Nature-based Tourism Resources Privatization in

TOURISM RECREATION RESEARCH VOL. 36(2), 2011: 99-111

Nature-based Tourism Resources Privatization in China: A System Dynamic Analysis of Opportunities and Risks XIANG HUANG (LOUIS), JIGANG BAO and ALAN A. LEW Abstract: Local governments in China have begun to lease scenic areas to private enterprises to fund their development as tourist attractions. The terms of the leases are for 25 to 30 years, and sometimes more. The privatization of naturebased tourism resources presents both opportunities and risks for governments and the sites being leased. Based on data collected from three case studies, and using a dynamic system modelling methodology, we identify the relationship trajectories among the major stakeholders (i.e., local government, local communities and private enterprises) in nature-based tourism resources. Four system dynamic models are proposed to explain the mechanism of natural area privatization through lease agreements and their impacts on stakeholders and nature-based tourism resources. The analysis shows that there is an ideal relationship that can sustainably support all stakeholders and the natural resource base. However, corrupt relationships will have a major negative impact on all of the stakeholders, and can threaten the nature-based resource, leading to the failure of the privatization effort. Keywords: China; lease agreements; nature reserves; nature-based tourism; privatization; system dynamic model; tourism resources.

China’s domestic tourism market is probably the largest in the world, reaching 1.61 billion person-trips in 2007 (CNTA 2008). It is also one of the fastest growing tourism markets, increasing at a rate of over 10% annually since 1985, when only 240 million person-trips were recorded (Lew 2009). Over 90 per cent of urban residents and about 50 per cent of rural residents take at least one domestic trip in China each year, and they account for at least 70 per cent of China’s travel industry revenues (US$ 129 billion in 2007) (CNTO, 2007).

China because virtually all natural resources are owned by the government. According to the Chinese constitution, ’all mineral resources, rivers, forests, mountains, grassland, wetland and the other nature resources belong to the nation, that is to say, to all Chinese people, except the ones that belong to a local collective by law’ (People’s Daily 1982). In other words, there is no private land ownership in China. Local and regional governments, however, do have the right to allocate public land and they can acquire rights to land belonging to a local collective (such as a village) through lease agreements (Lew 2001).

The enormous growth in China’s domestic tourism demand has been a major driver in the development of new tourism products and attractions. Among these, the development of nature-based tourism products is especially important in China because tourists who are interested in nature-based tourism comprise one of the largest segments of the domestic market (Nianyong and Zhuge 2001; Wen and Tisdale 2001; Deng et al. 2003). However, unlike marketbased economies, the development of new tourism products, especially a nature-based tourism product, is constrained in

Privatization has been a significant approach to conservation in other parts of the world, though mostly in developing countries, and especially in southern and eastern Africa (Spenceley 2008). In South Africa, Namibia and Botswana, it is common for a variety of private non-profit and for-profit organizations to either own or lease tracts of land for wildlife conservation and viewing. The popularity of Africa’s big game has helped to make nature reserve tourism, in at least some locations, more economically attractive than traditional farming (Cousins et al. 2008). Both

Introduction

XIANG HUANG (LOUIS) is Associate Professor at the Department of Tourism Management, Management School, Jinan University, China 510632. e-mail: [email protected] JIGANG BAO is Professor at the Center for Tourism Planning & Research, Sun Yat-sen University, China 510275. e-mail: [email protected] ALAN A. LEW is Professor at the Department of Geography, Planning and Recreation, Northern Arizona University, USA 86001. e-mail: [email protected] Copyright ©2011 Tourism Recreation Research

Nature-based Tourism Resources in China: Huang et al.

South Africa’s Kruger National Park and Tanzania’s Serengeti National Park use adjacent private reserves to extend their park ecosystems (Buckley 2006). Even for private nature reserve operators, however, the cost of managing conservation is usually higher than the tourism revenues they are able to generate, causing them to be marketed primarily to luxury niche tourists (Buckley 2010). The lack of adequate public financing to support adequate conservation efforts is the major reason for privatization, though it can result in questionable management practices, including decision-making based on tourist preferences, a suppression of less desirable fauna, and mixed benefits for local communities (Krüger 2005; Cousins et al. 2008). Despite these concerns, some non-profit management organizations have had positive local impacts and their potential contribution to nature area conservation is enormous (Spenceley 2008). Another issue with privatization is whether a natural site is considered a local resource or a national resource. Issues of corrupt land grabbing, tax loopholes and political kickback have often resulted in the recentralization of natural resource oversight in following a period of localization (Kelsall 2003; Ngoitiko et al. 2010). In Botswana, for example, an initial emphasis on local resource management has changed over time to more centralized control due, in part, to an ‘unaccountable local governance structure ... at the community level, which has led to frequent charges of mismanagement of revenue’ (Rihoy and Maguranyanga 2010: 56). In Tanzania, these issues have been further complicated by issues of tourism development by both private and government entities in a setting of poorly defined land ownership and a desire by many communities to maintain their traditional pastoral lifestyles (Ngoitiko et al. 2010). Since the 1980s, neoliberal economic policies have placed increasing emphasis on the private management of natural resources in many countries around the world (Nelson and Blomley 2010). Southern and eastern Africa, however, have been unique in their ability to attract international tourists to view its big game wildlife (Saarinen et al. 2009). Commercial tourism plays a far less significant financing role in private conservation efforts in other parts of the world. In Europe, private reserves are more likely to be historic private land holdings, while tax incentives in the US support the establishment of conservation trust lands (Buckley 2010). Privatized Nature Reserve Management in China China faces similar financing and management issues in the management of nature areas, and has similarly sought cooperation with private entities. Su et al. (2007) identified 100

