BERTEKAD CEMERLANG

UNIVERSITI MALAYSIA SABAH PERANCANGAN DAN PENILAIAN PROJEK BC 30603

Lecturer Name: DR. JANICE NGA LAY HUI Lecture Time & Day: THURSDAY (8AM-11AM) Proposal Title: How to Minimize the Illegal Immigration that Affects the Development in Sabah? Project Title: Greatly Increase Security Border in Sabah
NAME 1. CHIN CHIAN VUN 2. KONG WAI YEE 3. TAY SHIN SHYAN 2. VINIE BUJANG NO MATRIK BB08110149 BB08110356 BB08110384 BB08110185 SIGNATURE

Issue: How to Minimize the Illegal Immigration in Sabah Project Title: Greatly Increase Border Security Using Cost and Benefit Analysis:

With regard to the problem of illegal immigration in Sabah, the only way that Malaysian government can bring into effect is to reduce or minimize the amount of illegal immigrants from other countries. Due to this problem is one of the issues that cannot be avoided in every country so government should take this problem very seriously. Therefore, we are rationally chosen one of the suggestion solutions which increase the border security in Sabah especially in Kota Kinabalu, Kudat, Sandakan, Kota Belud, Lahad Datu, and Tawau. This solution is typically to reduce the amount of illegal immigrants came to Sabah through sea route. According to the basic steps of cost and benefit analysis (CBA), we break it down into nine basic steps, which are listed below: 1) Specify the set of alternative projects. There have two alternatives to analyze. The first one is to analyze the benefits and costs before the Malaysian government take an action toward this issue in year 2010. The second alternative is to analyze the benefits and costs after Malaysian government has greatly increases border security in order to reduce the amount of illegal immigrants from other countries in year 2011. In project benefits, we take those relevant dimensions into account such as social benefits and economy benefits. In detail, it includes criminal rate, health care, and unemployment rate to the local workers, income per capita, and social protection. Furthermore, we only take government expenditure into consideration as a project costs which includes labor allowance, equipment, and training. In practice, individuals can only focus on approximately four to seven numbers of alternatives, at best (G.A. Miller, 1956). There are often difficulties even at this stage; many projects have a huge number of potential alternatives including this one. The explanation below is regarding the project could vary on many dimensions including the following:

Social Benefits: Criminal Rate: It could be happen not only by illegal immigrants but also local citizens. Health Care: The diseases could be spread out due to the illegal immigrants sanitation problem in their country or inability to reveal their true identity to get a legal health care treatment. Economy Benefits: Unemployment Rate: Either illegal immigrants or local workers will get the job easily due to the presence of illegal immigrants and the competitive labor market. Income: It is depends on the wage rate of local workers. It could be greatly influenced by the illegal immigrants due to the wage rate is lower if compared to local workers. Social Protection: It is depends on the total amount of illegal immigrants whether it is higher or lower. Government Expenditure: Labor Allowance: It depends on the people that willing and interested to become a marine. Equipment: It could be either costly or cheap which depends on the kind of weapon that we produce or buy from other countries. Training: It could be either high-cost training or low-cost training which depends on the quality of training. Generally, we choose among alternative courses of action according to whichever has the largest net benefits. In CBA we try to consider all of the benefits and costs to society as a whole, which are social costs and the social

benefits. Supposedly, before starting the real project, the hypothetical project should be undertaken into the evaluation process. This hypothetical project will not be affecting the real government policy and sometimes called counter-factual. However, a set of alternative projects has shown below. Table 1.0: Increase Border Security in order to reduce the Amount of Illegal Immigrant in Sabah (RM Million) Year 2010 (before) A B National Perspectiv e Project Benefits: Social Benefits: Criminal (in value) Health Care (in value) Economy Benefits: Unemployment (in value) Income Social Protection Total Benefits: Project Costs: Government expenditure: Labor Allowance Equipment Training Total Costs: Net Social Benefits (TBTC) 12.42 16.69 580.87 750 850 2,209.98 1.22 1.66 45.27 50 65 163.15 11.78 15 560.27 800.25 800 2,187.30 1.01 1.08 40 60 57 159.09 Provincial Perspectiv e Year 2011 (after) C D National Perspectiv e Provincial Perspectiv e

40 80 1.8 121.8 2,088.18

3 6 0.12 9.12 154.03

60 120 2.4 182.4 2,004.90

4.5 9 0.18 13.68 145.41

2) Decide whose benefits and costs count (standing).

