Problem B Regulatory Compliance 1 No.docx

Problem B: Regulatory Compliance
1
Note: All character and company names are fictional and are not
intended to
depict any actual person or business.
Knowing that mergers may require a dramatic change in
company culture,
you realize that you need to meet with the human resources
(HR) and
leadership teams because they will play important roles in the
merger. The
leadership team will drive the change, and the HR team will be
charged with
managing the change. You have scheduled a meeting with Steve
Maine, your
vice president at ALTAP consulting, to consult with him on this
project.
“Thanks for meeting me today, Steve,” you begin. “I need to
talk through
some of the issues before meeting with the HR and leadership
teams at
UWEAR and PALEDENIM. The merger is going well, but it is

becoming
apparent that there are some significant change issues that need
to be
addressed.”
“I’ve heard good things about your work on this project,” Steve
answers. “I’m
sure you have it under control, but I’ll be happy to help where I
can.”
“We are dealing with the issues of joining together two very
disparate
companies,” you explain. “On the one hand, UWEAR is public
and has 100
employees; on the other hand, PALEDENIM is private with only
15
employees. They basically provide the same type of service, but
they are
completely different businesses in how they operate inside and
outside of the
company.”
You continue, “Yes, and both the employees and managers of
each company
have different philosophies and expectations. PALEDENIM
employees and
managers have a kind of ‘one-for-all and all-for-one’ attitude.
They all chip in
to get the job done. The UWEAR employees and managers look
at things
differently. They’re more apt to do their jobs, get them done,
and go home
without consideration for what else the rest of the team needs to
complete.”
“That is definitely a culture issue,” Steve agrees. “In fact, that

is the classic
definition of a culture issue. I’m sure they’re also dealing with
the typical
power struggles. I bet everyone is worried about whether their
department
will be headed by a UWEAR manager or a PALEDENIM
manager.”
Problem B: Regulatory Compliance
2
“Exactly,” you say. “I know the intention of the merger is to
benefit both
companies, but there are unintended consequences as well. We
need to do
whatever we can to help the employees of both companies get
through this
with the fewest glitches possible.”
Analysis

Assessing poverty–deforestation links: Evidence from Swat,
Pakistan
Shaheen Rafi Khan a, Shahrukh Rafi Khan b,⁎
a Sustainable Development Policy Institute, P. O. Box 1091,
Islamabad, Pakistan
b Department of Economics, Mount Holyoke College, 50
College Street, South Hadley, MA 01075-1481, USA
a b s t r a c ta r t i c l e i n f o
Article history:
Received 5 June 2008
Received in revised form 21 January 2009
Accepted 16 April 2009
Available online 21 May 2009
Keywords:
Ecological degradation
Deforestation
Poverty
Local institutions
Resource management
This paper contributes to the debate on the links between
poverty and forestry degradation; the view that
due to poverty and the meeting of subsistence needs the poor
use natural resources more intensively and
hence cause them to degrade. Using the case of the forest rich
Swat district, Pakistan, the paper addresses the
issue empirically, historically, and institutionally. We do not
find empirical support for the “poverty–
environment nexus”, in that the poor and other income groups
are equally resource dependent and also
show that resource degradation is not associated with poverty.

Our historical and institutional analyses
provide alternative explanations for resource degradation.
Selective and rotating ownership patterns, starting
with the 17th century, provided limited incentive for resource
conservation. It also created tension between
de jure and de facto owners, that has persisted, and is one
source of forest degradation. Ill-defined resource
rights have also exacerbated the impacts of several other factors
contributing to forest degradation which is
compounded by poor management, corruption, and perverse
incentives.
© 2009 Elsevier B.V. All rights reserved.
1. Introduction
Pakistan is poorly endowed with forest resources. Further, the
deforestation rate, at an annual 4.6%, is the second highest in
the
world and represents a loss of ecological services in the
national
context.1 For forest dependent communities, it constitutes a
serious
erosion of livelihoods.
Khan and Pervaiz (2001) point out that forest management in
Pakistan has led to the divergence of individual versus social
objectives with regard to the use of forest resources. The most
important factor in this development is commercial timber
extraction
in which influential extractors collude with forest department
officials. Co-opting officials has become easier as stagnant
salaries
have led to increased corruption. Forest fines and penalties have
also
become meaningless, as they have not kept pace with rising

timber
and fuel wood prices.2 Attempts to right price/tax the use of
environmental resources is politically challenging as vested
interests
resist policy reform threatening their economic profits. They
also
indicate that the lack of clearly defined resource rights
exacerbates the
impact of perverse incentives.
Sultan-i-Rome (2005) points to various institutional failures
that
have led to forest degradation in Swat, Pakistan over the years.
These
include departmental malpractice, opaque resource rights, and
judicial tardiness. He describes the tension between customary
and
statutory law and the progressive deterioration in conflict
resolution
mechanisms over time. He concludes that extended legal,
judicial and
governance lapses have been the key factors in forest
degradation.
Khan and Naqvi's (2000) qualitative analysis of the relationship
between poverty and resource degradation in Pakistan indicates
that
the poor are the most vulnerable to ecological degradation and
yet,
the absence of basic subsistence makes them predators of
natural
resources thereby further exacerbating their vulnerability. They
argue
that the poverty–resource degradation link reflects unavoidable
responses. This link been referred to in the broader literature as

the
“poverty–environment nexus.”
We add to the empirical literature by deconstructing the nexus
into
two related elements. We first explore relative resource
dependence
by income group. If, as generally believed, the poor do indeed
depend
more on natural resources for their livelihoods, then in principle
they
could be contributing relatively more to resource degradation,
even if
not absolutely so. However this still needs to be established and
that is
what we turn to next using visual methods (satellite imagery,
land use
maps, poverty and institutional maps). The use of satellite
imagery at
the disaggregate level to explore the above hypotheses is also
still
fairly rare in the literature.
We find no support for the hypotheses that resource degradation
is
inversely associated with income or that poverty and forest
degrada-
tion are positively associated. Yet there is considerable
evidence for a
Ecological Economics 68 (2009) 2607–2618
⁎ Corresponding author. 45 Brownley Drive, Stamford, CT
06905, USA. Tel.: +1 203
355 1884, +1 203 542 5292.

