Pertanika J. Soc. Sci. & Hum. 13(1): 1-8 (2005) ISSN: 0128-7702© Universiti Putra Malaysia Press

Use of Dichotomous Choice Contingent Valuation Methodto Value the Manukan Island, Sabah

'ALIAS RADAM & 2SHAZALI ABU MANSORfaculty of Economics and Management

Universiti Putra Malaysia43400 UPM, Serdang

Selangor, Malaysia2Universiti Malaysia Sarawak,

94300 Kota Samarahan, Sarawak, Malaysia

Keywords: Dichotomus contingent valuation method, outdoors-recreational resources, willingnessto pay, Manukan Island

ABSTRAKKajian ini menerangkan penggunaan kaedah penilaian pilihan dikotomous kontingen (CVM)untuk menilai sumber rekreasi luar di Pulau Manukan, Sabah. Kedua-dua model logit dan probitadalah digunakan untuk menganalisis data primer yang diperoleh melalui temu duga peribadi.Penganggaran kebolehjadian maksimum bagi model ini menunjukkan pendapatan dan hargaadalah pembolehubah yang signifikan dalam menentukan kesanggupan membayar (WTP)seseorang. Nilai WTP yang diterbitkan semasa yang dikenakan kepada pengunjung. Kajian inijuga menganggarkan hasil boleh dijanakan iaitu yuran yang dikenakan menurut rangka kerja WTP.

ABSTRACTThis study presents the application of dichotomous choice contingent valuation method (CVM)to value outdoors-recreational resources in Manukan Island, Sabah. Both the logit and probitmodels are used to analyze the primary data obtained through personal interview. The maximumlikelihood estimates of this model show that income and price are significant variables indetermining one is willingness to pay (WTP). The WTP figure derived from the model shows thatit is much higher than present fees charged to the visitors. This study has also estimated therevenue that could be derived is the fees were charged according to the WTP framework.

INTRODUCTIONWTiile much economic activity is organizedthrough the private market in which competitiveforces determine prices, most of the recreationalparks exist as public property because of theirnon-rival consumption and non-exclusion innature. If there are some fees charged to it, it isinsignificant compared to the utility obtained.The existence of public goods creates problemsfor a price system, as once a public good isproduced, a number of people will automaticallybenefit regardless of whether or not they pay fori t The designations of parks as public good

create free riders and over-usage problems. Thiscould lead to deterioration in its quality. Intandem with the concern of quality environment,the subject of user fees in the management ofnational parks and protected areas has receivedincreasing interest in the literature (Ana 1988;Leuschner et al 1987; Lindberg and Huber 1993Rosenthal et al 1984).

The cognizance of charging fees for theutilization of parks should be given specialattention in developing countries as governmentfunds are typically in short supply, and enforcementof environmental regulations lax or nonexistent.

I J Alias Radam and Shazali Abu Mansur are lecturers at Universiti Putra Malaysia (UPM) and Universiti MalaysiaSarawak (UNIMAS) respectively.

Alias Radam & Shazali Abu Mansor

The majority of the visitors are foreign touristswho incur few of the costs but enjoy many of thebenefits stemming from resource conservationefforts. Charging of fees could allow a certaindegree of the market system to function, absorbingpart of environmental costs.

The potential benefits from charging userfees and differentially pricing access to nationalparks are significant. As charging fees could leadto a more optimal market (Dixon and Sherman1991) it could provide the vehicle for capturingbenefits of ecotourism which often accrueprimarily to the private sector. It can also reducevisitation in areas that suffer from overuse andaccompanying ecological damage. Using ManukanIsland in Tunku Abdul Rahman Park, Sabah,this paper applies a Contingent ValuationMethod (CVM) to access the net economic valuesof recreational resource in Manukan Island.

This paper is organized into five sections.Section two describes the location of study. Sectionthree explain the methodology and source ofdata used in the study. Empirical result are presentedin Section four while the last section offers somediscussion and concluding comments with regardto nonmarket valuation work in this country.

LITERATURE REVIEW

Considerable research has established the CVMas a sound technique for estimating values forpublic policy decisions. Some example of thesestudies are Rendall et al (1974), Bishop andHeberlein (1979), Bishop et al (1983),Hanemann (1984), Seller et al (1986), Abala(1987), Cameron and James (1987), Bowker andStoll (1988), Cameron (1988), McConnel (1990),Balderas and Laarman (1990), Donaldson et al(1997), Rollins (1997), Rayn (1997), Willis andPowe (1998), Hayes and Hayes (1999), Carlsonand Johansson-Stenman (2000), Shackley andDixon (2000), Loomis et al (2000), and Scarpa(2000), just to name a few.