This step is to determine who has standing: that is, whose benefits and costs should be counted. Government will gain the benefits in terms of social benefits and economy benefits after border security has been increased. In social benefits which include criminal rate and health care. After government has implement this policy, the number of criminal cases will be decreasing due to the presence of illegal immigrants is less in Malaysia. In the provincial perspective, this can result in the citizens living in peace with each other. As we know, illegal immigrants will get access into other countries without permit and physical examination. Government should reduce or prohibit the number of illegal immigrants in order to prevent any diseases bring in to our country. Then, the health care problem will be decreased at the same time. Unemployment rate, income per capita, and social protection are part of economy benefits. In the scope of unemployment rate, the percentage of unemployed local workers in the labor force will be decrease due to the number of illegal immigrants are decreasing. In other words, the job opportunities for local workers are increasing. Besides that, since number of illegal immigrants has been reduced, every local worker has the job and enjoys a middle or higher income. This can result in an individual purchase more goods and services. In the end, this can lead to economic growth as well. Furthermore, the social protection here is describing the expenses on the illegal immigrants while sending them back to their country respectively if they have got caught. This meaning to say that government should provide the foods and beverages and shelter before sending them back. This will burden government due to it requires a numerous amount of funds on it. Since the number of illegal immigrants will be minimizing, so the government expenditure will be decrease as well. In the end, this can bring benefits to the country economy. Even though greatly increased border security can bring benefits to the country in term of society and economy but at the same time it is a burden to government because it requires a big amount of funds in order to

make this policy successful and sometimes called disbursement. From the table above, we found that the government expenditure is in the project costs which include labor allowance, equipment, and training. In the labor allowance, government will give them allowance for foods and beverages, shelter, insurance, salary, medical, and vacation. Due to the allowance is very attractive, for sure there will be a lot of people get interest to it. So, all these items require a big amount of funds from the government if the number of people willing or interested to join the group of marine is increasing. Equipment is one of the costs of the project. Government will produce their own weapons or import from other countries in order to protect the country. Next will be training. In order to upgrade trainees personal skills, definitely government has to build up training centre and give them professional training such as mentally training, management training, and physically training. All these training are very high costs for the government.

3) Catalogue the impacts and select measurement indicators

In generally, focus on the input and output that given in the criteria in step one. The input can be a require resource and the output can be a physical impact that came from the cost and benefit analyst. In the rational expectation, as an analyst should explore or predict the two points of view in a cost-and-benefit project. There would be some good impact and side effect in each of the dimension evaluation. However, since the hypothetical project is suggested to develop the economy in certain location, the good impact is the first consideration then the side-effect is come after. For every impact in each dimension, it has a specific way to measure by a measurement indicator method. But there is no such formula to indicate the quantitative valuing. So, to predict the quantitative value of each dimension has only using the rational expectation theory. The amount of illegal immigrant is expected to reduce after increasing the border security in certain sea-route of Sabah in year 2011 compare to 2010 which before increase the border security. In-depth, the project benefit in step one is concise showing that the social and economic growth is getting mainly benefit from this action not only in Sabah state but also in Malaysia. The hypothetical effects of social benefit from this controlling action to the illegal immigrant are reducing the criminal rate and health care spending by government. On the other hand, the hypothetical effects of economics benefit are the changes of unemployment trend, income, and cost of social protection. Generally, in Sabah state, the criminal cases such as rape, robbery, kidnapping and murder causes are mostly affected by the illegal immigrant. Since the illegal immigrants are non-citizen of Malaysia, so even they act crime but are difficult to get caught. Therefore, their criminal action was become seriously from the history. However, the criminal rate was the third lowest in Malaysia which recorded in end of 2009 (New Sabah Times: 31 December 2009). This phenomenon is greatly require the improvement of social security even the criminal rate was become lower than the past. The reason is because criminal cases have brought many disadvantages to the Malaysia development growth.

For instance, criminal cases once occur, it needs a vital of human resources such as police, lawyer and judge. They are the person who in charge to search for the reality of the criminal happened and the cases would transfer into courts case when it had been sued. Therefore, the cost of searching and judging are paid by public finance. Since Malaysia was targeted towards developed country, the allocation of the public finance into development project is more reasonable. Hence, to reduce the illegal immigrant that causing criminal cases occur has directly increase the social security benefits by the way increase the country development in terms of budget allocation. The summary of the impact of social benefit from reducing illegal immigrant is saved the courts fees charges with the number of criminal cases decline. The measurement indicator of the social benefit in reducing criminal value is taken by the amount of court charge for each criminal case in nation perspective and also provincial perspective. The second social benefit from reducing the illegal immigrant by increase the security border in Sabah is reducing the health care spending. Now, assume that there is no private sector to spend the precaution expenditure but only the government. Meaning to say the main budget resource that comes from the public finance should be allocated to the social benefit in terms of precaution disease such as HIV, SARS and TB. Similarly, the willingness-to-pay by government to the medical health care is depends on the public finance. Most of the expenditure to the medical health care is import from overseas. Therefore, when the amount of illegal immigrant reduces, the chances of disease infection to the nation especially in Sabah state could be reduce. By the way, it does indirectly induce the surplus of balance of payment in Malaysia increase from reducing the imported medicine and health care equipment. However, it also have a disadvantage of reducing the imported of

