THE MALAYSIAN FORESTER 75 (2): 189-196 (2012)

VALUING THE RECREATIONAL BENEFIT OF

CROSS-BORDER SHOPPING AT WANG KELIAN
SUNDAY MARKET, PERLIS, MALAYSIA
SYAMSUL HERMAN, M.A1,2, AHMAD, S.2,3,
RAMACHANDRAN, S.1,2 AND RUSLI, Y.4
1 Faculty of Forestry,Universiti Putra Malaysia, 43400 Serdang, Selangor, Malaysia
2 Institute of Tropical Forestry and Forest Product, Universiti Putra Malaysia, 43400 Serdang,
Selangor, Malaysia
3 Institute of Agricultural and Food Policy Studies, Universiti Putra Malaysia, 43400 Serdang,

Selangor, Malaysia
4 Faculty of Environmental Studies, Universiti Putra Malaysia, 43400 Serdang, Selangor, Malaysia

* Corresponding author: syamsulhma@putra.upm.edu.my

Abstract: The Wang Kelian Sunday Market, located within the border of the
Perlis State Park (PSP) is known for its unique recreational cross-border
shopping. This weekend activity, takes place at the border of Malaysia and
Thailand, attracting visitors from both countries. By applying the travel cost
model, the travel information is then used for the estimation of the
recreational value of the forest area in the PSP. Over the last 60 year,
modifications were made to refine the traditional model which also includes
functional forms. The study adopted and compared three functional models;
the linear, semi-log and log-log models. The goodness of fit statistics indicates
the double-log model has better statistical properties and chosen for welfare
estimation. The recreational value derived is estimated at RM1.86 per visit.
The total recreational net benefit is estimated at RM21,123.20 for the year
2007.

Key words: Recreational economic value, trans-border expenditure,

consumer surplus, model transformation, state park

INTRODUCTION

Wang Kelian Sunday Market (WKSM) is located in the state of Perlis, Malaysia. It is the
northern most state of Peninsular Malaysia and shares the southern border of Thailand.
The area is confined by the boundary of the Perlis State Park (PSP) making it under the
management of Perlis State Forestry Department (PSFD).There are many recreational
attractions in PSP in terms of natural resources as well as man-made features (Syamsul
Herman et al. 2012), especially WKSM. It is famous for cross-border tourism and
shopping experience and is included as one of the attraction spots in the state park.

Kasim (2003) indicated that activities conducted in PSP are those related to
nature-based experiences in Wang Burma (e.g. trekking, camping, caving, bird watching,
nature photography, nature education ), recreation activities in Gua Kelam (picnic,
swimming) and also weekend shopping experience at WKSM. These weekend visits have
certainly benefited the local community in terms of small-scale economic activities.
WKSM was first opened for cross-border trade activities in June 1991 with agreement
from both countries to allow access up to 2 km on each side of the border every Sunday
without the use of travel documents (Department of Immigration 2006). Most of the
visitors come mainly for cross-border shopping and visiting the market as part of their
recreational activities in PSP (Azyyati et al. 2007).

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The economic significance of WKSM in the tourism sector had prompted the
Government’s attention. Through PSFD, the Government had allocated RM4 million to
build the Wang Kelian Shopping Arcade in 2005, as stakeholders anticipated the benefits
of cross-border shopping to the local community and state economy in the long run. It is
an effort by the Government to enhance the WKSM in providing a more conducive and
unique recreational experience of PSP. The funding was mainly to eliminate problems at
Wang Kelian, such as traffic flow (going to and from the border), littering and illegal
stalls. It also houses a facility for comfortable cross-border shopping experience (PSFD
2005).

With huge expenditure by the Government, it is a good idea to assess if the

effort has its impact. One of the ways is by assessing by the means of a benefit-cost
analysis. Therefore, the purpose of this paper is to estimate the economic value in terms
of monetary benefit from this unique cross-border shopping experience of PSP. The
paper helps the managing agencies to justify the existence of this unique outdoor
recreational product in a protected area and development cost allocated for it,
particularly, the cost for development and maintenance of the infrastructure in WKSM.
The estimation of recreational benefits can also provide information to the Forestry
Department and the State Government, to use for future planning and development
since the study was based on actual visitors’ expenditures. With the projection of
economic value, it helps the managing agency to generate prospective funds from
various sources, either government, private or non-profit organisations.

