Medium Term Funding Deficits
1. The ‘Total Control’ Framework for invasive species to be set up will incur incremental recurrent costs. These costs constitute an ‘additionality’ over and above the regular baseline of conservation interventions associated with managing the National Park and Marine Reserve. The SLG provides for Park entrance fees to be earmarked for conservation management activities, including some invasive species control activities. Estimated annual gate takings of US$ 4.8 million35, would be distributed as follows:-
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40% (US$1.92m) to GNPS for the maintenance and surveillance of park areas including some localised and small scale control and eradication operations in the Park and spot checks in agricultural lands;
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5% (US$ 0.24) for GNPS for surveillance of human activities within the Marine Reserve;
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5% (US$ 0.24m) to the Ecuadorian Navy for surveillance of the 40 mile fishing free zone;
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5% (US$ 0.24m) to cover the recurrent costs of the new quarantine system [SICGAL]36
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10% (US$ 0.48m) for INGALA to support the recurrent costs of its new mandate which includes developing a five year regional development plan and a land zoning plan for lands outside the Park.
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20% (US$ 0.96m) to municipalities for public works (municipal operational plans and budgets require approval by INGALA to ensure compatibility with overall regional plans and directions of the SLG)
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10% (US$ 0.48m) for the Provincial Council for public works (provincial council operational plans and budgets also require INGALA approval)
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5% (US$ 0.24m) for the National Protected Areas Network in Ecuador.
2. These amounts are not insufficient to sustain a control programme of the quality needed and to ensure that the invasive species management capacities developed by the project are effectively applied. The invasive species control program would incur a number of recurrent funding deficits, discussed below.
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Adaptive Management Mechanisms for Invasive Species Control.
3. A permanent bio-invasion planning and research program is required to prioritise, plan and evaluate management actions and develop and adapt control measures. These include mitigation of the perverse impacts of invasive species on native species and broader ecological restoration based on knowledge of ecological processes. The Charles Darwin Foundation is a non-profit making organisation, which, under an agreement signed in 1959 with the GoE, provides the GNPS with the scientific information needed to execute conservation work. Additionally, under Articles 55 and 56, the SLG charges the CDF with specific responsibilities for invasive species control. This includes the provision of technical assistance to SICGAL and GNPS for inspection and prevention programs and for developing and executing species eradication plans. However, it does not specifically earmark resources to fund these additional responsibilities or for the permanent research and planning program that the total control framework demands.
4. Applied research into the control and impact of invasive species dominates the terrestrial research component of CDRS’ annual operational plan, and much of the local communications and education component as well37. Following successful completion of the GEF project, CDF’s budgetary requirements are estimated at approximately US$ 2.5 million annually (in 1999 prices) for its terrestrial work (including research operations, communications, education, advisory services, and training). The budget of CDF for FY 1998 was approximately US$ 2.2 million38. Much of the CDF’s income comprises ‘soft moneys’ leveraged from external donors, which fluctuate from year to year. Income stems from three main sources:
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Category A: Secure, permanent or near-permanent income. Approximately US$ 0.3 million derived from interest earned on a small endowment, the Darwin Scientific Foundation, (DSF), from appeals to the 10,000 members of the Friends of Galapagos (FOG) organisations that are independent but closely allied to CDF39, and two further very small endowments. [The DSF was formed offshore in 1985 as the repository of funds originally raised in conjunction with The Nature Conservancy and the Smithsonian Institute in Washington, D.C. The proceeds of the endowment are allocated towards scientific research and associated conservation projects in Galapagos, in direct co-operation with the CDF. It provides annual income of US$ 85,000 from assets of US$ 2 million, to which USAID is in the process of contributing US$ 500,000 following a successful evaluation of DSF’s legal and operational framework.]
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Category B: Reliable income over a period of a decade. Approximately US$ 0.6 million derived from souvenir sales to visitors; cost recovery on services to visiting scientists etc.; and donations from organisations with a long-term commitment to CDF such as the Frankfurt Zoological Society.