medicine and equipment which is lack of security measure when the diseases infection suddenly spread out without preparing enough. But this is a small impact instead of the social benefit is much more important. Hence, the bigger benefit impact from reducing the illegal immigrant is minimizing the risk of disease infection and secures the society health. The measurement indicator will be using in this part is the amount of payment for each patient who infected by disease. Based on the unemployment rate in Malaysia from the past decades until now, more or less the illegal immigrant has influenced the amount of unemployed in Sabah instead of financial crisis. The reason is because the wage rate of the illegal workers was lower than the local workers who have holding the identity card of Malaysia citizens. Since the local wage rate is higher than the illegal worker, the demand of labor force in Sabah has taken the opportunity to hire the low wage worker for cost saved in a company. This issue was typically to the construction field. Therefore, one of the solutions is reduce the illegal workers by increase the border security in Sabah state. So, the economic benefits in this project are reducing the unemployment in Sabah. The impact of the unemployment rate decline is brought to the country growth by increase the total factor productivity based of Kuznets hypothetical theory (Todaro, 8th Edition, 2003). Moreover, the wage rate of the local employee will be adjusted to the rational level. Therefore, the purchasing power of the household will be increase and this will lead to economic growth. However, the decline of unemployment rate will lead to the wage rate become lower. At the same time, the demand of labor force decline. So, the adjusted to the employment wage rate have to control by government policy. But this range is only a small part of it and can be under control. Thus, the economic benefits are much more important in this project impact prediction. The measurement indicator on this impact is the unemployment rate per year and the wage rate per labor in the population.

The consequence of unemployment rate decline is indirectly due to increase the border security in Sabah which to minimize the amount of illegal workers come in. Therefore, the local workers have the high opportunity to get the job so each of them will obtain a high income. So, the good impact from higher wage rate from the labor demand market is to attract more supply labor from the labor force. In-depth, the income of the employed labor increase will lead to economic growth because they have the ability to spend other than work earning. They also have their own leisure time instead of working. Therefore, the economic growth is causing by the willing-to-pay from the society. By contrast, there is one side-effect from the greater saving in the economy markets which can induce the inflation occur. This is because the money of the households becomes much and increases the purchasing power. The ability of the household to consume will cause the value of money decline. So, the inflation will be happen. So, government will encourage the household to buy bond and save their money into the bank. The households savings are the perfect condition to attract the investor to invest in Malaysia. Since the savings is greater, the investment model also becomes greater. Therefore, the foreign direct investment into Malaysia would be increase all the time assume there is no financial crisis obstacle. So, back to the point, the measurements of the income in the market which typically in this Sabah development project can be abstract from the total income of the Sabahs per unemployed worker and similarly abstract the whole Malaysia population for the nation perspective. According to the impact of social protection which is the government responsible to send back the illegal immigrant to their origin nations in terms of transport, foods and shelter provision. All these provisions are the cost of government expenditure. However, the government supposes to reduce the expenditure after implementing the security border in Sabah state. Since the amount of illegal immigrant reduces in Sabah, Malaysia government has the opportunity to allocate more budgets into Sabahs development. The impact

of this dimension is very clear and concise. On the other hand, the measurement indicator of the social protection is using total social cost of protection which including the transportation fees, food and shelter provision per illegal immigrant. In this project cost which target to reduce the illegal immigrant in Sabah has focus to the government expenditure. In overall, government expenditure increases which mean that the budget of government may be deficit if the income still remains the same. However, as an analyst who suggested the project to reduce the illegal immigrant come to Sabah, supposing look into the advantage first. Here, we are suggested government to distribute the budget cost of labor allowance, training and equipment into the project cost analysis. In deep, we suppose to focus on the labor allowance or marine allowance by inject an allowance such as food, lodging, insurance, medical, salary and vacation as an input to the Sabahs marine. The physical impact of giving a better allowance to the marine worker is to increase the spirit and motivation for them. They can enjoy the food and lodging allowance since they are work in a remote area which is lack of infrastructure benefit. Other than that, the government will spend the budget to buy insurance to each of the marine workers so that they can feel secure especially to their family. The next impact of the increase labor allowance from government expenditure is focus to the medical health care. The marine can take the opportunity to get a complete health care treatment pay by government similarly when getting illness due to work injury. Nowadays, marine has become more important to the country security. Therefore, the salary of them supposes to get higher and instead of working, they must have a leisure time. Hence, the government expenditure to the salary and vacation allowance will also lead to the economic growth by higher purchasing power of consumer. The measurement indicator that will be taken is based on the total allowance per marine annually.

