MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA MULTIFUNCTIONALITY OF AGRICULTURE IN MALAYSIA BY MOHD FARID BIN JAAFAR NG ONG KAI CHUAN TEOH KAI XUAN A research project submitted in partial fulfillment of the requirement for the degree of BACHELOR OF ECONOMICS (HONS) FINANCIAL ECONOMICS UNIVERSITI TUNKU ABDUL RAHMAN FACULTY OF ACCOUNTANCY AND MANAGEMENT DEPARTMENT OF ECONOMIC SEPTEMBER 2009 Page 1 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA Copyright @ 2009 ALL RIGHTS RESERVED.
No art of this paper may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, graphic, electronic, mechanical, photocopying, recording, scanning, or otherwise, without the prior consent of the authors. Page 2 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA DECLARATION We hereby declare that: 1. This UBEZ 3026 Undergraduate Project is the end result of our own work and that due acknowledgement has been given in the references to ALL sources of information be they printed, electronic, or personal. 2.
No portion of the research project has been submitted in support of any application for any other degree or qualification of this or any other university, or other institutes of learning. 3. Equal contribution has been made by each group member in completing this research project. 4. The word count of this research project is 12,634. 1. 2. 3. Name of Student: Mohd Farid Bin Jaafar Ng Ong Kai chuan Teoh Kai Xuan Student ID: 07UKB02453 07UKB00543 07UKB02530 Signature: Date: Page 3 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA ACKNOWLEDGEMENT We would like to thank our supervisor, Mr.
Eugene Pek Chuen Khee for sharing the useful advices and supportive guidelines. We appreciate the valuable time that he spend and shared with us whenever we need his assistance. Without these, our research project could not be done smoothly and successfully. Besides, we would also like thank all the respondents who spend their valuable time to answer the questionnaire. The co-operation and valuable feedbacks are appreciated. Finally, we thank our family members for supporting us during the tough time doing this dissertation. Without their support, we would not be able to make this far.
Thank you for being there when we need you the most. TABLE OF CONTENTS Page 4 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA Copyright Page……………………………………………………………………………. Declaration………………………………………………………………………………… Acknowledgement………………………………………………………………………… Table of Contents…………………………………………………………………………. List of Tables……………………….. ……………………………………………………. List of Figures………………………. ……………………………………………………. Preface…………………………………………………………………………………….. Abstract……………………………… ……………………………………………………. CHAPTER 1 1. 1 1. 2 1. 3 1. 4 1. 5 2 2. 1 2. 2 2. 3 2. 4 2. 5 3 3. 1 3. 2 3. 3 3. 4 3. 5. 1 3. 5. 2 3. 6 3. 3. 81 3. 8. 2 4 4. 1. 1 4. 1. 2 4. 1. 3 4. 1. 4 4. 1. 5 4. 1. 6 4. 1. 7 4. 1. 8 4. 1. 9 4. 2. 1 INTRODUCTION Introduction ………………………………………………………….. Background of Agriculture Multifunctionality……………………… Problem Statement…………………………………………………. Objectives… ………………………………………………………… Significance of Study ………………………………………………. LITERATURE REVIEW Empirical Studies on Multifunctionality Agriculture issue………….. Empirical studies on Contingent Valuation Method………………………. Empirical studies on Willingness to Pay (WTP) ……………………. Empirical studies on identifying socio-economic variables………….
Empirical studies on Tobit model and OLS…………………………. Research Method Methodology…………………………………………………………. Multifucntionality of Agriculture……………………………………. Economic Model…………………………………………………… .. Conpensating Surplus………………………………………………… Ordinary Least Square Regression Model…………………………… Tobit Model………………………………………………………….. Survey Design……………………………………………………….. Questionaire Design………………………………………………… Model Specification…………………………………………………. Test Hypothesis……………………………………………………… Research Result……………………………………………………… Report of Respondents’ Willingness to Pay………………………….
Report of respondents’ Gender………………………………………. Report of Respondents’ Age………………………………………… Report of Respondents’ Martial Status……………………………… Report of Respondents’ Education Level…………………………… Report of Type of Occupation of Respondents……………………… Report of Type of Respondents’ Profession………………………… Report of Respondents’ Monthly Household Gross Income………… Report of Respondents Monthly Household Expenses……………… Ordinary Least Squares (OLS) Model…………………………….. Page 5 of 79 Page ii iii iv v vii viii ix x 1 2 4 5 6 9 10 12 13 14 15 16 19 21 23 24 25 26 28 29 32 35 36 36 37 37 38 39 40 42
CHAPTER CHAPTER CHAPTER MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA 4. 2. 2 4. 3 4. 4 CHAPTER 5 5. 1 5. 2 5. 3 References Tobit Model…………………………………………………………… Empirical Result of Total Economic Value……………………….. Diagnostic Checking……………………………………………….. Discussion and Conclusion………………………………………… Methodology Implication…………………………………………… Policy Implication…………………………………………………… Conclusion…………………………………………………………… ………………………………………………………………………. 44 46 46 49 50 51 53 LIST OF TABLES Page 27 31 33 33 33 34 34 35 36 36 36 37 38 38 39 40 40 40 48 Table 1 Table 2 Table 3 Table 4. Table 4. 2 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13 Table 14 Table 15 Table 16 Table 17 Table 18 : Symbols’ Explanation for Regression Model……………………….. : Importance of the Sectors for Government Funding and Ranking of Environment Problems……………………………………………… : Respondents’ Willingness to Pay…………………………………….. : Reasons for Not Willing to Pay……………………………………… : Reasons for state WTP as zero………………………………………. : Respondents’ Willingness to Pay for Premium……………………… : Number of respondents care about the growth of agriculture ………. Type of Agriculture most concern by respondents…………………… : Gender of Respondents………………………………………………. : Age of Respondents………………………………………………….. : Marital Status of Respondents……………………………………… : Education Level of Respondents…………………………………….. : Type of Occupation of Respondents…………………………………. : Type of Respondents’ Profession…………………………………….. : Level of Monthly Household Gross Income…………………………. : Level of Respondents Monthly Household Expenses………………… : Descriptive Statistic for Open Ended CVM………………………….. : Result for OLS and Tobit Model…………………………………….. Correlation Matrix……………………………………………………. Page 6 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA LIST OF FIGURES Figure 1 Figure 2 Figure 3 Figure 4 : Concept build on total economic value (TEV) towards multifunctionality of griculture……………………………………… : Total Economic Value…………………………………………………………. : Measurement of consumer’s welfare………………………………… : Jarque-Bera test……………………………………………………… Page 18 19 22 47 Page 7 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA PREFACE We engage in this topic based on our own interest. We would like to investigate the multifunctionality of agriculture.