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Category C: Short-term income for one or a few years. Approximately US$ 1.3 million derived from donor-financed projects, and donations from tour operators and visitors.
5. The high reliance on Category C resources for funding means that CDF research staff dedicate a substantial amount of their time developing new project proposals. In order to relieve this pressure, the CDF has taken steps to strengthen its long-term financial base by expanding the existing DSF endowment to provide more sustained funding for institutional running costs. Whilst progress is being made in this area, the DSF remains under-capitalised and needs to be strengthened and expanded to support a comprehensive and permanent planning and research programme for the long-term control of invasive species.
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Control, Eradication and Mitigation of Invasive Species Across the Archipelago.
6. The proposed Project includes a number of site and species specific pilot projects to develop the know-how for successfully controlling invasive species populations and mitigating impacts on native habitats and species. The Bio-invasion Control Plan, to be formulated under the Project, will provide a detailed plan and schedule for replicating successful methodologies (to gradually cover all invasive species and islands). These replications will be undertaken by the GNPS with scientific and technical inputs provided by CDF. As with the CDF, the control of alien species is a dominant focus of the GNPS management plan although a slightly higher proportion of GNPS resources are dedicated towards enforcement activities needed to control access to the National Park and exploitation of natural resources. It is projected that, following completion of this Project, the GNPS will require approximately US$ 2.80 million annually to sustain its terrestrial conservation efforts. This will include periodic small-scale emergency control actions required above and beyond the level of normal control operations and for which no budgetary provision currently exists. The present sources of GNPS funds for terrestrial work are as follows:
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Category A: Secure, permanent or near-permanent income. Approximately US$ 2.25 million. This includes a portion of GNP entry fees, national budgetary appropriations and small amounts from FOG organisations.
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Category B: Income considered reasonably reliable over a period of a decade. Currently zero.
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Category C: Short-term income for one or a few years. Approximately US$ 0.2 million derived from foundation and aid agency projects, funds raised through tour operators and donations by visitors following recently increased financial autonomy that allows GNPS to directly receive private donations.
7. Given this baseline, funding deficits will be incurred for equipment and operational expenses associated with control replications. Furthermore, as activities increase in the marine area, competition for category C income may occur, increasing deficits in this area. Preliminary estimates of the annual funding deficits of CDF and GNPS are shown below, based on current levels of tourist revenue appropriations (see footnote1).
Intervention
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Annual Baseline
| Annual Funding Needs |
Annual Deficit
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Planning & Targeted Research
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US$ 2.20 m
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US$ 2.50 m
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US$ 0.30 m
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Control & Eradication
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US$ 2.45 m
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US$ 2.80 m
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US$ 0.35 m
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Total
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US$ 4. 65 m
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US$ 5.30 m
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US$ 0. 65 m
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Trust Fund Mechanism
8. The project proposes to create a permanent financial mechanism to provide sustained financing to manage environmental threats to the Galapagos archipelago. An endowment fund (hereinafter referred to as the fund) will be created, the proceeds of which will be used exclusively to address conservation management priorities identified in the Management Plan for the Galapagos. Activities would be consistent with the provisions of the Special Law of the Galapagos. In the medium term, the activities of the fund will be geared primarily to addressing the threat posed by invasive species. Accordingly, the fund will provide incremental financing to cover the bio-invasion control campaigns of the GNPS and CDF (as per their responsibilities under the Special Law). In particular, the fund will:
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Provide more secure long-term funding for the incremental costs of GNPS’ invasive species controls.
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Increase the percentage of Category A funding for CDF income, covering the costs of a small bio-invasion management planning and research core-team and sustaining the level of research and technical services built through the GEF Alternative.
The fund would be structured to allow for the expansion of its activities to address other conservation needs in the Islands in the longer-term. All due precautions will be taken to prevent deleveraging the baseline of conservation.
