SOPORTE DE CUCHILLA

Between 2003 and 2008, the international visitor arrivals and receipts increased significantly in the country. More visitors’ expenditure means more money re-circulated in the economy with more multiplier effects resulting in higher economic impacts in the economy. The findings revealed that the economic impact of tourism varied by visitors’ country of origin. Europe, North America, SEA countries, East Asia and Thailand are the major source markets for Lao PDR’s international tourism. Europe, North America, SEA, East Asia, and the Pacific contributed comparatively lower arrivals but higher tourism receipts to the economy. The visitors from the five GMS countries contributed higher arrivals but less total receipts to the economy because of their shorter stay and lower per capita daily expenditure.

The results show that the visitors spent most on accommodation, food and beverages, and retail trade. The visitors’ expenditure in local transportation was small. This is because visitors from neighbouring countries (such as Thailand, Vietnam and Yunnan-China) used their own vehicle to visit the Lao PDR. Further, long haul visitors may be purchasing air tickets from their country, which results in lower direct expenditure on transportation in the Lao PDR. The results also show that overnight visitors had a greater impact on accommodation and entertainment and recreation and day visitors on retail trade and food and beverages. Visitors who stayed longer spent more thereby increasing the tourism income to the economy. This results in higher multipliers and higher direct, indirect and induced impacts. For example, in 2009, the average length of stay of a tourist was 6.83 days, with a per capita expenditure about US$36 and total arrivals of 1.74 million in the country. The

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results suggest that if the average expenditure is increased by four dollars a day and the average stay by one day then the economy will receive additional receipts of US$200m per annum from the two million tourists currently visiting the country.

The primary tourism sectors, such as recreation and entertainment, and retail trade produced higher output multipliers whereas the food and beverages and recreation and entertainment sectors exhibited higher income multipliers. Retail trade, food and beverages, and entertainment sectors showed higher value added multipliers. Similarly, the accommodation, food and beverages, and recreation sectors produced higher employment multipliers among the seven primary tourism sectors. The accommodation and retail trade sectors exhibited higher import multipliers indicating significant leakages from these sectors’ activities.

Tourism contributed more to the national GDP in 2008 than in 2003. However, the tourism multiplier leakage ratios exhibited relatively higher value in 2008 (28%) than in 2003 (24%). This is because the growth of tourism imports increased at a greater rate than the growth of intermediate activities and the exports in the latter year. Overall, the service sector’s contribution to the value added was higher than the agriculture and industry sectors in 2008. The value added by the tourism sector increased at higher rate than the overall national value added annual increment for the same period.

The higher output multiplier in 2008 indicated that the tourism sector relied more on the country’s domestic production system. For every dollar spent by a tourist the total output generated 1.54 (2008) and 1.41 (2003) times in the economy. This indicated that the sector generated more output by 13 cents per dollar expenditure as total outputs from the economy in 2008 than 2003. In other words, a one dollar visitors’ expenditure multiplied 1.54 times in the economy in 2008. Tourism generated significantly higher output than the average output of all economic sectors in the Lao PDR for both years. Fletcher (1989) reported tourism output multiplier rates across the globe range from 1.39 in Samoa to 2.96 in Turkey and Mazumder et al. (2009; 2011) found the tourism output multiplier was 1.42 in Malaysia.

The study findings show that tourism output multipliers are larger than those for the industry and agricultural sectors in the country. This is because the service sectors are more labour intensive and the majority of the direct cost goes to purchase raw materials and other inputs in the agriculture and industry sectors. A study by the University of Vermont (1999) revealed that larger geographic areas will have higher multipliers because of more diversified

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economies and less leakage. Multipliers will be lower in smaller nations such as Lao PDR because tourism spending may be subject to more leakage (Frechtling & Horvath, 1999).

