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ReportNo. 11764-MA Malaysia Managing Costs of Urban Pollution Public Disclosure Authorized Country EconomicReport November15, 1993 Country Department I EastAsia and Pacific Region FOR OFFICIAL USEONLY Public Disclosure Authorized Public Disclosure Authorized Documentof the WorldBank Public Disclosure Authorized Thisdocument has a restricteddistribution and maybe usedby recipientsonly in the performanceof theirofficial duties.Its contentsmay nototherwise be disclosedwithout World Bankauthorization CURRENCY EQUIVALENTS Currency unit = Ringgit Average 1993 - US$1.0 - M$2.5798 (first 3 quarters) M$1.0 - US$0.3876 Average 1992 - US$1.0 - M$2.5474 M$1.0 - US$0.3926 Average 1991 - US$1.0 - M$2.7501 M$1.0 - US$0.3636 Average 1990 - US$1.0 - M$2.7049 M$1.0 - US$0.3697 Average 1989 - US$1.0 = M$2.7088 M$1.0 - US$0.3692 Average 1988 - US$1.0 - M$2.6188 M$1.0 = US$0.3819 Average 1987 - US$1.0 - M$2.5196 M$1.0 = US$0.3969 Average 1986 - US$1.0 - M$2.5814 M$1.0 = US$0.3874 GLOSSARY OF ABBREVIATIONS ABC Action Plan for a Beautiful and Clean Malaysia ASEAN Association of South-East Asian Nations BAU Business As Usual BOD Biological Oxygen Demand CNG Compressed Natural Gas co Carbon Oxide CPA Central Planning Area CVLB Commercial Vehicle Licensing Board DOE Department of Environment EE Energy Efficiency EIA Environmental Impact Assessment EQA Environmental Quality Act EQR Environmental Quality Report FMM Federation of Malaysia Manufacturers GDP Gross Domestic Product GNP Gross National Product GOM Government of Malaysia HC Hydro Carbon HSU Hartridge Smoke Units IMR Institute of Medical Research INEP Integrated National Energy Planning IPPS Industrial Pollution Projection System IWD Industrial Work Department JICA Japan Internatinal Cooperation Agency FOR OmCIAL USE ONLY MANAGING COSTS OF URBAN POLLUTION IN MALAYSIA Country Economic Report Table of Contents Pace No. Executive Summary . i I. The State of Malavsia's Urban Environment . 1 A. Background. 1 B. The State of Urban Environment ..... .. .. 2 C. Environmental Legislation and the Budget . 13 D. An Outline of the Report . 16 II. Health Implications of Urban Pollution . 21 A. Health Implications of Air Pollution . 22 B. Health Implications of Water Pollution . 30 C. Health Implications of Hazardous Waste Pollution . 35 D. Summary of Findings and Recommendations . 37 III. Industrial Pollution .43 A. The Industrial Pollution Profile . 44 B. Industrial Pollution Abatement . .50 C. Special Issues in Industrial Hazardous Waste . 64 IV. Road Transport .. 89 A. Introduction . 89 B. Vehicle Fleet, Energy Consumption, Pollution and Congestion . 91 C. Forecast of Vehicle Fleet, Energy Consumption and Emissions . 101 D. Policies for Transport Pollution Abatement . 102 E. Conclusions and Recommendations . 119 V. Urban Services . 140 A. Introduction .140 B. Coverage and Quality of Urban Services in Malaysia . 143 C. Efficiency Isues and Emerging Problems . 151 D. Local Authorities in Urban Pollution Abatement . 156 E. The Privatization Route . 161 F. Improving urban Services: A Demand Driven Approach . 166 G. A Summary and Recommendations .172 This report has been prepared by a team consisting of Ijaz Nabi (task manager), Finn Nielsen (urban services), Nobuko Ichikawa (hazardous waste), and consultants Jean Tilly (health), Anjum Altaf (willigness-to-pay), Anke Meyer (transport), Mujahid Iqbal (industry) and Judy Lu (Research Analyst). Jane Tameno gave excellent secretarial service. The report is based on a mission to Malaysia in November - December, 1992. This document has a restricted distribution andmay be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Text Tables Paae No 1.1 Economic Growth Indicators . 1 1.2 Air Pollution in Asian Cities . 3 1.3 International of Comparison of Air Quality: Suspended Particulate matter . 4 1.4 Excessive TSP Readings by Location . 5 1.5 International Comparison of Air Quality: Sulfur Dioxide Annual Mean Concentration ... 6 1.6 International Comparison of Water Quality: Dissolved oxygen Annual Mean Concentration ................... 10 1.7 BOD Load by Source . 11 1.8 Estimated Population and GDP of Urban Economies in Selected Asian . 12 1.9 Solid Waste Generated in Asian Cities . 12 1.10 List of Regulations and Orders Enforced by the Department of Environment ........................ 15 1.11 Allocation for Environmental Management and Conservation 1991-1993 ... 16 1.12 Priority Sectors by Type of Pollution . 17 1.13 Fuel Sources for Power Generation . 18 1A.1 Comparison of Ambient Air Quality Standards/Guidelines . 19 lA.2 Malaysia: Water Quality Classification Based on Index Values . 20 2.1 Populations Exposed to Annual Mean TSP Concentration . 23 2.2 Population Exposed to Annual Mean Lead Concentrations . 24 2.3 Estimated Number of Health Effects Avoided by Reducing TSP Pollution ................................................... 28 2.4 Estimated Economic Value of Health Benefits from Reducing TSP Pollution . 