E-mail addresses: [email protected], [email protected] (S.R.
Khan).
1 Government of Pakistan/World Wildlife Fund (2000).
Government of Pakistan,
Statistical Supplement (2008, p.19) shows a steady increase in
forest area from 1990-91
onwards to the current forest coverage of 4.2%. This increased
coverage reflects the
impact of farm forestry; primary forests however are degrading
rapidly as indicated
earlier.
2 Government of Pakistan, Statistical Supplement (2008, p. 62)
index of wholesale
prices shows timber and firewood prices have increased
respectively by 62.09 and
76.28% between 2000-01 and 2006-07, the second and fourth
highest among the 19
non-fuel related items for which indices are reported.
0921-8009/$ – see front matter © 2009 Elsevier B.V. All rights
reserved.
doi:10.1016/j.ecolecon.2009.04.018
Contents lists available at ScienceDirect
Ecological Economics
journal homepage: www.elsevier.com/locate/ecolecon
mailto:[email protected]
http://dx.doi.org/10.1016/j.ecolecon.2009.04.018
http://www.sciencedirect.com/science/journal/09218009

high level of forest degradation in the study area and so we turn
to a
historical and institutional analysis for alternative explanations.
We
explain the emergence of formal and informal systems of
resource
rights, their interface, the disjuncture–or conjunction–between
de
jure and de facto rights, and the subsequent administrative and
man-
agement failures. We posit that the historical evolution of
institutions
is central to understanding the current problem of rapid
deforestation
and that policy needs to take into account local history and
insti-
tutional evolution. We view this historical and institutional
analysis as
the mainstay of our contribution to the literature.
Section 2 reviews the literature and conceptual issues pertaining
to the poverty–environment nexus. Section 3 presents an
overview of
the case study area and its history. Section 4 discusses our
research
design, method, data and variables and the empirical analysis is
pre-
sented in Section 5. We review historical and institutional
explana-
tions for forest degradation in Section 6.
2. The empirical debate and conceptual issues
The empirical debate on the association of poverty and the
environment has several themes.3 The first pertains to whether

or
not poverty increases environmental degradation. Second, since
one of
the mechanisms for resource degradation is the intensity of
resource
dependence, one strand of this empirical literature explores the
extent
of resource dependence by income group. The third pertains to
whether or not environmental degradation increases poverty.
The
fourth views the correlations above as spurious and views
poverty
and resource degradation as jointly determined and caused by
other
factors. Finally, the quantitative debate above is complemented
by
historical and institutional analyses, the main focus of this
paper.
Poverty, it is presumed, imposes short time horizons and risk
aversion. Thus, poor people are viewed to have high pure rates
of time
preference. In terms of land use, this means overgrazing
pastures,
shortened fallow periods, and a reluctance to invest in land
improve-
ments when returns occur after a long gestation period. The
poor are
also viewed to be more risk averse because they possess fewer
assets
and limited access to credit and insurance and so face greater
con-
straints to managing their risks. Thus, they would be expected
to be
less willing to invest in conservation.

Degradation is also viewed to result from the ecological margin-
alization of the poor. They are forced into areas that are already
experiencing high levels of stress and where future outcomes
are
uncertain. Consequently, there is a tendency to mine resources
un-
sustainably. Finally, there is a more questionable contention
that
would lead to similar results which is that poverty generates
fatalism
and an acceptance of a given situation rather than a desire and
re-
sultant efforts to change it.
The evidence on such links are mixed with more studies refuting
than supporting a causal link from poverty to resource
degradation
in general and forests in particular. Deininger and Minten
(1999)
develop a theoretical model that is estimated using socio-
economic
and physio-geographic information (including digital maps) to
show
lower poverty results in lower degradation in Mexico. Swinton,
Escobar and Reardon (2003) draw on studies from across Latin
America to show that the non-poor and the poor are both at fault
for
resource degradation within the general context of poor
incentives
for preservation and the particular context of the low resource
base
of the poor.
Other studies are more categorical in showing that resource
degradation in general and deforestation in particular is not
associated

with poverty. Based on a qualitative study of Nicaraguan
hillsides,
Ravnborg (2003) demonstrates, based on an investigation of
five
environmentally harmful natural resource management
practices,
that the non-poor farmers rather than the poorest are
responsible.
Agudelo et al. (2003), using data from a household survey in a
watershed region of the Colombian Andes, show that there is no
straight forward linear association of poverty and natural
resource
degradation. The poorest have limited access to productive
resources
and it is the practices of the prosperous farmers that cause the
greatest
degradation.
Jodha (1998) posits that the poor have more reason to preserve
resources that their livelihood depends on and there is some
evidence
to support this view. For example, Swinton et al. (2003) show
that
fallowing is a practice used by the poor that reduces soil
erosion and
fertility loss. Similarly Scherr (2000) shows instances in which
the
poor enhanced natural resource conservation.
A substantial body of the empirical literature quantifies the
rela-
tionship between environmental degradation and resource
depen-
dence by income group, the assumption being that
greaterdependence

would lead to greater contribution to degradation. Jodha (1986)
points
to an inverse relationship between resource dependence, defined
as
the percentage of total income derived from common-pool
resources,
and income levels. Reddy and Chakravarty (1999) confirm this
finding
by demonstrating a difference of almost 19% in resource
dependence
between the rich and the poor. Cavendish (2000) also supports
this
finding, but finds absolute dependence levels to be much higher
than
most other studies for both poor and rich households. In a study
exploring the benefits derived by income group from common
forests
in Nepal, Adhikari (2005) finds that the richer households
derive
more income from these resources than the poor both absolutely
and
relatively.
Narain, Gupta, and Van de Veld (2008) document that the
inverse
association of income and dependence on common-pool
resources
(CPRs) are not the norm in the literature and make a case for
using
permanent rather than current household income in exploring
this
association. They establish a U-shaped relationship between
income
levels and dependence, with such dependence declining at first
and
then increasing with income. They also find that dependence is