9. In the medium term, fund would provide resources for replicating bio-invasion controls throughout the archipelago. The GNPS would then direct efforts towards greatly increasing its currently low Category C and B funding to cover the higher cost of large-scale eradication efforts. [Baseline commitments are secured through the SLG and national budgetary appropriations.] The CDF has illustrated its fund-raising ability over the last forty years and is committed to maintaining current appropriations for their terrestrial programme.
11. The appropriateness of a trust fund mechanism for overcoming the funding deficits identified above has been assessed taking into consideration the recommendations arising from the GEF Evaluation of Conservation Trust Funds. A Fund with assets of US$ 15 million would provide income of US$ 0.90m per annum, assuming a rate of return from fixed and variable investments of 6% per annum. Assuming administrative costs estimated at 16.9% of gross income, to cover operational requirements associated with management of the Fund, the Fund would net income for field activities of approximately US$ 748,000. This will cover the estimates for the funding deficits, allowing for baseline operations to continue unfettered and provide a small margin for any fluctuations in revenues secured from tourism, as well as any exceptionally large emergency operations in a given year. With these funding deficits covered by income from the Fund, campaigns and activities for eradication, requiring allocations larger than that normally available through Trust Fund mechanisms could be raised through project-specific investments.
10. A number of options have been considered for the design of the fund during the process of project preparation, and in full consultation with the Government of Ecuador. Important considerations include the need to 1] ensure the security of assets; 2] ensure that the fund functions beyond direct Government control; and 3] capitalize on the existence of the Darwin Scientific Foundation (DSF), and the administrative and operational structures created to operate it. It is proposed that the DSF be restructured to serve as Trustee for the proposed endowment on behalf of the Government of Ecuador. The DSF is well placed to provide this function, as it fulfils many of the recommendations of the GEF Evaluation of Trust Funds (1997). Agreements have been reached between the GoE and DSF to strengthen aspects considered to be weak. The following matrix describes how the Fund would comply with recommendations
Recommendation |
Impact on Design
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Existence of a valuable, globally significant biodiversity resource whose conservation is politically, technically, economically, and socially feasible. The importance of the resource on a global scale affects the fund’s ability to attract international financing.
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Prospects for attracting international financing for the Trust Fund are excellent. The Galapagos has an almost unequalled appeal at the global level due to its conservation values and its importance as a natural laboratory for the study of evolutionary processes. Global interest in and support for conservation efforts is expected to remain high. The record of international support for conservation in the Galapagos is excellent. Such support may be effectively channeled towards capitalization of the Fund.
The Government of Ecuador has demonstrated its strong political will to conservation of the Islands by earmarking tourism revenues for conservation management, and taking a number of other steps to maintain the integrity of ecosystems. The social feasibility of intervention is high owing in part to the small resident population on the Island’s, and past efforts to engender community participation in management. The GEF Alternative will establish the know-how for eradicating and controlling invasive species, uncovering the most technically feasible approaches. The 40-year track record of CDF and GNPS provides high scientific and technical credibility for the effort.
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Absence of major, urgent threats requiring mobilization of large amounts of resources in a short time period (i.e., the conservation action required is long term and addressable with the flows a trust fund could produce).
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With the creation of the Galapagos National Park and Marine Reserve, establishment of the new migrations law, and the strict management of visitors to the archipelago, the human “imprint” on the Galapagos has been largely controlled. The project will address the one critical outstanding threat to terrestrial biodiversity—that of bio-invasion by alien species. This threat is of a permanent nature and requires sustained funding mechanisms. Whilst a sizeable, one-time investment is required to establish the framework and capacity for controlling invasive species— of the quality required to protect global biodiversity values—much smaller quantities of resources are required to ensure sustained action following this intervention. A portion of this long-term funding is guaranteed through the SLG. Relatively small quantities of additional resources would cover the remaining deficits, particularly in relation to maintaining core research and planning activities; covering the operational costs of controlling small populations of invasive species; and periodically providing quick-delivery funds for emergency control actions. Trust fund mechanisms would be appropriate for these funding needs.