three types of public–private cooperative governance models for natural area management in China. These included: (1) the leasing model, (2) the non-listed share-holding model, and (3) the public-listed share-holding model. The two shareholding models create various forms of state-owned, privateowned, and mixed corporations that include public (government) and different types of private (nongovernment) share-holders (Peng 2003). Non-listed corporations do not issue stocks and usually involve greater local government participation. Publically listed corporations sell stocks on the stock market and operate more like private companies, though they may have had their origins as fully state-owned agencies (Eagles et al. 2001). This study presents an assessment of the leasing model in which state-owned land is leased to private management companies (Peng 2003; Su et al. 2007). Local governments have at least two motivations to lease land to private developers for nature-based tourism product development. First, local governments can earn revenue from leases; and second, they can collect taxes on the tourism businesses operating on leased lands. (In China, the tourism industry tax is not a national tax but a local tax that is part of a local government’s budget.) Local government officials recognized the potential benefits of leasing arrangements before the central (or national) government did, resulting in a virtual explosion of land leasing for tourism since the late 1990s. Although, the most famous scenic areas in China are still controlled by government agencies in one form or another (some operate as publically-listed companies), a growing number of undeveloped lands have been leased to completely private developers. These leases are typically for 25 to 30 years, although some reach 50 to 70 years. Today, most provinces in China have public lands that have been leased for private nature-based tourism development. A potential concern over the privatization trend occurred in 2001 when the Chinese Ministry of Construction (CMC) banned the Sichuan provincial government from leasing 10 scenic areas to private enterprises (Yi 2002). China does not have a national park system comparable to that in Canada or the US. However, it does have a system of scenic areas governed by the CMC. In practice, the CMC owns these scenic areas but has transferred their administration, including the ability to sign leases, to local governments. While the central government has not passed legislation banning privatized leases, there is concern that they may yet do so. In response, numerous local and provincial governments have accelerated the practice since 2001 while they are still able to do so. Most privatization has occurred in the less developed regions of China, primarily in the western and central parts Tourism Recreation Research Vol. 36, No. 2, 2011


of the country. The practice is much less common in eastern China where local and provincial governments have higher revenues and thus have less incentive to lease out natural resources. Thus, government interest in privatization is strongly driven by inadequate revenue sources. Privatization, when it occurs, tends to be done with large corporations that are mostly headquartered in eastern China. Most of the local enterprises in central and western China have lacked the capital needed to take advantage of privatization opportunities. In addition, the firms negotiating these leases are not necessarily from the tourist attraction sector, but come from the real estate, accommodation, and even manufacturing sectors. These enterprises see the leasing and development of public lands as a way of obtaining a potentially good return on their investment with a relatively low degree of risk.

case study interviews and site visit information, which provided input for a system dynamic analysis. The system dynamic approach was employed to explain the mechanism of opportunities and risks in privatizing nature based tourism resources (Forrester 1961, 1968). The system dynamic approach has been used since the 1960s to provide an overall conceptual framework for complex systems, including social and environmental management issues. The basic steps in developing a system dynamics model are (Ford1999):

The details of individual privatization agreements are impossible to obtain because of confidentiality concerns. Leasing provides the opportunity for a private enterprise to construct buildings or other structures under the guidelines of an approved tourism development plan administered by the local government tourism authority and subject to approval by the local government. All buildings and structures revert to the local government at the end of the lease contract. Terms of payment vary and may include a one-time lease payment, an initial lease payment plus additional annual payments, or annual payments only (Su et al. 2007). The annual payments may be fixed or set as a percentage of revenues, though this latter option is not very popular. All of the details are finalized through confidential negotiations. The leasing of nature-based tourism resources to private enterprises is a relatively new phenomenon in China, and thus has not been widely examined in the academic literature. We offer a conceptual examination of the opportunities and challenges of nature-based tourism resource privatization in China, which can assist in understanding and managing their success and sustainability, in both environmental and economic terms. Methodology The objective of this paper is to understand the relationship among the core components involved in the privatized leasing of nature-based tourism resource (NBTR) management and development in China. The research design for this paper is outlined in Figure 1. Secondary material on several privatized nature-based tourism sites was collected and a content analysis of relevant documents was undertaken to identify the opportunities and risks that such arrangements can entail. This data was combined with Tourism Recreation Research Vol. 36, No. 2, 2011

1.

