Role of Tourism in Socioeconomic Development

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ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC

STUDY ON THE ROLE OF TOURISM

IN SOCIO-ECONOMIC DEVELOPMENT

UNITED NATIONS


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ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC

STUDY ON THE ROLE OF TOURISM

IN SOCIO-ECONOMIC DEVELOPMENT

UNITED NATIONSNew York, 2007


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ESCAP WORKS TOWARDS REDUCING POVERTYAND MANAGING GLOBALIZATION

This study was produced with financial assistance from theGovernment of Japan.

The views expressed in the study do not necessarily reflect those ofthe United Nations. The designations employed and the presentation of thematerial in this publication do not imply the expression of any opinion whatsoeveron the part of the Secretariat of the United Nations concerning the legal status ofany country, territory, city or area, or of its authorities, or concerning thedelimitations of its frontiers or boundaries.

This study has been issued without formal editing.

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ST/ESCAP/2478


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CONTENTS

Page

INTRODUCTION 1

I. THE IMPORTANCE OF TOURISM IN THE ASIAN AND PACIFICREGION 4A. International tourism development 4B. Intra-regional travel .. 12C. Importance of domestic tourism . 14D. Tourism in least developed and island developing countries ... 16E. Summary observations .. 18

II. THE ECONOMIC IMPACT OF TOURISM .. 20

III. THE SOCIAL IMPACT OF TOURISM .. 32

IV. ASSESSING THE SOCIO-ECONOMIC IMPACTS OF TOURISM . 37

A. General approaches and methods . 37B. Assessing linkages, leakages and multiplier effects 47C. Strengthening the knowledge base 53

V. TOURISM AND TRANSPORTATION INFRASTRUCTURE .. 56

VI. TOURISM AND THE MILLENNIUM DEVELOPMENT GOALS .. 74

VII. THE ROLE OF GOVERNMENT .. 83

A. Tourism ministries .. 84B. Tourism plans . 85C. Empowerment of poor communities, property rights and

development control . 86D. Legislation and regulations .. 88E. Training, capacity-building and certification .. 90F. Taxes and levies 90G. Microfinancing and facilitating market access and linkages .. 91H. Marketing 92

VIII. THE ROLE OF THE PRIVATE SECTOR . 95

IX. ALLIANCES AND PARTNERSHIPS .. 97

A. Regional and sub-regional marketing alliances 97B. Networks, clusters and ICT . 98

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X.IMPLEMENTATION AND MONITORING OF THE PLAN OF ACTIONFOR SUSTAINABLE TOURISM DEVELOPMENT IN ASIA AND THEPACIFIC, PHASE II (2006-2012)

103

XI. CONCLUSIONS AND RECOMMENDATIONS 105

ANNEXES 1. Tourism satellite account tables ..

2. Monitoring and evaluation elements

3. Monitoring criteria ..

111

116

118

List of boxes

1. Role of domestic tourism in supporting roadside facilities and services .... 152. Tourism in Lao Peoples Democratic Republic .. 173. Case study of tourism in Maldives 184. Growth rate of the tourism industry (IND) and tourism economy (ECON)

contribution to GDP for selected Asian and Pacificcountries, 1995-2006 .. 265. Growth rates of government expenditure and capital investment in

tourism .. 306. Lao Peoples Democratic Republic: Linkages at the Luang Prabang Night

Market 517. Activities of ESCAP in the fields of tourism and poverty reduction . 558. India: Endogenous Tourism for Rural Livelihoods . 819. Nepal: Organizing local opportunities in Lumbini .. 87

10. Viet Nam: Empowerment through tourism legislation .. 8911. Nepal: Two examples of creating microenterprise opportunities

for the poor .. 92

12. Mongolia and the Islamic Republic of Iran: Nomadic tourism . 9413. Nepal: Tourism operators make a commitment to train local people .. 9614. Thailand: The Thai Village at the Rose Garden .. 9615. Creating opportunities for community-based tourism development and

ICT Asian Encounters . 99

List of figures

1. Inbound tourism by region of origin, tourist arrivals 2003 . 132. Types and number of enterprises in the Luang Prabang

tourism economy . 453. Linkages between tourism and poverty reduction . 76

List of tables

1. International tourist arrivals by regionand subregions, 1995-2005 and2006 5

2. International tourism arrivals in selected Asian and Pacific countries 83. International tourism receipts by region, 1995-2005 and 2006 .. 10

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4. Comparing international and domestic tourism statistics in selected

Asian and Pacific countries 155. International tourism in selected least developed and island developing

countries of Asia and the Pacific . 166. International tourism receipts in selected Asian and Pacific countries .. 21

7. Economic contribution of tourism to GDP and total exports in selectedAsian and Pacific subregions and countries, 2006 .. 24

8. Economy contribution (direct and indirect) of travel and tourism toemployment in selected Asian and Pacific subregions and countries . 33

9. Summary of turnover and income estimates across four value chains ofthe tourism economy in Luang Prabang, Lao PDR 46

10. Examples of supply chain linkages within selected sectors of the tourismindustry . 49

11. Ranking and scores on the travel and tourism competitiveness index,business environment and infrastructure, air and ground transportinfrastructure, selected Asian and Pacific countries . 60

12. Ranking and scores on quality of ground transport infrastructure

variables, selected Asian and Pacific countries . 6513. Comparing country scores on government priority given to travel and

tourism with selected infrastructure variables . 6714. Contribution of tourism to achieving the Millennium

Development Goals . 77

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INTRODUCTION

ESCAP member countries have recognized the significant role of tourism in

the Asian and Pacific region as well as the various wide-ranging issues arising from

the impact of tourism on socio-economic development. Since the first Plan of Action

for Sustainable Tourism Development in Asia and the Pacific (PASTA Phase I)

covering 1999 to 2005 was adopted by the Commission, Asian and Pacific countries

and areas have devised strategies and plans designed to promote tourism by

strengthening national capabilities and promoting regional cooperation in sustainable

tourism development. PASTA Phase I set general requirements for sustainable

tourism development and proposed actions at the national and regional levels.

Implementation of PASTA Phase I was supported by the secretariat through

regional, subregional and national activities that have assisted countries in the region

and enhanced regional cooperation. Most countries in the region have adopted the

concept of sustainable tourism development and encouraged all concerned

stakeholders to participate actively. Many countries began to develop tourism master

plans and many countries developed programmes for human resources development

in the tourism sector. The Network of Asia-Pacific Education and Training

Institutions in Tourism (APETIT) was established in 1997 to promote regional

cooperation, strengthen institutional links among tourism training institutes and serve

as a platform to exchange information and expertise on human resources development

for the tourism sector.1

At its sixty-second session, the Commission acknowledged the satisfactory

implementation and lessons learned from PASTA Phase I and resolved to implement

1 There are 248 education and training institutes and national tourism organizations in 44 countries andareas that participate in APETIT activities. Refer to www.apetit-network.org


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PASTA Phase II covering the period from 2006 to 2012 in order to facilitate and

guide the contribution of tourism to socio-economic development as well as take

greater action at the national and regional levels.

Before such action can be taken, however, there is an urgent need for all

policy-makers involved in socio-economic development to have greater awareness

and understanding of several important points. First, tourism has various wide-ranging

linkages throughout the economy and society at the macro, micro and institutional

level that need to be more thoroughly understood. Second, an improved policy

environment for sustainable tourism development has major implications for

macroeconomic goals and national social development objectives, especially those

related to poverty reduction, meeting Millennium Development Goals (MDGs) and

preserving unique environments and cultural heritage for the benefit of future

generations. Third, once policy-makers and planners in all areas of socio-economic

development better understand the role of sustainable tourism in national

development, its contribution can be enhanced by adopting best practices and

counteracting possible risks or negative impacts.

A number of major issues have already been identified and new issues have

recently emerged with respect to the role of tourism in socio-economic development

and poverty reduction. At the same time, there are new opportunities for increasing

the efficiency and effectiveness of tourisms contribution involving the government,

the private sector and other stakeholders. In line with PASTA Phase II, policy-makers

should understand the role of tourism in socio-economic development in order to be

able to identify areas for action along with approaches to monitor activities, assess

outcomes and evaluate results.

At its sixty-second session, ESCAP also adopted resolution 62/3 on


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Implementation of the Plan of Action for Sustainable Tourism Development in Asia

and the Pacific (PASTA, Phase II, 2006-2012) and the Regional Programme for

Sustainable Tourism Development. In adopting the resolution, the Commission

requested the secretariat to prepare and conduct a regional study on the role of tourism

in socio-economic development. This present study is meant to assist member

countries to consider various measures for developing tourism in line with the Plan of

Action. It provides information on the impact of the tourism industry on the regions

economy and its social development. This study proposes a common approach to

monitoring implementation of the Plan and includes a set of policy recommendation

aimed at increasing the effectiveness of tourism for socio-economic development and

poverty reduction.

