ECONOMIC VALUATION OF ECOSYSTEM SERVICES FOR

SUPPORTING LAND USE DECISION: THE CASE OF

MANGROVE ECOSYSTEM SERVICES IN PANGKALPINANG,
BANGKA BELITUNG ISLAND PROVINCE, INDONESIA

Thesis
Submitted as Partial Fulfillment of the Requirements for
The Degree of Master of Engineering

Study Program
Magister of Urban and Regional Planning

by:
Leni Anggeraini
15/389127/PTK/10247

to
THE GRADUATE SCHOOL
GADJAH MADA UNIVERSITY
YOGYAKARTA

2017
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 ACKNOWLEDGEMENTS

First, I wish to express my sincere thanks to my academic advisors Mr.

Retno Widodo Dwi Pramono and Ms. Motoko Kawano for their great idea and
useful guidance that gave me the direction to complete this thesis. Additionally,
Iwould also like to give many thanks to the director of study program, Mr. Bakti
Setiawan for his great support and my two examiners, Mr. Sani Roychansyah and
Mrs. Yori Herwangi for their valuable comments on my paper.
My great gratitude goes out to Mr. Yukihiro Kidokoro for his helpful
guidance, especially in the Cost Benefit Analysis section, and his constructive
comments in the process of writing this paper.
I would also like to give sincere thanks to all of the lecturers and the staff
members in Gadjah Mada University that I could not mention one by one for all
their inspiring knowledge as well as their help during my study. I owe a debt of
gratitude to my survey team, Nina and April, for their great help during the
questionnaire survey. I would also like to thank all of my DD 13’s friends for our
friendship and togetherness throughout the good and hard times during our study in
Yogyakarta.
I would like to express my gratitude to the Indonesian Government for
granting me the BAPPENAS scholarship to pursue my studies, both at Gadjah
Mada University, Yogyakarta and GRIPS, Tokyo
My heart goes out to my beloved husband Masud Mustalin, my children,
Radit and Daniyl, and my parents, Mama and Papa. I am sincerely grateful for their
understanding, support, and their patience, and always giving me their best wishes
for my study completion. Finally, I am grateful to God for his mercy in giving me
the wonderful experience to learn a lot of positive things during my study both in
Yogyakarta and Japan.

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 TABLE OF CONTENTS

ACKNOWLEDGEMENTS .................................................................................. v
LIST OF TABLES ............................................................................................. viii
LIST OF FIGURES ............................................................................................. ix
ABSTRACT ........................................................................................................... x
INTISARI ............................................................................................................. xi
ABBREVIATIONS ............................................................................................. xii
I. INTRODUCTION ............................................................................................. 1
1.1. Background............................................................................................ 1
1.2. Problem Statement and Research Question ....................................... 4
1.3. Research Objectives .............................................................................. 4
II. LITERATURE REVIEW .............................................................................. 6
2.1. The Prospect of Economic Valuation as A Tool of Land Use
Decision .............................................................................................................. 6
2.2. Valuing the Benefits of Mangrove Ecosystems ................................... 7
2.2.1. The Benefits of Mangrove Ecosystems .......................................... 7
2.2.2 Total Economic Value (TEV) and Valuation Methods .................. 8
2.2.3. Contingent Valuation Method (CVM) .......................................... 11
2.3. Cost Benefit Analysis (CBA) .............................................................. 12
2.4. Policy Evaluation in Previous Studies ............................................... 14
III. RESEARCH METHODS ............................................................................ 17
3.1. Data Collection .................................................................................... 17
3.2. Data Analysis ....................................................................................... 19
3.2.1. Small Fishermen’s WTP Estimation and Model ................................. 19
3.2.2. TEV and NPV of Mangrove ............................................................... 21
IV. STUDY AREA DESCRIPTION ................................................................. 25
4.1. The Mangrove Ecosystems in Pangkalpinang .................................. 25
4.2. The Land Use Change in Pangkalpinang ......................................... 26
V. RESULTS AND DISCUSSIONS .................................................................. 29
5.1. Willingness to Pay (WTP) .................................................................. 29
5.2. Total Economic Value (TEV) ............................................................. 35
5.3. Cost Benefit Analysis (CBA) .............................................................. 37
5.3.1. Total Revenues, Costs and Profitability of Industrial Development .. 37

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 5.3.2. Base Case Analysis ............................................................................. 40
5.3.3. Monte Carlo Sensitivity Analysis ....................................................... 41
5.4. ES Valuation for Informing Land-Use Decision: A Lesson Learnt
from Mangrove Ecosystems in Pangkalpinang ............................................ 46
VI. CONCLUSION AND RECOMMENDATION .......................................... 48
VII. LIMITATIONS AND FOR FUTURE RESEARCH ............................... 51
REFERENCES .................................................................................................... 52
Appendix A ...................................................................................................... 57
Appendix B ...................................................................................................... 63
Appendix C ...................................................................................................... 66
Appendix D ...................................................................................................... 68

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 LIST OF TABLES

Table 1. The Relationship between Valuation Methods and Values .................... 10

Table 2. Economic Values, the Selected Methods and the Data Sources ............. 18
Table 3. The description of Variables ................................................................... 20
Table 4. Annual WTP per Person and Total Each Type of Local People ............. 30
Table 5. Socio-economic Characteristics and Attitudes of Small Fishermen ....... 31
Table 6. Respondents Rank the Factor Causing Mangroves Damaged ................ 32
Table 7. The Determinants of Small Fishermen’s Willingness to Pay (WTP) ..... 33
Table 8. TEV of Mangrove Ecosystems in Pangkalpinang .................................. 36
Table 9. Summary of Base Case Assumptions ..................................................... 39
Table 10. The NPV Results under the Base Cases................................................ 40
Table 11. Parameter Values of the Empirical Data of Tin Price, Utilization and
Discount Rate ........................................................................................................ 43

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 LIST OF FIGURES

Figure 1. The Distribution of Mangrove Ecosystems in Pangkalpinang .............. 25

Figure 2.The Distribution and Conversion of Mangroves in the Study Area ....... 26
Figure 3. The Mangrove Removal and the Ownership Announcement in the Area
for Industrial Land Use ......................................................................................... 28
Figure 4. Histogram of Empirical Tin Price from 2007 - 2017 ............................ 42
Figure 5. Histogram of Empirical Utilization Rate from 2007 - 2017 .................. 42
Figure 6. Histogram of Empirical Discount Rate from 2007 - 2017 .................... 43
Figure 7. Histogram of NPV of Tin Plant ............................................................. 44
Figure 8. Histogram of NPV of Mangroves .......................................................... 45

ix
 ABSTRACT

Land use planning is the core of the development sustainability that is balancing
social, economic and ecological needs, but case studies using Ecosystem Services
(ES) valuation approach to decide or evaluate land-use policies are insufficient in
the scientific literature. Using mangrove ecosystems in Pangkalpinang as a case
study, this paper aims to estimate the Total Economic Value (TEV) of mangroves
derived by local people, to enable a direct comparison with a tin refinery plant’s
profitability as a representation of industrial development, using the Cost Benefit
Analysis (CBA) method. The study employs methods of travel cost, replacement
cost, net small fishermen’s income, benefit transfer, and contingent valuation to
estimate the Pangkalpinang mangroves’ TEV. A questionnaire survey of 164
respondents, field observations, and visits to relevant institutions were undertaken
in 2016 to gather data. Using the open-ended question method, this study further
investigates the small fishermen’s willingness to pay (WTP) to preserve the
mangroves and determine the factors influencing it. The result shows that the annual
TEV of mangrove ecosystems is approximately 1,642 kUSD (1,838 USD/ha/year),
which is equivalent to roughly double the city’s Gross Domestic Product (GDP) for
2015, confirming that mangrove ecosystems positively influence human lives. The
analysis also revealed that mangrove preservation can provide better outcomes and
certainty compared to tin industry development. The findings are expected to
provide local governments information about the importance of Pangkalpinang
mangrove ecosystems for local people, so that they can formulate better policies.

Keywords: Cost-benefit-analysis, Economic-valuation, Ecosystem-services, Land-

use-decision, Monte-Carlo-simulation.

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 INTISARI

Perencanaan penggunaan lahan adalah inti dari keberlanjutan pembangunan yang

menyeimbangkan kebutuhan sosial, ekonomi dan ekologi, namun studi kasus
dengan pendekatan penilaian Jasa-jasa Ekosistem (ES) untuk memutuskan atau
mengevaluasi kebijakan penggunaan lahan tidak mencukupi dalam literatur ilmiah.
Dengan menggunakan ekosistem mangrove di Pangkalpinang sebagai studi kasus,
Penelitian ini bertujuan untuk memperkirakan Total Economic Value (TEV)
mangrove yang berasal dari masyarakat lokal, untuk memungkinkan perbandingan
langsung dengan keuntungan pabrik kilang timah sebagai representasi
pengembangan industri, dengan menggunakan metode Analisa Biaya Manfaat
(CBA). Studi ini menggunakan metode biaya perjalanan, biaya penggantian,
pendapatan nelayan bersih bersih, transfer keuntungan, dan penilaian kontinjensi
untuk memperkirakan TEV hutan bakau Pangkalpinang. Survei kuesioner terhadap
164 responden, observasi lapangan, dan kunjungan ke institusi terkait dilakukan
pada tahun 2016 untuk mengumpulkan data. Dengan menggunakan metode
pertanyaan terbuka, penelitian ini selanjutnya menyelidiki kesediaan nelayan kecil
untuk membayar (WTP) untuk melestarikan mangrove dan menentukan faktor-
faktor yang mempengaruhinya. Hasilnya menunjukkan bahwa TEV tahunan
ekosistem mangrove sekitar 1.642 kUSD (1.838 USD / ha / tahun), yang setara
dengan sekitar dua kali lipat dari Produk Domestik Bruto (PDB) kota untuk tahun
2015, yang memastikan bahwa ekosistem mangrove secara positif mempengaruhi
kehidupan manusia. Analisis juga mengungkapkan bahwa pelestarian mangrove
dapat memberikan hasil dan kepastian yang lebih baik dibandingkan dengan
pengembangan industri timah. Temuan ini diharapkan dapat memberikan informasi
kepada pemerintah daerah mengenai pentingnya ekosistem mangrove
Pangkalpinang bagi masyarakat setempat, sehingga dapat merumuskan kebijakan
yang lebih baik.

