An Economic Analysis of Community-based Tourism in Thailand:
A case study of Mae Kam Pong Village
Komsan Suriya30.07.2009
A preliminary report presented at ZEF
Enjoy the presentation (30 minutes)
1. Five minutes tour to the village
2. Introduction to the survey
3. Merits of community-based tourism
4. The Kuznets’ curve effect
5. Problems of tourism
6. My road ahead
3
1,300 meters above sea level
50 kilometers from downtown
127 households
Local Northern nativeSpeak Northern Thai and official Thai
Source: www.travelblog.org
1. Tourism Economy of the village
Figure 1: Tourism income (Thai Baht)
Thai Baht
2006 2007 2008
Figure 2: Seasonal index of tourism income
Seasonal index
Summer Rainy
Winter
Winter
Figure 3: Income share of tourism in terms of retained value added in households (disposable
income)
Figure 4: Income share of souvenirs and coffee shop in terms of retained value added in households (disposable income)
Figure 5: Decomposition of tourism income in terms of retained value added in households (disposable income)
Figure 6: Decomposition of tourism and tourism-induced income in terms of retained value added in households
(disposable income)
Figure 7: Decomposition of tourists
Figure 8: Ratio between individual tourists and study visits
2. The survey
August 2008 – January 2009: 116 households
Based on Shankar Subramanian in Taylor and Adelman (1996)
Major output: Social Accounting Matrix (SAM)
Social Accounting Matrix of Mae Kam Pong village, Thailand
Reference period (RP): May 2007 – April 2008
15
Another output: The panel data 2003 and 2007
Panel data 2003: Social Research Institute, Chiang Mai University. Conducted in 2004, 118 Households
Panel data 2007: This study
Conducted in 2008, 116 Households
104 households out of 118 households (88%) are matched.
16
Mrs. Puth in 2003 Mrs. Puth in
2007
3. Merits of tourism
3.3 Better income distribution ?
3.1 Induced industries and infrastructures
3.2 Poverty reduction ?
3.1 Induced industries, infrastructures and facilities
3.1 Induced industries, infrastructures and facilities
Tourism promotion
Infrastructures and facilities
Enhancement of Commercial
sectors
Tourism induced industries and jobs
Direct Tourism income
Souvenirs production
Coffee shop
Buy agricultural products as inputs
Growths during 2003 – 2007 (4 years) in terms of retained value added in households
Tourism promotion
Infrastructures and facilities
Enhancement of Commercial
sectors
Tourism induced industries and jobs
Direct Tourism income
Souvenirs production
Coffee shop
Buy agricultural products as inputs
Growth= 545 % G= 952%
G= 702%
Growth= 554%
GDP village Growth= 64 %
GDP Thailand Growth= 44 %
G= -5 %
Multipliers in major sectors (3 rounds)
Tourism promotion
Infrastructures and facilities
Enhancement of Commercial
sectors
Tourism induced industries and jobs
Direct Tourism income
Souvenirs production
Coffee shop
Buy agricultural products as inputs
Multiplier=1.22 M=1.75
M=1.68
Multiplier= 1.03 to 2.04
Retained value added rate in major sectors
Tourism promotion
Infrastructures and facilities
Enhancement of Commercial
sectors
Tourism induced industries and jobs
Direct Tourism income
Souvenirs production
Coffee shop
Buy agricultural products as inputs
RVA=48% RVA=22%
RVA=49%
RVA= 14%
RVA=86%
All sectors
RVA=48%
3.2. Tourism and poverty reduction
2003 2007
Headcount index
Poverty gap index
Squared poverty gap index
39.42%
40.22%
21.69
47.46%
38.61%
20.64
Without tourism and induced industries
48.31%
39.81%
21.52
44.23%
43.80%
25.27
Headcount index
Poverty gap index
Squared poverty gap index
8%
4%
Did tourism income help reduce poverty in a household?
Model : Among the poor
Y = 1 if Turn to be Non-poor
Y = 0 if Still be poor
Income changes during 2003 - 2007
Agriculture = Chang of agricultural income
during 2003 – 3007
Souvenir = Change of souvenir income
Homestay = Change of homestay income
Coffee shop = Change of coffee shop income
Commerce = Change of commercial income
Other_nonagri = Change of other non-
agricultural income
Other_tourism = Change of other tourism
income
Financial = Change of financial income
Poverty status shift from poor to non-poor
Poverty status shift among the poor
This is simple.
When tourism income did not go to the poor,
how could it help them?
Tourism income concentrated in the rich households.
Tourism income in 2007 flowed backward from the richest group to the 3rd and 4th Quintile.
3.3 Good news, after 4 years, situation was better.
Gini Tourism 2003 =0.53
Gini Tourism 2007 =0.44
4. The Kuznet’s curve effect
Time
Market size
Natural spillover occurs when the market size exceeds the capacity of old members.
Threshold of natural spillover
2003 2007
5. Problems of tourism
5.1 Tourism income haven’t yet flown to the poorest class.
5.2 Income of tourism induced industries concentrates in the richest class.
The poorest 40% ( households in 2003) have never gained more than 13% of tourism income.
1
The poorest 40% (households in 2007) gained less than 7% of tourism income. (They gained 23% of agricultural income and 7.5% of non-agricultural income.)
Gini Souvenir 2007 =0.53
Gini Coffee shop 2007 =0.60
2
Why the problems?
1. The poor mentioned that they are not ready.
2. Barriers to entry in some important industries.
Problem I: Non-readiness on the poor’s side
1. Distance from the tourism node
2. No operational capital
3. No hospitality skills
Outer cluster (31 HHs) Middle cluster (18 HHs) Upper Middle cluster (38 HHs)
Inner cluster (48 HHs)
Entrance
Problem 1.1: The Distance
Center
Homestay income does not flow to the outer cluster.
0% 6% 11% 43%
27% of households in the outer cluster are in the poorest class which is more than other clusters.
27% 0% 19% 14%
The extension of members in homestay, souvenirs and coffee group have to be agreed by the old members.
Preliminary votes:
Homestay group => YES
Souvenirs group => NO
Coffee group => NO
Problem II: Barriers to entry
Conditions for voting “YES” to the member expansion policy
1. Our income must not be less than the current level.
2. Only financial investment is not acceptable. New members have to spend working hours for the service to the group.
We are serious on our
conditions.
7. My road ahead
To make the poor ready to receive the ball.
To make the rich pass the ball to the poor.
To make the poor ready to receive the ball.
To make the rich pass the ball to the poor.
Mechanisms• Shuttle bus
• Microcredit
• Capacity building
Autonomous mechanism after the market size exceeds their capacities.
On the poor’s side
• Use “Spillover model” to prove that these measures will make some poor households ready for tourism:
• Shuttle Bus Service
• Microcredit for operational capitals
• Capacity building
• Use Logit model to predict which household will participate into tourism.
• Use Tobit model to predict the tourism income that the participating households will earn.
On the rich’s side
• Find the threshold.
• Find the carrying capacity.
• Simulate with Village CGE how much the market expansion will benefit the poor.
Carrying capacity
Time
Market size
Maximum
tourism income distribution
that can be achieved
My thesis will be finished here.
To find the maximum tourism income distribution
Goal of thesis
When all villagers share burdens of tourism, they should have opportunity to share benefits from it.
Why I am on the same side with the poor?