The study is organized into eleven chapters. The first four chapters discuss

tourism in terms of its general economic and social aspects. Chapter I describes the

importance of tourism as a globalized industry and its significance for Asian and the

Pacific with a focus on international tourism development, intra-regional travel, the

importance of domestic tourism and tourism with reference to least developed and

island developing countries. Chapter II considers the economic impact of tourism and

how this is measured and interpreted in macroeconomic terms. The use of the tourism

satellite account is presented. Chapter III presents the social impact of tourism in

terms of its contribution to employment. Chapter IV provides an assessment of the

socio-economic impacts of tourism, which includes discussion of the general

approaches and methods, assessment of linkages, leakages and multiplier affects and

strengthening the knowledge base.

Chapter V focuses on various aspects of tourism and transportation

infrastructure in Asia and the Pacific. Chapter VI considers tourism and its linkage to


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the Millennium Development Goals, particularly with respect to how tourism might

be harnessed for poverty reduction. Chapter VII presents the main features concerning

the role of government with respect to enhancing the contribution of tourism to socio-

economic development and poverty reduction. Chapter VIII examines the role of the

private sector in the tourism industry with respect to contributing to socio-economic

development. Chapter IX considers the significance of alliances and partnerships

involving tourism at the regional and subregional level.

Chapter X discusses the implementation and monitoring of the Plan of Action

for Sustainable tourism Development in Asia and the Pacific, Phase II (2006-2012).

Chapter XI concludes the study and presents recommendations.

I. THE IMPORTANCE OF TOURISM IN THEASIAN AND PACIFIC REGION

A. International tourism development

1. Tourist arrivals

Tourism is a leading industry in the service sector at the global level as well as

a major provider of jobs and a significant generator of foreign exchange at the

national level. Tourism has become one of the largest and fastest growing industries

in the global economy. During the period between 1996 and 2006, international

tourist arrivals worldwide grew at an average annual rate of about 4.0 per cent. In

1996, there were 575 million tourists and in 2006, there were 846 million tourists, as

shown in table 1. During the ten-year period from 1996 to 2006, the Asian and Pacific

region was second only to the Middle East in outperforming the rest of the world,

with growth in tourist arrivals averaging 6.7 per cent a year. The global market share

of the Asian and Pacific region increased from 15.7 per cent in 1996 to 19.8 per cent

in 2006. Europe remained the top regional tourist destination, while the Americas


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moved from second to third place behind Asia and the Pacific. The global market

shares declined slightly from 57.8 per cent to 54.4 per cent for Europe and 19.9 per

cent to 16.1 per cent for the Americas over the decade from 1996 to 2006.

Table 1. International tourist arrivals by region and subregion, 1996- 2006

Arrivals (millionsof people)

Market share(percentage)

Averageannual growth

rate

1996 2006 1996 2006 1996-2006

Africa 22.2 40.7 3.9 4.8 6.0

Americas 114.5 135.9 19.9 16.1 1.8

Asia-Pacific, of which: 90.4 167.2 15.7 19.8 6.7

North-East Asia 47.6 94.0 8.3 11.1 7.8

South-East Asia 29.8 53.9 5.2 6.4 5.5

South Asia 4.5 8.8 0.8 1.0 6.6

Oceania 8.5 10.5 1.4 1.2 2.6Europe 332.1 460.8 57.8 54.4 3.3

Middle East 15.8 41.8 2.7 4.9 10.4

World 575.0 846.0 100.0 100.0 4.0

Sources: UNWTO, Tourism Market Trends: East Asia & Pacific (Madrid: UNWTO,2000). UNWTO, Tourism Highlights, 2006. UNWTO, Tourism Highlights2007 Edition.

North-East Asia has been the most dynamic subregion in Asia and the Pacific,

with an average growth rate in arrivals of 7.8 per cent over the decade, while its

global share grew from 8.3 per cent in 1996 to 11.1 per cent in 2006. China was the

strongest performer with an annual average growth of about 9 per cent over the ten-

year period. The number of international visitors to China more than doubled,

reaching 49.6 million in 2006, which was almost equivalent to the total number of

tourists visiting South-East Asia. This remarkable performance benefited from

growing international and intraregional demand, reduced transport costs and the

continued liberalization of outbound travel from China.

Despite disasters and various crises, other subregions in Asia and the Pacific

succeeded in maintaining a positive trend in growth of annual tourist arrivals over the

decade, varying from 5.5 per cent in South-East Asia to 6.6 per cent in South Asia and


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2.1 per cent in Oceania (Australia, New Zealand and Pacific island countries and

territories). Cambodia had an average annual growth rate of 20.3 per cent in tourist

arrivals from 1996 to 2006; Viet Nam had 6.5 per cent; and Thailand had 13.0 per

cent. India had an average annual growth rate of 10.0 per cent; and Maldives had

almost 30.0 per cent.2

The strong growth in tourism arrivals for Asia and the Pacific, particularly the

subregions of North-East Asia, South Asia and South-East Asia is one indicator of the

increased significance of tourism for developing countries. Visitors worldwide have

clearly recognized the attractiveness of tourism experiences in Asian and Pacific

developing countries in terms of the rich cultural heritage and natural environment.

Many officials in these countries have seen that tourism can be part of their

development strategies, especially in economic terms.

In the last two years for which data are available, tourism has continued to

grow rapidly in Asia and the Pacific. While the worlds average annual growth rate

for international tourist arrivals was 5.4 per cent from 2005 to 2006, Asia and the

Pacific grew at 7.7 per cent, which was the third highest rate of growth for 2006,

behind Africas growth rate of 9.2 per cent and the Middle East at 8.9 per cent. A

break down of the regional figures for Asia and the Pacific shows major subregional

differences. That is, growth from 2005 to 2006 was 7.4 per cent in North-East Asia;

9.3 per cent in South-East Asia; 11.0 per cent in South Asia; and 0.2 per cent in

Oceania.3 The strong growth in South-East Asia and South Asia was attributed in part

to the full recovery of Thailand and Maldives from the impact of the December 2004

2

UNWTO, Tourism Highlights (Madrid: UNWTO, 2006). Refer towww.unwto.org/facts/eng/highlights.htm. UNWTO, Tourism Highlights 2007 Edition.3 UNWTO, Tourism Highlights 2007 Edition.


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tsunami, as well as high growth rates for Cambodia; India; Macao, China; Malaysia;

the Philippines.4

Table 2 presents data on tourist arrivals for almost all ESCAP-member

countries during the period from 1995 to 2004. Most noteworthy is the strong

percentage increase in tourist arrivals for economies in transition, such as Armenia,

Azerbaijan and Kyrgyzstan. Countries experiencing increases of over 100 per cent

include Cambodia, China, the Islamic Republic of Iran, Lao Peoples Democratic

Republic, Malaysia, Mongolia, Myanmar, Turkey, Uzbekistan and Viet Nam. Almost

all of the countries showed increases, except for Kiribati and Singapore.

4 Ibid.


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Table 2. International tourism arrivals in selected Asian and Pacific countries

International tourist arrivals

Thousands of personsPercentage increase,

1995-2004

1995 2004Armenia 12 263 2 092

Australia 3 726a/ 4 774 28

Azerbaijan 93 1 349 1 351

Bangladesh 156 271 74

Bhutan 5 9 92

Brunei Darussalam 498 .. ..

Cambodia 220 1 055 380

China 20 034 41 761 108

Fiji 318 499 57

Georgia 85 368 333India 2 124 3 457 63

Indonesia 4 324 5 321 23

Islamic Republic of Iran 489 1 659 239

Japan 3 345 6 138 83

Kazakhstan .. 3 073 ..

Kiribati 4 3 -18

Republic of Korea 3 753 5 818 55

Kyrgyzstan 36 398 1 006

Lao P.D.R. 60 236 293

Malaysia 7 469 15 703 110

Maldives 315 617 96Marshall Islands 6 9 50

Federated States ofMicronesia .. 19 ..

Mongolia 108 301 179

Myanmar 117 242 107

Nepal 363 385 6

New Zealand 1 409 2 334 66

Pakistan 378 648 71

Palau 53 95 79

Papua New Guinea 42 59 40Philippines 1 760 2 291 30

Russian Federation 10 290 19 892 93

Samoa 68 98 44

Singapore 6 422 5 705 -11

Solomon Islands 12 .. ..

Sri Lanka 403 566 40

Thailand 6 952 11 737 69

Tonga 29 41 41

Turkey 7 083 16 826 138

Turkmenistan 218 .. ..

Tuvalu 1 1.3 30


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International tourist arrivals

Thousands of personsPercentage increase,

1995-2004

Uzbekistan 92 262 185

Vanuatu 44 61 39

Viet Nam 1 351 2 928 117

Total and regional average 84 267157273 87

Source: World Tourism Organization (UNWTO)Note: a/3,726 is the figure for visitors.