METHODOLOGY

Survey were conducted on public holidays and Sundays. The market at Wang Kelian is
an open market concept without entry and exit points. Hence, it was not possible to
establish a sampling frame for a probability sampling. Therefore, convenience sampling
was employed where respondents were interviewed on a voluntary basis. The surveys
were conducted from 8.30 am until 2.00 pm due to visitors rushing out of Wang Kelian.
A total of 196 visitors were interviewed at WKSM. Surveys were conducted between
February 2005 and December 2007.

The Travel Cost Method

This study adopts the Travel Cost Method (TCM) because it is consistent with the
consumer demand theory. TCM is the practical method that estimates actual
consumption of the environment, rather than a hypothetical one.

Three functional forms were used to estimate the econometric model of

WKSM visitor demand, which are the linear model (LM), semi-log (SL) and double-log
(DL). SL and DL models were transformed by taking the natural logarithm of both the
dependent and continuous independent variables. The advantages of using the semi-log
functional form include minimizing the problem of heteroscedasticity, as well as
eliminating the potential problem of negative trip prediction, which may happen in linear
functional form (Loomis and Cooper 1990).

The Model Used

The econometric models for the three models are defined as follows:

Linear Model (LM)

Vi = β0 + β1TCi +β2TCSi + β3TimeCi + β4INCi + β5AGEi + ε (Eq.1)

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Semi-Log Model (SL)

lnVi = β0 + β1TCi +β2TCSi + β3TimeCi + β4INCi + β5AGEi + ε (Eq. 2)

Double-Log model (DL)

lnVi = β0 + β1 lnTCi +β2lnTCSi + β3lnTimeCi + β4lnINCi + β5lnAGEi + ε
(Eq.3)

Where Vi is the number of visit for the past one year of the i-th visitor, TCi is
the round-trip travel cost of the i-th visitor, TCSi is the round-trip travel cost to
alternative sites1 (Table 1) of the i-th visitors, TimeCi is the opportunity cost for the i-th
visitor, INCi is the monthly household income for the i-th visitor and AGE is the age in
years of the i-th visitor. Travel cost consisted of travelling cost and time cost. The value
of travel distance was estimated by multiplying distance to mileage per km rates2 based
on type of vehicle. Round trip distances from WKSM to respondents’ origin were
calculated using MapSource 4.09 for GARMIN GPS mapping software. The time cost
or opportunity cost were conservatively estimated to be equal to 1/3 of the wage rate 3
multiplied by round-trip travel time.

Table 1. Alternative Sites According to Region of Respondent’s Origin at WKSM

Region Name Respondent's Origin Alternative Sites

1 North Perlis, Kedah, Perak, Penang Padang Besar, Perlis

2 Central Selangor, KL, Central Pahang

(Jerantut and west) Nilai 3, Negeri Sembilan

3 East Kelantan, Terengganu, Pahang

(Jerantut and east) RantauPanjang, Kelantan

4 South Johor, Melaka, Negeri Sembilan, Tangkak, Johor

Sabah and Sarawak (KLIA)

RESULTS AND DISCUSSION

Multiple Regression Result

The regression results are shown in Table 2. All OLS regression was conducted using
LIMDEP ver 3.0. In terms of R2 value amongst the three functional forms, DL model
(14.0%) outperforms the SL (9.45%) and LM (5.8%). This is supported by the log
likelihood values where DL model shows the highest value (-68.42). In subsequent, the
Akaike value also shows that DL has the lowest value (0.763). The results of coefficient
estimates are shown in Table 3.

With respect to the coefficient estimates, the travel cost (price) coefficient
estimate for each of the three model specifications are consistent with the demand
theory, in that the visitation in one year (quantity) is inversely related to travel cost
(price). The coefficient estimate associated with the travel cost variable is significant in

1 The selection for alternative sites is based on the shortest distance between the selected locations and the
respondents’ residence. It is assumed that respondents might choose the alternative locations due its proximity
to the residence.
2 Rates were provided by Highway Planning Unit, Ministry of Works, Malaysia
3 Refer to Cesario (1976).

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the SL and DL models at 95% confidence level. Except for income in DL model, all
other variables are found to be not significant in all models. The income coefficient
carries a negative sign indicates that visitation decreases with an increase in income.
Such behaviour demonstrated by the model suggests that the study area is an inferior
product. If the visitor experiences increase in their income, they are able to choose other
locations with higher cost. In this case the visitor would prefer further locations with
higher travelling costs.

