ESTIMATING TOTAL ECONOMIC VALUE (TEV) OF LABUAN MARINE … 19.pdf · ESTIMATING TOTAL ECONOMIC...

ESTIMATING TOTAL

ECONOMIC VALUE (TEV) OF

LABUAN MARINE PARK

ESTIMATING TOTAL

ECONOMIC VALUE (TEV) OF

LABUAN MARINE PARK

Assoc. Prof. Dr. Rasid Mail

Kamarul Mizal Marzuki

Roslinah Mahmud

Dayangku Aslinah Abdul Rahim

Assoc. Prof. Dr. Rasid Mail

Kamarul Mizal Marzuki

Roslinah Mahmud

Dayangku Aslinah Abdul Rahim

INTRODUCTION INTRODUCTION

• A major challenge in integrated marine planning is conflict between competing objectives - economic development & environmental protection.

• Economic valuation studies highlight the monetary values of coral reefs and help to reflect the true value of the related environmental attributes.

• The economic benefits generated by the marine environment can be best understood by the concept of total economic value, which sums all different types of values generated by an asset to provide a comprehensive measure of value.

• The total economic value (TEV) concept is an important component of economic valuation. It incorporates the range of environmental benefits offered by natural resources.

STUDY GOALSTUDY GOAL

‘to calculate the economic values of coral reefs

and how this information can be used to

improve planning and management by ensuring

the sustainability of Labuan Marine Park (LMP)’

STUDY OBJECTIVESSTUDY OBJECTIVES

• To explore areas that contribute to economic

value of the Labuan Marine Park;

• To quantitatively estimate the economic and

financial value of recreational activities in the

LMP;

• To estimate the consumers’ willingness to

pay (WTP) for improved coral reef quality at

LMP;

• To use these values to determine the

entrance fee for visiting the reef sites at

LMP; and

• To help enhance scientific and technological

knowledge, educational, social, cultural and

aesthetic values of marine biodiversity.

SCOPE OF STUDYSCOPE OF STUDY

• Identifying a structure and elements for the

assessment of Total Economic Value (TEV)

framework;

• Reviewing existing sources of information to

support the TEV framework including secondary

information and primary data.

• Collecting a baseline and relevant information

through visitor within the assessment framework;

• Analysing the data by calculating/estimating Total

Economic Value based on the combination of

financial and economic value;

• Proposing potential options and strategies for

planning and management of Labuan Marine Park

based on finding from analysis and calculation of

Total Economic Value (TEV).

METHODOLOGYMETHODOLOGY

RESEARCH FRAMEWORK • This study utilized the Total Economic Value (TEV) as a framework this

concept is an important component of economic valuation. • TEV incorporates the range of environmental benefits offered by

natural resources. • Basically, TEV model categorized all the elements under two main

component; use value and non-use value. • The TEV concept applied here is based on the coral reef ecosystem of

Pulau Payar Marine Park, adapted from Spurgeon and Aylward (1992) and Munasinghe and Lutz (1993) as illustrated in the figure 3.0.


RESEARCH FRAMEWORK


RESEARCH VARIABLE

TEV is based on the theory that environmental assets or

resources give rise to a range of economic values. These

values are:

• Direct use value - the contribution an environmental

asset makes directly to current production or

consumption (e.g. fisheries & tourism related)

• Indirect use value - the benefits derived from

functional services that the environment provides to

support current production and consumption (e.g.

biological support to fisheries provided by coral reefs).

• Non-use values include the premium that consumers

are willing to pay to ensure that an asset will always be

available in the future, even if it is currently unused.


COMPONENTS SUB-

COMPONENTS

TYPES OF BENEFIT/COST SOURCE OF DATA VALUATION

TECHNIQUE

Use Value

Direct Uses

Extractive

Capture Fisheries

LKIM

Production/Market

Valuation

Non-Extractive

Tourism/Recreation

Research/Education

(through research grant)

Aesthetic (including coral

mining)

DMPM, Labuan

Corporation, MOTOUR

Empirical Study

(Secondary data on market prices for coral reef)

Benefit Transfer

Approach

Indirect Uses Physical Protection to:

Coastal Protection

Global Life Support

Carbon sequestration

Secondary data based on

empirical study

Secondary data based on

empirical study

Benefit Transfer

Approach

Benefit Transfer

Approach

Non-Use Value Bequest Value Questionnaire

Survey in Labuan Marine

Park & Labuan Jetty

Terminal

WTP


RESEARCH DESIGN

• This research applied a mixed-method approach as

the study aimed to understand efforts that drive the

Labuan Marine Park towards sustainability and

greater competiveness.