Define the problem

2.

Describe the system

3.

Develop the model

4.

Build confidence in the model (validation)

5.

Use the model for policy analysis

6.

Use the model for public outreach. Model of situation before NBTRP Opportunities

Information and data collection

System dynamic analysis

Model of a successful outcome of NBTRP

Risks Model of a failed outcome of NBTRP

NBTRP = Nature Based Tourism Resource Privatization Figure 1. Research design to model the privatization of nature based tourism resources.

Stock-flow and feedback loops are important aspects of the system dynamic approach (Richardson 1991). Stock-flow refers to the movement or change (flow) of resources (stock), including social and monetary capital and goods, among the various components of a system, which are typically composed of various stakeholders. Feedback processes are forces that either accelerate or decelerate a stock-flow change within the system, depending on the nature of the forces at play. System dynamics has been applied to tourism issues in China by Xu (2001, 2003), Bao et al. (2002), and Xu and Bao (2003). An analytic hierarchy process (AHP) (Saaty 1980) was then followed to understand the key impact criteria that were identified in the system dynamics modelling. This helps to identify the areas of strength and weakness in the privatization process. We assume that NBTR will decrease or increase for various reasons, which means it can be considered as a type of “stock” resource, the decrement and increment of the NBTR is seen “flows” out of and into the resources, respectively. In a privatization context, the local government, the local community, and private enterprise are involved as major 101


stakeholders. Each stakeholder will affect the NBTR in its own way, based on the benefits it seeks to obtain. Also, based on what really happens in a privatized NBTR situation, we assume that there will be examples of both successful and failed outcomes. In a successful outcome, the enterprise will achieve an increased revenue flow, the local government will achieve an increased flow of social good, the local community will achieve a higher standard of living, and the environmental sustainability of the NBTR will increase. If any one or more of these goals is not met, then the privatized NBTR is in a failed situation. The system dynamic analysis methodology will help to identify the linkages that can lead to a failed outcome, and to which policy makers need to pay particular attention. Commercial software was used in this project to model the system of natural resource privatization in tourism. Vensim PLE, version 5.3 (Ventana Systems 2008), is a fully functional system dynamics program free for personal and educational use. Inputs to the model include an explicit identification of stakeholders, critical effect factors, and the relationships among these. The output of Vensim PLE is usually a map of system dynamic relationships between stakeholders using single-lined arrows that shows the direction of impacts (or resource stockflows) and whether the impacts are deemed positive or negative. System dynamic modelling helps to visually identify the direct and indirect relationships of factors and stakeholders that could be difficult to obtain through more conventional qualitative research methods. Source of Data and Descriptions of Case Study Sites Data for this project were drawn from a review of secondary sources, consisting primarily of official government documents and media reports related to the study sites. Site visits and personal interviews with selected key informants at the study sites were also conducted. The three case study sites examined were: Bifeng Gorge, Sichuan Province Bifeng Gorge is in the Ya’an area of Sichuan province in southwest China. This scenic area is composed of two gorges that converge to form a “V” pattern. The left gorge is about 7 km (4.3 miles) long, and the right gorge is about 6 km (3.7 miles). The width of the gorges is 30 to 50 m (100 to 165 ft) with a height of 100 to 200 m (325 to 650 ft). Bifeng Gorge is famous for its waterfalls and the dramatic landscape. Bifeng Temple, which was built in the Tang Dynasty (618– 907 CE) and a wild animal zoo are also major attractions. The Gorge contains some 400 species of wildlife, including rare species such as the white tiger, white lion, and giant panda. Over 30 species have been afforded national first level protection and another 50 species have been given 102

