31 Journal of Vacation Marketing Identifying economically potential inbound markets for Malaysian tourism industry

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2011 17: 31Journal of Vacation MarketingMohammad Nurul Huda Mazumder, Elsadig Musa Ahmed, Md. Wahid Murad and Abul Quasem Al-Amin

Identifying economically potential inbound markets for Malaysian tourism industry

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Academic Paper

Identifying economicallypotential inbound marketsfor Malaysian tourismindustry

Mohammad Nurul Huda Mazumder and Elsadig Musa AhmedMultimedia University, Malaysia

Md. Wahid MuradUniversity of South Australia, Australia

Abul Quasem Al-AminUniversity of Malaya, Malaysia

The key objective of this study is to determine and analyze the impacts of inbound tourism on theMalaysian economy using an input-output analysis. With the view of accomplishing the key objective,this study also explores the economic potential of inbound markets for the Malaysian tourism industry.As central to any economic impact analysis, tourism multipliers are estimated from the inverse ofLeontief’s input-output matrix. The empirical results reveal two interesting observations concerninginbound tourism impacts on Malaysian economy. These are, firstly, tourism sectors that produce largermultipliers do not generate larger total economic impact, and secondly, inbound markets with highestper capita do not yield highest economic impact. Therefore, this study concludes that an economicsector with lower multipliers should not be neglected and that the contribution of inbound tourismmarket generating lower per capita expenditure should not be ignored when preparing appropriatetourism marketing and public policies for developing economies.

Keywordseconomic impacts, inbound markets, inbound tourism, input-output analysis, Malaysia

Introduction

The presence of a combination of several

industries and the absence of its inclusion in the

system of national accounts of many economies

make it difficult to quantify the total economic

impact of tourism industry in a simple way. As a

diversified industry, tourism industry generates a

variety of economic impact for which it has been

perceived to be a reliable source for economic

development for many developed and developing

nations. Developing countries, like Thailand or

Malaysia, have relied a great deal on their tourist

industries for economic growth (Chon et al.,

1993). Since, the non-traditional exports of devel-

oping countries have too often failed to prove

effective in economic development and so tourism

is increasingly seen as something of a saviour

(Durbarry, 2004). Its importance is gaining wide-

spread recognition as developing countries view

tourism industry as a cushion for their economic

development and growth. Previously undiscovered

regions of the developing economies of the world

continue to be the major player of world tourism

growth trend and promote this industry.

Corresponding author:

Mohammad Nurul Huda Mazumder, Faculty of Management,

Multimedia University, Cyberjaya Campus, Jalan Multimedia,

Cyberjaya 63100, Selangor, Malaysia

Email: [email protected]; [email protected]

Journal of Vacation Marketing17(1) 31–50ª The Author(s) 2011Reprints and permission:sagepub.co.uk/journalsPermissions.navDOI: 10.1177/1356766710391133jvm.sagepub.com

Economic impacts of tourism begin with an

injection of tourism receipts that generate multi-

plier effects on output or sales, revenue, employ-

ment, income, and not suffice to say contributing

significantly in infrastructural development of an

economy. In an attempt to measure the economic

impact of changes in the injection of inbound

markets tourist expenditure, it is important to

recognize that economic impacts occur across a

wide range of economic variables and at differ-

ent levels (Fletcher, 1989). Though primary

effects or direct impacts of inbound tourist

expenditure are those that occur within tourism

related establishments, the measurement of pri-

mary benefits provides incomplete picture of the

precise contribution made by tourism. Through

intersectoral linkages, secondary (indirect and

induced) impact of inbound tourist expenditure

affects almost all sectors of an economy. The

addition of secondary effects generates sufficient

additional income and employment to rejuvenate

the local economies (Fletcher, 1989; Hurley

et al., 1994) since secondary benefits or indirect

impacts are seen as better measure (Archer,

1982; Fletcher, 1989; Vaughan et al., 2000).

