Edited by David Pearce, Corin Pearce and Charles Palmer
Chapter 4: Valuing improvements to sanitation in Malaysia
Susana Mourato This chapter reports on the results of an economic valuation study to assess household demand for improved drinking water and sanitation systems in Malacca, carried out as part of DANCED/EPU’s Institutional Strengthening and Capacity Building project. 1 INTRODUCTION Billions of dollars are invested every year in water and sanitation projects in urban and rural areas of developing countries. However, only rarely are these investments subjected to a serious economic analysis. The traditional focus of water and sanitation planning has been largely based on supplyside considerations such as estimating the costs of constructing and operating the proposed systems. For many decades, little attention was given to consumer demand for improved services, that is, for beneﬁt estimation. There are several reasons why demand-led assessment was absent in the policy and planning process. Sometimes, it was simply assumed that people would want to connect to and/or use new sanitation systems at whatever price charged. At other times, it was assumed that public beneﬁts of the system were so great that it would be heavily subsidized. In cases where there was some consideration for demand, the procedure was simply to compare the proposed fees to some ﬁxed ﬁnancial requirement: for example, for sanitation, it was commonly assumed that, if monthly charges did not exceed 3 per cent of income, consumers would choose to pay for the new system. However, non-rigorous procedures for assessing beneﬁts have usually proved incorrect, with a consequent exaggeration of economic returns. Erroneous choices of service...
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