Eradication of bigger populations may require up-front sums larger than will be available through the trust fund. These large-scale campaigns would typically require the Category C type funding referred to in item 1. The trust fund would indirectly improve the ability to generate such funding, by covering the core costs of invasive species controls. Donors would be convinced of the sustainability of their interventions. Donor confidence and support for projects would be increased as they would form part of the Bio-invasion Control Plan to be developed under this Project and would be well programmed, fully-costed ex ante, and based on proven methods. Finally, although larger eradication campaigns would require these additional project-specific resources, it is unlikely that funding needs would be excessively high because the improved prevention and control measures instituted through the GEF Alternative would prevent mega-scale populations of alien species from establishing themselves in the Islands.
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A legal framework that permits establishing a trust fund, foundation or similar organization.
Tax laws allowing such a fund to be tax exempt, and providing incentives for donations from private contributors.
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The Ecuadorian Civil Code (Codigo Civil) allows for the creation of non-profit, non-governmental foundations, including for environmental management. The nation’s tax framework (Ley de Regimen Tributario Interno) allows for the exemption of foundations created for charitable purposes from tax liabilities. The CDF has a formal agreement with the government (signed in 1959, currently valid until 2016, and automatically renewable) which confers tax exemption upon them. SLG Article 67 establishes that private contributions for conservation-related activities in the Galapagos, including the eradication of introduced species, could be eligible for income-tax deductions following approval of INGALA.
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A critical mass of people with a common vision. People from NGOs, the academic and private sector, and donor agencies -- the environment community” – who can work together despite their different approaches to biodiversity conservation.
The support and involvement of business leaders is crucial to bring in private sector management skills, especially skills in financial management”.
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The creation of a dedicated financial mechanism for the Galapagos, using the afore-mentioned approach, is fully supported by the GNPS/GoE. It is also compatible with the initiative to create an Ecuadorian Environment Trust Fund; this excludes the control of invasive species in Galapagos because of the new regional autonomy conferred to this Province in the SGL. Furthermore, the CDF has held a long partnership with the GoE, particularly the GNPS, and is increasingly forging links with other national and international NGOs such as WWF, the academic and private sector, and donor agencies. It has a 25 member General Assembly including founder members and representatives of international and national organizations. Ex officio members include the President of Ecuador, Ministers of Environment, External Relations, Tourism, Orstom, Max Plank, and the Smithsonian Institute amongst others.
In addition to the high-level and broad-based support of CDF, there is growing private sector support for CDF and the GNPS operations, particularly from the tourism sector. Despite any potential differences that these stakeholders may have in their approaches to biodiversity conservation, there have a shared understanding of the main issues that threaten the Galapagos. All would contribute to, and provide broad support for, the fund and private sector management skills would be leveraged from relevant stakeholders during the restructuring phase and fund-raising campaign.
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A basic fabric of legal and financial practices and supporting institutions (including banking, auditing and contracting) in which people have confidence.
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A number of international Banks have branch offices in Ecuador, including City Bank, ABN Amro Bank; Lloyds Bank, and ING-Barings, and provide a broad range of financial services. Several accounting firms have branch offices in Quito, including Price Waterhouse, Ernst and Young, Deloitte and Touche, and Arthur Anderson. These companies are able to provide a range of services, including accounting and management consulting services. The formalization of an agreement between the trustee and an acceptable asset manager will be a pre-condition for the release of seed capital by the Global Environment Facility into the endowment
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Availability of one or more mentors – a donor agency with good program support, a partnership with an international NGO, “twinning” with another, more experienced trust fund -- who can provide both moral and technical support to the fund.
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UNDP will provide support to the fund in a mentor capacity, and will be represented on the board of trustees in an ex officio capacity. The Friends of the Charles Darwin Foundation would provide backstopping for the fund through its affiliate organisations. The World Wide Fund for Nature (WWF) will provide technical support to the fund as required, including for the development of operations manuals and building administrative capacities. An international NGO will be represented on the Board of Trustees.
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