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CitySpeak X: Green City. Cool City: Fiona Waters - There is money in public open space: Contingency valuation techniques


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City Speak X: A Green City, A Cool City

Speaker: Fiona Water
There is money in public open space: Contingency valuation techniques

Hong Kong is surrounded by so much water and has so many green mountains, so does it really need more urban open space? How do we respond to the threats of global warming and air pollution? What is the meaning of “the urban heat island effect”? What is an “air ventilation assessment”? What value doesthe community place on open space? Is the demand for recreation and sport changing? Do we need a landscape vision and master plan? Is “green infrastructure” becoming more important than roads and railway lines in securing a sustainable built environment in Hong Kong?

Join experts, academics, planners, government officials and landscape architects in a discussion about how to stay cool in our city.

Designing Hong Kong is a not-for-profit organisation focused on sustainable urban planning. See:

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CitySpeak X: Green City. Cool City: Fiona Waters - There is money in public open space: Contingency valuation techniques

  1. 1. There is Value in Public Open Space The Economic Approach Fiona Waters Director, GHK (Hong Kong) Ltd January 2010
  2. 2. <ul><li>The World’s Best Airport </li></ul><ul><li>- AETRA Survey / Skytrax Global Survey </li></ul>
  3. 3. <ul><li>The World’s Best Skyline </li></ul><ul><li>- Emporis Annual Skyline Ranking </li></ul>
  4. 4. <ul><li>The World’s Freest Economy </li></ul><ul><li>The Heritage Foundation, 2010 </li></ul>
  5. 6. Rapid Economic Growth & Structural Change <ul><li>So where are we now? </li></ul><ul><li>Services dominated economy </li></ul><ul><li>GDP per capita now exceeds OECD Average, 8 th in world </li></ul><ul><li>International finance centre, global leader for market sophistication </li></ul><ul><li>Regional headquarters up 55% from 1997 </li></ul><ul><li>Third most popular destination in Asia & Pacific </li></ul>- 100 200 300 400 500 600 700 800 900 1,000 1960 1970 1980 1990 2000 Hong Kong GDP per capita, US$, 1961 = 100 3,000 30,000
  6. 7. So what is the problem? <ul><li>Hong Kong’s International Ranking for Infrastructure: </li></ul><ul><li>Quality of road infrastructure 5 th </li></ul><ul><li>Quality of railroad infrastructure 5 th </li></ul><ul><li>Quality of port infrastructure 2 nd </li></ul><ul><li>Quality of air transport infrastrucutre 2 nd </li></ul><ul><li>Overall Rank 5 th / 134 </li></ul>- Global Competitiveness Report, 2008-09 70 Hong Kong 15 69 Omuta 14 64 Yokkaichi 13 58 Tsukuba 12 54 Nagoya 11 44 Osaka 10 40 Kobe 9 38 Yokohama 8 35 Tokyo 7 34 Brisbane 6 32 Singapore 5 29 Adelaide 4 21 Perth 3 17 Melbourne 2 10 Sydney 1 Top Asian Cities <ul><li>Hong Kong’s International Ranking for Quality of Life: </li></ul><ul><li>Ranking for Quality of Life 70 th / 215 </li></ul><ul><li>Ranking out of Asia-Pacific Countries 15 th </li></ul>- Mercer Quality of Life Index, 2008
  7. 8. … Potential benefits of economic analysis not well used or understood in Hong Kong <ul><li>Value for money, valuing intangibles – still immature concepts </li></ul><ul><li>Sustainability Assessment is weak </li></ul><ul><li>Economics used to endorse rather than guide decision-making </li></ul><ul><li>Analysis of alternatives limited to alignment/design </li></ul>
  8. 9. What is the Value of Open Space? “ What would the land premium be for an urban area of open space for public enjoyment i.e. an area of land with no development rights whatsoever?” Financial Value = Negative Economic Value = Positive
  9. 10. Using economic analysis to make the most of our comparative advantage: Victoria Harbour
  10. 11. Using economic analysis to make the most of our comparative advantage: Victoria Harbour
  11. 12. Objective of Harbour Values Study “ Put a Dollar Value on Improving the Planning and Development of Hong Kong’s Harbour!” First Contingent Value Study in Hong Kong of this Scale