im-
pacted by the quality of natural resources (that the rich draw on
a
higher quality or resources), that there is a bi-modal pattern of
de-
pendence within groups (e.g. that the very rich do not draw on
CPRs)
and that overall resource dependence increases with the level of
common-pool biomass availability.
Studies that suggest other factors are at play include Swinton
and Quiroz (2003) who use farm survey data from the Peruvian
Altiplano to quantitatively show that natural resource
sustainability
varies with management activity rather than poverty, although
deforestation is associated with fuel wood harvesting by the
poorest.
Utilizing aggregate district and provincial level data, including
satel-
lite imagery for poverty mapping, Dasgupta et al. (2005)
conclude
that demographic pressure rather than poverty are the main
drivers of
deforestation in Cambodia and Laos. Markandya (1998, 2001)
agues
that the poverty–environment association is mediated via
several
factors such as gender, policy (e.g. commodity export drives
displacing
tenants, capital subsidies, credit policy, social sector delivery),
insti-
tutions (property regimes), incentives, demographics (rural–
urban
migration, civil war and population displacement), and
economic
growth and hence is complex and the evidence in most cases is

sketchy at best.
These reviews suggest that the evidence is far from conclusive
in establishing the poverty–degradation link and that the real
issues
may well be the nature and extent of the community's stake in
the
health and productivity of environmental resources and the
techno-
logical and institutional mechanisms available to safeguard
these
resources. For example, Jodha (1995, 1998) contends that
dilution
or disintegration of the community's stake and erosion of
grassroots
3 We are grateful to one of the referees of this paper for
suggesting the
organizational framework for our literature review. For more
elaborate frameworks
and literature reviews, refer to Duraiappah (1998) and Opschoor
(2007).
2608 S.R. Khan, S.R. Khan / Ecological Economics 68 (2009)
2607–2618
level mechanisms to protect and augment it are the fundamental
reasons behind environmental resource degradation rather than
poverty.
Essentially, Jodha claims that the resource management problem
is functionally linked with cognitive space, property regimes
and
scarcity. Exposure to market forces and the integration into the

broader administrative and legal framework weaken traditional
man-
agement regimes and lead to neglect and degradation of
hereditary
resource endowments. He presents alternative scenarios where
endowments are similar, but outcomes differ because economic
and
institutional parameters differ.
Schlager and Ostrom (1992) underscore the congruence of
clearly
defined resource rights and sustainable resource use. Incentives
need to be framed in a manner that promotes sustainable
resource
use; nevertheless, the risk is always present that they could
become
perverse and engender degradation. Howard et al. (1997)
classify
these incentives into direct fiscal and financial incentives and
indirect incentives. They suggest restructuring indirect
incentives
to empower local forest dependent communities to give them an
effective stake in sustainable forest management and this is also
an
issue we explore.
Mogaka et al. (2001), in a study based in South and East Africa,
argue that while forest resources have a high economic value
for forest
dependent local communities, there are significant economic
costs
associated with sustainable use as well. If communities are to
act as
efficient actors in promoting forest conservation, economic
benefits
received must be visibly more than those obtained from

unsustainable
use. This latter risk is always present with the rapid rise in
forest
product prices.
This strand of the literature suggests that strong and effective
institutions can mediate many of the tendencies that lead the
poor to
degrade the environment. While, there are many dimensions to
an
institutional analysis, we focus on the interface between
resource
rights and perverse incentives.
3. Case study area, forest degradation and brief history
Our case study area is the region of Swat district, which is
situated
in the North-West Frontier Province of Pakistan (refer to
Appendix A
Chart I for map). As indicated in Government of Pakistan
(1999), it
historically consisted of two tracts, Swat Kohistan, which is
located
on the upper reaches of the Swat River, and the main Swat
Valley.
In 1917, Swat was proclaimed a state, accessed to Pakistan in
1947,
and integrated administratively with the country in 1969. It is
now
referred to as Swat District.
The present district covers an area of 4000 square miles. It
borders
the Gilgit agency in the Northeast, Chitral in the North and Dir
in the

West. In 1998, the district population was estimated at 1.26
million
and the annual population increase lies between 3–4%. Literacy
levels
are generally low and far lower for women (25.2% male
compared to
3.7% female).
The Swat Valley has a Pathan majority, most of which belongs
to the
Akozai branch of the Yusufzai Pathans. Indigenous ethnic
groups
referred to as Kohistanis mainly inhabit swat Kohistan; these
comprise
the Ghauri tribe in the north and the Torwali tribe in the south.
A large
Gujjar community (itinerant grazers) has also taken permanent
re-
sidence in Swat. Agriculture and horticulture are the major
source
of income, followed by wages and salaries, and local and
foreign
remittances. The most important cash and fruit crops in the
district
include wheat, maize, persimmon, tomato, onions, apple, and
apricot.
The Swat Valley and Swat Kohistan are extremely rich in
natural
resources. Swat once was credited for having the world's only
virgin
deodar (cedar) forests. Despite extensive deforestation, even
today
the district is rich in forest cover. Agricultural land,
pastureland, and
rangeland are found throughout the area while alpine pastures

lie
to the extreme north of the Swat Valley and Swat Kohistan.
Table 1
above provides an overview of the change in natural resources
from
1969 to 2005 based on 403 responses.
As evident from the table above, forest cover has been rapidly
shrinking since 1969 when Swat state was taken over by
Pakistan
while the increase in agricultural land by 27% represents
encroach-
ment explained in Section 6 below.
The recent history of Swat begins with the Yusufzai Pathans
who
invaded and, subsequently, governed the region in the 16th
century,
defending it successfully against several waves of invaders.
They main-
tained a tribal set-up and by the 20th century Swat was in a
state of
anarchy, with the local khans (chiefs) individually ruling the
area that
fell under their sphere of influence. A dramatic turn in Swat's
history
came about in September 1917, when Miangul Abdul Wadud, a
Yusufzai
Pathan, proclaimed Swat an independent state. The British, who
ruled
India at the time, did not recognize Abdul Wadud formally, but
in 1926
agreed to accept him as the wali, or state ruler. Abdul Wadud
abdicated
in favor of his son, Miangul Jehanzeb, in December 1949.