.. indicates data are unavailable.

During the ten-year period of fast growth in tourist arrivals, several factors

contributed to the strong performance in most of the Asian and Pacific region. These

factors included rising levels of disposable income; improvements in transportation

and the introduction of low-cost airline services; easier access from traditional source

markets and the emergence of new source markets, such as China and India.

Moreover, the creation of new market niches such as cultural tourism, ecotourism and

adventure tourism has made the tourism industry more diversified.

2. Tourism receipts

The contribution of tourism to socio-economic development has been most

closely related to receipts and spending in the national economy. Table 3 presents the

international tourism receipts by regions of the world as well as Asian and Pacific

subregions. UNWTO has estimated that worldwide receipts from international

tourism reached US$ 733 billion in 2006, which was increase of 8.3 per cent over

2005 in current prices.5 The tourism receipts in Asia and the Pacific made up 20.8 per

cent of all international tourism receipts in 2006, compared with arrivals of 19.8 per

5 Ibid.


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cent, suggesting that the Asian and Pacific region does slightly better on receipts from

international tourism than it does on international arrivals.

Table 3. International tourism receipts by region, 1996-2006

Receipts (US$billion)

Average annualgrowth rate (%)

Market share(percentage)

1996 2006 1996-2006 1996 2006

Africa 9.2 24.3 10.6 2.1 3.3

Americas 110.6 154.0 4.1 25.3 21.0

Asia-Pacific, of which: 86.2 152.6 6.6 19.7 20.8

North-East Asia 37.3 74.3 7.9 8.5 10.1

South-East Asia 30.5 40.6 4.1 7.0 5.5

South Asia 3.8 11.5 12.4 0.9 1.6

Oceania 14.6 26.3 6.7 3.3 3.6

Europe 222.3 374.5 5.5 51 51.1

Middle East 8.2 27.3 14.4 1.9 3.7

World 436.5 733.0 5.5 100.0 100.0

Sources: UNWTO, Tourism Market Trends: East Asia & Pacific (Madrid: UNWTO,2000). UNWTO, Tourism Market Trends: Asia (Madrid: WTO, 2004).UNWTO, Tourism Highlights (Madrid: UNWTO, 2006). UNWTO, Tourism

Highlights 2007 Edition.

Worldwide, receipts from international tourism amounted to US$ 733.0 billion

in 2006, a net increase since 1996 of US$ 296.5 billion, which was an average annual

increase of 5.5 per cent during the ten-year period. The Asian and Pacific region

posted significant increases in international tourism receipts, with an average annual

growth rate of 6.6 per cent in line with growth in terms of arrivals over the last ten

years. This was higher than the global growth rate of 5.5 per cent, outpacing tourism

receipts for Europe and the Americas. As a result, the global share of tourism receipts

in the Asian and Pacific region increased from 19.7 per cent in 1996 to 20.8 per cent

in 2006, almost equivalent to the share of destinations in the Americas. By 2006, the

global share of the Asian and Pacific region (20.8 per cent) was about equal to the

share of the Americas (21.0 per cent).

In relative terms, expressed in local currencies at constant prices (taking out

the effect of exchange rates and inflation), according to UNWTO, international


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tourism receipts worldwide grew by 4.3 per cent in 2006, compared to 3.2 per cent in

2005. The relative growth in receipts for Asia and the Pacific from 2005 to 2006 was

8.9 per cent, which was second to Africa (10.2 per cent). The relative growth reached

double-digit rates in the subregions of South Asia (14 per cent) and North-East Asia

(11 per cent). Growth in South-East Asia was 9.5 per cent and in Oceania 1.7 per cent

between 2005 and 2006.6

For the decade from 1996 to 2006, South Asia emerged as the most dynamic

subregion, with an average percentage increase in double digits for tourism receipts,

followed by North-East Asia and Oceania. Despite recent disasters and crises, South-

East Asia managed to report positive annual average growth of 4.1 per cent during the

period from 1996 to 2006. Cambodia and Lao Peoples Democratic Republic are two

countries in the greater Mekong Subregion, which had strong results. For Cambodia,

international tourism receipts had an average annual growth rate of 28.3 per cent and

10.8 per cent for Lao Peoples Democratic Republic during the ten-year period.7 More

recently, international tourism receipts increased by 20.0 per cent between 2005 and

2006 for Cambodia. 8 However, each of the two Mekong subregion countries

accounted for less than one per cent share of international tourism receipts in Asia and

the Pacific during 2005, while Cambodias regional share was 0.6 per cent in 2006.

From 2005 to 2006, Indias international tourism receipts increased by 21.3

per cent and Chinas by 15.9 per cent. At the same time, India accounted for 5.8 per

cent share of regional receipts while China accounted for 22.2 per cent in 2006.9 Both

China and India were among the top 50 tourism destinations. Other countries in the

Asian and Pacific region among the top 50, which also had double-digit growth in

6 UNWTO, Tourism Highlights 2007 Edition.7

UNWTO, Tourism Market Trends: Asia (Madrid: UNWTO, 2004).8 UNWTO, Tourism Highlights (Madrid: UNWTO, 2006).9 UNWTO, Tourism Highlights 2007 Edition.


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international tourism receipts between 2005 and 2006 included: Hong Kong, China

(12.9 per cent); Japan (34.8 per cent); Russian Federation (26.3 per cent); Singapore

(14.1 per cent); Thailand (22.0 per cent); and Viet Nam (71.7 per cent).10

Destinations in Asia and the Pacific are expected to dominate global economic

growth in the travel and tourism industry in the years to come, even though they were

not very high on the list of top arrivals and earners in recent years. According to

UNWTOs Tourism 2020 Vision, international arrivals have been forecast to reach

nearly 1.6 billion by the year 2020. Furthermore, the forecast for 2020 shows that

East Asia (comprising North-East Asia and South-East Asia) and the Pacific would

expect to receive about 397 million visitors. This long-term assessment includes an

average annual growth rate of 6.5 per cent for arrivals to East Asia and the Pacific and

6.2 per cent for South Asia during the period from 1995 to 2020, which exceeds the

projected growth rate of 4.1 per cent for the world.11

B. Intra-regional travel

Growth of the tourism industry means that the Asian and Pacific region serves

as both an origin and a destination for international tourist arrivals. More people in the

region are able to travel due to easier access, rising levels of prosperity and increased

leisure time. Figure 1 shows that intraregional arrivals in Asia and the Pacific in 2003

accounted for 78 per cent of international travel in the region, amounting to 94 million

visitors. Among the subregions, intraregional travel accounted for 85 percent of

arrivals in North-East Asia and 77 percent of arrivals in South-East Asia in 2003. In

Oceania, intraregional tourism represented 65 percent of total arrivals and in South

Asia, it accounted for about 36 percent. The average annual growth rate for

10 UNWTO, World Tourism Barometer, vol. 5, #2 (June 2007).11 UNWTO, World Tourism Barometer, vol. 5, # 1 (January2007).


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intraregional tourism from 1995 to 2000 was 6.2 percent, which compared to a rate of

5.9 percent in the growth of total outbound tourism in Asia and the Pacific.12

Figure 1. Inbound tourism by region of origin, tourist arrivals 2003 (percentage share)

78%

1%

7%

11%

1%

2%

Asia and the Pacific Africa Americas

Europe Middle East Origin not specified

It can be assumed that intraregional travel will continue to grow rapidly for the

foreseeable future and become a more significant part of the regional economy.

Increased intraregional travel has significant implications for mode of transport and

related infrastructure development. Arrival by air transport accounted for almost half

of all arrivals in 2003, but the number traveling over land had reached a share of about

40 percent. Between 1990 and 2000, arrivals by air grew at an average of 6 percent,

while arrivals by road increased by an average of 10 percent a year. It has been noted

12 UNWTO, Tourism Market Trends: Asia (Madrid: WTO, 2004), p. 56, 62.

Source: UNWTO,Asia Tourism Market Trends, 2004 Edition (Madrid: WTO, 2004), p. 53.


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that arrivals by road as part of intraregional travel has become increasingly important

in North-East Asia and South-East Asia, particularly between China and Hong Kong,

China and between Singapore and Malaysia. 13 There is potential for increased

intraregional travel by road to South Asia. Clearly, however, island countries such as

Maldives and Sri Lanka, as well as the Oceania subregion must rely on air and sea

travel.

By 2004, several Asian and Pacific countries had become increasingly

significant as markets of origin for international travel. According to UNWTO, Japan,

China and the Russian Federation were among the top ten in terms of international

tourism expenditure. The Republic of Korea; Hong Kong, China; Australia; and

Singapore were among the top twenty. Tourists from these seven countries spent

about US$ 116 billion on international travel and tourism in 2004.14 More detailed

data and analysis are needed to assess the impact of expenditures due to intraregional

tourism.

