Investigating Total Economic

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INVESTIGATING TOTAL ECONOMICVALUE OF ECO-TOURISM INPULAU PAYAR MARINE PARK

2011

Department of Marine Park MalaysiaMinistry of Natural Resources and Environment

in collaboration with

Universiti Utara Malaysia

2011


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JABATAN TAMAN LAUT MALAYSIA

INVESTIGATING TOTAL ECONOMICVALUE OF ECO-TOURISM INPULAU PAYAR MARINE PARK

DEC 2011


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Copyright Department of Marine Park Malaysia

Ministry of Natural Resources and Environment

Malaysia, 2012

All right reserved. No part of this publication may be reproduced or stored in any form

that can be retrieved or transmitted in any form or by any means, electronic or mechanical,

including photocopy, recording or other means, without written permission from the

publisher.

Publisher:

Department of Marine Park MalaysiaMinistry of Natural Resources and Environment

Level 11, Wisma Sumber Asli

No. 25, Persiaran Perdana, Presint 4

62574 Putrajaya

Malaysia

ISBN 978-983-44311 - x - x

Bibliography Citation

Norlena Hasnan, Kamarruddin Ibrahim & et al, Department Of Marine Park Malaysia,

2012, Investigating Total Economic Value of Eco-Tourism in Pulau Payar Marine Park,

Ministry of Natural Resources and Environment, Putrajaya, Malaysia, xxxpp.

Cover courtesy:

Dr. Sukarno Wagiman

Printed by:

CETAKRAPI Sdn Bhd

No. 22, Jalan Sri Ehsan Satu

Taman Sri Ehsan, Kepong

52100 Kuala Lumpur

Tel: 603-6273 6391

Fax: 603-6273 6392


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Editors

Dr. Norlena Hasnan


Kamarruddin Ibrahim

Department of Marine Park Malaysia

Contributors

Prof. Dr. Rushami Zein Yusoff


Assoc. Prof. Dr. Shahimi MohtarUniversiti Utara Malaysia

Dr. Nor Hasni Osman


Azhar Ahmad


Munauwar MustafaUniversiti Utara Malaysia

Hasnizam Hasan


Abdul Ghaffar Salleh

Department of Marine Park Malaysia

Mohd. Zainudin OthmanUniversiti Utara Malaysia

Mohd Azril Ismail


Zulkui Aziz


Azahari Ramli



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Acknowledgement

Our heartfelt appreciation goes to all the Project Drafting Team who assisted in making this

research a reality.

We would like to extend our gracious gratitude to all users, stakeholders, agencies andorganization for their constructive comments and which have contributed in making thisstudy a valuable research and has given the sense of belonging to all who have participatedirectly or indirectly. These include invaluable information and facts from the Departmentof Marine Park Malaysia (JTLM) and Department of Fisheries that had contributed a lot tothe success of this study.

Editors


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IntroductionThis work has highlighted the total economic value of the existing marine protected

area (MPA) system with intention, in part, to enhance the biodiversity conservation

activities in this country. In todays environment, even though the MPAs are

increasingly understood, increasing conservation decisions still require dire economic

justications. However, the benets of MPA have seldom been quantied, even

internationally, and neither have their opportunity costs. Understanding the costs and

benets of Pulau Payar Marine Park (PPMP) is also particularly pertinent in view ofexisting policies, strategies and action plans.

The aim of this project was to provide preliminary estimates of the costs and benets

associated with PPMP, in particular, that could potentially lead to ability to estimate

how these costs and benets might change under different scenarios of other MPA

size and components intensity.

Study area and overall approach

Pulau Payar Marine Park (PPMP) is situated off the coast of Kedah, between Pulau

Langkawi and Penang. The marine park consists of a group of four islands i.e. Pulau

Payar, Pulau Kaca, Pulau Lembu and Pulau Segantang. Pulau Payar is the largest of

the islands with an approximate length of 1.75 km (Aikanathan and Wong, 1994).

The Island is made of predominantly rock and characterized by steep cliffs and wave-cut gullies. PPMP has limited strips of beach coast. Only four sandy beaches can be

found in PPMP with approximately 100 m to 150 m long each. The entire island is

covered by dense vegetation.

This project works within a Total Economic Value (TEV) framework. TEV

comprises direct use value, indirect use value and non-use value. Direct use value

may be consumptive or non consumptive (e.g. diving). Indirect use value is where

EXECUTIVE SUMMARY


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an ecosystem provides inputs into an economic activity elsewhere (sh landed in

this case). Non-use value comprises the option value of retaining an ecosystem for

future use, and existence value which is the wellbeing derived from knowing thatsomething exists, expressed in terms of public willingness to pay. In addition to these

values we examine the management and opportunity costs associated with PPMP.

The study was based on empirical data collection through surveys, as well as models

constructed using available data. A survey of visitors was carried out in 4 days on a

total of 120 visitors and 2 members of the JTLM staff were interviewed. It should be

noted that this is a preliminary study, and these sample sizes need to be boosted.

Capture Fisheries

Using published report on landed sh at the access point surveys, the catches attribute

to the presence of sh in PPMP was valued. This was based on the estimated value

per sh to the recreational shore (RM140), The resultant economic value of sh

caught from PPMPs MPA along the Kedah coast was valued at RM123,332,493.30million per year. This value is estimated to be around RM1.173 billion in 20 years

with 10% discount rate.

Tourism

PPMP has attracted a total of some 96,097 visitors during the 2010 nancial year,

attracting total revenues in the region of RM480,485.00 which is the consumer

surplus for PPMP. This is the additional amount that visitors have paid for over

and above what they actually had to pay. For the next 20-year period with the same

conservation fee, the value is going to achieve RM3.7 million at 10% discount rate.

The enjoyment of these nature reserves is derived from marine activities as translated

by 79.20% (snorkeling) and 57.50% (swimming). About 73% of the tourists had

decided to visit this nature reserve way back from their hometowns. Based on the

study, the total expenditure attributed to the PPMP is estimated to be RM19.219

million (96,097 x RM200.00), including consumers surplus.


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Aesthetics

The Aesthetics values for PPMP are conned to coral reef and reef sh values. Due

to unavailability of information, the coral reef value was excluded from the TEVcalculations. However, the reef sh value surrounding the circumference of 2 nautical

miles of PPMP as per year was valued at RM50.6 million. At discount rate 10%, the

present aesthetic value over 20-year period is expected to be RM481.7 million.

Coastal Protection

By using Benet Transfer method, for an estimated 0.251km2 of coral reef surroundingPPMP, it was found that approximately the total value of coastal protection to conserve

coral reef in year 2010 was around RM217,256.19. The present coastal protection

value over 20-year period with 10% discount rate is estimated at RM2.07 million.

Carbon Sequestration

Considering the cost of USD2,700 per hectare per year as the basis for calculation,it was identied that the cost for carbon sequestration in the PPMP region for 2010

was around RM213,206.08. At 10% discount rate, the carbon sequestration is valued

for 20 year period by RM2.03 million.

Bequest value

The bequest value of the MPA was determined using the Contingent Valuation Method

which elicits peoples willingness to pay to retain or improve an environmental

amenity or to prevent its loss. Respondents involved in the survey were predominantly

locals. Only 37% are foreign citizens including Europeans and East Asia. Since

the sample size was too small, the quantitative estimates only restricted to these

respondents. The survey also did not capture a signicantly representative group in

terms of country of origin, income and race.

On average, the overall willingness to pay (as a once-off payment), meant to

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


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RM1,268,480.40 million. This gure could be translated into the willingness to pay

of an additional RM12.60 per person for local tourists and an additional RM14.30 per

person for foreign tourists or an additional RM13.20 in general. The average presentbequest value for the next 20-year period (discount rate at 10%) is going to increase

to RM12.1 million. It should be noted that this study should only be considered as a

preliminary estimate since the result was generated from a small sample size.

Management costs

For the nancial year of 2010, the management cost (maintenance and research)

incurred on PPMP was approximately RM1.3 million which did not reveal economiesof scale. However, actual management costs are not the same as ideal management

costs, and these costs are low compared the global average. The expected present

value of maintenance cost over 20-year period is estimated at RM 913,302.12, where

as the present value of research and education cost is expected at RM 11.4 million for

the same time period at 10% discount rate.

Conclusion

This study has found that PPMP coast provide substantial value over and above the

value that other coastal areas would otherwise generate. The total economic value

of the PPMP includes the catchment of sh which add value to the commercial

sheries in surrounding areas, is estimated to be RM174 million (USD55.3 million)

for year 2010. The non-use value of the PPMP, when estimated as an annual value,

is also substantially greater than the use value alone. This is a substantial cost,

which therefore requires that the overall costs and benets are compared in order to

determine if increasing protection incurs an overall gain or loss in welfare.