RESEARCH INSTRUMENT

• The survey questionnaire is a survey instrument that

sets out a number of questions to elicit the monetary

value of a change in a non-market good.

• Questionnaire for this research has been designed to

gather primary information such as socio

demographic profile, motivation & behaviour, visitor’s

awareness, willingness to pay for ecotourism

resources & perceptions/ recommendations


DATA COLLECTION

• Primary Data – questionnaire (face-to-face

interview) & previous visitor tracking,

interview with government agencies (Labuan

Corporation, Ministry of Tourism (Labuan

Office), Department of Marine Park (Labuan)

& travel agencies/dive operators/boat

operators

• Secondary Data – document analysis &

database search: visitor arrival statistic,

fishery data


DATA COLLECTION

• Fishery data –Lembaga Kemajuan Ikan

Malaysia (LKIM)

• Allocation for research and educational fund-

Department of Marine Park Malaysia

• Cost for coastal protection - Department of

Marine Park Malaysia

• Visitor Arrival – Labuan Corporation& Ministry

of Tourism, Malaysia (Labuan Office)

• Development policies – Labuan Corporation

• WTP – Questionnaire and Survey

The respondents involved in the interview are:

HMD Tours & Travel Sdn. Bhd., Borneo Star Dive,

Public


DATA COLLECTION

COMPONENT OF TEV TAMAN LAUT LABUAN

1. Value of potential of fisheries industries

Data: Labuan Department of Fisheries and

Lembaga Kemajuan Ikan Malaysia Labuan

(Data 2012 - JANUARY TO JULY ONLY, thus use

average per year)

* The estimation of mean total fish landings (total capture

fisheries) in Labuan for 12 months is RM37,361,560.95.

This study used 15% as a basis in estimating the

contribution percentage of Labuan Marin Park towards the

total capture fisheries for the whole Labuan islands.


DATA COLLECTION


2. Value of tourism industry potential (benefit – cost)

Data: Labuan Corporation, 2012 (data kemasukan pelancong 2011)

• Labuan has attracted a total of some 832,000 visitors or tourists from domestic and

international during the 2011 financial year (this amount given by Labuan Corporation,

2012).

• Total revenues in services sector including tourism – RM 1,718,000.00 to Labuan GDP

which is the consumer surplus for Labuan. This study used 10% per year (RM171,

800) as a basis in estimating the contribution percentage of Labuan Marin Park

towards the total contribution of tourism industries for the whole Labuan islands.


DATA COLLECTION


3. Research and Education Cost (-)

Data: Jabatan Taman Laut Malaysia (Perbelanjaan 2012) – RM158,500 (2012)

4. Value of Aesthetics

* Elements of Value of Aesthetics : confined to coral reef, reef fish values including dead coral

* Estimations: normal average density of coral reef fish population inside the Labuan Marine Park

20,000kg per kilometer square* the sea zone in the protected area (ocean area of Kuraman island only - 4km2)*

minimum average market price for reef fishes RM30/kg

dead coral will be used in coral mining value

Source: David Lee, online newspaper Sabah, Sunday 9 august 2009 – Sabah Case of mining coral

RM300 per tan * 40 000 tan per acre (estimation only half from offshore Kuraman got dead coral for mining)* 2.6

acre


DATA COLLECTION


5. Value of Coastal Protection

Using : Benefit Transfer method

for an estimated 0.1 km2 only of coral coverage in Labuan Marine parks* the average value of

coastal protection provided by reefs was at USD 210, 000 per km2 of reef per year.