C. Importance of domestic tourism

As developing countries of the region have become more prosperous, domestic

tourists have emerged as a significant market, often using the same facilities as

international tourists. Table 4 provides relevant statistics for selected countries in the

region. In India, it has been estimated that there were more than 100 domestic tourists

for every international tourist in 2003. In China the ratio was 26:1, while in Thailand

it was 7:1, in Indonesia it was 7:1 and in Viet Nam it was 5:1. This type of tourism is

often overlooked, although it brings wealthier urban dwellers to rural areas. This

provides opportunities for wealth redistribution and economic development, as well as

13 Ibid., p. 56.14 UNWTO, Facts and Figures. http://www.unwto.org/statistics/index.htm


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contributing to greater awareness about the culture and environment in ones own

country.

Table 4. Comparing international and domestic tourism statisticsin selected Asian and Pacific countries

Referenceyear

Internationaltourist arrivals

(million)

Estimateddomestictourists

(million)

Ratio ofinternationalto domestic

China 2005 46.8 1,212.0 b 1 : 26India 2003 2.8 a 309.0 a 1 : 110Indonesia 2005 5.0 31.3 d 1 : 6

Thailand 2005 11.6 79.5

c

1 : 7Viet Nam 2003 2.4 a 13.0 a 1 : 5

Source: UNWTO, Tourism Highlights 2006, unless otherwise indicated.a UNWTO, Tourism Market Trends: Asia, 2004. Based on research anddata from www.tourismofindia.comb National Bureau of Statistics of the Peoples Republic of China, ChinaStatistics 2005.

c Tourism Authority of Thailand, Statistics Division.d Republic of Indonesia, Statistics of Indonesia.

It has been suggested that domestic tourism is less vulnerable to fluctuations

than overseas travel. 15 Box 1 gives examples to show how domestic tourism can

affect the national economy at the regional and local level.

15 K. B. Ghimire, ed. The Native Tourist: Mass Tourism within Developing Countries(London: Earthscan, 2001). Includes case studies of China, India and Thailand.

Box 1. Role of domestic tourism in supporting roadside facilities and services

It is possible for domestic tourism to support a spatial redistribution of income and

employment as in the cases of theMichi-no-Eki in Japan and theDhaba in India, whichare roadside service centre concepts. An important cultural phenomenon observed inmany Asian countries is that when a domestic tourist travels, he or she is expected tobring back gifts for friends and relatives that reflect the specialized food products andhandicrafts of the area visited. In Thailand, for example, this leads to large numbers ofroadside stalls, shops and agglomerations in the main regions--selling fruit in the north-eastern part of the country, dried fish in the eastern part and confectionery in thewestern part.
http://www.tourismofindia.com/http://www.tourismofindia.com/


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D. Tourism in least developed and island developing countries

Tourism has become a significant source of foreign exchange revenues for

many countries of the region, including some least developed countries (LDCs) and

island developing countries. Table 5 presents information about international tourism

for 12 LDCs and island developing countries in Asia and the Pacific. In most cases,

the data show that average annual growth in receipts has been somewhat faster than

growth in international tourist arrivals, particularly during the period from 1990 to

2000. This would tend to reinforce the attractiveness of the tourism industry as an

immediate source of foreign exchange earnings.

Table 5. International tourism in selected least developed and island developing countriesof Asia and the Pacific

International tourist arrivals International tourism receipts

Thousand of persons Average annualgrowth (%)

Value (US$ million) Average annualgrowth (%)

As % of exportsof goods and

services

1990 2000 2005 1990-2000

2000-2005

1990 2000 2005 1990-2000

2000-2005

Bangladesh 115 199 208 5.6 0.9 11 50 70 16.3 7.0 0.7

Bhutan 2 8 14 14.3 12.4 2 10 19 17.5 13.1 ..

Cambodia 17 466 1 422 39.2 25.0 .. 304 .. .. .. 18.6

Kiribati 3 5 .. 4.8 .. 1 3 .. 10.4 .. ..

Lao P.D.R 14 191 672 29.9 28.6 3 114 147 43.9 5.2 21.8

Maldives 195 467 395 9.1 -3.3 89 321 .. 13.7 .. 69.5

Myanmar 21 208 232 25.8 2.2 9 162 .. 33.5 .. 2.6

Nepal 255 464 376 6.2 -4.1 64 158 .. 9.5 .. 18.8

Samoa 48 88 102 6.2 3 20 41 77 7.4 13.4 ..

SolomonIslands

9 .. .. .. .. 7 4 .. -5.4 .. ..

Tuvalu .. 1.1 .. .. .. .. .. .. .. .. ..

Vanuatu 35 58 .. 5.2 .. 39 56 .. 3.7 .. 42.6

Source: UNWTO

According to WTTC estimates for 2006 based on tourism satellite accounting,

the overall economic contribution of tourism in Maldives was 66.6 per cent of gross

domestic product (GDP) and accounted for 65.9 per cent of exports. In Vanuatu, the

tourism sector contributed 47.0 per cent to GDP and 73.7 per cent to total export

earnings. In Cambodia, Lao Peoples Democratic Republic and Nepal, tourism was

estimated to account for more than 15 per cent of export earnings.


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There are implications for LDCs and island developing countries when they

depend on international tourism as a development strategy, since it can lead to an

undiversified economy with significant negative side effects. This can create greater

risks when there are downturns in the international tourism market or unforeseen

events or natural disasters. An equally important issue is the balance between

economic development and well-being on the one hand and social and environmental

well-being on the other hand in countries where culture, heritage and the environment

are the main tourism assets.16

More detailed information about two countries in Asia and the Pacific

highlight the situation of tourism as a development strategy for LDCs. The growing

economic important of tourism for Lao Peoples Democratic Republic is presented in

Box 2. The case of Maldives, an island developing country, is described in Box 3.

16 David Harrison, ed., Tourism and the Less Developed World: Issues and Case Studies(Wallingford, UK: CABI Publishing, 2004).

Box 2. Tourism in Lao Peoples Democratic RepublicTourism has become a leading economic sector, as well as the countrys principal foreign

exchange earner. In 2005, receipts from international tourism amounted to $US 146.7million. From 1995 to 2004, the number of international arrivals increased from 60,000 to236,000 a year, a jump of 236 per cent.

Revenue and rank of various Lao industries (revenue in US$ million)2001 2002 2003 2004 2005

Revenue Rank Revenue Rank Revenue Rank Revenue Rank Revenue Rank

Tourism 113.8 1 113.4 1 87.3 2 118.9 1 146.7 1

Garments 100.1 2 99.9 2 87.1 3 99.1 2 107.5 3

Electricity` 91.3 3 92.7 3 97.3 1 86.2 3 94.6 4

Wood Products 80.2 4 77.8 4 69.9 4 72.4 4 74.0 5

Coffee 15.3 5 9.8 7 10.9 9 13.0 8 9.5 8

AgriculturalProducts

5.7 6 25.6 5 11.1 8 20.5 6 26.6 6

Minerals 4.9 7 3.9 8 46.5 5 67.4 5 128.3 2

Handicrafts 3.8 8 2.7 9 12.4 7 1.9 9 2.7 9

OtherIndustries

- - 19.9 6 17.1 6 13.4 7 11.9 7

Source: Ministry of Commerce and Lao National Tourism Administration.


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E. Summary observations

Tourism continues to be important at the global level and the regional level of Asia

and the Pacific as tourism arrivals and receipts maintain or exceed growth expectations. This

indicates that the tourism industry is a major factor in globalization as well as resilient in the

face of natural disasters, health crises, oil price rises, exchange rate fluctuations and other

uncertainties.

The discussion in this chapter has underscored the importance of tourism in Asia and

the Pacific, while pointing out variation in some results and recent trends for the subregions

and various countries. Data about tourist arrivals and tourism receipts have been used to

describe the patterns and trends at global, regional, subregional and national levels.

Box 3. Case study of tourism in Maldives

In Asia and the Pacific, Maldives has been the most successful LDC in attracting internationaltourists, with about 600,000 international tourists in 2004, which was double the total resident

population. Maldives is one of five countries in Asia and the Pacific where tourism is the topcontributor to GDP. Fifty-seven per cent of total employment, or 1 in every 1.7 jobs, is createdby tourism. Tourism has been the major source of foreign exchange earnings and tax revenuefor many years. This has enabled the government to allocate financial resources for improvingeducation and health conditions. There is almost universal literacy and the infant mortality ratewent from 121 per thousand in 1977 to 35 per thousand in 2004. Over the same period,average life expectancy at birth increased from 47 years to 67 years.

The dominance of tourism shows that the economy of Maldives is not very diversified,however. The tsunami and seaquake of December 2004 underscored the countrysvulnerability. International tourist arrivals dropped from 617,000 in 2004 to 395,000 in 2005.Foreign exchange earnings also declined and the government faced a current account deficit aswell as a budget deficit. At the same time, the government faced supply constraints in itsreconstruction efforts.

