A look into tourism in ASEAN, and how we can optimize this sector for growth
BY EUGENE CHONG
Tourism accounts for roughly 4.6% of ASEAN GDP and 10.9% when taking into account all indirect contributions. It provides jobs for 9.3 million people, 3.2% of total employment, and indirectly supports approximately 25 million jobs (World Economic Forum, 2012). With 9.7% growth from 2012 to 2013 in international tourism receipts, and 10.5% growth in international tourist arrivals, the Southeast Asian region achieved the highest tourism growth rate in the world, above Europe and America (UNWTO, 2014). Clearly, tourism is very important for ASEAN members.
However, deeper research finds perplexing patterns in tourism performances of individual ASEAN countries. Singapore, for example, draws 20 times more tourists per capita and 30 times more receipts per capita than the ASEAN average. (World Economic Forum, 2012)
If ASEAN intends to exploit the tourism industry as leverage for strong economic growth, it needs to look into patterns such as disparity in revenues, and focus on value tourism instead of attracting tourists but not their money. This will likely create trade surpluses in individual ASEAN countries, enabling prospects of investments in capital. Intuitively, high tourist arrivals with low revenues may even represent a loss to the host country, taking into account the social and economic costs of providing the necessary services and infrastructure, such as immigration costs, airport maintenance costs and cleanliness costs.
We now turn to examining the problems in our tourism sector. Malaysia recorded 27,437,315 tourism arrivals in 2014, generating $16.69 billion in revenue. However, Thailand with lower tourism arrivals of 24,779,668 raked in double ($38.4 billion) despite political instability. Another case of higher tourist arrivals but lower revenue includes Myanmar; with 3.05 million arrivals, they generated $1.14 billion in revenues, double of Laos’ despite Laos bringing in more tourists. It should be noted that Brunei, with its lack of tourism policies, has been the laggard in ASEAN with just 250,000 to 270,000 arrivals, which poses a different problem of inadequate government initiatives (Saddique, 2015).
Our problems are now discerned as inefficient revenue generation and insufficient government efforts in tourism. For the first issue, we can infer various reasons for this phenomenon. Turning to tourist compositions, we find that while Malaysia has consistently been one of the top contributors to tourist arrivals in ASEAN, a large proportion of these arrivals are intra-ASEAN, with half of them coming from Singapore. In contrast, Thailand’s tourists hail mainly from outside Southeast Asia, chiefly China (ASEAN, 2015).
Visitors to Malaysia spend RM465 per person per day on average, as compared to visitors to Singapore who spend SGD 471, more than twice the average spending when both are converted to US Dollars (Bahar, 2014). We can attribute this to the fact that Singaporeans (who are the majority of tourists in Malaysia) are budget travellers, despite their significantly higher purchasing power. This is because the geographical differences are nearly non-existent while the cultural differences are relatively small. Singaporean tourists have remarkably similar travel patterns to the local travellers, meaning they visit less paying-museums, fewer foreign tourist attractions and such other habits. We can form the conjecture that such tourists who are familiar with the local lifestyles would tend to search for value rather than novelty.
Conversely, tourists from significantly different cultures tend to be larger spenders, which may explain the high tourist expenditure in Thailand by Chinese tourists. Also, given the strong economic growth of China, a higher purchasing power may help tourist expenditures.
Analysing the Travel & Tourism Competitiveness Index 2015 (TTCI), we can find a significantly poor level of infrastructure, in terms of air, ground and tourist services, in all the ASEAN countries with exception of Singapore (World Economic Forum, 2015). This pulls the rankings of ASEAN countries in the TTCI down, making us less competitive in tourism as a region. This analysis also shows Singapore’s only major weakness is price-competitiveness, which should be looked into. Singapore placed 11th in the Travel & Tourism Competitiveness Index (TTCI) in 2015, while Malaysia placed 25th. The rest are lagging behind and need some improvement in competitiveness (Statista, 2015).
For the second issue, we can deduce lack of funding to make such policies unfeasible. Most countries cannot afford to spend money promoting their tourism sector when there are more pressing domestic issues at hand, and those that can usually channel their funds towards other sectors. For example, government spending in Myanmar is moving towards education and social equality, which are more pressing issues. As shown below, with the exception of Indonesia, ASEAN countries do not place much emphasis on investment in tourism.
Source: Arangkada Philippines, 2010
Having identified our pitfalls, we now search for potential solutions to overcome these hurdles. China’s tourism expenditure in 2013 topped the charts at $129 billion, making it the target country of consideration. The USA and the UK have also been strong tourists, ranking 2nd and 5th in terms of tourism expenditure, making them good target markets. China, Russia and Brazil have been major drivers of outbound tourism in recent years. In 2013, they accounted for some US$ 40 billion of the total US$ 81 billion increase in international tourism expenditure (UNWTO, 2014). We can thus infer that our efforts should be aligned to draw in tourists from these countries to raise our tourist expenditure per capita figures.