Our team thinks that the multifunctionality of agriculture should be promoted and developed for the benefit of residents. There are still a lot of room and space for the growth of agriculture multifunctionality in Malaysia. We also wish to send the message to the public and government the importance of agriculture multifunctionality. Therefore, this research will be able to bring and generate useful information for the policy- makers and public. Page 8 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA Abstract Agriculture multifunctionality is the non-trade benefit provided by agriculture.
The image of agriculture for the public is that it can generates food but they have neglected the multifunctionality of it. Residents of Malaysia are being claimed as having very little knowledge about agriculture multifunctionality and the benefits of it. The primary objective of this paper is to obtain the Total Economic Value of agriculture in non-market product or the multi-functionality of the agriculture. The second objective is to study the willingness to pay of the respondents for the development of agriculture multifunctionality.
The monetary value of the non-trade benefits was gauged by the contingent valuation method (CVM) using open-ended approach. The data of questionnaire were collected by face-to-face interviews of 200. The willingness to pay is collected and it stated that slightly over fifty two percent of the respondents are willing to pay for the multifunctionality of agriculture.. Thus, this study is hoped can provide additional information for the government of Malaysia in formulating a better development plan for multifunctionality of agriculture.
Among 200 respondents, 95 of them are protest bid who are not willingness to pay for the premium charge on agriculture products, while 4 respondents are genuine bid who are willing to pay for the premium but state their as 0 value. . CHAPTER 1: INTRODUCTION Page 9 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA 1. 1 Introduction Agriculture does provide a lot of benefits for human. The most important roles of it are providing food, such like rice and vegetables. It was a delicate chain of existence that we once treated with respect and appreciation. As a human, we need food to be survived.
So it is an important industry which needs to be ensuring that the growth of it is sustainable. When the population keeps rising, people start to realize the importance of agriculture Agricultural industry is the one of the industries that survives under the 1997 financial crisis. Nowadays, this industry not only provides food but also play as non food roles or multifunctional in economic, culture, social and food security. These are predicted will be developed further in long run. Agricultural industry does contribute to the GDP and provides job opportunities.
Meanwhile, Multifunctionality of Agriculture (AMF) is a non-trade commodity provided by agriculture which is also known as non-trade concern (NTCs) in World Trade Organization (WTO) rules. It is also known as the benefit provided by agriculture for the country or religion. Multifunctionality is the non-trade benefits of agriculture, which is the benefit other than commerce and food production. The definition of Multifunctionality of Agriculture in WTO is environmental protection, landscape preservation, rural employment, and food security.
These can also being classified as benefit to social, culture, a nation economic as a whole, national security, and other concerns. For example, farms which available in rural area. The multifunctionality of it are better environmental being created, job opportunities provided, higher standard of living in rural area and stable food security. Contingent valuation method (CVM) is a method estimation of non-market value of environment attribution. It proved that willingness to pay will affect the Total Economic Value (TEV). While the willingness to accept (willingness to accept compensation for Page 10 of 79
MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA damaged environment or to accept a condition of being deprived of the improved environment) increase will decrease the Total Economic Value of a certain area. By studying valuation of agriculture, the people’s willingness will affect their life in several way, such as people willing to live at a house area that further far from the city that having bad pollution and pay more for the transportation fee; people willing to get lower paid for their job at good environment compare to polluted city; people willing to pay higher price for house that have green park around. . 2 Background of Agriculture Multifunctionality Malaysia is a growing and relatively open economy. The economy of Malaysia is the 29th largest economy in world in 2007. Malaysia has a multi-ethnic, multi-cultural population that enjoys a good standard of living and gives high priority to education and health. Malaysia has population 27. 73 million in year 2008. The Malaysia is located at Association of Southeast Asian Nations (ASEAN). Malaysia is an export country which is focus on agriculture product.
The agriculture productions bring a huge income for Malaysian, contributing 12 percent to the national GDP and providing employment for 16 percent of the population. Those agricultures include rubber, palm oil, coconuts and other commodities. And every year, Malaysia government uses the profit of the export agriculture products to develop country. Under the National Agriculture Policy (NAP) 1984, it is aimed to combine small size firms into mini estates to redistribute rural land. These are done to attain economies of scale by increasing production. Besides, the agricultural modernization is also the major focuses of Ninth Malaysia Plan.
It is aimed to increase agricultural output included exploration of new resources with bigger involvement from private sector; expand processing activities based on agricultural and various products; enhance the global marketing and linkage; increase the income of small planters, farmers and fishermen; and improved the service delivery system. Page 11 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA Malaysia had established some area as reserve area to protect those areas to avoid damaged from development purpose, for example like the Taman Negara (National Park), Jerantut District, Pahang, Malaysia.
The Department of Wildlife and National Parks (DWNP) is responsible for the management of national parks and wildlife reserves in Peninsular Malaysia. The management of these areas is focused on the planning and implementation of various activities which contribute to the long-term conservation of protected areas while mitigating/reducing conflicts between human and the environment. The development of protected areas was done sustainably to ensure optimum benefit to human and prosperity to the environment for the present and future generation.
Other than Department of Wildlife and National Parks (DWNP), Malaysia still exist a lot of societies to run campaigns for the protect environment purpose. Environment Protection Society Malaysia (EPSM) founded for the objective like to prevent environmental deterioration as a result of human activities, to increase public awareness about the state of our environment. Department of agriculture Malaysia is offering some agriculture training and courses for the youths, such as agriculture certificate, agriculture incubator training and entrepreneur development centre.