On the other hand, the government expenditure to the training program of the marine also has to consider. The input of the training program is the human resource (coach), training centre and the training equipment to train the marine trainee. Since the suggestion target is to minimize the amount of illegal immigrant for the whole social benefit, the side-effect of each factor should be look at the other way round and the benefits come first. For example, to hire a higher qualification coach must pay a higher salary to them. Moreover, to establish a training centre will polluting the environment such as sound pollution and air pollution during construction period. Other than that, the government fund a lot in the new technology training equipment is a great burden to the budget allocation. By contrast, the benefits of government spending to training program must look at the first. Government can improve the marine professional standard by recruit the higher education and qualification trainer to educate and transfer a clear mind set to the trainee. This is because the issue that becomes crowded is the corruption cases become higher. So, a professional and justified marine is the most require. The output of the training program expenditure is increase the professional skill of the marine worker in terms of physical and mentality after training. Besides that, before the training started, it must have a training centre which located in a suitable place like build in non-residential area and full of facilities condition. The impact of a high quality environment training centre is a basic requirement to establish a team of professional marine. The other advantage to build up the training centre in non-residential area is to prevent the sound pollution to residential area. In this case, the training equipment especially the new weapons must be provided to improve the knowledge of using them in the real world. The measurement indicator of this training program is the total cost of training. Next, the government should allocate the expenses to the equipment in the real border security which located in Sabah. This equipment is

including the amount of maintenance, ship-repair, buy a new ship and inject the new weapons to fulfill the requirement of the new batch marine coming. Therefore, all these equipment expenses will bring out some impacts to the new marine in two way of point of view. The consequence of the new equipment expenses will burden the government in terms of importing new equipment. However, the advantages of buying new equipment such as improve the knowledge of security and increase the quality of marine security. Thus, the Sabahs marine will getting improve to utilize the new equipment. Besides the weapons, shipping maintenance and buy the new ships to help to increase the border security is highly recommended. The action to increase the equipment would bring up the capability efficiency. For instance, the marine can work efficiency by controlling the ships movement based on the training before. The measurement indicator for equipment is the total cost of equipment.

4) Predict the impacts quantitatively over the life of the project This task is to quantify all impacts for each alternative in each time period. After government has implemented this policy, we estimated it will bring benefits to national perspective and provincial perspective. As we can see, the amount that we estimated is RM1205.07 million in the net social benefits for national perspective in year 2011. For the provincial perspective, we estimated that it will get RM85.446 million in year 2011. Since both of net social benefits are positive, so government should take it into account because this project is acceptable and reasonable. Now we will explain in detail regarding the calculation of each dimension that we obtained. We estimated that the criminal (in value) will be decrease to RM11.78 million and RM1.01 million in national perspective and provincial perspective respectively after government has greatly increase border security. a) Criminal: i) National Perspective: Criminal (in value) = Price of Court X Number of Crimin al Cases = RM10, 000 X 1,178 cases = RM11, 780, 000

ii) Provincial Perspective: Criminal (in value) = Price of Court X Number of Crimin al Cases = RM10, 000 X 101 cases = RM1, 010, 000 We estimated that the Health Care (in value) will be decrease to RM15 million and RM1.08 million in national perspective and provincial perspective respectively after government has greatly increase border security.

b) Health Care: i) National Perspective: Health Care (in value) = Medicine Fees X Number of Patients = RM15, 000 X 1000 patients = RM15, 000, 000

ii) Provincial Perspective: Health Care (in value) = Medicine Fees X Number of Patients = RM15, 000 X 72 patients = RM1, 080, 000 We estimated that the Unemployment (in value) will be decrease to RM560.18 million and RM40 million in national perspective and provincial perspective respectively after government has greatly increase border security. c) Unemployment:

i) National Perspective: Unemployment (in value) = (Percentage of Unemployed Rate = (3.3% / 100%) X 24,250,000 X RM700 = RM560, 175, 000 ii) Provincial Perspective: Unemployment (in value) = (Percentage of Unemployed Workers / 100%) X Population X Wage Rate = (3.3% / 100%) X 1,731,602 X RM700 = RM40, 000, 006 We estimated that the Income will be increase to RM800.25 million and RM60 million in national perspectives and provincial perspective respectively after government has greatly increase border security. d) Income: i) National Perspective: Income = (Total Income X Number of unemployed workers) = (RM1, 000 X 800,250) = RM800, 250, 000 ii) Provincial Perspective: unemployed workers) = (RM1, 000 X 60,000) = RM60, 000, 000 We estimated that the Social Protection will be decrease to RM800 million and RM57 million in national perspective and provincial perspective respectively after government has greatly increase border security. e) Social Protection: Income = (Total Income X Number of Workers / 100%) X Population X Wage

i) National Perspective: Social Protection = Number of Illegal Immigrants X Total Costs = 800,000 Illegal Immigrants X RM1, 000 = RM800, 000, 000 ii) Provincial Perspective: Social Protection = Number of Illegal