Tourism arrivals recovered fairly quickly and grew by 70 per cent in the first eight months of2006. The government had decided to add 35 uninhabited islands to its tourism portfolio inorder that foreign investors could gain leases to develop and build at least 20 new hotels and15 new resorts, which would include shareholding by the Maldives government.

Sources: UNWTO, Tourism Highlights 2006. Asian Development Bank,Asian DevelopmentOutlook 2006. Leisure Opportunties.com, November 2006,http://www.leisureopportunities.co.uk/LOemail/wider_newsdetail.cfm?codeID=18577


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This chapter has also described patterns of interregional travel, domestic

tourism and the role of tourism for least developed and island developing countries.

Such descriptions provide the starting point for raising policy issues about the

potential for tourism to make a greater contribution to socio-economic development.

Balancing economic well-being with social and environmental well-being has been

mentioned as a significant consideration affecting the role of tourism in socio-

economic development.


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II. THE ECONOMIC IMPACT OF TOURISM

The purpose of this chapter is to focus on the economic aspects of tourism in

order to highlight the impact at the macroeconomic level. Trends for countries of Asia

and the Pacific are assessed by using several approaches to measuring impact,

including data based on tourism satellite account methodology as developed by the

World Travel and Tourism Council. Tourism is considered according to its

contribution in the form of receipts; share of gross domestic product (GDP) and

exports; and growth rate patterns for the tourism industry, tourism economy,

government expenditures and capital investment.

The economic impact of the tourism industry is usually assessed at the

macroeconomic level and can be measured in several different ways. The most

general measurement focuses on tourism receipts and the contribution of tourism to a

countrys GDP. Table 6 presents international tourism receipts of ESCAP member

states in 1995 and 2004, where figures are available, and the percentage increases

over this period. The table also shows tourism receipts as a percentage of GDP for

2004.17 The data generally indicate the performance of tourism at the national level,

but not in a systematic way due to use of estimates and different definitions of the

tourism industry.

17 UNWTO, UNWTO World Tourism Barometer, vol. 4, #2 (June 2006), p. 2. For destinationcountries, receipts from international tourism count as exports and cover all transactionsrelated to the consumption by international visitors of, for instance, accommodation, food anddrink, transport in the country, fuel, entertainment, shopping, etc. It includes transactionsgenerated by same-day as well as overnight visitors. However, it does not include receiptsfrom international passenger transport contracted from companies outside the travelers'

countries of residence, which are reported in a separate category, international passengertransport.


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Table 6. International tourism receipts in selected Asian and Pacific countries

International tourism receipts

US$ millionPercentage increase,

1995-2004As % of

GDP, 20041995 2004

Armenia 1 86 8 500 2.9

Australia 7 873 12 703 61 2.8

Azerbaijan 70 65 -7 0.9

Bangladesh 25 67 168 0.1

Bhutan .. 12 .. ..

Cambodia 53 604 1 040 14.7

China 8 730 25 739 195 1.7

Fiji 291 412 42 21.8

Georgia .. 177 .. 4.1

India 2 582 3 887a/ 51 0.7

Indonesia 5 229 4 798 -8 2.0Islamic Republic of Iran 67 1 074 1 503 0.8

Japan 3 224 11 265 249 0.3

Kazakhstan 122 708 480 1.9

Republic of Korea 5 150 5 713 11 1.2

Kyrgyzstan 5 76 1 420 4.4

Lao P.D.R. 51 119 133 4.9

Malaysia 3 969 8 198 107 6.6

Maldives 211 471 123 62.5

Mongolia 21 185 781 13.4

Myanmar 151 84 -44 ..Nepal 177 230 30 3.9

New Zealand 2 318 5 069 119 5.1

Pakistan 110 178 62 0.8

Papua New Guinea 25 .. .. ..

Philippines 1 136 2 012 77 2.8

Russian Federation 4 312 5 226 21 1.2

Samoa 35 71 103 ..

Singapore 7 646 5 093 -33 4.8

Solomon Islands 16 4 -75 ..

Sri Lanka 226 513 127 4.0

Tajikistan .. 1 .. 0.4Thailand 8 035 10 043 25 8.0

Tonga 10 15 50 7.0

Turkey 4 957 15 888 221 5.3

Uzbekistan .. 28 .. 0.5

Vanuatu 45 52 16 25.7

Total66

873 120 866 81 6.8

Source: UNWTO

Notes:a/

Figure is for 2003... indicates data are unavailable.


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The United Nations Statistics Division and the World Tourism Organization

(now UNWTO) developed the tourism satellite account in 2001 as one of the most

systematic measurement of the economic impact and contribution of tourism at the

national level. According to the World Travel & Tourism Council (WTTC), the TSA

is based on a demand-side concept of economic activity, because the tourism industry

does not produce or supply a homogeneous product or service like many traditional

industries. Instead, the travel and tourism industry is defined by a diverse collection of

products (durables and non-durables) and services (transportation, accommodation,

food and beverage, entertainment, government services, etc) that are delivered to

visitors. It is important for policy-makers at national and local levels to see that this

diversity has many complex links to all parts of the economy. This is what makes the

economic impact of tourism so significant for development.

There are two basic aggregates of demand: (1) travel and tourism consumption

and (2) total demand. Satellite accounting produces two different and complementary

aggregates of travel and tourism supply when input/output modelling is used

separately with these two aggregates. The first aggregate is the travel and tourism

industry, which captures the explicitly-defined production-side industry contribution

(the direct impact only), for comparison with all other industries. The second

aggregate is the travel and tourism economy, which captures the broader economy-

wide impact of travel and tourismboth direct and indirect. 18

As shown in table 7, the largest travel and tourism economy contributions to

GDP have been in the island states of Fiji, Tonga and Vanuatu. Many small island

18

World Travel & Tourism Council.http://www.wttc.org/eng/Research/Tourism_Satellite_Accounting/TSA_Definitions_and_Methodology/index.php


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economies are highly dependent on tourism for export earnings as well. In 2006, the

tourism economy contributed 43.5 per cent of total export earnings of Fiji and one

third of GDP. The tourism economy generated about 66.0 per cent of total export

earnings and 66.6 per cent of GDP for Maldives. Other small island states, such as

Tonga and Vanuatu, depended on tourism for half to almost three-fourths of their

export earnings.19

The tourism economy provided a contribution of 13.7 per cent to Chinas GDP

in 2006. Countries in the Greater Mekong Subregion are also benefiting from the

tourism industry thereby taking full advantage of the potential of their natural and

cultural tourism resources. In 2006, tourism in Cambodia and the Lao Peoples

Democratic Republic accounted respectively for 22.3 and 21.4 per cent of their total

export earnings and contributed 19.6 and 9.3 per cent respectively of their GDP.

In other countries, the contribution of tourism to GDP and total exports

averaged between 7.0 and 10.0 per cent, mainly because their economies are more

diversified. However, in light of the continuing growth expected for the regions

tourism industry in the foreseeable future, it can be assumed that the share of tourism

in the regions economy will become more significant.

19 WTTC, WTTC 2006 Tourism Satellite Accounts: Regional Reports.www.wttc.org/frameset2.htm


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Table 7. Economic contribution of tourism to GDP and total exports in selectedAsian and Pacific subregions and countries, 2006a/

GDP Total exports

(per cent) (per cent)

North-East Asia, of which: 10.3 8.2China 13.7 7.4Republic of Korea 6.8 6.8

South-East Asia, of which: 7.0 8.4Cambodia 19.6 22.3Indonesia 8.7 11.5Lao PDR 9.3 21.4Papua New Guinea 9.2 7.5

Philippines 9.1 8.3Singapore 10.3 4.2Thailand 14.3 12.6Viet Nam 10.9 9.4

South Asia, of which: 5.5 5.4India 5.3 4.7Iran (Islamic Rep. of) 9.8 12.1Maldives 66.6 65.9Nepal 8.2 22.6Sri Lanka 9.6 14.9

Oceania, of which: 13.1 22.4Fiji 33.1 43.5Tonga 17.5 47.2Vanuatu 47.0 73.7

Source: World Travel & Tourism Council, WTTC 2006 Tourism Satellite Accounts.

Note:a/

Data used in the table refer to the travel and tourism economy (direct and indirect

impact) as this provides a more comprehensive account of the tourism sector.

Additional data from WTTC provides a time-series description for a number of

macroeconomic variables that show the economic impact of tourism. This data can also be

analyzed statistically to give policy-makers a deeper understanding of important economic

relationships in order to strengthen tourism policies and plans of the government and the

private sector. Annex tables 1 and 2 are descriptive reports on the variable of growth rate and

its impact on four macroeconomic dimensions of tourism.