national level class protection by the Ministry of Environment Protection (TUI 2008). Before 2000, Bifeng Gorge was a local recreation area solely visited by people living in the Ya’an area. In the decade since the private lease agreement was signed, visitation has grown to over 600,000 a year, many from distant parts of China. Logging, which was a widespread local practice a decade ago, is now banned, allowing more natural vegetation to return. The local residents today rely primarily on tourism industry for their livelihood, and instead of logging they actively protect the nature resource base. Maling Gorge, Guizhou Province Maling Gorge is located in Guizhou Province in, southwest China. This national scenic area covers 74 km2 (28 miles2) and it is composed of Maling Gorge, Wanfeng Lake, and Wanfeng Forest. Maling Gorge is famous for whitewater rafting, while the Wanfeng Forest has a dramatic karst topography and forested landscape. About 100,000 tourists visit Maling Gorge each year (Baidu Encyclopedia 2010), and it has been made part of the National Scenic Area System in China, which, although national in scope, places the responsibility for implementation solely in local government hands. Initially, the local government engaged directly in revenue generating activities, which included the construction of scenic viewing areas and operating a whitewater rafting company. After leasing management rights to a private company, the local government ended its economy activities. The results of the privatization of Maling Gorge, however, were less successful than those at Bifeng Gorge, which is discussed further below. Zhangjiajie World Nature Heritage Site, Hunan Province Zhangjiajie National Forest is located in Hunan Province in southern China. It is an iconic site of Chinese traditional landscape painting. Chinese landscape painting plays a very important role in Chinese culture and nature conservation. Painters usually use only brush pens and black ink to render classic versions of landscapes, and Zhangjiajie National Forest contains some of the most frequently painted landscapes. The National Forest was designated in 1982, though it has long been one of the most famous and mature scenic areas in China. In 1992, it was listed as World Natural Heritage Site by UNESCO and the World Conservation Union (IUCN). Before Zhangjiajie become a World Nature Heritage Site, a portion of the area was leased by local government to be managed by a private enterprise. In 1984, the private enterprise built a highly controversial steel elevator in the core area of this National Forest (Wang et al. 2008). Again, this is an example of mixed results following a privatization lease agreement. Tourism Recreation Research Vol. 36, No. 2, 2011


Privatization Impacts The potential impacts of privatization can be best described by citing examples, both shared and specific, from the three case study sites introduced above. The impacts are discussed in terms of opportunities and risks, which roughly equate to positive and negative stock-flows in the systems dynamic approach. Opportunities Bifeng Gorge is considered one of the most successful examples of the privatization of a scenic resource for tourism development in China in terms of achieving a balance of development and environmental protection. In 1998, the Sichuan Wan Guan Group (SWGG) negotiated a 50-year lease of Bifeng Gorge with the local government. Our examples of the potential opportunities and benefits of privatizations, in general, are from the Bifeng Gorge initiative and include the following. 



The local government, the local communities and the private enterprise can all benefited economically from a privatization project. Details of most lease payments for Bifeng Gorge are confidential, but SWGG has reported consistent annual earnings of 60 million RMB with payments of 5 million RMB in taxes annually to the local government since 2000 (SWGG 2003). Prior to privatization, Bifeng Gorge earned only 300,000 to 500,000 RMB per year for the local government (Zheng 2002). The success of Bifeng Gorge has also stimulated the development of a number of other small tourism enterprises to take advantage of the increased tourist traffic in the area. These include restaurants, souvenir shops, and transportation providers, among others (Table 1). The impact of the privatization of Bifeng Gorge and related tourism developments has allowed the local community to become one of the most prosperous in central Sichuan (Ya’an Town Government 2002). Privatization can free government agencies to focus on regulation and monitoring. Traditionally, the Chinese government is not only the umpire but also the athlete in the economic development game. However, since 1978, China has undergone a very gradual transition to a market economy. One of the driving forces behind this shift was the limited capital available from the central government to the various levels of local government for economic initiatives. Further, the central government also began to recognize that as long as its government-owned enterprises were insulated from true market forces, they could not be efficiently

Tourism Recreation Research Vol. 36, No. 2, 2011

Table 1. Selected impacts of privatization of Bifeng Gorge Before After privatization privatization (2002) (1996) Jobs in scenic area Related jobs outside scenic area

Percent change

30-50

450-500

~ 800% 1600%

n/a

35,000 - 40,000

n/a

800 RMB/person/ yr Net income of (3-5 person family will be residents 25004000RMB/fa mily/yr) Net income of 4,000 agricultural RMB/person/ and forestry year workers

Workers in scenic area: 4,000 - 5,000 RMB/person/yr Business owner: 100,000 – 150,000 RMB/family/yr

Workers in scenic area: ~ 500% 600% Business owner: ~2,500% 6,000%

7,500 87.5% RMB/person/year

Source: Ya’an local government report 2002

run. This can be seen in the relatively low level of development and revenues associated with the preprivatized Bifeng Gorge. Privatization has allowed this attraction to be developed into a more desirable and financially successful tourist attraction. The success of Bifeng Gorge has also stimulated the development of a number of other small tourism enterprises to take advantage of the increased tourism traffic in the area. At the same time, the local government both earns lease revenues from the enterprise and tax from tourismgenerated industry and can concentrate on monitoring environmental protection in Bifeng Gorge (Zheng 2002). 

Environmental protection by the local community can be enhanced. The economic benefits from privatization have permitted local residents of the Bifeng Gorge area to reduce the rate of deforestation associated with previous economic activity (primarily lumbering) by providing higher-paying alternative employment. Residents also recognize that the quality of the environment is essential to the economic success of the Gorge, so voluntary measures to protect the environment have been implemented (Zheng 2002). Local businesses are also paying more attention to protecting the quality of the environment, thus supplementing the previously limited (due to financial pressures) efforts by the local government to protect the gorge.

