ENVIRONMENTAL ECONOMICS

CASE STUDY 5

Cases on Command and Control Policies and Practices In

BOX 1

CASE 1:

A Partial List of Malaysian Environmental-Related Regulations

1. General

− Environmental Quality Act, 1974 (Act 127)

− Environmental Quality (Licensing) Regulations 1977

2. Air

− Environmental Quality (Clean Air) Regulations 1978

− Environmental Quality (Control of Lead Concentration in Motor Gasoline)
Regulations 1985
− Environmental Quality (Prohibition on Use of Chlorofluorocarbons and other
Gases as Propellants and Blowing Agents) Order 1993
− Environmental Quality (Motor Vehicle Noise) Regulations 1987

3. Water

− Environmental Quality (Sewage and Industrial Effluents) Regulations 1979

− Environmental Quality (Prescribed Premises) (Raw Natural Rubber)
Regulations 1978
− Environmental Quality (Prescribed Premises) (Crude Palm-Oil) Regulations
1977
− Environmental (Prohibited on Use of the Controlled Substance in Soap,
Synthetic Detergent and Other Cleaning Agents) Order 1995

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 − Environmental Quality (Delegation of Powers on Marine Pollution Control)
Order 1994
− Street Drainage and Building Act (Act 133)
− Sewerage Services Act (Act 508)
− Merchant Shipping Ordinance 1952
− Merchant Shipping (Oil Pollution) Act 1994
− Exclusive Economic Zone Act 1984

4. Hazards

Poisons

− Poisons Act 1952 (Act 366)

− Poisons Regulations 1952
− Poisons (Sodium Arsenite) Regulations 1949
− Poisons (Sodium Hydroxide) Regulations 1962

Pesticides

− Pesticides Act 1974

− Pesticides (Exemption) Order 1988
− Pesticides (Licensing for Sale and Storage for Sale) Rules 1988
− Pesticides (Labeling) Regulations 1984
− Pesticides (Importation for Educational or Research Purposes) (Amendment)
Rules 1987
− Pesticides (Advertisement) Regulations 1996

Petroleum

− Petroleum (Safety Measures) Act 1984 (Act 302)

− Petroleum (Safety Measures) (Transportation of Petroleum by Pipelines)
Regulations 1985

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 − Petroleum (Safety Measures) (Transportation of Petroleum by Water)
Regulations 1985

Radioactive Substances

− Atomic Energy Licensing Act 1984

− Radiation Protection (Licensing) Regulation 1986
− Radiation Protection (Basic Safety Standards) Regulation 1988

5. Waste Management

− Environmental Quality (Scheduled Wastes) Regulations 1989

− Environmental Quality (Prescribed Premises)(Scheduled Wastes Treatment and
Disposal Facilities Order) 1989
− Environmental Quality (Prescribed Premises)(Scheduled Wastes Treatment and
Disposal Facilities Order) Regulations 1989
− Local Government Act 1976 (Act 171)

6. Environmental Impact Assessment

− Environmental Quality (Prescribed Activities) (Environmental Impact

Assessment) Order 1987

7. Health and Safety

Occupational Safety and Health

− Occupational Safety and Health Act 1994 (Act 514)

− Occupational Safety and Health (Employers' Safety and Health General Policy
Statements) (Exception) Regulations 1995
− Occupational Safety and Health (Control of Industrial Major Accident Hazards)
Regulations 1996
− Occupational Safety and Health (Safety and Health Committee) Regulations
1996

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 − Occupational Safety and Health (Classification, Packaging and Labeling of
Hazardous Chemicals) Regulations 1997
− Occupational Safety and Health (Safety Health Officer) Regulations
− Occupational Safety and Health (Safety and Health Officer) Order 1997

Industrial Safety & Health

− Factories and Machinery Act, 1967 (Act 139)

− Factories and Machinery (Electric Passenger and Goods Lift) Regulations 1970
− Factories and Machinery (Persons-In-Charge) Regulations 1970
− Factories and Machinery (Safety, Health and Welfare) Regulation 1970
− Factories and Machinery (Steam Boiler and Unfired Pressure Vessel) Regulations
1970
− Factories and Machinery (Lead) Regulations 1984
− Factories and Machinery (Asbestos Process) Regulations 1986
− Factories and Machinery (Building Operations and Works of Engineering
Construction Safety) Regulations 1986
− Factories and Machinery (Noise Exposure) Regulations 1989
− Factories and Machinery (Mineral Dust) Regulations 1989

8. Fire Safety

− Fire Services Act 1988 (Act 341)

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BOX 2

CASE 2:

117 companies charged with environmental offence in 1997

Source: New Straits Times, Feb. 3/1998.

