them. The methodological
approaches used in the three cases show a strong convergence as they all emphasize the
use of water valuation to support local stakeholders in the context of IWRM, but their
point of departure is somewhat different.
Chapter 3 presents the case of the Mkoji sub-catchment in the United Republic of
Tanzania and focuses on the value of water resources to support different local livelihood
activities in different locations while also meeting environmental requirements. In this
case, a farming system and sustainable livelihoods approach provided the methodological
starting point.
Chapter 4 discusses the case of the Kirindi Oya basin in Sri Lanka and focuses on the
value of water resources to support different functions that are potentially conflicting:
irrigation and fisheries. The basis for the valuation methodology here was provided by the
principles of environmental impact assessment.
Chapter 5 discusses the case of the Stoen Treng Ramsar site in Cambodia, focusing
mainly on the valuation of insitu uses of water resources for the provision of various
wetland goods and services that support local livelihoods. This valuation process distinctly
featured different participatory rural appraisal methods.
Part II: Cases
17
Chapter 3
Valuation to support local water
resources management in the
United Republic of Tanzania
INTRODUCTION
Context of the valuation project
In the United Republic of Tanzania, some areas face severe situations of water scarcity
as water demands have been increasing, particularly for hydropower and agricultural
production: “Past uncoordinated planning for water use, inadequate water resources
data, and inefficient water use have resulted into water use conflicts between the energy
and irrigation sectors, between irrigation and the water ecosystems, hydropower and
the ecosystem, and between upstream and downstream users.” (Tanzania National
Water Sector Development Strategy 2005–2015). In order to address these problems,
the Government has developed a new policy and legal framework and it has embarked
on important institutional reforms. Responsibilities for water resources planning and
management are being transferred from the national level to local levels, through river
basin water organizations and water users associations (WUAs). These decentralized
management structures are still being formed and/or strengthened, working towards
increased involvement of local stakeholders in the process of IWRM.
The water scarcity concerns and water-use conflicts acknowledged in the national
policy documents are visible in the Mkoji subcatchment (MSC), a rural area in the
southwest of the country. Here, the local water resources are increasingly under
pressure and new water management structures are being shaped. In the MSC, water
valuation was done as part of an effort to enable the local stakeholders to engage
in a process towards implementing IWRM principles, based on a solid background
analysis of the linkages between local conditions and the value of water, with specific
attention for vulnerable groups. This should support the local stakeholders in coping
with their current water scarcity problems within the context of the ongoing process
of institutional reform. The project was carried out between June 2003 and January
2004 and is reported in more detail elsewhere (FAO, 2005; Hermans, Van Halsema and
Mahoo, forthcoming).
Water resources management in the Mkoji subcatchment

The MSC covers some 3 400 km2 and is a part of the larger Great Ruaha River basin,
which in turn is a part of the Rufiji River basin (Figure 5). The activities and concerns
of stakeholders within and outside the subcatchment fuel the pressures on the water
resources in the MSC.
Within the MSC, competition for water between different groups of water users
has increased in recent years. Different groups of water users can be identified on the
level of the subcatchment, based on the identification of three distinct agro-ecosystems
from upstream to downstream in the MSC. In the upper zone, relatively favourable
conditions allow for year-round cultivation, consisting of high-value rainfed agriculture
with supplementary irrigation. The middle zone of the MSC is dominated by paddy
rice cultivation, which is possible in large parts of this area because of the presence
of suitable soils. The lower zone is inhabited by pastoralists who raise their cattle in
the lower zone plains during the wet

FIGURE 5 season, when some rainfed agriculture
Location map of the Mkoji subcatchment is also practised. The expansion of
irrigation by farmers in the upper
parts of the MSC has led to increased
competition and conflict in recent
years. Competition among irrigators
has increased, especially between
paddy farmers in the middle part of the
subcatchment, as well as competition
Legend
between farmers and cattle-holders
Mkoji subcatchment and, in general, between upstream and
Rivers
Settlement
downstream water users.
Highway Outside the MSC, the drying up
All weather roads
of the Great Ruaha River in the dry
Railway
km
season causes important problems
for the environment in the Ruaha
National Park and is loosely associated
with reduced hydropower generation downstream of the Mtera Reservoir (Lankford
et al., 2004). In response, downstream stakeholders, including national politicians,
environmental non-governmental organizations (NGOs) and national park officials,
are looking increasingly to the water users in the MSC to release more water for
downstream uses.
The national and local concerns over the increasing pressures on the water
resources of the MSC have triggered efforts to address the water scarcity problems by
promoting the use of IWRM principles in the area. This process is linked closely to
institutional reforms in the water sector, as well as in the general institutions for public
administration, which promote participatory approaches and decentralization. These
reforms place more emphasis on the roles of the government districts, the Rufiji Basin
Water Office and local WUAs.
Table 1 summarizes the main stakeholder groups that are involved directly in water
resources management in the MSC and the main reason for their involvement, i.e.
problems or concerns related to the water resources of the MSC or official mandates
for their management. The water-using communities are organized in different ways
TABLE 1
Main stakeholders involved in water resources management in the MSC
Stakeholders Involvement in water resources management (concern or authority)
Upper zone (irrigating) Depend on water for year-round farm production as main source of food and income
farmers
Middle zone paddy farmers Depend on water for paddy rice production and/or dry season irrigation; increasing
competition over water for paddy and for irrigation
Lower zone pastoralists Depend on water for rainfed agriculture and to raise their cattle; dry season pasture
grounds and water resources are becoming scarce
District councils Regional-level government, responsible for rural development in their regions, including
agriculture. Main districts involved: Mbeya Rural and Mbarali
Water user associations Platform for local water users to manage their water resources and lowest level water
management institutions in the United Republic of Tanzania
Rufiji Basin Water Office Responsible for water allocation and regulation within Rufiji river basin, including
administering water rights, user fees and conflict resolution
National park officials Responsible for protection of national parks from illegal activities (grazing)
Environmental NGOs (WWF) Interested in environmental protection and nature conservation, especially in downstream
wetlands
Ministry of Water and National-level government institution responsible for water policy and strategy and for
Livestock Development livestock development, involved mainly through district councils
Ministry of Agriculture and National-level agency responsible for agricultural development, involved mainly through
Food Security district councils
Chapter 3 – Valuation to support local water resources management in the United Republic of Tanzania 19
and are supposedly represented in various ways in official water resources management
processes. The government agencies and institutions are expected to watch over their
interests as part of the broader general public interest. Some villagers or water users have
also organized themselves through local institutions such as village water committees,
irrigation associations, WUAs, farmer field schools (FFSs) and farmers’ cooperatives.
Generally, the level of organization tends to be better in the upper parts of the MSC,
with a low degree of local organization among the lower zone pastoralists.
WATER VALUATION APPROACH

Participatory action research approach
A participatory approach was used to conduct the water valuation. The combined use
of different participatory problem analysis and data collection methods was expected
to provide an improved understanding of the dynamics in the study area, and to
create a sense of ownership of the results, thus providing a good starting point for a
participatory IWRM process in the MSC.
Local communities were represented through a sample of six villages, two for each
of the three main farming systems. In these villages, a rapid rural appraisal (RRA) was
conducted. This included a wealth-ranking exercise to identify different stakeholder
groups within the villages based on wealth. This first information was then used in the
design of a household survey, covering a stratified random sample of 246 households
in the six villages. The results of the household survey were combined with historical
data available from rainfall, climate and gauging stations and results of previous studies
to provide a good overview of various trends, problems and associated values.
Based on a preliminary analysis of the data gathered in this first phase, it was
concluded that a better qualitative understanding of IWRM problems, possible
solutions and associated values was needed. Therefore, another round of focus group
discussions was conducted. These focus group discussions included representatives
from the villages and key officers from the Mbeya Rural District and the Mbarali
District, the Mkoji Water User Association Apex body that was being established and
a local FFS.
In the last phase of the project, a three-day stakeholder workshop was organized
where the preliminary results of the prior phases were presented and used as basis
for discussion among stakeholders. The stakeholders then structured the different
problems and concerns and worked towards a joint strategy for IWRM in the MSC.
Participants in the final workshop included representatives of the villages, district
officials, local training institutes and FFSs, experts from the national ministries, and
representative of NGOs.
Analytical frameworks to support water valuation

The water valuation was based on the use of two complementary analysis frameworks:
(i) an IWRM framework to identify and organize the different components that make
up the value of water; and (ii) a sustainable-livelihoods analysis framework to enable
more in-depth understanding of the underlying factors influencing the value of water
for local stakeholders.
The IWRM framework was based on the framework proposed by the GWP (2000),
in which three overriding criteria are identified for IWRM, along with some important
complementary elements that support effective water resources management. The
three overriding criteria provided the main entry points for valuation: economic, social
and environmental values.
A sustainable-livelihoods analysis framework was adopted to complement the
IWRM framework, based on the frameworks described by Ellis (2000) and Nicol
(2000). Together, the elements in this framework describe the impacts and dynamics
of rural livelihoods within a farming system, which determines the availability and use
of water resources and their associated values. This livelihoods framework enabled
a structured assessment of the local livelihoods based on different types of capital
(natural, physical, human, financial and social), institutional mechanisms, external
shocks and trends, and resulting livelihood strategies.
OVERVIEW OF MAIN OUTCOMES

Seasonal water availability
Insight into the availability and uses of water resources provides the necessary
background for water valuation, giving a first impression of water scarcity concerns
and the main water-using sectors. Table 2 shows estimations of the main water uses
associated with human activities as well as some estimates of evapotranspiration by
natural vegetation. It shows that the water supplied through rainfall exceeds the
water use during the wet season, leaving a significant part of the water available for
groundwater recharge, evaporation and runoff to downstream areas. It also shows
that dry-season water consumption exceeds the seasonal rainfall, using some of the
wet-season water stored in soils and drawing on water from elsewhere, for example
through migration of livestock to seasonal grazing grounds outside the MSC. The
deficit increases from the upper to the lower zones, meaning that the situation worsens
gradually when moving from upstream to downstream in the MSC. This is further
underscored by the fact that streams dry up annually half-way through the MSC in
the dry season. Owing to variable rainfall, the actual situation can differ significantly
from year to year.
Indicators used for water valuation

Three basic dimensions can be identified, which together cover most of the various
aspects that constitute the value of water: the economic, social and environmental
dimensions. For each of these dimensions, different value indicators were identified
that matched the known valuation methods with access to data. Table 3 provides an
overview of the indicators used. For some of these indicators, the relevant trends and
dynamics have also been assessed, where appropriate and feasible.
TABLE 2
Seasonal water availability in the Mkoji subcatchment
Wet-season uses Dry-season uses
Upper Middle Lower Total Upper Middle Lower Total
(Mm3)
Water use
Agriculture (excluding rice) 10.8 12.3 19.4 42.5 7.5 4.9 12.4
Paddy rice 14.6 20.5 35.1
Livestock MSC* 0.2 0.3 1.0 1.5 0.3 0.5 0.4 1.1
Migrated livestock* 0.1 0.3 2.0 2.4
Brick-making 0.1 0.1 0.0 0.2
Domestic 0.4 0.3 0.1 0.9 0.4 0.4 0.1 0.9
Natural vegetation 208.5 506.8 725.7 1 441.0 8.6 15.2 2.4 26.2
Total seasonal use 219.9 534.3 766.7 1 521.0 17.0 21.4 4.9 43.2
Total seasonal rainfall 604.3 1 051.4 808.0 2 463.7 15.6 6.4 0.5 22.5
* Livestock water-use figures here are related only to direct drinking needs. Hence, they do not reflect the true total water use.
TABLE 3
Overview of different value components in the project area
Economic values Social values Environmental values
Economic crop water productivity in different zones Food security in different zones Environmental base-flows
Economic value across water-using sectors Access to drinking-water Environmental changes
Income derived from water-related production activities Conflicts over water
Economic value of water

Economic crop water productivity in FIGURE 6
Economic crop water productivity in different zones of the
different zones
Mkoji subcatchment
Insight in crop water productivity
was deemed useful, as crop cultivation 0.25 Rainfed cereals
Rainfed vegetables
forms the main component of Irrigated cereals
human-related water consumption 0.20 Irrigated vegetables
in the MSC. Economic crop water Paddy rice
US$/m 3
productivity was assessed on the 0.15
basis of reported yields and farmgate

0.10
prices, combined with crop water
requirements calculated using local 0.05
data and FAO CROPWAT software.
Figure 6 contains an overview of 0.00
economic crop water productivity for Upper MSC Middle MSC Lower MSC
the three zones in the MSC. Note: US$1 = TSh1 030 for reference year 2003.
Generally, economic productivity
decreases from upstream to
downstream, with the exception of
FIGURE 7
rainfed vegetables. This decline in Economic water values for different sectors in the Mkoji
economic productivity is explained by subcatchment
the climate conditions that are more
1.20
favourable in the upstream parts of
the MSC and the fact that irrigation 1.00
modernization has been more
widespread in the upper zone villages. 0.80
US$/m3
Economic water values across water- 0.60

using sectors
In addition to economic crop water 0.40
productivity, economic values in
other sectors were also assessed, using 0.20
primarily household survey data.

0.00
Livestock water productivity was Irrigated Irrigated Rice Livestock Domestic
assessed using reported annual income cereales vegetables
from livestock together with estimates Note: US$1 = TSh1 030 for reference year 2003.
of livestock water consumption

using literature on tropical livestock-
keeping. Domestic water productivity was assessed both through a simple variant of
contingent valuation as well as observed market prices for commercially sold water.
Figure 7 shows the results.
All the values shown in Figure 7 cover higher level estimates for all sectors as they
refer to gross income. The values exclude estimates for production costs, the bulk of
which would consist of labour costs for working the land, herding, fetching water
and other activities. However, these labour costs are especially difficult to estimate
for the rural economy of the MSC. Therefore, it was decided to omit production
costs altogether in order to allow for at least comparable output in terms of water
productivity based on gross income.
The high productivity value for domestic uses is commonly observed in cross-
sectoral water productivity estimates (FAO, 2004). This may be explained by the fact
that domestic uses are linked directly to human health and are relatively low in terms of
volume. Nevertheless, the value shown is thought to indicate an upper limit, expressing
a willingness to pay. The reported household income levels suggest that it will not be
possible for most households to pay such prices for their domestic water all year round
(see section on the social value of water for details on income levels). This indicates a
discrepancy between the households’ willingness to pay and their ability to pay.
The high value of livestock water productivity is explained by the high market value
of cattle and the fact that the productivity estimates are based only on water withdrawal
for direct consumption, excluding the water needed to produce the food for the cattle.
The exact economic water productivity for livestock in agropastoral farming systems
is difficult to estimate owing to the relations and overlaps between different water-
using activities. Livestock consumes a considerable amount of water through the water
embedded in its fodder, but simply accounting all this embedded water as livestock
water consumption misses the point that livestock may graze on crop residues that
would otherwise be lost. Complications are not confined to the MSC as cattle herds are
taken outside the MSC in the dry season to graze in wildlife parks, where they compete
for water with the wildlife. It also means that the migrated cattle import a considerable
amount of “virtual” water from outside the subcatchment.
Dynamics in economic value

The economic value of water for crop production fluctuates based on the timing of
planting and marketing the crops, owing to the impact of price volatility. For example,
the price for rice fluctuates considerably during the year in direct relation to the
quantity of produce offered on the market. Rice marketed early in the season (April/
May) fetches a price that can be up to three times higher than the average price later
in the season (July/August). This results in fierce competition for water early in the
growing season.
Water to support livelihood activities

Table 4 summarizes the contribution of water-related activities to the income of average
households. It shows that more than 90 percent of household incomes in the MSC
depend on water as a critical input. However, poor households are more reliant on off-
farm activities as sources of income than are the average households. This is probably
because of their limited access to land and water resources. In fact, there seems to be
a trend towards off-farm livelihood diversification by poor households in the MSC.
In the lower zone, a shift away from cattle holding towards rainfed agriculture can
be observed. As described in the section on livelihood strategies, this is caused by
the diminishing seasonal floods during the wet season and the closing of the seasonal
grazing land in the Usangu Plains.
Social value of water

Food security in different zones
The annual production of cereals in the MSC can be reviewed for its nutritional value
in terms of energy and compared with the annual energy requirements, which are
about 2 550 kcal/day or 0.9 × 106 kcal/year for an average active adult as based on body
weights from a sample low-income country (Cameroon) (FAO, 1997). Although this is
a very rough estimate and there are more requirements to a healthy and balanced diet,
the results in Table 5 provide a first indication of the food security situation.
TABLE 4
Percentage of income derived from water-related production activities
Irrigated Intermed. Rainfed Livestock- Total sum Total for poor
agriculture agriculture (paddy) agriculture keeping households
(%)
Upper Zone 45 0 44 1 90 50
Middle Zone 6 39 24 23 92 75
Lower Zone 0 9 19 69 96 92
Table 5 indicates that, on an annual

basis, enough food is produced TABLE 5
in the MSC to meet basic energy Food security in the Mkoji subcatchment
requirements, but that the margins are Output Upper Middle Lower Requirement
(10 kcal/capita/year)
6
not very high, especially in the upper
Dry-season cereals 0.5 0.1 0 0.45
zone. Here, the food security situation
Wet-season cereals 0.9 1.6 3.9 0.45
seems precarious for a considerable (including rice)
part of the poor and very poor Total 1.4 1.7 3.9 0.9
households that are below the average
levels shown in the table, especially
in view of the risks involved in maize
storage and production.
Households in the middle and lower zones are almost entirely dependent on wet-
season food production. This means that they have to bridge an important period using
their wet-season harvests and non-agricultural livelihood strategies, but possibilities
for this are currently limited. Using storage facilities or increasing access to markets
may help to improve the food security situation and, thus, the social value of water
here, even though at first sight these measures may seem to have little to do with water
resources management from a narrower perspective.
Access to drinking-water
A special concern is the availability of domestic water in the lower zone in the dry
season, when the water situation is critical and water availability is reduced to a level
that makes it difficult to meet even basic household water needs. People from lower
zone households often have to travel long distances to obtain drinking-water in the dry
season. This seriously threatens the health of lower zone households and reduces the
availability of human capital in the dry season.
Conflicts over water

