Tourism as long run determinant of economic growth in Malaysia

Background of the survey

Tourism can be defined as for concern intents, going and for recreational activities. Peoples with the leisure intent going to many topographic points which is topographic points of their involvement. It creates demand and supply in touristry industry that will impact on economic growing in a peculiar state. Beside that, touristry industry consists of facets that contribute income in many sectors such as ecotourism, athleticss touristry, medical touristry and etc. These can be attracted by people to see or go to the peculiar state. Malaysia has been known as tourer finish through the Visit Malaysia and Malaysia genuinely Asia and other motto. As there is betterment on the development of the industry, there besides the increasing tourer reaching in the state. Domestic touristry and international touristry are the assets of this industry to act upon development of the other sectors such as transit, adjustment and nutrient industry to be advanced.

Problem statement

Determination factor that influence the growing in economic based on touristry.

Is touristry truly give upper limit impact to economic growing?

Research aim

The aim of the survey:

To place the relationship between the economic growing, touristry demand, GDP, tourer reaching and international tourer.

To gauge the development of touristry in Malaya

To find the factors those influence the touristry growing in Malaysia.

To find the possible range under the touristry field

Scope and restriction of the survey

This survey focuses on finding the relationship between the economic growing and touristry field. To find the independent variables and dependent variable whereby associated with others, the important of the variable is necessary.

The procedure of finishing this survey has several restrictions consist of:

Time consume to derive the informations related to the tourer outgo on each of the field in touristry constituents that contribute gross on it. Tourism range including the fluctuation of touristry line such ecotourism, agribusiness, dark touristry, nature touristry and etc.

The restriction of garnering the information via an cyberspace. It can non be accessed swimmingly for the informations watercourse information.

There was bureaucratism for authorities

Significance of the job

This determination will give some recommendation or thoughts in bettering the touristry industry locally and internationally. Therefore, the of import informations which included in the independent variables and dependant variable have to mensurate accurately.

Chapter lineation

Literature Review


Tourism is one of the of import sectors in the universe because it creates many benefits for the state itself. Domestic touristry and international touristry generate more income twelvemonth by twelvemonth and cut downing the unemployment rate of a peculiar state. Together with related activities, touristry and general travel non merely stand for 11 % of universe GDP, but exports of touristry services are about 6-7 % of entire exports of goods and services ( Roe, Ashley, Page and Meyer, 2004 ) . ” Nowadays, touristry represents one of the most of import and dynamic sectors in the universe economic system ” ( Neto, 2003 ; Balaguer and Cantavella- Jorda , 2002 ; Jamieson, 2000 ; Lanza and Pigliaru, 1999 ) . The constituents of touristry such as transit, amusements, and attractive forces create tourism demand among the tourers. Harmonizing to Tohamy and Swinscoe, ( 2000 ) , ” however, the part of touristry activity to a state ‘s economic system is non easy recognized non merely because touristry involves many different merchandises ( such as transit, mails, amusement, etc. ) but besides because some merchandises ( for illustration, a repast in a eating house ) can be sold to both tourers and local occupants. In this sense, touristry does non stand for a clearly identifiable industry ” .

Tourism Demand

The touristry demand in Malaysia is determine by the touristry monetary value, going cost and income. By the publicity through the Malaysia truly Asia, Malaysia may act upon the foreigner or foreign to see this state. Therefore, transporting capacity is necessary to be counted so that there is no over welcomed of visitant. It is used to avoid rising prices in Malaysia or even Southeast Asia. Asiatic present is an of import finish for international touristry. It has been known locally and internationally around the universe. As tourer finish, it besides affects Malaysia as a determiner for long tally investing in our state. The figure of tourers ‘ journeys increased from 25 million in 1950 to 700 million in 2003, and is predicted to make 1.6 billion in 2020 ( WTTC, 2006 ) . As touristry is one of the sectors contributes income in a state, little or big state may bring forth the income from the industry if their has adequate substructure and installation. International touristry has going a major foreign exchange earner for many low-income states and little islands, and it is a chief export for 83 % of developing states ( WTO, 2002 ) . Mohd Hafiz M.H et. Al ( 2010 ) found that an addition in GNI per capita cause addition in tourer reaching. Gravity theoretical account used to demo the form and tendency of people visit this state. Demand in touristry is depend on GNI, CPI, population and exchange rate. Norlida H. et. Al ( 2007 ) stated that the short tally and long tally is important with the variable they used by utilizing the ARDL model. ARDL is appropriate theoretical account to be used because it is suited for little graduated table in their instance.