Immigrants X Total Costs = 57,000 Illegal Immigrants X RM1, 000 = RM57, 000, 000 We estimated that the Labor allowance will be increase to RM60 million and RM4.5 million in national perspective and provincial perspective respectively after government has greatly increase border security. f) Labor Allowance: i) National Perspective: Labor Allowance = Total allowance X Number of Marine = RM5, 000 X 12,000 Marine = RM60, 000, 000 ii) Provincial Perspective: Labor Allowance = Total Allowance X Number of Marine = RM5, 000 X 900 Marine = RM4, 500, 000 We estimated that the Equipment will be increase to RM120 million and RM9 million in national perspective and provincial perspective respectively after government has greatly increase border security. g) Equipment: i) National Perspective: Equipment = Total Costs of Equipment X Number of Marine = RM10, 000 X 12,000 Marine

= RM120, 000, 000 ii) Provincial Perspective: Equipment = Total Costs of Equipment X Number of Marine = RM10, 000 X 900 Marine = RM9, 000, 000 We estimated that the Costs of Training will be increase to RM2.4 million and RM0.18 million in national perspective and provincial perspective respectively after government has greatly increase border security. h) Training: i) National Perspective: Training = Duration of Training X Costs of Training = 24 Months X RM100, 000 = RM2, 400, 000 ii) Provincial Perspective: Training = Duration of Training X Costs of Training = 24 Months X RM7500 = RM180, 000

5) Monetize (attach RM Ringgit Malaysia values to) all impacts Sometimes, the most intuitively important impacts are difficult to value in monetary terms. However, we will like to monetize each of the impacts. To monetize means to value in RM Ringgit Malaysia. These are the RM Ringgit Malaysia used in this CBA: Price of Court = RM10, 000 per case Medicine Fees = RM15, 000 per patient Wage Rate = RM700 per worker Percentage of Unemployed Worker = 3.3% Total Income = RM1, 000 per unemployed worker

Total Costs of Social Protection = RM1, 000 per illegal immigrant Labor Allowance = RM5, 000 per Marine Total Costs of Equipment = RM10, 000 per Marine Duration of Training = 24 Months Costs of Training = RM7, 500 per Marine

6) Discount Benefits and Costs to obtain present values In CBA, future benefits and costs are discounted relative to present benefits and costs in order to obtain their present values, PV. The need to discount arises due to most peoples preference to consume now rather than later and, if we consume now, we usually give up resources means there is an opportunity cost. The present value of the benefits, PV(B), and the present value of the costs, PV(C), of the project are respectively: PV (B) = Bt / (1 + s) t PV(C) = Ct / (1 + s) t

Before government increase border security in year 2010:

t = 1 year, s = 3% In National Perspective (in millions): (in millions): PV (B) = Bt / (1 + s)t = RM2, 209.98 / (1 + 0.03) 1 0.03)1 = RM2, 145.61 PV(C) = Ct / (1 + s)t = RM121.8 / (1 + 0.03)1 = RM118.25 = RM158.40 PV(C) = Ct / (1 + s)t = RM9.12 / (1 + 0.03)1 = RM8.85 PV(B) = Bt / (1 + s)t = RM163.15 / (1 + In Provincial Perspective

After government has greatly increased border security in year 2011:

t = 1 year, s = 3% In National Perspective (in millions): (in millions): PV (B) = Bt / (1 + s) t = RM2, 187.30 / (1 + 0.03) 1 0.03)1 = RM2, 123.59 PV(C) = Ct / (1 + s) t = RM182.40 / (1 + 0.03)1 = RM177.09 = RM154.46 PV(C) = Ct / (1 + s) t = RM13.68 / (1 + 0.03)1 = RM13.28 PV (B) = Bt / (1 + s) t = RM159.09 / (1 + In Provincial Perspective

In national perspective, the present value of the benefits is 2,145.61 million in year 2010 before government increase border security but we estimated that it will be decreased to 2,123.59 million in year 2011.

 In provincial perspective, the present value of the benefits is 158.40 million in year 2010 before government increase border security but we estimated that it will be decreased to 154.46 million in year 2011. In national perspective, the present value of the costs is 118.25 million in year 2010 before government increase border security but we estimated that it will be increased to 177.09 million in year 2011. In provincial perspective, the present value of the costs is 8.85 million in year 2010 before government increase border security but we estimated that it will be increased to 13.28 million in year 2011.