Using the ndings reported in the preceding chapter, we estimated that the present

value of PPMP over a 20 year period, using a discount rate of 10% is RM1.7 billion

(USD 530 million). The most important note is that the costs of PPMP as an MPA

are outweighed by the benets. This is in spite of the fact that both, the costs and

benets were conservatively estimated.


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Table of ContentsExecutive Summary i

List of Table x

List Of Figures xi

Chapter 1 Background of the Study

1.0 Introduction 1

1.1 Tourism in Malaysia 1

1.2 Ecotourism 2

1.3 Marine Parks in Malaysia 2

1.4 Study Site: Pulau Payar Marine Park (PPMP) 3

1.4.1 Background of PPMP 3

1.4.2 Good and Services in PPMP 5

1.5 Problem Statement 6

1.6 Research Objectives 8

1.7 Research Outputs 8

1.8 Research Impacts 8

1.8.1 Contribution to Economy 8

1.9 Signicance of the Study 9

Chapter 2 Literature Review

2.0 Introduction 10

2.1 Total Economic Value 11

2.1.1 Direct Economic Values 14

2.1.2 Indirect Use Values 14

2.1.3 Option Values 15

2.1.4 Non-Use Values 15

Table of Content


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Chapter 3 Research Methodology3.0 Introduction 17

3.1 Research Design 17

3.2 Research Framework 19

3.2.1 TEV Mathematical Model 20

3.2.2 Type of Benets / Costs 20

3.3 Variables Used (Operational Denitions) 17

3.3.1 Capture Fisheries 22

3.3.2 Tourism / Recreational 22

3.3.3 Research / Education 22

3.3.4 Aesthetic 22

3.3.5 Coastal Protection 23

3.3.6 Carbon Sequestration 23

3.3.7 Bequest Value 23

3.4 Valuation Techniques 24

3.4.1 Production Approach 24

3.4.2 Benet Transfer Approach 24

3.4.3 Willingness to Pay 24

3.5 Illustration of Mathematical Calculation 25

Chapter 4 Research Findings

4.0 Introduction 26

4.1 Nationality of Tourists 26

4.2 Intent to Visit 27

4.3 Boarding Jetty 28

4.4 Frequency of Visit 29

4.5 Aware of Marine Park 29

4.6 Activities at Pulau Payar Marine Park 30

4.7 Willingness to Pay among Visitors 31

4.8 Willingness to Pay among Local Visitors 31


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4.9 Willingness to Pay among Foreign Visitors 334.10 Attractiveness of Pulau Payar Marine Park 33

4.11 Total Economic Valuation of PPMP 36

a. Value of Capture Fisheries 37

b. Value of Tourism 37

c. Research and Education Cost 38

d. Value of Aesthetics 39

e. Value of Coastal Protection 40

f. Value of Carbon Sequestration 40

g. Value of Bequest Value 41

h. TEV for 20 year period 42

Chapter 5 Conclusion 43

References 47-56

Appendices

Appendices A A11-A11

Appendix A1: Present Value (PV) of Capture Fisheries at 5% discount rate for 5,

10 and 20 years respectively

Appendix A2: Present Value (PV) of Tourism at 5% discount rate for 5, 10 and 20

years respectively

Appendix A3: Present Value (PV) of Maintainance cost at 5% discount rate for 5,

10 and 20 years respectivelyAppendix A4: Present Value (PV) of Research Cost at 5% discount rate for 5, 10

and 20 years respectively

Appendix A5: Present Value (PV) of Aesthetic Value at 5% discount rate for 5, 10


Appendix A6: Present Value (PV) of Coastal Protection at 5% discount rate for 5,


Appendix A7: Present Value (PV) of Carbon Sequestration at 5% discount rate for

5, 10 and 20 years respectively

Appendix A8: Present Value (PV) of Bequest Value (mean WTP) at 5% discount

rate for 5, 10 and 20 years respectively


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Appendix A9: Present Value (PV) of Bequest Value (minimum WTP) at 5%discount rate for 5, 10 and 20 years respectively

Appendix A10: Present Value (PV) of Bequest Value (maximum WTP) at 5%

discount rate for 5, 10 and 20 years respectively

Appendix A11: Net Present Value at Pulau Payar at 5% discount rate

Appendices B B1-B11

Appendix B1: Present Value (PV) of Capture Fisheries at 10% discount rate for 5,10 and 20 years respectively

Appendix B2: Present Value (PV) of Tourism at 10% discount rate for 5, 10 and 20

years respectively

Appendix B3: Present Value (PV) of Maintainance cost at 10% discount rate for 5,


Appendix B4: Present Value (PV) of Research Cost at 10% discount rate for 5, 10


Appendix B5: Present Value (PV) of Aesthetic Value at 10% discount rate for 5, 10


Appendix B6: Present Value (PV) of Coastal Protection at 10% discount rate for 5,


Appendix B7: Present Value (PV) of Carbon Sequestration at 10% discount rate

for 5, 10 and 20 years respectively

Appendix B8: Present Value (PV) of Bequest Value (mean WTP) at 10% discount


Appendix B9: Present Value (PV) of Bequest Value (minimum WTP) at 10%


Appendix B10: Present Value (PV) of Bequest Value (maximum WTP) at 10%


Appendix B11: Net Present Value at Pulau Payar at 10% discount rate

Appendices C C1-C11

Appendix C1: Present Value (PV) of Capture Fisheries at 15% discount rate for 5,


Appendix C2: Present Value (PV) of Tourism at 15% discount rate for 5, 10 and 20

years respectively

Appendix C3: Present Value (PV) of Maintainance cost at 15% discount rate for 5,



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Appendix C4: Present Value (PV) of Research Cost at 15% discount rate for 5, 10and 20 years respectively

Appendix C5: Present Value (PV) of Aesthetic Value at 15% discount rate for 5, 10


Appendix C6: Present Value (PV) of Coastal Protection at 15% discount rate for 5,


Appendix C7: Present Value (PV) of Carbon Sequestration at 15% discount rate

for 5, 10 and 20 years respectively

Appendix C8: Present Value (PV) of Bequest Value (mean WTP) at 15% discount


Appendix C9: Present Value (PV) of Bequest Value (minimum WTP) at 15%


Appendix C10: Present Value (PV) of Bequest Value (maximum WTP) at 15%


Appendix C11: Net Present Value at Pulau Payar at 15% discount rate

Appendices D Questionnaires

Appendices E Slide Presentation to JTLM


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List of Table

Table 1.1 Number of visitors to Pulau Payar Marine Park 5Table 3.1 Calculation of capture sheries present value at 10% discount rate for 10 years 21

Table 4.1 Nationality of Tourists 27

Table 4.2 Willingness to pay among visitors 32

Table 4.3 Willingness to pay local visitors 32

Table 4.4 Willingness to pay among foreign visitors 33

Table 4.5 Present value of capture sheries 37

Table 4.6 Net present value of tourism 38

Table 4.7 Present value of research and education costs 39

Table 4.8 Present value of aesthetics 39

Table 4.9 Present value of coastal protection 40

Table 4.10 Present value of carbon sequestration 40

Table 4.11 Present value of bequest value 41

Table 4.12 Economic value of Pulau Payar Marine Park 41


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Figure 1.1 Pulau Payar Marine Parks 5Figure 2.1 Total Economic Value Concept 21

Figure 3.1 Research Design 27

Figure 3.2 The Total Economic Valuation (TEV) Model for Pulau Payar 32

Figure 4.1 Nationality of Tourists 32

Figure 4.2 Intent to visit 33

Figure 4.3 Boarding Jetty 37

Figure 4.4 Frequency of visit 38

Figure 4.5 Aware of Marine Park 39

Figure 4.6 Activities at Pulau Payar Marine Park 39

Figure 4.7 Coral reef attractiveness 40

Figure 4.8 Coral sh attractiveness 40

Figure 4.9 Avi vauna attractiveness 41

Figure 4.10 Flora attractiveness 41

List of Figures


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1.0 IntroductionMalaysia has committed itself into transforming 10% of its marine areas into marine

parks by the year of 2020 (JTLM, 2011). These parks form huge warehouses that host

treasures like coral, sh, sea-lives habitats and so on that could uniquely dene the

health and wealth of the nation. For now, these treasures form unique attractions to

national eco-tourism (which is a part of the key areas in the government transformation

plan) and also form a unique indicator that reects the nations sustainability into the

future.