Kata Kunci: Analisa biaya manfaat, Valuasi ekonomi, Jasa-jasa lingkungan,

Penggunaan lahan, Simulasi Monte Carlo.

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 ABBREVIATIONS

BCR Benefit Cost Ratio

CBA Cost Benefit Analysis
CSV Carbon Sequestration Value
CVM Contingent Valuation Method
DV Direct Value
ES Ecosystem Services
FAO Food Agriculture Organization
FPV Fishery Production Value
GDP Gross Domestic Product
GIS Geographic Information System
IDV Indirect Value
MA Millenium Ecosystem Assessment
NPV Net Present Value
NUV Non Use Value
OLS Ordinary Least Square
OV Option Value
P Profit
PV Present Value
Q Quantity
RV Recreational Value
SSV Shoreline Stabilization Value
TEEB The Economic of Ecosystem and Biodiversity
TEV Total Economic Value
TC Total Cost
TR Total Revenue
UV Use Value
WTP Willingness to Pay

xii
 I. INTRODUCTION

1.1. Background

Land use planning is the core of the development sustainability that is

balancing social, economic and ecological needs (Engel & Pickardt, 2012). Land

use planning can be used to support important development goals such as food

security, climate change mitigation and adaptation, biodiversity protection,

economic growth initiation, people protection from natural disaster. Because of this

strategic position, land use planning plays an important role in conserving or

destroying ecosystem services (Engel & Pickardt, 2012; Förster et al., 2015).

The term Ecosystem Services has been increasingly recognized to play an

important role in improving human lives (Fisher, Turner, & Morling, 2009). ES is

defined as the direct and indirect beneficial services that people receive from nature

(Millenium Ecosystem Assesment [MA], 2005; The Economics of Ecosystems and

Biodiversity [TEEB], 2010). This definition has shifted the nature conservation

paradigm from the thought based on intrinsic values to the more anthropocentric

values.

One of the most important ecosystems is the mangroves. Mangrove

ecosystems provide a lot of benefits to human beings both locally and globally. At

the local scale, mangrove ecosystems can support local people’s living like food

provisioning, potential fishery, timber products, recreational value, shoreline

stabilization, pollution abatement. Moreover, at a global scale, mangrove

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ecosystems can sequester carbon and contribute to reduction of the effects of

climate change (Alongi, 2008).

Despite the fact that mangroves support human well beings, empirical

evidences show that around 3.6 million hectares of the total mangrove area (about

20%) in the world was lost in the past 25 years (FAO, 2007). FAO (2007) further

reported that Indonesia which has the world’s largest mangrove forest with 19% of

the global distribution and the highest diversity, with 43 true species, has

experienced a notable decrease in mangroves. Approximately one quarter of its total

mangrove area was lost during the 25-year period (1980-2005).

The main contributing factors behind this decrease are likely to be

unsustainably land exploitations and land-use conversions by local people. Ilman

et al. (2011) mention that aquaculture, agriculture, coastal-area development, oil

palm expansion, logging and mining are the key drivers of the loss and degradation

of mangroves in Indonesia. However, the role of land use decisions as the final

product of ES asessement to either maintain or replace ecosystems (including

mangroves) by decision makers largely contributes to the quantity of ecosystem

areas (Förster et al., 2015).

There are at least two underlying aspects for decision makers to adopt a

land-use policy that may not or less take natural ecosystems into account. The first

aspect is that many developing countries still fund their development wheel by

exploiting natural resources (Carter, Schmidt, & Hirons, 2015). Another factor is

that ES are still counted unfairly in policy making processes due to the poor

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availability of information and understanding related to ES values that mainly do

not exist in market mechanism so called “externality” (TEEB, 2010b).

Consequently, in practices many policy decisions regarding land-use in

developing countries mainly affect the social-economic life of local people who are

ussually the poor whose livelihoods are heavily dependent on ecosystems. In

addition, converted lands usually can be owned only by wealthier individuals who

often come from the outside regions and employ laborers from other places (Jose

& Janssen, 1999). Inevitably, the need of tool to create awareness about the value

of natural resources emerges as an emergency, in order to convince policy makers

to consider alternative policies (Vo et al., 2012).

This case study was conducted in Pangkalpinang, located at Bangka

Belitung Island Province in Indonesia. The city covers approximately an area of

11.900 ha with around 1236 ha (10%) of mangrove areas, comprising Ketapang,

Selindung, Tanjung, and Bunga areas (Local Planning Agency, 2010). The

mangrove areas here face serious land-use pressures, since the local government

has assigned a policy to convert mainly the mangroves into industrial, warehouse,

and residential areas. Information from such analyses is urgently important as many

local governments, particularly in developing countries, are currently not

considering the beneficial values of mangroves in their policy making. Moreover,

the social economic background of local people in the study area whose livelihood

are directly dependent such as fishermen and crab cathers mostly come from the

poor and are vulnerable to the current local spatial policy.

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1.2. Problem Statement and Research Question

Many economic valuation studies have been conducted since the 1990s, to

support the notion that policy makers should consider ES values in their decision-

making process regarding land-use issues (e.g. Liekens et al., 2013). As mangrove

ecosystems offer a lot of benefits, there are many valuation studies of mangroves

that have been conducted in different places around the world (e.g. Gunawardena

& Rowan, 2005; Malik, Fensholt, & Mertz, 2015).

However, there are still only a few studies in the scientific literature of

Indonesia – the country with the largest area and highest biodiversity of mangroves

in the world – than the other countries, that have smaller areas of mangroves.

Besides, the economic value of this ecosystem may be different in each area due to

the specific economic activities, cultures, and lifesyles of the local communities

(Vo et al., 2012). In addition, there are still a few studies discussing the economic

benefits of mangroves, as compared to the profitability of industrial development.

This study has been undertaken to fill this lack. Therefore, the question of the study

is how ES valuation approach can be used as an analytical tool for supporting land

use decision or assessment.

1.3. Research Objectives

Using Mangrove ecosystem in Pangkalpinang as the study case, the

purpose of this paper is to demonstrate the use of ES valuation approach as an

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analytical tool for supporting land use decision or assessment. To achieve this

purpose, therefore, the main objectives of this research is to estimate the TEV

derived by local people from the mangroves in Pangkalpinang, including direct use

value (DV), indirect use value (IDV), and option value (OV), to enable a direct

comparison with the profitability of a tin refinery plant as a representation of

industrial development, using the CBA method. This study also aims to analyze the

preferences of the local people, whether to maintain or remove the mangroves in

the study, area through their willingness to pay (WTP) and determine the factors

influencing it.

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 II. LITERATURE REVIEW

2.1. The Prospect of Economic Valuation as A Tool of Land Use Decision

Land use planning is the core of the development sustainability that involves

three main components: social, economic and ecological needs (Engel & Pickardt,

2012). Many recent research show that spatial planning and land-use change have

an impact on ES sustainability (Crespin & Simonetti, 2016; Grêt-Regamey,

Altwegg, Sirén, van Strien, & Weibel, 2017; Tolessa, Senbeta, & Kidane, 2017).

At the same time, many scientific literature concerning ES information are

countinously growing to raise awareness of the importance of ES for human well

beings (Seppelt, Dormann, Eppink, Lautenbach, & Schmidt, 2011). However, the

research are insufficiently relevant to what information that decision makers

actually need for their real-situation problems (Honey-Rosés & Pendleton, 2013).

Moreover, case studies using ES valuation approach to decide or evaluate land-use

policies are rarely found in the recent published literature (Laurans, Rankovic, Billé,

Pirard, & Mermet, 2013; Marre et al., 2016). As a result, many decision makers

find it difficult or even unable to implement ES valuation concept into practice.

The development of such an applicable and transparent tool to respond the

need of decision makers, therefore, is in the process. Not only is it expected to

provide decision makers better information of ES (TEEB, 2010b) but also support

land-use decisions (Förster et al., 2015), which is the main focus of this study.

Economic valuation, an approach to attach value for ES in monetary terms, seems

6
to be a promising tool for realizing the objectives because it enables a trade off

between two or more land-use alternatives through CBA (Liekens et al., 2013) even

though ES approach is not always attributing monetary values (Ruckelshaus et al.,

2015). By using some methods and techniques of economic valuation and CBA

which will be explained in the next section and taking mangrove ecosystems in

Pangkalpinang as the study case, this study tries to provide an example of how ES

approach can be used to support land use decisions.

2.2. Valuing the Benefits of Mangrove Ecosystems

2.2.1. The Benefits of Mangrove Ecosystems

FAO (2007) defines mangroves as coastal forests found in sheltered

estuaries and along river banks and lagoons in tropic and sub-tropic areas.

Mangrove plants generally are covered and live near brackish water (Melana et al.,

2000). A mangrove ecosystem refers to plants classified as mangrove families and

the coastal environment surrounding that connect among them. Melana et al (2000)

further explains that flora and fauna living in mangrove ecosystems have specific

types. There are 26 families associated mangrove species and 47 types of the true

mangroves classified as the mangrove flora. Meanwhile, the mangrove fauna

consist of shore birds, some species of mammals, reptils, mollusks, crustaceans,

polychaetes, fishes and insects

In principle, the benefits of mangrove ecosystems are not much different

from those of ecosystems, in general. There are six primary ecological and

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economic benefits and functions of the mangrove ecosystems, according to Melana

et al., (2000):

1. Nursery grounds for many fish, crabs and prawns and fishery production;

2. Valuable sources of foods for animals;

3. Coastal area protector from surges, wave, tidal currents and typhoons;

4. A reduction tool of organic pollution in seashore areas;

5. Recreational grounds and observation of other wildlife;

6. Good sources for housing materials, firewood and charcoal and medicines.

A study conducted in the Gulf of California by Aburto-Oropeza, Ezcurra,

Danneman, Valdez, Murray and Salla (2008), for example, reveals that fishery

yields are positively related to the local abundance of mangroves. However, it is

not significantly related to estuary size, sea-grass beds, latitude, local rainfall, and

fishing effort, implying the immense importance of mangrove fringes for

maintaining the health of coastal ecosystems.

