HANOI UNIVERSITY FACULTY OF MANAGEMENT AND TOURISM ********oOo********

CONTRIBUTION OF INTERNATIONAL TRADE IN TOURISM TO VIETNAM ECONOMIC GROWTH

Teacher: Ms. Le Thu TrangGroup members: Vu Hoang Anh Dinh Thi Hue Nguyen Thi Thanh Loan Ha Thi ThuyABSTRACT

It comes as no surprise that the past fifty years have witnessed the revolution in economic growth globally. Numerous documents have been provided about the relationship between open economy and economic growth, especially in developing countries like Vietnam but not so many on international trade and the national development. Moreover, the increase of tourism recently has been considered as the driver leading to the increase of Gross Domestic Products (GDP) in Vietnam. Hence, this paper investigates the current situation of oversea commerce in Vietnam tourism and its trend as well as its contribution to the Vietnam economy. This essay is the secondary report; therefore, there is a consideration and acknowledgement with some previous research which also discuss the similar topic. It is hoped that this empirical research could be a useful reference for students to get further academic results. (Nguyen Thi Thanh Loan)

TABLE OF CONTENTS

Abstract2Introduction4The facts of international trade in tourism in Vietnam 4Contribution of international trade in tourism to Vietnam economic growth5 Stimulate Gross Domestic Product53.2 Generate export earnings6 3.3 Create job opportunities7 4. Some current activities and future projects of the authorities7 5. Conclusion8 6. References10

1. Introduction

The relationship between open economy, especially international trade, and economic development has been argued by some economists as trade comes into being. To be more percise, commerce promotes economic growth of the country. By the way, the last decade has experienced a marked contribution made by overseas trade in tourism in numerous countries, especially in developing world. Since participating in ASEAN in 1985, Vietnam has pushed and diversified its trade drammatically, reflecting a globalization period of the Vietnamese economy. Nowadays, tourism becomes a significant part of the modern Vietnam development. It not only brings needed foreign exchange to the country but also creates a large number of employment and stimulates domestic product consumption. This essay below will discuss more detail about its contributions with factual evidences to support each point made. (Nguyen Thi Thanh Loan)

2. The facts of international trade in tourism in VietnamTravel industry is regarded a compound product that passes into the international trade flow as an intangible export item. It can be seen that it is distinguished to other product exports because the purchasers or the tourists have to buy directly the items for consumption in the country where exports them. For this reason, tourism also plays an important role in developing the international trade and improving the economy in Viet Nam. We can be seen that Vietnams tourism has had undergone anastonishing transformation as well as the impact of internal tourism on Vietnams economy since the period of opening economy. By the 1990s, it is considered the starting point of Doi Moi period and as stated in Association Vietnam Trade Union cultural tourism (2015) new tourism industry in Vietnam welcomed and serviced 250,000 visitor arrivals. After five years, Vietnam applied for membership to many international trade organizations such as VNAT(1992), WTO (1995), and ASEAN (1995). Thenceforward, more international concerns to Vietnam had broughtto a wavein visitor numbers. Phuong(2013) noted that it was witnessed the rapid growth in the number of internal tourists andreached a record high of 1.3 million inbound tourists in 1995. This number has continued and be accounted to 7874312 inbound tourists in 2014. The number of foreign tourists in our country rises by 4 percent compared to 2013s. Tourist in North Asia holds more than 46 percent, China with approximately 25 percent, South Korea (about 11 percent) (Vietnam National Administration of Tourism 2014). Hence, inbound tourism brings significant revenue for overall tourism industry as well as Vietnams economy. According to Viet Nam National Administration of Tourism, the percentage of internal tourists who travel by plane constitutes 80 percent of total. This percentage contributes the development of Vietnams air industry. Considered the purpose for tourism, there are 60 percent of relaxation and tourism and 16.8 percent of business. However, according to Vietnam Consult, the number of outbound tourists of Vietnam is quite significant and becomes profitable source market of travel industry of many nations. As stated in this article:Each year about 1.1 million Vietnamese tourists went to China, 1 million to Cambodia, 500,000 to Thailand, 300,000 to Singapore, 200,000 to Malaysia and 110,000 to South Korea, not to mention the number of visitors to Europe, the United States.Mr. Vu The Binh, deputy chairman of the Vietnam Tourism Associationsaid On average, each year Vietnamese spend over $3.5 billion on foreign tours. This is a huge market. The problem in here is that the domestic tourism is not enough quality and attractive to pull the residents. In general, the tourism in Viet Nam has developed rapidly. We can be seen from the evidence of the inbound tourist in 4 first months of 2015s; it reaches more than 2 million people from other countries. This is good sign for the tourism in Vietnam in the future to grow the international trade. (Vu Hoang Anh)3. Contribution of international trade in tourism to Vietnam economic growth