We can also consider facilitating tourism by establishing more low-cost carriers to Southeast Asia. Since December 19, 2015, Eurowings, another low-cost carrier, has been offering direct flights between Europe and Southeast Asia (Jaengjamras, 2015). It is the second budget carrier to launch Southeast Asia flights after Norwegian started connecting Scandinavian cities with Bangkok in 2013. Eurowings serves Europe’s low-cost market by offering among the cheapest fares to Bangkok and Phuket, with the airline claiming that its operating costs will be 40 per cent lower than its parent company Lufthansa (Maierbrugger, 2015). This opens up greater connectivity between Europe and ASEAN.
Another step to consider is the implementation of the ASEAN common visa and visa exemption for select countries. Indonesian President Joko Widodo’s tourist visa exemption policy, now eligible for citizens of 45 countries, has positively impacted arrival numbers in Bali. We need to note, however, that this visa exemption policy will require eligible countries to provide reciprocity, implementing a visa-free policy for Indonesians to enter their country, as well. Some countries, such as France, commented that they welcomed the visa-free policy to enter Indonesia, but are unable to provide the same policy for Indonesians (Huang, 2015).
This brings us to the consideration of the common visa, of which smaller schemes such as the Cambodia-Thailand single visa have already been implemented and they have proven to be successful. We should deliberate the possibility of such an endeavour for ASEAN as a whole. Our visa-free travel policy between ASEAN countries have generated positive results for intra-ASEAN tourism, so this should complement our existing policy to boost extra-ASEAN tourism. However, there are numerous issues involved from management, security, education, training programmes and law enforcement to ecological and environmental management, and greater research should be conducted on this first. (Joy, 2014)
Visit ASEAN Year
ASEAN will launch a Visit ASEAN Year campaign to promote the region, but it is not the first time that ASEAN has declared a Visit Year. Past efforts, however, had a limited impact due to a lack of funding (Ngamsangchaikit, 2015).
To conclude, tourism is a crucial aspect of ASEAN’s economy; therefore, we need to rectify issues of revenue generation and insufficient funding. We can somewhat neutralise them through focusing on non-ASEAN tourists, improving connectivity, common visa and visa exemption schemes and better campaigns.
Arangkada Philippines, 2010. Background (TMTR). [online]. Available at: <http://www.investphilippines.info/arangkada/seven-winners/tourism-medical-travel-retirement/background-tmtr/> [Accessed 20 December 2015]
ASEAN, 2015. Tourism statistics. [online]. Available at: <http://www.asean.org/news/item/tourism-statistics> [Accessed 20 December 2015]
Bahar, J., 2014. Is Malaysia’s local market saturated? Kuala Lumpur: Spire Research and Consulting Sdn. Bhd. [presentation]. Available at: <http://www.slideshare.net/spireresearch/140614-franchise-international-malaysia-2014-conference-is-malaysias-local-market-saturated> [Accessed 20 December 2015]
Huang, C., 2015. Success of Indonesia tourist visa-free policy highlights Australia row. Investvine, [online] Available at: <http://investvine.com/success-of-indonesia-tourist-visa-free-policy-highlights-australia-row/> [Accessed 20 December 2015]
Jaengjamras, P., 2015. Phuket landing a first for European budget airline into Southeast Asia. Phuket Gazette, [online] Available at: <http://www.phuketgazette.net/phuket-news/Phuket-landing-first-European-budget-airline-Southeast/62685> [Accessed 7 January 2016]
Joy, S., 2014. ASEAN countries working towards Common Visa. The Financial Express, [online] Available at: <http://www.financialexpress.com/article/travel/latest-updates-travel/asean-countries-working-towards-common-visa/18434/> [Accessed 20 December 2015]
Maierbrugger, A., 2015. German budget carrier launches Thailand flights. Investvine, [online] Available at: <http://investvine.com/german-budget-carrier-launches-thailand-flights/> [Accessed 20 December 2015]
Ngamsangchaikit, W., 2015. ASEAN Visit Year 2017. [online]. Available at: < http://www.aseanvisa.com/> [Accessed 20 December 2015]
Saddique, I., 2015. Malaysia keeps topping ASEAN tourism arrivals. Investvine, [online] Available at: <http://investvine.com/asean-tourism-arrivals-top-10/> [Accessed 20 December 2015]
Statista, 2015. Leading countries in the Travel & Tourism Competitiveness Index (TTCI) in 2015. [online]. Available at: <http://www.statista.com/statistics/186639/best-ranked-countries-in-the-travel-and-tourism-competetiveness-index/> [Accessed 20 December 2015]
UNWTO, 2014. International tourism generates US$1.4 trillion in export earnings. [press release] 14 May 2014. Available at: <http://media.unwto.org/press-release/2014-05-13/international-tourism-generates-us-14-trillion-export-earnings> [Accessed 20 December 2015]
World Economic Forum, 2015. Index Results – The Travel & Tourism Competitiveness Index Ranking 2015. [online]. Available at: <http://reports.weforum.org/travel-and-tourism-competitiveness-report-2015/index-results-the-travel-tourism-competitiveness-index-ranking-2015/> [Accessed 20 December 2015]