Information about conflicts over water provides an indication of the social value
associated with existing water management practices. Where many sever conflicts
occur, this indicates that such practices contribute to social instability. Table 6 shows
that water-related conflicts in the MSC occur in the dry season and at the onset of the
wet season. The conflicts are concentrated in the middle zone, where conflicts among
farmers competing for irrigation water are the most severe and may erupt in violent
fights.
Environmental value of water

Environmental base-flows
Environmental base-flow requirements are regarded as the minimum flows to ensure
sustainable river environments and flora and fauna. A specific environmental base-
TABLE 6
Water-related conflicts in different zones of the Mkoji subcatchment
Upper zone Middle zone Lower zone
Typical Upstream – downstream conflicts Conflicts within and between Conflicts among cattleholders over
conflicts within and between irrigation irrigation schemes. Conflicts grazing lands. Conflicts of lower
schemes between irrigators and zone cattleholders with water users
cattleholders or authorities in other zones
Occurrence In dry season In dry season, and at the onset In dry season
of the wet season (peak)
Severity Low - Usually solved informally or High - Several court cases High – mostly with middle zone
through irrigation committee reported, sometimes violent over water and pasture; observed: a
fights lack of local-level conflict resolution
mechanisms
flow requirement could not be assessed for the MSC within the time, resource and
information constraints of the current project. However, as the streams used to be
perennial, it is safe to assert that at least a constant minimum flow is required in the
MSC throughout the year. In the MSC, increased river abstractions in recent years
have affected existing base-flows; in the lower zone, there is no water flow in the dry
season. This indicates that the current practices have a negative value for sustaining the
existing environment.
The lack of base-flows is also apparent further downstream of the MSC in the
drying up of the Great Ruaha River. As mentioned above, this causes environmental
and economic problems that receive a lot of attention at national level, where restoring
the environmental base-flow for the Great Ruaha River has been given priority.
As a consequence, pressure is put on upstream water users, including the MSC, to
use less water. Moreover, measures have been taken to protect wildlife through the
establishment of game reserves, which affects communities in the MSC directly.
Observed environmental changes

Another indication of the environmental value of existing water management practices
comes from observed changes in the MSC ecosystems. Such changes are most
noticeable in the lower zone, where an observed reduction in seasonal flooding allows
for the reclamation of floodplains for agricultural purposes. Although this might be a
positive development in a socio-economic sense, it also indicates that the current flow
regimes are not sustaining the original ecosystems in the lower zone.
Insights obtained from disaggregated values

The different components that make up the value of water show results that may seem
contradictory at first. A closer look into these apparent contradictions among the
indicators generates useful insights, which may well have been missed if the indicators
had been aggregated into one overall figure. For example, water for rice does not have
a very high economic value compared with that for other crops. Nevertheless, the
social value assessment shows that water for rice is one of the main sources of conflict
in the subcatchment, indicating a high social value. Apparently, this high social value
is explained by other factors that make rice a desirable crop, outside economic water
productivity. An examination of the broader picture of rural livelihoods indicates that
rice is preferred because it is a non-perishable crop that is relatively easy to market and
provides a more reliable source of income regardless of its water needs.
Another observation is the shift from cattleholding to rainfed agriculture in the lower
zone. Although the water used for cattle in the lower zone has a high economic value
compared with rainfed agriculture, a shift away from cattleholding can be observed
in the lower zone. This reflects political decisions to close off the outside wetlands
for grazing, but also the distribution of water resources within the MSC, where all
the little water available in the dry season is used in upstream parts. As a result, this
economically highly valued water use is currently under threat in the MSC.
Identification of stakeholder alternatives for improved IWRM

In the focus group discussions and the final stakeholder workshop, the stakeholders
identified several options for improved water resources management. They selected the
most promising ones during the final stakeholder workshop, based on their assessment
of the preliminary outcomes of the analysis offered to them by the project team. This
process was supported by a structured approach, using problem trees and score cards
to link the main water resources management problems to measures.
Options to address the value of water resources for economic production activities
included: the construction of charco dams to store excess runoff and make it available
for productive uses; and the training of farmers in on-farm water management
techniques to promote water conservation and increase crop water productivity. The
option of shifting to crops with lower water requirements was also identified.
The assessment of the social values associated with the current water resources
management arrangements indicated the need for improvements, for example to reduce
conflict and to ensure equal access to water resources for livelihood activities. Related
to these social values, options were identified to increase fairness and equity and to
ensure that water management practices would not lead to social instability. These
included a review of the existing system of water rights allocation and management, as
well as the continued formation of local WUAs throughout the MSC as a platform for
dialogue and negotiation.
Furthermore, the valuation results also suggested the usefulness of options that
at first sight do not seem directly related to water management but that nevertheless
could be linked to the water valuation study as they could help farmers to generate
more value per unit of water. These options included increasing farmers’ access to
storage facilities and low-cost farm inputs, such as agrochemicals, and supporting
farmers’ associations. In particular, rice producers associations that coordinate the joint
marketing of rice may benefit the region. If farmers can agree on a system to share the
benefits of coordinated marketing, they can increase their income and income stability
as compared with the existing competitive model that is conflict-prone and adds social
risk factors to the already significant natural risk factors.
All the stakeholders participating in the workshop were asked to identify the measures
that were feasible for them to initiate and that they would commit themselves to. A
distinction was made between short-term and long-term measures in order to ensure a
balance between long-term sustainability and much needed short-term improvements.
Most stakeholders were willing to commit themselves to the implementation or further
exploration of some of these options, especially the construction of small dams and the
provision of training at various levels.
POTENTIAL CONTRIBUTION TO STAKEHOLDER DECISION-MAKING

The valuation process included the use of participatory approaches, such as focus
groups, discussions and participatory workshops, putting stakeholders’ problems
and values at the centre. This participatory approach contributed to the local water
resources management process by facilitating communication among stakeholders,
helping them to explicate and communicate the values that water resources represent
to them. In this case, the valuation also pointed to possible room for flexibility and
negotiation among stakeholders, for example by indicating the high economic value
of downstream cattleholding, and by indicating the scope of organized rice marketing
rather than individual conflict over irrigation water.
Nevertheless, the use of a participatory approach alone is not sufficient to ensure
a contribution to decision-making by local stakeholders. For this, water valuation
processes also have to take the institutional context into account. The results of the
Mkoji case showed that the lack of well-functioning water management institutions
was an important impediment to allowing stakeholders to manage water in a way
that reflected its value. Especially for social values, related to the distribution of costs
and benefits associated with water uses (and non-uses), well-functioning institutional
structures are essential. In the MSC, institutions were only at the beginning of a long
process of reform and development.
Therefore, an explicit effort was made in the MSC to link the water valuation to
the work of public organizations that had a key role in the new institutional setup for
water resources management: the Rufiji Basin Water Office, WUAs and the district
authorities. This was done through involving them and through targeting some of the
measures and recommendations at issues that fell under their particular mandates. For
the Rufiji Basin Water Office, this meant in particular the question of water rights and
the representation of local water users through WUAs and their catchment-level apex
body. For the districts, this was done through generating input that could be taken up
in the district agricultural development plans, which should be established on the basis
of local input.
Through involving stakeholders throughout the MSC, the valuation process also
supported the start of an organization process among those stakeholders that had
previously not organized themselves to deal with water management issues. This was
especially important for the lower zone pastoralists, to ensure that their voices would
also be heard in the debate over water resources management in the MSC in addition
to those of the better organized upstream farmers’ communities. The solutions that
resulted from the valuation process made very clear that a minimum level of local
organization would be a precondition for the successful implementation for all of
them.
In conclusion, there are ample indications that the valuation process followed in
the MSC made a useful contribution to helping local stakeholders manage their water
resources. The explicit identification and establishment of links with the existing
institutions and planning processes are believed to be crucial and useful to ensuring
that the valuation process is indeed linked to decision-making by local stakeholders.
This is important not only in order to ensure an institutional anchorage of the valuation
process and its outcomes, but also to support the development of new, and the
functioning of existing, institutional structures by offering stakeholders a structured
process for communicating and reflecting upon the different values involved in
managing local water resources.
27
Chapter 4
Valuation for improved
management of irrigation
and fisheries in Sri Lanka
INTRODUCTION
Fisheries are the exploitation of living aquatic resources (mainly fish but also
invertebrates and some insects) held in some form of common or open access
property regime (in contrast to aquaculture, which implies active husbandry and
private ownership of stocks). This case concerns artisanal inland fisheries and refers to
freshwater systems that include rivers, lakes and wetlands, as well as brackish lacustrine
and estuarine systems. Such fisheries often contribute significantly to incomes and food
security in rural areas. Although there are exceptions, the combination of open access
and low costs can make fishing an important activity for poor people.
The development and operation of irrigation systems can have a range of impacts
on fisheries. Changes in flow patterns, size and connectivity of aquatic habitats, and
water quality can affect species diversity and productivity. Changes in the physical
accessibility or rights of access to waterbodies can affect who is able to benefit from the
resource and when. Healthy and productive fish stocks depend on particular quantities
and seasonal timing of flows in rivers and into waterbodies. Thus, trade-offs can arise
between the consumptive use of water for agriculture and the conservation or provision
of non-polluted instream flows, or inflows to and resident volumes of waterbodies and
wetlands (Nguyen Khoa and Smith, 2004). Although non-consumptive users of water
(apart from incremental evaporation when retained specifically for a fishery), fisheries
can thus preclude or constrain other water uses.
Although change is almost always detrimental to aquatic biodiversity, some water
management actions can be neutral or beneficial for fishery production and livelihoods.
For example, reservoirs, canals and drains can frequently compensate for aquatic
habitat modification or loss by supporting productive fisheries, and loss of livelihoods
in fishing may be compensated by improved opportunities in farm production or in
farm and other labour markets. Thus, there is considerable complexity and a range
of possible trade-offs and complementarities between irrigated farming and fisheries.
There is potential for fisheries to coexist with irrigation systems, contributing to
the overall productivity of water use, to the livelihoods and food security of rural
communities, and to the sustainability of land and water management.
This case study explores the scope for achieving such aims for the Kirindi Oya
Irrigation and Settlement Project (KOISP) in Sri Lanka, the approaches that may be
needed, and the positive role that stakeholder valuation of competing water uses can
play. It arises from work done to develop and test an approach to deal with the linkages
between irrigation development and fisheries (Nguyen Khoa, Smith and Lorenzen,
2005a, 2005b). The KOISP was selected because important fisheries existed within the
catchment but significant negative project impacts and competition for water between
farming and fishing had not been mitigated or resolved. Secondary data on the project’s
performance and the fisheries were also available, and the logistics, scope and duration
of the assessment matched the resources available.
Kirindi Oya Irrigation and

FIGURE 8 Settlement Project
Map of the Kirindi Oya watershed and the KOISP irrigation The KOISP is a major agricultural
system
development project implemented
New area
Old area
from 1986 in the eastern part of
Waterbodies Southern Province and the dry zone
Brackish waterbodies
in Sri Lanka (Figure 8). The project
Canal rehabilitated and incorporated
Drainage
an older irrigation system into a
Park boundary
cascading network consisting of a
large headwater reservoir, five existing
shallow reservoirs (known locally as
tanks) and existing and new command
areas. The tanks supplied an area of
4 200 ha, which was expanded by a
further 5 400 ha, and a substantial
population was encouraged to migrate
and re-settle within this new command
area. Drainage is via the Kirindi Oya
River to the Indian Ocean, apart
from the new right-bank command
area, which extends into and drains
Source: Matsuno, van der Hoek and Ranawake, 1998. from a neighbouring watershed into
two coastal lagoons. The project was
designed for a diversified cropping pattern but rice has been the main crop grown.
As a result, the demand for irrigation water has been higher than expected and overall
economic performance lower. Nonetheless, the project is considered to make an
important contribution to the economy of Southern Province (IIMI, 1995).
Inland fishery production is almost entirely concentrated in the head reservoir, tanks
and lagoons as the Kirindi Oya floodplain and irrigated rice fields of the command
areas have an innately low production potential. This is the result of the relatively
steep gradient of the river channel and of rainfall patterns that result in negligible or
only short-term flooding and, thus, low natural water retention within the catchment.
Thus, even in the pre-project situation, inland fisheries were the product of irrigation
development in so far as they were confined mainly to the existing tanks. Exceptions
to this are the lagoons. These have been a high-value fishery for shrimp and other
species. However, they are vulnerable to overfishing although nominally protected by
their recent designation within a national park and wildlife conservation zone (Nguyen
Khoa, Smith and Lorenzen, 2005a, 2005b).
The main biophysical impacts of the KOISP that were negative for fisheries were
the reduced productivity and biodiversity of the lagoon fisheries caused by drainage
inflows that raised water levels and reduced salinity. In order to lower water levels,
farmers also drained the lagoons to the sea more frequently, harming fishing by allowing
the escape of shrimp and other stocks. Other negative impacts within the basin were
the loss of floodplain habitat and small tanks inundated by the head reservoir, and
reduced river flow and flooding below the dam. Although these areas were little used
as a fishery prior to scheme development, this had an impact in terms of lost potential
productivity and more significantly for biodiversity.
The main positive impacts of the project were the creation of a new fishery in the
large head reservoir, and the retention of five large tanks as fisheries but with modified
patterns of water inflow and release. The project evaluation report (IIMI, 1995) states
that water levels in these tanks increased after construction of the head reservoir, but
stakeholders complained of reduced water levels and interruptions to the pre-existing
Chapter 4 – Valuation for improved management of irrigation and fisheries in Sri Lanka 29
drainage inflows. A combination of recent droughts and increasing demand for

irrigation had increased the frequency with which reservoir levels were drawn down
to meet crop needs. In extreme cases, tanks had been drained completely. However,
even at water depths of about 1.5 m or less, fish stocks declined under conditions of
high density, given natural factors and overexploitation.
Thus, the main conflicts arising were between farming and fishing interests
concerning the management of the reservoirs and lagoons. The key stakeholders
were the local farmers and fishers, recognizing that some households engaged in both
activities, particularly in villages located near to the reservoirs. The other important
stakeholders were the national, provincial and district-level government agencies
responsible for irrigation, water resources, agriculture, conservation, and inland and
coastal fisheries. All faced the challenge of achieving more productive and sustainable
use of land and water within the Kirindi Oya basin in the face of increasing demands
for these resources. Stakeholder valuation and prioritization of alternative water uses
had the potential to inform and improve decision-making and the implementation of
management options.

Principles
The principles of environmental impact assessment (EIA) were adopted as a framework
for the valuation approach for this case, with particular emphasis on the following
aspects. First, the valuation needed to achieve holistic coverage that integrated types
and sources of knowledge (expert, technician and stakeholder), disciplines (hydrology,
fisheries, agronomy, engineering and socio-economics), sectoral and wider societal
interests (fisheries, agriculture, employment, food security and living standards), and
governmental priorities (local, regional and national).
Second, there needed to be genuine participation by stakeholders, defined as their
active, creative and continuous contribution to the understanding of key issues and
to decision-making – corresponding to “interactive participation” in the typology
proposed by Pretty (1995). Among the known benefits of participation, capture of
local knowledge and an understanding of the values and priorities of affected groups
were particularly sought. The interests of fishers have been relatively neglected in
the development of the KOISP, but an understanding of these was paramount in
this exercise. Thus, particular emphasis was placed on gaining the participation of
community representatives for both fishing and farming interests.
Third, the valuation needed to consist of a sequential process capable of progressing
to decision-making and action, but within which learning was inherent. This
recognized that the progress and outcomes of a valuation process should be monitored
and evaluated continually, with iterative adaptation a necessary response to the
inevitable complexity and uncertainty that arises. Not least, the study team needed to
learn how best to facilitate participation and utilize the diverse knowledge and values
of stakeholders. This also reflected the view that improvements in water resource
management at a catchment level will generally need to be achieved through a dynamic
process of change rather than as the outcome of a single point in time analysis and its
recommendations.
Stages of the approach

Following conventional practice for EIA, the valuation approach involved sequential
stages of preliminary assessment, screening, scoping, impact assessment and
identification of mitigation or enhancement options (Figure 9). This would be followed
by monitoring and evaluation of implementation of measures selected.
As illustrated in Figure 9, this process was implemented through a series of
stakeholder workshops (Table 7 lists the participants). These were the principal
FIGURE 9
Stages of the valuation approach for fisheries in the Kirindi Oya catchment
Preparation of the valuation process

PRELIMINARY SURVEY SITE SELECTION STAKEHOLDER
11 villages visited 8 villages selected IDENTIFICATION
Selection of community leaders
WORKSHOP 1
Study introduction PROBLEM IDENTIFICATION
Definition of key issues Screening and scoping
WORKSHOP 2
Validation of key issues and
identification of potential Identification
mitigation/enhancement of key issues and values
measures
Stakeholder analysis
Identification of interest, ASSESSMENT
relative importance and METHODOLOGY
influence of stakeholders Defined for each issue/value
REVIEW AVAILABLE DATA IDENTIFICATION OF