The walis are credited with consolidating the state. They put ef-
ficient government machinery in place and undertook a large
number
of development projects. The first wali, Miangul Abdul Wadud,
in-
stituted a land settlement system and brought the forests under
state
management. He signed the Instrument of Accession in 1947
and the
second wali signed the Supplementary Instrument of Accession
in
1954 and Swat state was finally merged into Pakistan in 1969.4
Swat
residents consider the rule of the walis as the golden period in
the
region's history.5
4. Research design, method, data and variables6
The geographic focus of our study is Swat District that contains
two sub-divisions; Swat and Matta. There are 8 tehsils in the
district.
These tehsils are not regular revenue tehsils as in other districts
in the
country but are small administrative units that evolved when the
district was a state. Matta tehsil, with 13 union councils, is the
main
Swat valley and Swat Kohistan, with 53 union councils, is an
adjoining
valley. Historically, these valleys have had the largest primary
forest
concentrations in the country and they are the most vulnerable
to
degradation. We purposively selected Matta valley which has
three

eco-zones (low, mid and high), defined by ecological,
agricultural
and altitudinal characteristics, as indicated in the land use map
(Appendix B Chart II). The numbers represent the 18 villages in
the
sample.
Table 1
Change in quantity of natural resources (1965–2005).
Natural
resource
Increase/decrease Change (%) Increase/decrease Change (%)
Swat Valley Swat Kohistan
Conifer forests Decrease −62 Decrease −34
Oak forests Decrease −75 Decrease −43
Agriculture land Increase +29 Increase N/A
Pasture land Decrease N/A Decrease N/A
Water Decrease −53 N/A N/A
Source: SDPI survey.
Note: the numbers in the table represent a tabulation of
responses on the natural
resource questionnaire regarding degradation.
4 The first wali, Abdul Wadud, was illiterate and so the stamp
from his seal (ring)
represented the signature.
5 Even though our fieldwork indicated that the Walis of Swat
increasingly used
natural resources, particularly forests, for political patronage,
that era is nonetheless

associated with much better resource management and
conservation than the
succeeding era.
6 District information is from Government of Pakistan (1999)
and the rest of the
information for this section was derived from fieldwork.
2609S.R. Khan, S.R. Khan / Ecological Economics 68 (2009)
2607–2618
We selected five villages from the low zone, four from the mid-
zone, and three from the high zone. Household information was
collected from 403 households. Since our main interest was in
re-
source dependence and this was anticipated to be much higher
in the
high eco-zone, we selected an additional 200 households from
an
additional six villages in this zone, for an extended sample of
603, for
the qualitative analysis.
For the analysis of resource dependence, information was
collected
on resource income (RI) as the dependent variable and the
independent
variables included income from other sources or non-resource
in-
come (NRI) and livestock numbers (LS), given their potential
impact on
resource degradation. Depending on the eco-zone, natural
resources
(firewood, timber, fodder and other forest products) are either

pur-
chased from the market or collected directly from the forests.
The low
eco-zone has a relatively high density of village settlements. Its
location
does not permit easy access to natural resources, with such
resources
being accessed indirectly via purchases from the market. The
mid-
zone is defined by extensive horticultural activities and lies in
closer
proximity to the forests, allowing households direct access to
forest
resources. This zone includes a mix of coniferous and deciduous
forests.
The high eco-zone falls along the upper valley ranges and
includes
largely coniferous forests, grazing lands and alpine pastures.
The village
households are located both on the forest fringes, as well as
within the
forests where land has been cleared for residential purposes,
agriculture
and livestock grazing.
A household survey was pre-tested and implemented over a six-
month period, from April to September 2005. Information on
natural
resource management (NRM), village attributes, local history,
in-
stitutions and community perceptions regarding forest
management
by the state was collected via a community surveys, focus group
discussions (FGD) and key respondent interviews. This
fieldwork
also included a survey of prices, village profiles, and a natural

re-
source survey.7
Total household aggregate income was derived from: natural re-
sources (fuel wood (wood and brush) collection, timber, fodder,
non-
timber forest products (NTFPs), fish, and forest royalties);
agriculture
(crops and orchards as an annual figure including both kharif
(summer) and rabi (winter) season crops); livestock;
employment;
donations/transfers; forest royalties; and rental income.
5. Empirical results
5.1. The poverty–resource dependence association
As mentioned in the introduction, we quantitatively examined
poverty–resource degradation links by deconstructing them into
two related elements; resource dependence by income group and
the impact of resource dependence (poverty) on resource degra-
dation. Resource dependence is defined as the ratio of income
from natural resources to income from all other sources. Natural
resource income refers to self-consumption and sale of natural
re-
sources (defined above) collected from government and
community
forests.8
Our first objective was to assess if resource dependence is in-
versely and significantly associated with other (non-resource)
in-
come, controlling for livestock, ownership and eco-zones. Our
OLS
(ordinary least squares) result (Table 2) suggests that the
income

coefficient is insignificant. Since non-resource income (NRI)
might
be endogenous, we address this potential problem using 2SLS
(two-
stage least squares) estimation. Since the bulk of non-resource
income is wage income, we instrument it using the human
capital
model.9
NRI = NRI ðEd; Prof; Age; M; LS; E2; E3Þ ð1Þ
where
Ed education measured in years
Prof profession (dummies for skilled and unskilled)
Age proxy for experience
M migration status
LS livestock (numbers)
E E stands for the three eco-zones (low, middle and high).
The second stage equation is the original OLS with predicted
NRI:
RI = RI ðpredicted NRI; LS; E2; E3Þ: ð2Þ
Even though the fit of the first stage equation is poor, the F-
statistic
from the first stage equation demonstrates the validity of the in-
strument. As shown above in Table 2, there is virtually no
difference in
the OLS equation and the second stage 2SLS equation
suggesting that
endogeneity is not an issue.
Eq. (2), like the OLS result, has a good fit for cross sectional