Kuala Lumpur, Mon. Feb. 3/98– The Department of Environment prosecuted 177
companies for flouting various environmental regulations last year. They were among the
2,598 cases of environmental violations uncovered during same year. Science,
Technology and Environment Minister Datuk Law Hieng Ding said most of the cases
taken to court involved water pollution by industries.

Of the 177, 52 companies were prosecuted for discharging effluents and sewage into
waterways, 45 for air pollution, two for violating environmental impact assessment
regulations and one for inappropriate management of scheduled wastes. Law said 29 oil
palm and rubber processing factory operators were charged with failure to comply with
licensing conditions.

The DOE had also taken 48 other cases to court for various offences including illegal
dumping and transportation of scheduled wastes, noise pollution and discharging oil or
sludge into the sea. The DOE had issued compound notices for other less serious cases. It
had also issued directives to some companies to adopt proper measures to comply with
the laws. However, for a few severe cases the DOE had issued prohibitive orders for
factories to stop operations until all rehabilitative measures have been adopted.

There were 1,557 cases of companies flouting the Environmental Quality (Clean Air)
Regulations 1978 last year. Besides taking 45 companies to court for flouting this law,
the DOE had issued 1,433 companies with compound notices and one with a prohibitive
order. It had also issued directives to 78 others to comply with the regulations.

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Law said 727 companies had flouted the Environmental Quality (Scheduled Wastes)
Regulations 1989. One company was taken to court and the rest were either compounded
or directed to take measures for proper management of their scheduled wastes. As for
polluting the waterways, 198 companies were caught violating the Environmental Quality
(Sewage and Industrial Effluents) Regulations 1979. Besides the 52 cases taken to court,
three were given prohibitive orders. The rest were directed to adopt rehabilitative
measures.

As for agro-based companies such as rubber and oil palm processing factories, 66 were
caught flouting their licensing conditions. On oil spill in Malaysian waters, Law said 23
cases were detected last year. Of this, the DOE had taken seven ship owners to court
under the Environmental Quality Act. On the proposal to privatize aerial surveillance to
check desludging or oil dumping at sea, Law said the matter was still being considered.

BOX 3

CASE 3:

Small and Polluting

Golden Enterprise was a small electroplating company located in Kampong Baru, Sungai
Buloh, Selangor, founded in Mach 1989. In producing the good, waste products
(effluents) were discharged into the waterways. The Selangor Department of
Environment (DOE) found that the effluent contained high levels of heavy metals that
may cause adverse effect on the environment and public health. The lack of pollution
control measures reflected the attitude of the plant management towards the environment.
As a small business operator, the company did not have access to information concerning
best practices environmental management and neither did it has the expertise and capital
to undertake cleaner production processes.

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The company has been reminded by the DOE to ensure that the plant’s effluent met the
safety standards before being discharged into the environment. Although pollution
control technology was available, it was considered costly by the firm. In order to reduce
its pollutant emission, the company appointed a consultant firm to redesign the
maintenance and treatment of the effluent and waste system, which involved a sum of
RM150, 000.

However in November 1999 the Department of Environment of Selangor found that the
plant continued to discharge untreated effluent into the river. Four samples of effluent
from the last point of the outlets have been taken to the Chemistry Department in Petaling
Jaya. The results revealed;
i. Concentrations of zinc was found to be 220 mg/liter (safety level is 1 mg/liter)
ii. Concentrations of cyanide was found to be 60 mg/liter (safety level is 0.1
mg/liter)
iii. Concentrations of Chemical Oxygen Demand (COD) was found to be 220
mg/liter (safety level is 1 mg/liter)

The company was then charged by the authority under section 25 (3) Environmental Act
1974 (Amended 1996) and compounded RM30, 000.

To meet the safety standard the company was required to spend more money on better
pollution control equipment and methods. Investments in pollution abatement equipment
were unproductive to the company, in the sense that they do not result in any increase in
output. To the company, the costs of eliminating the pollution will be greater then the
benefits the company will reap, thereby resulting in a shrinking of total profit.

Deterioration of river quality is one of the main environmental issues in the country.
Water quality assessment in 1995 has revealed that out of 87 rivers monitored in
Malaysia, 7 rivers are considered as heavily polluted, 55 rivers are only slightly polluted
and 25 rivers are classified as clean. The Department of Environment has enforced

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Quality Act 1974 in order to prevent and control pollution by limiting the volumes, types
and constituents of pollution discharged, emitted or deposited into the environment.

BOX 4

CASE 4:

The Cost of Persistency

The enforcement of Environmental Impact Assessment (EIA) is to ensure that

development in environmental sensitive areas could be monitored and impacts on the
environment are effectively mitigated. Nevertheless, firms, which were given EIA
approval, need to be continuously monitored to ensure its development activities follow
the regulations stipulated in the EIA report.