Agriculture certificate aims to provide skilled personnel in agriculture at operational level to fulfill the need for government and private sectors. It also contributes in developing and producing future agriculture entrepreneurs. Agriculture incubator provides skilled training and exposure to commercial farming operation for entrepreneurs and young farmers for 8 months. For entrepreneur development centre, it provides hand- on training on commercial food production methods that meets the Good Manufacturing Standard (GMP) and the Good Agriculture Practices (GAP) for 6 months. . 3 Problem statement The agriculture sector played an important role in the early 1920s with the rubber industry which has placed Malaysia as the world’s leading producer of natural rubber until 1980s. The country’s economy after Independence was monopolized by agriculture and Page 12 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA mining activities, contributing 46% to the nation’s Gross Domestic Product (GDP). Although recent years the agriculture industry did not contribute as much as before, but it is still one of the most important industry in Malaysia.
After Malaysia economic suffered from economic crisis on 1997, the only industry that survived is the agriculture industry. It still provides constant and stable growth although other industries were performing badly during the crisis. Since the government is trying its best in promoting this industry, indirectly the agriculture multifunctionality is developing as well. The awareness, knowledge and importance of the agriculture multifunctionality are not popular among the residents in Malaysia. Most of the residents do not realize the benefits of agriculture multifunctionality and the effects of it.
After Malaysia’s economic hit by the economic crisis, the agriculture industry did contribute a lot of job opportunities for Malaysian. This helps to reduce the effects of economic crisis. Crime can be controlled even through economic of the country is not doing well. Residents of the country still able to survive with the lower rate of salary during high inflation period. Since the lower salary may affect the willingness to pay for the development and sustain of agriculture multifunctionality, the factors that cause the willingness to pay for sustain and development of agriculture multifunctionality is included in this paper.
Since a series of flood that hit Malaysia on from 2006 to 2007, people started to concern the factor of the caused the flood. Although the flood was caused by the abnormal rainfall which is higher than the average level and the attribution of Typhoon Utor, it cannot be denied that the insufficient of agriculture activities in these areas is also one of the factors. Agriculture activities are believed can absorb the water in the land and pervert landslide. If agriculture activities were widely promoting in the area which occurred the flood, at least it can reduce or minimize the effect of the extraordinary rainfall.
Furthermore, it may prevent the flood. So is it more agriculture activities should be done in the area which is claimed that always suffered in flood? Today, this topic is still one of the topic discussing by the policy makers. Page 13 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA In Malaysia, there are only a few or very little researches have been done on agriculture multifunctionality. Most of the researches and politicians pay more attention on agriculture industry only. Some residents are worrying that the agriculture multifunctionality has been ignored or pay little attention by policy makers.
After flood happened frequently in 2006, residents of Malaysia hopes that more research can be done in order to efficiently prevent flood. 1. 4 Research Objective Many studies have showed that the multi-functionality has bought a lot of tangible benefit (financial benefit) and intangible benefit, which are the function of environment protection. In this research study, Total Economic Value of agriculture in non-market product or the multi-functionality of the agriculture is measured. In order to become a modern country with highly standard of living, development of the country is a must.
Some developing and modern countries are trying to reduce the developing of agriculture sector and multifunctionality of it since most of them do not pay much attention on it and prefer to import agriculture products. Since Malaysia is a developing country, this paper is hoped can provide some ideas for the policy makers about the importance of the agriculture multifunctionality. Altought this sector cannot contribute much to the GDP, but it can helps to improve the quality and standard of living. So it should not be neglected.
This paper is aimed to study the willingness to pay of the people for the development of agriculture multifunctionality. It reveals that whether people concern about this issue and how much contribution they are willing to provide in order to help to improve or further development of agriculture muntifunctionality. On other hand, which sector that people concern the most is also being study in this paper. The rank of importance of various sectors which including public Page 14 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA ducation, public safety, unemployment, agriculture sustainability, environment sustainability, housing and public health services, are included in the questionnaires. The information and definition of agriculture multifunctionality are also included. This can provide a chance for public and interviewees to know and learn more about agriculture multifunctionality. 1. 5 Significance of study In Malaysia, the research topic relate with environment economic still not as common as those topic related with financial topic.
Most of the researchers are prefering those financial topics such like exchange rate regimes or unemployment rate for their graduate project topic. This means the environment economic still at the early state and the valuing of non-marketable commodities also not so popular in Malaysia. In this research, we use the contingent value method to value those multifunctional of agriculture into monetary form. This can help policy maker to determine how much benefit to trade off with the cost of protect agriculture. Malaysia still consider as developing country, therefore still has potential to develop.
In term of develop country, most of time will scarify green area to develop country. So, the determination value of agriculture is very important. Other than the determination of the benefit and cost of agriculture, this research also can let the researchers know how much attention of people paying after the incident of the landslide at Bukit Antarabangsa and the disaster at Johor (flood). From science information, those incidents can avoid or reduce by multi-functionality of agriculture. Landslide and flood can be happened due to the modernization and insufficient of green area especially at urban areas.
People may emphasize eco-friendly and protect green area or protect agriculture by paying higher cost. After running the interview with people, we can know how much cost can people pay for the protection activity for agriculture, since agriculture can contribution several of protection to society. Page 15 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA The focus group of study in this paper, those people who are under group of uppermiddle income, may affect the country most significantly. This is because this group is the major group of people in this country.
Therefore, this research can contribute some idea to policy maker who are planning to run projects in the country. Since the willingness to pay (WTP) has been collected from the interview, it is hoped that it may help policy maker to indentify the value of agriculture multifunctionality. This paper may give an idea and result about the value of agriculture multifunctionality in Malaysia. It was done in hope that policy maker may pay more attention or concern about this issue which has so much direct and indirect impact in our life. Public will also learn more about agriculture from this paper.
They will find out more about the role played by agriculture multifunctionality. The importance agriculture multifunctionality is included in this paper, public will know how importance of agriculture multifunctionality. After that, they are more willing to take part in the contribution for development of it. With the help and contribution from the public, agriculture multifunctionality can be developed more smoothly. This can also improved the standard of living of public and a better living environment can be created. This research can provides some ideas of the benefit of agriculture multifunctionality.