1.1 Tourism in Malaysia

Malaysia comprises the Peninsular and East Malaysia on the island of Borneo and

covers a total area of 329,758 square kilometers. The countrys climate is warm and

humid throughout the year. Malaysia is one of the most botanically diverse countries

in the world. It is endowed with many natural attractions, particularly sandy beaches,

enchanting islands, diverse ora and fauna, tropical forest retreats and magnicentmountains that are among the best in the region.

Malaysia is a multi-racial country with a population of approximately 22 million

consisting of Malays, Chinese, Indians and various indigenous people in Sabah and

Sarawak. This has made the country unique in such a way that it comprises the three

major civilizations and cultures in Asia and, without doubt, a land of fascinating

sights and attractions. The services sector, including the tourism industry, is themajor revenue earner as well as the largest contributor to Malaysias Gross Domestic

Product (GDP) at 46% in 1999, followed by manufacturing (30%), agriculture (9.3%),

mining (7.3%) and construction (3.6%), in order of importance.

Specically, tourism is a growing sector and gaining importance in the Malaysian

economy. In 1999, about 7.9 million foreign tourists visited the country generating

some RM13.4 billion in foreign exchange earnings. The majority of the foreign

CHAPTER ONE

BACKGROUND OF THE STUDY

Investigating The Total Economic Value OfEco-Tourism In Pulau Payar Marine Park 2011

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tourists were from neighbouring Asian and Pacic countries such as Singapore,

Japan and China. Undoubtedly, the tourism industry in Malaysia is relatively new

with tremendous potential to be developed. In view of this, the country is making aconcerted effort to further develop the industry as a whole, including the ecotourism

sector. Complementing the effort, the Malaysian government has embarked on a

plan to promote the country as one of the primary tourist destination in the region.

1.2 Ecotourism

There are many denitions of ecotourism. The most commonly used denition is the

one established by the International Ecotourism Society (TIES, 1990), which denesecotourism as responsible travel to natural areas that conserves the environmental

and sustains the well-being of local people. Ecotourism allows for more tourist

expenditure to stay in the local economy, subsequently boosting the national

wealth.

In order to implement ecotourism activities successfully, there must be joint efforts

between various entities like government, the private sector and the local communities.In facilitating the efforts, a special committee, which comprises members from the

federal and local governments, private sector and NGOs, has been formed (MOCAT)

to spearhead the overall implementation of the National Ecotourism Plan. Based on

the recommended action, activities like workshops, training programs and ecotourism

projects have been conducted under the Eighth Malaysian Development Plan.

1.3 Marine Parks in Malaysia

A Marine Park is a sea area zoned as a sanctuary for the protection of marine

ecosystems especially coral reef and its associated ora and fauna, like the sea

grass bed, mangrove and the seashore (Hiew, 2000). Protecting special biological

and environment values have been the main objectives behind the establishment of

marine parks in the country. However, due to open access to marine park resources

and failure of the market system in restricting their use, over-use and environmental

degradation have resulted. The degradation of marine parks might affect the

sustainability of ecotourism in the future. In addition, the market failure is associated

with users not paying the full costs of using the natural resources in the marine parks.


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Thus it is possible that the park may be subject to excessive use, overcrowding and

biological degradation. The high level of usage may result in conicts between users,

the social and biological carrying capacity, limits of acceptable change and potentialenvironmental degradation.

In the long run, Malaysia has committed itself into transforming 10% of its marine

areas into marine parks by the year of 2020 (JTLM, 2011). These parks form huge

warehouses that host treasures like coral, sh, sea-lives habitats and so on that could

uniquely dene the health and wealth of the nation. For now, these treasures form

unique attractions to national eco-tourism (which is a part of the key areas in thegovernment transformation plan) and also form a unique indicator that reects the

nations sustainability into the future.

1.4 Study Site: Pulau Payar Marine Park (PPMP)

1.4.1 Background of PPMP

Pulau Payar Marine Park (PPMP) is situated off the coast of Kedah, betweenPulau Langkawi and Penang. The marine park consists of a group of four

islands i.e. Pulau Payar, Pulau Kaca, Pulau Lembu and Pulau Segantang.

Pulau Payar is the largest of the islands with an approximate length of 1.75

km (Aikanathan and Wong, 1994). The Island is made of predominantly rock

and characterised by steep cliffs and wave-cut gullies. PPMP has limited

strips of beach coast. Only four sandy beaches can be found in PPMP with

approximately 100 m to 150 m long each. The entire island is covered by

dense vegetation. The Pulau Payar group of islands constitutes one of the few

coral reef areas found off the west coast of Peninsular Malaysia. The type

of coral reefs in PPMP is fringing reef. The coral fringes off the islands are

shelter to a vast diversity of marine ora and fauna. Major coral genera include

Acropora, Octocorals, Porites, Platygyra, Goniopora, Sponges, Corallimorph,

Diploastrea and Plerogyra (Aikanathan and Wong, 1994; Harborne et al.,

2000). Fish observed underwater include barracuda, giant grouper, rabbit sh,

triggersh, damsel sh and sharks (Harborne et al., 2000).


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The Pulau Payar Marine Park Centre was open to public in 1989, with restriction

as sheries prohibited area. This island was gazette as a marine park in 1994. The

establishment of this island as a marine park is the rst step to conserve marine

resources from future impact of tourism on the island itself. Nowadays PPMP is

receiving pressure from inux of visitors. The total number of visitors to PPMP has

been increased in every year (as in Table 1.1).

Figure 1.1 : Pulau Payar Marine Parks


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Table 1.1 : Number of visitors to Pulau Payar Marine Park

1.4.2 Goods and Services in PPMP

Pulau Payar Marine Park offers abundance of opportunities for ecotourism

activities especially through its terrestrial and marine environment. Water

sports like snorkeling and swimming are the most popular services enjoyedby tourists on the island. Relaxing, sh feeding and sunbathing were also the

other major activities participated by the tourists (Zaidnuddin, et al., 2000).

Facility-wise, there are man-made environment available such as toilets and

rubbish bins. At the entry point, tourists are greeted with an informative

gallery that provides brief information about the island and services offered.

The other interesting and unique package that attracts tourist attention is the

Pontoon which is located on the eastern shore of Pulau Payar. Sheltered from

YEAR COUNTRY OF ORIGIN NUMBER OF VISITORS

2000LOCAL 19,944

106,780FOREIGN 86,836

2001LOCAL 38,027

127,541FOREIGN 89,514

2002LOCAL 56,259

133,775FOREIGN 77,516

2003LOCAL 44,291

114,684FOREIGN 70,393

2004LOCAL 36,282

135,272FOREIGN 98,990

2005

LOCAL 19,607

94,099FOREIGN 74,492

2006LOCAL 26,043

112,648FOREIGN 86,605

2007LOCAL 24,580

110,629FOREIGN 86,049

2008LOCAL 23,298

96,071FOREIGN 72,773

2009LOCAL 25,454

FOREIGN 77,412 102,866

2010LOCAL 26,429

FOREIGN 69,668 96,097

(Source: JTLM Portal)


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the south-west winds and surrounded by Pulau Kaca, Pulau Lembu and Pulau

Segantang, its clear water and rich diversity of marine life offer visitors a

rsthand encounter with nature. The pontoon is specially built to cater forboth environmental and recreational needs which are strategically positioned

away from various authorities and sensitive marine life, and away from the

coral colonies to prevent from any damaging effects to the corals. The pontoon

is also equipped with the followings (Hiang Aun, 2000):

Swimming platforms take off points for swimming and snorkeling

Diving platform Changing rooms

Fresh water showers

Under water observatory viewing marine life without getting wet

Sun deck sun bathing and island view

Bar soft drinks and beer sales

Snorkeling equipment masks, snorkels, ns and life jacket

Diving equipment regulators, buoyancy compensators (BC), tank,weights, masks and ns

Glass bottom boats coral viewing and transfer to Marine Park Centre

Dive boat transport certied divers to different dive sites

1.5 Problem Statement

Economists consider ecosystems as capital goods generating valuable services, some

of which are marketable while others are not (e.g. Point 1992). This approach is used,

for instance, by studies attempting to justify the interest of biodiversity protection

on economic grounds (Brown and Goldstein, 1984, Alexander, 2000). As a result,

various studies focusing on the valuation of ecosystem services have been conducted

(Constanza and Faber, 2002; De Groot et al. 2002; Faber et al. 2002). However,

natural assets are often providers of multiple services, which create difculties

when trying to assess their economic value (Desaigues and Point, 1990). A number

of assessment methods such as travel cost and contingent valuation have been

developed to estimate the economic value of these services (e.g. Randall and Stoll,

1983, Desaigues and Point, 1990). Yet, only small part of this literature is dedicated


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to the economic valuation of natural assets deals with marine ecosystems (Alban,

Alperre and Boncoeur, 2005). Hence, this research presents quantitative estimates

of the economic and nancial value of activity undertaken within the PPMP for thenancial year 2005 - 2010.