2.2.2 Total Economic Value (TEV) and Valuation Methods

Many experts (Georgiou, Whittington, Pearce, & Moran, 1997; Hussen,

2004; Tietenberg & Lewis, 2015) agreed that the conceptual model of TEV for

environmental resources can be presented as the following formula:

TEV = Use Value (UV) + Non-use Value (NUV)

UV involves direct and indirect uses of the environmental resources. Timbers,

leaves, natural medicine sources, and fish, that people derive from mangrove forests

8
are the examples of direct use value, whereas stabilization and carbon sequestration

reflect the indirect use value. NUV, on the other hand, captures the willingness to

pay (WTP) for the preservation of environmental resources, that people do not take

direct benefits from. This value also covers bequest and existence values. Bequest

value measures the WTP of people to preserve an environmental resource for their

children and grandchildren, while existence value relates to the people’s

satisfaction that the environmental assets shall continue to exist even, though they

do not use them.

Even though many economists agree to the general concept of TEV, there

are slightly different definitions among experts in classifying the option values in

the TEV. The differences depend on the experts’ view. While some economists

categorize option value as a component of non-use value (Hussen, 2004) and as an

independent value separated from use and non-use value (Tietenberg & Lewis,

2015), Georgiou et al. (1997) defined that use value includes direct use, indirect use

and option values. Option value, according to Georgiou et al. (1997), can be defined

as the use value that the current local people may use in the future. This study

follows the concept of TEV derived by Georgiou et al. (1997) that option value is

a component of UV. This is based on the definition that option value is the use value

that current generation may use in the future (Georgiou et al., 1997). This definition

is essentially different from bequest value, in the context of the subject who takes

benefits, since Georgiou et al., (1997) defines bequest value as the WTP of the

current generation to preserve an environmental resource for their future

generations.

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 This study is only limited to estimating the TEV through UV, and does not

involve the NUV. The UV includes direct use, indirect use, and option values. This

limitation is based on the main purpose of this study, that is to estimate the benefits

of mangroves derived by the current local people. For example, direct use values

such as fuel wood and timber were not estimated because the local people in the

study area did not benefit from them. In addition, bequest value was also not

considered, because it relates to future generations and has nothing to do with the

current local people.

Table 1. The Relationship between Valuation Methods and Values

Approach Method Value

Price-based Market prices
Avoided cost
Market Cost-based Replacement cost
Valuation Mitigation/Restoration cost
Production function approach
Production-based
Factor Income
Travel cost method
Revealed preference
Hedonic pricing
Contingent valuation
Choice modelling/conjoint
Stated preference analysis
Contingent ranking
Deliberative group valuation
direct and indirect use
direct and indirect use
direct and indirect use
direct and indirect use
indirect use
indirect use
direct (indirect) use
direct and indirect use
Use and non-use
Use and non-use
Use and non-use
Use and non-use

Source: TEEB (2010b)

Meanwhile, the valuation method used to estimate TEV was carefully

selected. Different types of value are measured by different methods of economic

valuation. TEEB (2010b) has summarized the different types of valuation

10
techniques to estimate the variation of ecosystem values . The link between

specified methods and value components is presented in Table 1.

2.2.3. Contingent Valuation Method (CVM)

Contingent Valuation Method (CVM) is the method to estimate resource

values (both use and non-use values) using stated preference approach, as shown

on Table 1. In principle, CVM is used for many environmental goods that do not

exist in a market (Hanley, Shogren, & White, 2001). In such a situation, individual

respondents are directly asked by means of questioning, about their behavior toward

existence of the market. CVM is recognized by many valuation studies as the only

method that is capable of capturing NUV and passive values (Ndebele, Forgie, &

Vu, 2014).

There are several ways to elicit respondents’ choice or preference.

According to Georgiou et al. (1997), the simplest way to do so is by asking open-

ended questions, that is to simply ask how much they would be willing to pay for

the goods or services. Another way is using dichotomous choices, that is the

respondents’ choice over certain bid-level options. Alternatively, respondents may

be asked a series of questions to iterate toward their best valuation, which is called

the iterative bidding method. Another possible way is to show the respondents “a

payment card” and asked for their preferences.

Recently, many valuation studies prefer to use dichotomous choice method

to elicit respondents’ WTP (e.g Indab, 2016; Ndebele et al., 2014). Although there

11
are some studies undertaken to compare these methods (e.g. Balistreri, Mcclelland,

Poe, & Schulze, 2001; Loomis, Brown, Lucero, & Peterson, 1997), the best way to

estimate respondents’ preferences remains unknown. Moreover, the results of the

study conducted by Loomis et al. (1997) also suggests that there are no significant

differences between the open-ended and dichotomous choice formats, when both

methods were compared to estimate either hypothesized or actual WTP. Therefore,

this study chose the open-ended question method to get the WTP value and estimate

the OV for mangrove protection.

2.3. Cost Benefit Analysis (CBA)

CBA is a method that has been used for a long time by policy makers to

evaluate a policy or a project. Many empirical studies, notably in the field of

environmental policy, transport planning, and healthcare around the world have

applied CBA when they needed to choose the best policy or project from a series

of options. According to Boardman, Greenberg, Vining, and Weimer (2011), the

feasible project or policy can be determined using the following theoretical

framework:

𝐵 −𝐶
NPV = ∑𝑛𝑖=1 (1+𝑟)
𝑖 𝑖
𝑡 > 0
(1)

Where NPV is Net Present Value, PV(B) and PV(C) are the total benefits

and costs that occur in years t and can be converted to its present value by using the

12
discount rate r. If policy or project alternatives are more than one and mutually

exclusive, then the one with the largest NPV should be selected.

In this study, there are two mutually exclusive policy scenarios are

proposed in evaluating the land use policy in Pangkalpinang, particularly the policy

for industrial zones. The first option is developing industries in the existing

mangroves, as the local government has assigned, and the second one is maintaining

the mangroves. To simplify the calculation, a tin refinery plant was selected as a

representation of the industrial development scenario, and the same mangrove area

that would need to be removed if the plant is built was selected as a representation

of the mangrove preservation scenario.

To obtain a plausible judgment, a sensitivity analysis is necessary to be

undertaken. Besides, a sensitivity analysis also serves the purpose of recognizing

the underlying uncertainty (Boardman et al., 2011). It precisely reveals how the

predicted net benefits (losses) are to vary from the assumptions. We can say the

results are robust if the net benefits (losses) show consistent signs when the range

of assumptions are applied. On the contrary, the results are considered less

convincing if the signs of net benefits (losses) change inconsistently. The sensitivity

analysis undertaken in this study follows the Monte Carlo simulation. This method

was chosen because it is often used to address problems which deal with risks and

high uncertainties.

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2.4. Policy Evaluation in Previous Studies

Many previous studies have performed the valuation methods, as shown

in Table 1, to estimate either the TEV or the benefit values of mangroves for local

people and use the information to evaluate policies or projects using CBA. A case

study was conducted Gunawardena and Rowan (2005) in Rekawa Lagoon, Sri

Lanka. The main purpose of the study was to report the TEV of mangroves in the

total area of 42 ha. The TEV of mangroves in Rekawa Lagoon was estimated about

1,088 USD/ha/year with the highest contribution of around 80% comes from IUV

(fishery benefits, erosion control and buffer), since the greater benefits of

mangroves are commonly intangible and do not exist in conventional markets. The

study also revealed that when the TEV was included in the extended cost benefit

analysis (ECBA) of a shrimp development project assessment, the benefits of the

project was much lower than its cost, implying that the project was not feasible to

be developed.

Tuan and Duc (2013) conducted a cost benefit analysis of mangrove

restoration in Binh Dinh Province, Vietnam. They compared the cost-benefit of

mangrove restoration with aquaculture development. The results concluded that the

benefits from mangrove restoration are roughly double of the profits from

aquaculture development. Even though the results concluded that the mangrove

restoration scenario is better than that of aquaculture development, this study

applied the Benefit Cost Ratio (BCR), that is less suitable for discrepant scenarios,

in the analysis to decide the best option. According to Pearce, Atkinson, and

14
Mourato (2006), BCR is used for alternative projects, programs, or policies that are

not mutually exclusive, whereas the programs in the study were mutually exclusive.

A more recent economic valuation study has been conducted by Malik,

Fensholt, and Mertz, (2015). The study estimated the TEV of mangrove benefits in

Takalar district South Sulawesi, Indonesia. According to this study, the TEV of

mangroves in the area was in the range of 4,000 to 8,000 USD/ha/year. It was also

found that the greatest portion of the TEV came from IUV, composing about 95%

of the TEV. In addition, since mangroves face a high land use pressure of being

converted for commercial aquaculture in Sulawesi Province, this study also

conducted a CBA to assess the development of commercial aquaculture in the area.

They revealed that the benefits of the shrimp development are much lower than the

costs when wider environmental impacts are included in the ratio between 1:6 and

1:11.

Many economic valuation studies of mangroves have recognized that the

key drivers of the decreasing amount of mangroves are due to urbanization,

aquaculture development, and industrialization (Ilman et al., 2011; Tuan et al.,

2013; Vo et al., 2012). Moreover, several case studies have also conducted the CBA

to compare the economic values of mangroves with the land use alternatives’ profits,

a condition that is often mutually exclusive in deciding whether mangroves or the

land use alternative should be chosen. Although many case studies show that the

mangrove protection scenario is more economically feasible, the land use

alternative comparison is still limited to commercial aquaculture and palm

plantations. In the author’s knowledge, there is no study which compares

15
mangroves’ benefits with the profitability of industrial development. Therefore,

using a tin refinery plant development as the representation of industrial

development, this study tries to fill this gap.

16
 III. RESEARCH METHODS

3.1. Data Collection

This study uses both primary and secondary data. A house-to-house survey

among small fishermen, and site surveys during weekends and weekdays on the

local people benefiting from mangroves1 in Pangkalpinang were conducted in the

middle of August 2016 to gather primary data and information. The primary data

were mainly used to estimate recreational value, fishery value, and option value.