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Risks While there are opportunities for substantial benefits from privatization, there are also risks. The examples provided here come largely from the Maling Gorge and Zhangjiajie case studies. 

Local government officials may be perceived as succumbing to corruption and personal gain. While no evidence for corruption has become public in connection with privatization in any of three case study areas, the privatization process is conducted largely behind closed doors and there is the potential that officials may be seen as obtaining personal profit through bribes or other paybacks (Li et al. 2007). Major decisions about the privatization agreements are typically made without adequate mechanisms for checks and balances. Without an effective monitoring and review system, however, there remains the potential for corruption in the decision-making process. Maling Gorge illustrates this situation (Shi 2004). This scenic area is famous for its whitewater rafting. Three rafting enterprises operate in the area, one of which is owned by the local government. In 2001, the local government leased the right to do business in Maling Gorge to the Q Group for a 50-year period. As a part of the contract, the Q Group paid 950,000 RMB (US$79,000) to the local government. Employees of the government company (which runs the business in the gorge) speculated to the authors that this low lease payment may be due to corruption, because the enterprise had the potential to earn 1 million RMB per year (Shi 2004). Assuming no changes in revenue, a 50-year lease could generate 50 million RMB for the Q Group on their initial investment of 0.95 million RMB. This has created concerns of under-pricing and has raised questions over how such a favourable contract was negotiated.



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Local governments may potentially have less control over development in the privatized area. Though most private enterprises understand the importance of protecting the natural environment upon which their tourism product depends, some still fail to follow wise and appropriate environmental practices. One example is the construction of a 326 m (1070 ft) elevator on the front of a sandstone cliff in the Zhangjiajie World Natural Heritage site in 1999, significantly damaging the scenic quality of the cliff (Zhang, 2002). The controversial Bailong Elevator is the tallest glass elevator in the world and has generated significant controversy (Deng et al. 2003).



Local communities may be economically exploited or may otherwise fail to receive benefits from the development. The local communities in most areas where the privatization of tourism lands has occurred are generally comprised of rural peasants with low education levels and who are a potentially vulnerable population (Song 2005). If there is no mechanism to ensure community participation in tourism development, the local community may not benefit from economic growth, which is one of the intended goals of privatization in China. For example, in 2002, the right to an underground river was sold by the local government to a developer in city of Lianzhou in Guangdong Province. Part of the contract involved also providing the lessee access to the land above the underground river, which involved the government relocating residents from the site. More generally, while state-run tourism enterprises are not always run or marketed efficiently, they usually provide the opportunity for local residents to earn money from tourists through the operation of small, private and family-run businesses. Privatization can bar local residents from creating spinoff enterprises, and does not guarantee that they will have access to jobs created by the enterprise (Wang 2004).

System Dynamic Modelling of the Impacts of Privatization of Nature-based Tourism Resources Based on a review of the development experience of each of the case study locations, three key stakeholder groups were identified for a system dynamic analysis of the situation before and after privatization. These were (1) local government agencies, (2) local residents, and (3) private enterprises. The local government is interested in its political legitimacy, which is primarily measured in its ability to improve the quality of life of its constituents. While this is primarily thought of in terms of public infrastructure and the economic environment, it also includes the management of public goods, including natural resources. Local resident interests are generally more concerned to having a secure home, job and access to food. They may also have an interest in maintaining a historical sense of place attachment to their home community and to its natural resources. Private enterprises are primarily interested in economic stability and growth of their investments. Large and diversified enterprises may be influenced by business decisions far from the naturebased resource location, which can impact resource management policies. In addition to the stakeholders, the nature-based resource is a key stock resource, with certain stakeholderlike attributes. While all three of the stakeholders has Tourism Recreation Research Vol. 36, No. 2, 2011


economic and quality of life interests in the nature-based resource, the resource itself has an interest in its sustainability, though this interest is exclusively in the hands of the three stakeholder groups. Of those three groups, however, it is the local government that has primary responsibility for maintaining the quality of the nature-based resource, even though some of this responsibility is transferred to the private enterprise through the lease agreement. Table 2 provides a summary of the potential impacts of the privatization of tourism resources for each of the three stakeholder groups. This list is compiled from the three case studies discussed above. Preliminary indicators for monitoring these impacts are also suggested. Table 2. Stakeholder Groups and Potential Impact Indicators Potential Indicators Lease revenues Tax collections Direct government investment activity Losses due to bad investment or lost opportunity costs Formal charges filed in court Government Number of citizen complaints officially filed Opinions of government officials Government budgets for, and inspections of, environmental practices of tourism enterprises Annual corporate profits Annual return on investment Enterprise Total return on investment since inception rate Annual income change per person Number of jobs created or lost Number of complaint registered in the legal system Local Public protest events against enterprise Communities and government Survey of opinions toward development Surveys of attitudes towards environmental protection Vegetation and land cover changes Census and health of rare species Environment Water quality Percent of land under development