Literature
.
review REQUIRED DATA
Stakeholders and experts Defined by methodology
IDENTIFICATION OF GAPS
between required
and available data
Biophysical impacts
ASSESSMENT Mapping of change in aquatic
ACTIVITIES habitats
. and rapid field appraisal
Ecological assessment
.
WORKSHOP 3
ASSESSMENT RESULTS .
Discussion and validation of Fish production impacts
preliminary results MITIGATION/ENHANCEMENT Estimates based on comparative
Selection of mitigation and empirical data for habitat types
enhancement measures
Socioeconomic impacts
SCENARIOS Based on available data and
WORKSHOP 4 Establish various scenarios
Final workshop at local level rapid appraisal.
Identification of scenarios
Institutional assessment
TRADEOFF ANALYSIS Based on available data and
WORKSHOP 5 AND key informants
Final workshop at national level RECOMMENDATIONS
Trade-off analysis
Recommendations
Activities Process Activities

with stakeholders by study team
fora for participation and facilitated interaction between experts, stakeholders and
policymakers. They were interspersed with research activities including the collection
and review of secondary information, consultation with key informants, and field
surveys. A knowledge base was assembled by a multidisciplinary team of specialists
(fisheries ecology and management, irrigation engineering and management, and rural
development economics) and this was used to support the analyses conducted with
stakeholders at the workshops.
TABLE 7
List of workshop participants and their respective affiliations
Stakeholder Organization Positions of participants
Villagers 8 villages Community leaders
District level 3 divisional secretariats within the lower river basin Divisional secretaries
Irrigation Management Division Project manager (KOISP)
Fisheries Assistant director & fisheries inspector
Department of Agriculture Assistant director
Central Environment Authority Environmental officers
Coastal Conservation Department Director of Coastal Resources
Development Division
Southern Development Authority District director
Farmer societies (2)* Chairpersons
Provincial level Department of Irrigation Chief irrigation engineer (Southern)
Department of Wildlife Conservation Assistant director (Southern)
National level** National Aquatic Resources Research Development Agency Researchers
National Aquaculture Development Authority Extension officers
University of Kelaniya Researchers
Water Resource Secretariat Officer
* Farmer societies were not represented at the first workshop.
** Stakeholders from the national level doubled their representation at the final workshop.
The preliminary assessment of probable impacts on fisheries for the KOISP was
paralleled by, and completed through, a stakeholder analysis. This analysis included
initial determination of both likely impacts that affected the values of importance for
different groups and the role or influence of those groups in relation to decision-making
and management. The screening stage considered whether the possible impacts on fish
production, livelihoods and biodiversity that had been identified justified further
assessment. Given limited resources, it is never possible to investigate all possible
impacts for all relevant values in detail, and the scoping stage refined the decision to
proceed by defining the key issues to be addressed and depth of data collection and
analysis needed for each.
Establishment of contact with and participation by all relevant stakeholder groups
was also completed during this stage. Thus, the workshop at the scoping stage involved
reaching agreement on the key issues, their mechanisms and their urgency, and on the
locations and groups most affected. The following activities in the valuation process
then focused on these key issues through comparison of the current “with project”
situation with its reconstructed pre-project state. Such analysis led to identification of
mitigation and enhancement measures specified in the form of management options
that could be compared and appraised by workshop participants.
Data collection and analysis

Time and resource constraints and the economic scale of fisheries in the catchment
determined that primary data collection could consist of small and narrowly focused
rapid surveys only. Similarly, the valuation relied mainly on simple comparative
analyses using existing secondary data and comparable data from other locations as
much as possible.
Primary data collection consisted of the following activities. For the preliminary
assessment, a reconnaissance survey of 11 villages selected to be spatially representative
of relevant zones within the river basin assessed the nature and importance of fisheries
at each site. These zones were upstream of the head reservoir, the vicinity of the
reservoir itself, the floodplain and command areas downstream of the reservoir, the
vicinity of the lagoons, and the river mouth. Eight villages were judged subsequently
as representing adequately the fisheries of concern, and these provided stakeholder
representatives and locations for more detailed investigation of impacts.
Key informant interviews were conducted in the eight villages. The respondent was
a leader of the community and in most cases of the village fishing society. Information
was collected about the fishery, village economy and local labour market. Attention
focused on the proportion of households engaged in fishing and its relative importance
compared with other employment. Ad hoc early morning interviews of fish traders and
fishers were also conducted when fish catches were being returned to shore.
Five of the eight villages were identified as representative of the most important
fisheries and project impacts. These covered the head reservoir and largest existing
tanks (3 villages) and the coastal lagoons affected by drainage inflows (2 villages). In
these villages, households for which fishing was a significant full-time or part-time
activity were interviewed to provide more detail on the contributions of fishing to
livelihoods and the impacts of both the irrigation scheme and a recent severe drought.
Two poor, two middle-income and two rich households were interviewed in each
village, with selection being based on a simple wealth ranking conducted with the key
informant.
Secondary data sources included project evaluation reports, other relevant studies
and locally available statistics. Information was also gained from key informants in the
Division Secretariat and wildlife, fisheries and irrigation departments, and from their
participation in workshops.
Analytically, a composite approach evolved that made selective use of a range
of methods. Changes in aquatic habitats and their connectivity were assessed using
standard topographic maps and participatory mapping exercises to compare the current
and pre-project situations. Fisheries production estimates for the pre- and post-project
habitats were derived from existing local survey data for the reservoir and lagoon
fisheries. Comparable data from other Asian regions were used for the pre-project river
floodplain and for flooded rice fields. All production estimates were cross-checked
with consumption and market estimates and validated by presentation to stakeholders.
Using a livelihoods framework (Smith, Nguyen Khoa and Lorenzen, 2005), the socio-
economic analysis used data from the household interviews, stakeholder knowledge
and secondary information to assess the resource endowments, vulnerability and
livelihood strategies of affected households. Key factors in the policy and institutional
environment and recent trends in these and the rural economy were also considered.
Four workshops were held in the project area, plus a final one conveniently
accessible to the national capital (Figure 9). This was the minimum needed for the
assessment of impacts, but further sessions were needed to complete the design and
selection of mitigation and enhancement measures and to plan their implementation.
All the workshops involved 20–25 participants representing the selected communities
and agencies (Table 7). The exception to this was the final workshop, which lacked
adequate national-level representation from the Irrigation Department despite
its location. This highlighted the fact that participation from the highest levels of
government can be difficult to include in such processes even though it may ultimately
be essential for effective decision-making.

Table 8 shows that the aggregate value of the waterbodies in the catchment was
influenced positively by the KOISP project in terms of their potential to support
fisheries. Catchment-scale production potential had increased by about 75 percent,
although its monetary value had only increased by up to 35 percent because of the
decline in the high-value lagoon fishery (for which output and value estimates are more
uncertain). Table 8 shows that the impact of scheme construction had been to increase
the aggregate production potential of fisheries in the catchment. However, it was found
that scheme operation and water management were having a negative impact on the
actual production of the pre-existing reservoirs and lagoons, particularly in drought
TABLE 8
Impact of the KOISP on production potential and monetary value of fisheries
Before KOISP After KOISP
Waterbody Catchment area Production Value Catchment area Production Value
(ha) (tonnes/year) (SLRs1 000) (ha) (tonnes/year) (SLRs1 000)
Floodplain 6 200 124 50 0 0 0
Lagoons 1 500 150 225 1 500 150 60
Head reservoir 0 0 0 3 200 1 344 538
Tanks 1 608 1 013 405 1 608 1 013 405
Small tanks 300 189 76 200 126 50
River 0 35 14 0 0
Total 9 608 1 511 769 6 508 2 633 1 053
Change -3 100 1 122 284
Note: 1999 has been used as reference year with an exchange rate of US$1 = SLRs70.
Source: Nguyen-Khoa, Smith and Lorenzen, 2005a.
years. At the time of the study, actual production was much lower than that shown in
Table 8. This emphasized the fact that conflicts over water resources in the reservoirs
and lagoons were the main issues of concern to stakeholders, rather than the overall
impacts of construction of the project itself.
An indication of the value of various waterbodies to support fisheries as a livelihood
activity in various locations was obtained by assessing the number of households
engaged in fishing full time and part time in different villages. Only 5–15 percent
of households in villages near to the tanks and head reservoir fished these regularly
(Table 9), but more than half of these were landless or marginal farming households for
whom fishing was the primary source of livelihood. The remainder were both farmers
and fishers, for whom fishing was an important supplementary source of food and
income.
In villages near the coast, 7–30 percent of households had been regularly engaged
in fishing from the lagoons (Table 9), with up to 400 households relying primarily on
shrimp fishing in the early 1990s (IIMI, 1995). Fishing was the main source of income
for 88 percent of all households that fished in that district, with farming and fish
retailing as the main alternatives. In addition, some households engaged in fishing on a
part-time basis, and many “non-fishing” households fished in the lagoon for their own
consumption only. The average monthly income in 1996/97 for full-time lagoon fishing
households was reported to be three times that of non-fishing households in the same
area (Kularatne, 1999).
At the time of the study, fish stocks and catches in the tanks and lagoons had
declined to a level at which fishing had become only a livelihood of last resort for those
TABLE 9
Value of fishing as a livelihood activity: proportion of households in surveyed villages engaged in fishing,
2002
Village Location in Fishery No. of No. of fisher % of households
catchment households households (full- engaged in
and part-time) fishing
Ranawaranewewa upper catchment small tanks 196 15 8
Kudagama 1 new command area new reservoir 240 15 6
Bandagiriya old command area ancient tank 1 500 200 15
Malakapupathana old command area ancient tank 282 17 6
Nadiganwila banks of Kirindi Oya ancient tanks and river 265 30* 11
downstream of reservoir
Pallemalala near coast lagoon 350–388 102** 25
Udamalala near coast lagoon 435 30 7
Sippikulama near coast lagoon 450 140** 30
*
Mainly opportunistic and “leisure” fishing in the river.
Few fishing during prevailing drought.
**
Source: Nguyen-Khoa, Smith and Lorenzen, 2005b.

households with no alternatives. Given local population growth and unemployment

rates, particularly among the landless second generation of scheme settler households,
this had provided an important safety net but little relief from poverty. Alternative
livelihoods among the landless and unemployed included firewood collection, shell
mining and lime making, but these are environmentally damaging.
It was beyond the scope of the assessment to quantify accurately the value of water
use in fisheries compared with farming, but the available data give some indications
of the relative values. Overall, about 7 percent of households within the project area
engaged in fishing as a regular activity, generating an estimated gross income from
fishing of about US$1.4 million/year (expressed in 1999 values, with US$1 = SLRs70),
13 percent of the total income from farming and fishing in the scheme. Catches in the
reservoir and lagoon fisheries before their decline generated returns to labour up to
four times higher than did wage rates for farm labour (Table 10), with an even higher
disparity in the case of the lagoon shrimp fishery. This provides further indications of
a relatively high value of water use in fisheries.
In any case, such values only take account of the productive value of water use in
farming or for fishing. The importance of stakeholder involvement was in allowing
account to be taken of the wider societal values of these competing water uses.
Although non-quantified in monetary terms, stakeholder valuation went beyond the
consideration of only fish and farm production by taking account of the full range
of productive, societal and environmental values that were relevant to the trade-offs
between fishing and farming.
For example, the value of water use in fisheries for local livelihoods depends on the
objectives of households that fish, the functions fishing performs in their livelihood
strategies, their access to fisheries and their alternative livelihood opportunities.
Valuation must look beyond incomes and consider the wider benefits provided by
fishing as part of a diversified livelihood strategy. These benefits can include buffering
against shocks, managing income risk, and smoothing consumption and labour use.
Fish can also be valuable for nutrition, for cash income, for reciprocal exchange in
social networks and simply recreation. The household interviews provided examples
of such benefits, and stakeholder assessment provided an effective means to weigh the
importance of these at reasonable cost.
Relatively less weight was given to environmental values in contrast to the fact
that conventional EIAs tend to focus on issues of biodiversity and ecological integrity
TABLE 10
when considering fisheries. For the
Estimates for income from fishing and alternative male KOISP, irrigation development was
employment deemed to increase the production
Employment Income per day potential of fisheries and related
1997 2002 livelihood opportunities for the local
(SLRs) population despite negative impacts on
Tank/reservoir fishing 200–800 50–150
biodiversity and ecological integrity.
Lagoon fishing (fish) 200–800 Nil
Lagoon fishing (shrimp) 700–5000
*
Nil
Thus, for example, restoration of
Fish retailing (freshwater only) 300–1000 100–200 the river’s natural flow patterns
Farm labour 145–180
**
200–250 and lateral connectivity would help
Construction sector: preserve original aquatic biodiversity.
Colombo **
185 255 However, this was not a priority
Locally 110–145
**
150–200 of local stakeholders and would be
Saltpan **
160 220
unlikely to yield significant productive
Notes:
Reference year is 1999 with exchange rate US$1 = SLRs70. and societal benefits.
*
Reported income range prior to decline of shrimp fishery. The outcome of the process was
**
Inflation adjusted estimates for 1997 from 2002 figures (Colombo
Consumers’ Food Price Index, Department of Census and Statistics). that two principles received universal
Source: Nguyen Khoa, Smith and Lorenzen, 2005b (from household support from the participants. The
interviews, village survey, February 2002).
first was that priority should be
given to the needs of the poorest sections of communities and that the livelihood
contributions provided to them by the reservoir and lagoon fisheries should be restored
and sustained if possible. The second was that it was both imperative and possible to
improve water-use efficiency within the catchment in order to better meet the needs of
both fishing and farming, the achieving of a more optimal allocation of water between
these two uses being seen as having the potential to raise the aggregate benefits from
water use in the scheme.
Stakeholders agreed that fishery interests should be considered in irrigation water
management and suggested that fishers be represented at the seasonal planning meetings
that determine irrigation allocations. It was recognized that further awareness creation
and accompanying institutional measures would be required to support this initiative
and to improve the planning and management of irrigation. Similarly, it was recognized
that more empirical research is needed to develop improved management regimes
for the reservoirs and lagoons. A set of scenarios capturing possible management
options was developed with the workshop participants and initial selection of the
most appropriate and feasible options was made based on the priorities and values
of stakeholders. Through this process, a consensus emerged that a combination of
improved and better integrated water management measures across the catchment was
most likely to deliver preferred outcomes and a more equitable distribution of benefits
from water use at a feasible cost.

The role of stakeholder-oriented valuation
While valuation of the impacts of irrigation development on fisheries is important,
the costs incurred for it must be reasonable in relation to the expected benefits. In this
project, emphasis was placed on the judicious use of comparative empirical information
and the understanding of mechanisms, within a process based on combined expert
judgement, local knowledge and stakeholder participation. The aim was an integrated
and holistic assessment of the relative values of alternative uses and management
practices for water and of the processes of change that had affected these. Stakeholder
valuation helped identify priorities and establish a consensus that the fisheries in the
project area should be restored and sustained if possible, recognizing that at the very
least this would require improvements in the efficiency of water management for
irrigation.
Where the final stage of a stakeholder-driven approach is supported adequately
by valid empirical analysis from expert input and includes government agencies
responsible for decisions and their implementation, it can potentially function as a
decision-making process. Depending on their scale and significance, recommendations
may still be subject to final approval at ministerial or parliamentary level. However,
where government endorses the process from the start, the reversal of recommendations
emerging from a stakeholder analysis should be an exception rather than the norm.
More commonly, and as was the case here, stakeholder valuation will serve to better
support and inform decision-making by the responsible authorities. Compared with
a narrow technical assessment alone, the results and management recommendations
arising from this study were well adapted to site-specific conditions and issues, and
reflective of both scientific rationales and societal choices. The key conflicts of interest
were identified and means to resolve them explored.
A specific orientation on the values and needs of the stakeholders played an important
role at each stage of the process. During the preliminary assessment, the perceptions
of the diverse stakeholders (Table 7) ensured that a holistic and comprehensive list of
issues of concern was generated. The screening and scoping stages narrowed this list
progressively and established consensus on priorities. For example, pollution of tanks
and lagoons by agrochemicals was considered a future potential threat but not a critical
issue at the time of the assessment. Ultimately, there was agreement that attention
should focus on the following issues:
¾ declining dry-season water retention in the reservoirs;
¾ inflow of drainage water into the lagoons;
¾ conflicts between fishers and farmers over the management of the reservoirs and
lagoons;
¾ weak linkages between fishery institutions and irrigation institutions;
¾ reduction in river flow and floodplain habitat.
This selection was contingent on the values and priorities of stakeholders, and
technical specialists working alone would have determined priorities differently.
For example, fisheries experts initially prioritized the potential biodiversity and
productivity losses resulting from reduced river flow and floodplain habitat, whereas
local stakeholders were most concerned with the negative impacts for livelihoods
arising from reduced fish production in the pre-existing reservoirs and lagoons.
Investigation of the former confirmed that the river floodplain was not an important
fishery, while the latter were unanticipated impacts of the scheme’s modes of operation
and water management rather than its construction.
Stakeholders had less interest in a scientific evaluation of what the impacts of project
construction had been but wanted to address problems constraining more productive
and sustainable use of water resources. They focused on the competing values of
alternative water uses as encapsulated in the following questions:
¾ Were fisheries of sufficient value to justify water retention in reservoirs and
consequent loss of irrigated area and/or crop yield?
¾ Could negative impacts on the lagoons be mitigated at an acceptable cost?
¾ Could the livelihood opportunities provided by both irrigated farming and fishing
be sustained and enhanced?
Thus, the need to resolve conflicts between fishing and farming interests and
to address institutional factors that determined patterns of resource use and the
interventions of the relevant government agencies was paramount. Conflicts of interest
were identified that initially appeared irreconcilable. However, the stakeholder process
through which they were investigated and analysed demonstrated the potential to
evolve solutions. It was notable that the needs of fishers gained weight in this process
compared with the prior situation. Simply initiating or improving the representation
of fishers in negotiations with farmers and other water users was useful to correct
past sources of bias and neglect. This showed how stakeholder-oriented valuation can
provide the means to discover and compare competing perspectives and to empower
those otherwise neglected.
Stakeholder involvement was a prerequisite in this case for a valuation that was
genuinely holistic and inclusive. Although aggregate net impacts on potential fishery
productivity were positive for the KOISP, stakeholder involvement from different
communities and the use of multiple valuation criteria prompted an assessment of
impacts that was disaggregated spatially across the catchment and by socio-economic
group; for example, assessment for both reservoir and lagoon fishers (Nguyen Khoa,
Smith and Lorenzen, 2005a and 2005b). In turn, this led to further identification of
opportunities for the mitigation of negative impacts and the enhancement of positive
ones.
The results of the study were also action-oriented and practical. Here again,
stakeholder involvement was a prerequisite as it was inherent in the process that
the valuation moved beyond a point-in-time evaluation of project impacts to the
development of options for improved water management. At first, the remedial
measures proposed by stakeholders tended to lack creativity with a tendency to
focus on engineering measures to divert drainage flows or drain the lagoons that had
already proved unsuccessful or would be too costly for implementation. Then, as
understanding and consensus grew, there was innovation in recognition of the potential
benefits of integrated combinations of measures, addressing interacting effects that
might otherwise impede effectiveness, and improving the institutions central to water,
land and fisheries management.
The action-orientation of the approach meant that identification of “institutional
uptake pathways” was part of the process, and this helped to ensure the relevance of the
outcomes. For example, it was identified that there were current opportunities to address
the lack of linkages between fisheries and irrigation management by emphasizing this
in the national IWRM policy that was under preparation. Similarly, awareness of the
socio-economic importance of fisheries was raised among national-level policy-makers.
For example, a member of the Water Resource Secretariat requested guidance on how
better to address fisheries for the purposes of improving water management policy.
Strong interest in continued use of the approach was demonstrated by the reactions of
workshop participants and responses to workshop evaluation questionnaires (Nguyen
Khoa, Smith and Lorenzen, 2005a).
Representation from diverse stakeholder groups, i.e. communities, researchers and
government agencies, was necessary not just from the stand-point of ownership and
equity issues, but also because knowledge and perception of impacts differs between
groups. There is a risk that stakeholders will introduce a bias or misinformation.
However, combining technical expertise with knowledge from stakeholder groups can
minimize this and ensure adequate and objective coverage of issues. This combination
of expert analysis and local knowledge was a major strength of the approach. Despite
this, uncertainty inevitably remains inherent in the prediction or evaluation of complex
and variable phenomena that involve interactions between biophysical, economic and
social systems. Stakeholder-oriented valuation can provide a useful first stage in the
identification and prioritization of key processes and issues, and appropriate use of
sensitivity analysis can be helpful where there is uncertainty. Where resources are
available, more rigorous valuation studies to quantify the trade-offs between fishing
and farming could then be well targeted before decisions are made. However, unless
the objective of sustaining fisheries were to be reversed, it would be more important
to proceed with an iterative and adaptive approach to system improvements, one well
informed by monitoring and selective valuation studies where appropriate.
Outcomes and conclusions