analysis
with all included variables having the expected signs. The
hypothesis
that resource dependence varies inversely with household
income is
refuted. As expected, eco-zones have the expected signs,
differences in
magnitudes, and are highly significant.10 Also as expected,
livestock
owned has a positive and highly significant coefficient. While
we
reject the hypothesis that the poor are necessarily more resource
dependent, we nonetheless explore the second link stated above
between poverty and forest degradation.
7 Copies of the household and natural resource instruments can
be made available
on request to [email protected]
8 Communities continue to retain subsistence and royalty rights
in these forests
subsequent to government take-over of the forests.
Table 2
OLS and 2SLS estimation of resource dependence.
Variables/statistics Eq. (1)—2SLS
(LHS/NRI)
Eq. (2) —2SLS
(LHS/RI)
OLS
(LHS/RI)
Constant −35.29 (−1.52) 2.52 (1.12) 2.60⁎⁎⁎(1.66)
Education (years) 6.44⁎(5.09)

Profession
(non-agriculture=1)
25.91⁎⁎(2.18)
Age 1.26⁎(3.43)
Migration
(migrant from household=1)
−30.36 (−1.40)
Livestock owned (numbers) 4.24⁎⁎(1.95) 2.13⁎(5.90)
2.14⁎(6.14)
Medium altitude eco-zone 16.69 (1.31) 5.77⁎(2.73) 5.79⁎(2.78)
High altitude eco-zone 5.08 (0.34) 20.62⁎(8.30) 20.62⁎(8.35)
Predicted NRI 0.01 (0.76)
NRI 0.01 (0.93)
Adjusted R2 .07 .26 0.26
F-stat 5.43⁎ 36.40⁎ 37.77⁎
n 401 401 402
Notes: E1 (low eco-zone) is the excluded variable.
RI = resource income.
NRI = non-resource income.
LHS = left hand side variable.
Parentheses contain t-statistics.
⁎Significant at the 1% level.
⁎⁎Significant at the 5% level.
⁎⁎⁎Significant at the 10% level.
9 Mean and standard deviations of all variables used in the
quantitative analysis are
reported in Appendix Table 1.
10 For example, those residing respectively in the high and
middle eco-zones derive

Rs. 20,620 and Rs. 5790 more annually from resources than
those residing in the low
eco-zones. The average exchange rate of the Rs. for $1 was
59.86 in 2005-2006,
Government of Pakistan (2008), Statistical Supplement, p. 76.
2607–2618
5.2. The forest degradation–poverty association11
To explore the association of poverty and resource degradation,
we
generated a relative poverty ranking of villages and overlapped
it
spatially with forest degradation using satellite imagery. From a
list
of the most frequently used global poverty indicators, we
selected
those for which data had already been collected as part of our
sur-
veys.12 After a number of iterations we arrived at a final set of
five
indicators including mean annual per-capita household income,
em-
ployment rate, mean per-capita household livestock numbers,
mean
per-capita rooms per household, and per-capita area of land
under
private ownership.
The individual villages were ranked for each indicator. We then
arrived at the final ranking by taking the un-weighted average

of the
individual rankings with the lowest ranking representing the
poorest
village. Our main concern is the high zone where degradation is
a
serious problem. Here, we have a mix of both rich and poor
villages,
which is counter intuitive as one would, a priori, expect the
more
remote areas to be poor.
There is no evidence of a poverty–environment nexus within the
high zone. Appendix C Chart III shows the high poverty-ranked
villages (3, 4, 9, 12, 16–18) in the high zone and the red
shading shows
the degraded areas in the high zone. Only two of the seven
villages
overlap with the degraded areas confirming the lack of
correspon-
dence between poverty and forest degradation. The absence of
an
explicit relationship between poverty and resource dependence,
com-
bined with a lack of correspondence between zones of poverty
and
forest degradation, led us to explore alternative explanations for
such
degradation.
6. Historical and institutional analyses
6.1. Historical analysis13
The system of resource rights in the main Swat Valley was es-
tablished after the Yusufzai Pathans invaded the valley in the
16th

century. Customary law governing rights to natural resources
was
rooted in a system introduced by a Yusufzai notable and
revenue
expert, Sheikh Malli. This system was known as garzinda wesh;
trans-
lated literally, it means moveable distribution. The rationale
was that
as land differed in composition, location/accessibility, fertility,
and
availability of water, it was necessary to ensure equal sharing of
its
best and worst features. Land allotments were by village and re-
allotments, by ballot, were carried out every 5, 7 or 10 years, as
agreed
mutually between the villages. The land allotments included a
mix of
agricultural land, forest (zangal), pasture (warshoo), and
wasteland.
While the system assured socio-economic justice, it relocated
entire
villages and took away the incentive to use natural resources in
a
sustainable manner.
Within the village allotments, the entitlements to common prop-
erty resources (shamilaat) that included forests, pastures,
rangelands,
and water were in proportion to the size of private holdings of
agricultural land. The holdings were referred to as dawtar and
the
owners as dawtaris. The sale and purchase of agricultural land
meant
that the dawtars varied over time and, commensurately, so did
the
common property entitlements within the village.