It will encourage policy makers to put in more effort on this area or industry since it can increase the living standard and boost up the GDP. More job opportunity will be created. As result, the development of agriculture may bring some benefits for government and public. So it can be further expand in order to provide the benefits continuously. This research paper can be divided into five chapters; this chapter is introduction, background of Western Malaysia, problem statement, objectives of the research, and the importance of this study.
Chapter 2 is literature review on previous studies that have been done. Chapter 3 present the research method including economy model, research Page 16 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA methodology, model specification, data collection and the strategy adopted for the questionnaire while Chapter 4 reports on the research result and lastly chapter 5 present the discussion and conclusion of this study. CHAPTER 2: LITERATURE REVIEW In Malaysia, research on valuating non-market commodities is at an early stage.
Most of the researches are done with valuation of non-market commodities which related with environment or eco-system. This chapter will present review of the current literature Page 17 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA on valuing on multifunctionality of agriculture and several methods applied by previous researchers. 2. 1 Empirical Studies on Multi-functionality Agriculture issue Throughout history, agriculture has played a dominant role in the development of rural areas and in the shaping of rural landscapes or provides output like sources of food.
However, the role of agriculture for the future is presently under discussion. Many economists were studied on the agriculture sector to find some ways to improve the quality or quantity of production. The concept of multifunctionality of agriculture recognizes important potential benefits of agriculture in addition to the food or non-commodity good which stated by Groenfeldt (2005) and Huylenbroeck, Vandermeulen, Mettepenningen, and Verspecht (2007).
The research done by Groenfeldt (2005) has provided an overview, which is the multifunctionality of agriculture have four main functions, they are Economic and production function, Environmental function, Social Economic function and Rural Development function. From the studies of Randall (2005), in European Union, the multifunctionality of agriculture’s objectives is supported by Agri-enviroment programs of many kinds, regional assistance programs, and structural adjustment through investment aid.
Doitchinova (2005) states that the main function of agriculture to provide food for the population is related to closely link opportunities for protecting environment, biodiversity and the wealth of cultural traditions and values in rural life. In the studies of Jervall and Jolly (2003), states that the existence of multiple commodity and non-commodity output that are jointly produced by agriculture and the fact that some of the non-commodity output exhibit the characteristic of externalities or public goods, with result that markets for these goods do not exist or function poorly.
Discussion led by the OECD is so important for the international debate, in which multifunctionality was convinced as a specific characteristic of agriculture that combines production of private good and the simultaneous production of public good (OECD, 2001) Attention was centered on agriculture contribution to landscape, environmental benefit and Page 18 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA contributions to socio-economic viability of rural areas.
In studies of Kallas, Limon and Arriaza (2006), they have analyzed the demand of society for non-marketable goods and services provided by the agricultural sector through the money-value approach and determine which socio-economic characteristic are relevant to define the willingness of individual to pay for the output of agriculture multifunctioanlity. Lopez, Groot, Torres, and Rossing (2007) propose studies to apply a methodological framework to integrate the social demand for multifunctionality of agriculture in the evaluation and design of more sustainable agro-landscapes composed of dairy farming systems.
Previous researches done by those researchers showed that, the environment economic and socio-economic has significant relationship. Therefore, in this paper, socioeconomic variables will be including as well. 2. 2 Empirical studies on Contingent Valuation Method Economic valuation attempts to provide an empirical account of value as the services and amenities produced. The Contingent Valuation method is used to estimate economic value for all kind of ecosystem and environment services. Contingent Valuation method relies particularly on the premise of respondent’s rationality when answering willingness to pay (Fror, 2008).
Several researches that done by previous researchers were applied with Contingent Valuation method. Those researches have established the CVM as a sound technique foe estimating WTP values for public services or public goods. Value on conservative for biodiversity (Sattout, Talhoukb and Caligari, 2005; Lee and James, 2006); renewable energy system (Nobory and Makoto, 2004); existence value (Amirnejad, Khalilian, Assareh and Ahmadian (2005), restoring ecosystem services (Xu, Cheng, Zhang, Su, and Loomis, 2002) and environment (Mika and Eija, 2002).
Page 19 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA Based on the research of Sayadi, Roa and Requena (2008), they applied two stated preference method, the Contingent Valuation Method (CVM) and Conjoint Analysis (CA). In their finding, the CVM and CA found that the agricultural-landscape components play an important role in public preferences on the landscape and WTP, and states that the Contingent Valuation method is a monetary method to use to quantify the monetary value of the different aspects of these landscapes.
Randall (2005) used Contingent Valuation method to value and pricing the value generate by the agriculture multifunctionality programs, which is value on the explicit prices for non-commodity output. In the studies of Roberts, McLeod and Syme (1992) and Fror (2008), they suggest that the Contingent Valuation method uses survey questions to directly elicit an individual’s willingness to pay for a good or services in monetary term. Those researchers run several of survey on total of 426 farmers to collect information, to determine those farmers willingness to pay to support the Agriculture Protection Board’s proposal.
Buckley, Rensburg and Hynesa (2008), applied Contingent Valuation method to measure willingness to pay for public access and trail improvements on commonage farmland for recreational walk in upland and lowland areas of Connemara region in the west of Ireland. In the research of Tziakis et al. (2007), Contingent Valuation method has been applied to estimate the value that people attribute to the stemming benefits from the clean environment in the absence of a market value. Tziakis et al. 2007) state that, Contingent Valuation studies should clearly state what the payment vehicle is, and the payment vehicle for charges for wastewater is water bill. In term of valuation of a certain good, the simplest way to understand by public is determine the good in monetary term. The previous studies had proved this statement. Therefore, the paper would apply Contingent Valuation method. 2. 3 Empirical studies on Willingness to Pay (WTP) Page 20 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA The way of researches to choose a realistic payment option in a survey is very important.
The option represents the WTP scenario posed to the respondents. The payment question can either be phrased as the conventional “what are you willing to pay to receive this environment asset? ’’ In the studies of Roberts, Mcleod and Syme (1992), the researchers suggest used both opened-ended and closed-ended question to design the questionnaire. The opened-ended questionnaire can make people to have more range to value the output, and the closed-ended was help people to have a clear idea to answer the question.