The key results of this project of relevance to the management of the KOISP were:
¾ the identification of the main processes causing degradation of fisheries;
¾ an assessment of the number, location and vulnerability status of fishing
households affected negatively by the operational conflicts between irrigated
farming and fishing;
an assessment of the severity of these impacts in terms of lost income relative to
returns to labour in alternative livelihoods.
It was important to broaden the scope of valuation, and improvements in water
management across the Kirindi Oya catchment were identified to have the potential
to deliver a range of productive, societal and environmental benefits. For example,
fisheries can be restored in reservoirs where savings can be made in the water needs
of farming. Similarly, although more research is needed on their ecology to prevent
overfishing and protect wildlife, the lagoon fisheries can be restored through improved
management of drainage flows and lagoon water levels. Restoration of these fisheries
would bring a range of economic and social benefits to local people, particularly to
poor households currently marginalized in relation to irrigated farming and other
employment opportunities. Stakeholder valuation contributed to the determination of
these results and the prioritization of response measures.
39
Chapter 5
Valuation of aquatic resource use
at the Stoeng Treng Ramsar site,
Cambodia
INTRODUCTION
Wetlands in Cambodia are vital to the livelihoods of millions of Cambodians, and
particularly the food security of many of the rural poor. There are many stakeholders
involved in the management of these precious resources. They include government
agencies across different sectors and at different levels, private businesses, international
and local NGOs, and the local communities whose livelihoods depend on wetland
resources. However, in Cambodia, there are a number of barriers to effective wetlands
management. These include:
¾ lack of coordination between different sectoral approaches;
¾ weak policy frameworks and unsupportive economic environments;
¾ inadequate information base on which to base wetland policy, planning and
management decisions;
¾ inadequate human and technical resources;
¾ lack of options for resource use by local communities.
The Mekong Wetlands Biodiversity Conservation and Sustainable Use Programme
(MWBP) is a partnership between the four governments of the Lower Mekong
(Cambodia, Lao People’s Democratic Republic, Thailand and Viet Nam) implemented
through the United Nations Development Programme (UNDP), World Conservation
Union (IUCN) and the Mekong River Commission (MRC), supported by the Global
Environment Facility (GEF). The MWBP aims to overcome the barriers described
above by promoting an integrated cooperative approach to wetlands management at
regional, national and local levels. To this end, it is working with national and local
stakeholders to develop wetland planning and management mechanisms.
A key aspect of the MWBP is the application of valuation tools and techniques to
support wetlands management for poverty alleviation outcomes at four demonstration
sites. An essential first step is to understand the in situ value of water in wetlands to
provide ecosystem goods and services to local communities. This chapter describes a
participatory valuation study carried out between August 2004 and January 2005 at the
Stoeng Treng Ramsar site in Cambodia, one of the four demonstration sites. The study
aimed to provide guidance for the use of valuation methodologies to support wetlands
management for poverty alleviation outcomes. In particular, it aimed to examine how
community-based forms of water resources management could strengthen wetland
conservation and sustainable development in Veun Sean, a small village in the Stoeng
Treng Ramsar site. More details can be found in the report by Chong (2005).
The Stoeng Treng Ramsar site

The Stoeng Treng Ramsar site covers about 14 600 ha and extends 37 km along the
Mekong River, from 5 km north of the town of Stoeng Treng to the Lao border. It is
characterized by rocky streams, small islands, sandy inlets, deep pools and seasonally
inundated riverine forests. The wetlands contain important habitats for several globally
threatened species.
The village of Veun Sean is located

FIGURE 10 in O’Svay Commune, Thala Borivat
Location map of the Stoeng Treng Ramsar site District, about 20 km from the Lao
border (Figure 10). With 36 households
Lao People's Democratic and a population of about 150 people,
Republic
Veun Sean is the smallest village in the
km
Ramsar site. The village households
are situated on the island of Khorn
Hang although the location of land-
use practices such as cultivation,
non-timber forest products (NTFPs)
collection and wildlife hunting extends
beyond the island to the mainland.
Veun Sean is relatively poor in built
Legend
Provincial capital
and human capital – there is only one
District centre
Villages with VDC (106)
well, no electricity, no latrines and
Other villages (32) no VDC
poor access to health services. Almost
Major roads
Provincial roads
International boundary
three-quarters of the people from
Provincial boundary
District boundary
Veun Sean cannot read or write.
Commune boundary
Lake, river For the 150 people living in Veun
Sean and the 12 000 people living
in the Stoeng Treng Ramsar site,
wetlands are a precious source of
fish, aquatic animals, waterbirds and building materials. For many communities, the
wetland is a vital source of water for consumption and washing, and the waterways are
an essential means of transportation. The deep pools and flooded forests also provide
dry-season refuges and spawning habitats for many important species of fish that
migrate throughout the Lower Mekong system, e.g. the critically endangered giant
catfish (Pangasianodon Gigas).
The resources of the wetland fisheries are particularly important for the largely
agrarian, subsistence households in Veun Sean. However, there is evidence of declines
in fisheries resources at the Stoeng Treng Ramsar site. Assessments conducted by
Partners for Development (PfD) and the Culture and Environment Preservation
Association (CEPA) in 2000 and 2002, respectively, explored the trends in and causes
of natural resource declines in Veun Sean. The declines in fisheries, forest and wildlife
resources since 1975 reflect the general pressures on such resources in the region.
Community wetland and fisheries management: the main stakeholders

In Cambodia, partly in response to declining natural resources, various forms of
community-based natural resource management have been established. By 2002,
there were 162 community fishery sites and 237 community forestry sites in
Cambodia (McKenney and Prom, 2002). Moreover, as Marshke (2003) noted, “a
policy environment, albeit disjointed, is being developed to support some forms of
community involvement in resource management.” The different community-based
management approaches in Cambodia tend to have similar characteristics:
¾ Governments or NGOs provide support to communities to establish physically
demarcated management areas and plans.
¾ Rules and regulations are established that apply to members of the community
management association.
¾ Resource management committees are elected to guide community-based
management initiatives.
¾ Community-based natural resource management requires approval from some
government level (e.g. a provincial governor or national line agency).
Chapter 5 – Valuation of aquatic resource use at the Stoeng Treng Ramsar site, Cambodia 41
TABLE 11
Community fisheries management: summary of key actors
Actor Description
Villagers Depend on the fisheries resource for food and income. Fisheries provide food
security when the staple crop, rice, is threatened. Some are reported to be
involved in illegal fishing, or have been forced to sell to commercial fish-buyers
at reduced prices.
Community Fisheries Committee Receives training from the CEPA and is charged with communicating to and
encouraging the villagers to maintain the fisheries resource. First in reporting
line when a villager sights illegal fishing.
Culture and Environment Cambodia-based NGO that supports community fisheries management in
Preservation Association (CEPA) villages within the site.
Provincial Fisheries Office (PFO) Has the legal authority to detail fishers accused of conducting illegal activities.
Reportedly underresourced. Some provincial fisheries officers reportedly
conduct unregulated fee extraction from fishers near Stoeng Treng throughout
the year.
Department of Environment (DOE) Pending enabling legislation, the DOE (and not the PFO) has responsibility over
the management of resources, including community fisheries, within the site. In
practice, the PFO has greater influence than the DOE.
Ramsar Rangers Within the site, DOE Ramsar Rangers have the authority to detain individuals
accused of conducting illegal activities, including illegal fishing. In practice, the
Ramsar Rangers lack training and equipment, and their pay is often delayed.
Provincial governor As the fisheries law and subdecree have not been passed yet, the support of
a provincial governor can influence the extent to which line agencies support
community fisheries.
Commune Council Can report to the police if illegal fishing is sighted. Also involved with planning
and prioritization of village-level projects, and the negotiation with line
departments and NGOs to support these projects.
The term “community fishery management” was introduced officially into the
fisheries policy dialogue in October 2000, when fishery policy reforms commenced
under Prime Minister Hun Sen. One of the main stated objectives of government
fishery reform is to improve food security and reduce poverty among locally-
dependent fishers. The main elements of the reforms included:
¾ release of 56 percent of fishing lots to “community fisheries”;
¾ elimination of tax on middle-scale fisheries;
¾ drafting of a community fisheries subdecree, which is intended to provide a
framework within which community fisheries can be established.
Private fishing lots have never been officially established in Stoeng Treng province
(although illegal licensing has occurred), reflecting the recognized importance of the
region as a spawning ground for many fish species. Nevertheless, many of the broader
issues and policy impacts that affect community fisheries throughout Cambodia are
also relevant to areas in Stoeng Treng. They include a lack of knowledge or clear
specification of roles and responsibilities of government officials at various levels, and
a lack of political or legal recognition of community fisheries.
The community fisheries subdecree is a key piece of legislation that could
potentially support community-based fishery management through defining the role,
responsibilities and relationships between villagers, NGOs and government agencies
involved with the management of the resource (Table 11).

Combining conventional economic valuation with participatory rural
appraisal
In the Stoeng Treng Ramsar site, there are a number of constraints that, while
not necessarily unique to the area, could in combination restrict the extent to
which value assessments can influence wetland management. In particular, power
relations determine how resources are used and managed. The Cambodian system is
characterized by unofficial fee collection, a lack of trust in government agencies, and

social displacement among its people. There is some evidence that planning processes
are hampered by a lack of cooperation between government agencies, NGOs and
communities. Furthermore, there is a lack of scientific information and human capacity
to apply to the management of natural resources.
These legal, physical, institutional and social barriers might limit the short-term
influence of information on the value of aquatic resources. However, there exist urgent
opportunities for EIAs to contribute to the dialogue between stakeholders and to have
real, if longer-term, influence on wetland and fisheries management. Such assessments
can help in managing wetland resources by improving understanding of what drives
people’s resource-use decisions – and why, and to what extent, wetlands are valuable to
local communities. However, some economic assessments place emphasis on calculating
the quantitative value of a resource. Although information about monetary values can
have a powerful influence in promoting resource conservation, a deeper understanding
of the nature of wetland values is required for effective planning and management. In
particular:
¾ How are wetlands important in terms of people’s livelihoods, food security and
health?
¾ How are wetlands essential in helping communities cope with external shocks and
stresses?
¾ Who benefits most from the wetlands? Who is most vulnerable to the loss of
wetland resources, and why?
Conventional techniques for gathering socio-economic data or assessing the value
of wetland resources often rely on the household survey. The household survey
commonly applied in economic assessments has a number of potential drawbacks. For
example, surveys are often lengthy and complicated, causing interviewees to become
fatigued, while the concepts and questions used often reflect the perceptions of the
researchers rather than the reality of the respondents.
One way to overcome some of these problems is to combine conventional survey
techniques with more flexible PRA methods. These methods evolved in response
to the need for practical research and planning approaches that could support more
decentralized planning and local-level participation in decision-making (IIED, 1997).
Participatory techniques vary in the extent to which they are truly participatory.
Generally defined, RRA methods focus on applying participatory methods to gain
information while minimizing biases. PRAs tend to have greater emphasis on sharing
knowledge and processes at the local level, and they tend to be much longer and open-
ended processes.
For this reason, the study went beyond quantitative assessment in order to
understand the context in which resource-use decisions are made – and the linkages
between poverty and the importance of wetland resources. It employed village-level
valuation techniques to conduct livelihoods assessment in Veun Sean. In consultation
with stakeholders, the constraints and opportunities for using valuation in key planning
processes were identified. Reflecting the particular importance of fisheries resources
to livelihoods, community fisheries management was identified as a key wetland
management process. However, this study was not restricted to the fisheries resource
as fisheries form an integrated component both of wetland resources and of village and
household livelihoods. Therefore, the study considered the spectrum of processes that
affect the use and management of wetlands (including fisheries).
Overview of methods used for participatory water valuation

A participatory approach to valuation was used in order to enable villagers in Veun
Sean to define and describe wetland values within the context of their own perceptions,
needs and priorities rather than categories imposed by the researchers. The following
TABLE 12
Participatory valuation methods used
Activity Groups Outputs
Resource mapping mixed Households mapped
Resources and infrastructure mapped
Resource uses and key activities discussed
Flow diagram mixed Benefits from wetlands
river and wetland uses and Food resources
benefit flows Market linkages
Sources of income and expenditure
Semi-structured interviews Various

Wealth ranking mixed Villagers’ perceptions of wealth
Households categorized
Web diagram gender External organizations identified

social networks Social networks within village
stakeholders Villagers’ perceptions of the importance of agencies
Stakeholders in wetland resources
Seasonal calendar gender Key labour activities identified

activities Relative labour efforts identified, across seasons and for different
activities
Relative ratings mixed Wetland values ranked
wetland values Household problems and underlying causes
household problems Dependency on wetland resources
Food resources wealth Drivers of wetland resource use

income Relative ranking of values
expenditure
Household surveys Fish catch, consumption, purchase and sale quantified
Fish prices and market linkages identified
Household problems and underlying causes identified
Perceptions and participation in community fisheries management
methodology was applied in order to analyse the value of wetland resources to the
village:
1. Identify different wetland resource values through PRA group activities (resource
flow diagram and the relative rating of wetland values).
2. Design and apply a household survey that includes collection of quantitative
information about the fisheries resource (which had been identified throughout
group activities as an important resource).
3. Estimate the monetary value of the fisheries resource.
4. Compare the relative ratings of other components of the wetland resource to the
fisheries resource, to estimate the monetary value of other wetland resources.
The assessment team, which varied between three and five members, conducted the
activities outlined below. The outputs of many of the activities listed in Table 12 do
not necessarily relate directly to calculating the monetary value of the wetlands and
fisheries resource. Understanding the linkages between households, stakeholders and
the resources is vital to the evaluation of why the wetland resources are important to
the village and, ultimately, to assess whether there is potential for valuation techniques
to be used in planning processes affecting wetlands in the Stoeng Treng Ramsar site.