7) Compute the Net Present Value of Each Alternative The net present value of an alternative, NPV, equals the difference between the present value of the benefits and the present value of the costs: NPV = PV (B) PV(C) The basic decision rule for a single alternative is simple: adopt the project if its NPV is positive. In short, the analyst should recommend proceeding with the project if its NPV = PV(B) PV(C) > 0, that is, if PV(B) > PV(C), its benefits exceed its costs. Before government increase border security in year 2010:

In National Perspective (in millions): (in millions): NPV = PV (B) PV(C) = RM2, 209.98 RM121.80 = RM2, 088.18

In Provincial Perspective NPV = PV (B) PV(C) = RM163.15 RM9.12 = RM154.03

After government has greatly increased border security in year 2011: In Provincial Perspective NPV = PV (B) PV(C) = RM159.09 RM13.68 = RM145.41

In National Perspective (in millions): (in millions): NPV = PV (B) PV(C) = RM2, 187.30 RM182.40 = RM2, 004.90

Since PV(B) PV(C) is greater than zero but we refuse to proceed with the project due to the net present value comparison between year 2010 and year 2011, it was a decreasing trend in national perspective which from RM2,088.18 to RM2004.90. Since PV(B) PV(C) is greater than zero but we refuse to proceed with the project due to the net present value comparison between year 2010 and year 2011, it was a decreasing trend in provincial perspective which from RM154.03 to RM145.41.

8) Perform Sensitivity Analysis Sensitivity analysis is a way of acknowledging uncertainty about the values of important parameters in our prediction. Sensitivity analysis also a technique used to determine how different values of an independent variable will impact a particular dependent variable under a given set of assumption. Sensitivity analysis is very useful when attempting to determine the impact the actual outcome of particular variable will have if it differs from what was previously assumed. So now we will set up our uncertainty (Inverstopedia: Dictionary). In economy benefit, the uncertainty in this case is the number of criminal cases, because we cannot predict the actual amount of the criminal cases. So, if the national perspectives number of criminal cases increase to 1200 cases, and the provincial perspectives number of criminal cases increase to 135 cases, the criminal ( in value) will be change.

(a) Criminal (in value) = Price of Court X Number of Criminal Cases NATIONAL PERSPECTIVE: CRIMINAL RM 10, 000 1 178 = RM 11, 780, 000 if number of criminal cases is decrease to 1000 cases CRIMINAL RM 10, 000 1000 = RM 10, 000, 000 if number of criminal cases is increase to 1200 cases CRIMINAL RM 10, 000 1200 = RM 12, 000, 000 PROVINCIAL PERSPECTIVE: CRIMINAL RM 10, 000 101 if number of criminal cases is decrease to 80 cases CRIMINAL RM 10, 000 80 if number of criminal cases is increase to 135 cases CRIMINAL RM 10, 000 135 = RM 1, 010, 000 = RM 800, 000 = RM 1, 350,

000 Next is health care, the uncertainty is the number of patients, because we cannot predict the actual amount of patients. So, if the national perspectives number of patients increase to 1500 and the provincial perspectives number of patients increase to 100, the health care (in value) will be change: (b) Health Care (in value) = Medicine Fees X Number of Patients NATIONAL PERSPECTIVE: HEALTH CARE RM15, 000 1000 if number of patients is decrease to 800 patients HEALTH CARE RM 15, 000 800 if number of patients is increase to 1200 patients HEALTH CARE RM 15, 000 1200 = RM15, 000, 000 =RM 12, 000, 000 =RM 18, 000, 000

PROVINCIAL PERSPECTIVE:

HEALTH CARE RM15, 000 72 if number of patients is decrease to 60 patients HEALTH CARE RM 15, 000 60 if number of patients is increase to 100 patients HEALTH CARE RM 15, 000 100

= RM1, 080, 000 =RM 900, 000 = RM 1, 500, 000

In unemployment, we analyze the uncertain in this aspect is the percentage of unemployed workers. The changes in percentage of unemployed will affect the unemployment either in national perspective or provincial perspective. The table has been show below: (c) Unemployment= Percentage of Unemployed / 100% X

Population X Wage Rate NATIONAL PERSPECTIVE: UNEMPLOTME NT If percentage of unemployed decrease to 1.5% UNEMPLOYME 1.5% 24, 250, 000 RM 700 = RM 254, 625, 000 = RM 848, 750, 000 NT if percentage of unemployed increase to 5% UNEMPLOYME NT 5% 24, 250, 000 RM 700 3.3% 24, 250, 000 RM 700 = RM 560, 175, 000

PROVINCIAL PERSPETIVE: UNEMPLOYME NT If percentage of unemployed decrease to 1.5% UNEMPLOYME NT if percentage of unemployed increase to 5% UNEMPLOYME NT 5% 1, 731, 602 RM 700 = RM 60, 606, 070 1.5% 1, 731, 602 RM 700 = RM 18, 181, 821 3.3% 1, 731, 602 RM 700 = RM 40, 000, 000

Then in income aspect, we analyze the uncertain is the total income per worker. Due to most of the employees income will be paid based on their skills, level of education, and time of work. So, the changes in total income per worker have been show below: (d) Income= Total Income per Worker X Number of Unemployed NATIONAL PERSPECTIVE: INCOME RM 1, 000 800, 250 =RM 800, 250, 000 if total income per workers is decrease to RM 500 INCOME RM 500 800, 250 =RM 400, 125, 000 if total income per workers is increase to RM 1, 500 INCOME RM 1, 500 800, 250 =RM 1, 200, 375, 000