Data on the recreational value were produced from the average number of visitors

coming to the mangrove areas every year for fishing and the average travel costs

spent per visit, whereas fisheries value was taken from the data provided by the

small fishermen 2 . Thus, it was expected that they captured fish only in the

surrounding mangrove areas. Lastly, data regarding the option value resulted from

the open-ended questions about the small fishermen’s Willingness to Pay (WTP)

and the number of local people benefiting from mangroves per year, who were

mainly the small fishermen and mangrove visitors for fishing.

Meanwhile, for valuing shoreline stabilization and carbon sequestration

values, secondary data was acquired from various sources. The detailed explanation

is shown in Table 2. As many as 137 respondents, out of the 227 small fishermen

1
In this survey, I found that almost all of them were anglers, while crab catchers were few. To
simplify the estimation, this study only considers anglers and ignores the benefit of mangroves for
crab catchers.
2
The term small fishermen used in this study is defined as those fishermen who do not have
fishing boats or have only unmotorized/outboard boats.

17
in Pangkalpinang, were surveyed by random sampling method following Tuan, My,

Anh, and Toan (2014) as follow:

N
n = (2)
1+Ne2

Where:

n = sample size;

N = total number of households in the area, and

e = design margin of error.

Table 2. Economic Values, the Selected Methods and the Data Sources

Economic Value Method Data Source

Direct Use Recreational Survey data: the number of visitors per
Travel cost
value year, the travel cost spent per visit
Fishermen’s Survey data: the fisherman’s trips, total
Fisheries
income costs and income per trip

Shoreline SNVT PJSA Sumatera VIII, Provinsi

Indirect Use Replacement cost
stabilization3 Bangka Belitung (2016)

Hilmi, E. 2003 as summarized in Ministry

Carbon
Benefit transfer of Environment and Forestry Resume, n.d
sequestration

Survey data: local people’s WTP, the

CVM – open
Option value number of local people benefiting
ended question
mangroves

Source: Author’s compilation, 2016

Meanwhile, 30 visitors who come to the mangrove areas every year for

fishing were selected by purposive sampling method in the study areas, in Tanjung

3
The approach for measuring this value is highly debated, depending on experts’ view. Some argue
that regulating service, such as shoreline stabilization, should be measured through damage costs if
the service disappeared. Based on TEEB (2010b), replacement cost method could estimate the costs
charged by substituting ES with artificial technologies, although compliance with some conditions
should be fulfilled. This study refers to TEEB. For detailed discussion about these conditions, see
Sundberg (2004).

18
Bunga, Ketapang and Selindung (as many as 10 visitors were surveyed in each area).

All the respondents have direct relation to or are depend on mangroves.

Some of the questionnaire questions of this study adopts from Tuan and

Duc, (2013), but with modifications. The questionnaire asked to small fishermen

were about their socioeconomic and demographic characteristics (age, education,

other livelihood, total expenditure, boat status, house status), total income and costs

per trip as well as attitude towards mangrove restoration and protection whereas

WTP value was asked by CVM open-ended question (see Appendix A). Meanwhile,

the questions to thirty visitors include basic information (such as occupation, age,

education, expenditure, house status), WTP, types of activity on mangroves,

frequency of visit per week and total costs involved per visit (see Appendix B).

The elicitation format of open-ended question to get WTP value is shown

as the following format:

“How much money would you spend per month to support mangrove for this

mangrove protection program?”

3.2. Data Analysis

3.2.1. Small Fishermen’s WTP Estimation and Model

As this study conducted an open-ended valuation method, the estimation

of the WTP from the responses is typically straightforward. The mean WTP was

estimated by the following equation:

19
 ∑𝑛
𝑖=1 𝑊𝑇𝑃𝑖
Mean WTP = (3)
𝑛

The total value of the WTP estimate is calculated by multiplying the mean WTP,

resulting from equation (1), by the total number of small fishermen in

Pangkalpinang (227).

Table 3. The Description of Variables

Variable Description
Log_expdt Monthly household expenditure
Age Age of respondents in years
Edu The years of schooling
House House ownership status (Yes = 1, No = 0)
Boat Boat ownership status (Yes = 1, No = 0)
HZ Number of persons in household
Other_occ Having other revenue sources besides as fisherman (Yes = 1, No = 0)
Attitude Opinion on mangrove's condition (Damaged = 1, No = 0)
Attitude2 Attitude towards mangrove protection (Agree = 1, No = 0)
Log_wtp Respondents' WTP response

Furthermore, in this paper, the correlation between the dependent variable

(WTP of the small fishermen) and independent variables to determine the factors

affecting small fishermen explained their willingness to pay for mangrove

protection, is also analyzed. The WTP model that is used in this study follows

Ndebele et al., (2014):

WTP = f (Y, Z) (4)

Where Y and Z are the expenditure variable4 and explanatory variables that are

hypothesized to affect the small fishermen’s WTP, respectively. The explanatory

4
This study uses the expenditure approach to measure the income variable. It assumes that local
people tend to honestly talk about their expenditure instead of their income.

20
variables include their socio-economic background (age, education, other

livelihood, household size, boat status, house status) and attitudes5 (see Table 3).

This analysis used the Ordinary Least Square (OLS) regression, using the STATA

SE 14 software. The detailed results and analysis of this value will be discussed

separately in the results and discussion section, under “Willingness to Pay”.

3.2.2. TEV and NPV of Mangrove

The TEV of mangroves in this study covers the DUV, IUV and OV of

mangroves (Table 2) and uses the following equation:

TEV = DUV + IUV + OV (5)

Those values are reported in USD/total mangroves in the study area (893.4 ha) per

year and USD/ha/year.

It is revealed from the field study that some local residents were fishing in

surrounding mangrove areas for recreational purpose only. They do not sell their

catch to the markets and they visit the location only twice a week in average. The

DUV of mangroves was derived from benefit values of recreational values using

the travel cost method and fisheries value that was estimated by small fishermen’s

trips, total income, and costs per trip using the following formulas:

▪ Recreational Value (RV)

RV = total visitor (2184 visits/year) x total costs (USD/visit) (6)

5
In this study, attitudes that are hypothesized to influence the WTP include opinion on current
condition of mangroves and the attitude towards mangrove protection.

21
Where:

Total visitor (visits/year) = average people (21 people/week) x week/year (52

weeks) x average visits/person (104 visits/people)

▪ Fishery production value (FPV)

FPV = total small fishermen (227) x average annual net revenue from capturing fish

(USD) (7)

Where:

Average annual net revenue = [total revenue/season (bad, fair and good season) x

trips undertaken/each season] – [average cost/trip

x total trip/year].

In acquiring this value, from the total responses of 137, only 75 responses were

valid.

The IUV of mangroves were calculated from benefit values of mangrove

services: shoreline stabilization and carbon sequestration. These benefit values

were estimated using the replacement cost and benefit transfer methods. The

shoreline stabilization was estimated by the costs of breakwater construction, built

in the coastal area of Pangkalpinang, based on data from SNVT PJSA Sumatera

VIII, Provinsi Bangka Belitung, over a 10-year project lifespan. Finally, the value

of carbon sequestration was estimated by using average carbon storage of the

mangrove species Rhizopora Mucronata (0.36 tons C/ha) from Hilmi (2003) as

summarized by the Ministry of Environment and Forestry (n.d.). This paper used

the average price of carbon credits (USD 4.6/tCO2) based on Forest Trends (2016).

The IUV calculation used the following formulas:

22
▪ Shoreline stabilization value (SSV)

SSV = mangroves’ length along the coastline (m) × cost of breakwater

construction (USD) (8)

Where:

Mangroves’ length along the coastline (approximated by using GIS) = 2772 m; the

cost of breakwater construction = 1336 USD.

▪ Carbon sequestration value (CSV)

CSV = carbon sequestration rate (0.36 tonC/ha) x total area of mangrove (893.4

ha) × price of carbon market (USD 4.6/tonCO2) (9)

The OV of mangroves was calculated using the CVM. The OV was

estimated by the average WTP and the total number of local people who have direct

relation to or depend on the mangroves, as estimated from the questionnaire. OV of

the mangroves was estimated by using the following formulas:

▪ Option Value (OV)

OV per year = (WTP of small fisherman/year x total small fishermen) + (total

visitor/year x WTP of angler/year) (10)

Where:

Total visitor = average people (21 people/week) x week/year (52 weeks) x

average visits/person (104 visits/people)

Finally, to acquire the net benefit of the mangroves, protection costs for

maintaining them should be subtracted from the TEV. This study adopted the costs

of mangrove protection per ha from the study conducted in Vietnam (Tuan et al.,

23
2013) according to which, the costs of mangrove protection per ha was about VN$1

million/ha/year in 2013. By using the current inflation rate (2017), acquired from

trading economics, for this country (5.22%) and converting it into USD (1 USD

equals to VN$22,700), this study calculated the annual cost of mangrove protection

to be 51.5 USD per ha. The NPV of the mangroves was then calculated by using

equation (1), for 30 years with the average discount rate at 5.89%, based on

Indonesia Central Bank from 2007 to 2017. The number of years follows the life

span of the tin plant, that will be discussed in the ‘Total Revenues, Costs, and

Profitability of Industrial Development’ in the CBA section.

24
 IV. STUDY AREA DESCRIPTION

4.1. The Mangrove Ecosystems in Pangkalpinang

Bangka Belitung Island Province is a young province in Indonesia. It was

formerly a part of South Sumatera Province, located on the western part of the

island, until 21 November 2000. Pangkalpinang, which is the capital city of Bangka

Belitung Island Province, covers approximately an area of 11.900 ha with around

1236 ha (10%) of mangrove areas, comprising Ketapang, Selindung, Tanjung, and

Bunga areas (Local Planning Agency, 2010) as seen in Figure 1.

Figure 1. The Distribution of Mangrove Ecosystems in Pangkalpinang

Source: Environmental Agency of Pangkalpinang, 2012

25
4.2. The Land Use Change in Pangkalpinang

As a young capital city, Pangkalpinang is rapidly developing. To facilitate

and control the economic development activities in Pangkalpinang, the local

government had assigned a land use plan, which has been operative since 2004.