Many studies are used the Willingness to pay to value environment and eco-system, recreation demand for farm commonage (Buckley, Rensburg and Hynesa, 2008; wastewater (Tziakis et al, 2007). The conceptually valid measures of welfare change are WTP for benefit, and willingness to accept for cost (Allan, 2005). Sayadi, Roa and Requena (2008), create an artificial market to estimate the willingness to pay for landscape view which is use several photographs to ask for maximum willingness to pay for a day of lodging to enjoy the different views represent in the photographs.
From the review of the Food Institution report, people will generally spent 1. 1% of income to purchase agriculture products. In this research, when setting the questionnaire, the general spending amount on agriculture products will take into consideration. This can provide an idea for people to fill the questionnaire. Since the questionnaire is related with environment, the bid protest may occur. A bid protest is a legal mechanism by which any “interested party” may contest the procedure or outcome of a government contract award.
A protester is typically a third party aggrieved by the actions of a government agency which result in a contract going to an awardees viewed by the protester as non-deserving. In the empirical studies of Sayadi, Roa and Requena (2006), state that the protest bid problem in the Contingent Valuation method is quite common. Since the questionnaire is asking the willingness to pay, the respondents Page 21 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA are possible to answer the question by value the willingness to pay equal to zero. Therefore the bid protest problem need take into consideration. . 4 Empirical studies on identifying socio-economic variables Since in previous studies showed that socio-economic is one of the important components. A number of socio-economic variables are also included in the empirical investigation. Aliza and Yacov (1999) completed a work for measuring the recreational value of agriculture landscape. In the paper done by Robert, McLeod and Syme (1992), Those researchers are using library service, health services, Department of agriculture services, school, police, rail services, water supply as the social indicator.
Those researchers investigate on those socio-economic variables such as age, income, gender education level. Zein, Jose and Manuel (2006), had done on variable such as sex, age, household income, education level, and labor situation, and household size, village of childhood and knowledge of the agriculture of the area. All of these socio-economic variables are included in the models as dummy variables. In studies of Robert, McLeod and Syme (1992) suggested the socio-demographic data collected from respondent, the value specified varied across respondent and was ranged of amounts between $500 and $2,500 with increments of $500.
From the finding of Yusuf and Ojo (2007), the study showed that relationship between expenditure and willingness to pay is positive. The study of Amirnejad, Khalilian, Assareh and Ahmadian (2005), showed positive relationship between education levels with the willingness to pay and also the income. Positive relationship was proved by Jones, Sophoulis and Malesios (2007). The study of Chen, Lupi, He, Ouyang and Liu (2008), the marital status is positive relationship with the willingness to pay. Tey (2008) proved the willingness to pay is positive relationship with the gender.
This paper will take the previous result as this study expects result. Page 22 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA 2. 5 Empirical studies on Tobit model and OLS Ordinary least square (OLS) is a widely used econometric model in the field of the environment issues. OLS served as a tool to exploit a statistical route to determine what if any factors that could identify might elucidate or foresee respondents’ willingness to pay more (or less) for the conservation easements program. A common feature of microeconomic data is that observations on the dependent variable that lie in a certain range are translated into a single number.
This mean a variable is zero for a nontrivial fractional of the population but is roughly continuously distributed over positive values. In studies of Ioannis et al. (2007); Chen et al. (2009); Kizito and Steve (2008) respondents were possible to have zero WTP, therefore Tobit model were applied. CHAPTER 3: RESEARCH METHOD 3. 1 Methodology In this paper, Contingent Valuation Method (CVM) is used. It is used to estimate economics values of all kinds of ecosystem and environmental services. It is suitable to be used to estimate both use and non-use values, and it is the most widely used method for estimating non-use value.
It is also the most controversial of the non-market valuation Page 23 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA method. This method is selected in this paper because of non-use values and their potentially significant levels. Since this paper is aimed to collect the result as how much surplus of price that consumers are willing to pay for agriculture products, as CVM is used in survey questions to elicit respondents willingness to pay. The contingent valuation method required face to face interview in the survey to get the idea that how much the interviewees are willing to pay for specific environmental services.
In some cases, interviewees are asked for the amount of compensation they would be willing to accept in order to give up specific environment services. In this paper, interviewees are required to state out how much they spend on agriculture product every week and how much surplus they are willing to pay for the every RM10 spend on agriculture products in order to support the multifunctionality of agriculture. The total amount of surplus will be distributed to the producers of the agriculture product as the reward for their contribution in the agriculture sector and further development of the multifunctionality of agriculture.
It is named as ‘contingent’ valuation because interviewees will be asked to state the amount that they are willing to pay which is contingent on a specific hypothetical scenario and description of environment service. It required people to state their value directly rather than inferring values from actual choices, as the ‘reveled preference’ method does. Contingent valuation (CV) is known as ‘stated preference’. Since CV is based on what people say they would do, as opposed to what people are observed to do, and is the sores of its greatest strengths and its greatest weaknesses.
CV is also the only way to assigne dollar values to non-use value of the environment-values that do no involve market purchase and may not involve direct participation. These values also known as ‘passive use’ values. They including everthing from the basic life support functions associated with ecosystem health or biodiversity, to the enjoyment of a scenic vista or a wilderness experience, to appreciate the option to fish or bird watch in future, or the right to bequest those options to your grandchildren. Page 24 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA
Most of the people are willing to pay for non-use, or passive environmental benefits. However, these values are likely to be implicitly treated as zero unless their dollar value is being estimated. The question is, how much are they worth? No one has the answer for it. So people are going to answer the questionnaire or question to indentify how much they are going to pay for it and are they really concern about this issue. 3. 2 Multifunctionality of Agriculture Figure 1 below shows the basic concepts of total economic value (TEV) towards recreation industry based on agriculture resource.
Agricultural activity, beyond its primary function, can also shape the landscape, provide environmental benefits such as land conservation, the sustainable management of renewable natural resources and the preservation of biodiversity, and contribute to the socio-economic viability of many rural areas. Looking from the primary function’s point of view, agricultural activities result in the production of food and fiber. In this narrow economic sense, agriculture is not a sector that enjoys significant comparative advantages (competitiveness) or builds up the economic performance of the country.