The economic impact process begins with a

unit injection of tourist expenditure in an econ-

omy and rests on the structure of the economy

and the nature of the expenditure pattern of

inbound market tourists. By measuring the

direct, indirect, and induced impact, total impact

of tourist expenditure is formed (Archer, 1995;

Gabe et al., 1996; Liu, 1986). The economic

impact process of inbound tourists’ expenditure

is shown in Figure 1. The accommodation sector,

however, is included in this figure to show how

the multiplier concept works. The same concept

can be applied to all other tourism related sectors

such as food and beverage, transportation, enter-

tainment, shopping, and miscellaneous services

sector.

Given its comparative advantages and poten-

tiality, tourism industry is now considered as one

of the most important engines of growth and

development for the Malaysian economy receiv-

ing vital focus in the government’s industrial

Direct household income

LeakagesInter-industry purchases within economy

Government revenue

All businesses

AccommodationFood and beverage

Transportation Entertainment Shopping Miscellaneous

Household purchases within economy

Savings Household purchases outside economy

Inter-industry purchases within economy

Secondary household income

Government revenue

Leakages

Household purchases within

economy

Savings Household purchases outside

economy

• Imports• Taxes• Non-resident

Remuneration • Insurance

Payments

Initial injection of tourist expenditure

Direct effect

Indirect effect

Induced effect

Total economic impact in generating:• Output• Income• Employment• Value added• Import

Figure 1. A structural or procedural diagram of flows of tourist expenditure reflects the multiplier effect oftourist expenditure (i.e. modified from referral authors) (Liu and Var, 1982)

32 Journal of Vacation Marketing 17(1)

strategy to promote the industry that is assisting

in balancing distribution of income. The devel-

opment allocation for this industry has increased

100 percent over the years from RM605.5 million

to RM1367.0 million between 7th and 9th

Malaysian plan period (EPU, 2001, 2006). As a

newly emerging industry, the industry not only

creates considerable high multiplier effects and

linkages in the economy, but also fosters national

integration and unity (GOM, 1991). As the growth

of tourism continues in Malaysia, tourism devel-

opment is viewed as an alternative economic

development tool. If this trend of tourism growth

in Malaysia continues, it may surpass manufactur-

ing sector which has been the country’s engine of

growth since 1987. The revenue earned from

inbound tourism has a pivotal role that directing

Malaysian economy to higher growth (Sadi and

Bartels, 1997). In fact, inbound tourism receipts

increased significantly over the last three decades

from RM1.1 million to RM46.09 million during

1982–2007 periods with an average annual

growth of 16.38 percent with the increase in

tourist arrivals from 2.7 million in 1982 to

20.97 million in 2007 with an average annual

growth rate of 10.17 percent (Figure 2). During

the 8th Malaysia Plan period tourism industry

performed favourably and remained strong in

terms of growth of tourist arrivals and earnings

(Figure 2).

As Malaysia shifted from an agricultural base

to a more industrialized and service-based econ-

omy, tourism plays an ever increasing and cru-

cial role. The effects of any changes in tourism

industry have substantial effect on other sectors

of the economy reflecting strong linkages with

them, and any changes in this industry will

directly and indirectly influence other industries

and, ultimately, the growth of the economy. The

present study estimated the direct, indirect, and

induced impact of inbound tourist expenditure

on Malaysian economy where column of house-

hold consumption and row of income are

included in the Leontief matrix (corrected with

leakages) to overcome the limitations of previous

studies. The key objective of this study is to

determine and analyze the impacts of inbound

tourism on Malaysian economy using an input-

output analysis. With the view of accomplishing

the key objective, this study also explores the

economically potential inbound markets for

Malaysian tourism industry. The findings of the

study are expected to assist the Malaysian Tour-

ism authorities in taking decision and formulat-

ing policies for their potential inbound tourism

markets. Depending on the degree to which cur-

rent tourism state of affairs and policies of

Malaysia are similar to those in other developing

countries, the findings and policy recommenda-

tions of this study will have a wider applicability.