3.1. Stimulating Gross Domestic Product (GDP)The international trade plays a crucial part in tourism that helps tourism develop and obtains the economic benefits. Spending from visitors and the export and import of related goods and services contribute income to the host economy and can encourage the investment to finance growth in other sectors. Recently, the increase in international tourism generates to foreign exchange earnings and contributes to GDP growth. Foreign exchange earnings are profit generated from that money of one country is exchanged for that of another. According to Vietnam National Administration Tourism (2015), the receipts from international tourism spending in Vietnam in 2014 are USD 12 billion, and the direct investment carried out by foreign is USD 12.35 billion. The average expenditure per a tourist has had a rise from USD 661.4 (2005) to USD 934 (2010), to USD 994.2 (2013), to about USD 927.1 (2014). Moreover, receipts from international visitors spending on accommodation, food and drink, entertainment, shopping and other services and goods had an increase of 3.7% in real terms. As a result, the foreign currency leads to balance of payment surplus, increase the foreign reserve and stabilize the exchange rate.3.2. Generating export earningsBesides, tourism also contributes to export earnings. As we can see in figure 1, there is a remarkable increase in tourism and services export during the period from 2005 to 2014. It reached a high of USD 7.53 billion in 2013.

Figure 1: Tourism and services exports from 2005 to 2014 (USD billion)Source: General Statistics Office of VietnamIn these, visitor exports are a key component of the direct contribution of Travel & Tourism. In 2014, this has to grow by 9.8% compared with 4.7% in 2013 in visitor exports and the country attracts 5,833,000 international tourist arrivals. By 2024, international tourist arrivals are forecast to total 10,555,000, generating an increase of huge expenditure. An additional benefit in international trade in tourism is business travel that is a vital factor to economy by foster domestic and foreign investments. Foreign direct investments that result from business travel introduce capital, technology, skills, people, know-how, and demand for local supplies to the domestic economy; they also bring improvements in trade balances. According to World Travel and Tourism Council (WTTC) (2014), business travel spending has a growth by 9.1 %, and is forecast rise by 6.0 % in 2024. In 2014, capital investment accounting for 5.9% was driven slightly to 6.8% in 2014.3.3. Creating job opportunitiesIt is undeniable that international trade in tourism contributes not only to economic development but also in term of job generation. As we can see, the rapid expansion of international tourism has led to significant employment creation. According to WTTC (2014), there are 1,899,000 job created directly in 2013, which made up 3.7 percent of total employment. This number went up by 5.4 percent on 2014 to 2,001,000 employment including hotels, travel agents, airlines, passenger transportation services and the activities of restaurant and leisure industries. A number of tourism-related jobs are estimated 2,329,000, an increase of 1.5 percent over the next ten years. The international trade helps travel easily and conveniently. Therefore, the more visitors are attracted to the destinations, the more hotels, restaurants and the related goods and services are needed and the more jobs are created. The development of restaurants, bars, coffee shops, retail establishments, and other tourism related businesses can help to improve the quality of life for local residents by expanding the choices available to them in their community. Moreover, tourism may help to motivate the development of collective investments in public utilities and transportation infrastructure including roads, airports, harbors, electricity, sewage, potable water, and communications infrastructures. As a result, it is necessary for Vietnam to strengthen the co-operation with the global organizations and other countries, especially the developed nations. (Ha Thi Thuy)