The term multifunctionality is not strictly defined and has many different interpretations, depending on the country and on the context in which it has arisen. Generally it is concluded that the multifunctionality of agriculture can be defined as the joint production of commodities and non-commodities by the agricultural sector. So, multifunctionality refers to the fact that an economic activity may have multiple outputs and, by virtue of this, may contribute to several societal objectives at once. There are: i. The existence of multiple commodity and non-commodity outputs that are jointly produced by agriculture; and ii.
The fact that some of the non-commodity outputs exhibit the characteristics of Page 25 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA externalities or public goods, with the result that markets for these goods do not exist or function poorly. Figure 1: Concept builds on total economic value (TEV) towards multifunctionality of agriculture. Production of food and fiber External influences, knowledge, traditions, new demands in society MULTIFUNCTIONAL AGRICULTURE Commodity outputs (Food and fiber, other Marketable products) Page 26 of 79
MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA Non-commodity outputs New activities (Agro tourism, social services, care-activities, etc) Positive externalities (Cultural capital, heritage, preserving the landscape, etc) Negative externalities (Pollution, land degradation, etc) Innovations, public support Transformation into commodity outputs Transformation and improvement with sustainable management Source: Journal for General Social Issues, 2005. Page 27 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA 3. 3 Total Economic Value of Agriculture and its functionality. Figure 2:
Total Economic Value Total Economic Value of Agriculture USE VALUE NONUSE VALUE DIRECT USE INDIRECT USE OPTION VALUE EXISTENCE VALUE BEQUEST VALUE Total Economic Value (TEV) appears in environmental economics as an aggregation of the main function based values provided by a given ecosystem. Those include use and non-use values. This chapter begins with a description of the both use value and non-use value of agriculture. The total economic value (TEV) of a natural resource or a agriculture can be divided into two broad categories: (i) Instrumental, also known as use value. ii) Intrinsic, also known as non-use value (some call passive use). Use values, which are most commonly known, refer to the capacity of a good or service to satisfy consumer needs or preferences. Use values can be further divided into direct value and indirect use value. Direct use values consist of consumptive uses such as commodity outputs for food and fiber, other marketable products. Indirect use values include environmental services such as maintenance of hydrological system, climate stabilization (e. g. carbon fixing) and soil stabilization. In addition, indirect use also help the nation to preserve its heritage and culture, which will later related to tourism industry, social services, care-activities, etc. Page 28 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA Intrinsic or non-use values, as the name suggests, are inherent in the good. That is, the satisfaction we derive from the good is not related to its consumption, per se. Non-use or passive use values comprise existence value, bequest value and option value.
Existence value arises from the benefit an individual derives from knowing that a resource exists or will continue to exist regardless of the fact that they have never seen or used the resource, or intends to see or use it in the future. A good example of the significance of non-use value is the international outcry over the whaling issue. There are many people who have never seen a whale or plan to see one, but are nevertheless willing to pay significant sums of money to ensure that whales are not hunted to extinction.
Bequest values arise from the benefits that individuals derive from knowing that a resource will be available for their children and incoming generation. Option value is a little more complex. Option value may be defined as an amount of money an individual is willing to pay, at the current time, to ensure that a resource is available in the future, should they decide to use it. To the extent that option value is the expected value of future use of the resource, it may also be classified as a form of use value.
Total economics value written as a model will be: (1) TEV = UV + NUV WHERE: TEV———Total economic value UV ——— Use Value NUV——– Non-use Value (2) UV = DUV + IUV WHERE: DUV ——– Direct Use Value IUV ——– Indirect Use Value (3) NUV = EV + BV + OV WHERE: EV ——– Existence Value BV ——– Bequest Value OV ——– Optional Value Page 29 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA 3. 4 Compensating Surplus The measurement of the value of an environment change based on substitutability can be expressed either as a compensating surplus (CS) or equivalent surplus (ES).
In principle, CS and ES measure can be defined in terms of any other good which an individual is willing to substitute for the good being valued. The compensating surplus (CS) is defined as the compensating that must be taken from an individual, leaving him better than before while the quantity of the commodity remains the same. In other words, certain amount of money must be paid in order to enjoy the improvement. In this study, people who desire to enjoy the benefits of multifunctionality of agriculture may pay an amount of money to improve agriculture.
Determination of CS requires one to know what individual would be willing to pay (WTP). In the questionnaire, respondents would be requested to answer two questions which are: Will you pay for the premium to support multifunctionality of agriculture? How much the exact value of that you are willing to pay for the premium? In Figure 3, indifference-map curve give consideration of 2 commodities, there are quality of agriculture (label as Q on horizontal axis) and the usage of other product value or known as composite commodity (label as Y on vertical axis).
Assume higher benefit of agriculture can be obtained. Initially, the equilibrium is at point A, on the indifference-map curve, U0. People enjoy Q0 of agriculture benefits. When more people supporting the multifuctionality of agriculture by paying the premium, the people’s indifference curve will shift upward from U0 to U1. The quality of agriculture products will increase from Q0 to Q1. The new equilibrium point is point B. The difference between Y0 and Y1 is the compensating surplus. Page 30 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA
Page 31 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA 3. 5. 1 Ordinary Least Square Regression Model Ordinary least square is a statistical technique that uses sample data to estimate the true population relationship between two variables. These estimated values are the dependent variable can be subtracted from the actual value of the dependent variable in the data set to produce what are called the residual. These residuals could be thought as the estimation if the unknown disturbances inherent in the data set.
It is an estimator generating the set of values of the parameters that minimizes the sum of squared residuals. This estimator is probably the most popular estimator among researchers doing empirical works. The reason for this popularity, however, does not stem from the fact that it makes the residuals “small” by minimizing the sum of squared residuals. Many econometricians are leery of this criterion because minimizing the sum of squared residuals does not say anything specific about the relationship of the estimator to the true parameter value which is estimated.
