Perhentian Islands' Cost of Environment: Estimating the Loss of Revenue from Tourism Impact

Tourism activities typically caused disturbances to the functions provided by the environment. Regrettably, these environmental impacts are commonly ignored in the measurement of financial performance. Therefore, the focus of the study is to account for the environmental degradations such as overshoot and overcapacity of environmental resources and overuse of environmental asset. Consequently, the study estimates the Perhentian Islands' tourism revenue and use it as a proxy to estimate the loss of revenue due to the environmental impact caused. Therefore, the paper highlights on financial estimates of environmental degradations and environmental asset overuse. The quantification of these estimates were based on secondary resources. Concurrently, the paper briefly discussed the estimation of tourism revenue which derived from 923 visitors spending on Perhentian Island, analysed using two-steps Chi-Square Automatic Interaction Detection (CHAID). The costs of the environment were measured loosely based on ecological footprint and tourism carrying capacity concepts, and economic valuation techniques. The findings suggest that the cost of the environment comprised of RM5, 446, 563.00 overshoot, RM506, 576.00 overcapacity and between 1, 343, 041.00 to 3, 357, 602.00 for environmental asset overuse. Thus, overall tourism cost of environment for Perhentian Island was recorded between RM 7, 296, 180.00 to -RM 9, 310, 741.00. Keyword: Perhentian Islands, Cost of Environment, Loss of Revenue, Environmental Degradation, Environmental Asset Overuse. Introduction Tourism is a key industry for many countries, especially in supporting employment, infrastructure development and as a significant contributor to the GDP. World Tourism Organization (UNWTO) (2013) reported that the United States of America, Spain, France and China were the top 4 earner for international tourism receipt in 2012 with USD126, USD55.9, USD53.7 and USD50 billion respectively. Subsequently, the year 2012 is significant for the global tourism sector when it recorded more than 1 billion of international tourists' arrivals worldwide, and Malaysia was among the top 10 world destinations with France leading the category (World Tourism Organization (UNWTO), 2013). It has International Journal of Academic Research in Business and Social Sciences Vol. 1 0 , No. 8, 2020, E-ISSN: 2222-6990 © 2020 HRMARS 828 led to a positive trend for the tourism industry in Malaysia concerning tourism receipt with reported RM 69.1 billion in 2015, RM 82.1 billion for 2016, 82.2 billion in 2017 and 84.1billion for 2018 (Tourism Malaysia, 2019). Unfortunately, tourism also contributes to undesirable social, cultural and environmental consequences. Various works of literature have documented negative impacts of tourism activities, namely degradation of natural capital (Gil, Renfro, Figueroa-Zavala, Penié, & Dunton, 2015; Xiaojiang, 2008) and pollution of the seas and coastlines (El Sherbiny, Sherif, & Hassan, 2006; Wilson & Verlis, 2017). These types of impact caused significant concerns, especially for island destinations, since they are ecologically fragile and have limited resources (Balzan, Potschin-Young, & Haines-Young, 2018). Most island destinations such as the Maldives, Bora Bora, Palawan, Koh Phi Phi and Perhentian Islands were heavily depended on its nature to attract visitors. Tagged as 'Sun, Sea and Sand' destinations, these islands were exposed to a high influx of tourists throughout the year. Since the islands were ecologically sensitive, high intensity of tourism activities may raise some sustainability issues. Rhodes Island in Greece, for example, is experiencing environmental degradation in some of its saturated area of crowded beaches (Vandarakis et al., 2018). Perhentian Islands, the unit of analysis of this study also face several environmental issues from tourism activities. One of them is waste management, where an increasing number of tourists to the island caused a considerable volume of solid waste. It is argued that the current practice by transporting the waste 21 km away to the mainland is considered as uneconomical (Saat, 2017; Saat, Saputra, Jamin, Muhamad, & Muhamad, 2019). Apart from that, erosions caused by illegal resorts and chalet on the island were also documented (Ramli & Idris, 2016). In terms of visitors perception on tourism activities on the island, some studies found several issues in regards to crowdedness, impacts on vegetation, water quality and wildlife (Nejati, Mohamed, & Omar, 2015; Ramdas & Mohamed, 2017; Rasoolimanesh, Jaafar, Marzuki, & Abdullah, 2017). The sustainability of a tourism destination is crucial since it affects not only the host community but the whole nation as well. However, any form of tourism activities will give impact to the environments, especially those that heavily depended on natural landscape as attractions. Therefore, the question is, to what extent do these activities are allowed to occur? From the viewpoint of weak sustainability, manufactured capital can be substituted for losses in natural capital (Bartelmus, 2009). Arguably, as long as benefit exceeds the cost, the damages (limiting to recoverable state) may be tolerated. However, to do this, benefits and costs must first be defined and quantified. The main focus of the study is to measure the cost of the environment from tourism activities of a well-known island destination in Malaysia called Perhentian Islands. Therefore, the study embarked on the following objectives: 1. To estimate tourism revenue based on segmented visitor spending 2. To estimate loss of revenue from overcapacity and overshoot of environmental resources 3. To estimate loss of revenue from overuse of environmental asset