Religious and tribal status was the basis for separate
entitlements
known as serai and the owners of such lands were called
stanadars.
These were community land grants and were made to holy
families/
persons to construct mosques as well as for self-sustenance.
A more important type of land grant, that subsequently had im-
portant political ramifications in that it established a basis for
here-
ditary title, was to the tribal elders and this was referred to as
khan
serai. Originally, these grants had the functional purpose of
providing
the wherewithal to entertain, a critical requisite for leadership:
the
categories were daday serai (maize serving area), mela serai
(guest
area), and telu serai (oil burning area in the hujra (segregated
space
for male congregation)). Serai holdings were mundai (with
defined
borders) and did not preclude dawtar shares.
Only the Yusufzais could be dawtaris, with ownership rights to
agricultural land and hence to common-pool resources. Non-
dawtaris
comprised different ethnic groups, tenants, and village artisans.
They
were required to pay begar (labor tax) and qalang (grazing tax)
for
tenancy and grazing rights. They were allowed use rights by
dawtaris
in the forests but, even as owners of purchased land, had no

owner-
ship rights in common property. Thus the resource rights regime
differentiated clearly between the rights of owners and users.
When Swat state came into existence in 1917, the wali (ruler)
claimed ownership and custodial rights over the forests. He
estab-
lished a forest department to manage the forests and sanctioned
a
10% royalty from the commercial proceeds of timber. The wali
also
instituted two types of timber quotas. The local quota was
meant for
local residents requiring timber for domestic use. The qaumi
(people's) quota applied to residents of areas where natural
resources
were not found in abundance. It was also used to acquire timber
for
public schemes. The wesh rotations were abolished, locking in
private
ownership and common property entitlements spatially and in
terms
of shares. In the sense that dawtar shares determined the
division of
royalties, historical ownership rights persisted. As in the pre-
state
days, the rights regime continued to differentiate between
owners and
users. In fact, the old system continued to prevail for all natural
resources except forests. For instance, the practice of begar and
qalang
was left unaltered by the wali. With regard to forests, the only
change
in terms of subsistence use was the qaumi quota; in other
respects the
old divisions and entitlements remained.

In 1926, Swat State and the colonial administration of the
Govern-
ment of India entered into a formal agreement to manage and
con-
serve forests. The agreement transferred administrative
authority
of these forests to the Government of India, but the de facto
control
and management remained with Swat State. While the rules and
regulations were drawn up by the colonial government, the wali
continued to exercise effective jurisdiction over the forests.
The independence of Pakistan in 1947, and the subsequent
signing
of the instrument of accession had no significant impact on
natural
resource management in Swat State. Resource rights remained
un-
changed for both owners and users. There were no efforts from
either
the Pakistani government (with whom the State had not merged
at the
time) or the wali to undertake any forest or land settlements in
the
main Swat Valley.
A change in management practices came about after Swat State
merged with Pakistan in 1969. The forests were declared
provincial
subjects under the sole jurisdiction of provincial
governments.14 In
1975, the provincial government declared forests as protected,
and
converted them into state property. The local and awami quotas
continued; the latter were determined solely by the forest

department
that was susceptible to political influences. As a
consequence,11 As indicated in Section 2, Dasgupta et al.
(2003) and Deininger and Minten (1999)
also use spatial data. The former used aggregate district and
provincial level data and
the latter indicate some problems with aggregate analysis.
12 There are likely to be rich people in poor villages and vice
versa but we are
concerned here with average village prosperity.
13 We restrict our analysis to the main Swat-Kohistan valleys
due to space
constraints. For more details, refer to Khan and Pervaiz (2001)
and Sultan-i-Rome
(2005, 2006).
14 Despite the change of management, many of the officials
working in the Forest
Department under the wali continued to hold their posts after
the merger with
Pakistan. The implementation mechanisms were however
completely overhauled.
2607–2618
the quotas benefited a select few. Under the new system,
traditional
owners were to be compensated by providing them a share in
royal-
ties for timber extraction. Currently, the royalty share in Matta
is fixed
at 60%.

The period between 1969 and 1975 was marked by confusion
regarding community resource entitlements. Pre-merger, the
wali's
rule was authoritative, the writ of law was well established, and
resource rights for communities relatively well defined. The
walis
closely monitored natural resources, forests in particular, and
ensured
that no illegal felling took place. With their strict vigilance
gone, there
was confusion surrounding the future rights of communities and
natural resources began to be freely exploited.
Another major change in the ownership patterns also came
about
during the tenure of Prime Minister Zulfiqar Ali Bhutto (1972–
77). At
this time, the issue of de facto versus de jure ownership became
important. The period saw large-scale purchases by resident
Gujjars
and land tenants of agricultural land and grazing land
“bandajaat”
from the landowners. The tenants and Gujjars also claimed the
land
they were cultivating and grazing, encouraged by the land and
ten-
ancy reforms instituted by the populist Bhutto government. This
also
triggered a willingness to sell by the absentee landlords. Prior
to
this development, any non-Pathan had to seek consensus of the
jirga
(council of village elders) or the consent of the khan (chief) to
pur-
chase land. The tenants had now become de jure owners and

were
relieved of their obligation to pay begar and qalang to the
Pathans.
Land settlements, which took place in 1986, further formalized
this
process.
6.2. Institutional analysis15
Customary and statutory law defines resource rights in the
Matta
tehsil. Customary law was prevalent during the pre-wali era
when
communities owned and managed the forests. Over time, the
forests
came progressively under state control which managed them
under
statutory writ — first, under the walis and later the federal
govern-
ment. Thus, forest ownership, originally vested in the
communities,
was in time transferred to the state. While communities
continue to
retain rights in the forests the forest department's (FD) legal
term for
them is now “concessionists” rather than rights holders.
The transition from community to state ownership and from
customary to statutory law has engendered conditions
detrimental to
the forests and turned harmonious relations between
communities
and the state into exploitative and conflict-ridden ones. Good
gov-
ernance characterizes the wali era in that enforcement was both
strict

and fair. However, after the provincial government takeover in
1969,
governance failures have become endemic and forests have
degraded
both due to community and timber contractor inroads — the
latter
aided in no small part by forest department officials and local
elders.
Thus the post-merger period resulted in a rapid increase in
defores-
tation, stemming from institutional failure.
Community FGDs (focus group discussions) indicate that the
forest
department is viewed as inefficient and corrupt. The discussions
cited
collusion with the timber mafia and the selective application of
fines
and penalties for forest transgressions as manifestations of such
corruption. The deteriorating state of resources other than the
forests,
such as grazing lands, pastures and fisheries present an equally
dismal
picture and this is partly due to the opaque rights that presently
govern these resources.
Communities perceive customary law in a positive light stating
a
positive correlation between sustainable resource use and
customary
law. This is largely a result of the clarity of established norms,
owner-
ship and close monitoring of natural resources, which holds
despite
the fact that customary law puts no limit on the use of resources