The Eco-Tourism Economic Value (TEEV) concept used in this research, covering:

1. Use and non-use values.

2. Within the former, direct and indirect values, also broken down into extractive

and non-extractive uses and goods and services.

3. Some of these may or may not line up well with standard stocks and owsconcepts, and in many cases, valuations are both difcult and subjective.

This is not to say that such values are either unimportant or not worth attempting to

quantify but they cover dimensions not easily incorporated into the current national

accounting framework.

This research is much less ambitious in a way that:1. It only looks at national accounts-basedfowsfor which market transactions can

readily be estimated and for which input-output tables can be compiled.

2. It concentrates on value added, gross product and employment.

3. It does not look at stocks because of the edgling state of the art in relation to

environmental accounting using national accounts frameworks.

4. And it concentrates on only three industries: tourism, commercial shing and

cultural and recreational activity, where the rst and third of these include

estimates for recreational shing.

1.6 Research Objectives

In order to support the effort to drive the Pulau Payar Marine Park (PPMP) towards

sustainability and greater competiveness in line with International Union of

Conservation of Natural Resources (IUCN) standards, the following objectives of

the study have been identied:


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1. To explore areas that contribute to economic value of the Pulau Payar Marine

Park;

2. To quantitatively estimate the economic and nancial value of Eco-Tourismactivities in the Pulau Payar Marine Park;

3. To help enhance scientic and technological knowledge, educational, social,

cultural and aesthetic values of marine biodiversity.

1.7 Research Outputs

This research highlights:

1. Areas that contribute to economic value to PPMP2. Components of Eco-Tourism economic activities in PPMP

Besides that, it will also put into better perspective the following issues:

1. Mathematical model of Eco-Tourism in PPMP

2. Total value of Eco-Tourism activities in PPMP

1.8 Research Impacts1.8.1 Contributions to Economy

a. Able to draws a signicant amount of visitors (domestic and foreign)

into PPMP

b. Able to identify total economic impact in terms of gross output

(i.e. revenue) and number of job opportunities (i.e. number of workers

and wages) in the existing economy related to PPMP per year.

c. Able to compare the growth of total economic impact to previous years

d. Able to enhance public awareness on the existence PPMP as a regional

economic growth center.

1.9 Signicance of the Study

In view of the above, it is highly signicant that a study be conducted on these

unique treasures to translate them into economic values that dene the wealth of

the nation. In view of this issue, most of the previous economic studies focus on

employing environmental economic tools such as the Travel Cost Method (TCM),

Contingent Valuation Method (CVM) and Choice Modelling (CM) with the aim of


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measuring consumer welfare and gains rather than the direct nancial ow (Yacob,

Shuib, Mamat and Radam, 2008; Yacob, Radam, Wahidin & Shuib, 2009).

This study is deemed to identify some information on total economic values of PPMP

which has never been acknowledged before. This would translate, in isolation, the

values of direct and indirect marine inventory. Furthermore, this study will establish

a mathematical model that will be exible enough to perform similar evaluations on

other Marine Parks in this country. The signicance of these resources to Malaysia

will be analyzed based on:

1. Their contribution to the national economy (in terms of Gross Domestic Product(GDP) percentage, and generation of Government revenue).

2. Their roles (benecial and adverse) in the conservation of the environment.

(Basiron, 1995).


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2.0 IntroductionThis chapter is divided into two parts. The rst part describes the socioeconomic

literature dedicated to various aspects of marine parks eco-tourism. The second part

is devoted to methodological issues. It rst deals with concepts and related issues

to the total economic value (TEV). The valuation techniques that have been used to

derive TEV will be presented.

2.1 Total Economic ValuePagiola, von Ritter, and Bishop (October 2004) mentioned that economists typically

classify ecosystem goods and services according to how they are used. According to

them, the main framework used should be the Total Economic Value (TEV) approach

as developed by Pearce and Warford (1993).

Researchers such as Spurgeon and Aylward (1992) and Munasinghe and Lutz (1993)

divided total economic value into two major components which are use value and non-use value (Please refer to Figure 1). The two components then are further divided into

three sub-components such as direct uses, indirect uses and existence value. Direct

uses and indirect uses in this case are referred to use value while existence value is

categorized as non-use values. However, it should be noted that some terminologies

or terms that we used may be varies among the researchers.

Hence in the following section we offer detail discussions on each component andsub-component of TEV.

CHAPTER TWO

LITERATURE REVIEW


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TOTAL ECONOMIC VALUE

Use Value Non-use Value

Direct use Indirect Use Existence Value

Extractive: Biological support to :

Capture Fisheries Fisheries Endangered species

Turtles Charismatic species

Sea birds Threatened species

Cherished reefscapes

Physical protection to :

Tourism Ecosystems

Recreation Landforms

Research Navigation

Education Coastal extension

Aesthetic

Global life support :

Calcium store

Carbon store

Decreasing tangibility of value to individuals

2.1.1 Direct Economic Values

Focus on direct use values associated with the resource, in particular

sheries and tourism. This is most likely because - due to their commercial

nature - they are easier to measure and of more obvious interest to policymakers.

Use value can be divided into direct use and indirect use value (Yeo, 1998).

Direct use values refer to ecosystem goods and services that are used

directly by human beings. They include the value of consumptiveuses such

as harvesting of food products, timber for fuel or construction, and medicinal

products and hunting of animals for consumption (Pagiola et al., October

Figure 1: Total Economic Value Concept


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2004) or the use of goods and services extracted from the marine ecosystem

such as sh, aggregates and energy (Saunders, Tinch, and Hull, 2010). Yeo

(1998) divided direct use value bequest.

On the other hand, according to Pagiola et al. (2004), the value of non-

consumptive uses of Marine Park was referred to recreational and cultural

activities that do not require any harvesting activities. Pugh (2008), in his

research on socio-economic indicators of marine-related activities, further

elaborated the non-consumptive uses of PPMP by focusing on the use of

marine ecosystem for leisure and recreation such as holiday tourism, cruisingand leisure craft services, and for research and development. Research and

development falls into three categories i.e. industry sector research, higher

education institutions research and public sector research (Pugh, 2008).

Direct use values are most often enjoyed by people visiting or residing in the

ecosystem itself.

Fisheries are considered an extractive direct use value of coastal ecosystems(i.e. resources are removed from the ecosystem). Other extractive uses include:

coral mining, harvest of live corals for the aquarium trade and wood production

from mangroves. Tourism is a non-extractive direct use value associated with

coastal ecosystems, particularly coral reefs (i.e. individuals use it directly,

but do not remove anything). Research and education activities associated

with coral reefs/ mangroves may also be considered non-extractive direct use

values of these ecosystems (Fiji).

In general, direct use values can be considered as the most easiest variable

to be measured, since they usually involve observable quantities of products

whose prices can usually also be observed in the market-place. Recreation

is also relatively easy to value as the number of visits is directly observable.

Assessing the benet received by visitors is more difcult, but a large body

of literature has developed to tackle this problem, mainly using surveys

of tourists actual travel costs or of their stated willingness to pay to visit

particular sites.


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Meanwhile, measuring indirect use value is often considerably more difcult

than measuring direct use values For one thing, the quantities of the service

being providedsuch as the amount of carbon stored in biomass or in thesoilare often hard to measure. While their contribution of ecosystem services

to the production of marketed goods and services may be signicant, it is often

difcult to distinguish it from that of other, marketed inputs to production.

Moreover, many of these services often do not enter markets at all, so that

their price is also difcult to establish.

The aesthetic benets provided by a landscape, for example, are nonrivalin consumption, meaning that they can be enjoyed by many people without

detracting from the enjoyment of others. Non-use value is the most difcult

type of value to estimate, since in most cases it is not, by denition, reected

in peoples behavior and is thus almost wholly unobservable (there are some

exceptions, such as voluntary contributions that many people make to good

causes, even when they expect little or no advantage to themselves). Surveys

are used to estimate non-use or existence values, such as consumers statedWTP for the conservation of endangered species or remote ecosystems which

they themselves do not use or experience directly.

From an economic perspective, the benets derived from conserving biological

diversity are among the most difcult to dene and quantify. While it is

relatively easy to identify the benets obtained from individual components

of biodiversity, such as the value of harvesting particular wild species, it is not

so easy to describe the benets of variability itself.