The high output multiplier of the tourism sector also revealed that the sector provided a stimulus effect to increase the output of other economic sectors, such as food and beverages, wholesale and retail trade, agriculture and livestock and banking and finance. However, the tourism income multiplier is small, revealing more imports, and the sector is not particularly significant for income generation due to skill shortage, and tax and imports are relatively high in the sector. The low income multiplier implies that tourism’s primary impacts created larger income effects than the indirect and induced impacts. The low income multiplier of tourism also showed that the sector significantly depends on foreign employees resulting in a high level of income leakage from the economy.

The large value of the import multiplier shows that the tourism sector depends significantly on the import of tourism goods and services in the country. Frechtling and Horvath (1999) reported that a large value of the import multiplier is associated with a large output multiplier. The Lao PDR tourism sector exhibited high import and large output multipliers for both years in our study. Tourism imports were higher in 2008 than in 2003 implying that domestic suppliers were constrained in their capacity to deliver the regular and required quantity and quality of tourism goods and services in the country. Lejarraja and Walkenhorst (2007) and Heng and Low (1990) emphasized that tourism linkages require a broad array of supporting services and manufacturing sectors in order to minimize the leakage. Nevertheless, tourism is an important sector in generating business tax revenue and contributed 8.4 percent to the Lao PDR’s total tax revenue in 2008 because the visitors’ consumption can be taxed efficiently.

The services sector was the most important sector in 2008 replacing agriculture which created the highest employment in 2003. The tourism sector ranked as the fourth largest sector in terms of employment in 2003 and improved to third in 2008. Furthermore, the tourism sector created the highest number of new jobs among the 14 economic sectors observed during the study period. The results indicate that the tourism sector is labour intensive, whereby a high percentage of the revenue goes to wages and salaries that make the indirect and induced impacts very important in the economy. The large employment multiplier in the tourism sector is due to the combined effects of the low-skilled people available for the jobs and the high dependence on foreign workers in the country’s tourism sector. Similarly, the higher indirect and induced impacts in the tourism employment suggest that there was more employment generated by the indirect impacts of the tourism sector in 2008 than in 2003. The

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significant indirect employment increment in the tourism sector revealed that the sector was purchasing and selling its products and services within the economy.

The findings demonstrated that in 2008, tourism accounted for US$424m in output, US$94m in income and US$119m in value added in the country’s economy. Specifically, for every million dollars spent by the visitors in the country, an additional US$544,260 worth of output is generated, personal income increases by US$344,780, value added created is US$412,060, tourism business taxes increase by US$139,600 and 68 direct and 41 indirect jobs are created in the country’s economy.

The results showed that the tourism sector generated higher effects of 1.38 (1.29: 2003), 1.77 (1.53: 2003) and 2.26 (1.89: 2003) as direct, indirect and induced impacts, respectively, in 2008. The visitors’ expenditure of US$275m generated US$382m direct, US$489m indirect and US$624m induced impacts in the economy in 2008. Further, the LNTA (2010) has projected the gross tourism receipts to be US$326m in 2013, US$364m in 2015 and US$457m in 2020. Given these indicators, any changes in the tourism sector significantly affect the economy-wide impacts in the output, income, employment, import and value added parts of the economy. For example, to fulfil the LNTA’s projected additional tourism demand of US$85m by 2013, our study estimated that the economy must produce US$131m of total outputs. To meet this tourism demand, the tourism sector must produce 67 percent (US$87m) and the inter-linked sectors must produce 33 percent (US$44m) of the total outputs.

The results revealed that both the normal and ratio multipliers were higher for the tourism sector than most of the other economic sectors in 2008. The higher ratio multipliers reflect the higher secondary effects of outputs in the tourism inter-linked sectors of the economy. Comparing the tourism economic indicators between 2003 and 2008, the findings of the output, value added and employment multipliers showed that the tourism sector influences the economy more substantially and the domestic economy was more diverse in 2008.

7.1.2 Research Objective Two: interdependency, inter-industry linkages and