29 2.5 Estimated Economic Value of Health Benefits from Reducing Lead Pollution ... 30 2.6 Water Supply and Illness Rates . 32 2.7 Reported Incidence of Five Diarrhoeal Diseases by Year . 34 2A.1 TSP Dose-Response Functions . 38 2A.2 Lead Dose-Response Functions . 39 2A.3 Estimated Number of Health Effects Avoided by Reducing Lead Pollution . 40 3.1 Manufacturing Sector Growth and Importance . 43 3.2 Most Important Industrial Sources of Air Pollution . 45 3.3 Most Important Industrial Sources of Water Pollution . 46 3.4 Malaysia: Scheduled Waste Generation, by Category of Waste, 1984 . 48 3.5 Most Important Industrial Sources of Hazardous Waste . 49 3.6 Selected Environmental Impacts in the Malaysian Industry . 51 3.7 Comparative U.S.-Japan Pollution Abatement Costs . 52 3.8 Marginal Cost of POME Treatment per Ton of Effluent . 53 3.9 Estimated Pollution Abatement Costs in Malaysia, 1992 . 54 Paoe No 3.10 Taxonomy of Policy to Reduce Pollution . 55 3.11 The Economic Structure of Polluting Industry (as at Dec-1989) . 60 3.12 ELPC Summary of Economic Feasibility Study for Electroplating Industry Waste Minimization . 62 3.13 ELC Summary of Electronic Capacitor Manufacturing Waste Minimization Options ... 63 3.14 Hazardous Waste Ranking By Environment Risk and Risk\ Reduction (1987) . 71 3.15 Cross Regional Comparison of Industrial Hazardous Waste Management . 77 3A.1 Comparison of Effluent Quality Standards for Palm Oil Industry . 83 3A.2a Summary of Common Pollutants Critical to Human Health . 84 3A.2 Comparison of Effluent Quality Standard for Rubber Industry . 85 3A.3 Unit Costs of Water Pollution Treatment in The Philippines . 86 3A.4 Malaysia: Number of EIA Reports Received and Being Reviewed by the Department of Environment, 1988-1991 . 87 3A.5 Hazardous Waste: Environmental Risk Factors and Costs . 88 4.1 Emission Characteristics of Combustion Technologies . 90 4.2 Registered Vehicles, Total Malaysia and Klang Valley 1991 . 92 4.3 Energy Consumption in the Transport Sector . 94 4.4 Specific Vehicle Fuel Consumption, Klang Valley . 95 4.5 Emissions From the Transport Sector, 1991 . 96 4.6 Cost Estimates of Travel Time Lost due to Congestion in Kuala Lumpur ................ 100 4.7 Fuel Consumption and Pollutant Load in the Transport Sector 1990-2000 ............... 101 4.8 Cost of Current Environmental Policies in the Transport Sector . 105 4.9 Emission Standards for Private Cars and Motorcycles, 2000 . 108 4.10 End-User Prices for Regular Gasoline in June 1991 (Includes Taxes) and Passenger Car Fleet Average Fuel Consumption . 116 4.11 Cost-Effectiveness of Fuel Price Increases (2000) . 117 4A.1.1 Scenario Business-As-Usual for the Transport Sector . 125 5.1 Organic Pollution Load Discharged According to Sector, 1987-1991 142 5.2 Status and Trend of River Water Quality, 1986-1991 . 142 5.3 Development Expenditure on Water Supply 1976-1995 . 144 5.4a Urban Water Supply Coverage by State, 1985-1995 . 145 5.4b Rural Water Supply Coverage by State, 1985-1995 . 146 5.5 Level of Service in Urban Areas, 1990 . 147 5.6 Development Expenditure on Sewerage 1976-1995 . 148 5.7 Population Distribution by Type of Sanitation Facility . 148 5.8 Per Capita Generation of Waste . 149 5.9 Solid Waste Composition . 149 5.10 Kuala Lumpur Municipal Cleaning Expenditures - 1991 . 150 5.11 Water Supply Productivity Indicators 1987 . 152 Page No 5.12 Future Investment Needs and Actual Allocations . 155 5.13 Personnel Costs in Local Authority Budget, 1988-1992 . 160 5.14 Estimates of Profitability in Private Sewerage Investment . 162 5.15 Company Size and Cost of Operations . 163 5.16 Sample Areas . 168 5.17 Satisfaction with Existing Services . 169 5.18 Correlation of Contribution with Independent Variables . 171 5.19 Mean Contribution by Area . 172 5A.1.1 The Structure of Per Capita Grant in Federal-State Finances .... 178 5A.1.2 An Analysis of the Priority Ratio in Development Allocations. ...... 179 5A.1.3 Local Governments Consolidated Finance . 181 5A.1.4 Federal, State and Local Governments Shares in Combined Government Revenue ................... 182 5A.1.5 Federal Expenditure on Grants to the State and Local Governments . 182 5A.1.6 Relative Size of Revenue and Expenditure by Level of Government. ..... 183 5A.1.7 Federal Government Development Allocation and Expenditure by State. ... 183 5A.2.1 An Evaluation of Three Malaysian Privatized Entities . 185 5A.2.2 Gains From privatization: A Comparative Perspective . 186 Text Figures 1.1 Petaling Jaya: Concentration of Total Suspended Particulates October, 1991 . 5 1.2 Status of Air Quality, Annual Mean Values of Lead by Area Type, 1988-91 ... 7 1.3 Emission of Pollutant to the Atmosphere by Sources (Uncontrolled) . 7 1.4a Trends in Mobile Sources 1987-1991 . 8 1.4b Trends in Stationary Sources 1987-1991 . 8 1.5 River Water Quality Index . 9 1.6 BOD Load Discharged by Sewage 1987-1991 . 10 2.1 Average TSP Concentrations by State .