Literature review

A vast of literature on tourism industry and its

economic impacts in many countries has been

found, but the literature on the Malaysian tour-

ism industry is found to be considerably low. It

is also noticeable that there is a paucity of litera-

ture addressing the total economic impact of

tourism inbound markets on Malaysian econ-

omy. The review of literature on the Malaysian

tourism industry thus clearly indicates that there

is need to assess the total economic impact of

inbound tourism on Malaysian economy and to

Figure 2. Inbound tourist arrivals and receiptsSource: Annual Tourism Statistical Report (several years) (MTPB, 2006)

Mazumder et al. 33

identify the economically potential inbound mar-

kets for the same. In an attempt to attain the

stated objective, the most widely used method

of input-output was employed to estimate the

economic impact of inbound tourism to encapsu-

late the ripple effects of inbound tourism. These

ripple effects are defined as ‘tourism multipliers’

(Wanhill, 1994). The underlying assumptions,

benefits, and disadvantages of using input-

output method are well addressed in the literature

of Archer (1977, 1995), Fletcher (1989), Archer

and Fletcher (1996), Fleming and Toepper

(1990), and Dwyer et al. (2004). There have been

a considerable number of studies conducted in

many regions of the world in measuring the eco-

nomic impact of international tourism using the

input-output model as a tool to evaluate eco-

nomic impacts from tourism, primarily on con-

sumption, income, and employment (Crompton

et al., 2001; Fletcher, 1989; Johnson and Moore,

1993). Among the studies of Durbarry (2004);

Diamond (1976); Archer (1985); Ruiz (1985);

Khan et al. (1990, 1995); Crespo and Diaz

(1997); Mistilis and Dwyer (1999); Tohamy and

Swinscoe (2001); Yan and Wall (2002); Kweka

et al. (2003), to some extent only few studies like

Archer (1995); Archer and Fletcher (1996); Heng

and Low (1990); Kim et al. (2003); Rashid and

Bashir (2004); and Lee and Taylor (2005) have

estimated the economic contribution of tourism

or related events by types of tourists using the

input-output model.

Heng and Low (1990) used input-output

model for measuring the economic impact of

tourism in Singapore by examining the differ-

ences between Leontief and Leontief-Keynes

multipliers; the differences of multipliers based

on tourist countries of origin and their purpose

of the trip; and the multipliers for different sec-

tors of the economy. The study revealed that

there were no significant differences between

tourists from developing and underdeveloped

countries, therefore, promotions should not

ignore tourists from low-income countries.

Archer (1995), however, compared the results

of three separate input-output studies carried out

to measure the contribution of international tour-

ism to Bermudan economy in comparison with

the impacts made by other export sectors. Visi-

tors were categorized by overnight visitors and

cruise passengers. The study concluded that the

economic conditions in Bermuda were unique

and unlikely to be replicated elsewhere.

Archer and Fletcher (1996) examined the

impact made by 1991 tourism expenditure on

incomes, employment, public sector revenue and

the balance of payments in the Seychelles

employing input-output analysis.

Lee and Taylor (2005) used the input-output

model to estimate the economic impact of 2002

FIFA World Cup in South Korea on output,

income, and value added excluding non-event

related tourists. They found that international

tourists related to World Cup generated a much

higher yield compared with other international

tourists and there was a sharp decrease of tradi-

tional Japanese tourists though there was an

increase in arrivals of American and European

tourists.