PROVINCIAL PERSPECTIVE: INCOME RM 1, 000 60, 000 if total income per workers is decrease to RM 500 INCOME RM 500 60, 000 if total income per workers is increase to RM 1, 500 INCOME RM 1, 500 60, 000 =RM 60, 000, 000 =RM 30, 000, 000 =RM 90, 000, 000

Next aspect is in social protection, the expenditure for social protection is because government wants to protect they citizen from the disease, pollution and also from illegal immigration to take over the opportunity on job, goods and services. So, the changes in number of illegal immigration will affect the social protection have been shows below: (e) Social Protection= Number of Illegal Immigration X Total Cost per Illegal NATIONAL PERSPECTIVE: SOCIAL 800, 000 RM 1, 000 =RM 800, 000, 000 PROTECTION if number of illegal immigration is decrease to 700, 000 SOCIAL 700, 000 RM1, 000 PROTECTION if number of illegal immigration is increase to 900, 000 SOCIAL 900, 000 RM 1, 000

=RM 700, 000, 000 =RM 900, 000,

PROTECTION PROVINCIAL PERSPECTIVE: SOCIAL 57, 000 RM 1, 000

000

=RM 57, 000, 000 =RM 55, 000, 000 =RM 59, 000, 000

PROTECTION if number of illegal immigration is decrease to 55, 000 SOCIAL 55, 000 RM1, 000 PROTECTION if number of illegal immigration is increase to 59, 000 SOCIAL PROTECTION 59, 000 RM 1, 000

Next, in the project costs, firstly by government expenditure on labor allowance, the uncertainty for this aspect is uncertain about the number of marine was involved in this project. It is hard for us to make an exact amount of the marine so we estimated it, any changes in number of marine will change the amount of government expenditure for labor allowance. (f) Labor Allowance = Total Allowance X Number of Marine NATIONAL PERSPECTIVE: LABOR RM 5, 000 12, 000 = RM 60, 000, 000 =RM 50, 000, 000 14, 000 =RM 70, 000, 000 ALLOWANCE if number of marine is decrease to 10 000 LABOR RM 5, 000 10, 000 ALLOWANCE if number marine is increase to 14 000 LABOR ALLOWANCE PROVINCIAL PERSPECTIVE: LABOR RM 5, 000 900 =RM 4, 500, 000 RM 5, 000

ALLOWANCE if number of marine is decrease to 800 LABOR RM5, 000 800 = RM 4, 000, 000 =RM 5, 000, 000 ALLOWANCE if number of marine is increase to 1, 000 LABOR ALLOWANCE RM 5, 000 1, 000

In addition, for the government expenditure for equipment, the uncertainty for this aspect is uncertain about the number of marine. It same with labor allowance. (g) Equipment = Total Cost of Equipment X Number of Marine NATIONAL PERSPECTIVE: EQUIPMENT RM 10, 000 12, 000 = RM 120, 000, 000 if number of marine is decrease to 10, 000 EQUIPMENT RM 10, 000 10, 000 =RM 100, 000, 000 if number of marine is increase to 14, 000 EQUIPMENT RM 10, 000 14, 000 =RM 140, 000, 000 PROVINCIAL PERSPECTIVE: EQUIPMENT RM 10, 000 900 =RM 9, 000, 000

 if number of marine is decrease to 800 EQUIPMENT RM10, 000 800 = RM 8, 000, 000 if number of marine is increase to 1, 000 EQUIPMENT RM 10, 000 1, 000 =RM 10, 000, 000

Finally, in the aspect of training, the uncertainty in this case is about the duration of training, because the duration of training for each level of organization is different. The duration of training will change the total costs for training. So, there will be difficult to have the exact duration of training, and then we estimated the duration such as in the table below: (h) Training = Duration of Training X Costs of Training NATIONAL PERSPECTIVE: TRAINING 24 MONTHS RM 100, 000 = RM 24, 000, 000 if duration of training is decrease to 12 months TRAINING 12 MONTHS RM100, 000 =RM 12, 000, 000 if duration of training is increase to 36 MONTHS

TRAINING

36 MONTHS

RM 100, 000

=RM 36, 000, 000

PROVINCIAL PERSPECTIVE: TRAINING 24 MONTHS RM 7, 500 if duration of training is decrease to 12 months TRAINING 12 MONTHS RM 7, 500 if duration of training is increase to 36 months TRAINING 36 MONTHS RM 7, 500 =RM 180, 000 = RM 90, 000 =RM 270, 000

In addition, the uncertainty in this case is the discount rate, we hard to estimate the correct discount rate because the training wages might rise or fall in the future. So, here if the discount rate is increase to 4%, the PV (B) and PV(C) will be change. After government has greatly increased border security in year 2011: t = 1 year, s = 3% Perspective National Benefit (in millions) PV(B) = Bt / (1 + s)t = RM2, 187.30 / (1 + 0.03) Provincial
1