Resource mapping
The resource mapping activity encouraged participants to draw and discuss their
village and the location and use of resources. The resource map is an effective tool
for gaining an understanding of the spatial distribution of wetland resources. It is also
an interactive activity that can be a good “ice-breaker” between communities and
researchers. The resource map of Veun Sean village identified deep pools as important
fishing grounds, and areas of cultivation and hunting some distance from the village.
Web diagrams of social networks

FIGURE 11
Web diagrams for Stoeng Treng The web diagram was applied in
order to identify the stakeholders in
the wetland resource, and to explore
Department of
Agriculture social networks within the village,
YWAM Department of
Environment the relationships between villagers
UNICEF
TBA - Traditional
AIDS and external organizations, and the
Focal Points
Birth Assistant
extent to which different individuals,
Health agent
School institutions and organizations have an
influence on their lives.
Teacher
Nutritionist
In this activity, separate groups
Agriculture Parents of men and women were invited
Association
Committee
Households to identify institutions, which
Sanitation Elder group were illustrated on paper circles.
Focal Point
Institutions from within the village
Community
Forestry Ass.
Village chief
were placed inside a large circle, and
external institutions were placed
Community VDC
Fishery Ass.
Rice Bank
outside the circle. Lines were then
Commune
drawn between different institutions
CEPA in order to describe the strength of
PFD
IUCN influence between these organizations
(Figure 11).
Strong influence
CEPA Culture and Environment
Medium influence Preservation Association
Less influence Group Inside
IUCN World Conservation Union
Influence identified
but not rated
village
PFD Partners for Development Flow diagram of wetland values
Outside
village Individual
UNICEF
VDC
United Nations Children’s Fund
Village Development Committee The flow diagram activity invited
YWAM Youth With a Mission
participants to describe the values
Women
derived from the wetland resource,
and to discuss why these aspects of
UNICEF ADHOC
wetlands are valuable. The wetland
IUCN
YWAM
was represented by drawing the
CEPA
Mekong River with flooded forests
Provincial Human Rights
Red Cross
AIDS Focal
Point
Committee in the centre of a sheet. An arrow was
Community drawn from the wetland to a fish to
TBA – Traditional Fishery Ass.
Birth Assistant illustrate a wetland use. The group
Community
Red Cross Forestry Ass. then identified and described various
Commitee
Parents
benefit flows and market linkages,
Nutritionist
Association
including: fishing, fish spawning,
Households waterbird hunting, water for cooking
Traditional Events
Health Support
Commitee
Committee and drinking, irrigating cash crops,
PBC – Planning and transport. The group agreed that
& Budgeting
Sanitation
Commitee
Comm. fish, a valuable source of nutrition and
Village Head income, was the “most important”
VDC – Village
Devt. Committee
Roads
wetland resource.
Agriculture Commitee
Committee Commune Head
Seasonal calendar of activities

PFD
Commune King's
Education
District Office The purpose of the seasonal calendar
Head Centre Representative
was to identify key activities
Strong influence ADHOC Cambodian Human Rights and
Medium influence Development association conducted by men and women, and
Less influence Group Inside CEPA Culture and Environment
Influence identified
village
Preservation Association to broadly assess differences in time
but not rated IUCN World Conservation Union
Outside
village
PFD Partners for Development and effort spent between activities
Individual UNICEF United Nations Children's Fund
YWAM Youth With a Mission and across seasons. Each group was
Men
invited to identify the main activities
they conducted. These were then rated
TABLE 13
Seasonal calendar of activities for men’s group, Stoeng Treng
Men’s group Season
Activities Wet Cold Hot
Rice-growing
Fishing
Cropping – bean, corn, others
Hunting wildlife from forest – snake,
turtle, rabbit and deer
Cogon grass harvest and weaving
Collecting resin (NTFP)
Collecting rattan, bamboo, vines for
fishing gear
Drinking wine – during ceremonies
Collecting traditional medicines
Collecting timber, bamboo and rattan
for house construction
Boat-making and repair
Caring for children
Travelling to market
Overall
TABLE 14
Seasonal calendar of activities for women’s group, Stoeng Treng
Women’s Group Season
Activities Wet Cold Hot
Upland rice cultivation
Lowland (paddy) rice cultivation
Vegetable planting
Livestock raising
Collecting water
Collecting fuelwood
Cooking and washing
Caring for children
Lowland rice harvest
Upland rice harvest
Cogon grass harvest and weaving
Harvesting vegetables
Planting tobacco
Collecting tobacco
Overall
across seasons – wet, dry cold, and dry hot – using piles of 1–10 beans (Tables 13 and
14). It was evident that the key factor influencing the timing of activities across the
seasons is rice-growing, which is driven by seasonal differences in weather. The wet
season, when most rice cultivation occurs, is the busiest time of year for both men and
women.
Wealth ranking
Wealth ranking was conducted in order to gain an understanding of villagers’
perceptions of wealth characteristics and to provide information so that further
activities could assess the linkages between wetland resources and poverty. A group
of six individuals (three men and three women) were selected with assistance from
the village chief. The group discussed the different characteristics of different “wealth
groups”, and then categorized individual households.
A measure of wealth identified consistently by all members of the group was a
household’s ability to grow sufficient rice to meet the needs of the family throughout
TABLE 15
Wealth ranking for Stoeng Treng
Rich Medium Poor Very poor
Motorboat Motorboat Rowboat Small cottage
Rice mill Medium house with tin Small house with grass roof Small or no paddy fields
roof
Television Buffalo (1) Small chamkar, some left fallow
Buffalo (2–3)
Many buffalo Fewer paddy fields than Sickness
Less paddy fields than rich medium households
Many paddy fields Many children
households
Rice shortage for 9 months
Large house with tin roof Rice shortage for 10 months
Rice shortage for 6 months
Chicken and ducks (2–3)
Always enough food Work as labourer on others’
Pigs (1–2)
Small chamkar fields, some land
Many pigs (5)
Chicken and ducks (3–4) left fallow
Fish and hunt to earn money to
Many ducks and chicken
Chamkar fields (1–2) Borrow rice from relatives or buy rice
Enough rice to sell rice bank, or buy rice from
No debt Chicken and ducks (2–3)
others
No debt
Some skills No knowledge or skills
No knowledge or skills
Many chamkar fields
Widowed
Knowledge and skills
Disabled
4 households 14 households 10 households 8 households
the year (Table 15). Rich families were identified as growing sufficient or excess rice,
medium families as facing “rice shortage” for six months, and poor and very poor
families for nine or ten months. Rice shortages are widespread and faced by the
majority of households. During this activity, the group noted that, in response to rice
shortages, poorer households generated income to purchase rice by selling fish and
wildlife.
Relative ratings
The rating exercises were linked directly to demonstrating relative values of the wetlands
and fisheries resources. The approach undertaken reflected the experiences drawn from
previous activities. Ratings were conducted using piles of one to five beans.
Wetland values were first identified in the wetland resource flows diagram. A variety
of wetland values were identified. Many of these values represented consumptive use
of wetland resources, e.g. fishing, traditional medicines and wildlife. Other values
related specifically to consumptive or non-consumptive uses of water, e.g. drinking,
washing, irrigation and transportation. The results in Figure 12 show that the group
unanimously rated fish as “five”, representing the highest level of relative importance.
The results from ratings of food
FIGURE 12 sources suggest that, in Veun Sean,
Relative ranking of wetland values for Stoeng Treng the types of food consumed are
not related strongly to the level of
Fishing
Washing
poverty. Independently of the level
Cooking and drinking of wealth, most people noted that
Transportation rice was a staple and that fresh fish
Construction sand and rock and prahoc (preserved fish) were
Fuelwood
Aquatic animals
also very important. However, a key
Waterbirds difference is that poorer households
Reptiles suggested that aquatic animals were an
Traditional medicines
important source of food because they
Irrigation
Floodplain rice cultivation were readily available the entire year,
Dolphins whereas wealthier groups could choose
Recreation not to consume aquatic animals.
0 1 2 3 4
Rating
5 Ratings of sources of income
revealed that poorer households have
fewer options for generating income

although it appears that they may be FIGURE 13
more dependent on generating income Household problems in Stoeng Treng
to purchase the staple food, rice. Fish Health
(mostly sold to intermediaries) and Hospital too far away
cash crops are relatively important Drought impact on rice yields

Rice shortage
income sources for all households.
Lack buffalo dragpower for rice growing
Fish decreasing
Problem discussion Drought impact on transport
The problem discussion activity was Drought impact on water collection
a combination of rating and linkage School building in poor condition
exercises. The aim of the activity was No bridges in village
to identify some of the key problems Animal illness

Small, poor condition huts
facing households, the underlying
Domestic arguments
causes of these problems, and the
0 1 2 3 4 5
ways households respond. The two Rating
main types of problems related to
health and rice sufficiency (Figure 13).
Lack of access to a hospital was described as a major factor contributing to health
problems. The impact of recent droughts and the lack of buffalo to prepare land were
described as major underlying causes of rice shortage. Declining fish stocks were also
identified as a significant problem.
The problem discussion confirms the importance of rice-growing that emerged
from the seasonal activity calendars and the wealth ranking. This indicates that the
livelihoods of the Veun Sean villagers are built around two main pillars: rice cultivation
combined with reliance on wetland goods and services for fisheries, hunting and
collection of natural resources.
Household surveys
Eight of 36 Veun Sean households were surveyed individually. The survey was pre-
tested twice and the final survey conducted with four households from “poor” and
“very poor” wealth categories, and four households from “medium” and “rich” wealth
categories. The purpose of the survey was to cross-check the information gained from
group activities, to gain further quantitative information about the value of the wetland
resource, and to investigate participation in and awareness of community fishing
activities. Key types of information included:
¾ household information – names, children, ages, school attendance, reasons for
moving to Veun Sean, observations about household size, condition and building
materials;
¾ fishing – activities, fish catch quantity and location, fish consumption;
¾ expenditure on rice and other main goods;
¾ income from selling fish and from other activities;
¾ community fishery participation and perceptions.
There are many challenges associated with obtaining specific information from
a household survey owing to varying interpretations of questions and biases in
responses. These were overcome by applying a semi-structured approach to household
surveys, and by encouraging flexible questioning and discussions. The survey outcomes
confirmed that the fisheries resource is more valuable to poorer households because of
its importance as a source of income (Table 16).
Wetland values – how much?

Wetland values were rated by a group of households representing a mix of wealth
groups. The monetary values of these values were calculated using the average
TABLE 16 household value of fish and the relative

Fish value to households ratings. From other group activities,
Value Average Poor Less poor
qualitative observations were made
CR/household/year
Fish consumed 500 000 600 000 500 000
about why different wetland resources
Income from fish 1 200 000 2 000 000 600 000 are valuable, and whether there are
(77% total) (56% total) any linkages between poverty levels
Total 1 700 000 2 600 000 1 100 000 and wetland resources. Table 17 shows
Note: US$1 = CR4 000.
the results.
Summary of the main analytical results of the valuation

The study found that wetlands resources are essential to the livelihoods of the villagers
of Veun Sean. Worth an average of US$ 3 000 per household per year (about 13 percent
of which is accounted for by fisheries resources), the absolute value of wetland resource
use is high in a country with an estimated gross domestic product (GDP) of only US$ 290
(US$1 = CR4 000). On a per-capita basis, the value of wetland resources can thus be
estimated to be similar to the level of “recorded” or “formal” GDP. Unlike GDP, the
wetland value does not refer to generated income or realized production but refers to the
value of wetlands as a natural asset that has an income-generating capacity. It provides an
estimation of its value to support local livelihoods, underlining the importance of non-
marketed and informally traded natural resources. Quantitative estimates also reveal
that, in Veun Sean village, the fisheries resource is more valuable to poorer households
than to wealthier households. This is partly because the larger household sizes of poor
households mean that they consume more fish per household, and partly because poorer
households sell a greater proportion of their fish catch for income.
Fisheries, wildlife and aquatic resources are critical both in terms of nutritive value
and household income, particularly in the context of interrelated pressures of poor
health, drought and rice shortages. In terms of meeting day-to-day needs as well as
TABLE 17
Wetland values in Stoeng Treng
Ratings Value Description of value
(CR/hh/year)
Fishing 1 700 000 The fisheries resource is a vital source of food and income. Particularly for poorer
households, who do not grow sufficient rice and need to purchase rice each year,
food security depends on income earned from fishing.
Washing 1 700 000 As Veun Sean has only one well, the majority of households draw water directly
Cooking and 1 700 000 from the Mekong River for washing, cooking and drinking. Few households own
drinking water filters and sometimes it is difficult to collect fuelwood to boil drinking-water.
Transportation 1 360 000 Veun Sean is not serviced by roads connecting to other villages or communes. As fish
catch, cash crops, and wildlife are sold and medicines and rice purchased at Veun
Kham and Stoeng Treng markets, Veun Sean villagers rely on the river as a transport
route.
Construction 1 020 000 Rocks and sand for construction are extracted from river bed.
material
Fuelwood 1 020 000 Fuelwood is collected from near the banks of the river.
Aquatic animals 680 000 Wetland wildlife such as small aquatic animals, waterbirds and turtles are a vital
Waterbirds 680 000 source of food and income. Some poorer families, who lack access to land, boats or
fishing equipment, are particularly reliant on wetland wildlife for nutrition.
Reptiles 680 000
Irrigation 680 000 Some vegetable crops are irrigated by fetching water from river.
Traditional 680 000 Traditional medicines are collected from the flooded forests. Most families resort to
medicines conventional medicine only when traditional treatments fail, but for many, medicine
is a significant expense. Conventional medicines are often ineffective because
households lack access to medical care – they diagnose symptoms themselves,
resulting in improper use of medicines.
Floodplain rice 340 000 Most rice is not floodplain, but rainfed.
Dolphins 340 000 The group did not describe clearly why dolphins were important.
Recreation 340 000 Swimming.
Total 12 900 000 About US$3 000/household/year.
Note: US$1 = CR4 000.
coping with periods of external stresses and shocks, the conservation and maintenance
of wetland resources is vital to all the households of Veun Sean. However, it is equally
critical to consider access to these fisheries and other wetland resources. The poorest
households have limited access to land, labour, transport to markets, health care, and
alternative sources of income. They are particularly dependent on fisheries resources
on an “as needs” basis in order to generate income to purchase rice.
In addition to providing day-to-day resources on a routine basis, wetlands are also
vital to ensuring that households can cope with external stresses and shocks, such
as harvest failures, livestock disease, droughts, floods, and civil and political unrest.
Where stresses affect productive activities such as cultivating rice and raising livestock,
these can be substituted to a certain extent by collection and capture of wild resources
such as fish, wildlife and aquatic animals.
All the households in Veun Sean, but particularly the very poor, are vulnerable to
pressures that limit their capacity to cultivate land to grow rice and produce, such as
the ongoing stress of limited access to land, or shocks such as drought, livestock death,
and human illnesses. For example, rice-growing is a key economic activity, and “rice
shortage” (the inability to be self-sufficient in rice production because of lack of access
to labour or land) is a major pressure facing most households. For these households,
access to wetland resources is vital on a year-to-year basis, and more so when they face
other stresses such as poor health and drought.
For many households in Veun Sean, the pressures of poor health, drought and rice
shortages appear to reinforce each other. Poor health limits households’ capacity to
work on the land, resulting in low rice yields, which are further lowered by drought.
This emphasizes the importance of owning buffalo to assist in rice-growing. However,
during periods of drought, buffalo are more likely to suffer sicknesses and die.
Furthermore, when faced with rice shortages, households must spend their income on
rice and may face difficulties in purchasing buffalo or health services.

There is great potential and an emerging capacity to use stakeholder-oriented valuation
for wetland conservation and development policy, planning and management in
Cambodia. However, it is critical that the decision-makers and local communities
participate in the development and execution of such studies in order to ensure that
they reflect real-world management issues.
The activities being carried out under the MWBP at the Stoeng Treng Ramsar site
provide an important opportunity to mainstream wetland valuation into conservation
planning processes at both national and local levels. In Stoeng Treng, a number
of strategies and plans to conserve and protect wetland resources are underway.
These include large donor-funded projects, government initiatives, and the work of
national NGOs and local community-based organizations (CBOs). These processes
must consider the biological and ecological importance of wetlands. However, it is
also essential that this information be considered in the light of local community
dependencies on and access to resources. In this context, participatory valuation
methods should continue to be used as a key tool to inform in the planning process – to
gain an understanding of the important in situ value of water for wetlands to support
local communities.
The future sustainability of attempts to conserve the Stoeng Treng Ramsar site
depends critically on sufficient financial resources and economic incentives being made
available to support wetlands management. Economic assessment tools can help to: (i)
indicate the economic impacts, costs and benefits of conservation management regimes;
(ii) point to opportunities and needs to capture and redistribute benefits to cover the
costs of conservation; (iii) and present a strong case to outside agencies and central
government of the need to fund wetland management initiatives.
In Cambodia, community fisheries management activities are being carried out by

organizations such as the CEPA as part of the official fisheries policy dialogue. In
these activities, some of the assessment techniques could be applied when establishing
or monitoring the progress of their community fisheries (e.g. to develop measurable
indicators), and to provide local- and national-level advocacy and awareness materials
that underline the value of wetlands resources to villagers.
Water valuation could also provide valuable inputs into existing and future five-
year development and investment plans that have been developed in the context of
commune council development planning. In particular, a broad value assessment can
highlight the contribution of wetland conservation to socio-economic development
and poverty alleviation goals, and demonstrate the links between wetland status and
improved outcomes for other sectors. This link is important because of the dual-
livelihood strategy in many wetland communities: combining agricultural activities,
such as the cultivation of rice and livestock raising, with the collection and capture of
wild resources provided by the Ramsar wetlands.
In the context of Cambodia’s international commitments to the Ramsar Convention
on Wetlands, economic aspects form an important supplement to initial assessments
of biodiversity status, threats and management needs in the planning and management
of wetlands. As management plans are developed, valuation can help to identify a
wide range of economic and financial tools with which to strengthen conservation
implementation.
51
Part III
Towards a stakeholder-oriented
valuation process
The descriptions of the three cases in Part II are used to learn about the responses
developed in practice to confront the three challenges for stakeholder-oriented water
valuation that were identified in Part I. The differences between the cases somewhat reduce
the possibilities for a detailed comparative review of the valuation approaches used, but
their independence makes a strong argument for the common elements that nevertheless
appear in these different cases. This is not to say that these cases effectively address all the
valuation problems identified in Part I, but they serve a purpose in highlighting recent
attempts in moving towards a more stakeholder-oriented valuation approach.
Chapter 6 describes the responses to the three challenges for stakeholder-oriented
water valuation that emerge from the cases.
Chapter 7 merges these practical responses from the cases with the concepts from
literature on IWRM processes to provide an outline of a stakeholder-oriented water
valuation process. This should provide a basis to support future use and further
development of a stakeholder-oriented approach to water valuation. The chapter ends
with the identification of some remaining questions and directions for such future work.
53
Chapter 6
Responses to the challenges
for stakeholder-oriented
water valuation
CHALLENGES AND PRACTICAL RESPONSES

