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This report was done through strengthening Protected Areas Financing and Management Project, fu
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In general terms, “capital” is defined as the stock of materials or information that exists within a system at any given time. Some common features or forms of capital are financial capital, man-made capital and social capital. The important concept within all of forms of capital, however, is that, when put to use, they yield a flow of goods and / or services, much as an investor will use financial capital to generate profits. Similarly, natural capital is the stock of the earth’s living ecosystems that provides a vital flow of goods and services (e.g. a stock of trees or population or fish will provide a future flow of timber or food). Biologically diverse ecosystems provide a greater flow of ecosystem services than non-diverse systems. There is also strong evidence that more biologically diverse ecosystems are more resilient to changing physical environment.

However, in spite of all efforts made in recent years to finance biodiversity, by justifying expenditure, identifying priority investments, estimating the funding needed and identifying potential sources of finance, it is still an unresolved problem, and several challenges still exist and need to be resolved.

The first challenge is that many benefits of biodiversity and ecosystem services are considered “public goods” This means firms / authorities who provide public biodiversity benefits cannot easily charge consumers for enjoying them, while at the same time people who are made worse off due to biodiversity loss cannot easily extract compensation from those responsible for the damage. Thus, markets tend to ignore biodiversity altogether. This challenge can be solved using mechanisms that “internalize” the public good value of natural capital in private production and consumption decisions, for example, green commodities, subsidy reforms, payment for ecosystem services and environmental offset schemes. Such mechanisms have the dual merit of directly addressing the economic drivers of biodiversity and ecosystem loss, while some also help to reduce pressure on government budgets.

The second challenge facing financing biodiversity and ecosystem services is that many of the public benefits are enjoyed at a distance from the site of conservation where funding is needed (locally). This disconnect poses a particular financing challenge, mainly how to elicit sustainable funding from distant beneficiaries to compensate local communities for their loss of access to natural resources. Modest sustainable uses such as eco-tourism or bio-prospecting do not yield short-term profits for local communities. International funding is needed to bridge the gap between the global beneficiaries and local providers of biodiversity and ecosystem services.

The third challenge is that we still have limited knowledge of the extent and value of natural capital, especially in marine environments. We may be nearing ecological thresholds, where further biodiversity loss would result in the collapse of certain ecological functions, and a dramatic decline in ecosystem services. Decision makers don’t know which ecosystem or which components of biodiversity most need to be conserved in order to maintain and increase human prosperity. Thus, there is an urgent need to develop the natural capital knowledge base, particularly on the links between biodiversity, ecosystem services and economy.

In addition, there are few immediate steps that need to be taken towards a more rational approach to biodiversity finance:

  • Track all that is currently being spent on biodiversity
  • Assess the relative effectiveness of different financial mechanisms
  • Better understand the conservation funding gaps for different components of natural capital, by preparing objectives expressed in terms of conservation outcome and quantitative indicators.


These challenges and the above mentioned steps were analyzed and addressed during the preparatory phase of this project. Field visits were made to priority PAs in Egypt, information was collected, and interviews were made with PA managers and staff. In addition, interviews were made with the Director of NCS and senior staff of EEAA, including the Director of the Environmental Protection Fund (EPF), and other Departments. This work was made by international experts, hired by UNDP, as well as senior staff of NCS and UNDP.

According to the analysis undertaken as part of the financial scorecard preparations, financial resources available to NCS are well below what is required under even a basic scenario. The average annual NCS expenditure from 2003 / 04 to 2005/08 from both the Government budget and various donor projects were $5.5 million, whereas the annual financial needs projected for 2009 – 2014 are $ 14.5 million. This represents only 16.5% of basic financial needs and 8.3% of optimal financial needs. However, Egypt’s protected area system possesses highly significant opportunities for resource mobilization that could be used to finance its protected areas and fulfill its financial basic and optimal needs. This can be achieved after 10 years, by addressing and solving key barriers to protected area finance system.

The proposed long-term solution for biodiversity conservation of Egypt’s protected areas is an effective and sustainable PA system operated by an autonomous NCS that has the financial wherewithal and management capacities needed for effective management. A PA system which is effective in conserving biodiversity, run on a solid economic basis, well-marketed and seen as playing a positive role in the future economic development of Egypt, will be able to secure substantial political and public support and leverage. The foundation financing system resting on the following three pillars:

  1. Legal, regulatory and institutional frameworks that support sustainable PA financing
  2. Tools and practices for revenue generation and mobilization and
  3. Business planning and other tools for cost-effective management.


This inception report aims to translate the project document into actions, by addressing the three pillars of the project outcomes, solving key barriers to protected areas finance system, and demonstrating objectively that biodiversity conservation can be achieved through an effective finance PA system in Egypt. This will require strong political and public support (through partnerships with relevant stakeholders) as well as institutional and individual capacities to undertake serious sustainable finance processes.