Growth in little state

Harmonizing to Easterly and Kraay ( 2000 ) , a corollary of our findings is that the function played by the touristry sector should non be ignored by the argument about whether littleness is harmful for growing. By their determination, it can be concluded that littleness of the state will non harmful the economic public presentation of the state itself. But there are some position that graduated table of the state is really affect the turning the economic system. Grossman et. all ( 1991 ) and Aghion at. all ( 1998 ) , grounds for being pessimistic are non hard to happen in the literature, particularly in endogenous growing, where scale effects frequently play a function in the finding of an economic system ‘s growing rate. For the underdeveloped state, it does n’t intend that little state will acquire the disadvantages because if the state concentrating on the industry, it will maintain turning faster than the other states.

Impact on economic system

Cortes-Jimenez and Pulina ( 2006 ) explored the effects of foreign exchange, specifically touristry on economic growing. Tourism has large potency to economic growing in Malaysia and even in the universe. With the development, new engineering, substructure and transit provided, there is increasing in tourer reaching in Malaysia. The impact non merely give benefit to the industry itself but it helped in keeping the stableness of economic growing based on the investing. If touristry determine the long tally subscriber for economic growing, it can be a chief sector to the state. Gabriel J. at all ( 2008 ) has tested utilizing the Granger causality and Johansen analysis to demo the cointegration between the touristry outgo, existent exchange rate and economic growing. It is found that there is weak relation between the variables and so as after use the modified Granger. It gives positive impact after a spot downswing.

Harmonizing to Balaguer Al ( 2002 ) , ” it is found that there is relation between the economic growing and touristry. It has been tested utilizing the Johansen cointegration enlargement which is they think is suited for place the nonstationary variables. ”

Impact on employment

Private sector such travel bureau and circuit operator had doing concern which is create the chance occupations and increased public disbursement will go on to play their portion in future economic growing. However, touristry besides creates the negative impact to the state that is leakages. As the touristry quickly increases, there are some revenue enhancements, rewards and gross paid and reassign outside of the state. The developing state has faced this state of affairs. Harmonizing to Pleumarom ( 1999 ) , in this manner, big per centums of travellers ‘ outgos leave the local economic systems, more than two-thirds of the grosss from international touristry, sometimes, do non make the local economic systems.

International tourer reaching

Factor that contribute to tourism growing non merely by the local tourer but including the international tourers that have come in different intents. Harmonizing to Lim ( 1997 ) , “ nearlt 80 % of empirical surveies on touristry demand or reachings used individual equation of linear or log additive equation because the estimated coefficient can be interpreted as snaps.

Tourist outgo to economic growh

Based on the theory of Eugenio-Martin et Al. ( 2004 ) , “ the part of touristry to economic growing of South-East Asian and Pacific states was analyzed working a dynamic panel informations theoretical account ” .

I”yit= cons + yit + Xit + I

which can be related to tourist outgo influenced by population of tourer reaching in the peculiar state


Theory and theoretical account specification

This survey measured by the statistical method to analyse the information collected. The informations such as international tourer reaching, GDP per capita, tourer outgo for each sector related, and touristry demand from 1990 to 2010. It will be forecasted in five old ages gross for future development. To turn out the relationship between the dependant variable and independent variables, the pool OLS attacks will be usage to mensurate the information collected. Unit roots will be used to mensurate whether there is important each of the independent variables in different degree. Econometricss methods which is about Eviews will be used to calculate development of touristry industry in this state.

Theoretical model

Gross Domestic merchandise

International tourers reachings

Economic growing

Tourist Outgo

Tourism demand



Aim of the survey

Problem statement

Methodology used




Norlida Hanim et. Al ( 2007 )

To place and foretell the importance of the factors that will impact tourer reaching to Malaysia, from the specific part. Singapore, Japan, Hong Kong and


Other cardinal factors that contribute in touristry such as transit, amusement and nutrient industry.