In fact, it is possible to be too successful of that particular sample that the estimator loses its general validity, in the sense that, were that estimator applied to a new sample, poor estimates would result. The great popularity if the OLS estimator comes from the fact that in some estimating problems, it scores well on some of the other criteria, described below, which are thought to be of greater importance. A secondary reason for its popularity is its computational ease; all computer packages include the OLS estimator for linear relationships, and many have routines for nonlinear cases.
Page 32 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA 3. 5. 2 Tobit Model Tobit model is known as econometric model which the dependent variable is censored; in the original model of Tobin (1958), for examples, the dependent variable was expenditures on durables, and the censoring occurs because values below zero are not observed. On other hand, Tobit model is also known as censored normal regression model. It can be estimated with maximum likelihood estimation, a general method for obtaining parameter estimates and performing statistical inferences on the estimates.
A common feature of microeconomic data is that observations on the dependent variable that lie in a certain range are translated into (or reported as) a single number. In the demand for hockey fame tickets examples, all demands above the capacity of the arena are translated into k, the arena capacity. This problem is analyzed using a Tobit model, named James Tobin who was the first to analyze this type of data in a regression context: in his application, all values below zero are translated into zero. The Tobit model is a special case of a more general model incorporating what is called sample selection.
In these models there is a second equation, called the selection equation, which determines whether an observation makes it into the sample. This causes the sample to be nonrandom, drawn from a special subpopulation of a wider population. Tobit model is used in this paper mainly because it can capture the value of zero. Since willingness to pay is one of the question included in questionnaires and it is one of the mainly focus in this paper, some of the interviewees will answer it with zero or in other words, they do not wish to pay for a premium of the agriculture product.
The disadvantage of Tobit model is it makes the same assumptions about error distribution as the OLS model but it is much more vulnerable to violation of those assumptions. This can found by comparing the heteroskedastic errors in Tobit and OLS model. In an OLS model with heteroskedastic errors, the estimated standard errors can be too small, but a Tobit model with the same errors, the computer used a bad estimate of the error distribution to determine the chance that a case would be censored, and the coefficient is badly biased. Page 33 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA 3. 6 Survey Design . 6. 1 Sampling and Survey Method In this paper, face-to face interview method was used in order to retrieve primary data. This interview method is believed can avoid most misspecification during the interview or collecting data. Questionnaires are set with open ended question. There are all together 200 copies of questionnaires. All questionnaires will divide to 2; each 100 copies will distribute to north Malaysia and south Malaysia. Interviewees are 200 household chiefs and spouse. All interviewees are Malaysian. Due to the reason of budget and time constrain, the interview will progress in 5 locations.
There are Sungai Long, Serdang, Putrajaya; which are from Kuala Lumpur, Kluang, Johor; and Ipoh, Perak. The first round of interview was took place at Putrajaya from 1pm to 6pm on 10 July 2009 (Friday) and the second interview was held at Serdang from 1pm to 4pm on 13 July 2009 (Monday). For the third round interview, it was done at Sungai Long from 1pm to 4pm on 15 July 2009 (Wednesday). The subsequent round of interview was done at Kluang, Johor, from 1pm to 4pm on 18 July 2009 (Saturday). The last interview was done at Ipoh, Perak, on 20 July 2009 (Monday). Page 34 of 79
MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA 3. 7 Questionnaire Design There are three major parts in the contingent valuation questionnaire. Part one is the individual information about the interviewee and part two is the attitude and concerns about agricultural multi-functionality. The last part is the willingness to pay of the interviewee in order to support agriculture multifunctionality. Every time before the interview is started, a briefly explanation will be done by the interviewer. The questionnaire is including the definition and explanation of the Multifunctionality of Agriculture.
Market and examples of agriculture multifunctionality are included as well. This is done to ensure the respondent is given a clear mind and better understanding about agriculture multifunctionality. The first part of the questionnaire including gender, age, marital status, highest qualification, status of profession, types of profession, monthly household gross income and monthly household expenditure on consumption. These data helps to identify whether socioeconomic position affects willingness to pay and concern on agriculture multifunctionality. Part two is the contingent valuation section.
The questions elicit the preference of the respondents on ranking the area of socioeconomics that should be given priority by the government and the agriculture sustainability issues. It including which kind of agriculture product that respondent concerns the most. These preferences were measured ranging from the highest preference to the lowest preference. It part of questionnaire was created to study the level of concern of the respondents regarding the agriculture industry. Finally, willingness to pay (WTP) for agriculture multifunctionality was included in parts three of the questionnaire.
The only WTP elicitation method was used in this study is open-ended method. Every respondent was told and explained about the agriculture industry and multifunctionality of it. Since agriculture multifunctionality brings a lot of benefits to us, respondents are encouraged to state out the exactly amount of willingness to Page 35 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA pay in order to support the further development of this industry. A premium will be charged on every agriculture product that produced by the manufacturers or producers who are the members of Association of Agriculture Multi-functionality.
A special tag will be pasted on every product that produced by the members. This is done to help the consumers to differentiate the products which are produced by the members of the association. Consumers who are willing to support the agriculture multifunctionality will purchase the products with the tag. The premium collected from the sales of the products will be redistributed to the producers to reward and encourage them for further development in agriculture multifunctionality. There are always a few types of biasness may appeared and affect the interviews.