Both the previous land use plan (2004) and the revised one (2010) assigned almost

all the mangrove areas in Pangkalpinang to be converted into industrial, warehouse

and residential zones, causing them to be irreversibly lost. As a result, based on the

Geographic Information System (GIS) analysis estimation, mangrove areas in the

city have significantly decreased by as much as 342.6 ha or nearly 30% from 2004

to 2013 (see Figure 2). It is believed that the mangrove conversion activities in the

Figure 2.The Distribution and Conversion of Mangroves in the Study Area

Source: Aerial Photograph 2004 and 2013

26
city will accelerate in the future (Local Environmental Agency of Pangkalpinang,

2012) since no legal regulation controls them. It can also be seen in Figure 2 that

the most significant degradation of mangroves took place in the eastern part of the

city, Ketapang area.

Based on the field observations, the degradation are likely because of the

development of a new bridge and roads, connecting the neighborhood regency, to

make the area more strategic and accessible in the future. However, the majority

of the existing land from the mangrove clearings in the majority of the industrial

area (Ketapang) are still left empty without any industrial developments or

economic activity. It means that while many local people, particularly the fishermen,

have lost their livelihood because of the mangrove removals, it has not been

accompanied by the generation of new jobs in the industrial areas. The land clearing

activities are just likely to be motivated by the announcement activities declaring

that the lands are already owned. It was also found in the study area that the land

clearings for building road infrastructure have seriously degraded mangroves in the

industrial area in Pangkalpinang, and some ownership announcements of the lands

were also found in the area (Figure 3).

On the other hand, in the study area, some of the local people contributed

voluntarily to the replanting of the mangroves. These local people were the small

fishermen who exhibited a good knowledge about the essential services provided

by the mangroves, such as breeding grounds for juvenile fishes, feeding in coastal

fisheries. They also expressed their emotional worries, during the questionnaire

survey, about how the possibility of their income and their living situation getting

27
even worse because of the mangrove removal. Furthermore, they also expressed

that it would be very difficult for them to get a better livelihood if they lost their

work as fishermen. Their worry is certainly reasonable since, based on the data from

Statistics Pangkalpinang (2016), the unemployment rate in the city is considerably

high (more than 10%). In addition to this, the education of these people is also

considerably low, making job competitions with other higher-educated job seekers

becomes tougher for them.

Figure 3. The Mangrove Removal and the Ownership Announcement in the Area for
Industrial Land Use

28
 V. RESULTS AND DISCUSSIONS

5.1. Willingness to Pay (WTP)

In this study, WTP is used to estimate the OV of the mangroves. However,

the information about the preference of the local people to maintain or remove the

mangroves and factors affecting their choices may give the local governments a

deeper understanding of the local people’s condition, particularly those who are

directly dependent on mangroves. The local governments, therefore, could develop

a better policy. For this reason, this section will firstly present the annual WTP of

the local people, based on the questionnaire survey. Then, the local people’s socio-

economic background and attitudes towards mangrove preservation were

described, and, finally, the factors affecting the local people’s willingness to pay

are determined and discussed.

Based on the field observations, there were two groups representing the

local people, small fishermen and anglers – local people fishing for recreational

purpose. Results from the 164 survey responses indicated that each household of

small fishermen and anglers would pay an average of 8.83USD and 11.79USD per

year, respectively, for preserving mangroves (Table 4). Generalizing these numbers

to the total population of the small fishermen and anglers yields a total value of a

WTP of about 28kUSD per year. This value also represents the option value of

mangroves in the study area.

29
 Table 4. Annual WTP per Person and Total Each Type of Local People

Local people Annual WTP/person in USD Total Annual WTP in USD

Small fisherman 8.83 277 2444.93
Angler 11.79 2184 25758.43
total WTP 28203.36

The analysis of factors affecting the WTP should include all local people

benefiting from the mangroves, that have been considered for this study.

Unfortunately, due to data limitations, this paper did not include the anglers in

analyzing the factors affecting the local people’s WTP. Angler samples were not

collected randomly, so it was not possible to apply the statistical analysis on them.

The total number of fishermen in Pangkalpinang, based on the data from a

relevant local authority, were around 1.000 people. However, only 227 people, who

are being called small fishermen in this paper – were classified to be dependent on

mangroves. As many as 137 respondents were taken randomly from the total

number of small fishermen. Table 5 reports the socio-economic backgrounds and

attitudes of the 137 respondents toward mangrove protection.

In terms of the socio-economic background, the survey results indicated that

the respondents belong to low social and economic class, as seen from their average

education level and monthly family income. This study has used the family

expenditure approach as the indicator to measure income. It was expected that

attainment of a better education level and family expenditure, would lead to a higher

WTP to protect the mangroves. Although the respondents can be described as

belonging to the low-income class, more than 80% of them had a house and a

fishing boat, which was expected to have positive correlations with the WTP.

30
 Table 5. Socio-economic Characteristics and Attitudes of Small Fishermen

Characteristics Mean Standard Dev.

Years of schooling (average) 6.993 2.772
Age (average) 44.365 11.060
Monthly family expenditure (USD, average) 173 0.075
House status: Yes 0.912 0.284
Boat status: Yes 0.854 0.354
Household size (average) 4.014 1.539
Other livelihood : Yes 0.226 0.463
Opinion on mangrove's condition: Damaged 0.693 0.221
Attitude towards mangrove protection: Agree 0.949 0.221
Note: This table reports the socio-demographic information of small fishermen in the study area,
who are those fishermen using small boat with a machine power of not more than 20 PK.

The survey results also show that the respondents are still considered to be

in their productive age, with an average age of below 45 years, and more than 75%

of them did not have any other livelihood. While a higher WTP can be positively

correlated with either younger or older respondents, it would correlate negatively

with the respondents who do not have another source of livelihood. Similar to this,

the household size was also predicted to have a negative relationship with the WTP.

Based on the results, the average household size of the respondents was four family

members.

In many studies, the information regarding the local people’s attitudes and

opinions are also considered to influence their WTP (Indab, 2016;

Seenprachawong, 2016; Tuan et al., 2013). In this survey, opinions on the

conditions of mangroves and attitudes towards mangrove protection were also

asked from the respondents. The result of the respondents’ opinions showed that

nearly 70% of the respondents thought that the mangroves had been damaged. Not

surprisingly, almost 95% of them agreed to mangrove protection whereas the rest

31
5% did not have an opinion. The results turned out to be so because majority of the

small fishermen did not have another income source to support their daily needs.

No respondent stated that he agreed to the mangrove conversion. It was expected

that there is a positive relationship between attitudes towards mangrove protection

and WTP.

Table 6. Respondents Rank the Factor Causing Mangroves Damaged

Reason Percentage
Industrial development 25
Tin mining 23
Land clearing 21
Not maintained 11
Other developments
(Residences and Aquaculture) 8
Waste 8
Fuel wood 3
Erosion 1
Flood 1
Total 100

Similarly, opinions on the condition of the mangroves were predicted to be

positively correlated with the WTP. Based on the survey results, industrial

development is the major factor causing the decrease of mangroves, with a

frequency rate of about 25%, followed by tin mining (23%), land clearing (21%)

and lack of maintenance (11%). On the other hand, the frequency rate of the other

developments, like aquaculture, residence area development, fuel wood collecting,

waste problem, and erosion contributes less than 9% (Table 6).

As previously described, this study also analyzes the correlation between

the dependent variable (WTP of small fishermen) and independent variables to

32
determine small fishermen’s willingness to pay for mangrove protection. The OLS 6

regression result of the determinant variables of small fishermen’s WTP are shown

in Table 7. The results are significant at the 5% level with an F value of 0.0002,

meaning that the econometric model is acceptable. The R-squared value of this

model is 0.225, implying that the model only explains around 22.5% of the

variability in the response data. This smaller R-square indicates that there may be

other important variables which have an influence, but were not included in the

model.

Table 7. The Determinants of Small Fishermen’s Willingness to Pay (WTP)

in Pangkalpinang

Variable Coefficient SE
Attitude towards mangrove protection ***5.932 1.659
Education **-0.373 0.133
Age *-0.075 0.034
Log family expenditure 0.2605 0.871
House status -0.0070 0.256
Boat status 1.2984 1.072
Household size -0.0085 1.379
Other livelihoods -0.2848 0.836
Opinion on mangrove's condition -0.6039 0.767
Constant 17.612
Sample size 137
R-squared 0.225

legend: *p<0.05; ** p<0.01; *** p<0.001

Variables that are attitude on mangrove protection, education level and age

are all statistically significant at the 5% level; whereas family expenditure, house

6
This study also tried to use Tobit model to estimate the relationship between the WTP and the
covariates. The result shows similar to the OLS model.

33
status, boat status, household size, other livelihood, and opinion on the condition of

the mangroves do not show any significant effect on the WTP variable. The

variables that are statistically significant and influence the WTP will be discussed,

respectively.

The attitude toward mangrove protection, as predicted, positively influences

small fishermen’s WTP. The effect of this variable is statistically significant at the

0.1% level – very large in a real-world sense. A coefficient of 5.93 for the attitude

variable indicates that the agreement toward mangrove protection is associated with

a 5.93 point increase in WTP for protecting mangroves.

In contrast, the education level here contradicts with the recent studies

(e.g.Tuan et al., 2013), which declared that education level has a positive correlation

with the WTP. The regression result of **-0.373 in the education variable presents

a significantly negative relationship between education attainment and WTP at 1%

level, implying that every additional year of schooling is associated with a 37.3%

decrease in the WTP. This result can be acceptable because all the small fisherman

respondents were from a low education level. Moreover, this result suggested that

there might be another variable influencing their WTP. When the survey was

conducted, the respondents seemed to know the benefits of mangroves and the

consequences of its disappearance very well. Thus, this may indicate that fishing

experiences may have taught them such informal knowledge about the benefits of

nature in supporting a human’s well-being.

The last, statistically significant, variable that is based on the results is the

respondents’ age. The OLS regression shows that the age variable negatively affects

34
WTP, implying that the younger the respondents are, the higher they would pay for

mangrove protection. This variable is statistically significant at the 5% level, and

the coefficient of 0.075 signifies that every additional age of the respondents is

correlated with a 7.5% decrease in the WTP. This result implies that the younger

small fishermen need a certainty for their future job as a fisherman. They might

think that it is very difficult for them, because of their low education qualification,

to compete with other highly-educated job seekers to get a better job. In addition,

the high unemployment rate in the city seems to make the job-seeking

competitiveness much tougher. Surprisingly, family expenditure, which was

expected to be a significant factor affecting the WTP, was not statistically correlated

even though the coefficient shows a “right” sign. Although this is not a proven

reason, it is quite likely because respondents’ attitudes greatly influence their

decision to pay.