Most Malaysian cases on environmentalvaluation have applied the Travel Cost Methods(TCM) to estimate the benefits of nature-basedrecreation - for instance, Shuib (1991), Willis etal (1998), Jamal and Redzuan (1998), Jamal(2000). There have been fewer published studiesof a CV application: Nik Mustapha (1993), Aliaset al (2002), Alias and Ruhana (2003) and Jamaland Shahariah (2003) employed the dichotomouschoice and open-ended CV formats to estimate

the benefits of a lake recreation and non-usevalues of forest resources, respectively.

Nik Mustapha (1993) carried out a study atTasik Perdana recreational area in Kuala Lumpurusing the dichotomous choice contingentvaluation method. Both the logit and probit modelsare used to analyze the data and the maximumlikelihood estimates of these models areencouraging. The consumers' mean and medianwillingness-to-pay were computed. The meanwillingnes-to-pay ranged from RM84 to RM106from both models while the median WTP rangedfrom RM109 to RM36. Median WTP measuresare argued to be more robust than the meanWTP, and in this study he concluded that themedian WTP figure for the outdoor recreationalresources in Tasik Perdana recreational resourcesin Tasik Perdana is about RM36.

Alias et al (2002) conducted a study ofwillingness of Local Tourists to Pay forConservation of Tourism Sports in the DamaiDistrict Sarawak. The study applied thedichotomous choice of Contingent ValuationMethod (CVM), to visitors sampled randomly.Results indicated a per person median value ofRM11.64 WTP for the preservation of Damai,using the logit model. The amount could becollected by dividing the whole Damai resortinto specific areas (e.g. beach, mangrove swamp,mountain range, etc.). The current environmentalcondition in Damai is still pristine and undefiled(the mangrove swamps, beaches, and mountaintreks), as it has yet to be fully developed into atourist attraction. As such, each individual areaof interest could be developed accordingly withthe level of WTP as indicated in this study.

Alias and Ruhana (2003) apply thedichotomous choice CVM to the outdoorrecreational resources of the Malaysian Agricul-tural Park, Bukit Cahaya Sri Alam, Selangor.Both the logit and probit models are used toanalyze the primary data obtained from personelinterviews. The maximimum likelihood estimatesof this model show that income and price aresignificant variables in determining one's WTP.The WTP figure derived from the model showsthat these were much higher than present feescharge to the visitors. The calculated premiummean WTP using the logit model ranged fromRM3.85 to RM6.29 for single respondents and,for the marrige respondents from RM2.84 toRM4.80 based on 95.7 percent confident interval,with mean premium value of RM4.87 and RM3.61,respectively.

Pertanika J. Soc. Sci. & Hum. Vol. 13 No. 1 2005

Use of Dichotomous Choice Contingent Valuation Method to Value the Manukan Island Sabah

Jamal and Shahariah (2003) applied theDichotomous-Choice Contingent ValuationMethod on Paya Indah wetlands in Kuala Langat,Selangor to estimate the non-marketed benefitsof conserving the wetland from the perspectiveof non-users, in particular among urbanhouseholds in Selangor. Results indicate thatthe mean willingness to pay (equivalent surplus)which reflects the non-use values of Paya Indahwetlands accrued to urban non-user householdsin Selangor ranged from RM28 - RM31 annually.The large sum of monetary value that householdsplace for the conservation of Paya Indahillustrates partially the magnitude of socialbenefits that society at large obtains from theassurance that the'Wetland is to be maintainedas a site for nature. This strongly indicates thatconservation of the wetlands is highly valued bythe general public.

LOCATION OF THE STUDYThe Tunku Abdul Rahman Park lying from 3 to8 kilometers off Kota Kinabalu, comprises fiveislands covering an area of 4,929 hectares.Tourists and divers are attracted to the parkbecause the islands namely Pulau Gaya, PulauManukan, Pulau Mamutik, Pulau Sapi Pulau Sulugare surrounded by clear waters and coral reefs.

Pulau Manukan is a boomerang shapedisland covering an area of 51 acres. It is thesecond largest island of the Tunku AbdulRahman Park and has good stretchers of beacheson the southern coast line. The island is idealfor diving and swimming. Among the facilitiesavailable on the island are chalets, clubhouses,restaurants, diving centers, pools, football fields,and squash/tennis courts. Other infrastructuralsupport such as water, electricity, desalinationplant, sewerage system and a solar-powered publictelephone are also provided. The best reefs arejust located around the island and are exposedduring low tide.

