Monday, August 31, 2009

What are Factors Contributing to Public Willingness to Pay for an Improved Waste Management

By Muhammad Subhan & Ahmad Bashawir

(This article that has been published in the journal of economics, Univ. 11 Maret Indonesia)

INTRODUCTION


Among the most significant effect on the natural decline in many cities is about air and water pollution, loud noise, traffic crowding, smog, flash flooding, and waste pollution (Sham Sani 1990). Municipal waste problem is the main issues or a frequently discussed issue that may not end there. This is due waste will continuously exist as a result of the activity of human life. Waste generations have a closely relation with production and consumption activities. When the process of production and consumption activity is still running, the waste generation will continue to exist.

Individual produces waste in the event of his life whether either in many or small quantity. In the United States, as reported by Environmental Protection Agency (2007), the amount of waste produced by urban communities in the United States increased almost threefold in the last three decades, i.e. 254 million tons recorded in the year 2007 compared to 88 million tons in 1960. In the meantime, the industries manufacture thousands of new products each year that ultimately become urban waste creating more complex problems of handling and disposal.

The main problem is that whether the current waste management involved all parties such as the government, private sector, and also the community (household) as a single entity that can not be separated as mentioned in a study by Ridwan Lubis (1994) which states that community should be involved in waste management and get their support entirely. The community support can be seen from their awareness in the process keeping the environment clean. This is also in accordance with the study by Jamaluddin Jahi (1993) which concluded that environmental management may not be successful if the cooperation (with community and private sector) does not exist. Community preference is part of the supervision system in the environmental issue.
However, an integrated management should be implemented, taking into account household attitude as the major urban waste generator and the management must be able to recognize household attitudes and demand towards this issue. The final goal that wants to be achieved here is that the waste generation from the household side can be minimized to the most minimum level, if it is impossible to eliminate them entirely.

This study attempted to look at and identify the community (household) willingness to pay in the waste management problems and if the management initiate to enhance the services. Contingent valuation method (CV) is used in assessing WTP of the community.


BACKGROUND

Population growth and increasing number of economic standards of the community have caused increased demand products that force the industry for more products to meet these needs. Fulfilling the needs of fact this has caused improvement of the remaining material.

Concentration distribution of the community in a city and other areas have also showed a serious problem in terms of financial, management, and technical problems in waste disposal. In addition, the continuation of the development of technology and improvement in the way of making (manufacturing), packing, and marketing products have given a significant impact on the increase of waste and in the characteristics of the waste. The increase in packing goods, rapidly growth in productivity has been over with the amount donated to the quantity of waste in urban areas. Changes also occur in the employment sector of the agricultural sector to industrial sector and services. As a result of changes in this community, the industry is forced to increase production to meet increases in living standards which in turn will also cause the generation of waste material (Liddle 2000; Peterson et al. 1999).


Ways of waste disposal, that are not efficient, creating a serious danger to public health, including air and water resources pollution, increased spreader of disease vectors, and a bad impact of the land value that will ultimately affect people's lives and development. On the other hand, failure and incompetence or lack of knowledge of waste recycle some type of material, economically has ruined the natural resources and environmental havoc. Therefore, Sham Sani (1993) focused on the need to consider the economic and ecological factors in designing and making any decision taking into account the environmental quality degradation. In principle, waste collection and disposal is the primary responsibility of local governments, and other related parties. But, in fact, this problem of waste has become a national problem that forced the central government involvement.

From the facts above, it is clear that the current waste management system needs to be reviewed and upgraded to an integrated system that taking into attention of environmental sustainability, conservation of natural resources, and health and comfort of human life. Therefore, among the important elements that must be considered is the role and attitude of the community towards the problems of waste management and the improved plan to be run.

STUDY AREA

This study was conducted in the Majlis Perbandaran Seremban (MPS), which is located in Negeri Sembilan Darul Khusus Malaysia. MPS has borders with Seremban district in the west, Jelebu and Kuala Pilah in the east, Rembau and Port Dickson in the south. MPS covers seven residential areas called mukim with a 55.0 square miles or 14355.32 hectares. This includes the areas of the new expansion from the Majlis Perbandaran Seremban (MPS 2009).