Asmik Sdn. Bhd. was a developer firm, which was given an EIA approval to embark on a
mixed development project at FELDA Bukit Cerakah I dan II, in the district of Kuala
Selangor. The first stage of development involved land clearings and earth woks. As
prescribed in the EIA report, it was the responsibility of the company to take preventive
measures by constructing retention ponds so that the water and mud runoffs from the
earth works will not affect the environment adversely. However, work done during the
rainy season had resulted in mud runoffs that affected the nearby waterways.

Nearby residents argued that the project had led to the accumulation of mud in the water
system and changed the color of the water while affecting the natural scenic beauty of the
area. The residents had asked the earth works to be carried out after the rainy season. The
firm held a discussion with the residents but insisted that the earth works would continue
as planned. In return, the company agreed to clean the waterways and deepen the
retention ponds. This rehabilitation works had caused a delay of the project and increased
the project cost.

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The residents observed that mud runoffs were still flowing into the waterways. But, the
company insisted that it was minimal and argued that it will soon stop after the rainy
season. The dissension was then reported to the Selangor state Department of
Environment. Tests on water samples taken at the last point of emissions by the
Department of Chemistry in Petaling Jaya revealed that the levels of suspended solid
matter in the water samples collected from two emission points were 240 mg/litre and
170 mg/litre. This clearly exceeded the maximum level of 100 mg/litre as stipulated by
the EIA. The company was found guilty under Section 34 A(7) of the Environmental
Quality Act 1974 (Amendment 1996) and also under Section 34 A (A8) of the same Act
and was fined RM10,000.

BOX 5

CASE 5:

New Straits Times (Malaysia), January 11, 2000

BYLINE: By Esther Tan

KUALA LUMPUR, Mon. - Those planning to conduct open burning to dispose of

infected crops or carcasses of diseased animals must inform the Department of
Environment and get approval from relevant agencies under new legislation which will
be enforced next month.

They must adhere to a set of conditions or face a fine of up to RM2,000 under the new
Environmental Quality (Prescribed Activities)(Open Burning) Order which will be
gazetted by the end of next month.

They are also liable to a maximum fine of RM500,000 or up to five years' jail or both
under the Environmental Quality Act if their case is taken to court.

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DOE director-general Rosnani Ibarahim told the New Straits Times that the draft of the
Order, drawn up following the severe haze in 1998, has been finalized and would be
submitted to the Cabinet after the Hari Raya holidays.

"We plan to gazette and enforce the Order by the end of next month," she said. The Order
is made possible with the 1998 amendments to the Environmental Quality Act (EQA),
which also saw the introduction of stiffer penalties for open burning.

At present, some of the conditions under the Order are being implemented as mere
guidelines. Once gazetted, the conditions will have legal force. Under the Order, open
burning will only be allowed for prescribed activities such as religious practices, training
and research activities, disease control, and agricultural practices which involve the
burning of sugar cane leaves and padi stalks, and shifting cultivation.

The existing Environmental Quality (Clean Air) Regulations 1978, allow open burning
for these activities. The difference is that the DOE does not need to be informed
beforehand and there are no stringent conditions to adhere to. Rosnani said the Order
would make it a requirement for those wishing to carry out open burning for these
exempted activities to provide prior notification to the DOE. Those wanting to dispose of
infected crops and carcasses of diseased animals or poultry for disease and pest control
must get approval from the departments of Agriculture and Veterinary Services.

One of the conditions is that burning of carcasses can only be carried out in areas where
other alternatives such as incinerators are not available. The burning must be conducted
in designated areas determined by the DOE. Open burning activities must cease if the Air
Pollutant Index breaches 100. All open burning must also be supervised.

Burning of garden refuse on the premises of private residences will continue to be

allowed under the Order provided it is done between 8am and 6pm. Private residents are
not required to inform the DOE. "Under the Order, we will no longer issue written
permission for open burning such as for land-clearing by plantations. This means open

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burning for any other activities other than the prescribed activities will no longer be
allowed," said Rosnani.

The Order will remove ambiguities that obstruct effective enforcement, as the prescribed
list is very specific on types of activities. For instance, Rosnani said the Order clearly
defined the types of agricultural practices where open burning is allowed. Essentially, the
exemption is given to smallholders and those carrying out traditional agricultural
practices as they cannot afford zero-burning technology. Big plantation companies have
no excuse. The plantation sector is lumped under agricultural practices under the current
regulations. "Under normal circumstances, they will no longer be allowed to carry out
open burning because they are capable of zero-burning techniques," said Rosnani.

The Order is the second stage of the DOE's efforts to ensure stringent enforcement to
curb local sources of haze. It had amended the EQA to raise the maximum fine from
RM100,000 to RM500,000 for open burning. It also made landowners responsible for
fires on their land unless they could prove that the open burning occurred outside of their
control.

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