4. Discuss some current activities and future projects of the authorities to foster international trade in tourismObviously, the prosperity of international trade in tourism is considered an engine for Vietnam economic growth. For such a persuasive basis, the VNAT (Vietnam National Administration of Tourism) has conducted various activities as well as projects with a view to boosting international tourism cooperation with other countries and international organizations, linking Vietnams tourism market with regional and world tourism markets.The most prominent activity which has been taking place is Tourism Trade Fair in India. In an attempt to popularize tourism activities and exchange tourists between Vietnam and India, from 23rd to 28th of April, 2015, the VNAT together with Vietnamese Embassy in India participated in Tourism Trade Fair GES 2015 in Delhi and organized Road show in order to introduce Vietnam tourism in two big cities Hyderabad and Chennai of India. It can be seen that India is one of the most potential tourist market to Vietnam. During the period of last five years, the number of India visitors traveling to Vietnam has increased 344%, from 16000 arrivals in 2010 to 55000 ones in 2014 (Thanh Tam, 2015). The quantity of Vietnamese travelers touring to India has also gone up significantly. Due to this fact, it can be the best chance for Vietnam to extend tourism market to international scale.Another outstanding action of the VNAT which is worth concerning in promotion of tourism industry is Vietnam International Tourism Market 2015 event (VITM 2015). Hold on the city of Hanoi, VITM 2015 lasted from 3rd to 6th of April with the slogan Vietnam the country of heritages. At VITM 2015, over 500 tourism product departments from 44 different provinces of Vietnam and 24 other worldwide nations were exhibited (Ministry of Culture, Sport and Tourism, 2015). It was this exhibition that conveyed profoundly the beauty as well as specific character of Vietnamese culture. This event was also considered leverage to tourism enhancement.Not only existing activities but also future strategies have been launched by the Government to improve international trade in tourism. The strategy on Vietnams Tourism development until 2020, vision to 2030 was approved by Prime Minister Nguyen Tan Dung in decree 2473/CP, dated December 30th, 2011. The main objective of this plan is that by 2020, Vietnam will have received 10 to 10.5 million international arrivals, total revenue from tourism will reach $18 billion to $19 billion, contributing to 6.5 7 % of the countrys GDP and the sector will create three million jobs, in which 870000 employees working directly in tourism. In 2030, total revenue of tourism will double that of 2020. Beside some strategies enacted by the Government, the VNAT also proposes some projects such as orienting to attract foreign travelers from North-East Asia (China, Japan, Korea), South-East Asia (Singapore, Malaysia, Indonesia, Thailand and Australia), West-Europe and East-Europe (Phan, 2015)All in all, it can be believed that with these open policies from the authorities, international trade in tourism will be more improved, which contributes considerably to economic growth. (Dinh Thi Hue)5. ConclusionIn conclusion, oversea commerce in tourism plays the leading role in Vietnam economic improvement. With the fact that the number of foreign tourists traveling to Vietnam has experienced a significant increase annually, tourism market in Vietnam hold an enormous potentiality to foster international trade. As mentioned, the economic contributions of international trade in tourism include accelerating the countrys GDP, generating export earnings as well as creating more job vacancies. Due to such great benefits, the Government and the authorities in charge have carried out some crucial activities and launched future plans in order to extend tourism market into worldwide scale. Owing to the breadth of this analysis as opposed to the limited dimension of this paper, we can not cover all the details. Hopefully, future researches can investigate further into this topic in terms of all facets in a whole procedure. (Dinh Thi Hue)

REFERENCES Association Vietnam trade union cultural tourism 2015, viewed 10 May 2015,http://vucta.vn/index.php?option=com_content&task=view&id=307&Itemid=41&lang=vietnam Don khach quoc te khong chi la tien [online], viewed 8 May 2015, available at URL: http://baodientu.chinhphu.vn/Kinh-te/Don-khach-quoc-te-khong-chi-la-tien/218029.vgp Vietnam Consult, Vietnamese people spent $3.5 billion on overseas tours, viewed 8 May 2015, http://vietnamconsult.com/outbound-tourism-estimated-at-35-billion-annually Vietnam National Administration of tourism 2014, International visitors to Viet Nam in December and 12 months of 2014,viewd 9 May 2015 http://vietnamtourism.gov.vn/english/index.php/items/8149 Decree 2473/CP, issued December 30th, 2011 about the strategy on Vietnams tourism development until 2020, vision to 2030 [online]. Available at URL:http://www.chinhphu.vn/portal/page/portal/English/strategies/strategiesdetails?categoryId=30&articleId=10051267 (Accessed 6 May 2015) Ministry of Culture, Sport and Tourism and Vietnam National Administration of Tourism (2015), VITM 215, Tourism Journal, no.1 & 4, May 2015. Thai Ha, P.T 2015, De an day manh thu hut khach du lich quoc te den Vietnam, viewed 6 May 2015, http://vietnamtourism.gov.vn/index.php/cat/1305 Thanh Tam 2015, Vietnam quang ba du lich tai An Do [online], viewed 7 May, 2015, available at URL: http://vietnamtourism.gov.vn/index.php/items/17462 Truyen , P 2013, Tu hao ve chang duong phat trien cua nganh du lich Viet Nam sau 53 nam, viewed 9 May 2015, http://vanminhsonghong.gov.vn/news/news_id/411/tu-hao-ve-chang-duong-phat-trien-cua-nganh-du-lich-vn-sau-nam World Travel and Tourism Council, Travel and Tourism economic impacts on Vietnam 2014, viewed 7 May 2015, available at URL:http://www.wttc.org/-/media/files/reports/economic%20impact%20research/country%20reports/vietnam2014.pdf (Dinh Thi Hue)

1