5.2. Total Economic Value (TEV)

TEV is the total value of the DUV, IUV, OV, and NUV. However, the TEV

of the mangrove ecosystem in this study is limited to the socio-economic benefits

that local people derive from them. Based on the field observation and questionnaire

results, the types of services that have been identified include recreational ground,

fishery, shoreline stabilization, carbon sequestration, and option value.

Table 8 summarizes the estimates of the benefit values derived from

mangrove ecosystem, based on formulas (6), (7), (8), (9) and (10) presented in the

35
methodology section. The annual estimated TEV of the mangrove ecosystem in the

study area is approximately 1,642 kUSD or 1,838 USD/ha/year. In other words, this

amount is roughly equivalent to double the city’s Gross Domestic Product (GDP)

for the year 2015, confirming the notion that mangrove ecosystems have an

important role in improving human lives . The DUV, which are the fisheries and

recreational values, accounts for the highest value of the mangrove ecosystem,

gaining almost 75%, whereas the IUV that represents shoreline stabilization and

carbon sequestration values, and the OV contributed 23.47% and 1.72% toward the

creation of the TEV, respectively.

Table 8. TEV of Mangrove Ecosystems in Pangkalpinang

Value ($ per
Economic value of mangroves (893.4 Ha) $/ha/year Percentage
year)
Direct use Recreational value 22,247.06 24.9
74.81
Fishery 1,206,001.10 1,349.90
Indirect use Shoreline stabilization 370,442.30 414.64
23.47
Carbon sequestration 14,825.12 16.59
Option value $28,203.40 31.57 1.72
Total 1,641,718.98 1,837.61 100.00

The DUV, particularly of fishery, shares the greatest value. This figure

indicates that mangroves have an important role in providing a livelihood for the

small fishermen. However, the local government has failed to realize this important

link between small fishermen and the mangrove ecosystem due to their poor

awareness of such economic values. The disappearance of mangroves will not only

lead to the loss of the livelihood of small fishermen but may also lead to other social

problems, such as higher unemployment number, not to mention rising local fish

36
prices in the market resulting out of importing fish from outside the city.

Accordingly, the considerable value of IUV also cannot be ignored. The absence of

a market price seems to be the reason why this benefit is often overlooked. In fact,

the IUV result shows that this value contributes to one fourth of the TEV of

mangrove ecosystems in the study area.

5.3. Cost Benefit Analysis (CBA)

As described previously, this study also attempts to evaluate the local policy

that assigns mangrove ecosystems in the study area to be converted for other land

uses, particularly for industrial development. Therefore, the CBA was undertaken

to compare the mangrove preservation scenario with the industrial development

scenario, represented by a tin refinery plant in this study for simplification. This

section firstly determines the base-case assumptions for the tin refinery plant’s

profitability. Then, the results of the CBA under the base cases and a sensitivity

analysis using the Monte Carlo simulation were presented, to judge whether the tin

industry or mangrove preservation is economically feasible to be taken as a policy.

5.3.1. Total Revenues, Costs and Profitability of Industrial Development

To estimate the industrial development profitability, some assumptions have

been made to simplify the calculation. A tin refinery plant was selected as a

representation of industrial development in Pangkalpinang. The investment, direct

37
costs, operational costs, non-operational costs, and revenue (production capacity

per year multiplied by the tin prices and capacity utilization rate) were adopted from

a feasibility study of the development project of a tin refinery plant in Riau

Province, Indonesia conducted by Piesta Dinamika Consultant (2013). Direct costs

involve the costs supporting operational production such as fuel, raw materials and

export costs, while operational costs are the costs to operate the plant, such as labor,

administration, and instrument depreciation. Non-operational costs include

investment credit and other costs. Meanwhile, the tin price data were taken from

indexmundi and the discount rates were based on data from the Indonesia Central

Bank, from 2007 to 2017.

The formula for calculating the profit of the tin plant used in this study is as

follows:

Profit of Tin Plant (P) = Total Revenue (TR) – Total Cost (TC) (11)

Where:

TR = Production capacity of the plant x Utilization rate x Tin price

TC = Investment cost + Direct Cost + Operational cost + Non-operational cost

By assuming the total cost that the tin refinery production holds, the

profitability of a tin refinery plant will heavily depend on the probability of its

production revenue. The magnitude of the tin price and the production output (Q),

therefore, becomes the key components to measure the profitability of a tin refinery

plant.

The quantity of output Q, however, depends on the capacity utilization of

some components – labor, capital, fuel and index technical change (Nelson, 1989).

38
Hence, the capacity utilization rate could become a control to estimate the quantity

of output Q. According to Corrado and Mattey (1997), the capacity utilization rate

is defined as a ratio of the actual output to the maximum potential output or

capacity. It is very difficult to get the data about capacity utilization rate of a tin

refinery plan. Therefore, this study adopted the general capacity utilization rate for

manufacturing in Indonesia, based on trading economics. The detailed assumptions

of the tin refinery plant are presented in Table 9.

Table 9. Summary of Base Case Assumptions

Component Unit Value Source

metric ton The feasibility study of a
Production capacity 1440
(MT) tin refinery plant in Riau
Area per unit plant ha 4 Province, Indonesia by
Piesta Dinamika Consult
Plant's lifespan year 30
(2013)
Investment cost (fixed cost) USD 4,384,615.38
Direct costs USD 19,230,769.23
Non-operational costs (the first
USD 724,538.46
five years)
Operational costs USD 846,153.85
Retrieved from:
http://www.indexmundi.
Tin price (range) USD/MT 17,426
com/commodities/?com
(10,689 – 32,347)
modity=tin&months=120
Retrieved from:
Discount rate (range) http://www.bi.go.id/en/m
Percent 5.89
oneter/inflasi/data/Defaul
(2.41 – 12.14)
t.aspx
Retrieved from:
Capacity utilization rate (range) https://tradingeconomics.
Percent 74
com/indonesia/capacity-
(70.1 – 79.8)
utilization

39
5.3.2. Base Case Analysis

Using the assumptions shown in Table 9, the present value of the expected

net profit of a tin refinery plant is calculated, by equations (1) and (11), over the

plant’s lifespan of 30 years, based on the feasibility study of the tin refinery, and

the mean of discount rate is calculated to be 5.89%. Similarly, the present value of

the expected net benefit of mangrove preservation was also estimated based on the

TEV of mangroves, in the same area as the tin factory. The TEV derived in the

previous section was deducted from the maintenance cost for the mangrove

protection program, adopted from the study conducted by Tuan and Duc (2013)

(see Appendix D for the detailed calculation). Table 10 presents the present value

of the expected net benefit (loss) of each alternative under the base cases.

Table 10. The NPV Results under the Base Cases

Scenario NPV
Industrial development -$27,267,565.62
Mangrove preservation $105,268.36

Based on Table 10, mangrove preservation yields a positive benefit whereas

industrial development, represented by a tin refinery plant in this case, generates a

negative profit. These base case results indicated that maintaining mangroves is

economically more desirable than developing tin industries. However, these figures

were estimated based on the mean of the interest rate, utilization rate, and tin price,

that has fluctuated in the last ten years (from 2007 to 2017), implying a noticeable

uncertainty in the present value of the net benefits (loss) predicted. Accordingly, to

40
attain a more rigorous conclusion, it is necessary to undertake a sensitivity analysis,

presented in the next sub section.

5.3.3. Monte Carlo Sensitivity Analysis

The base case estimates indicated that the mangrove preservation scenario

is better than the industrial scenario. However, these estimates still face uncertainty

about the value attached to them, that might potentially lead to false conclusions.

The results from the base cases need a further treatment to achieve a convincing

judgment. This study used the Monte Carlo sensitivity analysis to solve this

problem.

In the industrial development scenario of this study, there are three variables

with underlying uncertainty i.e. discount rate, utilization rate, and tin price. All

these variables have change across the years 7 , between 2007 and 2017. Such

empirical data are essential because they are required to specify the appropriate

distributions for all the uncertain variables like discount rate, tin price, and

utilization rate in this case.

Specifying a suitable distribution is important in the Monte Carlo simulation

because once the assumed distribution is not appropriate, it may lead to the wrong

conclusion. The suitable distributions are determined by drawing histograms based

on the real data for all the variables. Figure 4 shows the histogram of the empirical

tin price. Based on the casual inspection, it suggests that normal distribution would

7
To make it consistent, I have defined the same interval of years for the three variables, that are
from 2007 to 2017.

41
be appropriate. Likewise, utilization and discount rate histograms also indicate the

same (Figure 5 and 6 ).

Figure 5. Histogram of Empirical Utilization Rate from 2007 - 2017

Figure 4. Histogram of Empirical Tin Price from 2007 - 2017

42
 Figure 6. Histogram of Empirical Discount Rate from 2007 - 2017

Table 11. Parameter Values of the Empirical Data of Tin Price, Utilization and
Discount Rate

Parameter
Variable
Min value Max value Mean Std. Dev
Capacity utilization rate (%) 70.1 79.8 74 2.3
Discount rate (%) 2.41 12.14 8.59 2.27
Tin Price (USD) 10,689 32,347 17,426 4291.4

43
 After determining the appropriate distributions, as many as 10,000 trials

were randomly drawn using Ms. Office Excel 2013, for each variable. The trials

applied followed a normal distribution by using parameter mean and standard

deviation as shown in Table 11, to generate the entire distribution of the realized

net benefits (profits) for each scenario. Since the benefits of mangroves do not relate

Figure 7. Histogram of NPV of Tin Plant

to the tin price and utilization rate variables, only discount rate variable could be

taken into account in the mangrove scenario. The results of the trials for the tin

industry development and mangrove scenarios can be seen in Figure 7 and Figure

44
8, respectively. The height of each bar in the figures is equivalent to the number of

trials that represented the net benefits (profits) in the corresponding increment.