METHODOLOGY AND SOURCE OF DATAFollowing recommendations from environmentalliterature (Arrow et al 1993), the closed-ended(CE) WTP approach to estimate the benefitsfrom the preservation of the Manukan Islandwas used. Individuals were asked whether theywould pay specific additional fees for a givencommodity, with possible responses being "YES"and "NO". The bid amount is varied acrossrespondents and the only information obtained

from each individual is whether his /hermaximum WTP is above or below the bid offered.

Logistic regression technique were used toestimate WTP (Hanemann 1984). Uisng thisapproach, the probability of saying "YES" to abid at different levels of the independent variableis estimated as:

P = (1)

where x is estimated regression logit regressionequation and P is the probability of acceptingthe price. Mean WTP is estimated as the areaunder this probability function. This area showsthe proportion of the population who wouldconsume the good at each price level, and theirassociated utility. The area under the curve isestimated by integration techniques and can beexpressed as:

E(WTP) = (2)

where (1 + ea + bPRICE)"1, is the probability of

saying "YES" and U and L the upper and lowerlimits of the integration respectively.

Estimating mean WTP within this frameworkrelies on making some assumption about upperand lower limits of the integral, i.e. knowing theprice amounts at which the probability of saying"NO" is zero and the probability of saying "YES"is one. Applying this to Manukan Island, andassuming that individuals will not pay if theyreceive a disutility from it, negative WTP can beruled out and zero used as the lower limit.Bishop and Heberlein (1979) and Sellar et al(1985) used the upper range for the integrationof their price amounts as the upper limit for theintegration. Hanemann (1984) argued that suchan approach makes assumption about theprobability distribution for the unknown WTP inthe sample. He argued that the upper limit shouldbe infinity and that using the highest offeredamount may be a poor approximation of themean utility estimated when integrating betweenzero and infinity. In this study zero was chosenas the lower limit of the integral and maximumvalue as the upper limit. Confidence interval ofWTP was also calculated using the variance-covariance matrix and a technique adopted fordichotomous CVM by Park et al (1991).

For the purpose of this study, primary datawere collected through interviews by means ofquestionnaires. A total of 180 domestic visitors

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Alias Radam 8c Shazali Abu Mansor

TABLE 1Socio-economic characteristic of respondents

Frequency Percent

GenderFemaleMale

Origin of touristKota KinabaluOther Sabah areaSarawakPeninsular MalaysiaForeign tourist

Age distributionLess than 25 years25-34 years35-44 yearsMore than 44 years

Marital statusSingleMarried

RaceMalayChineseIndianOther bumiputeraOther race

Education levelPrimary schoolSecondary schoolCollege and university

Family membersLess than 5 persons6 - 1 0 personsMore than 10 persons

Job categoryProfessionalAdministratorClericalServices sectorOthers

Income levelLess than RM500RM501-RM1000RM1001-RM2000More than RM2001

9882

1222041125

74702115

11169

3611310525

48393

120564

3014146062

63504027

54.4445.56

67.7811.112.226.1113.89

41.1138.8911.678.33

61.6738.33

20.006.111.67

58.3313.89

2.2246.1151.67

66.7031.102.20

16.677.787.7833.3334.44

35.0027.7822.2215.00

were interviewed and only 160 are used for thepurpose of this analysis because of missing values.Information on socio-economic characteristicsof respondents obtained included race, origin,age, marital status, education, size of familymembers, occupation, monthly and supplementarygross income (Table 1). Visitors at ManukanIsland were asked to by anwer the questionnairesat the chosen location. Each of the respondentswas given the details on the purpose of

preservation of the island, facilities available andformat used in Contingent Value techniques.Respondents were asked the following questionand required to respond either 'Yes* or 'No':

If entrance fees are increased by RM x, wouldyou willing to pay so that you could havecontinued to use this recreational area?

Where x ranged from RM1.00 to RM10.00,it represents a 'reasonable' additional amount

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Use of Dichotomous Choice Contingent Valuation Method to Value the Manukan Island Sabah

of entrance fee to many privately managed recrea-tional areas in Sabah. The ability to seek willing-ness to pay is represented by the dichotomousvariable of WTP with values of 1 for those willingto pay the additional amount of entrance feeand 0 is otherwise. An OLS regression of theabove relationship with WTP as the dummyvariable is beset by several problems namely: (1)non-normality of the error term, (2) heteros-cedasticity, and (3) the possibility of the estimatedprobabilities lying outside the 0-1 boundary(Gujarati 1988). Since the dummy WTP is actuallya proxy of the the actual propensity or ability ofwillingness to pay, the probit and logit modelsguarantee that the estimated probabilities lie inthe 0-1 range and that there are non-linearlyfactors related to the explanatory variables. Thedifference between these two approaches aremainly in the distribution of the regression errorterms. The logit approach assumes that thecumulative distribution of the error term is logisticwhile probit assumes that is normal.