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Annex table 1 presents the growth rate variable covering various years. The two

dimensions are: (1) the tourism industry, which shows the direct impact and (2) the tourism

economy, which includes the wider direct and indirect impact of tourism activities. There is

clearly a wide variety of results among the 33 countries and areas of Asia and the Pacific, as

well as fluctuations over time for each country. However, when there is strong annual growth

for the tourism industry, there is strong growth in the wider tourism economy for at least nine

countries (Azerbaijan; Cambodia; China; Lao PDR; Macao, China; Malaysia; Philippines;

Thailand; and Viet Nam). The charts in box 4 present the results for the nine selected

countries from 1995 to 2006. While the nature of this relationship needs more careful study,

this suggests that the links between the tourism industry and other industries in these national

economies generate GDP growth that is noteworthy.


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Box 4. Growth rate of the tourism industry (IND) and tourism economy (ECON) contribution toGDP for selected Asian and Pacific countries, 1995-2006

Azerbaijan

-30.00

-20.00

-10.00

0.00

10.00

20.0030.00

40.00

50.00

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Percentagegrowth

rate

IND

ECON

C a m b o d i a

-40.00

-20.00

0.00

20.00

40.00

60.00

80.00

100.00

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Percentagegrowthrate

IN D

E C O N

China

-5.00

0.00

5.00

10.00

15.00

20.00

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006P

ercentagegrowthrate

IND

ECON

Lao People's Democratic Republic

-40.00

-20.00

0.00

20.00

40.00

60.00

80.00

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006


IND

ECON


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Box 4. (continued)

Macao, China

-10.00

0.00

10.00

20.00

30.00

40.00

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006Pe

rcentagegrowthrate

IND

ECON

Malaysia

-30.00

-20.00

-10.00

0.00

10.00

20.00

30.00

40.00

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

P

ercentagegrowthrate

IND

ECON

Philippines

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

25.00

30.00

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006


IND

ECON

Thailand

-10.00

-5.00

0.00

5.00

10.00

15.00

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006


IND

ECON

Viet Nam

-40.00

-30.00

-20.00

-10.00

0.00

10.00

20.00

30.00

40.00

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006


IND

ECON


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Annex table 1 also shows some distinctive patterns for island developing countries in

cases where there have been strong annual declines in the contribution of both the tourism

industry and the tourism economy to GDP. This appears to underscore the dependency of

some countries economies on tourism, although in subsequent years some recovery in the

growth rates was possible. It is important for policy-makers to know which factors are

influencing such declines and recoveries, including the role of government spending, the role

of capital investment, the effects of changes in international tourist markets, unexpected

crises, disasters, and so forth.

Annex table 2 presents data on the growth rate variable for various years along two

dimensions: (1) government expenditures (GOV) and (2) capital investment (CAP.INV) in the

travel and tourism industry. The descriptive statistics show a wide range of results among and

within the 33 Asian and Pacific countries and areas over time.

Box 5 shows two charts that give a general view of growth in government

expenditures (chart A) and capital investment (chart B) in tourism according to subregion.

The 1997 economic crisis in South-East Asia had a strong impact on government expenditure

on tourism as well as a significant impact on capital investment. However, strong growth

quickly followed such declines in growth; although subsequent declines lead to questions

about sustainable support and investment in the tourist industry. The South Asian growth

pattern for government expenditure showed some fluctuation in the 1990s, but the pattern

since 2001 has been a fairly steady increase in the growth rate. Capital investment in South

Asian tourism had fairly strong fluctuations in the pattern of growth during the 1990s, and

like government expenditure, began to grow again at a steady pace from 2001.

In the case of North-East Asia, the growth rate of government expenditure on tourism

has generally been at a steady rate of close to 5 per cent, as shown in box 5 (chart A). Capital

investment in North-East Asia had declined from 1995 to slightly negative growth up to 1999

and then began a trend of strong positive growth until about 2004. For the subregion of

Oceania, government expenditure showed wide fluctuation over the period from 1995 to

2005, but this never declined into negative growth. From peaks in 1996 and 1999, the general


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trend has been a slowdown in the growth rate of government expenditures on tourism in

Oceania. (See box 5, chart A.) The growth rate for capital expenditures on tourism in Oceania

showed the greatest fluctuations of all subregions during the period from 1999 to 2005. (See

box 5, chart B.)

The data and patterns suggest that the relationship between government spending and

capital investment to develop the tourism industry is complicated and in need of more detailed

study. Once again, statistical analysis can give an improved understanding about relationships

involving government expenditures, private investment and growth of the tourism industry,

among others, in order that tourism policies and plans of the government and business

decisions of the private sector complement each other.


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Box 5. Growth rates of government expenditure and capital investment in tourism

Chart A. Growth rate of government e xpenditures on tourism by subregion of Asia and the Pacific, 1995-

2005

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005Percentagegrowthrate

South Asia

South-East Asia

North-East Asia

Oceania

Chart B. Growth rate of capital investment in tourism by subregion of Asia and the Pacific, 1995-2005

-30.00

-20.00

-10.00

0.00

10.00

20.00

30.00

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Percentage

growthrate

South Asia

South-East Asia

North-East Asia

Oceania


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Several important issues need to be taken into account when considering the

economic impact of tourism development. For example, policy-makers need to know whether

growth or decline in government expenditure leads or lags more general growth (or decline)

in the tourism industry or tourism economy. It is equally important to know if capital

investment leads or lags behind general patterns of growth or decline in the tourism industry

or tourism economy. In countries that are dependent on the tourism industry, such as island

developing countries and some least developed countries, it is important to understand what

have been the reasons for declines in capital investment and what factors have helped to

recover capital investment.

Policy-makers and planners can make use of a wealth of data and information when

tourism satellite accounts are fully implemented. As noted by WTTC, the tourism satellite

account can help governments understand: (1) the economic dynamics of tourism beyond the

traditional scope of tourism expenditure research and travel service sector production when it

is narrowly defined; (2) the relationship between tourism and the durables sector of the

economy; (3) the relationship between tourism and government spending to help establish a

clear linkage between tourism results and government support for tourism; (4) the balance of

payments arising from the comprehensive flow of tourism goods and services necessary to

make tourism possible and the possible discovery of hidden trade surpluses or deficits; and (5)

the relationship between tourism and capital investment to assist in long-term planning for

infrastructure, resort development, promotion, and so forth.


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III. THE SOCIAL IMPACT OF TOURISM

This chapter considers some of the social aspects of tourism in order to

measure and understand the social impact. The main macro-level indicator is

employment created by the tourism economy for subregions and selected nations in

Asia and the Pacific. The discussions cover the gender aspects of employment

patterns in the tourism industry.

There are various definitions of social development, and most of them

converge around the concepts of improving the well-being of a countrys citizens,

promoting higher standards of living, increasing employment and creating conditions

of economic and social progress. Employment is one of the most readily available

indicators to begin measuring the social impact of tourism, since job creation

generally helps create the opportunities for better standards of living and related

conditions of socio-economic progress.

Tourism contributes significantly, both directly and indirectly, to the creation

of employment. In 2006, the tourism economy (direct plus indirect contribution)

provided jobs for about 140 million people in the selected subregions and countries of

the Asian and Pacific region, representing an average of 8.9 per cent of total

employment. As shown in table 8, tourism employment in North-East Asia was

estimated at 87.7 million jobs, which was 10.1 per cent of the total employment in the

subregion. This result can be attributed mainly to China, where 77.6 million people,

approximately 1 in every 10 employed persons worked in the tourism economy. In

Oceania, the workforce in the tourism economy accounted for 14.5 per cent of total

employment in the subregion, which was 1 in every 6.9 jobs. The importance of

tourism becomes more significant when the workforce ratios in selected Pacific island


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economies is analysed. For instance, 1 in every 3.2 persons in Fiji was employed in

the tourism economy, while in Vanuatu the ratio was 1 in every 2.4 jobs in 2006. By

comparison, 1 in every 1.7 persons in Maldives was employed in the tourism

economy.

Comparisons among countries in other subregions show that the share of

tourism economy employment as part of total employment in 2006 varied from 5.4

per cent in India to more than 10 per cent in Cambodia, the Philippines and Thailand.