The position of the study area will become increasingly important in the future due to by two main factors, internal and external factors. Internal factors result from the increase in economic activities, infrastructure development, and social and local residence development. While the external factors derived from the impact of development that exists outside the municipality, particularly momentum of development in Lembah Kelang, rapid growth areas of the Kuala Lumpur International Airport (KLIA), continuing development of the Federal Government complex Putrajaya, the development of Multimedia Super Corridor (MSC) in addition to industrial development in the area around Seremban and Bandar Baru Nilai.

The land use in the area of Majlis Perbandaran Seremban (MPS) generally indicates empty lands, agricultural purposes, rivers, roads, rail, and housing (Table 1). The main development of this area is in the north side of Utara-Selatan Highway, especially in the Mukim Bandar and Mukim Ampangan, while most areas in Mukim Rasah, in the north of Jalan Jelebu remains as farming areas.

Table 1: Land Use in Study Area (Land Use Area Hectare) (Percent)
Housing 1,978.21 13.78
Business 145.44 1.01
Industry 373.31 2.60
Agriculture and Farms 3,705.54 25.81
Institutions:
- Education 211.65 1.47
- Religious 18.53 0.13
- Others 392.94 2.74
Recreation 131.24 0.91
Empty Lands 4,695.36 32.71
In Progress of Development 483.38 3.37
Utility reserves 158.88 1.11
Rivers, roads, rail 2,060.83 14.36
Total 14,355.32 100.00
Source: MPS (2000)

The population in the Majlis Perbandaran Seremban (MPS) according to the Statistics Year 1991 showed that Majlis Perbandaran Seremban’s (MPS) population is 186,234 people, mainly residing in the Mukim Bandar and Mukim Ampangan. The number of the population is estimated to increase to 847,134 people in the year 2020 with an average growth rate of 5.22 percent for the 1991 - 2020 (MPS 2000). This increase occurred as a result of rapid development of housing sector and also other development sectors. This means the population growth in this area occurs because of internal factors that is natural and external factors that is migration.

Majlis Perbandaran Seremban, as like other state capital cities, experienced serious problems in waste management. Waste increases every year and the attitude of the community that are less concerned with the environment issues had increased the complexity of management. The waste generation according to the MPS (2000) report is 230.56 metric tons a day. This amount will be increased each year and in 2020 it is estimated waste production will be reached 418.86 metric tons a day.

If we look at disposal aspects, the current disposal site according to the reports by Jabatan Perkhidmatan Bandar Seremban 1999 as cited by MPS (2000) is unable not accommodate the amount of waste at this time and for the future. Therefore, the MPS will present a proposal for new local waste disposal area of 9.1 acre to accommodate the amount of waste until the year 2020 (see table 2).

Table 2: Amount of Waste and Area of Landfill Needed
Year Amount of Waste Generated
Each Year (Kg) Landfill
Area Needed (Acre)
2010 113,796,780 6.74
2020 152,884,630 9.10
Source: MPS (2000)

The practice of dumping wastes anywhere by the community, especially into the rivers and in the residential areas has created difficulties to the management to clean the areas. The response from the small and medium size industries about this issue is not good and not in accordance to the environment acts. The reason is perhaps because of lack of knowledge of the people pertaining to waste management resulted by their factories. Therefore, the MPS will promote the environmental or green campaign (MPS 2000).

DEFINING WASTE

The waste is generated from the activities of human and animal life, which are dumped away because it’s no longer useful or less useful or unwanted whether in the form of solid or liquid. Therefore, physically, the waste contains the same material as that found in a useful product, it just different in terms of value (White et al. 1995). Chamhuri (2000) defines waste as material that is discarded because it can not be used or no longer needed by the owner or economically does not have any value that resulted from day-to-day activities.

According to Akta Kualiti Alam Sekeliling Malaysia (the Environmental Quality Act of Malaysia) 1974, waste can be put under ‘any object that is set out as scheduled garbage, or any objects whether in the form of a solid, or liquid, or in the form of gas or vapor that released or emitted to or placed in natural surroundings that cause pollution' (Laws of Malaysia 1998).

While the term solid waste' is used to refer to the material physically in form of solid or half-solid (White et al. 1995). In other words, Mishra and Kayastha (1998) states that the term of solid waste is referred to as the waste in which it contains low liquid.