RESULTS AND DISCUSSIONAn initial estimation of the model using all thesocio-economic characteristics as independentvariables reveals that all variables are insignificantexcept for income and price (refer to Table 2).

The maximum likelihood estimates of thespecification for logit and probit models areestimated using Shazam, version 7.0 and themeans of WTP are calculated using MATEMATICA,version 2.2 (Sherlock 1993). The results aregiven in Table 2. The chi-squared statistics showsthat the model is highly significant. The value ofadjusted McFadden's pseudo R2 is 0.0982 and0.0980 for logit and probit models, respectively.The percent of right prediction is 62.92 percentfor both models. The price and income in bothmodels are significant at one- percent level. Theresult also shows the logit and probit modelsdiffered little in terms of summary statistics.This corresponds with prior work in whichneither model dominated the other empiricallyin the binary dependent variable case (Bowkerand Stoll 1988).

Based on the estimation results, equivalentWTP measures were calculated using logit andprobit models at income level (Table 3). Thecalculated mean WTP ranged from RM3.99 toRM6.14 for the logit model, and for the probitmodel it ranged from RM4.34 to RM5.69 basedon 95 percent confident interval. As shown inTable 1, the logit model performed slightly betterthan probit model both in terms of percentcorrect prediction and McFadden-R2. In the lightof this the mean WTP obtained from the logit

TABLE 2Parameter estimates for dichotomous choice model for Manukan Island, Sabah

Logit Model Probit Model

InterceptPriceIncomeLog-likelihoodChi-squareMcFadden R2

% Right Prediction

0.6658 (1.9919)***-0.2008 (-3.5284)*0.00017 (2.7195)*

-112.4523.8558*0,098262.95%

0.3985 (1.927)***-0.1213 (-3.510)*0.00010 (2.991)*

-112.4423.8760*0.098062.92%

Significant at 1% level

TABLE 3Estimating of mean mean WTP for Manukan Island Sabah

Lower Limit 95%Confident Interval

Mean Upper Limit 95%Confident Interval

Logit ModelProbit Model

3.994.34

5.025.00

6.145.69

Source: Computed from field survey

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Alias Radam & Shazali Abu Mansor

TABLE 4The estimation of additional benefit of Manukan Island, Sabah 1988 - 1998

19881989199019911992199319941995199619971998

DomesticVisitors

11,12713,51330,21434,72248,26952,51467,51772,88959,72953,93047,492

ExpectedIncreaseBenefit

55,857.5467,835.26151,674.28174,304.44242,310.38263,620.28338,935.34365,902.78299,839.58270,728.60238,409.84

ForeignVisitors

1,2281,208886536

9,69115,04117,37618,49015,19917,48018,110

ExpectedIncreaseBenefit

6,201.406,100.404,474.302,706.8048,939.5575,957.0587,748.8093,374.5076,754.9588,274.0091,455.50

Total Visitors

12,35514,72131,10035,25857,96067,55584,89391,37974,92871,41065,602

ExpectedIncreaseBenefit

62,058.9473,935.66156,148.58177,011.24291,249.93339,577.33426,684.14459,277.28376,594.53359,002.60329,865.34

Source: Computed from the Sabah National Park, Various issues.

model would be a more reliable measure.Therefore, the premium value of RM5.02 wouldbe taken as the conservative WTP measure.

From these values of consumers' surplus orthe additional maximum willingness to pay toManukan Island Recreation Area, Sabah, onecan compute the additional net benefit ofManukan Island for the respective year bymultiplying WTP by the number of visitors tothis island, (refer to Table 4). The number ofvisitors has increased from 12,355 in 1988 to91,379 in 1995, and decreased to 65,602 in 1998as the result of the regional economic crisis andhaze disaster. The number of visitors can betranslated to huge monetary economic benefitsfor the relevant authorities.

CONCLUSIONThis study has shown that visitors to the ManukanIsland park are willing to pay more than thecurrent RM1.00 to RM2.00 entrance fees. Byemploying the logit model, it is estimated thatthe visitors are willing to pay about RM5.02 forthe entrance fee. The revenue collected from thevisitors could be used as an additional support tothe limited fund allocated for maintenance andconservation of the park. Moreover, the revenuederived from the tourism industry is not beingearmarked for park maintenance or resourceconservation efforts; rather, it is frequentlymerged with other sources of revenues. Also,without users' fees to effectively capture eco-tourism revenues, alternative land use that providesgreater short-run return will often be pursed on

public as well as private land. Setting fees torecreational parks, would enable apportioningthe use of resources to the rationale user.

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