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
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 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 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 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).
METHODOLOGY
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.
METHODOLOGY
RESEARCH FRAMEWORK
METHODOLOGY
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.
METHODOLOGY
COMPONENTS
SUBCOMPONENTS
Direct Uses
Use Value
Indirect Uses
Non-Use Value
TYPES OF BENEFIT/COST
SOURCE OF DATA
Extractive
Capture Fisheries
LKIM
Non-Extractive
Tourism/Recreation
Research/Education
(through research grant)
Aesthetic (including coral
mining)
Physical Protection to:
Coastal Protection
Global Life Support
Carbon sequestration
DMPM, Labuan
Corporation, MOTOUR
Empirical Study
(Secondary data on market
prices for coral reef)
Secondary data based on
empirical study
Secondary data based on
empirical study
Bequest Value
Questionnaire
Survey in Labuan Marine
Park & Labuan Jetty
Terminal
VALUATION
TECHNIQUE
Production/Market
Valuation
Benefit Transfer
Approach
Benefit Transfer
Approach
Benefit Transfer
Approach
WTP
METHODOLOGY
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
METHODOLOGY
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
METHODOLOGY
DATA COLLECTION
• Fishery data –Lembaga Kemajuan Ikan
Malaysia (LKIM)
• Allocation for research and educational fundDepartment 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
METHODOLOGY
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.
METHODOLOGY
DATA COLLECTION
COMPONENT OF TEV TAMAN LAUT LABUAN
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.
METHODOLOGY
DATA COLLECTION
COMPONENT OF TEV TAMAN LAUT LABUAN
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
METHODOLOGY
DATA COLLECTION
COMPONENT OF TEV TAMAN LAUT LABUAN
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.
METHODOLOGY
DATA COLLECTION
COMPONENT OF TEV TAMAN LAUT LABUAN
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)
METHODOLOGY
DATA COLLECTION
COMPONENT OF TEV TAMAN LAUT LABUAN
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
METHODOLOGY
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:
METHODOLOGY
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
METHODOLOGY
VALUATION TECHNIQUES
NO.
1.
VALUATION
TECHNIQUES
Production Approach
DESCRIPTION
•
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 questionnairebased approach that is deliberated to estimate the economic value of nonmarket 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 FINDINGS
DEMOGRAPHIC BACKGROUND
Socio-demographic
Characteristic
Gender
Male
Female
Age
20 – 29 years old
30 – 39 years old
40– 49 years old
>50 years old
Nationality
Malaysia
Other countries
Education Level
SPM/STPM
Bachelor of Degree
Master Degree
Occupation
Unemployed
Self-Employed
Private Sector
Government Sector
Respondent (%)
60.0
40.0
20.0
40.0
20.0
20.0
80.0
20.0
50.0
40.0
10.0
20.0
40.0
20.0
20.0
STUDY FINDINGS
Willingness to Pay among Visitors
STUDY FINDINGS
SUMMARY OF TOTAL ECONOMIC VALUATION
Components TEV
Capture
Fisheries
Tourism
Research /
Education
Aesthetic
Coastal
protection
Carbon
sequestration
Bequest Value
(mean WTP)
TOTAL
Economics Value Per
Year (RM)
PV (15-year period,
i=5%) (RM)
5,604,234.143
58,170,269.13
171, 800
1,783,232.46
-158,500
-1,645,182.45
33,600,000
323,846,640
67,200
697,515.84
84,982.5
882,092.8553
416,000
4,317,955.2
39,613,916.64
388,052,523.04
0.21
0.17
1.05
14.15
0.43
-0.4
84.82
Capture Fisheries
Tourism
Research / Education
Aesthetic
Coastal protection
Carbon sequestration
Bequest Value (mean WTP)
SUMMARY
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.
SUMMARY
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.
RECOMMENDATIONS
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.
RECOMMENDATIONS
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.
RECOMMENDATIONS
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.
ACKNOWLEDGEMENT
Department of Marine Park Malaysia (DMPM)
Lembaga Kemajuan Ikan Malaysia (LKIM)
Labuan Corporation
Ministry of Tourism (MOTOUR)
Institut Penyelidikan Marin Borneo, UMS
Universiti Malaysia Sabah
THANK YOU