At the beginning of this report, an argument was made for a stakeholder-oriented
approach to water valuation and three challenges were identified that have to
be confronted in realizing such a more stakeholder-oriented approach to water
valuation:
¾ An analytical challenge, to broaden the scope of valuation to include economic,
social and environmental values, and to provide insight into stakeholder-specific
values as well as relevant trends and dynamics. Transparent and valid assessments
of a diverse range of values are required, while still providing insight into the
overall picture.
¾ An adaptive challenge, to adapt to the working conditions for local water resources
management in developing countries, requiring the adaptation of valuation to the
existing institutional setup and to the available data, knowledge, expertise, time
and resources.
¾ A participatory challenge, to embed water valuation in local stakeholder processes,
combining stakeholder judgement, local knowledge and scientific inputs through
a stakeholder-driven process.
TABLE 18
Challenges and observed responses
Observed stakeholder-oriented response Expert-oriented approach1
Analytical challenge
Differentiate within an overarching framework Aggregate within an overarching framework
Focus on livelihoods as a driving force and integrating Focus on water as resources to be valued in integrated
element water resources management
Link valuation to possible solutions/alternatives Valuation of water resources in current situation
Validate accuracy and robustness through triangulation Rely on statistical analysis to validate accuracy
and other techniques
Adaptive challenge
Combine various methods, indicators and data to build a Collect data as complete as possible for input into
more complete picture integrative economic methods
Use an adaptive and learning approach Authoritative calculations by experts
Ensure links with existing institutions while building social External information input (independent or for client
capital organization)
Participatory challenge
Use tools and techniques for participatory analysis (with Limited participation – passive or by consultation (surveys,
specific attention for stakeholder representation) willingness to pay)
Mix expert and stakeholder inputs Expert inputs dominate
Focus on use of participatory valuation to build Focus on accurate values for given point in time and on
agreement on actions theoretic optimum
Use methods accessible to a wide range of stakeholders Concerns over validity and accuracy demand use of
to facilitate participatory effort complex methods
1
Expert here refers to a valuation expert, whose expertise is the use of economic valuation methods. Stakeholders are also experts,
but of a different kind.
This report has described three pilot cases that have been implementing a more
stakeholder-oriented approach to water valuation than is used conventionally, and in
which stakeholders and experts facing the above challenges have formulated practical
responses. Although the characteristics of each case are different, they provide useful
lessons for future applications of stakeholder-oriented water valuation. Table 18
compares the responses that emerge from the stakeholder-oriented case studies with
the expert-oriented approach that has to date been dominant in water valuation. The
responses in Table 18 are categorized under the challenges they address. The three
challenges are closely related and they sometimes require integrated rather than
separated responses. Nevertheless, most responses put a certain emphasis on one of the
three challenges, enabling some degree of categorization. The remainder of this chapter
discusses the responses in more detail.
ANALYTICAL CHALLENGE
Differentiating within an overarching framework
It has been argued in Chapter 2 that, although economic, social and environmental
values can be aggregated into a full economic value or value function, it may be more
appropriate to provide a picture of the diversity of values. The cases confirm this and
show that there is no urgent need to bring the different value components all under a
common heading.
This does not mean that all efforts towards integration should be given up in
favour of a fragmented approach. A more loose integration of values is possible, using
an integrating framework to ensure that the main value components are covered as
well as some of the important relations between them. For this, existing analytical
frameworks can be used, such as the sustainable-livelihoods analysis framework or the
IWRM framework used in the Tanzania case. Methodological frameworks can also be
used, such as the framework for EIA used as a starting point for the Sri Lanka case.
In addition to these frameworks, analytical tools such as objective trees or hierarchies
and means–objectives networks (Keeney, 1994a), causal-relations diagrams (Eden,
1989; Bots, van Twist and van Duin, 2000) and basic multicriteria analysis methods,
such as score cards or impact tables, provide useful support in structuring values and
objectives. Whatever the framework selected, it is essential to ensure that the relevant
values and the related objectives of all involved stakeholders are identified.
A looser and more pragmatic type of integration, ensuring that the valuation
encompasses the main sectors and disciplines, makes an integrated approach easier to
realize in practice, targeting different needs. Aggregating everything into one overall
value means missing the opportunity to identify specific measures to meet the specific
values of different stakeholders. Rather, insight into disaggregated values is essential
because different stakeholders have different perspectives on the value of water. Values
can be assessed for stakeholder groups at different locations (as in the Sri Lanka
and Tanzania cases), for different sectors or water users, such as fishers, irrigators,
livestock-keeping and drinking-water (the Sri Lanka and Tanzania cases), for different
wealth classes (all three cases) and for accessibility of water resources (the Sri Lanka
case). Other distinctions that may be relevant are gender, cultural groups (immigrants,
and indigenous population), age groups, etc.
Focusing on livelihoods as a driving force

Experiences show that the water component is generally not the only factor driving
local stakeholders in their water resources management decisions, not even in water-
scarce environments. It is important to realize that water resources management is an
instrument for realizing broader societal goals, such as poverty reduction and food
security, adequate health standards and environmental sustainability. Adequate water
Chapter 6 – Responses to the challenges for stakeholder-oriented water valuation 55
resources management is necessary to ensure that these goals are realized, but at the
same time, water is just one factor in a larger system.
On the local level, there will be little room to improve water management within
existing livelihood patterns where one does not also address factors such as education,
land tenure, financial assets, transportation infrastructure, market barriers, etc. For
example, in the Tanzania case, there is great potential to improve the productivity
of water uses by the poorer households, whose limited access to production capital
keeps them trapped in a vicious cycle of low-input – low-output livelihood activities
with significant production risks. Important bottlenecks for these households are the
limited access to: natural resources, such as irrigable land and water, human capital and
labour (especially at peak periods); physical production capital, such as agrochemicals
or livestock; and social capital, such as membership of local societies and associations.
Merely addressing the water constraints without addressing the others will not be
sufficient to enable any structural changes.
A similar example can be drawn from the Cambodia case, where the pressures of poor
health, drought and rice shortage appear to reinforce each other for many households
in Veun Sean. Poor health limits households’ capacity to work on the land, resulting in
low rice yields, further lowered by drought. This emphasizes the importance of owning
buffalo to assist in rice-growing. However, when faced with rice shortages, households
must spend their income on rice and may face difficulties purchasing buffalo or health
services. In these cases, the wetlands provide a last resource for livelihoods. However,
also in this case, merely ensuring wetland conservation will not break the vicious cycle
of poverty for the poor households.
All three cases underscore the importance of the broader livelihood context for local
water resources management to ensure the relevance of the valuation process. The use
of a sustainable-livelihoods analysis framework, such as described by Ellis (2000)
and Nicol (2000), enables a more structured inclusion of livelihood aspects in water
valuation. These frameworks help to screen out issues of more and of less relevance
and provide the connecting tissue for the expression of a range of water-related values.
The focus on livelihoods is not only present in the cases discussed here, but also in one
of the few known tools for assessing social values of water, the Water Poverty Index
(Sullivan and Meigh, 2003).
Connecting valuation to possible solutions and alternatives

The discussion in Chapter 2 of the water resources management processes shows that
valuation should support the analysis of both problems and solutions. Traditionally,
valuation has often been used as part of problem analysis, whereas solution analysis has
been the domain of impact assessment and cost–benefit analysis. However, the cases
indicate that this distinction is not very helpful when supporting local stakeholder
processes. This is very clear in the case of Sri Lanka, which actually used EIA as its
methodological starting point, but also the Tanzania case included a partial valuation
of the expected impacts of possible solutions. Such action orientation is very important
to use valuation as a tool to inform decision-making on possible future actions by
stakeholders. This implies that water valuation should:
¾ support a problem analysis and baseline valuation, which can support the
identification of potential solutions;
¾ support a solutions analysis, which takes into account the costs and values
associated with the realization of potential solutions, including specifically the
transaction costs.
Valuation to support the identification of potential solutions

Sketching an estimate of the current value of water resources is useful for raising
awareness and informing stakeholders, but it does not necessarily help in identifying
and discussing strategies for improved water resources management. For example,
the knowledge that fisheries from the Stoeng Treng wetland in Cambodia constitutes
almost 80 percent of the total annual income for the poor households provides a good
argument for the protection of the wetland. However, it is not sufficient to identify
how such wetland protection should be shaped and how it could be balanced with the
need for social and economic development. For this, it needs to be complemented with
the insight into the underlying dynamics provided by the PRA outcomes.
This means that it is necessary to extend the water valuation to cover solutions
analysis, starting with the identification of possible solutions. An assessment of current
values associated with different water uses or in different dimensions can help to
identify key areas to focus on. Furthermore, reviewing the objectives and their relations
to the different stakeholders may help to identify possibilities for improvement or areas
where there may be room for flexibility – areas that have a relatively low score on
certain value dimensions and a relatively high score on others. If one has used a certain
livelihoods analysis framework, then the mechanisms and elements in this framework
can also provide useful starting points for the identification of possible solutions.
Possible solutions can be of a physical nature, such as reservoirs, channels and diversion
structures, but they may also use economic incentives or market mechanisms for water
allocation, as well as institutionalized allocation procedures. A long list of measures can
be compiled by collecting the suggestions from stakeholders and experts.
In using water valuation to support the identification and evaluation of possible
solutions, determining the proper relative values is more important than estimating
absolute values. Priority areas to address are those where value scores are currently
relatively low compared with other areas, whereas the prioritization of solutions can be
done using ordinal rather than absolute scales, i.e. ranking possible solutions in order
of preference.
Valuation to analyse implications of realizing potential solutions, including

transaction costs
Once such a long list of potentially useful measures has been established, stakeholders’
values drive the evaluation and prioritization of potential solutions. They will want
to prioritize those measures that seem most promising to improve the situation with
regard to the values that are most important to them. Thus, valuation also has a useful
role to play in assigning values to the impacts expected from implementing measures.
Therefore, water valuation as a tool to support water management decisions should
take into account not only the value of water in different uses but also the costs
associated with making the water available to these uses in practice. For example, water
may have a high value in a certain water-scarce region of a country, but distributing a
certain amount of water to this region may require an expensive distribution system
which, in the end, results in a negative outcome of the cost–benefit analysis for this
option of transferring water.
ADAPTIVE CHALLENGE
Combining various valuation methods, indicators and data
Indicators are the way by which values can be observed and measured in practice.
Which indicators are required depends on the stakeholders’ values. Thus, the specific
sets of value indicators are likely to differ on a case-by-case basis. Nevertheless, the
case experiences suggest that certain indicators are generally likely to be included in
these case-specific sets: economic water productivity; food security or nutritional water
productivity; and a qualitative indicator that links water resources to the livelihood
activities that matter for local households. The latter also suggest the usefulness of
indicators that cannot be meaningfully expressed as output for a specific unit of water
quantity but that nevertheless can be traced back to the availability of a certain amount
of water resources, such as the aforementioned livelihood opportunities, biodiversity,

changes in habitats/ecosystems and conflicts over water.
Where several indicators are being used to cover the full range of values that water
represents to local stakeholders, local data for all these indicators will not always be
available. In these cases, value estimates for a certain location may be based on data on
water values from other locations, resulting in an approach that economists refer to
as “benefit transfer” or “environmental value transfer” (Agudelo, 2001; FAO, 2004).
This has to be done with caution owing to the differences between different locations
that are likely to affect the value estimates. However, it can nevertheless provide a
powerful tool for valuation. For example, for the Sri Lanka case, data from the Lao
People’s Democratic Republic were used as the basis for an appropriately adjusted
estimate of a balance of gains and losses in fishery-production potential, while data
from comparable fisheries elsewhere in Sri Lanka and in Bangladesh were used to assess
fish-stock dynamics in relation to reservoir levels.
When the accuracy or availability of basic data are limited, more insight into the
accuracy of resulting value estimates can be gained through the use of a triangulation
strategy, using data from multiple sources and using multiple methods to obtain
different estimates of similar values (Pretty, 1995). Triangulation can help to obtain
some insights into the accuracy of value estimates by comparing values resulting
from the use of different data sources or different methods. For example, in the
Cambodia case, information about the quantitative value of fisheries was verified
by using different methods for data collection: responses from a variety of survey
questions; group discussions; and participatory activities. In the Tanzania case, values
for domestic water were assessed using survey results on stated willingness to pay as
well as observed market prices in one specific part of the study area.
The use of different methods is necessary because water valuation is so diverse and
complex that it is not feasible to develop one single method that is applicable to all
cases. The appropriate methods are different per case, requiring a broad approach to
water valuation that can be tailored to the specific needs for each new case. This ensures
analytical quality together with flexibility. However, it also places certain requirements
on the analysts supporting the stakeholders in their valuation process, as they should
have a good knowledge of at least some of the different methods available for valuation.
Using interdisciplinary teams is likely to be of help, as different values require different
expertise, as do different methods for assessment and data collection. In addition to
economic valuation methods (e.g. residual imputation, contingent valuation, averting
behaviour, and observations of market-based transactions), especially tools and
methods for participatory assessments are promising (see below).
Using an adaptive and learning approach

The adaptive challenge is to deal with gaps in knowledge and information and to use
whatever partial information there is to take forward decision-making processes by
local stakeholders. It may sound tautological, but addressing the adaptive challenge
implies the use of an adaptive approach that has many similarities to the approach
known in ecosystems management as adaptive management. Adaptive management
“assumes that scientific knowledge is provisional and focuses on management as a
learning process or continuous experiment where incorporating the results of previous
actions allows managers to remain flexible and adapt to uncertainty” (Van Eeten and
Roe, 2002). Originally, adaptive management was used to address the complexity of
ecosystem dynamics. Recently, the concept has been expanded to cover the dynamics
in social systems, e.g. in the concept of adaptive comanagement (Olsson, Folke and
Berkes, 2004).
The notion of learning is central in adaptive management and comanagement, and
this conveys the message that current knowledge and understanding of complex water
systems is not sufficient to allow for 100-percent certainty. Whatever measure experts
think is the best to improve water resources management, they can always be wrong and
find that these measures have unintended side-effects. Furthermore, both ecosystems
and social systems are dynamic systems, changing continuously. Therefore, what may
have been appropriate or acceptable at one point in time, may be problematic at a later
stage. This means that: (i) all decisions are based inevitably on knowledge that is less
than perfect and necessarily include a certain level of uncertainty; and (ii) decision-
makers and experts should realize that they need to revisit their initial decision or
analysis and that it may be necessary to adjust – or fine-tune – their activities according
to new developments, new insights and new preferences.
The main aim of water valuation is not to find the “true” value or the “right” answer
to a problem but rather to help stakeholders reach a point at which they feel confident
to take action (Eden, 1989). Building confidence and capacity for people to take
informed action means that iteration and overlap of activities can be a helpful strategy
for communication and learning, not necessarily a waste of resources for duplicating
efforts. In the Tanzania case, some data collection and analysis activities covered similar
topics, and during the final stakeholder workshop, a problem analysis was again done
even though it had already been part of comprehensive assessment. Nevertheless, this
iteration was useful to ensure that everyone had a similar understanding of the main
problems and the logic of the process, as well as to further sharpen the picture of
stakeholders’ values and what drives their water uses.
Adaptive management also means that it might be necessary to revisit the initial
choices and adjust the activities as the valuation progresses. In the Sri Lanka case,
the stakeholder process was monitored and evaluated continuously in order to allow
for learning throughout the process and to be able to adjust it as necessary. Room
for flexibility and for re-thinking initial options has to be built into the design of
any stakeholder-driven valuation process in order to allow participants to identify
knowledge gaps and research needs as the process progresses. This extends into the
activity of implementing measures and solutions, where valuation cannot rule out all
uncertainty. This suggests the usefulness of combining analysis and reflection with the
implementation of pilot projects where possible.
Ensuring links with existing institutions while building social capital