One of the recent studies on Malaysian tourism

industry was carried out by Rashid and Bashir

(2004) to measure the economic impact of chang-

ing tourist profile using primary open input-output

model or partial inter-industrial analysis. Their

study assessed the economic impact of tourism

on Malaysian economy in part, but the loophole

of the study for not measuring and addressing the

induced impact of tourism’s inbound markets

clearly indicates that they were unable to precisely

show the total economic impact of inbound tourist

expenditure. Archer (1973) argues that the induced

effects are quite considerable. Moreover, the study

by Rashid and Bashir (2004) focused only on

changes in output, value-added, tax revenue, and

import due to a change in international tourist

expenditure and did not measure the income and

employment impact. The present study is thus an

effort to overcome the drawbacks of the previous

studies and estimate the total economic impact of

inbound tourism on a wide range of macroeco-

nomic variables.

In fact, input-output model has extensively

been employed in assessing different kinds of

tourism economic impacts particularly on

income, employment, and government revenue.

Most of the studies were conducted either in a

small setting or for an event except Rashid and

Bashir (2004) and Heng and Low (1990). The

study of Archer and Fletcher (1996), Heng and

Low (1990), and Rashid and Bashir (2004) pro-

vide a detail of contribution made by different

types of tourists but their models were not cor-

rected by deducting imports from the final

demand and showed the importance of contigu-

ous inbound markets. Since imports are leakages

for an economy, without taking import leakages

into account, the direct and indirect impacts of

tourism will significantly be overstated (Henry

and Deane, 1997). One of the important efforts

of this study is to fill in the above research gap


and to correct the above measure of tourism

impact by deducting imports from the final

demand in the case of Malaysia. It is thus

expected that this research would provide a mile-

stone as well as the latest techniques of addres-

sing the total economic impact of inbound

tourism, and on the basis of this, it would also

identify the economically potential inbound mar-

kets for the Malaysian tourism industry.

Methodology

The major strength of input-output analysis is

that it provides detailed information on direct,

indirect and induced effects of visitor spending

on all economic measures for different indus-

tries in the local economy (Loomis and Walsh,

1997). In order to satisfy the aforementioned

objective, the methodology employed in this

study is based on Leontief input-output model

where structure of an economy is analyzed in

terms of inter-relationships between economic

sectors. The input-output table of a particular

economy traces the flow of goods and services

among its different industries for a particular

time period comprised of processing or inter-

mediate, primary input, and final demand sec-

tors. The framework of input-output table is a

general equilibrium approach where the rela-

tionships between economic sectors can be

described in a system of linear equations in

which total output produced by each sector is

either consumed as an intermediate input by

other sectors or sometimes internally by the pro-

ducing sector itself, and by the final demand

sector. Let there be an economy with n-

producing sectors and a final demand sector.

Total output of sector i will be:

Xi ¼Xn

j ¼ 1

XijþðFi�MiÞ ð1Þ

Where, Xi ¼ the vector of gross output of sector

i; Xij¼ the vector of sales of sector i to sector j; F

denotes the final demand (e.g., household, gov-

ernment, and other final users) vector; M denotes

imports, and i, j ¼ 1, . . . . . . . . . . . . ., n.

One of the vital assumptions of input-output

model is that input demand is a fixed proportion

of total output. Hence, if there is a change in total

output, there will be an obvious change in

requirement of each input used to produce that

output. Let aij be the technical (input) coefficient

which represents the amount (value in physical

or monetary terms) of sector i’s output used as

an input to produce one unit (one Ringgit) of

sector j’s output; so we get:

aij ¼ xij=Xj or xij ¼ aijXj

Where, aijXj ¼ total value of purchases of

goods and services by sector j from sector i.

Therefore, for a given target of final demand

on goods and services, F, this relation defines

how much each producing sector must produce

in order to satisfy a particular bundle of final

demand on goods and services, i.e., Equation

(1) in reduced matrix form can be written as:

X ¼ AXþ ðF�MÞ ð2Þ

Hence, the matrix of technical coefficients aij

including the household sector is denoted by A.

Solving the Equation (2) can be found as:

X ¼ ðI� AÞ�1ðF�MÞ ð3Þ

In Equation (3), X is the output vector; I is

an identity matrix and [I � A]�1 is the total

requirement matrix or mostly known as the

closed Leontief inverse matrix.