for
subsistence.
In contrast, they have formed a jaundiced view of statutory law
and the associated forest department mandate. The reasons that
they cite for this include excessive rent-seeking practices,
bureau-
cratic hurdles, and most importantly the loose writ of the forest
department, which results in the failure to implement rules and
regulations. Discretionary powers encourage corruption and
collu-
sion with timber contractors.16 The forest department is under-
staffed, with one forest guard being assigned, on average, to
four
villages. Delays in the release of royalties to communities have
un-
dermined the state's credibility. Further, the forest department is
tardy in educating communities about sustainable forest
practices
and the potential benefits that could accrue as a result. The
utility of
such education is self-evident when the enforcement writ is
weak
and the resource needs many.
The interrelationships of statutory and customary law and the
complex and conflicting system of resource rights it has created
are
the primary source of forest degradation. In this context, we
identified
four categories of forest “owners”: the forest department (FD);
com-
munities with use rights; de jure owners living in close
proximity to
their forest holdings; de jure owners not living in close
proximity to

their forest holdings.
De jure owners living in close proximity to the land use the
services
of gujjar who normally pay qalang (grazing tax) and tenants
who pay
begar (free labor for using their land and forests), and they do
not claim
royalties. However, de jure owners not living in close proximity
to their
land create rival ownership claims by the long-resident gujjars.
In such
situations, the latter do not pay qalang, claim royalties and,
effectively
control the forests thereby becoming de facto owners. These
forests are
disputed and the subject of frequent litigation.
The Bhutto era (1971–1977) saw new pro-community rulings
being instituted. These aggravated existing tensions between
com-
munities and forest owners, with adverse effects on the forests.
Fear-
ing outright acquisition de jure owners sold their forest
clearings
(bandajat) to de facto owners during the Bhutto era. The nature
of the
sale deed was such that any area under tree cover remained the
property of the de jure owners while uncovered area became the
entitlement of de facto owners. This provided an incentive to de
facto
owners to fell trees, thereby laying claim to additional land
even
though it was against the spirit of the sale deed. In addition,
when the
provincial government declared the forests as protected in 1975

and
compensated the de jure owners with a 60% share in royalty, the
de
facto owners received no such rights. On the one hand, this led
to
significant deforestation and land use change (forests were
converted
to agricultural land) and on the other hand it increased tensions
between de jure and de facto owners.
Appendix D Chart IV characterizes the overlap between owner-
ship conflict and forest degradation for four blocks and shows
that
the ownership–degradation nexus is more pronounced and over
rides poverty considerations. The spatial disjuncture between de
jure and de facto ownership is a key factor in degradation.
The15 The institutional analysis in this sub-section is based on
key respondent interviews
and focus group discussions (FGDs). The interviewees include
forest department
officials, heads of local and foreign NGOs working in the area,
and donor
representatives. The FGDs were with local communities across
the zones. The essence
of the notes of the principal investigator, who personally led the
fieldwork, is
contained in this sub-section. Other interviews and FGDs were
taped and in some
cases translated and transcribed. We have not used direct quotes
since the text in these
cases is rough. These tapes and documents and also field reports
of other field team
members can be made available to the interested reader by
[email protected]
16 One example of this is the post of “forest magistrate” who is

the sole authority
responsible for implementing any penalties against
transgressors. This combined with
the rising timber prices and meaningless level of fines and
penalties have acted as a
perverse incentive for timber extraction.
2607–2618
degraded forests represent areas where de jure and de facto
owners
are different because de jure owners reside at a distance from
the
forests. Conversely, the well-protected forests are those where
de
jure and de facto owners are one and the same and live close to
the
forests.
Shaur Block consists of compartments 1–8 and 12–22 that are
privately owned and well protected. By contrast, in
compartments
9–11 and 23–25, where the de jure owners reside down country
and
the de facto owners (Gujjars) are proximate settlers, are in a de-
graded state.
In Biha Block, compartments 1–13 are contested by the Dir
residents and are in a degraded state. The remaining
compartments,
11–47, are privately owned and in relatively good shape.
However,

the watershed dividing the two districts is subject to frequent
in-
cursions by the Dir residents and this part of the private forests
is
also degraded.
Rohringar Block is the most degraded block in Matta tehsil.
Compartments 1–5, 12–17 and 31–35 are disputed,
compartments
7–11 are tenant controlled, and compartments 18–30 are
communally
owned. In each case, the ownership incentive for conserving the
forests is weak.
Finally, in Lalku Block the Mians are the de jure and de facto
owners of compartments 7–46, a well-protected forest tract. In
contrast, compartments 6–16 and 49–53 are disputed, while
compart-
ments 1–5 and 47 are tenant controlled. The two latter
categories of
forests are degraded.
Ill-defined resource rights have exacerbated the impacts of
several other factors contributing to forest degradation. One of
the
main forces resulting in the change in the demarcation of the
land
has resulted from the rapid increase in population in the valleys.
With demographic pressure the demand for food and cash crops
increased and accelerated encroachments on forest land. The
same forces also resulted in livestock intrusions. This also
resulted
in out-migration down country and abroad given the limited
num-
ber of employment opportunities in the mountain areas. The
sub-

sequent inflow of remittances increased the demand for modern
housing structures and fuel wood and with that an increase in
timber
prices. Despite many promises, there has been no development
of
alternative sources of energy such as via the tapping of hydro
power
potential.
Second, the lack of a proper demarcation of forest and non-
forest
land has also contributed to forest degradation. In 1986, the
govern-
ment of NWFP instituted a land settlement for such
demarcation.
However, there is a lack of coordination between revenue and
forest
department officials. The patwaris (revenue officials) are
supposed
to do the annual girdawari (land use survey) but are willing to
work
with influentials to change records. Thus, while the records of
the
forest department show forests, the revenue records show them
as
farmlands. Civil courts have often settled against the forest
depart-
ment by reference to the de facto situation and hence have
accele-
rated deforestation.
Third, prior to the current conflict raging between the military
and
the Taliban militants, Swat was one of the most popular cool
weather
tourist sites in the country.17 Over the years, this resulted in a