Table 8. Economy contribution (direct and indirect) of travel and tourism to employment inselected Asian and Pacific subregions and countries

Million ofjobs

As percentage share oftotal employment withinsubregion and country

Ratio of tourismemployment to total

employment

North-East Asia, ofwhich:

87.58 10.11 : 9.9

China 77.60 10.2 1 : 9.8Republic of Korea 1.73 7.4 1 : 13.4

South-East Asia, ofwhich:

21.74 8.61 : 11.7

Cambodia 1.07 15.4 1 : 6.5Indonesia 7.33 7.2 1 : 13.8Lao PDR .20 7.3 1 : 13.7Papua New Guinea .19 7.5 1 : 13.3Philippines 3.34 10.8 1 : 9.2Singapore 1.91 8.3 1 : 12.0Thailand 3.82 10.7 1 : 9.4Viet Nam 3.36 8.7 1 : 11.5

South Asia, of which: 30.89 5.2 1 : 19.4India 24.35 5.4 1 : 18.4Iran (Islamic Rep. of) 1.71 8.7 1 : 11.4Maldives .69 57.6 1 : 1.7

Nepal .73 6.4 1 : 15.5Sri Lanka .66 7.9 1 : 12.7

Oceania, of which: 1.91 14.5 1 : 6.9Fiji .11 31.0 1 : 3.2Tonga .01 15.2 1 : 6.6Vanuatu .03 42.4 1 : 2.4

Source: WWTC, WTTC 2006 Tourism Satellite Accounts: Regional Reports.www.wttc.org/frameset2.htm
http://www.wttc.org/frameset2.htmhttp://www.wttc.org/frameset2.htm


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Additional information about employment using data from the WTTCs

tourism satellite accounting framework is presented in annex table 3. Patterns of

employment growth in the tourism industry and tourism economy for a number of

Asian and Pacific countries indicate significant fluctuations within many countries

over time as well as strong declines in employment for some countries in particular

years. In many cases, such as Australia in 2005; Azerbaijan in 1995; Cambodia in

2000, 2004 and 2005; China in 2000 and 2004; Hong Kong, China in 2000 and 2004;

Lao PDR in 1995 and 2000; Malaysia in 2000 and 2004; Maldives in 2004 and 2006;

Myanmar in 1995 and 2004; Nepal in 1995; Pakistan in 2005; Solomon Islands in

2004; Thailand in 2000 and 2004; Turkey in 2000; and Vanuatu in 2000 and 2006,

strong employment growth occurred simultaneously in both the tourism industry and

tourism economy. However, high employment growth in some years was followed by

slower growth or even strong declines in a number of countries.

In view of such fluctuations and wide variations within countries and among

countries, there is a compelling need to study and analyze further whether steep

declines mean jobs are lost or whether there is temporary unemployment followed by

rehiring. Detailed study would have to account for unique situations and factors

affecting particular countries or subregions, although analysis of a longer time series

could account for large increases or declines over the short term, thus giving a more

complete overall picture. A look at annex table 3 seems to suggest that even as the

tourism industry and tourism economy grow, the link to direct and/or indirect

employment needs to be more clearly established and understood. This could

contribute to improved planning and policy making for job creation and human

resource management as part of tourism development. Patterns of employment growth


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and decline in the tourism industry and tourism economy have direct implications on

the social benefits and opportunities expected from tourism development.

When growth of the tourism industry is sustained, it is more likely to be a

significant provider of employment in countries of the Asian and Pacific region. It is

then possible to improve the social situation of people, often through Government

policies and programmes. In addition, revenue generated from tourism has enabled

Governments to allocate financial resources for improving education and health

conditions. For example, as indicated in box 3, in Maldives where tourism activity is

the economic mainstay, almost 100 per cent of the population was literate by 2004.

The infant mortality rate declined from 121 per 1,000 in 1977 to 35 per 1,000 in 2004.

Over the same period, the average life expectancy at birth increased from 47 years to

67 years.20

The quantitative and qualitative dimensions of issues related to gender balance

in employment in the tourism industry require more analysis on both, especially if

tourism is expected to give women more and better employment opportunities and

improve their well-being. There is a general lack of available quantitative data that

disaggregates tourism employment, wage levels, types of jobs, etc. by gender. In

2003, the International Labour Organization (ILO) reported some general

impressions, information from other sources and a few results from a limited survey

of hotels in the Asia and Pacific region.21

At the level of general impression, employment of women in the hospitality

sector, the term used by ILO, was higher than in many other industries, in part

reflecting the high percentage of low skilled jobs in hotels and restaurants such as

waitresses, chambermaids and so on. As a broad generalization, the ratio between

20

UNDP,Human Development Report(New York: UNDP, various years).21 ILO, Employment and Human Resources in the Tourist Industry in Asia and the Pacific, SectoralWorking Paper No. 204 (Geneva: ILO, 2003).


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male and female employees in the Asian and Pacific region was fairly equally split.

Among respondents to the ILO survey, there was no indication that recruitment of

women was more difficult than recruitment of men. In Thailand, it was reported that

the majority of people working in the tourism industry were 21 to 30 years old, and

there was a relatively even split between men and women. 22 However, it was

mentioned that in China there were legal regulations protecting female workers. 23

The ILO reported that the hospitality sector in Singapore attracted a relatively

high proportion of female workers. In 2000, there was an almost even ratio of females

to males working in the hotels and restaurants sector (that is, a gender ratio of

48.5:51.5). This is compared with a 39:61 gender ratio for the Singaporean workforce

as a whole. It was noted that there was a higher proportion of younger (15-19 year

olds) and older (50 years and over) workers, particularly women, in the hotels and

restaurants sector compared with all sectors generally. Average earnings in hotels and

restaurants were the lowest of any category in Singapores formal sector. 24

According to the ILO study, the South Pacific Tourism Organization (SPTO)

stated that most small and medium enterprises (SMEs) in the Pacific island countries

are run as family operations. In that context, tourism offers opportunities to both male

and female entrepreneurs, especially in the case of ecotourism, when businesses are

established within their natural and cultural framework. In some cases, SPTO noted

that wives are operating and children are working in small family operations. In most

cases, rental cars, travel offices and booking agencies are dominated by female

entrepreneurs.25

22 Ibid., p. 26.23

Ibid., p. 11.24 Ibid., p. 22.25 Ibid., pp. 23-24.


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More up-to-date, systematic statistics and general descriptions of gender

patterns in national tourism industries throughout Asia and the Pacific can help

strengthen the analysis about the social impact of tourism from a gender perspective.

This can help to improve the image of career opportunities for women and men in the

tourism industry. In addition, it can help employers as well as government policy

makers to have a more complete understanding about the gender dimensions of

tourism industry employment. Based on such understanding and analysis, it would

then be possible to decide whether protective, corrective or inclusionary policies and

regulations might be needed.

IV. ASSESSING THE SOCIO-ECONOMIC IMPACTSOF TOURISM

This chapter addresses the ways in which the socio-economic impact of

tourism can be assessed at the macro-level and the micro-level. Various techniques,

such as TSA, social accounting matrix, project level approaches, and value chain

analysis, are reviewed. The discussion also covers the assessment of linkages,

leakages and multiplier effects. The overall aim of the discussion is to emphasize the

importance of the knowledge base to clearly show the socio-economic importance of

tourism.

A. General approaches and methods

A full assessment of the socio-economic impacts of tourism requires that the linkages

between tourism and socio-economic development need to be clearly identified. Having

established the linkages, policymakers are then in a better position to consider specific

interventions that can raise standards of living and reduce poverty. Techniques to assess such

impacts fall into two broad categories: top-down, aggregate or macrolevel approaches; and

bottom-up, project or microlevel approaches.


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1. Macro-level approaches

Aggregate approaches include tourism satellite accounts (TSAs), input-output

tables,26 social accounting matrices and computable general equilibrium models, as

well as econometric, correlation and regression analysis.

As an aggregate approach, data from TSAs were used in chapters II and III of

this document to show the importance and describe some features of the tourism

sector. The World Travel & Tourism Council (WTTC) is the leading organization,

which produces annual data and time series data on tourisms contribution to GDP,

employment, exports, imports, taxes, among others. Since 1998, the Council has

developed tourism satellite accounts for 176 countries. At present, 33 are members or

associate members of ESCAP.

In addition, India and the Philippines have produced their own tourism

satellite accounts. Thailand has begun its tourism satellite account project and has

reached the stage of approximating preliminary tables. Once constructed, TSAs can

help to answer questions about the direct (industry) and indirect (economy) impacts of

tourism on GDP and employment; the strength of linkages between tourism and other

sectors of the economy; the multipliers (changes in income and employment resulting

from a change in expenditure) and the leakages (proportion of tourist expenditure that

does not remain in the economy).

The Government of India reported in 2006 on its tourism satellite account

covering the period of 2002-2003. As a pilot study, the Indian TSA focused on

constructing seven TSA tables: three tables to identify tourism consumption (inbound,

domestic and outbound); a fourth table to consolidate total tourism consumption; a

26

During the first half of the 1990s, ESCAP undertook 11 country studies on the economicimpact of tourism using input-output table methodologies. Publications relating to thesestudies can be found at www.unescap.org/ttdw/index.asp?menuname=PublicationArchives.


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fifth table to show the production account of tourism industries in order to compare

with tourism consumption; a sixth table bringing together the demand and supply side

to evaluate aggregate tourism value added and GDP; and a seventh table for analyzing

employment.

In India, it was found that adjustment factors had to be applied since some

expenditure, particularly for transport services, was considerably underestimated.