TECHNIQUE FOR ASSESSING WASTE MANAGEMENT

Environmental management including waste management requires a cost. These costs may include the cost of collection, transportation, disposal and also additional costs such as subsidies, recycling and so forth (Palmer et al. 1997).

The amount of fees charged depends on the assessment of management or service provided. Assessment analysis is based on to the individual preferences of the products or services. The value of a product or service for a person is dependent on the extent to which he was able to afford to pay and sacrifice to obtain a product or service is. Sacrifice to get the products or services are meant the amount of power to buy. Basic idea in this assessment is the willingness to pay (WTP). The amount of willingness to pay or sacrifice to get the products or services usually depend on wealth of a person, or in other words the wealthier someone, the greater the willingness to pay of a person (Field and Field 2006).

Furthermore Field and Field (2006) states there are three ways that may be used in assessing WTP of a person. The first way is to see someone’s attitude in solving the environmental problems individually. The amount of costs required to solve the environmental problems can explain the WTP of that person. The second way is to provide a choice to the individual in avoiding environmental problems in places of origin to other places. The amount of willingness to pay of that person to avoid the environmental problems from original place to other places explains the WTP of the person. Field and Field (2006) called the first and the second way as the indirect method or indirect technique of describing someone’s WTP. The third way is to run a survey and ask directly to the household how much their willingness to pay if the environmental problems in their surroundings can be overcome. This is called the direct assessment method (direct technique). This third way gets much attention from many economists nowadays because of its flexibility.

In this study, the assessment techniques used is a direct assessment technique. This method is called the contingent valuation (CV), i.e. a method to directly ask the community about their willingness and their preferences (Field and Field 2006).
There are four steps to be done in this study for assessing the role of the household towards an improved waste management through the contingent valuation method (CV):
1. Identify and gain insights about the characteristics of the environmental quality problems and waste management events that will be assessed in the study area
2. Identify the respondents were to be, including the selection procedure to get the respondents
3. Designing and running a survey through questionnaires to the respondents or the household
4. Make analysis from the response obtained to a model to determine the role of the household towards the improved waste management.

The contents of the questionnaire cover various things needed about the role and attitudes based on the problems and goals of this study. Among the contents of the questionnaire is a concern of the household towards environmental problems in general and the problems of waste in particular, educational background, occupation, household income and waste generation and waste management at household level.

THE CONCEPT OF CONTINGENT VALUATION METHOD

As already discussed in the previous parts, to assess the benefits of an improved environmental management can be used contingent valuation (CV) method. This method is executed by asking directly to the public about their preferences and willingness towards the benefits of the management of the environment and their willingness to pay those benefits received.

A current plan or current management with the various problems that exist when trying to be improved for a new plan or a new management to reduce the problems, then this is often related to the cost. In practice, this condition is usually charged to the household. The amount of household willingness to pay for things is very depending on the benefits they will receive.

Suppose the current situation in waste management is Q0, the frequency of waste collection is three times a week but irregular with no separation of waste at source, the type of disposal is tipping control, using open truck transportation, and an indirect or hint payment. Suppose the household average income is M0, the service will be improved to the new management plan (Q1) with the frequency of waste collection is three times a week but regular, there are waste separation at source for recycling, the type of disposal (TPA) is sanitary landfill, using closed freight truck or compactor, and the payment is monthly direct charge, surely the satisfaction (utility) will increased from U0 to U1 (Figure 3.1). If we maintain the state of satisfaction (utility) curve the same U0, then the consequences, the household will lose some income to M1 to get the improved service. The difference in household income from M0 to M1 is referred to as the willingness to pay (WTP).

DATA ANALYSIS AND MODEL

Econometric method is used for analysis of data in this study. Econometric methods can be defined as a branch of economics that combine economic theory, mathematics, and statistics for the purpose of assessing the relationship of quantitative economics (Mokhtar Abdullah 1992; Mohd. Anuar 1991; Osman Rani & Chua Yee Yen 1987).