Therefore, precautions have been done to eliminate or minimize the effects of them. These potential biases and the ways to prevent or eliminate them are shown in the table 1 below: Table 1: Potential Bias Potential Bias Scenario misspecifications Solution to eliminate or minimize Interviews are done by face-to-face explanation are provided whenever it is needed. Hypothetical bias Payment vehicle in this study was use the method of charge premium in each agriculture answer product. the When part of respondent willingness to pay, respondent will consider the ability to pay. Tendency to give misrepresented response All responses were collected anonymously 3. 8. 1 Model Specification Page 36 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA Data analysis relied on the modeling of the WTP as dependent variables with the considered socioeconomic variables for the population. The model is set up as below: WTP = f (Gender, Marital status, Education, Occupation, Monthly Household Gross Income, Monthly Household Expenditure, Care on Agriculture, Expenses on Agriculture) In mathematical form: WTP = ? 0 + ? 1G + ? 2MS + ? 3E + ? 4O + ? MHI + ? 6MHE + ? 7CoA + ? 8EoA These symbols are explained in Table 1 Table 1: Symbols’ Explanation for Regression Model Symbol WTP G Type of Variables Dependent Independent Dummy Variable Explanations Willingness to pay of respondent Gender 1 = Male 0 = Female Marital Status 1 = Married 0 = Others (Single/Divorced/Separated) Educational Level 1 = Above level of Higher Secondary Education 0 = Higher Secondary Education or Below MS Dummy Variable E Dummy Variable Page 37 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA Symbol O Type of Variables Dummy Variable
Explanations Occupation 1 = Private sector 0 = Others (Government Sector/Businessman/Housewife/ Unemployment/Retiree) Monthly Household Gross Income 1 = Monthly Gross Income ? RM 4,500 0 = Monthly Gross Income ; RM 4,500 Monthly Household Expenditure 1 = Monthly Gross Income ? RM 2,000 0 = Monthly Gross Income ; RM 2,000 Care on Agriculture 1 = Yes 0 = No Weekly Expenses on Agriculture Product MHI Dummy Variable MHE Dummy Variable CoA Dummy Variable EoA Discrete Variable 3. 8. 2 Test Hypothesis Ho: ? k does not significantly influence on willingness to pay.
H1: ? k does significantly influence on willingness to pay. (k= 1, 2, 3, 4, 5, 6, 7, 8) ? 1 = Gender of respondents ? 2 = Marital Status of respondents ? 3 = Educational level of respondent ? 4 = Occupation of respondent ? 5 = Monthly Household Gross Income of respondent Page 38 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA ?6 = Monthly Household Expenditure of respondent ? 7 = Attitude of respondent Care on Agriculture ? 8 = Weekly Agriculture Product expenses of respondent Page 39 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA CHAPTER 4: RSEARCH RESULTS
Data Analysis Table 2: Importance of the Sectors for Government Funding and Ranking of Environment Problems. N Mean Score Standard Deviation Importance of Sector for Government Funding Public Education 200 2. 33 1. 69 Public Safety 200 2. 97 1. 61 Agricultural Sustainability 200 4. 92 1. 63 Unemployment 200 4. 77 2. 06 Environment Sustainability 200 4. 97 1. 69 Housing 200 4. 52 1. 87 Public Health Services 200 3. 53 1. 64 Importance of Environment Problems Air Purification 200 2. 24 1. 39 Landscape 200 3. 82 1. 43 Flood Prevention 200 3. 71 1. 34 Recreation 200 4. 73 1. 9 Food Security 200 2. 29 1. 46 Conservation of Biodiversity 200 4. 23 1. 59 Note: N is number of observations Sector Ranking 1 2 7 3 6 5 4 2 4 5 6 1 3 In previous studies, researchers are discuss the question of how to aggregate the measures of individual welfare changes (compensation surplus or equivalent surplus), when gains and losses accrue to different individuals. They state that, the fundamental value judgment of standard welfare economics is that social ranking of alternative policies should be based on individuals’ preference over these alternatives differently.
The Pareto Principle provides a minimum standard for deriving a social ranking from individuals’ preferences or ranking. In the paper, respondents are requested by answer those question related with socioeconomic factor. The respondents were asked to rank the importance of the various socioPage 40 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA economic sectors for government budgetary allocation. From the result shown at above, respondents are most concern about the Education sector, which is rank by respondents’ on the first one out of eight.
Followed by the public safety, Unemployment, Public Health Services, Housing, Environment sustainability and the last one are the Agriculture sustainability. This shown that people are more concern on other sector than agriculture sector. This may because of Malaysian are not familiar or understand the benefit of agriculture. The multifunctionality of agriculture is still considering a new thing to for Malaysian. When come to environment problem, scientists were found out agriculture were able provide a lot of function to resolve environment problem.
From the result, respondents were showed that, the food security is most important. The second important was followed by air purification function which is provided by function of agriculture. Third, respondents were taking that conservation of biodiversity are the third important issue. Beside the conservation of biodiversity issue, landscape and flood prevention are the forth and firth important issue for agriculture sustainability. The last issue which is feeling important by respondents is recreation issue. 4. 1. 1 Report of Respondents’ Willingness to Pay There were 200 respondents being interviewed.
In this paper, there were 105 respondents (52. 5%) willing to pay for the premium to support Multifunctionality of Agriculture. From this amount, there were 95 cases, (47. 5%) are protest bid case and 4 respondents are willing to pay premium, but pay zero value. This may cause by the economic condition which the country is under recession. Therefore, people are not willing to pay any value to support multifunctionality of agriculture, and hope other part will bear for it. It is shown in the table 4. 2, in the table 4. 1, 51 of the respondents, 53. % not willing to pay any amount to support Multifuctionality of Agriculture with the concept that government are responsible to bear the cost of support Multifuctionality of Agriculture. Besides that, 35 respondents, 36. 8% did support Multifunctionality of agriculture but they Page 41 of 79 MULTIFUNTIONALITY OF AGRICULTURE IN MALAYSIA not afford to pay any amount of money. 3 of respondents, 3. 2% are feel not interest at the activities which to support Multifunctionality of Agriculture. In the same times, 6 respondents which are 6. 3%, states others reason for would not pay for the premium to support Multifunctionality of Agriculture.
These 99 respondents will be ignored in OLS regression model. Table 3: Respondents’ Willingness to Pay Willingness to pay Yes No Total No. Observation 105 95 200 Percentage(%) 52. 5 47. 5 100 Table 4. 1: Reasons for Not Willing to Pay for Premium (Protest Bid) Reason for not willing to pay No. Observation It is Government Responsibility 51 Do support to Multifunctionality of Agriculture, 35 but cannot afford to pay any amount of money Do not support to Multifunctioanlity of Agriculture 3 Other reasons 6 Total 95 Percentage(%) 53. 7 36. 8 3. 2 6. 3 100 Table 4. : Reasons for state WTP as 0 Reason for not willing to pay It is Government Responsibility Do support to Multifunctionality of Agriculture, but cannot afford to pay any amount of money Total No. Observation 2 2 4 Percentage(%) 50 50 100 In this paper, there were 105 respondents willing to pay at d
