Firms Compliance Behaviour With Environmental Regulations in Malaysia

Abstract

Malaysia has not been exempted from facing environmental pollution problems as a result of the rapid development of the manufacturing sector.The manufacturing sector is the main driver of the economic growth of this country but it is also the second biggest contributor to the pollution of the rivers in the country. As the operations within the manufacturing sector compete hard to maximise their profits they must also give due consideration to the costs of waste treatment in the production process. This consideration will influence their behaviour to comply or otherwise with the regulations. The behaviour is similar to the criminal acts explained by Becker (1968). The purpose of this study is to identify the factors that influence the industry’s compliance to the effluent treatment regulations for manufacturing industries in the states of Pulau Pinang, Kedah and Perlis. A modified Becker’s criminal behaviour model was used to estimate the dichotomous compliance results. The approach taken in conducting the study was utilisation of a structured questionnaire followed by non-parametric statistical test analyses to analyse the feedback from the 42 factories involved. Findings from the study show that the level of compliance is influenced by the probability of being fined and the number of inspections. Besides that, the enforcement authorities in Pulau Pinang had managed to create an enforcement reputation amongst the factories compared to those in Kedah and Perlis. Results of the analysis suggest that the environmental protection policy must ensure a reputation for enforcement, a systematic inspection strategy and informal control mechanisms such as pressure from the public and NGOs must be empowered