Overall, it was reported that the direct contribution of tourism accounted for 2.78 per

cent of GDP and when the indirect effects were added, the tourism share was 5.83 per

cent of GDP. The results for the total tourism output multiplier suggested that the

combined direct and indirect impact was 2.1 times the actual spending by tourists. The

tourism industry accounted for 4.59 per cent of employment and the tourism economy

accounted for 8.27 per cent of total employment in India, which was estimated to be

38.6 million jobs. Adjustment factors were applied to account for same-day tourism,

which was a large and growing segment of Indias tourism industry. After making

adjustments, it was found that the direct contribution increased from 2.78 per cent to

3.78 per cent and the tourism economy (direct and indirect) contribution went from

5.83 per cent to 6.83 per cent. The contribution to employment also went up from 8.27

per cent to 9.27 per cent.27

In 1997, the Government of the Philippines created the Inter-Agency

Committee on the Development of a Satellite Account on Tourism and applied the

TSA framework to data covering 1994 and 1998. The Philippine TSA consisted of ten

tables, which included: two types of tourism value added; tourism GDP; tourism

employment; tourism gross fixed capital formation; tourism collective consumption

and tourism demand. A report in 2001 noted that the results were considered as

27 Ministry of Tourism, Tourism Satellite Account for India (New Delhi: National Councilof Applied Economic Research, January 2006), pp. 22, 30, 32 and 55.


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preliminary with limited scope and coverage due to data constraints. Nevertheless, the

Philippine TSA report revealed significant features of tourisms impact with a focus

on the link between tourism consumption and the supply of tourism goods and

services.

In the Philippines, the TSA framework showed that between 1994 and 1998

total tourism demand grew at an annual average of 11 per cent. Visitor consumption

expenditures accounted for more than 60 per cent of total tourism demand and grew at

about 20 per cent a year. Domestic tourism consumption expanded at an annual rate

33 per cent and inbound tourism grew at 13 per cent. Government consumption

expenditures had an average annual growth rate of 23 per cent and its share of total

tourism consumption was 22 per cent in 1994 and 26 per cent in 1998. The value

added of tourism industries was 12 per cent of GDP in 1994 and13 per cent 1998. On

the supply side, tourism generated 20 per cent of total employment in 1994 and 22 per

cent in 1998. It was found that 63 per cent of those employed in the tourism industry

were men and 37 per cent were women. This is in contrast to the general pattern

where women accounted for a larger share of total employment generated in the

economy. However, among all employed women, the proportion in tourism was 24

per cent in 1994 and 25 per cent in 1998. In comparison, among all employed men, 17

per cent worked in tourism in 1994 and 20 per cent in 1998.28

In Viet Nam, data was gathered in 1999 in order to prepare a social accounting

matrix (SAM) as an economy-wide simulation model. The aim was to develop SAM

multipliers to show which components of the tourism sector have the greatest impact

on the overall domestic economy, which have the strongest linkages with other sectors

28

Romulo Virola et al., Measuring the Contribution of Tourism to the Economy: ThePhilippine Tourism Satellite Account, paper prepared for the Eight National Convention onStatistics, Manila, October 2001, pp. 16.


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and how much household income is induced for a given expansion in various sectors

of the economy. Issues about the impact of tourism on poverty could be addressed by

including data from the Vietnam Living Standards Survey which provided

information valid to the regional and provincial level.29 Among 13 sectors with total

SAM multipliers ranging from 2.24 to 9.48, the tourism multiplier was 5.16. The

range of multipliers for linkages with other sectors was 0.63 to 4.11, with tourism

having a multiplier of 2.07. For induced household income, the multipliers for the 13

sectors ranged from 0.14 to 1.31 with the tourism multiplier being 0.53.30

Computable general equilibrium models have not been developed extensively

for tourism, but one developed by Adam Blake et al. for Brazil looked at the effects of

tourism expansion and concluded:

The results also show that tourism benefits the lowest income sectionsof (the) Brazilian population and has the potential to reduce incomeinequality. The lowest income households are not, however, the mainbeneficiaries of tourism and we have also shown that alternativerevenue distribution by the government could double the benefits forthe poorest households and give them around one-third of all thebenefits from tourism.31

2. Project-level approaches

Among the project-level approaches used to assess the impact of tourism are

traditional cost-benefit analyses, including their extensions to social impact analysis

and environmental impact analysis, livelihood analysis, accountancy-based lodging

and enterprise assessments, local economic mapping, tourism value chain analyses

and ex-post documentation of specific case studies. It is often easier to hypothesize

29 Christopher Edmonds, Economic Modeling and Measurement of the Effects of TourismGrowth on the Well-Being of the Poor presentation for the Asian Development Bank, 2001.30 Ibid.31

Adam Blake et al., Tourism and Poverty Alleviation in Brazil, (Brasilia: University ofBrasilia, October 2005), p. 34.Accessed at www.unb.br/cet/noticias/ Adam_Blake.pdf/ on 27February 2007.


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and test linkages between particular interventions and improved standards of living at

this level, because these types of analyses are done at the micro level.

Some preliminary information provided by ESCAP-member countries shows

how various project- level approaches could be applied more extensively and

systematically to assess the socio-economic impacts of tourism. For example, in

Indonesia there was a joint venture project between the local government and Patra

Pala Foundation with support from the Japan International Cooperation Agency

(JICA) to provide alternative income for villagers living in the area surrounding the

Borobudur World Heritage site. The project was designed to provide agro-forestry

activities, develop community-based ecotourism, improve local awareness of resource

management, set up a training centre for villagers and establish a community forum

for networking and monitoring. Social impacts have been observed at the village level

and economic impacts still have to be analyzed quantitatively. More significantly, the

wider benefits have extended to the Borobudur World Heritage site since the villagers

understand that environmental resource management strengthens the zone

surrounding the site.32

Another example is in Nepal where the Ministry of Culture, Tourism and Civil

Aviation initiated the Tourism for Rural Poverty Alleviation Programme (TRPAP)

from 2001 to 2005. The immediate objectives were to demonstrate sustainable

tourism development models, review and improve policy formulation and strategic

planning, adapt institutional mechanisms, including decentralization, in order to

achieve sustainable tourism development that would be pro-poor, pro-environment,

pro-rural communities and pro-women.33 Six districts and 48 villages were involved

32

United Nations ESCAP, The Contribution of Tourism to Poverty Alleviation, TourismReview number 25 (New York: United Nations, 2005), p. 64. ST/ESCAP/2380.33 Ibid., pp. 68-70.


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in this pilot programme, which was supported by UNDP and the development

agencies of the United Kingdom and the Netherlands. According to one report,

regular monitoring and evaluation to assess the benefits was difficult at the field level

due to lack of communication, limits on transportation and on-going armed conflict in

some districts. Similarly, frequent transfer of the government officers from the

programme districts presented a challenge to monitoring implementation of pro-poor

tourism policies and strategies of TRPAP. Monitoring activities from the rural

community level to the central level in order to sustain the pilot rural tourism models

required a different evaluation strategy.

An evaluation tool known as the Development Wheel was designed for

communities to self-monitor their progress through discussions about changes in the

community structure, development of enterprises and natural and cultural resources.

The Development Wheel is one of several evaluation tools that is part of an

evaluation methodology known as the Appreciative Participatory Planning and Action

(APPA). The APPA methodology focuses on having local people identify plans and

activities that are positive, successful and strong so they can serve as a means to

empower communities. When people used the Development Wheel, it proved to be

the most effective participatory way to evaluate progress of TRPAP at the programme

sites.34

3. Value chain analysis

One technique that has become increasingly popular in the current era of

globalization is value chain analysis (VCA). This type of analysis enables

34 Yogi Kayastha, Monitoring and Evaluation of a Pro-Poor Tourism Projectin a Conflict Situation, paper presented at the EASYECO 20052007

Conference Monitoring and Evaluation of Pro-Poor Tourism Policies forSustainable Development, Saarbrucken, Germany, 2006. www.wu-wien.ac.at/inst/iuw/fsnu/saarbruecken/papers/abstracts/Kayastha.pdf


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policymakers to consider each element of a tourists experience to see how the

product or service is produced, distributed and sold -- that is, the value added by each

element. This can help to identify where to make interventions that will increase

linkages with the local economy and create more opportunities for local people to gain

the benefits from tourism. In 2006, the technique was used in the city of Luang

Prabang, Lao Peoples Democratic Republic, where opportunities to increase earnings

were identified by assessing value chains for accommodations, handicrafts, excursions

and food. Key aspects included in any form of local assessment are local employment,

the earnings of sole traders, micro-enterprises and SMEs, ownership by the poor of

tourism-related enterprises, the significance of tourism income at the household and

community level and linkages with other sectors. An inventory of

Documents

Role of Tourism in Socioeconomic Development