Table 2. Comparison of Selected Functional Forms

LMa SLb DLc

2
R 0.0751 0.0945 0.1400
Adj. R2 0.0506 0.0706 0.1172
Log-likelihood -542.95 -73.45 -68.42
Akaike info Criteria 5.630 0.815 0.763
F value 3.07 3.95 6.15
Note a,b,c: Selected functional forms, refer to Eq. 1, 2 and 3

Table 3. Parameter Estimates of Selected Functional Forms

LM SL DL
Constant 5.4428 0.5132 1.2283
TC -0.2317E-02* -0.2295E-03** -0.2107E-01**
TCS -0.2646E-01 -0.2614E-02 -0.5683E-04
TimeC 0.1334E-04 0.1115E-03 0.1077E-01
INC -0.2494E-03 -0.3225E-04 -0.1860**
AGE -0.1413E-01 -0.8885E-03 0.6303
Note: E+nn or E-nn means multiply by 10 to + or -nn power
* Significant at 0.1 level, ** Significant at .05 level

The elasticity of demand can be estimated with respect to price (travel cost). In
a double-log model, the coefficients of the travel cost estimates the elasticity. From the
study, a 10% increase in price, quantity demanded decreases by 2.1%, which means that
the cross-border shopping demand is inelastic. This is probably because of the type of
goods sold in WKSM are not considered as luxury goods. Composition of the items is
mostly consumer products such as food, clothes, household products and souvenirs.

The computation of the economic value is possible once the demand function
is specified and estimated. In this study, the economic value is assessed by estimating
the consumer surplus, by taking integrating of the recreational demand function.
However, the estimation of welfare is based on the best-fit model that is the DL model.
Following Graham-Tomasi et al. (1990) and Stoeckl and Mules (2006), the calculation of
consumer surplus for DL model is as below.

IfβTC< -1, then

CS = Σ( –TC)(V) / βTC + 1 (Eq. 4)

IfβTC> -1, then

CS = (Max TC)(MinV) – (TC)(V) / βTC + 1 (Eq. 5)

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where;
CSi = Consumer surplus
V = Average visit for one year
TC = Average travelling cost for one year
βTC = Coefficient of the travel cost
Max TC = Actual maximum total travelling cost from
the sample
Min V = Actual minimum visit from the sample

Economic Value Estimation

From the OLS regression, βTC> -1 = 0.2107, hence the CS calculation is based on
equation (5). From the formula, the value for CS is estimated at RM1,154. The value is
then divided with the total visitation per year (621 visits) yields to RM1.86 per
person/visit. Assuming the total number of visitor arrival in 2007 equals to the number
of actual number of visit to WKSM (each visitor made one visit), the calculation for total
net recreation value for WKSM is then measured by multiplying the CS per trip to the
total visitation to WKSM.

The statistics supplied by the Department of Immigration, Wang Kelian Post

did not reflect the actual recreation visitors to WKSM. Instead, it represented the
number of people passing through the Malaysia-Thailand border for the whole year.
Using such numbers might overestimate the total value. Since the market only operates
on Sundays, only Sunday visitors were counted as the visitors to WKSM. In 2007, there
were 52 Sundays (14.25% of 365 days) or approximately 11,367 visits (Table 4). Using
the adjusted visit rate for WKSM, then the total net recreational benefits for the site is
estimated at RM21,123.20 for the year 2007.

Table 4. Estimated Total Recreational Use Value for WKSM

Actual Adjusted Economic Value

(RM)
Visitors Arrivala 79,770 11,367 21,123.20
a Source:Department of Immigration, Perlis

The CS value estimated from the study is relatively low compared to various
studies in valuation of recreational use of natural areas. The absence of TCM studies on
cross-border shopping in a state park in Malaysia made it difficult to do comparative
analysis. However, some similar studies are those valuation works on recreational uses
of the natural areas. For instance, the recreational use of forest area worldwide had been
estimated in various types of publication, estimated between €0.66 to €111.90 from year
1977 to 2001 (Table 5). In Malaysia, past studies have shown that recreational values
ranged between RM0.50 to RM225 per visit. Ahmad et al. (1990) estimated CS values
of RM0.50-2.50 per visit for recreational visit to Semenyih Dam. Mohd Shahwahid et al.
(1999) estimated CS value of RM16-28 per trip when conducting a study for sport
fishing in Matang Mangrove Forest in Perak. Studies by Awang Noor et al. (2009) found
values between RM67.20-106.40 per visit (2007) for Chamang Recreational Forest
Bentong. The low value of the total recreational benefit is probably due to the nature of
once-a-week nature of the market. Mohd Shahwahid et al. (1998) reported that low value
is caused by very low visitation rates. In contrast to most recreational park, the Sunday
market only operates one day per week, making the other days unutilised. Hence, the
visitation rates were low due to its once-a-week event.

