Yang Ming Shan

Yang Ming Shan

Wednesday, April 18, 2012

Examining the existence of long-run relationship between East Asian economic integration and ASEAN tourism exports

Introduction East Asian countries are important partner for ASEAN’s countries. Comparing with other region, East Asian countries have more intensive relationship and partnership with ASEAN. Their cooperation involved almost all aspect in economic activities. Although East Asian countries have big volume on international trade, they do not have the regional institution yet. Indeed, East Asian also needs the existence of ASEAN as growth regional organization in Southeast Asian. Hence, both regions have large cooperation, especially for long term purposes. Both regions have strong relationship in economic integration and trade. The paper that I am reviewing here examined the existence of long-run relationship between East Asian economic integration and ASEAN tourism exports. This paper used Johansen’s Fisher panel co integration test to examine that relationship. The paper covered that tourist arrivals and trade ratios are co integrated in seven out of nine Southeast Asia countries. This suggests that East Asia economic integration can be one of the important factors that influence international tourism demand to ASEAN countries in the long-run. However, for Laos and Thailand, the tourist arrivals and trade ratios are not co integrated. The author use tourist arrival as a proxy for tourism export and trade ratios as a proxy for economic integration Highlighted Points In the early 1990s, ASEAN members established the ASEAN Free Trade Area (AFTA), the ASEAN Framework Agreement on Services (AFAS) and the ASEAN Investment Area (AIA) agreement, with the purpose of accelerating economic integration and attracting more foreign direct investment. Furthermore, since the occurrence of Asian Financial Crisis in 1997-98, East Asian countries have committed to fostering financial and macroeconomic stability. Hence, in 2002, China, Japan and South Korea joined ASEAN during the Chiang Mai Initiative (CMI) and formed ASEAN+3. Its objectives are to build business partnerships in trade, investment liberalization and other areas of cooperation. There is some evidence showing that East Asian economic integration leads to strong trade growth in the region. Figure 1 shows that exports to ASEAN from the main East Asian countries in 2009 have surged dramatically compared to the year 1999. For instance, China’s export to the ASEAN region in 2009 was US$97 billion (in nominal terms), which is approximately eight times the value in 1999. During the same period, Singapore’s export to ASEAN countries surged from US$35 billion to US$82 billion, whereas Indonesia’s export increased from merely US$8.3 billion to US$24 billion. Similarly, the value of imports from the main East Asia countries to the ASEAN members has grown significantly between 1999 and 2009 (Figure 2). The value of imports from ASEAN countries to China was the highest, reaching a record of US$98 billion in 2009 compared to US$15 billion in 1999. In addition, Indonesia’s import from ASEAN countries in 2009 was US$44 billion, which is about nine times the import value in 1999. These trends, for imports and exports, were evident for all 13 countries albeit from a very low base for countries such as Brunei, Cambodia, Laos and Myanmar. Figure 1 Figure 2 The author not only shows the strong relationship between East Asian’s countries and ASEAN main point to highlight the growth of both regions economic cooperation. Indeed, the author also describe the Gross Domestic Product (GDP) to convince that the economic cooperation among them have contributed to the growth and strength their economic through GDP index. Alongside the surge in trade, data for nine of these countries indicates that there has been a sign of considerable economic growth over the same period. The average annual growth in GDP per capita in China between 2006 and 2009 was 21.2% which is the highest, followed by Indonesia (16.1%). Despite some countries experiencing decline in income between 2008 and 2009, their average annual GDP per capita growth remained strong (except for South Korea). For instance, Vietnam’s GPD per capita increased about 14.9% each year from 2006 to 2009. Given the same years, the annual GPD per capital growth for Philippines and Thailand were 11.2% and 10.1%, respectively. These figures suggest that household income and the standards of living in East Asia countries are improving. Moreover, the improvement of these economies may indicate that intra-regional and inter-regional travel has become affordable for their citizens. As East Asian countries have demonstrated economic cooperation with each other, the economic integration could stimulate the region’s tourism industry. In fact, for ASEAN members, the majority of international tourists in 2009 were those from ASEAN members themselves and more specifically, from South East Asia (49.6%) excluding China (See Table 1). Furthermore, China and Japan ranked third and fourth among the top ten sources of tourist arrivals to ASEAN countries. Hence, as argued by Timothy (2003), the growing trading relationships mean more business travelers and a trend that is also enhanced by removal of international travel restrictions in some ASEAN countries. Table 1 The author try to question the East Asian economic integration influence the collective ASEAN tourism industry and each members countries’ tourism industry. The author tries to see the East Asian economic integration from the ASEAN tourism perspectives. International tourism is important for ASEAN governments as it creates job opportunities in service industries, increases foreign exchange earnings and encourages tourism investment. Because of its importance to economic growth, since the 1990s, the ASEAN governments agreed to increase their cooperative in tourism promotion efforts. In 1992, ASEAN members designated the year as the “Visit ASEAN Year” to promote South East Asian countries as one travel destination. Then, in 1998, they passed the Plan of Action on ASEAN Cooperation in Tourism and established the Ministerial Understanding on ASEAN Cooperation in Tourism (ASEAN, 1998). Tourism development in South East Asia is also uneven across the region, with the countries generating the most tourism revenue in 2008 being Thailand, followed by Malaysia and Singapore. These countries have better tourism infrastructure and facilities and hence, most tourists would prefer to visit these destinations. Conversely, Laos generated the least tourism revenue, because of poorly maintained roads and limited tourism facilities in the country (Phakdisoth and Kim, 2007). While developed ASEAN members were interested in assisting the less developed members with their tourism developments, this collaboration did not progress well as The ASEAN Secretariat lacked the necessary financial resources and expertise (Wong, Mistilis and Dwyer, 2010). It is clear that economic integration occurred concurrently with economic growth and intraregional travel as well as for many countries, with strong performance in generating tourism revenue. However, this information by itself does not prove that economic integration is responsible for the improvements observed in the performance of ASEAN travel industries. This preliminary study investigated whether long-run relationships exist between East Asia economic integration and tourism exports in each ASEAN state, covering the 12 year period 1996-2007. In this paper, the author employed tourist arrivals data as a proxy for tourism exports and trade ratio as a proxy for economic integration. Using various panel unit root tests, the tests suggested that the tourist arrivals data are non-stationary for most of the ASEAN states, but there was a mixture of orders of integration for the trade ratios variables. Conclusion and Personal Opinion The article “Examining the existence of long-run relationship between East Asian economic integration and ASEAN tourism exports” that written by Ghialy Yap in 2010 shows comprehensive data analysis to convince the existence of relationship between East Asian economic integration and ASEAN tourism exports. The analysis of this article answered the research question on East Asian economic integration influence the collective ASEAN tourism industry and each member countries’ tourism industry. Another strength point of this article is the data-written which updated and comprehensive to involve all countries-written herein. But the problem has come from the analysis of the author towards the result-number of calculation according to the equation that the authors used. It has seen that the author has not deep analysis. The strong relation among the variables here only strengthen by the qualitative wherein it may say that result-number were useless. In my personal opinion, the result-number that the author has been calculated to show the relationship between East Asian economic integration and ASEAN tourism exports must examine the theory herein also. For example, when the author said that Laos and Thailand are the exception, hence, it should be positioning the theory, therefore it would benefit for further research. But, as reviewer, I see that this article is very comprehensive and updated to the issues related the research question-offered here. Article Source: Yap, Ghialy (2010). Examining the existence of long-run relationship between East Asian economic integration and ASEAN tourism exports. Available at Joondalup: Edith Cowan University.

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