Some argue that diverse ecosystems are more resilient and thus provide a kind

of natural insurance against climatic and other risks (Perrings, 1998). Others

suppose that the likelihood of nding useful products in nature varies with

the number of natural expressions considered or, in other words, that diverse

ecosystems are more likely to contain economically useful plants, animals or

biological compounds (Laird and ten Kate, 2002; Simpson and others, 1994;

Barbier and Aylward, 1996; Rausser and Small, 2000). Finally, there is some


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evidence that the general public including home buyers and tourists prefer

variation in ecosystems to homogeneous landscapes (Garrod and Willis, 1992;

Powe and others, 1995).

2.1.2 Indirect Use Values

Most existing indirect use valuations have focused on coastal protection (see

McKenzie et al, 2005; Gustavson, 2000; Cesar, 1996). Coral reefs, mangroves

and coastal littoral vegetation provide protection to agricultural land and human

settlements from oods, storms and erosion. Another important indirect use

values is waste assimilation. Mangroves and seagrass beds effectively processinadequately treated sewage and other waste, by absorbing excess nutrients,

before this enters the sea (and affects sheries and health). Other indirect use

values include: habitat and biological control, and water quality control. Due

to the difculty inherent in measuring the relative contribution of an ecosystem

to these services and functions of nature, there are very few valuation studies

that estimated the economic value of these indirect use values (Fiji).

Indirect use values are derived from ecosystem services that provide benets

outside the ecosystem itself. Examples include the natural water ltration

function of wetlands, which often benets people far downstream, the storm

protection function of coastal mangrove forests, which benets coastal

properties and infrastructure, and carbon sequestration, which benets the

entire global community by abating climate change. These functions often

affect activities that have directly measurable values, allowing their value to

be estimated.

2.1.3 Option Values

Option values (and the closely-related concept of quasi-option values) are

rather complex use values, which essentially represent the value today of

potential future information about the ecosystem in question. They are an

indicator of how much we value holding onto something that we do not know

enough about at present, with the view that more will be learned in the future

(Fiji).


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3.0 IntroductionThis research is based on case study approach which is widely recognized in many

social science studies especially when in-depth explanations of a social behavior

are sought after. Through case study methods, a researcher is able to go beyond the

quantitative statistical results and understand the behavioral conditions through the

actors perspective. Furthermore, case study research excels at bringing us to an

understanding of a complex issue or object and can extend experience or add strength

to what is already known through previous research. Case studies emphasize detailedcontextual analysis of a limited number of events or conditions and their relationships.

By including both quantitative and qualitative data, case study helps explain both the

process and outcome of a phenomenon through complete observation, reconstruction

and analysis of the cases under investigation [Tellis, (1997)].

3.1 Research Design

This research applied a mixed-method approach as the study aimed to understandefforts that drive the Pulau Payar Marine Park towards sustainability and greater

competiveness. Hence, it was vital to explore areas that contribute to economic value

of the Pulau Payar Marine Park through various sources and multi stages of data

collection, as explained in the following section.

In maneuvering all resources towards achieving the research objectives, a Balanced

Approach was used as the strategy to balance the tradeoff between control, realismand generalizability. For that, research activities were conducted in a few stages in

which specic intentions were realized as described in the following Chart 3.1:

CHAPTER THREE

RESEARCH METHODOLOGY


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CHART 3.1: Research Design

Proposal(Workshop 2)

Indentify ObjectiveFramework

Literature review(Workshop 3)

Site Visit 1

Site Visit 2Unexpected

weatherconditions

Meeting identify

info neededInterview at Alor

Setar

Interview at

Penang

Identification

Feasible variable Indentify key contact

person related to

PPMP issue

Trip 1-Distribute

Questionnaire atPPMP

Trip 2-DistributeQuestionnaire at

PPMP

Face to face

Interview at Dept of

Fisheries Putrajaya

Contact MarzianaFisheries Institute

Teren anu

Dept. of fisheries

Penang

Feasible research

FrameworkInterim report

Worksho 4

Analysis data andreport writing

(Workshop 5)

Meeting -

Review interimre ort

1st draft final report & presentation JTLM Comment from JTLM

ImprovementFinal presentation and submission of the reportJTLM

Plan 2 days trip

1 day trip

Face to face Interview at

Dept of Fisheries A.Setar

(Shuhada)

April

May

June

July

August

Sept

Oct

Nov

2011

START

No

IdeaGeneration

(Workshop 1)


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3.2 Research Framework

This study utilized the Total Economic Value (TEV) as a framework. There were

a few models capable of describing similar valuation processes. Basically, TEVmodel categorized all the elements under two main component; use value and non-

use value. After careful considerations, the TEV model relevant for Pulau Payar

environment and applied in this research is illustrated by Figure 3.1.

Figure 3.1: The Total Economic Valuation (TEV) Model for Pulau Payar

This model is an adaptation from Yeo (1998), where all the variables except captured

sheries under sub-component extractive direct use had been considered under

different categories. It was due to specic policies applied to Pulau Payar that outlined

prohibitions for all catchments, harvest and related activities within Pulau Payar and

two nautical miles sea zone from the shore measured at the lowest low tide. In this

study, we identied coral reef and aquarium shes as an aesthetic component which

fell under non-extractive category.

TOTAL ECONOMIC VALUE MODEL FOR PULAU PAYAR

USE VALUE NON-USE VALUE

Direct Use Indirect Use Bequest ValueExtractive

Capture

Fisheries

Non-Extractive

Tourism

Research /

education

Aesthetic

Physical Protection To:

Coastal Protection

Global Life Support:

Carbon

sequestration

Source: Adapted from Yeo (1998)

Decreasing tangibility of value to individuals


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3.2.1 TEV Mathematical Model

In order to evaluate the value of each research variables, this study employed

TEV mathematical equation (1) proposed by OGarra (2007) which wasadopted from Boardman et al.(2001). This mathematical equation reected the

cost-benet analysis which took in account the gross benets, cost, discount

rate and number of years that signicantly explained the areas of study. The

mathematical equation can be seen as follows:

NPV = net present value

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

i = discount rate

C = cost per year

n = number of years that we are interestedEmpirically, the discount rates used in the valuations of marine resources

ranged between 5% and 15% (Gustavson, 2000). The calculation of equation

(1) utilized a few discount rates within that range.

3.2.2 Type of benets /costs

Based on our preliminary study, we found that four (4) elements under use

value components and three (3) elements under non-use value components

were feasible to be measured using TEV mathematical model. All these seven

elements consisted of capture sheries, tourism, research / education, aesthetic,

coastal protection, carbon xation and bequest value. These elements were

considered as either benets or costs to the Pulau Payar stakeholders. For

each of these elements, there were several ways in getting the data and a

few valuation techniques were adopted in measuring these elements value.

Table 3.1 described the categories of each component, sub-components, type

of benet / cost, source of data and the valuation technique which had been

considered in this study.


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COMPONENTS SUB-

COMPONENTS

TYPE OF BENEFIT

/ COST

SOURCE OF

DATA

VALUATION

TECHNIQUE

USE VALUE Direct Uses 1. Capture

Fisheries

2. Tourism

3. Research /

education

4. Aesthetic

Coral reef

Aquarium fish

Fishery

Department

JTLM

JTLM

Secondary data

based on

market prices

Production

Approach

Production

Approach

Production

Approach

Indirect Uses 5. Coastal

protection

6. Carbon

sequestration

Secondary data

based on

empirical study

Benefit Transfer

Benefit Transfer

NON-USE

VALUE

7. Bequest Value Survey in Pulau

Payar

WTP

Table 3.1: Type of benets, source of data and valuation technique used

3.3 Variables Used (Operational Denitions)

3.3.1 Capture sheries

The capture sheries were dened as the catchment done outside the two

nautical mile sea zone from Pulau Payar shore measured at the lowest low

tide. The landing area for the captured sheries included Kuala Kedah and

Kuala Muda. The assumption was that Pulau Payar had always been the

breeding place for shes and would move out from coral area to many shing

areas in the Strait of Malacca especially nearby Kedah water. The data on the

amount of capture sheries were based on secondary data obtained from the

Department of Fisheries in Kedah.

3.3.2 Tourism /recreational

The tourism elements considered in this study were the number of tourists

and their nationality documented by the JTLM. All tourists were charged for a

conservation fee during their visit to Pulau Payar since 1999. This charge was

included in their package ticket, where the conservation fee for adults was at

RM5.00 and where as students, retired citizen and children were at RM2.50.