Source : Economic value of coral reefs in Solomon Islands:

Case-study findings from coral trade and non-coral trade communities: Albert, J.A.1, Trinidad,

A.2, Cabral, R. and Boso, D.1 (2010)

The total economic value (TEV) indicates that coral reefs was estimated at SBD $1.2 to $4.3

million (US $100,000 to $420,000) per km² reef per year in direct, indirect (through coastal

protection) and non-use value.


DATA COLLECTION


6. Value of Carbon Sequestration

Using : Benefit Transfer method

Considering the benefit of carbon sequestrated by coral reef which is valued

at USD 2,700 (RM8,498.25) per hectare per year (Emerton & Kekulandala,

2003). – Source Study on Pulau Payar Marine Park.

Estimation of width of coral coverage (10 km per square)* RM8,498.25

* Estimated that 1 km per square of coral reef will capture carbon up to 10 km

per square)


DATA COLLECTION


7. Value of Bequest value

Definition : peoples‘ willingness to pay to retain or improve an environmental

amenity or to prevent its loss.

On average, the overall willingness to pay, meant to conserve for future

generations or equates the future value of the current system, was

RM416,000 (this amount is only based on number of estimated visitors (5%

from the total of visitor to Labuan 2011) and the willingness to pay of

respondents). This study only uses the result of willingness to pay of RM10.00

in general.

5% from the total of visitor to Labuan 2011* RM10.00


ANALYSIS & SYNTHESIS

The tool used to analyze the data is SPSS 18 and applied descriptive

analysis in presenting the information.

TEV Mathematical Model

For the TEV, this study employed TEV mathematical model that concentrate

on the cost and benefit analysis which took in account the gross benefits,

cost, discount rate and number of years that significantly explained the

areas of study. The mathematical equation can be seen as follows:


TEV Mathematical Model Suppose we want to value the gross economic benefits arising from the use of a natural resource, such as a coral reef. By discounting all future values to the present, using an appropriate discount rate, we would obtain what is known as the Present Value (NPV) of the resource.

NPV = net present value

B =gross annual economic benefits, over n years, at a discount rate of i

i= discount rate

C = cost per year

n = number of years that we are interested


VALUATION TECHNIQUES

NO. VALUATION

TECHNIQUES

DESCRIPTION

1. Production Approach • Estimated the value of each variables obtained from an ecosystem by subtracting all costs associated with the production of goods (or services) using market prices from the total revenue obtained.

2. Benefit Transfer

Approach

• An application to a set of data developed for addressing one particular environmental or natural resource valuation question to another context.

• This approach used to determine values by estimating values of non-market natural resources and services. manner based on the similar geographic area.

3. Willingness to Pay • Contingent valuation method (CVM) is a survey method using questionnaire-based approach that is deliberated to estimate the economic value of non-market goods.

• Willingness to Pay (WTP) is one of the most important concepts in CVM. WTP is the maximum quantity consumers are ready to pay for a good or service.

STUDY FINDINGSSTUDY FINDINGS

DEMOGRAPHIC BACKGROUND Socio-demographic

Characteristic Respondent (%)

Gender Male 60.0 Female 40.0 Age 20 – 29 years old 20.0 30 – 39 years old 40.0

40– 49 years old 20.0 >50 years old 20.0

Nationality Malaysia 80.0 Other countries 20.0 Education Level

SPM/STPM 50.0

Bachelor of Degree 40.0

Master Degree 10.0

Occupation Unemployed 20.0 Self-Employed 40.0 Private Sector 20.0 Government Sector 20.0


Willingness to Pay among Visitors


SUMMARY OF TOTAL ECONOMIC VALUATION

Components TEV Economics Value Per Year (RM)

PV (15-year period, i=5%) (RM)

Capture Fisheries

5,604,234.143 58,170,269.13

Tourism 171, 800 1,783,232.46

Research / Education

-158,500 -1,645,182.45

Aesthetic 33,600,000 323,846,640

Coastal protection

67,200 697,515.84

Carbon sequestration

84,982.5 882,092.8553

Bequest Value (mean WTP)

416,000 4,317,955.2

TOTAL 39,613,916.64 388,052,523.04

14.15

0.43

-0.4

84.82

0.17

0.21

1.05

Capture Fisheries Tourism

Research / Education Aesthetic

Coastal protection Carbon sequestration

Bequest Value (mean WTP)

SUMMARYSUMMARY

The result presented in the above elaboration clearly

indicates the economic value of Labuan Marine Park. To

be more realistic the value has been estimated by using

discounted cash flow method considering the time value

of money, direct and indirect cost incurred and benefit

generated. To validate the findings this research has

employed a proven methodological approach in its

process of estimation; i.e the methodological approach

that employed by a number previous similar and

comparable research. This research has considered the

best combination of variables, which to our opinion, is

representative enough to reflect the value of Labuan

Marine Park. As such the findings of this research are

illuminative to highlight the importance of protective

policy, proactive programmes, and the significance of

future contributions related to the area.