The process of privatization is the key driver in the changing relationship among these stakeholders and the nature-based resource. An important assumption in this analysis is that each of the stakeholders seeks to negotiate positive outcomes and tradeoffs from their own perspective (Yoon et al. 2001; Kayat 2002). Finally, it is necessary to summarize the stock and flow components of a privatized nature-based tourism resource. Stock is the amount of resource (financial, goods or other values) that exists at a specific point of time, or the amount of the resource that has been compiled or integrated up to that point in that time (Kaoru 1999). Flow is defined as an increment or decrement of stock over a time interval. Figure 2 shows the relationships among the local government, the local community, and the natural resource base before privatization for tourism development. Before privatization, local residents engage in consumptive use of their natural resources, primarily deforestation, in order to generate income. This can result in a decremental stock flow on the resource. At the same time, however, the supply of wood from the nature-based resource means that the resource has an incremental (or positive) impact on the local community.

NBTR -

local government

-

+ local community

NBTR = Nature Based Tourism Resource Figure 2. Common Incremental (Positive) and Decremental (Negative) Resource Relationships (Stock-flows) Before Privatization.

Without government intervention, this situation could potentially continue until the natural resources were exhausted from both a commercial and ecosystem perspective. Therefore, government conservation interventions result in a decremental stock impact on the local community. From the perspective of the local government, attempts at protecting and managing the natural resources create a drain on government finances and administrative resources. Therefore the nature-based resource has a decremental stock impact on the local government. Unfortunately, in many instances, government attempts to control the destruction of natural resources by local residents are ineffective. This situation existed in all three of the case studies presented here prior to privatization,

105


which resulted in a drain on public resources, a continually deteriorating environment, and a local economy that was not sustainable. In response to this situation, the local governments decided to privatize aspects of the management of their natural resource base. Figure 3 shows a conceptual model of the potential positive relationships among the stakeholders and the resource base in a successful privatized nature-based tourism situation. This is the goal that local governments seek when they first enter into a privatization lease agreement. A key difference between Figures 2 and 3 is the addition of a new stakeholder, the private enterprise, which has leased rights to exploit certain natural resources for tourism development. If successfully implemented, privatization provides positive benefits to all three stakeholders, as well as to the nature-based resource. From the perspective of the enterprise, a long-term lease to develop and operate a nature-based tourism product has been approved, providing a long-term potential for the creation of profit. The resource, therefore, provides an incremental stockflow to the enterprise. Furthermore, the enterprise that is now operating the nature-based tourism development has a vested interest in ensuring the sustainable development of the resource to ensure long-term economic sustainability. This can result in improved environmental protection and a incremental stock-flow for the resource.

The local government also enjoys benefits from the privatization agreement. It now has a new source of potentially larger and more stable revenue (incremental stock-flow from the enterprise to the government). In addition, it is potentially able to achieve a higher level of environmental protection with minimal net increase in cost (an incremental stock-flow from government to the nature-based resource), though there may be some trade-off in a loss of direct management of the resource. Finally, in an ideal situation, the local community now better understands the importance of protecting the natural environment and voluntarily begins to engage in more sustainable economic and environmental practices. This provides an incremental stock-flow from the local community to the nature-based resource. Unfortunately, as discussed in the case studies above, privatization does not always yield positive results. Figure 4 describes the potential points of failure in a privatization development model. A key addition in Figure 4 is the broken line between the enterprise and the local government. This line represents the situation of a hidden corrupt relationship between the enterprise and local government, whereby the enterprise provides kickbacks to local officials in return for favours. Such favours may include exemptions from environmental protection regulations or allowing an enterprise to conduct business in ways that do not benefit the local community. NBTR

NBTR

-

+

+ local government +

local community +

local government

+ local community -

+ enterprise

NBTR = Nature Based Tourism Resource Figure 3. Positive Model of Stakeholder and Resource Relationships in a Successful Privatized Nature-based Tourism Resource.

In a successful implementation, the increased value placed by the enterprise on sustainable tourism development can incorporate the quality of life needs of the local community and provide a model for the local community to follow in terms of sustainable environmental practices. In addition, employment by, or related to, the enterprise becomes a trade-off for the community against prior resource exploitation practices. The local community is, therefore, able to benefit from both economic growth as well as an improved environment, and in this way, the enterprise has a positive impact (incremental stock-flow) on the local community. 106

+

+ enterprise

NBTR = Nature Based Tourism Resource Figure 4. Negative Model of Stakeholder and Resource Relationships in a Failed Privatized Nature- based Tourism Resource.

Under this situation, instead of pursuing long-term sustainability through an environmentally-sound business plan that also responds to market forces, the enterprise may opt to pursue short-term profits at the expense of a degradation of the natural resource. This one element of a secretive relationship results in a series of negative (or decremental) stock-flows. The private enterprise exerts a exploitative decremental stock-flow on both the nature-based resource and on the local community. By shifting support to Tourism Recreation Research Vol. 36, No. 2, 2011


the private enterprise in an inequitable way, the corrupt government has a decremental impact on the local community, and indirectly on the nature-based resource.