  12. 13. Total economic value Use value Non-use value Actual use Option value For others Existence Residents Visitors Altruism Bequest Look at the market But what if no market? Hypothetical Market Contingent Valuation (Stated Preference) How to measure?
  13. 14. International Use of Contingent Valuation <ul><li>Contingent Valuation is not new </li></ul><ul><li>It has been used the world over and is now a subject in its own right </li></ul><ul><li>Common applications include: </li></ul><ul><ul><li>Cost Benefit Analysis </li></ul></ul><ul><ul><li>Demonstration of Importance </li></ul></ul><ul><ul><li>Priority Setting </li></ul></ul><ul><ul><li>Design of Economic Instruments and Pricing </li></ul></ul><ul><ul><li>Legal Damage Assessment </li></ul></ul>
  14. 15. A Famous Example Exxon Valdez Oil Spill, 1989 11 million gallons of crude oil Killed: 250,000 seabirds, 2,800 sea otters, 300 harbour seals, 250 bald eagles, up to 22 killer whales and an unknown number of salmon & herring CV estimated value of preventing a similar accident: US$2.8bn Out of court settlement in excess of US$1 billion Nobel Prize winning economists led review, in favour of CV CV now accepted evidence for assessing legal damage claims
  15. 16. Preparing the Survey Public Opinion Survey Focus Group Discussions Visual Stimuli Face to Face Interviews EFTEC Survey Design Two Pilot Surveys
  16. 17. The Survey Sample <ul><li>1,034 Interviews, each lasting 20 minutes on average </li></ul>Perceptions of the Harbour Usage of the Harbour Ideal Future of the Harbour Willingness to Pay for Ideal Scenario
  17. 18. Selecting an ideal harbour… 1. Green areas 5. Promenade 12. Ground level access to the harbour 9. Covered walkways 11. Recreational places 6. Water activities 7. Roads and highways 8. Open-air eating places 10. Commercial 2. Residential 4. Cultural facilities 3. Parks and open-air plazas
  18. 19. Selecting an ideal harbour… 89% 91% 91% 36% 34% 36% 2 1 3 Least Popular: 2 1 3 Most Popular: 7. Roads and highways 2. Residential 5. Promenade 11. Recreational places 1. Green areas 10. Commercial
  19. 20. Willingness to Pay… <ul><li>In order to understand how valuable your selected slides are to you, we would like you to imagine how much you would be willing to pay for them on a monthly basis out of your own income? </li></ul>For example , given how much you spend each month on things like your mobile phone and eating out, how much would you be willing to pay? How much for your ideal harbour?
  20. 21. Willingness to Pay Results How much for your ideal harbour? Why not willing to pay? <ul><li>Gov should pay </li></ul><ul><li>Already paying in taxes </li></ul>WTP not necessarily zero, just not revealed! Median monthly WTP: $68 Average monthly WTP: $222
  21. 22. Willingness to Pay Results <ul><li>Average length of time willing to pay for: 5.8 years </li></ul><ul><li>Average individual contingent valuation: $12,573 (NPV) </li></ul>How much for your ideal harbour? $73 billion
  22. 23. $73 billion in context <ul><li>Government spending in 2005: </li></ul><ul><ul><li>Capital Projects </li></ul></ul><ul><ul><li>Expenditure on Health </li></ul></ul><ul><ul><li>Expenditure on Education </li></ul></ul><ul><li>Fixed assets of HK Airport Authority </li></ul><ul><li>Fixed assets of MTR Corporation </li></ul>= $48 billion = $103 billion = $34 billion = $28 billion = $26 billion
  23. 24. Key Messages World’s most efficient economy but only 70 th on Quality of Life 90% want a harbour featuring green spaces, recreational areas and promenades $73 billion Improved harbour planning and development is valued at $73bn – high and cannot be ignored
  24. 25. Moving Forward – Public Policy Implications Useful techniques for better public policy decision making Provides powerful evidence of the need for public policy change Parks and recreational areas should be a policy priority Realising Potential is Key to Competitiveness!! From a Better Harbour… … To a Better Hong Kong A better harbour is affordable because it is valued by the public and will contribute to Hong Kong as an attractive place to live, work k and visit
  25. 26. Thank you. Fiona Waters, Director, GHK (Hong Kong) Ltd [email_address]
  26. 27. Using economic analysis to make the most of our comparative advantage: Victoria Harbour Source: Integrated Harbour Vision & Delivery Plan – The Business Case Harbour Business Forum / GHK