Figure 8. Histogram of NPV of Mangroves

It can be seen in Figure 7 that out of the 10,000 trials, the NPV of the tin

plant was negative in about 66% of the cases. On the other hand, there was a 100%

certainty that the NPV of mangrove preservation is positive, as shown in Figure 8.

This result suggested that the base case results in the last sub-section were robust

and it can be declared that mangroves should be protected.

45
5.4. ES Valuation for Informing Land-Use Decision: A Lesson Learnt from

Mangrove Ecosystems in Pangkalpinang

It is widely agreed that natural ecosystems provide goods and services

contributing to human well beings. The absence of market price in mainly services

of ecosystems makes policy makers often underestimate their benefits and fail to

consider them in decision makings. In consequence, the decrease of natural

ecosystems are severe and the capability of ecosystems to support local livelihoods

is getting weak.

This study has demonstrated how economic valuation could be used to

assess the local land-use policy in Pangkalpinang, the area in which mangrove

ecosystems face a serious land-use pressure, that has assigned to replace mangrove

ecosystems in the area into industrial development area. Compared to previous

economic valuation studies, this study used a different land-use alternative that is

tin refinery industry. This study applied Monte Carlo simulation to deal with the

uncertainties. Monte Carlo simulation was chosen because the tin industry has high

risk and uncertainty.

The main result of the study shows that when the intagible benefits of

mangrove were given a price, the total value of mangroves in Pangkalpinang was

estimated as about double the city’s GDP. In addition, when CBA was applied to

compare the land-use options, the results concluded that the mangrove ecosystems

offer higher net value as well as a certainty than those of the tin industry. The final

46
result of the study clearly suggests that the local government should maintain the

mangroves.

Attaching monetary values to ecosystems using economic valuation can

be a promising solution for supporting better land-use decisions because it enables

a direct comparison between land-use scenarios through CBA as shown in this

study. However, one main issue found during the study. The availability of

database in mainly developing countries in some cases are not as good and reliable

as in developed countries. This condition certainly affect the data quality used in

ES valuation that can potentially lead to the less accuracy and/or transparency of

the result. For example, in this study, it was very difficult to get the city population

database. Consequently, it was not possible to get randomly sample data from the

general population in the city. As a result, NUV that is one of TEV components

could not be estimated in this study. Another example is that some secondary data

often were found inconsistency from different or even same resources. Although

ES valuation seems to be a promising tool to inform decision makers for supporting

land-use decisions particularly in developing countries, in which the countries

ussually face higher pressures on natural ecosystems, it would not be so if it is not

a line with the improvement of the data availability.

47
 VI. CONCLUSION AND RECOMMENDATION

Land use planning plays an important role in conserving or destroying ES.

However, ES are often undervalued by policy makers because their benefits mainly

do not have prices in the conventional market. In other words, policy makers,

particularly in developing countries, have extremely less information about the

benefits and the impacts of ecosystems, if they disappeared. As a result, local

governments often fail to include the benefits of ecosystems in their decision-

making. Economic valuation, a method to give value for environmental services in

monetary terms, can be a solution for this situation. Moreover, economic valuation

could also make it possible to include these services in the CBA.

The study finding revealed that the annual TEV of mangrove ecosystems in

this city is approximately 1,642 kUSD or 1,838 USD/ha/year. The highest share of

the TEV comes from DUV (recreational and fishery values). The result also shows

that small fishermen are willing to pay almost as much as 9 USD/household to

preserve the mangroves, while anglers are willing to give up nearly as much as 12

USD to get recreational value from the mangroves. Attitude, level of education, and

age variables are the factors that influencing the WTP of small fishermen in

Pangkalpinang to preserve mangroves. Attitude is likely to increase the WTP,

whereas age and education tend to decrease the WTP.

Moreover, this study also conducted the CBA to evaluate the local policy

that has assigned to replace the mangrove areas with industrial development. Using

a tin industry as the representation of industrial development, the CBA result

showed that the mangrove preservation scenario was better than tin the industry

48
development scenario, in terms of both the NPV under base cases and the certainty

of benefits themselves. A Monte Carlo sensitivity analysis was also undertaken to

supplement this result, and it was finally recommended that mangroves should be

protected.

The findings of this study are expected to provide local governments with

information about the importance of mangrove ecosystems for local people in

Pangkalpinang, so that local governments can formulate better policy regarding

land use decision. Information about the TEV of mangroves in Pangkalpinang could

be used as a consideration to evaluate the spatial plan of Pangkalpinang or any

similar documents, that have advocated to convert almost all the mangrove areas.

As seen from this study, the TEV enabled mangrove benefits to be included in the

policy evaluation, using the CBA. The local government also can expand the policy

evaluation by comparing the TEV information with either other types of industry

or even other policies.

Moreover, since the small fishermen’s income are relatively low, as shown

in this study, local governments could also develop alternative options to support

their livelihood, such as providing skill trainings to produce marine products for

their family and facilitating and strengthening market networks for marine products

from fishermen. There are also many studies which have concluded that mangrove

forests can sequester carbon more than terrestrial forests (Alongi, 2012; Murdiyarso

et al., 2009) and the establishment of the Reducing Emissions from Deforestation

and Forest Degradation (REDD+) scheme for developing countries may offer a

great promise for mangrove conservation and at the same time, generate revenue.

49
Thus, local governments could consider this opportunity as one of their policy

options. Lastly, considering the recreational value estimated from this study, local

government can also promote ecotourism as one of the methods to induce

sustainable mangrove management.

50
 VII. LIMITATIONS AND FOR FUTURE RESEARCH

Due to data and time limitations, this study only employed a primary survey

to estimate the OV of mangroves in Pangkalpinang, limited to small fishermen and

anglers. Therefore, in the future, a study that conducts a survey involving the

household population living in the city can be a potential topic to research,

especially regarding the WTP estimation. Non-use value, that was not taken into

account in this study, could also be considered for future research to provide a more

comprehensive and complete information about the TEV of mangroves. In addition,

this study only used a specific industry to represent the industrial development in

the CBA. Further studies are, therefore, suggested to broaden industry alternatives

in the industrial development scenario to provide a more realistic situation.

51
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 APPENDICES

Appendix A

Questionnaire Form for Small Fisherman

Hello, my name is ....... from…. University. I am undertaking a study on mangrove
ecosystems in Pangkalpinang titled Economic Valuation of Ecosystem Services:
The Case of Mangrove Ecosystem in Pangkalpinang. I would like to ask you a
series of questions. Your answers will remain secret and shall be used for
research purposes only.
Name of respondent :
Age :
Gender :
Marital status :
Number of family members :
Education :
Address :
Contact number :

Instructions:
a. Please read and understand all the questions carefully;
b. Choose the answer by putting the mark (v) in the provided boxes;
c. The answers can be more than one;
d. If there is no suitable answer, please choose the option ‘others’ and give your answer;
e. For the questions that have no optional choices, please answer them clearly and
concisely.

Section 1: Economic Value

1. How long have you been doing this activity?
2. In which area do you usually do this activity?
 Selindung
 Ketapang
 Tanjung Bunga
 others, please specify: __________________________________
3. What tool do you usually use to catch goods?
 Tugu
 Bubu

57
  Rawai
 Others, please specify: __________________________________
4. How often do you go for catching fish?
- Under good season (month _________to month___________) = _________times
- Under fair season (month _________to month___________) = _________times
- Under bad season (month _________to month___________) = _________times
5. Approximately how much fish do you usually get in average?
- Under good season = _______ kg/trip
- Under fair season = _______ kg/trip
- Under bad season = _________kg/trip
6. What is the net income you approximately earn?
- Under good season = Rp _____________
- Under fair season = Rp ______________
- Under bad season = Rp _________________
7. What is the average total costs you spend per trip, such as fuel etc.?
8. What kinds of fish do you often get? Please specify:
9. Do you have less or more results compared to the previous years? What do you think
are the possible reasons?
Number 10 to 14 fishermen who have boat
10. What type of fishing boat/ship do you have?
*if using ship, what is the ship capacity (Gross tonnage/GT)?
11. What is the price of the boat/ship you buy (including machine)?
12. What is the approximate age of the boat you can use to fishing?
13. How much is the maintenance cost of your boat/ship?
14. How often do you check and maintain your boat/ship?
 per month
 per two months
 per 3 months
 per 4 months
 twice a year
 per year
 others, please specify: ___________________________________________

58
Section 2 :Willingness to Pay
The following is a brief description of mangrove ecosystems in Pangkalpinang:
Mangrove ecosystems in Pangkalpinang had a total area of 1.200 ha based on the data from
the Local Planning Agency of Pangkalpinang (2010) These ecosystems have created
favorable conditions for high productivity and biodiversity of water resource, the richness
of seafood resources, and for maintaining the stability of the environment and communities
living around the ecosystems. However, the magnitude of this area is decreasing to be
irreversibly converted for other uses. Mangrove resources in Pangkalpinang also provide
various benefits to humans, including supporting livelihoods of the local communities and
providing ecosystem services (such as storm prevention, climate protection, nursing
seedlings).

Please let us know your opinion about mangrove protection:

 Strongly agree with mangrove protection
 Agree with mangrove protection
 No opinion
 Disagree with mangrove protection
 Strongly disagree with mangrove protection

Below are some reasons for mangroves protection in Pangkalpinang, please let us know
your opinion.

Not very Not No Very

Reasons for mangrove Important
important important opinion important
protection

1 2 3 4 5
Mangroves help sustain local
livelihoods.

Mangroves provide
recreational value, e.g. scenery.

Mangroves provide services

such as storm prevention and
climate protection.
Mangroves help protect
biodiversity.
Mangroves will provide
opportunities and benefits to
future generations.

What benefits, if any, do you currently get from using the mangrove area and its natural
resources?
 Income from fishing
 Biodiversity protection

59
 Shrimp and fish
 Preventing soil erosion/environmental protection
 Expanding area toward sea
 Others, please specify________________________

What do you think about the condition of mangrove ecosystems in Pangkalpinang?

 Fairly good, why?_______________________________________
 Starting to damage, why? _______________________________________
 Damaged, why? _______________________________________

Suppose there was a program for the management and preservation of mangroves in
Pangkalpinang. Of course, the implementation of this project would cost money and
people would have to pay their share of the costs on a continuous basis if they wanted
to enjoy the benefits that the mangrove preservation offers.