RE DE

As seen in Figure 2, the natural resource base can become increasingly degraded if the government is unable to (or chooses not to) intervene to protect the environment or the interests of the local community. The community is trapped in an unsustainable situation where their long-term economic and environmental health is in even more jeopardy as they compete with the private enterprise for access to the natural resource base. In this situation, the local community finds itself excluded from the benefits of tourism development and they, therefore, continue their old practices of exploiting the environment to meet their own short-term, basic needs, despite the long-term risks. Sometimes, the local community may even be barred from access to its traditional resources because control over those resources has been transferred wholesale to the enterprise. In such a situation, the living conditions of local residents may begin a rapid decline, as frustrations with both government and the enterprise rises. In the long run, none of the stakeholders will enjoy sustainable success.

NBTR I

RLC

Clouds = Resource Sources and Resource Sinks Double Triangle = Flow Rate Valves that regulate the resource flow I = Increment RE = Revenue to the enterprise DE = Decrement Due to Enterprise RLC = Revenue to the Local Community DLC= Decrement Due to Enterprise Figure 5. System Dynamic Model of a Nature-based Tourism Resource

(2)

The primary interest of a private enterprise is to generate revenue and profits. As such, their activities are inherently based on the exploitation of the naturebased tourism resource, although such exploitation will also include a conservation element. Thus, the second fundamental stock-flow in a privatization approach is an enterprise-based decrement (DE). The level of stockflow decrement due to private enterprise activities varies, as shown by the double triangle “flow rate valve” on the (DE) pipe in Figure 5. Local government revenues from the privatized lease agreement are dependent on private enterprise activities, as is not shown as a fundamental stock-flow in Figure 5.

(3)

The third major stock-flow in a privatized nature-based tourism situation is the relationship between the resource and the local community. The local community depends upon the resource for their economic livelihood and quality of life. Like the private enterprise, their relationship to the resources is essentially exploitative, though this also includes an interest in long-term conservation. Local government revenues are also derived from taxes and other fees generated by local community activities. These influences are represented by the decrement due to the local community (DLC) stock-flow pipe, which can vary, as shown by the double triangle “flow rate valve.”

Structure of a Privatized Nature-based Tourism Resource Figure 5 shows the overall structure of the stock-flow dynamic process among the stakeholders in a nature-based tourism resource system. The double-lined arrows (or pipes) represent major stock or financial flows. The single-lined arrows show the feedback loops that are measured in terms of revenues to the private community (RE) and local community (RLC), which in turn impacts policies that regulate the stock flows (represented by the double-triangle “valves” in Figure 5). The key difference between single-lined and double-lined arrow is that the former indicates policy decision-making based on feedback loops, while the latter represent a primary stock (or resource) flow direction. There are essentially three stock-flows in the system: (1)

Ecological restoration or environmental enhancement measures for the nature-based tourism resources initiated by the private enterprise, the local community or the local government can increase either the quality or quantity of the stock of tourism resources. This is the Incremental (I) flow in Figure 5. The level and degree of ecological enhancement will vary at different times, which is represented by the double triangle “flow rate valve” on the (I) pipe in Figure 5.


DLC

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In addition to the three basic stock-flows in the overall privatization model, the revenues to the enterprise (RE) and the revenues to the local community (RLC) are integral parts of the feedback loops (thin lines) that regulate the rate of stock-flows (represented by the double triangle “valves” in Figure 5). In this model, there are three feedback loops. The first is the NBTR-RE-I-,the second is the NBTR-DE-RE loop and the third is the NBTR-DLC-RLC DLC-RLC-NBTR loop. This model can qualitatively explain the states or evolution of resources under three scenarios: (1) the base situation before privatization, (2) the system under a successful privatization implementation, and (3) and the system under an unsuccessful privatization effort. Base Situation - Prior to Privatization In the base situation, the DE flow (or pipe) does not exist. The stock of nature-based tourism resources are affected only by the (DLC) flow, and the NBTR-DLC-RLC loop will often result in a vicious cycle of resource exploitation with the potential of long-term environmental damage. Without the intervening influence of an (I) flow either from government intervention or possibly a local communitybased initiative to enhance the resource, the NBTR-DLC-RLC cycle may eventually deplete the stock of nature-based tourism resources. Successful Privatization Successful privatization is signalled by the absence of the depletion of nature-based tourism resources due to the actions of the private enterprise. In other words, the (DLC) flow is either greatly diminished or no longer exists (if there is no local community relationship to the privatized resource). The stock of nature-based tourism resources will only be affected by flows (I) and (DE). It is important to note two important assumptions of this scenario: (1) a decrease in the tourism resource stock will likely decrease the revenue of the enterprise in the long-term; (2) even with a conservation oriented utilization of the resources for tourism development the (DE) flow cannot be avoided. The NBTR-RE-I loop is a “virtuous” cycle. Protecting the stock of tourism resources (I) enhances the revenues of the enterprise (RE), which encourages the enterprise to strengthen its protection and enhancement (I) of those resources. Conversely, a strong, positive feedback loop between resource protection and enterprise revenue also tends to dampen or restrict the flows on the NBTR-DE-RE loop, which can reduce enterprise revenues (RE). The integrated effect of the NBTR-RE-I and the NBTR-DE-RE loops requires that the two be balanced to achieve an optimized level and form of development, which is the effect sought by the local government. 108