Figure 3.1: The concept of Contingent Valuation Method
Source: Modified from Field and Field (2006)


A computer assisted program i.e. Statistics Package for Social Science (SPSS) is used to obtained the statistical figures needed for analysis such as to estimate the coefficients of some variables in the model.
Non-numerical data that is qualitative about the background and attitude is converted to dummy data. Dummy data in this study are as follows:
1. Type of house: 1 for bungalow and semi-detached houses and 0 (null) for other types of house
2. Gender: 1 for the men and 0 (null) for women
3. Race: 1 for the Malay and 0 (null) for non-Malays
4. Education: 1 for certificate / diploma and above and 0 for lower than certificate / diploma
5. Household recycling practices: 1 for household that often or rarely practicing recycle and 0 for never practice recycling
6. Tendency to protection of the environment or the source: 1 for household that only tend to the protection of the environment and 0 for tend to the source, or both tend to choose the protection of the environment and select the source together.


WTP by Navrud and Ready (2007) is defined as a function of the nature of the product or environment services and individuals.

WTPij = f(Gj, Hi) (1)

Where:
WTPij = Willingness to pay of household i towards
environmental management in place j;
Gj = Characteristics of the environment services in place j;
Hi = Characteristics of household i;


From equation (1), the model that will be used in this study are shown in the form of a linear regression model as follows:

Yi = ß1 + ß2 . X2i + ß3 . X3i + … + Ui (2)

Where:
Yi = Dependent variable;
ß1,2,3, … = regression coefficients that describe the changes in the
dependent variable that caused by independent variables
X2,3, … = Independent variables
Ui = Regression error or a random variable.


From equation (1) and (2) above can be estimated the regression model for household WTP (Yi ) in this study as follows:

Yi = ß1 + ß2 . X2i + ß3 . X3i + ß4 . X4i + ß5 . X5i + ß6 . X6i
+ ß7 . X7i + ß8 . X8i + ß9 . X9i (3)

Where:
ß1,2,3, … = regression coefficients;
X2i = type of house;
X3i = age;
X4i = gender;
X5i = race;
X6i = education level;
X7i = recycling practices;
X8i = trend to environmental protection;
X9i = household income each month.

The obtained model from the regression results acceptable after F and t test showing a significant and consistent. In addition, autocorrelation factors and co-linearity test are also conducted in the regression analysis to test the model produced.


RESULTS

In statistics, to create a model that can describe the situation or indeed represent something of the desired area, e.g. the attitude of a local community, then the sampling procedure must be done properly. Samples taken in this study referred to as the respondents represent the entire population in the area of the study.
The respondents come from different background one another. Of 140 respondents selected in this study, the average age of respondents is 37 year old with the oldest respondent was 63 year old while the youngest respondents was 20 year old (Table 4.1).

In regard to gender factor, most respondents consisted of 73 men, while the rest are women that are 67 people. In terms of race factor, most of the respondents, 72.9 per cent, are Malays, while the remaining 27.1 percent of the respondents is non-Malays (Table 4.3).

Table 4.1 Respondents based on Age
No. Age Number of Respondent Per cent
1 <21>60 1 0.7
Total 140 100.0


In terms of employment, 25.7 per cent of the respondents or 36 people are housewives, followed by respondents who work in private sectors 28 people (20 percent), work as businessmen 24 persons (17.1 percent), and the rest consists of government officials, part-time workers, retirees, and students (see Table 4.4). Those who work as government employees or private employees, 40 people, mostly working in the fields of management and administrative and professional (see Table 4.5)

Table 4.3 Respondent based on Race
No. Race Number of Respondent Percent
1 Malay 102 72.9
2 China 24 17.1
3 India 14 10.0
Total 140 100.0


Table 4.4 Respondent based on Employment
No. Type of Employment Number of Respondent Percent
1 Government official 12 8.6
2 Private employee 28 20.0
3 Part-time worker 18 12.9
4 Businessmen 24 17.1
5 Retiree 9 6.4
6 Housewife 36 25.7
7 Student 13 9.3
Total 140 100.0


In terms of education, most respondents have a bachelor degree followed by those who completed high school education (see Table 4.6). The average household income is RM3660 with a whole range of income of respondents is in the range of RM1000 - RM6000 a month (see table 4.7).