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3.3.3 Research /education

There are many research activities had been carried out in PPMP either

scientic study (e.g: Alias, 2008) or economic valuation (e.g: Mohd. Rusli,2009) and involved many parties. However, for the purpose of this study and

within the time given we used an assumption on the value of research budget

given for year 2010.

3.3.4 Aesthetic

Aesthetic value is one of the sub-components under Use Value but has been

classied as non-extractive. This aesthetic value is very valuable and isthe main reason that attract tourist all over the world to visit PPMP. This

study identies coral reef and aquarium / reef sh as variables that are non-

extractive due to the PPMP policy where catchment activities are prohibited.

3.3.5 Coastal protection

In order to abstains Pulau Payar from any distraction especially along the

beaches, coastal protection programs should be done and properly coordinated.However based on the preliminary study, there was no systematic coastal

protection programs carried-out. In this conjunction, the economic value of

the coastal protection in the Pulau Payar was estimated using benets transfer/

cost replacement approach. This involved transferring values from other

studies to the Pulau Payar context. Empirically, coastal protection is valued

by the contribution of the coral reef per km2.

3.3.6 Carbon sequestration

Carbon sequestration is very important to support global community by

abating climate change. According to Sathirathai (1998), carbon sequestration

is a process that xes carbon dioxide thru mangrove and limestone. This

process will offset CO2 emissions, and helping to slow down the greenhouse

effect.However in Pulau Payar, the carbon sequestration process will involve

limestone or more specic by coral reef. The value of carbon sequestration

is derived based on other studies which measured the area of coral reef per

hectare.


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3.3.7 Bequest value

Bequest value is one of the sub-components under Non-Use Value. The

value is derived from conserving the future ecosystem goods and servicesthat is not going to be used at present. This study employed Contingent

Valuation Method which surveyed tourists opinion in conserving PPMP. Their

willingness to pay in the future towards all the goods and services provided in

PPMP is measured as a bequest value.

3.4 Valuation Techniques

This study applied three approaches in evaluating each type of benets/costs that wereconsidered in our feasible sub-component of the total economic valuation of Pulau

Payar. The three valuation techniques were production approach, benet transfer

approach and willingness to pay. The description of each technique is as follows:

3.4.1 Production Approach

Production approaches estimated the value of each variables obtained from

an ecosystem by subtracting all costs associated with the production of goods(or services), from the total revenue obtained. Total revenue was typically

calculated using market prices for the good in question. If the good (or service)

was not sold on the market, but was used for subsistence purposes, then one

may appropriately dene the economic value of the goods using the market

price of a substitute product.

3.4.2 Benet Transfer Approach

Benet transfer is an application to a set of data developed for addressing

one particular environmental or natural resource valuation question to another

context. Benet transfer could be a reasonable method for determining such

values by estimating values of non-market natural resources and services.

Benet transfer applications for this study was done using estimation based on

expert opinion through proxy values. This proxy values were used in relative

manner based on the similar geographic area.


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3.4.3 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. More specically, WTP is the amount of money that a person is

willing and able to pay to get pleasure from recreational facilities. It measures

whether an individual is willing to sacrice their income in order to obtain

more goods and services, and is typically used for non-market goods. This

study used mean value of the WTP multiply by number of tourists to PulauPayar in getting the value for component non-use value, specically bequest

value.

3.5 Illustration of Mathematical Calculation

The illustration of mathematical simulation for one of the subcomponent is shown in

Table 3.2. Table 3.2 illustrates the calculation of capture sheries present value for

10 years at 10% discount rate. This study utilized three different discount rates i.e.

5%, 10% and 15%. All other worksheets of the calculation for TEV are displayed inthe Appendices.

Table 3.2: Calculation of Capture Fisheries Present Value at 10% discount

rate for 10 years

Capture fisheriesvalue in year 2009 = RM880,946,381

% contributon from PPMP= 14%

Bi = 880946381 X 14%

B0 / (i + 1)0

= 123332493.3B1 / (i +1)

1 = 112120448.5

B2 / (i+ 1)2 = 101927680.4

B3 / (i + 1)3 = 92661527.68

B4 / (i + 1)4 = 84237752.43

B5 / (i + 1)5 = 76579774.94

B6 / (i + 1)6 = 69617977.22

B7 / (i + 1)7 = 63289070.2

B8 / (i+ 1)8 = 57535518.36

B9 / (i+ 1)9 = 52305016.69

B10 / (i + 1)

10

= 47550015.18PV (10, 10%) = 881157275


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As a result of all the calculations, Table 3.3 illustrates the ndings for Pulau Payar

TEV Table 3.3: Pulau Payar TEV for 10-year Period.

TABLE 3.3: ILLUSTRATION OF PULAU PAYAR TEV

VARIABLES OF TEV

Capure Fisheries Benefit

Tourism Benefit - Cost

Research and Education Cost

Aesthetic Coral

Aquarium fishes

Benefit

Coastal protection Benefit

Carbon sequestration Benefit

Bequest Value

TOTAL1

1The range of values presented = the lower bound and upper bound of

bequest values

Benefit

[. .. .. .. .. .. , . .. .. .. .. ..] [ .. .. .. .. .. . , . .. .. .. .. ..]

The TEV of thePulau Payar isestimated byadding up the

fisheries value,tourism, aesthetic,research and

education, coastalprotection, carbon

seqestration andbequest value

ECONOMIC VALUE

PER YEAR

PV (10-year

period, i=10%)


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4.0 IntroductionThis chapter consists of two main sections that report the ndings of the research.

The rst section is divided into ten parts and offers information about the nationality

of tourists. Later, this chapter highlights several reasons for tourists visits to Pulau

Payar, tourists departure point and the frequency of visit. Besides that, this chapter

also highlights some information with regards to the tourists level of awareness

in preserving the marine park, tourists activities and tourist attractions in view of

PPMP. In addition to that, the value of PPMP will then be illustrated based on extravalue both, the local and foreign, visitors would be willing to pay when they visit

PPMP.

The second section focuses on the valuation of the Total Economic Value (TEV).

The valuations for each sub-component of the TEV which involve seven research

variables are measured thru TEV mathematical model. The results for all research

variables are discussed based on their present value for 10 and 20 year periods atthree different discount rates; 5%, 10% and 15%. Finally, this study comes out with

the economic value per year and TEV for PPMP for the next 20 years at 10% discount

rate.

4.1 Nationality of Tourists

In this study, for the duration of survey, researchers managed to survey one hundred

and six tourists during the data collection phase. Out of this number, 62.3 percentwere Malaysians while the other 37.7 percent were foreigners. Majority of these

foreign tourists were from Asia (42.5 percent) and Europe (37.5 percent); followed

by Russia & Balkan countries (10 percent), USA (5 percent), and Australia (5 percent)

as described by the following table:

CHAPTER FOUR

RESEARCH FINDINGS


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Table 4.1: Nationality of Tourists

Figure 4.1: Nationality of Tourists

Country Num. Of Tourists Percent

Malaysia 66 62.3

China 5 4.7

India 8 7.5

Germany 5 4.7

Russia 3 2.8

Ireland 2 1.9

France 3 2.8

Great Britain 4 3.8

Singapore 2 1.9

Thailand 1 .9

Australia 2 1.9USA 2 1.9

Austria 1 .9

Japan 1 .9

Belarus 1 .9

Total 106 100.0


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4.2 Intent to Visit

Respondents were then asked to state whether their visit to Pulau Payar Marine Park

was by their own choice or due to other reasons. As shown in Figure 4.2 below, 73percent of them mentioned that they intentionally chose to visit the Marine Park,

while the other 24 percent of the respondents said that they did not specically choose

to visit the Marine Park.

Figure 4.2: Intent to Visit

4.3 Boarding Jetty

Ferries to Pulau Payar Marine Park can be boarded at four jetties. The jetties are

located at Langkawi Island, Penang Island, Kuala Kedah, and Satun, Thailand. Figure

4.3 below shows that majority of respondents (93.4 percent) boarded the ferries from

Kuah, which is located at Langkawi Island.


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Figure 4.3 : Boarding Jetty

4.4 Frequency of Visit

Respondents were also asked to state the number of their previous visits to Pulau

Payar Marine Park. 82.2 percent of them mentioned that the visit was their rst visit.

The other 9.4 percent, 4.7 percent, and 3.7 percent of the respondents had alreadyvisited the Marine Park either once or twice already, between three to ve times, and

more than ve times, respectively.

Figure 4.4: Frequency of Visit

93.4%

3.8% 0.9%

1.9%

Langkawi

KualaKedah

Penang

Satun

82%

9% 5%4%

First

Time

Less than

3 time

Between

3-5 times

More

than 5

time


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4.5 Aware of Marine Park

With regard to the awareness of the respondents towards Pulau Payar as a Marine

Park, almost 70 percent of them provided a positive answer; while the other 30percent either did not aware about that or did not answer the question at all.