Failure of Privatization A failure in the privatization effort will be signalled by a restriction or complete closing of the incremental (I) flow. Thus, the stock of nature-based tourism resources will be affected primarily by the (DE) and (DLC) regulatory or policy valves. A key assumption in this scenario is that decreases in the quantity or quality of resources due to their exploitation results, at least in the short-term, in increased revenues to the enterprise (DE) or local community (DLC). The NBTRDLC-RLC loop is a feedback cycle that drives the stock of resources to zero. The DE-RE-NBTR loop will also deplete the pool of tourism resources. In other words, without the compensating effects of the (I) flow, the (DE) and (DLC) flows will lead to the degredation of nature-based tourism resources. Discussion The privatization of nature-based tourism resources is a relatively new development in China, but does have parallels in other countries. For example, limited by inadequate public financing, private wildlife reserves are complimenting Nicaragua’s under-developed public protected area system, further enhancing the desirability of Nicaragua as an eco-tourism destination (Barany et al. 2001). Large portions of the protected areas in Latin America are not effectively safeguarded and an even larger areas lack long-term management plans and financial resources needed to guarantee their perpetuity (Umana and Brandon 1992). Private reserves in Nicaragua provide a supply of experience and infrastructure needed to meet the expanding ecotourism demand. Ecotourism can provide a sizeable contribution to a developing nation’s economy, while creating market incentives for sustainable land use and conservation. This is a significant contribution in regions where poverty and marginalization are creating high risks of environmental and social disasters (Barany et al. 2001). The sustainable development of private reserve systems in Nicaragua depend on public policy and effective monitoring from government. China has a very similar situation in that protected areas (these are generally scenic areas, as well) usually face substantial financial challenges. Privatized nature-based tourism resource in China, in which the land remains the property of the state but is leased to private companies for long-term development, has the potential, if properly implemented, to ensure the growth of sustainable tourism in China. China shares some similarities to the experiences or other countries in its natural resource management. China is a developing country where, like in much of sub-Saharan Africa, private development interests are closely intertwined Tourism Recreation Research Vol. 36, No. 2, 2011


with government policy and the oversight of natural resources (Ake 1996; Neslon 2010). On the other hand, China has a massive domestic population, which make commercial tourism to many sites more economically viable than in many other parts of the world, though it also gives rise to increased environmental impacts from tourism (Wang and Buckley 2010). Limited government resources has given rise to a wide range of public–private structures to oversee natural area management on government-owned land (which includes almost all of the land in China). Leasing land to private management companies is one of these arrangements, and is especially common where commercial tourism shows significant promise. This makes China’s situation quite different from that in Africa and other parts of the world. However, despite these differences, China’s nature areas share many of the same management issues seen elsewhere, including how to balance the various roles of local government, national/state government, private investors, non-profit/non-governmental organizations, the local community and the natural resource base (Nelson 2010). Through the case studies and system dynamics modelling, we identified the key components and processes involved in the success or failure of a privatized nature-based tourism resource in China. The local government, the local community or communities, and the private enterprise investors were identified as the three major stakeholder groups, whose interests could potentially benefit from a privatization approach to natural resource development. Unfortunately, the opportunities for failure tend to be greater

than the opportunities for success. The corruption of government officials by private enterprises is a primary point of failure in the privatization process, usually resulting in the exploitation of the nature-based resource that is not in balance with its conservation. Local communities can also exploit the nature-based resource to its decrement, if proper incentives or regulatory policies to restrict exploitation and encourage resource conservation are not implemented. From a planning and management perspective, the system dynamics modelling approach demonstrated three key points of monitoring and intervention in a privatized nature-based tourism resource development. These were (1) policies and activities by all three stakeholder groups to conserve and enhance the nature-based tourism resource, (2) policies and actions to manage the level of exploitation of the nature-based resource by the private enterprise, and (3) policies and actions to manage the level of exploitation of the nature-based resource by the local community. Some level of local government intervention is essential in all three of these areas to ensure environmentally and socially sustainable and economically successful outcomes in the privatization of nature-based tourism resources. Acknowledgement This research was partially supported by the National Natural Science Foundation of China (Grant No. 41001087) and the Fundamental Research Funds for the Central Universities (China).

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Submitted: December 10, 2010 Accepted: April 12, 2011


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