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CALCULATION OF INCREMENTAL COST
Broad Development Goals
The development goal of the project is to reverse the decline in the environmental condition of Lake Victoria. It will achieve this by initiating a process of regional collaboration between Kenya, Uganda and Tanzania in reducing water pollution and eutrophication and in fisheries management, biodiversity conservation and water hyacinth control. This process will maximize the sustainable benefits that the riparian states and communities obtain from the lake and help to conserve its unique biodiversity and genetic resources for the benefit of the global community.
Baseline Scenario
The baseline scenario consists of: (1) a set of environmentally-oriented activities that the countries could reasonably be expected to undertake in the absence of a regional framework for collaborative environmental management; and (2) new activities, stimulated by the establishment of such a framework, that will contribute to more effective environmental management of the lake and to the achievement of global benefits, but are also expected to contribute domestic benefits at least equal to their costs. Because these latter activities are consistent with the three countries' development needs, they have been added to the baseline.
The baseline activities in category (1) comprise: (a) a modest aquaculture program for fish species with nutritional and commercial value, costing $1.8 million; (b) mechanical measures to control water hyacinth infestation at key points such as power station intakes, harbors and water supply intakes, costing $3.7 million; (c) investments in industrial and municipal waste water treatment at known pollution "hot spots" which pose serious local health threats and/or have caused extensive fish kills ($9.4 million); and (d) lake catchment afforestation and integrated soil and water conservation initiatives ($5.6 million).
The new project activities that, because of their likely domestic benefits, comprise category (2) of the baseline scenario are: (a) expanded community fisheries management assistance ($2.3 million); (b) fisheries extension, quality control, handling and processing improvements ($14.1 million); and (c) development of a fisheries levy system ($2.0 million). The total cost of the baseline scenario, comprising the sum of all the above items, is $38.9 million.
GEF Alternative Scenario
The alternative scenario consists of the actions needed to both introduce sustainable management of the lake ecosystem and capture the resulting global environment benefits. It involves actions to establish the mechanisms, capacity and information required to begin an effective program of regional collaboration in the management of the lake environment and implementation of a coordinated program of priority action to address the most urgent environmental threats. To achieve these results, the alternative adds the following components to the baseline: (a) support to the Secretariat of the Lake Victoria Fisheries Organization so it can build the capacity to harmonize environmental regulations and coordinate external collaboration in the management of the lake's common pool resources; (b) a lake-wide fisheries research program to provide the information needed to manage sustainably the commercial fish catch and to better protect the lake's biodiversity; (c) an inventory of the lake's unique aquatic biology, analysis of species behavior and identification of measures to manage them sustainably; (d) expansion of aquaculture initiatives to include endangered species; (e) improved ecosystem management, based on the results of socio-economic analysis and consistent with poverty alleviation; (f) a coordinated, lake-wide water hyacinth control program, primarily involving the use of biological measures; (g) establishment of a lake-wide water quality monitoring system; (h) measures to identify and control some of the major sources of non-point pollution through land use changes and greater use of wetland buffers; and (i) support to the regional secretariats that will coordinate implementation of the project.
In summary, the alternative scenario consists of the measures required to create the framework and capacity for regional cooperation, without which the project's national and global objectives cannot be achieved, and to implement the first phase of a coordinated regional program of priority actions to reverse the lake's environmental decline. Its total cost is $77.8 million.
Additional Domestic Benefits
Additional national benefits, mainly in the form of higher sustainable productivity of the lake fisheries, could result from the project. However, these benefits will only be realized if the untested effort to establish effective regional collaborative management and harmonized environmental management policies and programs is successful. Given that there is no track record of effective regional collaboration and little current capacity to achieve it, the probability, scale and timing of these benefits are highly uncertain. It is therefore not possible to estimate them nor reasonable to deduct them from the project's incremental costs. To do so would also conflict with the principles of GEF funding for international waters projects as expressed in the Operational Strategy. This explicitly states that the GEF can fund the transactions costs of overcoming the barriers to sustainable management of international waters and their drainage basins. The costs of establishing and supporting, over a minimum initial period, a regional collaborative mechanism, capacity-building, the information base needed for decision making and the design and enforcement of harmonized fisheries and water quality management policies are just such transactions costs.
Incremental Cost
In summary, the cost of the baseline scenario is $38.9 million and the cost of the GEF alternative scenario (the project) is $77.8 million. The incremental costs that must be incurred to achieve the project's global benefits is therefore $38.9 million. The breakdown of these costs by major project component, expressed in $million, is shown in the following table.
Reflecting their commitment to the project's objectives and to the success of this first promising initiative for regional cooperation in environmental management of the Lake Victoria basin, the three riparian governments have decided that, in addition to financing the baseline measures from non-GEF (IDA) resources, they will contribute $3.9 million from their own scarce resources to finance a part of the project's incremental cost. A GEF grant of $35.0 million is requested to fund the balance of the incremental cost.