February 15, 2013

Putting a Value on Coral Reefs

By Reef Check Malaysia

\"\"Coral reefs are highly productive ecosystems that thrive in what would otherwise be unproductive waters. They provide a number of services to human societies, including employment in tourism, food from the fisheries industry, coastal protection, as well as a way of life connected to traditional uses, to name a few. However, putting a value on these various “ecosystem services” is a difficult task, and without an understanding of the true value of coral reefs it is difficult to make a case for improving management and conservation.

This article draws a comparison with an important industry sector in Malaysia: palm oil. It then presents various estimates of the value of coral reefs, some of which show that coral reefs may be worth more than the palm oil sector, and argues that such an economically important ecosystem deserves more attention from government to ensure its sustainability.

Malaysia is the second largest producer, and leading exporter of, palm oil. Malaysia’s palm oil industry is recognized as a key economic growth driver in Malaysia. It was the second largest contributor to external trade in 2008 and employs some 570,000 people directly.

The palm oil industry is acknowledged as an important economic sector. It has enjoyed support from the Government since its economic potential was recognized in the 1960’s, and Government policies have moved from import substitution initiatives to export-oriented diversification. The Government has created vital institutions, including the MPOB and MPOC, and has supported the industry through tax incentives, policy and trade promotion by MITI.

If the economic value of an industry sector can be used to assess its importance to the national economy and to justify government attention and support, then how do coral reefs compare to palm oil?

Putting a value on an industry like palm oil is relatively straightforward. Market capitalization of listed companies, employment and the value of exports can all be used as indicators of the economic value of the sector, and information is readily available.

In contrast, putting a value on an ecosystem like coral reefs is much more complicated. Coral reefs produce fewer “products”, and methodologies to value coral reefs must rely on economic models to estimate the value of the ecosystem services they provide.

Over the last 10 years, methodologies have improved as the number of economists and scientists working on the problem has grown. The table below demonstrates the changing estimates of the value of reefs values over that period.

Year Source Basis of estimate Value (US$) (world)  Value of coral reefs
in Malaysia

(RM = Malaysian Ringgit)

Burke, Selig
and Spalding

Fisheries, shoreline
protection, tourism,
recreation, and aesthetic value


RM 0.3 – 3.4 billion

2003 Cesar et al.

Fisheries, coastal
tourism/recreation and biodiversity value

$797.4 billion NPV (50yr, 3%)

RM 0.65 billion


Martinez et al.

Human welfare $172 billion/yr

RM 7.02 billion/yr


of 83 studies)

Provisional, regulating, and cultural services


RM 145 billion/yr


Synthesis report

Annual benefits from restoring reef projects


RM 162 billion/ha


NOAA (website)

Economic services – job, food, tourism

$375 billion/yr

RM 15.3 billion/yr

Clearly, an accurate economic valuation of coral reefs, or more precisely the ecosystem services they provide, is important to properly understand their economic importance.

The TEEB report was compiled by a large number of eminent scientists, so has high credibility. If the value of RM 145 billion per year for Malaysia proves to be accurate, then coral reef ecosystem services in Malaysia are valued at more than three times the export value of the palm oil industry and twice the market capitalisation of the palm oil industry.

These statistics support the argument that coral reefs should take their place high up in the ranking of important business sectors in Malaysia.

Coral reefs are a valuable economic resource, and, armed with this better understanding of their true value, it seems clear that protecting coral reefs should receive a higher priority than it currently does.

Two examples of the cost of coral reef degradation serve to reinforce this point.

\"\"Tourism Value
Many of the islands off the East coast of Peninsular Malaysia are important tourist destinations. Today, many of them are a draw for divers and snorkelers, and the coral reefs around the islands can be considered to be a central element of the tourist product on the islands.

The northernmost islands, the Perhentian islands, have seen rapid growth in tourism over the last 10 years, and visitor numbers continue to increase. Hand in hand with this has been an increase in the provision of facilities and services for tourists.

But growing tourist numbers are placing increasing stress on the coral reefs around the islands. Tourism impacts range from physical (divers and snorkelers damaging reefs) to biological (nutrient pollution from poorly treated sewage). The condition of reefs around the islands is declining: they have the lowest live coral cover of any of the islands off the East coast; and among the highest level of nutrient indicator algae (Reef Check Malaysia: “Status of Coral Reefs in Malaysia 2011”).

Peninsular Malaysia has 25% of Malaysia’s reefs (the majority are in East Malaysia, mainly Sabah). Of this, we estimate that the Perhentian islands account for some 5% of Peninsular reefs. Based on a total value of coral reefs in Malaysia of RM 145 billion per annum (derived by TEEB for provisional, regulating, and cultural services), we estimate that the annual economic value of coral reefs around the Perhentian islands is RM 1.81 billion. Ironically, this value is under threat from the very people who travel to the islands to see the coral reefs, because of uncontrolled development and the poor quality of services such as waste management and sewage treatment.

Fisheries Value
Fish bombing is still a commonly used fishing method in Sabah. Cheap, quick and \"\"easy, it uses home-made bombs (made from fertilizer and diesel) to stun and kill fish, which float to the surface or sink to the bottom, and are easy to gather.

Unfortunately, since bombing is usually practiced in shallow coastal waters, it invariably destroys the coral reef below the blast area. Once destroyed, such areas can take 25 years or more to recover their biodiversity and productivity. In 1999, Ismail et al estimated that, at the then rate of fish bombing, by 2020 an amount of reef equal to 130% of Sabah’s reefs would be destroyed by fish bombing. Clearly this is impossible, but it does indicate the urgent need to address the problem.

Fish bombing is a serious economic issue. It is estimated that a single fish bomb creates a crater some 5m in diameter, with an area of 19.64m² (Ismail et al). Using the value of coral reefs of RM 145 billion per annum (RM 36.25 per m²), the cost (lost economic value) of a single bombed area can be calculated at RM 711.95, a cost far in excess of the value of the few kilograms of fish collected by the bomber.

In May 2011, Reef Check Malaysia started to gather data on fish bombing in Sabah, in an attempt to quantify the scale of the problem.

In the following 12 months, we received 103 reports on fish bombing, some reporting a single bomb blast, others reporting multiple bomb blasts. The total number of bomb blasts reported during the period was 166. At a cost of RM 711.95 per bomb blast, this suggests that the cost of the fish bombing reported to Reef Check Malaysia, in terms of lost reef value, is RM 118,183 over the 12 month period.

Most of the reports we receive originate from a small number of resort operators around the Semporna area. We suspect that these reports account for less than 1% of the true number of bomb blasts, putting a much higher “cost” on bombed areas of over RM 11 million per annum.

Investment in education and enforcement to protect this value will provide a significant economic payback.

When it was first established in 2007, Reef Check Malaysia commonly quoted a value for Malaysia’s coral reefs of just RM 2 billion per annum, consistent with early estimates of global reef values. At this level, it is difficult to make a compelling financial argument to support coral reef conservation, particularly when compared to other industries of strategic importance (eg. oil palm). However, it has become clear that this is a significant under-estimate. More recent estimates put the value of coral reefs in excess of oil palm exports.

We encourage the Malaysian government to revise its approach to coral reefs, viewing them as a strategic asset that underpin fisheries, tourism jobs and other intangible values such as coastal protection.