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ACTIVITY
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DAMAGE
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| Costs of early response actions |
US$ 975,000 |
| Loss of revenue to fishing and angling |
US$ 5,839,000 |
| Revenue losses of businesses in the tourism sector |
US$ 4.3-7.8 million |
| Marketing expenditures |
US$ 325,000 |
TOTAL
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US$ 11.4-15 million
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Further damage may occur in the future, increasing the total costs of the
Tisza river cyanide and heavy metal contamination.. In the case of fishing
for instance, the totals might be influenced by the pace of regeneration of
fish stocks. The lower development capacity of the Tisza region also supports
the prediction of future damages being severely felt.
The report lists the damages from a range of sectors and activities,
including the costs of early response actions; the revenue lost by fishing
and angling; the revenue losses felt by the tourism sector and tourist
related activities as well as the excess expenditures related to the
marketing actions that were taken to combat the Tisza river's impaired
image. Furthermore, the study examines the financial damage to the business
sector and the effect of the contamination on the value of real estate
properties. Assessment of forgone revenue (i.e. predicted future revenue
losses) is an essential factor in damage evaluation.
A substantial amount of money was required to implement early response
actions, involving those activities closely connected to pollution abatement
arising during or just after the contamination. Such activities included the
prevention, collection and disposition of fish carcasses and primary
clean-up costs. The estimated costs resulting from early response actions
were about US$ 975,000, with most of this being paid by governmental
institutions.
In the case of fishing activity, the market value of the deceased fish was
said to have totalled US$ 2,840,000. Future damage prediction, incorporating
the lower reproductive capacity of remaining fish stocks, is estimated
(US$ 2,840,000) to at least double from initial costs. The damage felt by
fisherman corporations due to the contamination is estimated to be
US$ 78,000. The forgone revenue of angling is estimated at around
US$ 81,000, derived from calculating the number of unsold angling permits
predicted. This sum is probably slightly underestimated as not all angling
organisations were reviewed. The total damage felt by the region’s fishing
and angling sector was some US$ 5,839,000.
The cyanide contamination had a dramatic effect on the region's tourism
sector. Wild water canoeing activity dramatically decreased by around 90%
after the contamination events. This is due to the clear data that, instead
of the usual 18-20,000 guests hosted in the Tisza region per year, only
about 1,500 visited in 2000.
Along the banks of the Lake Tisza, the observed 33% reduction in the number
of German and Austrian tourists was the most striking and severe loss to the
region’s tourism. The vanishing of regular customers was shocking to local
businesses. The decrease in the number of foreign angling tourists is
complete (i.e. nearing 100%) even in those areas of the Lake Tisza which
were relatively unaffected by the contamination. Another sign of the rapid
loss of foreign investment is the fact that the number and value of real
estate properties bought by foreigners in the vicinity of the Lake Tisza
region has halved compared with those figures from 1999.
On the lower section of the river Tisza, the decrease in the number of
tourists was also considerable: the city of Csongrad reported an 80% drop
and even Martely, a tourist resort in the vicinity of the Tisza river, which
was unaffected by the contamination, experienced a 30% drop. The vast
majority of Tisza settlements reported tourism losses, while the overall
tourism turnover of Hungary grew. Up to the end of the main Tisza tourism
season in 2000, around 300,000 guest nights were lost. It generated a
US$ 2.9-4.9 million revenue loss. The total damage to the tourism sector -
complete with estimated future losses - totals around US$ 4.3-7.8 million.
These losses are particularly painful in a region that has very few
operating enterprises and alternatives. Losses per entrepreneur are
considerably high compared with the size of these enterprises. The reduction
in turnover was so significant that not only the annual profit was challenged
but also the main season itself made a loss. For example, due to such a
reduced turnover, camping at Tivadar, one of the usual stops for wild-water
canoers, did not even open in the peak summer season of 2000. Tourist
businesses generally balance their year round deficit from the profits of
the peak season, so the economic damage felt compelled the entrepreneurs to
use a significant amount of their financial reserves.
Nevertheless, the main economic damage of the cyanide contamination - and
the following heavy metal contamination - are their continuing effects into
the future. The cyanide contamination introduced a new risk category to the
Tisza region. As a result, from now on, businesses shall integrate any
investment opportunities with the disturbing possibility that a major river
contamination may happen - killing the river's wildlife, ruining the river's
image and scaring off tourists.
For the Tisza region, which is underdeveloped compared to other regions in
Hungary, tourism promised a new sector of economic development. Local
tourism could use the region's unrivalled natural scenery to promote the
tourism sector even outside of Hungary. A range of investment were taking
place in local areas of the Tisza region, prior to the contamination, with
promising developments occurring along the Tisza river and especially along
the Lake Tisza. For example, there were schemes for enhancing the quality of
wild water canoeing facilities, by building ports and modernising camping
sites. However, the potential source of these investments disintegrated with
the contamination.
The local tourist businesses utilised the majority of their monetary
reserves to survive. In addition, heavy deficits and the risk of further
river contamination significantly reduced the chance of bank credit being
granted to local businesses and decreased the likelihood of businesses being
encouraged to invest in the region. In fact, even state development
assistance is financially unbalanced as the system logically favours giving
loans to businesses who are able to prove their creditworthiness and
profitability.
The reduction in tourist turnover has not only affected the tourism sector,
having an overall effect on the region's economy. Soon after the cyanide
contamination broke out, the Tokaj municipality collected estimations from
city entrepreneurs in order to ascertain the likely level of compensation
required. According to the findings, businesses involved in fuel retailing
and catering expected immense losses.
In order to compare anticipated and actual losses by the autumn of 2000, the
Center for Environmental Studies interviewed a number of the respondents
from the initial, Tokaj municipality co-ordinated survey about their actual
losses. The answers indicated that the anticipated damage had not been
exaggerated. In fact, in some sectors the economic losses surpassed the
anticipated amounts. However, local entrepreneurs also argued that besides
the lower number of tourists, weaker local demand was also a cause for the
reduction in the turnover of retail stores. To summarise, the turnover of
tourist agencies dropped by an average 80%, turnover of catering and
accommodation services decreased by 40%, while food retailing businesses
lost around 20% of it’s major turnover. In other types of retail shops,
including petrol filling stations, the loss in revenue was between 10 and
40%.
The report concludes with the following statements and suggestions in regard
to how the Tisza region can facilitate future economic progression, enabling
the region to break out of its current, laggard state: -
The contamination of the river should never happen again. Further
contamination would represent a major blow to the local economy. It would
clearly ruin the river's image even more and the unfavourable tendencies
that prevailed in the year 2000 would continue for a long time.
The cyanide contamination harmed probably the most important resource of
the Tisza region - its unique natural environment. If the region's ability
to attract tourists continues to be extremely challenging the split in the
level of development between the region and the most developed parts of the
country will continue to increase. A successful development process may
begin if, instead of implementing centrally co-ordinated countrywide
development objectives, the regional and local micro regions can use
development subsidies according to their own needs, in essence managing
their own budget. However, this would need a reform of the current regional
development system.
Co-operation between local businesses should be strengthened because
such a synergetic process can vitalise the whole Tisza region and create a
more economically secure environment, ripe for future investment. The
success of complex development programmes depends on the co-operation of
local businesses.
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