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The study infers that the real value of the development of a nature based park
ought to include the value for non-market services of the park. Although the study is
done post cancellation of the free-flow facility, perhaps the estimated value from the
study indicates the gross estimates of the recreational value of cross-border shopping in
terms of monetary value.

Though the consumer surplus value is relatively low, some past studies also
indicate low value in consumer surplus estimates. One possible reason is because of the
nature of the cross-border shopping experience which occurs only once a week - hence
limiting visitation rates and contributes to the low estimation. The three models, linear,
semi-log and double-log demonstrate consistency in the result. However, the estimation
of value is based on the best-fit model based on comparison of R2, adjusted R2, log
likelihood and Akaike information criteria values. As suggested in literature, all three
models have incorporated relevant variables in many TCM studies such as time cost,
alternative price and socio demographic components. Nevertheless, only income is
found significantly affecting visits, revealing the Sunday Market at Wang Kelian is an
inferior product.

Table 5. Past Studies of Recreational Use Valuation of Forest Area using TCM

Study Year Country Type of Mean CS

Publication (€ 2000)
Bateman et al. 1996 UK Journal 2.92
Boatto et al. 1984 Italy Report 5.95
Bojo 1985 Sweden Report 32.37
Christensen 1988 Denmark Dissertation 0.80
Christensen 1988 Wales Dissertation 1.30
Elsasser 1996 Germany Dissertation 9.87
Everett 1979 UK Journal 4.52
Gatto 1988 Italy Journal 3.12
Gluck and Kuen 1977 Austria Journal 0.66
Hanley 1989 UK Journal 4.22
Hanley and Ruffell 1993 UK Book 4.18
INRA 1979 France Report 10.16
Lowenstein 1991 Germany Proceedings 51.89
Luttmann 1995 Germany MSc Thesis 111.92
Marangon and Gottardo 2001 Italy Report 16.76
Marinelli et al. 1990 Italy Journal 23.47
Marinelli and Romano 1987 Italy Book 1.67
Merlo 1986 Italy Journal 2.53
Merlo and Signorello 1991 Italy Proceedings 15.32
Moons et al. 2001 Belgium Journal 4.86
Ovaskainen et al. 2001 Finland Journal 35.76
Oyarzun 1994 Spain Journal 88.04
Willis 1991 UK Journal 3.63
Willis and Benson 1988 UK Journal 3.64
Willis and Benson 1989 UK Journal 3.94
Willis and Garrod 1991 UK Journal 1.82
Source: Zandersen and Tol (2008)

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Wang Kelian has been known for its cross-border shopping. It is a recreational
product that is unique to PSP. This special product attracts tourists and it contributes in
generating economic value for PSP. It is recommended that the market should be
sustained and further promoted as it is suitable for those who seek less vigorous outdoor
recreational activities in PSP. A good promotion of the product can attract a wide variety
of visitors to PSP, hence contributing to higher economic value for PSP.

CONCLUSION

In the study, the cross boundary shopping provides an alternative recreational product as
it gives a unique experience to the visitors. Estimates generated by the study could give
some information to the park management on the value the cross-border shopping has
been giving in terms of economic value to the park. The foremost benefit of the study is
that, it highlights the managing agency on the information of benefit-cost ratio for
allocation in facilities development in WKSM. Although the cross-border activity was
estimated after the WKSM development, it has a direct policy implication. The estimated
value indicates the type of management style in practice and the level of usage of Wang
Kelian. Another type of management will produce different value of the experience. If
the management changes the policy at Wang Kelian as such it would affect visitors’
arrival, this will also affect the value. Should the change in management or public
funding is to be reduced, such changes can be justified if the present use and value are
known. On contrary, additional allocation for the resource is substantial if it can be
shown that the resource presently allocated is producing sufficient benefit. This study, at
the very least had provided a more objective framework to supply for decision-making
process.

ACKNOWLEDGEMENTS

The authors would like to appreciate the IRPA grant financing the study. The authors
also wish to express their gratitude to Forest Research Institute Malaysia (FRIM) field
staff for their help during the survey. Our appreciation also goes to Mr. Aldrich
Richards, the former Warden of the Perlis State Park, staff of Perlis State Park for their
support during the study and Ms. Nur Syuhada Che Ibrahim for her assistance during
this paper writing.

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