The general solution of Equation (3) deter-

mines how much each sector of the economy

must produce in order to satisfy a given level

of final demand. It is mandatory that [I � A]

should be a non-singular matrix meaning that the

determinant of [I � A] does not equal to zero to

have a unique solution in the form of [I � A]�1

that captures multipliers on three distinct direc-

tions such as the direct, indirect, and induced

effect of a unit change in final demand due to

an injection of inbound tourist expenditure.

Three sets of data were employed in this

study: (1) Malaysian national input-output trans-

action table for the year 2000 (the latest table

published by the Department of Statistics,

Malaysia in the year 2005 and it was used to

determine tourism multipliers), (2) tourist expen-

diture categories, and (3) types of tourists by

country of origin data. Worth noting to mention

that the data sets under (2) and (3) above were

obtained from MTPB (2006). The 2000 input-

output table is a 94 X 94 sector input-output

matrix of Malaysia that was aggregated into

52 sectors by disaggregated tourism-related sec-

tors. The aggregating process followed the

guideline of the United Nations (1999). To esti-

mate the induced impact of inbound tourists, the

open input output model was converted into the

closed input-output model by considering the

household sector as endogenous into the model.

Mazumder et al. 35

The number of paid employees, import and value

added data were derived from input-output trans-

action table of 2000. But we have to acknowl-

edge an inescapable limitation of this study that

the input-output table used in this study was

found to be latest for the year 2000, which was

actually published in 2005 by the Department

of Statistics, Malaysia. While we had to fully rely

on the Malaysian government authorities for

input-output data, such limitation was beyond

our ability. Input-output, a data hungry model

(Briassoulis, 1991) requires input-output table

as data requirement. The time-lag in preparing

and publishing the table due to its complex

nature is found to be very common (Yan and

Wall, 2002) in studies using data from input-

output table. The common limitations of the

studies using input-output models as well as their

advantages, however, could be found in detail in

the studies of Fletcher (1989) and Briassoulis

(1991).

Results and discussion

In this section, economic impact of inbound tour-

ism and its implication to identify the economi-

cally significant inbound markets of tourism to

Malaysia are represented through the derivation

of multipliers in terms of output, income,

employment, value-added, and import. The suc-

cessive rounds of spending by inbound tourists

and re-spending by tourism and other sectors

(as shown in Figure 1) explaining the performing

effects of exogenous tourist expenditure on

Malaysian economy are calculated through the

derivation of tourism multipliers. Different tour-

ism multiplier values can be calculated depend-

ing on the macroeconomic variables of interest.

The impact of inbound tourists’ expenditure on

any of these macroeconomic variables can be

broken down into three categories, namely

direct, indirect and induced effects. Direct effect

of inbound tourists’ expenditure symbolizes

output, income, import, value-added and

employment generated per Ringgit of inbound

tourists’ spending on goods and services from

tourism sectors. Indirect effect signifies those

created as these sectors constitute local pur-

chases from all industries in the economy. In

addition, induced effect describes the economic

impact that is created by consumption of house-

holds due to their additional income directly or

indirectly connected with tourism. The

direct, indirect, and induced multipliers (normal

multipliers) of output, income, employment,

value-added, and import in the six tourism

related sectors are shown in Appendix,

Table A. Furthermore, the distribution and cal-

culation of economic impact of inbound tourism

expenditure on different macroeconomic vari-

ables are shown in Table 1. In estimating the

distribution of economic impact, the derived

direct, indirect, and induced normal tourism

multipliers (Appendix, Table A) are utilized

with the distribution of inbound tourist expendi-

ture on six tourism related sectors provided in

the MTPB’s (2006) profile of tourist (Appendix,

Table B). Normal multipliers are considered for

the analysis since they are the most appropriate

tools for policy formulation purposes (Frech-

tling and Horvath, 1999).