Table 4.5 Respondent based on Working Area
No. Working Area Number of Respondent Percent
1 Managerial and administrative 14 10.0
2 Professional 16 11.4
3 Technical and services 7 5.0
4 Clerk 3 2.1
Total 40 28.6


Table 4.6 Respondent based on Level of Education
No. Level of Education Number of Respondent Percent
1 Completed secondary school 4 2.9
2 Completed high school 44 31.4
3 Certificate or Diploma 34 24.3
4 Bachelor degree 58 41.4
Total 140 100.0


Table 4.7 Respondent based on Monthly Income (RM)
No. Monthly Income Number of Respondent Percent
1 1000-2000 9 6.4
2 2001-3000 22 15.7
3 3001-4000 61 43.6
4 4001-5000 40 28.6
5 5001-6000 8 5.7
Total 140 100.0


a. Household Attitudes towards Environmental Problems
Before further discussion about the attitudes of the household towards the issue of waste generation and management, the household attitude towards environmental problems will be highlighted first. This attitude is important to note because it will affect the household attitude towards the issue of waste generation and management and their willingness to pay.

Table 4.8 shows that household attitudes towards government financing of the environmental development is below other issues such as education, issues of poverty and unemployment, public health services, and housing issues, while household attitude towards the issue of waste is ranked at six after several other environmental issues. All these attitudes are influenced by the background of the respondents that come from various different backgrounds.

Table 4.8 Respondent Attitudes towards Environmental Issues
Rank Government Fund Priority Environmental Problems
1 Education Food safety and security
2 poverty and unemployment Water pollution
3 public health services Air pollution
4 Housing Flood
5 Environment Flora and fauna reservation
6 Criminal Prevention Waste management
7 Defense Landslide
8 --- Traffic congestion
9 --- Deforestation
10 --- Noise pollution
11 --- Wetland conservation


b. Household Attitudes towards Waste Generation and Management Issue
Basically, all people are concerned about the environmental degradation problems including especially the issue of waste production and management, where many people worry about the issue so much when the garbage problem is not solved soon with the way that effective and sustainable.

In this study, respondents' attitudes towards the issue of waste management divided into two folds. 80 respondents (57.1 percent) states that they are very concerned about the waste issue and management, while 42.9 percent or 60 people states that they are quite concerned about the issue. Differences in attitudes also appear due to differences in the background of respondents. Because of this difference in attitude as well, the collection and placement of packing waste out of the house carried out by other members of household and only 37.1 percent or 52 respondents who do it by themselves. This perhaps relate to the status or position of the respondents in the household. However, all or 100 percent of the respondents stated that waste reduction efforts are important in the waste management.

As for the recycling efforts in the waste management, the respondents gave a slightly different manner proportionate to the reduction of waste. Only 123 people or 87.9 percent of respondents stating that recycling is good for the environment, while the remaining 17 people or 12.1 percent states that they are not sure with recycling programs. This may be due to lack of respondents' knowledge and know-how of recycling program.

51 respondents (36.4 percent) have practiced recycling in their home even if it rarely or sometimes. The recycling way they practiced is through reuse of certain waste or making compost of food waste. Meanwhile, 89 people (63.6 percent) of respondents never practice recycling in their homes for reasons not interesting (7.1 percent), not enough time (14.3 percent), there is no nearest recycling program (46.4 percent), there is no economic incentive ( 7.1 percent), and do not know how to recycling (25.0 percent).

In addition to practicing recycling program, there are also 10 percent of respondents that practice waste separation in the initial level even though it rarely. The respondent’s reason for waste separation practice is good for the environment (0.7 percent), ease practice compost (9.3 percent), and facilitate recycling practices (2.1 percent). Meanwhile, 126 people (90 percent) of respondents did not practice the separation of waste at the initial level because of not interesting for the reason (8.6 percent), not enough time (18.6 percent), there is no economic incentive (37.1 percent), does not know how (10 percent) , the facilities are not available (80 percent), and it is too expensive (10.7 percent).
In terms of household attitude towards considering only purchase of products if the product is made from recycled materials or materials that can be recycled or not, 119 people or 85 percent of respondents stated not consider it. Only 21 people or 15 percent of the respondents consider it slightly.