The identification and establishment of links with existing institutions and planning
processes is crucial to ensure that, in the end, the outcomes of a valuation process will
actually feed into decision-making by local stakeholders and that valuation processes
are not taking place in an institutional vacuum. Making a conscious effort to link water
valuation processes to existing formalized planning processes is likely to improve their
practical usefulness and impact. In the Tanzania case, an effort was made to ensure
such links through the involvement of the River Basin Water Office and the District
Agriculture Development Office. The latter was responsible for establishing district
agricultural development plans, one of the main government planning instruments for
channelling the outcomes of the participatory water valuation process. Where such
linkages are not possible, this is not necessarily a reason to forget about stakeholder-
oriented water valuation. Rather, it should be a reason to reconsider seriously the need
and potential usefulness of a water valuation process to improve local water resources
management.
Water valuation should not only feed into existing institutional structures and
planning processes. It could also help stakeholders to improve their functioning within
these structures and processes by offering them a channel to communicate and reflect
upon the different values involved in managing local water resources. In this way, it
offers a practical instrument for capacity building and for increasing the social capital
among participating stakeholders. In the Cambodia case, many internal and external
institutions were identified, but it also appeared that households rarely had contact
with provincial government agencies and that many working committees within the
village, established previously by NGOs, were inactive. The described participatory
approach to water valuation could strengthen the commune council development
planning process, supporting the local communities to establish five-year development
and investment plans.
PARTICIPATORY CHALLENGE
Using available tools and techniques for participatory analysis with specific
attention for stakeholder representation
A stakeholder approach to valuation requires stakeholder involvement throughout the
process. This involvement can be supported by tools for participatory problem analysis,
especially visual modelling and diagramming tools. This gives local stakeholders “a
share in the creation and analysis of knowledge, providing a focus for dialogue which
can be sequentially modified and extended” (FAO, 1997; for overviews of participatory
methods and tools, see also: Pretty, 1995; World Bank, 1996; IAC, 2005). In the
Cambodia case, the tools for PRA provided the methodological starting point for the
valuation. In this case, use was made of participatory resource mapping, construction
of web diagrams, flow diagrams, seasonal calendars of activities, and participatory
wealth ranking. In the Sri Lanka and Tanzania cases, focus group discussions and
workshops also provided important inputs for the analysis, using participatory tools
to discuss priorities and assess values.
In using tools for participatory analysis, the representation of stakeholders deserves
specific attention in order prevent a small group of stakeholders from dominating
participatory processes. Among the stakeholders that risk being underrepresented
are the poor and vulnerable groups, who usually are not part of any of the traditional
institutions and who are likely to have difficulties in finding the time and resources
needed to attend participatory sessions and meetings. Other stakeholders that risk
being underrepresented include private-sector companies or government agencies
whose role in water resources management is not reflected in any of the existing water
institutions although they have an important influence on, or stake in, water resources
management.
Therefore, identifying and selecting organizations and stakeholder representatives is
an essential part of a water valuation process. This should be done proactively, i.e. not
just advertising the opportunity to participate, but actively seeking out the key interest
groups and making sure that they are contacted, briefed and represented adequately
(followed by capacity building where necessary). A stakeholder or actor analysis that
supports the identification of the main stakeholders and their interests, influence and
importance provides useful analytical support for such a proactive approach (Grimble
and Chan, 1995; Hermans, 2005). The Sri Lanka case provides an example of this with
regard to fisheries interests.
Once a participatory process has been initiated and the participation of a broad
basis of stakeholders has been secured, attention needs to be given to the possibilities
for stakeholders to actually voice their concerns and ideas during the process. In
stakeholder meetings, attention needs to be given to the use of discussion techniques
that allow all participants to express their view. If such aspects of empowerment and
participation are not addressed consciously, participatory water valuation may turn
into just another vehicle for ruling elites to exercise their power. Throughout the
process, a continuous monitoring of the process and role of stakeholders is required
in order to ensure that stakeholder participation remains balanced and that the process
continues to focus on issues that are relevant to stakeholders.
Mixing expert and stakeholder inputs

Water valuation should focus on values that are most important to the stakeholders
involved. The stakeholders and not the experts should drive the process. Therefore,
local knowledge is needed to identify the main values to be assessed and to support
the assessments of them. Local stakeholders have a better knowledge of many aspects
of local water management than do external experts. Drawing on local knowledge is
essential to eliciting values but also to identifying historic trends, avoiding repetition
of past failures and ensuring a match with local conditions and institutions. Local
knowledge can be mobilized through the use of focus group discussions, stakeholder
workshops and surveys, supported by the use of participatory analysis tools.
This does not mean that stakeholders alone decide what values to include in water
valuation. Experts should contribute their specific expertise and bring forward certain
information related to water valuation that stakeholders at first might not recognize,
such as the importance of certain values that so far have been overlooked, or to inform
stakeholders about solutions that are not grounded locally but for example at national
level. Experts continue to play a role in a stakeholder approach to valuation, as it needs
to draw on a large set of potentially suitable analytical tools to combine stakeholder
and scientific knowledge in order to support stakeholder judgement with scientific
inputs. They are also likely to be required to offer the facilitation skills needed to
support the water resources management process. In addition, where chosen correctly,
external experts can act as neutral brokers that do not have vested interests in the
project or in potential solutions.
Focusing on use of valuation to build agreement on actionable

recommendations
A focus on actionable recommendations is necessary in order to ensure that, when
local stakeholders are participating in a valuation process, this does not benefit only the
initiator of the study or project who wants to assess water values or develop some long-
term policy proposals, but also the local participants. It would not be justifiable to ask
local stakeholders to invest precious time and energy in processes that they cannot
see the benefits of. Feasibility of the proposed actions is an important consideration,
identifying not only actions that would be required ideally, but also focusing on actions
that are feasible in the given conditions. Therefore, different measures that target the
different needs of stakeholders are likely to be preferable over single comprehensive
blueprints or master plans. For example, in the Sri Lanka case, different measures
were identified that could lead to improvements without radical changes, while in the
Tanzania case, specific attention was given to the identification of a balanced set of
actions for addressing both short-term and long-term issues and that local stakeholders
could implement.
Once potential actions have been identified and their feasibility and impacts have
been assessed qualitatively, stakeholders have to reach an agreement on what actions they
will actually implement. Analytical support for this is offered by tools for multicriteria
analysis, such as the score cards used in the participatory planning workshop in the
Tanzania case, which help to compare the impacts of different solutions over a range
of indicators/criteria.
However, rather than analytical tools, process facilitation skills are much more
important in this phase of the process. Especially in situations of serious water scarcity
and conflicts among users, this evaluation of solutions is closer to negotiations than
to an analytical comparison of impacts. All stakeholders look for ways to claim as
much value as possible, or at least to avoid negative impacts on interests that are of
importance to them. Mapping positive and negative impacts of actions per stakeholder
helps to see where compensation is required in order to reach an equitable outcome.
Facilitating negotiations is particularly complex as considerations of power and equity
come into play. Powerful stakeholders are likely to use their power in the choice for a
set of actions, and in dealing with this, truly neutral choices hardly seem possible.
The evaluation and negotiation activities have not been executed in the cases although
a start has been made using various techniques. In the Sri Lanka case, specific attention
was given to the identification of mitigating measures, to ensure that a larger range
of environmental, social and economic benefits would be delivered and that packages
of measures could be identified that met the interests of various stakeholders. In the
Tanzania case, there was a remarkable consensus on the usefulness of certain measures
as well as on the issues to be addressed. This included small-scale charco dams, training
and education of water users, and a review of the existing system of water rights. This
offered a good basis for further action and implementation. However, hard choices will
be inevitable, especially regarding water rights, as not all stakeholders will have had
the same “ideal” system in mind for the allocation of a water rights system. Agreement
over such hard choices seems unlikely unless compensation measures are put in place.
Using methods accessible to a wide range of stakeholders to facilitate

communication and learning
Many of the existing water valuation methods are highly complex and go beyond what
a majority of non-specialists could understand. This may be partly in line with the
expectations of specialists and non-specialists alike, who may feel that if the method
used is too simple, its outcomes cannot be correct. However, even the most advanced
methods remain fraught with uncertainties and are likely to result in crude and inexact
estimations (Gibbons, 1986). However, the most important decisions are often the
most obvious ones (Daily et al., 2000). For these situations, relatively simple methods
may be as adequate as very complex ones.
A participatory approach puts additional requirements on analysis methods, beyond
analytical accuracy. Where used in a participatory process, facilitating communication
and mutual learning are also important for reaching a shared frame of reference and
supporting stakeholders to reach a point at which they all feel confident to take action.
Especially where it challenges conventional wisdom, water valuation may be highly
political and the use of complex “black-box” methods increases the risk that outcomes
are not accepted by all the stakeholders or some of them. Simpler methods that are
easier to grasp for a large group of stakeholders will contribute more to a better
communication and understanding of the different values of water. Furthermore, the
expertise and/or data required for complicated methods are often not available, whereas
the use of straightforward methods may be more easily repeated by local stakeholders
themselves at a later stage, building capacity to conduct water valuations locally.
Previously the emphasis in water valuation has been on complex methods. However,
the case experiences show the importance of balancing complex expert inputs with
an overall approach to valuation that is fairly easy to grasp and that is accessible to
a wide range of stakeholders. For example, in the Tanzania case, relatively simple
diagrams and tables were used to facilitate participatory planning during a stakeholder
workshop, supported by technical inputs related to the various aspects of water
resources management presented by the project team experts. In the Cambodia case,
the valuation process was based on the use of various tools for PRA combined with
household surveys to strengthen the quantitative aspects.
63
Chapter 7
Towards a framework
for stakeholder-oriented
water valuation
REDEFINING WATER VALUATION AS A STAKEHOLDER PROCESS

The practical valuation processes applied in the cases can be merged with the
conceptual approaches from literature (Chapter 2) to water resources management as a
stakeholder process into the outline of a stakeholder-oriented water valuation process.
Such a combination of concepts with experiences from local practice creates a basis
to support future use and further development of a stakeholder-oriented approach to
water valuation.
Outline of a stakeholder-oriented water valuation process

The responses to the challenges for stakeholder-oriented water valuation observed
in the cases are based on an underlying perspective of water valuation as an intrinsic
part of a water resources management process. Transposing the experiences from the
cases to these IWRM processes enables a generic process for stakeholder-oriented
water valuation to be outlined. This process is based on the previous descriptions of
the IWRM process by the GWP (2004) and the World Bank (1994), as described in
Chapter 2. However, it puts more emphasis on the role of valuation in the IWRM
process.
Essentially, the proposed process consists of seven elements that are linked to one
another in a logical sequence of activities:
1. identification of the main problems to be addressed and key stakeholders
involved;
2. identification of values at stake through a structured overview of stakeholders’
objectives;
3. assessment of values associated with these objectives for current practices;
4. identification of possible solutions and the stakeholders that control them (or in
part do so);
5. assessment of values associated with expected impacts of solutions;
6. evaluation, refinement and negotiated choice of preferred set of solutions;
7. implementation, monitoring and evaluation by stakeholders.
Just as the descriptions of the IWRM process, the stakeholder-oriented valuation
process should not be seen as a blueprint but rather as pointing into useful directions
for subsequent activities in a participatory and iterative valuation process. Although a
valuation process as outlined here may rarely be found in actual practice, its internal
logic makes it a useful tool for practitioners seeking to support stakeholders by adding
an analytical and rational component to the essentially political water resources
management processes.
Redundancy between activities, repetition of elements and skipping certain elements
only to come back to them at a later stage will be the norm rather than the exception.
Stakeholders may move from problem to solutions, from solutions to other solutions,
and even from one problem to the next. The role of stakeholder-driven water valuation
is to support stakeholders in these processes by clarifying the problems and the stakes
involved, sharing the different perspectives and positions and, through this process,
identifying some solutions that can

FIGURE 14 form an acceptable basis for action.
Stakeholder-oriented water valuation process This results in an iterative process as
Problems and depicted in Figure 14.
stakeholders
Fitting the cases to the

Implementation
Values at stake: stakeholder-oriented valuation
stakeholders'
and monitoring objectives process
None of the cases described in this
report followed all the elements of the
stakeholder-oriented valuation process
Refinement and
as outlined above as they were carried
Valuation of
(negotiated) current practice out prior to developing this outline.
choice (indicator-based)
Nevertheless, important features of
this process are present in each of the
cases. This is illustrated in Table 19,
Valuation of
which shows that, in all the cases, the
Possible
expcted impacts solutions first three elements of this process can
of solutions
be recognized easily.
The implementation of these
elements in the cases resulted in useful
responses to deal with the challenges for water valuation (Chapter 6). Implementing
these first elements of the process is likely to have an impact, if not directly through the
valuation outcomes, then at least through enabling communication and learning among
stakeholders and among stakeholders and experts. Through their involvement in the
water valuation process, stakeholders engage in dialogue with one another, increasing
their understanding for each other’s value perspectives and of water-related problems.
If this process goes well, as in the cases, it will also contribute to establishing a base of
confidence among participating stakeholders that is likely to benefit them in negotiating
measures for implementation. Furthermore, it will build capacity among local
stakeholders for water valuation and for participation in water resources management,
which can help in the resolution of current resource management problems and with
other and future problems.
Whether or not these benefits indeed materialize in the subsequent phases of
the stakeholder process is difficult to observe. The cases all described fairly recent
experiences, whereas policy-making processes have a longer horizon and follow a
different time scale. Thus, more time would be needed to assess the role of valuation in
these last phases of decision-making and implementation. Moreover, water resources
management processes are affected by several factors and events, many of them
external and beyond the control of local stakeholders. This makes it difficult to isolate
the impact of just one factor. Nevertheless, as the first elements of the stakeholder-
oriented valuation process were followed and as the last elements follow more or less
logically from the first, one could expect that stakeholder-oriented valuation can offer
useful support also for these last elements.
CRITICAL ELEMENTS FOR STAKEHOLDER-ORIENTED VALUATION

Discussion of critical elements for stakeholder-oriented valuation processes
Based on the case experiences that offer empirical evidence to support the main part of
the stakeholder-oriented valuation process, a concise overview is given of the elements
that are considered essential for a stakeholder-oriented valuation process. This
overview of elements offers a checklist to be used throughout the valuation process, to
check whether the most critical elements are addressed and the most common pitfalls
avoided. Table 20 summarizes the elements, and it provides a brief description of the
Chapter 7 – Towards a framework for stakeholder-oriented water valuation 65
TABLE 19
The stakeholder-oriented valuation process in the cases
Elements in the process Tanzania case Sri Lanka case Cambodia case
1. Problems and Increasing water shortages Impacts of irrigation Pressures on local wetland, putting
stakeholders in the subcatchment, rehabilitation project on at risk habitats of several globally
especially in the lower fisheries and conflicts over threatened species and local
zone, affecting livestock water for farming and livelihoods for villagers.
and crop production. fishing.
Downstream problems
with wildlife conservation
and hydropower
generation.
2. Goals and objectives Preserve or enhance Preserve or enhance local Protect habitats, globally
at stake livelihood opportunities livelihoods and food threatened species and migrating
(mainly crops and security, with specific focus fish species in larger Mekong
livestock). on role of fisheries. system.
Equitable distribution of Biodiversity conservation Poverty alleviation, protect natural
water resources. (secondary here to resource base for local livelihoods,
Enhance food security. livelihoods and food especially for vulnerable groups.
Conservation of security). Food security.
existing flora and Traditional values (medicine).
fauna, maintenance of Promote public health.
environmental base-flow
for downstream wetlands.
3. Value associated Values increasing in dry Value to support fishery Values for livelihoods,
with these objectives season and when moving production of 2 633 tonnes/ transportation, etc. Value estimate
for current practices downstream; social year equivalent to of wetland assets some US$3 000/
values “higher” than US$14 300 (in 1999), but household/year (in 2004). Values
economic values. Latter important differences across increase for poor households. For
ranges from < US$0.05 to locations. Value of fisheries very poor, wetlands have high value
almost US$1/m3 (in 2003). as social safety net for poor. as key source for nutrition. Values
Environmental values of deep pools as conservation areas
threatened downstream. and traditional fishing grounds
may conflict. Value for diversified
livelihood and thus increased
resilience.
4. Possible solutions Small dams for water Improved management of .... (protect wetlands, recognizing
storage, training of water drainage flows, seawater their biological importance and
users, strengthening flows and lagoon water local-level dependencies on and
user platforms, review levels, water savings for access to resources for livelihoods).
water rights, “non- farming, minimum levels
water” related measures to conserve sustainable fish
(marketing associations, stocks.
harvest storage facilities,
etc.).
5. Values associated Generally only positive Potential social and -
with expected impacts on values expected economic benefits.
impacts of solutions – indicating also lack
of sufficiently detailed
insights.
6. Evaluation and Some preliminary selection - -

choice of (set of) based on preferences of
solutions stakeholders: training,
education, small dams.
7. Implementation, - - -
monitoring and
evaluation
Note: Different reference years have been used in the different cases, affecting the monetary values shown.
main analytical output associated with each element and the issues that help to increase
the link between these analytical outputs and the stakeholder process.
Table 20 contains the critical elements that should be part of any sound stakeholder-
oriented valuation process, be it as a logical sequence or in a more haphazard way. The
elements are discussed in more detail below. More details on strategies and specific
tools to support this valuation process can be found in the discussion of responses to
challenges in Chapter 6.
TABLE 20
Critical elements in stakeholder-oriented valuation processes
Element Analytical output Link to stakeholders
1. Problems and Overview of main problems that need to be Identify who are affected by problems or
stakeholders addressed. solutions, what stakeholders have capacity to
contribute to or obstruct problem solving. Identify
one/two “lead” stakeholders.
2. Main values at stake Overview of main objectives involved, Ensure that the main objectives of all stakeholders
structured in overarching framework. are considered. Clarify link between stakeholders
and identified objectives.
3. Values associated Set of value indicators and a baseline Provide insight into values per stakeholder (group)
with current practice assessment of the existing situation using to see whose values are catered for, whose values
these indicators. need to be improved, etc.
4. Possible solutions List of possible actions, as concrete as Review the stakeholders to be responsible
possible, to support realization of objectives and/or whose cooperation is necessary for
– screened for feasibility and acceptance. implementation of each action.
5. Expected impacts of Overview of expected impacts of possible Assess impacts on values of importance to
solutions on values solutions (combinations of actions) on main different stakeholders. Clarify stakeholder roles in
objectives. implementation, including financing.
6. Selection of solution Agreed solution: set of actions and time Provide insight into impacts per stakeholder: who
frame for implementation. benefits, who suffers? Identify compensation
and mitigating measures that contribute to a fair
balance of costs and benefits among different
stakeholders.
7. Implementation, Implementation of agreed actions and (This is only possible where implementation
monitoring and regular monitoring of impacts, covering key has support of critical mass of stakeholders,
evaluation indicators. who should also agree on and contribute to
monitoring and evaluation procedures.)
Identification of the main problems and key stakeholders