By cointegration, the void hypothesis of no cointegration is rejected.

Short tally and long tally is important with the variable

M. H. Mohd Hanafiah and M. F. Mohd Harun ( 2010 )

To estimations tourism demand in Malaysia

based on the cardinal economic factors

Gravity theoretical account: it used to pull the analogy to explicate about the tendency and form and migration of people.

1 % addition in GNI per

capita of the beginning states, it would increase 0.463 %

tourer reachings to Malaysia. 1 % addition in CPI ratio, diminish 5.16 % tourer reachings in Malaysia. 1 % in CPI of Malaysia has lend 5.366 % .

An economic crisis is non act upon the touristry form the Asiatic states. But it is positively affected for Western state.

Edgargo Sica ( 2005 )

To verify if touristry represents a determiner of growing in such states.

Contribution to economic growing non clearly recognized, since touristry is non a clearly identifiable industry.

Pooled OLS


For Pooled OLS, R2 = .99. It shows the variables is important at 15 degree.

For Arellano-Bond it shows X2 = 6.58 with a p-value = 1.00. Therefore, the void hypothesis is non rejected.

There is relationship between the touristry and economic growing. It means the industry contribute income for the peculiar state.

Mori Kogid,

Dullah Mulok,

Lim Fui Yee Beatrice,

Kasim Mansur

To look into the factors that influence and keep the economic stability.To look into the relationship and causal form of several

deciding factors.

Determining assortments sectors that is determiners to economic growing

Johansen attack multivariate cointegration analysis and Error Correction Model ( ECM ) attack

It shows that there is more than one cointegrating vectors whereby there are four cointegrating vectors between the GDP and other variables.

Consumption outgo and exports play an of import function in hiking economic growing in Malaysia.

Rinaldo Brau et. Al ( 2003 )

To compare and analyze the economic public presentation about 14 states from the 143 sample since 1980 until 1995

Measuring the little states when specialize in touristry, it can go disadvantage or good.

Solovian growing theoretical account

1 % assurance interval represents addition of 10 % in the ratio of touristry grosss to GDP 9 is associated to an

addition of 0.7 % in the one-year growing rate of per capita GDP.

The coefficient of the new synergistic variable is important and its value is big.

Balaguer J. at all ( 2002 )

This paper examines the function of touristry in the Spanish long-term economic development.

Johansen ‘s cointegration

It estimates long-term or cointegration relationships between non-stationary variables utilizing a maximal likeliness process which tests for the figure of cointegrating relationships and

estimations the parametric quantities of those cointegrating relationships

The cointegration consequences provide grounds of the being of a unique

cointegrating vector. Therefore, the reading of its estimations should be straightforward.

The analysis shows, so, that a long-term stable relationship between economic growing and

touristry enlargement exists.

Gabriel J. at. all ( 2008 )

This paper investigates possible causal

relationships among touristry outgo, existent exchange rate and economic growing by utilizing quarterly informations.

Does the touristry sector cause

economic growing and/or can it be a cardinal factor for the Mexican economic system

Johansen cointegration analysis.

Granger Causality

The corresponding snap of touristry outgo has a important consequence on economic growing

Cointegration relationship bespeaking that touristry positively

affects economic growing over clip

Chor Foon Tang ( 2010 )

The research note attempts to re look into the cogency of touristry led growing hypothesis for Malaysia based on the information set of 12 different touristry market from January 1995 to February 2009

One of

the pre-test advantages of utilizing disaggregated

information is that it will offer a better account on

the function of each touristry market on economic

growing in Malaysia because non all international

touristry markets contribute to economic



bivariate theoretical account ( monthly informations )

non all the international touristry

markets contribute to economic growing.


the variables under probe are integrated

of order one, I ( 1 ) procedure.



Data, Population Sampling Methods

For finishing this survey, informations is of import to obtain the accurate determination subsequently. This survey used the information from 1990 to 2010, retrieving 20 old ages. The population including the Malayan population and sample of population from other states which keep contribute in touristry outgo.

Y=I?o + I?1TA+ I?2Exp+I?3GDP


This paper sing the factors that lending gross to the state through the touristry sector utilizing the OLS theoretical accounts and Econometricss.