Output impact

The estimation reveals that a total of RM36.3

billion of inbound tourism receipts were received

from a total of 17.5 million tourist arrivals in

2006, which generated approximately RM51.4

billion of average tourism related total output.

This outcome is consistent with comprehensive

tourism output multiplier of RM1.42 (Appendix,

Table A). The indirect and induced output

impacts were responsible for about 85 percent

of total output impact against 15 percent of the

total output impact generated by the direct output

impact. The accommodation sector generated

the greatest output impact contributing to about

36 percent of total tourism output impact. The

food and beverage sector was the second largest

contributor (24 percent of total tourism output).

The third and fourth most vital sectors were

shopping and tour and transport sectors, which

contributed 21 percent and 15 percent of the total

output impact, respectively. The least output

generating sectors were the miscellaneous ser-

vices sector and entertainment sector and they

jointly contributed 4 percent of output impact.

The above findings clearly reveal that the sector

with highest output multiplier may not generate

the largest output impact.

Income impact

The average total income impacts resulted from

inbound tourist expenditure were amounted to

approximately RM13 billion to the Malaysian

households (Table 1). The accommodation sector

held the largest income impact of RM8.4 billion

on Malaysian economy. It is also evident that

total household income generated by this sector


surpassed the total of all other sectors. The

second most important income impact was made

by the food and beverage sector, resulting

approximately RM2 billion of household

income. The shopping sector and tour and

transport sector were respectively the third

Table 1. Total economic impact of inbound tourist expenditure in terms of output, income, employment, andvalue-added, 2006 (in millions of Ringgit)

Tourismsector

Touristexpenditure(% of Total) Amount

Directimpact (1)

Indirectimpact

(2)

Inducedimpact

(3)

Totalimpact

(1þ2þ3) Rank

Accommodation:Output 35.4 12 847.93 2 843.49 14 998.81 677.97 18 520.27 1 (36.0%)Income 35.4 12 847.93 7 421.98 888.02 141.66 8 451.66 1 (57.1%)Employment 35.4 12 847.93 1 640.13 513.43 94.52 2 248.08 1 (35.6%)Value-added 35.4 12 847.93 4 560.47 1 911.51 343.85 6 815.84 2 (32.5%)Import 35.4 12 847.93 2 469.67 700.26 100.06 3 269.99 1 (40.1%)Food &

Beverage:Output 18.7 6 786.90 2 901.51 9 199.53 274.38 12 375.42 2 (23.6%)Income 18.7 6 786.90 1 038.62 843.27 57.34 1 939.23 2 (15.0%)Employment 18.7 6 786.90 361.84 403.92 38.26 804.02 4 (12.5%)Value-added 18.7 6 786.90 1 507.07 1 571.23 139.16 3 217.45 3 (15.8%)Import 18.7 6 786.90 850.03 702.87 40.50 1 593.39 3 (19.2%)Tour &

Transport:Output 15.2 5 516.62 1 338.88 6 103.67 327.64 7 770.19 4 (15.1%)Income 15.2 5 516.62 549.16 416.60 68.47 1 034.23 4 (8.0%)Employment 15.2 5 516.62 830.14 282.56 45.68 1 158.38 3 (18.2%)Value-added 15.2 5 516.62 1 919.26 867.71 166.17 2 953.14 4 (14.5%)Import 15.2 5 516.62 1 390.67 366.99 48.35 1 806.02 2 (21.2%)Entertainment:Output 3.7 1 342.86 207.96 1 447.71 66.44 1 722.11 5 (3.1%)Income 3.7 1 342.86 868.73 82.51 13.88 965.12 5 (7.1%)Employment 3.7 1 342.86 173.38 45.42 9.26 228.07 5 (3.6%)Value-added 3.7 1 342.86 794.65 167.18 33.70 995.52 5 (3.4%)Import 3.7 1 342.86 74.70 43.93 9.80 128.43 5 (1.3%)Shopping:Output 25.7 9 327.45 971.99 9 716.34 509.82 11 198.15 3 (21.4%)Income 25.7 9 327.45 1 297.79 295.30 106.54 1 699.63 3 (13.1%)Employment 25.7 9 327.45 1 597.52 209.01 71.18 1 877.71 2 (29.3%)Value-added 25.7 9 327.45 6 235.48 757.55 258.58 7 251.61 1 (33.6%)Import 25.7 9 327.45 1 229.20 204.98 75.24 1 509.42 4 (17.4%)Miscellaneous:Output 1.3 471.82 69.18 504.43 66.70 640.31 6 (1.2%)Income 1.3 471.82 12.54 18.50 13.94 44.98 6 (0.1%)Employment 1.3 471.82 55.84 14.77 9.30 79.90 6 (1.2%)Value-added 1.3 471.82 61.34 49.30 33.83 144.46 6 (0.6%)Import 1.3 471.82 90.72 16.19 9.84 116.75 6 (1.1%)Tourism