Then, how much money would you spend per month to support mangroves for this
program?

Please keep in mind:

• The issues discussed here are only a few among many other environmental problems
Indonesia faces.
• This interview is about the mangroves in Pangkalpinang and not about other
environmental issues or other mangroves around the country.
• Your own personal income is limited and has important alternative uses.
• There are no right or wrong answers and you should answer for yourself.

1. I would spend (specify)___________________ (to question 3)

2. I wouldn’t spend my money ---> to question 4

3. Why do you agree to pay?

I think the program is good 1

I feel this is a reasonable amount to pay 2

I am concerned about the loss of mangroves/biodiversity 3

It is what I can afford to pay 4

I am not sure I could pay what I declared, but I wish I could 5

Don’t know/not applicable 6

Other: Please specify 7

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4. What is your reason to say no?
I do not care about the conservation area 1

Marine protected areas are not required 2

The money will be wasted 3

The government and people who damaged it should pay 4

Not having enough information 5

Other, please specify 6

Section 3: Social Economic Background

The following are a few questions about your background that will only be used for
statistical purposes:

1. Name:
2. Gender of the respondent:  Male  Female
3. Age:
4. What is the highest level of education you have obtained?
 No formal education
 Primary
 Secondary
 Technical diploma
 Bachelor degree
 Other:
Please specify the year (just in case you did not finish your last education):
5. What is your occupation?
 Civil servant
 Own business
 Private employee
 Laborer/farmer
 Student
 Retired
 Other: please specify
6. Number of members in your household:

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7. Please select the assets below that you have:
No Name of asset No Name of asset
1 Motorbike 5 TV

2 Fridge 6 Computer

3 Air conditioning 7 Cooking-stove

4 Telephone/mobiles 8 Other: please specify

8. What is the status of your house?
 Your own house
 Your parent’s house
 Rent house
 Others, please specify: __________________________
9. How much is your average monthly costs (IDR)?
 2 million
 3 million
 4 million
 5 million
 Others, please specify: Rp______________________

Pangkalpinang, 2016

(............................................................)

62
Appendix B

Questionnaire Form for local people taking benefits in surrounding mangroves

Hello, my name is.... from…. University. I am undertaking a study on mangrove

ecosystems in Pangkalpinang titlde Economic Valuation of Ecosystem Services:
The Case of Mangrove Ecosystem in Pangkalpinang. I would like to ask you a series
of questions. Your answers will remain secret and shall be used for research
purposes only.

Name of respondent :
Age :
Gender :
Marital status :
Number of family members :
Education :
Address :
Contact number :

Instructions:
a. Please read and understand all the questions carefully;
b. Choose the answer by putting the mark (v) in the provided boxes;
c. The answers can be more than one;
d. If there is no suitable answer, please choose the option ‘others’ and give your answer;
e. For the questions that have no optional choices, please answer them clearly and
concisely.

Section 1: Economic Value

1. What kind of benefits do you get from this area?
 Fishing/ catching fish
 Catching crabs
 Catching shrimps
 Catching birds
 Faking firewood
 Others, please specify: _________________________________
2. What is the purpose of your activities?
 Livelihood
 Hobby
 Spending spare time
 Others, please specify: __________________________________
3. What tool do you use to catch the goods?
 Tugu
 Bubu

63
  Rawai
 Others, please specify: __________________________________
4. In which area do you usually do this activity?
 Selindung
 Ketapang
 Tanjung Bunga
 Others, please specify: __________________________________
5. How often do you usually do this activity?
 Everyday
 Once a week
 Two times a week
 Three times a week
 Others, please specify: __________________________________
6. Approximately how long does it usually take for you to do this activity?
 0-1hour  2 hour  3 hour
 4 hour  5 hour  6 hour
 Others, please specify: ________________
7. What kind of transportation do you usually use to reach the location?
 On feet
 Bicycle
 Motorbike
 Car
 Others, please specify: __________________________________
8. Approximately how far is this location (km)?
____________________________________________________
9. How long does it take to reach this location
(minutes)?____________________________________________________
10. Do you get additional income for this activity?
 Yes
 No
if your answer is no, just ignore question 11-12
11. Where do you usually sell your goods?
 Traditional market
 Directly to consumers
 Distributors
 Others, please specify: _____________________________________
12. How much are the price of the products?
Number of products
No product (kg)/harvesting Price per unit

64
13. Do you spend certain costs to do this activity?
 No
 Yes, (estimation) Rp______________________________________
(e.g fishing stick, feed, etc)
Just ignore question 13 to 14 if you do not take firewood from mangrove
ecosystems

14. How much do you spend per trip? Rp___________________/trip

15. How many bundles of firewoods do you get per

trip?____________________________

16. If you buy firewood, How much do you spend to buy a bundle?
Rp________________/bundle

17. Approximately how many firewood/bundles and what amount of the weight
of firewood per bundle (kg)? firewoods per bundle: ______________unit
__________________kg/bundle

Section 2 :Willingness to Pay

Idem to Questionnaire Form for Small Fisherman

Section 3: Social Economic Background

Idem to Questionnaire Form for Small Fisherman

Pangkalpinang, 2016

(............................................................)

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Appendix C

The Cost Benefit Analysis Calculation of the Mangroves and Tin Industry

Scenarios

The NPV of mangroves: 4 Ha

NPV
Year Total Benefit Total Cost Net benefit
r=5.89%
1 7,350.40 205.94 7,144.46 7,144.46
2 7,350.40 205.94 7,144.46 6,746.42
3 7,350.40 205.94 7,144.46 6,370.56
4 7,350.40 205.94 7,144.46 6,015.63
5 7,350.40 205.94 7,144.46 5,680.48
6 7,350.40 205.94 7,144.46 5,364.01
7 7,350.40 205.94 7,144.46 5,065.16
8 7,350.40 205.94 7,144.46 4,782.97
9 7,350.40 205.94 7,144.46 4,516.50
10 7,350.40 205.94 7,144.46 4,264.87
11 7,350.40 205.94 7,144.46 4,027.26
12 7,350.40 205.94 7,144.46 3,802.89
13 7,350.40 205.94 7,144.46 3,591.02
14 7,350.40 205.94 7,144.46 3,390.95
15 7,350.40 205.94 7,144.46 3,202.03
16 7,350.40 205.94 7,144.46 3,023.64
17 7,350.40 205.94 7,144.46 2,855.18
18 7,350.40 205.94 7,144.46 2,696.11
19 7,350.40 205.94 7,144.46 2,545.90
20 7,350.40 205.94 7,144.46 2,404.06
21 7,350.40 205.94 7,144.46 2,270.13
22 7,350.40 205.94 7,144.46 2,143.65
23 7,350.40 205.94 7,144.46 2,024.22
24 7,350.40 205.94 7,144.46 1,911.45
25 7,350.40 205.94 7,144.46 1,804.95
26 7,350.40 205.94 7,144.46 1,704.39
27 7,350.40 205.94 7,144.46 1,609.44
28 7,350.40 205.94 7,144.46 1,519.77
29 7,350.40 205.94 7,144.46 1,435.10
30 7,350.40 205.94 7,144.46 1,355.15
total $214,333.71 $105,268.36

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The tin refinery plant @4 ha production capacity:1140 MT/year
tin price: $17.426/MT and Utilization rate: 74% (base) NPV
Year Total Profit Total cost Net Profit r=5.89% (base)
1 18,569,145.60 24,591,000.00 -6,021,854.40 -6,021,854.40
2 18,569,145.60 20,328,923.08 -1,759,777.48 -1,661,735.11
3 18,569,145.60 20,267,923.08 -1,698,777.48 -1,514,762.60
4 18,569,145.60 20,195,250.00 -1,626,104.40 -1,369,179.99
5 18,569,145.60 20,114,134.62 -1,544,989.02 -1,228,404.94
6 18,569,145.60 20,076,923.08 -1,507,777.48 -1,132,028.74
7 18,569,145.60 20,076,923.08 -1,507,777.48 -1,068,960.09
8 18,569,145.60 20,076,923.08 -1,507,777.48 -1,009,405.18
9 18,569,145.60 20,076,923.08 -1,507,777.48 -953,168.26
10 18,569,145.60 20,076,923.08 -1,507,777.48 -900,064.45
11 18,569,145.60 20,076,923.08 -1,507,777.48 -849,919.22
12 18,569,145.60 20,076,923.08 -1,507,777.48 -802,567.72
13 18,569,145.60 20,076,923.08 -1,507,777.48 -757,854.32
14 18,569,145.60 20,076,923.08 -1,507,777.48 -715,632.03
15 18,569,145.60 20,076,923.08 -1,507,777.48 -675,762.07
16 18,569,145.60 20,076,923.08 -1,507,777.48 -638,113.38
17 18,569,145.60 20,076,923.08 -1,507,777.48 -602,562.21
18 18,569,145.60 20,076,923.08 -1,507,777.48 -568,991.70
19 18,569,145.60 20,076,923.08 -1,507,777.48 -537,291.50
20 18,569,145.60 20,076,923.08 -1,507,777.48 -507,357.41
21 18,569,145.60 20,076,923.08 -1,507,777.48 -479,091.04
22 18,569,145.60 20,076,923.08 -1,507,777.48 -452,399.47
23 18,569,145.60 20,076,923.08 -1,507,777.48 -427,194.97
24 18,569,145.60 20,076,923.08 -1,507,777.48 -403,394.68
25 18,569,145.60 20,076,923.08 -1,507,777.48 -380,920.38
26 18,569,145.60 20,076,923.08 -1,507,777.48 -359,698.19
27 18,569,145.60 20,076,923.08 -1,507,777.48 -339,658.34
28 18,569,145.60 20,076,923.08 -1,507,777.48 -320,734.98
29 18,569,145.60 20,076,923.08 -1,507,777.48 -302,865.89
30 18,569,145.60 20,076,923.08 -1,507,777.48 -285,992.34
Total -$50,345,939.69 -$27,267,565.62

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Appendix D

Some Photos during the Questionnaire Surveys (August-September, 2016)

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