Towards the satisfaction of the waste collection service by the concerned agencies, only 55.7 percent somewhat satisfied with the service, and 42.9 percent claim not satisfied, while the rest (1.4 percent) said do not know. The satisfaction of the waste disposal services by the relevant authority or agency, only 12.1 percent of the respondent was quite happy to waste disposal service, and 11.4 percent claim not satisfied, while most of them (76.4 percent) states do not know.
When the respondents are offered to choose which of them more likely to: to the environmental conservation or tend to use sources or likely to select both at once, then 42.1 percent of respondents tended to choose the environmental conservation and 57.9 percent more likely to select both at once.

c. Household Attitudes towards an Improved Service
Basically, this attitude explains the household willingness to pay (WTP) towards an improved environmental management, especially waste management. WTP exists if the people receive the benefits of a product or service. In this study, the form of benefits offered is an improved management compared to the current management by taking into consideration aspects of health, comfort, and environment-friendly management. The household is first exposed to current waste management practiced, and the forms of improved management then offered to the households as an improved service.

There are two options offered to the households. The first option is the current management option with all the problems that exist. The households are explained about the characteristics and current management problems such as the frequency of waste collection, method of disposal is not environmental friendly, forms of transportation, and mode of payment of bills.

The current frequency of waste collection is three times a week, but the collection time is not certain or irregular. Sometimes waste is uncollected for many days that attract insects and animals such as flies, dogs and cats. This condition also causes bad odor and uncomfortable.

The current type of disposal or landfill has many problems to the environment and human life. The landfill in whole or in part is open and uncovered with the soil. The wastes on the disposal area are also not treated and lack of control, so the hazard leach to the environment that can cause the emergence of health problems such as water and air pollution and cause environmental problems such as threatening of aquatic life and lost of recreational opportunities.

In terms of transporting the waste, for some routes still use open truck. This may cause uncomfortable view, bad odor, and some parts of the waste may fall upon the road from the trucks that have excess cargo. In terms of the charge, the households do not pay the service provider directly but it through the annual tax (land and building tax) that they pay. The actual amount of the charge for the waste service alone is not known by many households.

Second option is the improved service and management. The problems that existed on the first option (the current waste service) will be eliminated on the second option. The households are exposed to the benefits that they will receive if they choose the second option than the first one. On this second option, the frequency of waste collection remains three times a week, but on the day and the time that has been set for each household.

Form of transportation on the second option is only using compactor trucks or closed trucks so that the problems such as the smell and so forth will reduce. While the condition of disposal site is also improved, only the sanitary landfill is considered. This sanitary landfill requires that the floor or base of the landfill should be constructed in such a way to prevent the occurrence of leakage into the ground and this landfill also requires the closing of waste with a layer of land every day, so that insect and animal can not breed or disrupt the disposal site. The disposal site will be placed far from residential areas.

Both these options have the implications of each, the monthly charges. With the first option, each household is required to pay the service through the tax to the government without knowing exactly the amount of money deducted for the service. Meanwhile, with the second option, the payments are made directly by the household each month to the service providers separated from the tax. This payment is not a substitute for direct payment on the first choice.

Results of this study show 45 people or 32.1 percent of respondents choose the first option for reasons disagree with the monthly direct payment (31.4 percent) and not sure of the improved service offered (0.7 percent). Meanwhile, respondents who choose the second option are 95 people or 67.9 percent. So from here, analysis of the household’s WTP will be focused to the 95 respondents who chose the second option.

From regression analysis, we obtain the WTP model for the improved waste management in Majlis Perbandaran Seremban as follows:

WTP = 12.069 - 1.143.X2 + 0.056.X3 + 0.865.X4 + 1.768.X5
(1.922) (0.873) (0.036)** (0.704) (0.714)***

+ 0.771.X6 - 1.077.X7 - 0.417.X8 + 0.0022.X9
(0.770) (0.701) (0.670) (0.00)***

Where:
X2 = dummy variable for the type of home;
X3 = age of respondents;
X4 = dummy variable for male gender;
X5 = dummy variables for Malay race;
X6 = dummy variable for education level;
X7 = dummy variable for the practice of recycle;
X8 = dummy variable for the tend to the environmental
or source protection
X9 = Income of respondents each month.

R2 = 0.359;
Durbin - Watson = 1.896;
Figures in brackets indicate standard error of the respected variables.

From this model we can calculate the average WTP for respondent which is ....

(Discontinued)

Note: Please send me an e-mail for full paper at: subhanaceh@yahoo.com

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