In water resources management processes, new rounds in a planning cycle may be
triggered by external events or decisions, or by new stakeholders that enter the scene.
These may create new problems, increase the urgency to address lingering problems
and bring new solutions into the process, revitalizing processes that had come to a
standstill because there were no solutions to take them forward.
Ideally, one would start by identifying and describing the main problems before
identifying solutions to those problems. The problem formulation comes even before
the identification or explication of values. This is because, if there is no problem, there
is no urgent need to take action and thus no urgent need for valuation. Valuation
should be used to address the problems that drive stakeholders into a negotiation or
planning process.
Using a problem-based approach makes it easier to identify which stakeholders
should be driving the process. These are likely to be the stakeholders suffering from
a problem and that have a certain capacity to mobilize additional stakeholders that
are also interested in addressing this problem. However, these are not necessarily the
stakeholders who can solve the problem. Problems may be caused by the actions of
other stakeholders, who should then also be involved in the process. For example,
water quality problems may be perceived by government agencies responsible for
water management, by downstream communities and by environmental groups, but
these are not necessarily the stakeholders who are causing the problems or who have
the capacity to solve them.
Although all stakeholders need to be involved, it is helpful to identify one or two
stakeholders that should take the lead, motivated by a specific problem that affects
them. Otherwise, there is a considerable risk that the process stagnates as no one feels
a particular responsibility to take it forward.
Identification of values through structured overview of objectives for key

stakeholders
The identification of the complete range of values that are at stake requires a closer
look at the problems and the stakeholders involved in the process, reviewing why
stakeholders consider something to be a problem. If one defines a problem as a gap
between a desired state and the actual state (or expected future state), then a closer look
at what is “desired” will aid a more adequate identification and evaluation of the main
objectives involved. Without a careful identification and structuring of these objectives,
there is a risk of neglecting certain implicit objectives of stakeholders. These implicit
objectives may turn out to be important, disrupting the stakeholder process at a later
stage when an agreement cannot be reached with stakeholders who realize that certain
important objectives are not catered for in the proposed set of measures, or when
unintended negative impacts of implemented measures surface.
Assessment of the values associated with identified objectives for current practices
– indicators and baseline valuation
An assessment of the values associated with the existing situation, a “baseline
valuation”, should be done in order to identify the seriousness of problems and to help
prioritize them. If one does not know where one stands on the aspects that matter, it
will be hard to see in what areas improvements are most needed and whether proposed
measures indeed lead to significant improvements. This baseline valuation should
cover all the relevant values, using the objectives and their indicators that have been
identified by the stakeholders. The identification of objectives and indicators and the
baseline valuation are likely to be part of an iterative process. New information may
come up during the process that points to the existence of an additional objective. It
may not be possible to assess some of the identified indicators with the available data
and expertise and additional indicators may be identified once one looks into the data
and the details.
The baseline valuation should include not only a “snapshot” of the current situation,
but it should also identify the main trends and dynamics. Where water scarcity is a
major concern, a water balance (estimate) is an essential part of this baseline valuation,
providing an indication of the severity of the water scarcity problems.
Identification of possible solutions and stakeholders that control them

The valuation process should help stakeholders to reach a level of confidence and
agreement that enables them to implement a set of measures that can reasonably
be expected to improve their situation, i.e. to solve some of their problems. Some
promising measures will already be known from past experiences or from other
regions, and many stakeholders may have a preference for certain measures throughout
the process. A good understanding of the main problems and objectives and the values
associated with the current situation helps to identify some additional measures.
Initially, one should be creative and identify a wide range of measures, bearing in mind
that multivalue mapping enables an integrated approach of multitargeted processes and
measures for improvements. Eventually, there should be a first screening, taking into
account the financial and legal feasibility of the identified measures.
Furthermore, the measures should also be screened for acceptance by stakeholders.
Therefore, the list of potentially promising measures should include an overview of
the key stakeholders to be responsible for the implementation of each measure and of
stakeholders whose cooperation is essential for successful implementation (for example,
because they could obstruct the implementation of a certain measure although they are
not responsible for implementing it). This may give rise to a reiteration starting from
the first element: the identification of stakeholders to be included in the valuation
process.
Assessment of expected impacts of measures on main objectives

Once promising measures have been identified, their impacts need to be assessed and
valued. This assessment should include a cost–benefit or cost-effectiveness component,
looking into the financial and other costs associated with implementation, versus the
contribution to the attainment of important objectives. An accurate assessment of
impacts of measures is likely to require substantial analytical effort, especially where
the list of possible measures is long and where measures are also likely to influence one
another. However, at least a qualitative assessment should be made as otherwise there
will be no analytical basis to discuss and negotiate a preferred set of measures to be
implemented. The use of tools and techniques for multicriteria analysis can support the
presentation and interpretation of these assessments.
Evaluation, refinement (mitigating measures) and choice

Eventually, stakeholders should reach a certain level of agreement on the solution to be
implemented. This requires that stakeholders reach an agreement or compromise on a
balanced set of measures that they expect to result in an acceptable distribution of costs
and benefits among stakeholders. Thus, it is useful to consider the expected benefits
and costs associated with each measure per stakeholder, to see how measures may be
combined in a package that covers all interests, where compensation may be required
in order to reach an equitable outcome, and where mitigating measures are needed. A
meaningful discussion on measures requires that they be described in sufficient detail,
including, for physical measures, details such as exact locations and sizes. Agreement
on measures without such details may be rather easy, but then conflicts are likely to
arise when the details have to be filled in for their actual implementation.
The result of this negotiation process should be an agreed set of measures and a
time frame for implementation, as well as an overview of the role and responsibilities
of stakeholders for their implementation.
Implementation, monitoring and evaluation

Where the valuation process results in a decision that has the consent of all the major
stakeholders, there will be a fruitful basis for implementation. However, this will not
always be the case and, often, some stakeholders will be more willing than others
to implement the agreed set of measures. Even where some stakeholders are not
cooperating actively, the others involved may nevertheless decide to move on with the
implementation. However, if too many stakeholders stall or obstruct implementation
for a considerable period, it will be necessary to go back a few steps in the process and
review the reached agreements or even the identified objectives.
Once implementation is underway, the use of adequate monitoring and evaluation
procedures, involving local stakeholders, is crucial. There should be a clear monitoring
arrangement, specifying indicators and monitoring procedures, as well as a structure
for periodic evaluations. Monitoring the impacts of the implemented measures is
necessary to see whether the actual impacts are in line with the expectations, whether
adjustments or mitigating measures are needed, or whether unforeseen problems arise
that need to be addressed. These monitoring arrangements should be based for an
important part on the stakeholders’ objectives and their indicators that were used for
the baseline valuation earlier in the process. This allows stakeholders to see whether the
situation is actually improving or not.
Implementing the critical elements for valuation processes in practice

The sketched critical elements may give the impression that stakeholder-oriented
valuation is a straightforward process in which all the important stakeholders are
happily participating. However, this will not necessarily be the case. Participation of,
let alone agreement among, all stakeholders may be nearly impossible to realize in
many instances. Therefore, it should again be stressed that the process and the elements
outlined here are ideal types. Consciously addressing the presented elements is likely
to help improve the role that valuation can play in supporting local stakeholders to
manage their water resources, but one should be careful not to let theory obstruct
practical progress.
Waiting until all stakeholders agree on all things will make progress virtually
impossible. Therefore, it may be wise to “move on” with a process even where not
all stakeholders are yet participating or agreeing. One can always come back to initial
decisions or elements through iteration in a later phase of the process, and certain
stakeholders may decide to join the process later on, when it has gained sufficient
momentum. It is difficult to give specific guidelines for the decision either to move
on or to continue with efforts to persuade additional stakeholders to come on board.
A critical mass of stakeholders needs to be on board in order to allow the process to
proceed. However, it is impossible to say at the outset when it would be acceptable
to continue even if certain stakeholders are not yet, or are no longer, supporting the
process.
CONCLUSIONS AND DIRECTIONS FOR FUTURE WORK

Responding to challenges: the benefits of a stakeholder-oriented approach
Improving the connection between analytical water valuation tools with actual
water resources management processes requires valuation practitioners to formulate
responses to several challenges, three of which have been central in this report. First,
water valuation needs to go beyond an analysis of economic values expressed in
monetary units in order to cover the full range of values that are considered important
by stakeholders, including social and environmental values. Second, there is an adaptive
challenge in that water valuation needs to adapt to the local conditions, coping with
limits in available data, expertise and time, as well as uncertainty, knowledge gaps
and social and physical environments that are changing continuously. Third, water
valuation needs to be participatory, combining subjective stakeholder judgements with
scientific inputs, responding to stakeholders’ needs and supporting communication,
learning and negotiating among stakeholders.
In the three pilot cases presented above, attempts have been made to improve the
link between water valuation and the local stakeholder processes. In these cases, several
responses were observed that helped to meet the challenges for water valuation. An
effort was made to capture the lessons from the cases in the outline of an ideal-type
process, based on the identification of critical elements in a stakeholder-oriented
valuation approach.
In this approach, efforts are made to bring valuation into line with stakeholders’
needs, providing insight into disaggregated value estimates to reflect differences
among stakeholders and using valuation to identify and evaluate possible measures for
improving water resources management. It features an adaptive and learning approach
in which the absence of complete data sets is not taken as an excuse for not starting
improvements. It recognizes that the aim of valuation is not to find the “right” answer
to the question of what the value of water is, but to help stakeholders to reach a point
at which they feel confident to take action. This requires a collaborative effort between
experts and stakeholders, where stakeholder ownership of the valuation process is
central right from the outset, asking them to bring forward their problems and their
felt needs/solutions. This approach has the further advantage of leading the process to
the key problems and the underlying values of stakeholders.
Although the cases described cover mainly the first part of the outlined process,
the evidence suggests that stakeholder-oriented valuation provides a promising means
to take account of the broad range of values related to water resources and their uses,
to deal with uncertainty and practical constraints, and that it can become part of an
integrated, participatory and adaptive approach to water resources management.

Such stakeholder-oriented valuation processes are likely to have benefits in terms of
improved outcomes, i.e. better decisions, implementation, etc., and benefits in terms
of the establishment of processes and capacity within local civil society to participate
in water resources management. The latter benefits the resolution of current as well as
future problems.
Remaining challenges and directions for future work

Although the outlined stakeholder process and the described responses will help to
address the identified challenges for water valuation, they are neither the definitive
answers, nor are they easy to implement. The case material presented here offers a
useful basis to build an argument for the stakeholder-oriented valuation approach
presented in this final chapter. However, it does not offer the broad basis of experiences
needed in order to validate the stakeholder-oriented valuation approach beyond its
initial elements. Certain questions remain and new challenges can be identified for
stakeholder-oriented water valuation. Discussing some of these helps to be cautious
about potential weak spots and to focus further work on stakeholder-oriented water
valuation.
Values depend on the specific circumstances in a certain place and at a certain
time. This means that all valuation is context specific. Stakeholder-oriented valuation
is no exception. Indeed, it may be even more context specific than “classic” water
valuation approaches; valuation embedded in a stakeholder process may have little use
or meaning outside of that process. This limits the possibilities for comparing values
across scales and for trend analyses of values over time to evaluate whether situations
have improved.
In future work, these limits may be reduced by including some basic value
indicators that are the same across cases and that would make it easier to compare
results of different valuation studies and to upscale water valuation results from the
local to the regional and national level. For this, more experiences are needed to
design a framework that balances predefined indicators with room for flexibility and
stakeholder inputs. Such frameworks should probably include multicriteria analysis
techniques that can support a participatory analysis based on a range of indicators.
With regard to valuation indicators, specific attention is needed for indicators and
methods to assess non-monetary social and environmental values.
The stakeholder approach to water valuation has the potential to stimulate agreement
among stakeholders throughout their decision-making process – from problem
formulation to the identification and implementation of solutions. However, it sets
higher requirements for investments from stakeholders in terms of time and effort for
participation, which requires a careful focus on the usefulness of the process for local
stakeholders. Their investment is worthwhile where the process leads to some degree
of consensus on priority actions for water resources management. Where this is not the
case, the process may turn out to be quite expensive, if not in terms of expert time, then
at least in terms of time required from all the stakeholders involved. This underscores
the importance of further developing and using procedures to continuously monitor
and evaluate the valuation process itself, to see whether it is still going in the desired
direction.
Stakeholder-oriented valuation puts less rigid requirements on available data and
economic or technical expertise. However, its dependence on participatory analysis
methods puts higher requirements on the facilitation skills of experts and on the
analysis skills of stakeholders. Moreover, while expressing values in stakeholder
processes helps stakeholders to communicate and discuss the issues of importance to
them, it may also elicit conflicts. Conflicts can sometimes play a useful role, clearing
the air and enabling stakeholders to move ahead afterwards. However, they may also
be counterproductive and inflict lasting damage to relations among stakeholders.

Therefore, conflict management remains a key issue for stakeholder-oriented water
valuation.
An issue that requires specific attention in stakeholder-oriented valuation processes
is the role of local politics and existing power structures. These may pose a threat to
realizing an equal representation of stakeholders and interests in the valuation process,
but ignoring or bypassing them may reduce the possibilities to actually implement
the agreed decisions later on. Empowering poor and vulnerable groups increases the
equity and democratic legitimacy of stakeholder processes, but it may also create
opposition from traditional elites. These might block stakeholder processes that they
fear erode their power base, whereas the underprivileged generally lack the resources
to implement agreed decisions successfully on their own. Thus, experts who are
facilitating stakeholder-oriented valuation processes have to find a delicate balance
between ethical considerations of equal representation and practical considerations of
connecting to existing decision-making and power structures.
While stakeholder-oriented valuation helps to improve the transparency and fairness
of water resources management processes, it does not offer an easy solution. This report
has reviewed the process through which existing valuation methods can support local
stakeholders in their water resources management processes, and the focus and scope
of this report leaves several important directions open for future work. These include:
¾ studying the possibilities and implications of upscaling the stakeholder-oriented
participatory approaches to the national or international level and replicating
valuation processes over time;
¾ the further improvement of analytical tools to assess social and environmental
values and the use of multicriteria decision-making tools to support the analysis
of trade-offs between values;
¾ strengthening and disseminating a new set of tools for the facilitation of
participatory processes, conflict management, adaptive management and dealing
with existing power structures and inequalities, which are all needed to help water
professionals to embed their work in multistakeholder processes.
All in all, more experience with the stakeholder-oriented valuation approach is
needed, taking a broader sample than the three pilot cases discussed here and covering
a longer period, in order to better evaluate the impacts on policy processes.
73
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Availability: February 2006

Ar + Arabic Multil – Multilingual
C + Chinese * Out of print
E + English ** In preparation
F + French
P + Portuguese
S + Spanish
The FAO Technical Papers are available through the

authorized FAO Sales Agents or directly from Sales and
Marketing Group, FAO, Viale delle Terme di Caracalla,
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Stakeholder-oriented FAO

valuation to support water 30

FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS

Part I – Introduction and literature 1

2. Challenges for using valuation to support water resources

3. Valuation to support local water resources management in the

4. Valuation for improved management of irrigation and fisheries

5. Valuation of aquatic resource use at the Stoeng Treng Ramsar site,

Part III – Towards a stakeholder-oriented valuation process 51

6. Responses to the challenges for stakeholder-oriented water

7. Towards a framework for stakeholder-oriented water valuation 63

1. IWRM as an ongoing process 7

1. Main stakeholders involved in water resources management in the MSC 18

Growing pressures on water resources, increasing interdependencies between users,

7. Implementation, monitoring and evaluation by involved stakeholders.

CBO Community-based organization

WATER RESOURCES MANAGEMENT AND THE NEED FOR VALUATION

Stakeholders and managing competing demands for water

Stakeholders can be regarded as part of a network, being linked to one another

WATER VALUATION AS A MEANS TO SUPPORT STAKEHOLDERS

Terms and definitions

Water valuation in practice

Water valuation: beyond economics and embedded in the decision-making

approaches in that it is embedded in the water resources management process, of which

AIM AND SCOPE OF THE REPORT

WATER RESOURCES MANAGEMENT AS A STAKEHOLDER PROCESS

Establish status and

Source: GWP, 2004.

Where do we want to be?

How do we ensure arrival at goals? Where are we now?

How can we get where

Which way is best?

Source: World Bank, 1994.

1987). Cognitive, knowledge and information constraints limit the possibilities to

Problems and solutions

EXISTING APPROACHES TO WATER VALUATION

Complicating economic valuation: marginal values

into one overarching value. However,

Complicating economic valuation: the time dimension

Inclusion of social and environmental values

CHALLENGES FOR LINKING WATER VALUATION AND STAKEHOLDER

Source: De Groot, Wilson and Boumans, 2002.

A stakeholder-oriented approach to water valuation is proposed, one which is

Three specific challenges for stakeholder-oriented water valuation

Water resources management in the Mkoji subcatchment

the lower zone plains during the wet

WATER VALUATION APPROACH

Analytical frameworks to support water valuation

OVERVIEW OF MAIN OUTCOMES

Indicators used for water valuation

Economic value of water

basis of reported yields and farmgate

Economic water values across water- 0.60

primarily household survey data.

of livestock water consumption

Dynamics in economic value

Water to support livelihood activities

Social value of water

Table 5 indicates that, on an annual