Figure 4.5: Aware of Marine Park

4.6 Activities at Pulau Payar Marine Park

Ferries to Pulau Payar Marine Park can be boarded at four jetties. The jetties are

located at Langkawi Island, Penang Island, Kuala Kedah, and Satun, Thailand. Figure

4.3 below shows that majority of respondents (93.4 percent) boarded the ferries from

Kuah, which is located at Langkawi Island.


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RM10.00 21 19.8

RM15.00 2 1.9

RM20.00 9 8.5

RM25.00 5 4.7

RM30.00 11 10.4

RM40.00 4 3.8

RM50.00 10 9.4

RM60.00 2 1.9

RM70.00 3 2.8

RM80.00 1 0.9

RM90.00 0 0

RM100.00 6 5.7

Total 106 100.00

Mean RM13.20

The result showed that the mode is RM10 with 21 number of respondents, followed by RM 5 (14

respondents), RM30 (11 respondents), RM50 (10 respondents), and RM20 (9 respondents).

The mean amount among the respondents is RM13.20 and this result includes both local and

foreign tourists.

Table 4.4: Willingness to Pay among Local Visitors

Amount Of Fee Num. of Local Visitors Percent

RM0.50 4 6.1

RM1.50 6 9.1

RM2.00 1 1.5

RM3.00 1 1.5

RM5.00 12 18.2

RM9.00 1 1.5

RM10.00 11 16.7

RM15.00 1 1.5


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RM20.00 5 8.33

RM25.00 3 4.55

RM30.00 7 10.6

RM40.00 0 0

RM50.00 6 9.1

RM60.00 2 3.0

RM70.00 1 1.5

RM80.00 0 0

RM90.00 0 0

RM100.00 5 5.7

Total 66 100.00

4.8 Willingness to Pay among Local Visitors

Among local visitors, the mode for the highest user fee that they are willing to pay is RM5 with

12 number of respondents, followed by RM 10 (11 respondents), RM30 (7 respondents), RM50

(6 respondents), and RM1.50 (6 respondents). The mean amount among local visitors is

RM12.60.

4.9 Willingness to Pay among Foreign Visitors

According to Table 4.5, among foreign visitors, the mode for the highest user fee that they are

willing to pay is RM10 with 10 number of respondents, followed by RM 20, RM30, RM40, and

RM50, with 4 respondents each. The mean amount among foreign visitors is RM 14.30.

Table 4.5: Willingness to Pay among Foreign Visitors

Amount of Fee Num. of Foreigners Percent

RM0.50 2 5

RM1.50 1 2.5

RM2.00 1 2.5

RM3.00 1 2.5

RM5.00 2 5

RM9.00 0 0

RM10.00 10 25

RM15.00 1 2.5


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RM20.00 4 10

RM25.00 2 5

RM30.00 4 10

RM40.00 4 10

RM50.00 4 10

RM60.00 0 0

RM70.00 2 5

RM80.00 1 2.5

RM90.00 0 0

RM100.00 1 2.5

Total 40 100.00

4.10 Attractiveness of Pulau Payar Marine Park

In this last section, findings on respondents perceptions on the level of attractiveness of Pulau

Payar Marine Park are being presented. There are four dimensions of attractiveness that were

being assessed. The four dimensions are the coral reef attractiveness, coral fish attractiveness,

avi fauna attractiveness, and flora attractiveness.

Figure 4.7 below shows that only 11 percent of the respondents among local and foreign

tourists answered high and very high for the influence of attractiveness of coral reef on their

decision to go to Pulau Payar Marine Park. The two highest percentages of respondents

choice were 44 percent for moderate and 30 percent for low.

Figure 4.7: Coral Reef Attractiveness


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Similar to coral reef attractiveness, findings on the attractiveness of coral fish that influence the

respondents decision to visit Pulau Payar Marine Park reveal that 46 percent of them rate it at

the moderate level, while 34 percent of them gave a low rating (Figure 4.8).

Figure 4.8: Coral Fish Attractiveness

Figure 4.9 below shows that 46 percent of the respondents gave a moderate rating while 34

percent of the respondents gave a high rating for the influence of avio fauna attractiveness on

their decision to go to Pulau Payar Marine Park.

Figure 4.9: Avi Fauna Attractiveness


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At almost the same percentage as the influence of avi fauna attractiveness on their decision to

go to Pulau Payar Marine Park, 43 percent of the respondents gave a moderate rating while 31

percent of the respondents gave a high rating for the influence of flora attractiveness on theirdecision to go to Pulau Payar Marine Park.

Figure 4.10: Flora Attractiveness

All in all, the rating of the level of attractiveness of Pulau Payar Marine Park was at a moderate

level for all four dimensions of attractiveness. However, for coral reef and coral fish influence on

the decision of the respondents to visit the Marine Park, the next highest rating was at a low

level; while for the influence of avio fauna and flora on the decision of the respondents to visit

the Marine Park, the next highest rating was at a high level.

4.11 Total Economic Valuation of PPMP

The total economic value (TEV) of Pulau Payar Marine Park (PPMP) is estimated based

on seven values of research variables. The TEV are summation of these values

namely; capture fisheries, tourism, research and education, aesthetics, coastal


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protection, carbon sequestration and bequest value. The following section describes

each of the values and the findings of its present value (PV).

4.11.1 Value of Capture Fisheries

Capture fisheries are considered to have significant impact on the TEV of PPMP. Using

retail value of marine fish landings (Department of Fisheries, 2010) at Kedah coast thecatches attribute from the presence of fish in PPMP was valued. In 2009, the total value

of fish landings in Kedah was RM880,946,381.00. Meanwhile the contribution from

Pulau Langkawi was around 14% of the total capture fisheries in Kedah (Mahyam et.

al., 1998). Thus, this study used 14% as a basis in estimating the contribution

percentage of PPMP towards the total capture fisheries. Table 4.6 indicates the only

one extractive value under TEV component associated with present values (PVs).

Table 4.6: Present Value of Capture Fisheries

Present Value Discount rates (i)

i=5% i=10% i=15%

PV over 10-year period (RM) 1,075,673,315.07 881,157,274.98 742,309,741.46

PV over 20-year period (RM) 1,660,327,967.41 1,173,331,534.11 895,311,450.64

The resultant economic value of fish caught from PPMPs MPA along the Kedah coast

is valued at RM 123,332,493.30 million per year (refer to Appendix B1). The PV is

estimated to be within RM 895 million to RM1.660 billion in 20 years at 5% - 15%

discount rate.

4.11.2 Value of Tourism

PPMP has attracted a total of some 96,097 visitors during the 2010 financial year,

attracting total revenues in the region of RM480, 485.00 which is the consumer surplus


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for PPMP. This is the additional amount that visitors have paid for over and above what

they actually had to pay which is RM 5.00 per person. To preserve the environment and

maintain the cleanliness of PPMP, JTLM had spent almost RM8, 000 per month whichtotal-up the cost to RM96,000 yearly. The PV of gross benefit achieved from tourism

over 10 and 20 year period is ranging from RM2.9 million and RM3.5 million (at 15%

discount rate) to RM4.2 million and RM6.5 million (at 5% discount rate) for these two

consecutive periods. Whilst the PV of the maintenance cost over 10 and 20 year period

are within RM 577,802 and RM 696,896 (at 15% discount rate) to RM 837,287 and RM

1.2 million (at 5% discount rate) for the same two periods. The detail PVs are shown in

Table 4.7.

Table 4.6: Net Present Value of Tourism

Present value Discount rate (i)

i=5% i=10% i=15%

PV of gross benefits over 10-year period (RM) 4,190,662.81 3,432,857.33 2,891,928.04

PV of gross benefits over 20-year period (RM) 6,468,390.14 4,571,124.66 3,487,999.88

PV of cost over 10-year period (RM) 837,286.55 685,878.44 577,801.79

PV of cost over 20-year period (RM) 1,292,372.19 913,302.12 696,895.82

NPV over 10-year period (RM) 3,353,376.25 2,746,978.88 2,314,126.26

NPV over 20-year period (RM) 5,176,017.94 3,657,822.55 2,791,104.06

Overall, the net present values (NPVs) over 10-year period are RM 3.4 million, RM 2.7

million and RM 2.3 million at 5%, 10% and 15% discount rates respectively.