SUMMARYSUMMARY

This research found that the economic value of Labuan

Marine Park is RM39,613,916.64 annually. This figure, if

accumulated within 15 years would reach an amount of

RM594,208,749.60. Considering the time value of

money the considerable value of that amount is

estimated to be RM388,052,523.04. If this figure were to

be allocated equally within the period of 15 years, it real

annual value would be about RM25,870,168.20. As such

this research concludes that the Labuan Marine Park is

economically valueable for various reasons. By looking

into its net present value, therefore, related authoritative

bodies, interested parties, and stakeholders as a whole

should take all necessary measures now and then to

ensure its future benefit economically, socially, and

politically protedted and preserved accordingly.

RECOMMENDATIONSRECOMMENDATIONS

5.1.1 This research should be extended to

other marine parks so as to highlight related

issues as a whole. This will enable a

congruent policy and collective implementation

to be carried out for different areas. This will

also enable a comparative analysis to be done

in which a useful database could be developed

for research, control, and monitoring purpose.

With such a concentrate effort and holistic

policy the related program could be carried out

in a more synergetic manner and the

resources could be optimized more efficiently.


5.2.2 Longer time and enough allocation of resources

should be devoted to this research as it needs the

feedback of several parties. The respons from the tourist

and visitors are of a particular important since they are the

most reliable informer, most important stakeholders, and

considerably close to the subject matter. Since it is not

easy to capture and relocate their whereabout, in order to

get response, a longitudinal data collection process is

necessary. To tackle this, the involvement of the service

provider is of a great importance. The responsibility and

task of collecting the information could b edelegated to the

service providers, such as tour guide and travel agents,

through a particular mechanism. It can be done through a

regulatory structure or through a voluntarily mechanism

where their awareness and consciousness about such an

information could be enhanced at first.


5.2.3 Appropriate database that

encapsulate relevant data about local as well

as international visitors should be developed.

This research found that quite a number of

visitors came from Brunei but appropriate data

about it is not available. Verbal response from

public and online discussion in available blog

shows that the response and comment from

Brunei tourists and travel agents are

considerably illuminative.

ACKNOWLEDGEMENTACKNOWLEDGEMENT

Department of Marine Park Malaysia (DMPM)Department of Marine Park Malaysia (DMPM)

LembagaLembaga KemajuanKemajuan IkanIkan Malaysia (LKIM)Malaysia (LKIM)

Labuan CorporationLabuan Corporation

Ministry of Tourism (MOTOUR)Ministry of Tourism (MOTOUR)

InstitutInstitut PenyelidikanPenyelidikan Marin Borneo, UMSMarin Borneo, UMS

UniversitiUniversiti Malaysia SabahMalaysia Sabah

ACKNOWLEDGEMENTACKNOWLEDGEMENT

Department of Marine Park Malaysia (DMPM)Department of Marine Park Malaysia (DMPM)

LembagaLembaga KemajuanKemajuan IkanIkan Malaysia (LKIM)Malaysia (LKIM)

Labuan CorporationLabuan Corporation

Ministry of Tourism (MOTOUR)Ministry of Tourism (MOTOUR)

InstitutInstitut PenyelidikanPenyelidikan Marin Borneo, UMSMarin Borneo, UMS

UniversitiUniversiti Malaysia SabahMalaysia Sabah

THANK YOUTHANK YOU THANK YOUTHANK YOU

ESTIMATING TOTAL ECONOMIC VALUE (TEV) OF LABUAN MARINE … 19.pdf · ESTIMATING TOTAL ECONOMIC...

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