Cost (in millions) PV(C) = Ct / (1 + s)t = RM182.40 / (1 + 0.03)

1

= RM2, 123.59 PV(B) = Bt / (1 + s)t = RM159.09 / (1 + 0.03)1 = RM154.46

= RM177.09 PV(C) = Ct / (1 + s)t = RM13.68 / (1 + 0.03)1 = RM13.28

 if the discount rate increase to 4% t = 1 year, s = 4% Perspective National Benefit (in millions) PV(B) = Bt / (1 + s)t = RM2, 187.30 / (1 + 0.04)1 Provincial = RM2, 103.17 PV(B) = Bt / (1 + s)t = RM159.09 / (1 + 0.04)1 = RM152.97 0.04)1 = RM175.38 PV(C) = Ct / (1 + s)t = RM13.68 / (1 + 0.04)1 = RM13.15 Cost (in millions) PV(C) = Ct / (1 + s)t = RM182.40 / (1 +

When we predict that the discount rate will fall to 2%, the PV (B) and PV(C) will be change. t = 1 year, s = 2% Perspective National Benefit (in millions) PV(B) = Bt / (1 + s)t = RM2, 187.30 / (1 + 0.02)1 Provincial = RM2, 144.41 PV(B) = Bt / (1 + s)t = RM159.09 / (1 + 0.02)1 = RM155.97 Thus, when the PV for both benefit and cost is change, the net present value (NPV) will change relatively. t = 1 year, s = 3% Perspective National Benefit millions) RM 2, 187.30 (in Cost (in millions) RM182.40 NPV = PV(B) PV(C) = RM2, 187.30 0.02)1 = RM178.82 PV(C) = Ct / (1 + s)t = RM13.68 / (1 + 0.02)1 = RM13.41 Cost (in millions) PV(C) = Ct / (1 + s)t = RM182.40 / (1 +

RM182.40

Provincial

RM159.09

RM13.68

=RM2, 004.90 = RM159.09 RM13.68 = RM145.41

t = 1 year, s = 4% Perspective National Benefit millions) RM2, 103.17 (in Cost (in millions) RM175.38 NPV = PV(B) PV(C) = RM2, 103.17

RM175.38 Provincial RM152.97 RM13.15 = RM1,927.79 = RM152.97 RM13.15 = RM139.82

t = 1 year, s = 2% Perspective National Benefit millions) RM2, 144.41 (in Cost (in millions) RM178.82 NPV = PV(B) PV(C) = RM2, 144.41

RM178.82 Provincial RM155.97 RM13.41 = RM1, 965.59 = RM155.97 RM13.41 = RM142.56 9) Make a Recommendation The final phase of benefit- cost analysis involves comparing the projects net present value (NPV) and find out the highest NPV among alternatives in the project. Where in this step, we should analyze and make recommend adoption of our project with the largest Net Present Value. In our project, there are four alternative projects which are all of alternative having positive NPV. Before government increase the border security in year 2010, the NPV for national perspective is RM 2,088.18 million and the NPV for provincial perspective is RM 154.03 million. We predicted that after the government has greatly increased border security in year 2011, the NPV for

national

perspective

is RM

2,004.90

million

and

NPV

for provincial

perspective is RM145.41 million. National Perspective Before ( Year 2010) NPV = RM 2,088.18 million After ( Year 2011-predict) NPV= RM 2,004.90 million Therefore: NPV Before > NPV After ; million Provincial Perspective Before (Year 2010) NPV= RM 154.03 million After ( Year 2011- predict) NPV= RM 145.41 million Therefore: NPV Before> NPV After million > RM145.41 million

RM2,088.18 million > RM2,004.90 RM154.03

Based on the table above, we recommend that it will be more better before government greatly increase border security due to the NPV for national perspective before is higher than after and same case with NPV for provincial perspective which is before is higher than after. So, the before greatly increase border security alternatives is superior. Even though, all of the alternatives are having positive NPV or more than 1, but the alternative before that is higher if compared to after government has increase border security. So, the alternative have higher NPV is the best alternative for our project. Reference: G.A.Miller. 1956. The Magical Number Seven, Plus or Minus Two: Some Limits on Our Capacity for Processing Information. Psychological Review 65 (1), 81-97. Investopedia: Dictionary. Sensitivity Analysis. [Online] [Accessed 17 October 2010] Available from World Wide Web from: <http://www.investopedia.com/terms/s/sensitivityanalysis.asp> New Sabah Times. 2009. SABAH CRIME THIRD LOWEST IN MALAYSIA. 31 December 2009 [Online]. [Accessed 16 October 2010] Available from

World

Wide

Web:

http://www.newsabahtimes.com.my/nstweb/fullstory/34933 Todaro, M.P and Smith, S. C. 2003. Economic Development 8th Edition. United Kingdom. Published: Pearson Education Limited.