Furthermore, the enjoyment of these nature reserves is derived from marine activities

as translated by 79.20% (snorkeling) and 57.50% (swimming), while, about 73% of the

tourists had decided to visit this nature reserve way back from their hometowns. Based

on the study, the total expenditure attributed to the PPMP is estimated to be RM19.219

million (96,097 x minimum RM200.00), including consumers surplus.


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4.11.3 Research and Education Cost

The research budget allocated to JTLM was around RM900, 000, while an expense oneducation activities was RM 300,000 for a financial year 2010. Thus the total value is

expected to be RM 1.2 million a year. However the actual cost spends exactly to PPMP

is not available. Table 4.7 indicates PVs of the research and education cost.

Table 4.7: Present Value of Research and Education Costs


i=5% i=10% i=15%

PV of cost over 10-year period (RM) 10,466,081.92 8,573,480.53 7,222,522.35PV of cost over 20-year period (RM) 16,154,652.41 11,416,276.46 8,711,197.77

The estimated PV of cost for 10 year period is within RM 7.2 million to RM10.5 million

and for 20 year period is within RM 8.7 million to 16.2 million within the three discount

rates.

4.11.4 Value of Aesthetics

The aesthetics values for PPMP are confined to coral reef and reef fish values. Due to

unavailability of information, the coral reef value was excluded from the TEV

calculations. According to Alias (2008), the average density of coral reef fish population

inside the PP protected area was 29,000kg/km2. Meanwhile the sea zone in the

protected area in km2 is approximately to be 50.43km2. Thus, based on the minimum

market price for reef fishes (USD11/kg = RM34.62/kg), the reef fish value surrounding

the circumference of 2 nautical miles of PPMP as per the year was valued at RM 50,

636, 375.68 (refer Appendix A5, B5 & C5). The estimated PVs for 10 and 20 yearperiod are illustrated in Table 4.8.

Table 4.8: Present Value of Aesthetics


i=5% i=10% i=15%

PV over 10-year period (RM) - coral reef N/A N/A N/A


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PV over 10-year period (RM) - reef fishes N/A N/A N/A

PV over 10-year period (RM) - reef fishes 53,348,522.04 44,346,836.85 37,785,748.70

PV over 20-year period (RM) - reef fishes 87,556,304.49 61,874,867.55 47,213,661.11

At 10 % discount rate, the present value for reef fishes to be around 62 million in 20years.4.11.5 Value of Coastal Protection

Based on Constanza et al (1997), the value of coastal protection provided by reefs was

at USD 275, 000 (RM 865, 562. 50 as at USD 3.1475 per RM1.00) per km2 of reef per

year. By using Benefit Transfer method, for an estimated 0.251km2 (LEK Report) of

coral coverage in PPMP, it was found that approximately the total value of coastal

protection by coral reef per year is around RM 217, 256.19 (refer Appendix A6, B6 &

C6). Thus, the present values for 10 and 20 year periods are shown in the Table 4.9.

Table 4.9: Present Value of Coastal Protection


i=5% i=10% i=15%

PV over 10-year period (RM) 1,894,850.88 1,552,201.41 1,307,614.73


At 10% discount rate, the coastal protection is valued for 20 year period at RM 2.07million.

4.11.6 Value of Carbon Sequestration

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), this study

transferred that benefit as the basis for calculation. For 25.1 hectares of coral coverage

in PPMP it was identified that the value for carbon sequestration in the PPMP region per

year is RM 213, 306.08. Table 4.10 indicates the PVs for both study periods.


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Table 4.10: Present Value of Carbon Sequestration


i=5% i=10% i=15%



At 10% discount rate, the carbon sequestration is valued for 20 year period by RM 2.03

million.

4.11.7 Value of Bequest value

The bequest value of the MPA was determined using the Contingent Valuation Method

which elicits peoples willingness to pay to retain or improve an environmental amenity

or to prevent its loss. Respondents involved in the survey were predominantly locals.

Only 37% are foreign citizens including Europeans and East Asia. Since the sample

size was too small, the quantitative estimates only restricted to these respondents. The

survey also did not capture a significantly representative group in terms of country of

origin, income and race.

On average, the overall willingness to pay (as a once-off payment), meant to conserve

for future generations or equates the future value of the current system, was RM1,

268,480.40 million. This figure could be translated into the willingness to pay of an

additional RM12.60 per person for local tourists and an additional RM14.30 per person

for foreign tourists or an additional RM13.20 in general. It should be noted that this

study should only be considered as a preliminary estimate since the result was


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generated from a small sample size. For economic value in 10 year and 20 year

periods, the values are illustrated in Table 4.11.

Table 4.11: Present Value of Bequest Value


i=5% i=10% i=15%

PV over 10-year period (RM) - mean WTP 11,063,349.81 9,062,743.34 7,634,690.03

PV over 20-year period (RM) - mean WTP 17,076,549.96 12,067,769.11 9,208,319.69

PV over 10-year period (RM) - minimum WTP 419,066.28 343,285.73 289,192.80

PV over 20-year period (RM) - minimum WTP 646,839.01 457,112.47 348,799.99

Bequest value is estimated at RM 12 million based on mean value of WTP = RM13.20,

and only RM457, 113 for the minimum WTP = RM0.50 both values for 20 year period

at 10% discount rate.

4.11.8 TEV for 20 year period

The economic value per year for each of components of TEV is shown in Table 4.12.

The results indicate that capture fisheries contribute almost 70% to the TEV and

followed by aesthetic value of 29%. Where as, other components only contribute for the

remaining 1% of the total economic value per year. This study found that the value is

within RM174 million (USD55.3 million) to RM175 million (USD55.7 million) per year. In

the next 20 year period, TEV for PPMP is estimated to be nearly RM 1.7 billion (USD

530 million) with 10% discount rate.

Table 4.12: Economic values of Pulau Payar Marine Park

Component of TEVEconomic Value per

Year (RM)

PV (20-year period, i=10%)

(RM)

Capture Fisheries 123,332,493.34 1,173,331,534.11

Tourism 384,485.00 3,657,822.55

Research / Education -1,200,000.00 -11,416,276.46

Aesthetic 50,636,375.68 481,732,386.57


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Coastal protection 217256.19 2,066,880.58

Carbon sequestration 213,306.08 2,029,300.94

Bequest Value min WTP 48,048.50 457,112.47

ave WTP 1,268,480.40 12,067,769.11

TOTAL LOWER BOUND 173,631,964.78 1,651,858,760.75

UPPER BOUND 174,852,396.68 1,663,469,417.39


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This study was conducted to determine the total economic value of Pulau PayarMarine Park, Kedah. The Marine Park is an area of the sea zone, two nautical miles

from the shore at the lowest tide, preserved as a sanctuary for the protection of

marine eco-system especially coral reefs and its ora and fauna. The Department

of Marine Park is a federal agency under the Ministry of Natural Resources and

Environment (NRE) which has been tasked to establish, administer and manage

Marine Parks in Malaysia. The principle aims of establishing Marine Parks in the

country is to protect, conserve and manage is perpetuity representative marine eco-systems of signicance, particularly coral reef and their associated ora and fauna,

so that remain undamaged for the future generations.

Pulau Payar Marine Park consists of four islands that form the archipelago of Pulau

Payar. The islands are Pulau Payar itself, Pulau Lembu, Pulau Kaca and Pulau

Segantang. Pulau Payar Marine Park is located about 19nm south of Pulau Langkawi,

32nm north of Penang and 15nm west of Kuala Kedah. The islands was gazette as aMarine Park in 1994 under the Fisheries Act 1985 (Amended 1991).

Pulau Payar is the largest of the archipelago, with an area of 31.2 hectares and an

approximate length of 1.75 km and about 500 meters wide. It rises to 80 90 meters

above sea level at the peak point. Coastline of the island is about 3.35 km with

very limited beach and at land with no freshwater sources. The four sandy beaches

are found at the eastern side of the island. The entire length of its north-westerncoast is predominantly rocky and characterized by steep cliffs and wave-cut gullies.

Two longest beaches, around 100 meters each, are located in front of marine park

information centre and commercial tourist platform. The entire island is covered

with dense vegetation.

The goal of this study is to provide preliminary estimates of the costs and benets

associated with Pulau Payar Marine Park, in particular, that could potentially lead

CHAPTER FIVE

CONCLUSION


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to an ability to estimate how these costs and benets might change under different

scenarios in view of the Marine Park Area size and the components intensity. This

study works with the Total Economic Value (TEV) as the research framework whichcomprises the elements of direct use value, indirect use value and non-use value.

Direct use value refers to consumptive or non consumptive values. Indirect use value

covered in this study provides landed sh statistics. The non-use elements comprises

of the optio

Documents

Investigating Total Economic