large
number of river front hotels built from the top to the center of
the
main valley and some of the side valleys. Much of the refuse
and
sewage went untreated into the rivers. Also due to the
increasing
number of tourists over time and the relative increase in local
prosperity the demand for fuel wood increased.
Fourth, one of the most destructive manifestations of
mismanage-
ment were the long delays in the release of royalty shares to
claimants.
This induced poor communities to sell their royalty rights in
advance
to rapacious timber merchants for a fraction of their real value.
With
an extraction rights in hand, the merchants removed timber
beyond
mandated amounts in collusion with forest guards. Due to this
abuse
of harvesting quotas, civil society organizations working with
international donor organizations won a rare victory in the form
of
a ban on commercial logging.18 Even this backfired because it
induced
higher amounts of illicit cutting.
Fifth, a much trumpeted initiative of the military government
that
assumed power in 1999 was the devolution of power to the
grassroots
level. However, there was ineffectual implementation and little
community participation so that the joint forest management

plans
that were to be a part of this initiative failed and local
politicians in the
“devolved” administrative structure became privy to the timber
smuggling.19
7. Summary and conclusion
In this paper, we explore the debates around poverty–resource
degradation linkages; that the poor are more resource dependent
and consequently contribute relatively more to resource
degrada-
tion. Our quantitative results show no clear association between
income (poverty) and resource dependence. Utilizing satellite
imagery and poverty mapping, we also demonstrate that there is
no necessary overlap between poverty and forest degradation.
We
turned to a historical and institutional analysis to explain forest
degradation.
Our historical analysis starting with the 16th century indicates
that
selective and rotating ownership patterns provided limited
incentive
for resource conservation. However, once the walis of Swat
took
control in the early 20th century, ownership was frozen and
resources
were protected by stringent oversight of the forest department
they
created.
When Swat was administratively merged into Pakistan in 1969,
the government declared forests protected and created tensions
between customary and statutory law. They also did not invest
in

developing the managerial ability required to protect resources.
Given the rapid rise in timber prices, the forest department
officials have more incentive to collude with “forest mafias”
than to
protect community resources. Furthermore, the lack of
coordina-
tion between the forest and revenue departments and the lack of
an implemented land demarcation enables encroachment on
forest
land for alternative uses via corruption and accommodating
courts.
The populist government that absorbed Swat exacerbated the
conflict between de jure owners with property rights and tenants
or
de facto owners. Unless de jure owners were also de facto
owners, the
nature of contracts resulted in tension and forest degradation.
Swat district residents depend substantially on natural resources
for subsistence use and as an income source. Such dependence
underscores the need both for defining the rights to these
resources
clearly based on an understanding of local history and
institutional
evolution. It also requires instituting sound management
systems
that avoid perverse incentives. Only with such policies in place
can
the current rapid rate of deforestation be avoided and
sustainable
resource use ensured.
17 Information gleaned from local contacts suggests an
intensification of degradation
post 2005 as a result of the “talibanization” of Swat and the

attack on state institutions
like public girl schools, police stations, and law courts and the
subsequent military
response. Under the cover of conflict, the timber mafia has
trucked down vast amounts
of timber with payoffs to the Taleban. The heavy air
bombardment of the high forest
covered mountains where the Taleban take refuge is also taking
its toll. A full account
would have to await a survey once the conflict subsides.
18 This outcome was the result of the appointment by the
military government of a
respected ex head of a civil society organization as Minister of
the Environment.
19 For a review of devolution in various contexts including
resource management
refer to Shyamsundar (2008).
2607–2618
Appendix A. Chart I
2607–2618
Appendix B. Chart II
2607–2618

Appendix C. Chart III
2607–2618
Appendix D. Chart IV
2607–2618
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Descriptive statistics (403 households).

Variables Mean Standard deviation
Resource income (Rs. annual) 14,281.82 21,260.99
Non-resource income (Rs. annual) 71,391.49 114,981.76
Livestock (numbers) 2.09 2.72
Age (years) 51.14 16.13
Migration (migrant from household=1) 0.07 0.26
Education (years) 2.93 4.70
Profession (non-agriculture=1) 0.35 0.48
Low eco-zone 0.42 0.49
Middle eco-zone 0.36 0.48
High eco-zone 0.22 0.42
Source: SDPI survey, 2005.
Appendix Table 1
2607–2618
Assessing poverty–deforestation links: Evidence from Swat,
PakistanIntroductionThe empirical debate and conceptual
issuesCase study area, forest degradation and brief
historyResearch design, method, data and variables66District
information is from Government of Pakista.....Empirical
resultsThe poverty–resource dependence associationThe forest
degradation–poverty association1111As indicated in Section 2,
Dasgupta et al. (2003).....Historical and institutional
analysesHistorical analysis1313We restrict our analysis to the
main Swat-Kohistan valleys due to space .....Institutional
analysis1515The institutional analysis in this sub-section is
based on key respon.....Summary and conclusionChart IChart
IIChart IIIChart IVReferences

Society, Resources, and Conservation
Read: http://whathasgood.com/2014/04/23/three-springs/
and check out the photographs and browse a few more of the
posts on this site by a bi-cultural Nepali-New Zealander with
exceptional observation and writing skills and a unique life
experience
· Read : Khan, Shaheen Rafi, and Shahrukh Rafi Khan.
"Assessing poverty–deforestation links: Evidence from Swat,
Pakistan." Ecological Economics 68.10 (2009): 2607-2618.
Which is in the other attached file
AND post responses to the following 3 items to the Assignment
#3 :
I. Respond to Three Springs—c. 250 words
II. For your article, prepare a synopsis to include:
1. an abstract—a summary of what the paper is about;
2. a brief identification of the author/s;
3. a bullet list or outline of key points
4. anything else you think was interesting and worth talking
about further.

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