Average:Output 100.0 36 294 7 846.85 41 242.79 2 407.97 51 497.61 (100%)Income 100.0 36 294 9 937.83 2 426.84 503.17 12 867.85 (100%)Employment 100.0 36 294 4 537.79 1 441.04 335.79 6 314.61 (100%)Value-added 100.0 36 294 14 004.38 5 128.14 1 221.28 20 353.80 (100%)Import 100.0 36 294 5 741.83 1 896.96 355.39 7 994.17 (100%)

Source: Authors’ calculationNote: Ranking shows the relative importance of each tourism sector in terms of amount of output, income, employment,value-added and import where 1 is the most important and 6 is the least important.Figures in parentheses represent percentage of each sector against total output, income, employment, value-added, and importresulted from inbound tourist expenditure.

Mazumder et al. 37

and fourth most important business sectors, gen-

erating 13 percent and 8 percent of total house-

hold income, correspondingly. The fifth income

generating sector was the entertainment sector,

which was resulting in RM0.9 billion of house-

hold income, slightly lower than the income gen-

erated by tour and transportation sector. The least

contributing sector was the miscellaneous ser-

vices sector with less than 1 percent of the total

household income. Again, the results reveal that

the sector with higher multipliers does not inevi-

tably produce the largest income impact.

Employment impact

The tourism industry average impact on employ-

ment represents that approximately 6300 full

time equivalent employments were supported

by inbound tourism receipts of RM36.3 billion

in the year of 2006 (Table 1). The most important

contributing sector in terms of employment gen-

eration was found to be the accommodation sec-

tor which supported approximately 2248 jobs in

total. About 35 percent of total employment

impact was attributed to the accommodation

sector, reflecting this sector’s highly labour-

intensive nature among tourism sectors. The

second largest contributor in generating employ-

ment was the shopping sector that ranked third in

terms of output and income. A total of 1699 jobs

were attributed to this sector, responsible for

about 29 percent of the total employment. The

other sectors generated 36 percent of total

employment together. The sectors of accommo-

dation and shopping accounted for 64 percent

of the total employment, directing their leading

position in employment generation proved to

be comparatively highly labour-intensive. The

examination of the table also reveals that the sec-

tor with higher employment multipliers does not

necessarily hold the position of highest contri-

butor in terms of total employment impact. This

situation may have caused the employment

figures to become a bit low compared to the tour-

ism’s indirect and induced impacts. In fact, dur-

ing the period from 1997 until the end of 2000

most Southeast Asian countries had experienced

severe financial as well as economic crisis,

which resulted in a significant reduction in the

inflow of tourists from contiguous countries to

Malaysia. It’s not only Malaysia, but all other

Southeast Asian countries have, then, experi-

enced the same inflow of tourists visiting these

countries. We believe that the above reason has

greatly reduced the employment in Malaysia.

According to economic theory, the pace of

employment recovery is slower than the recov-

eries an economy experiences in other macroeco-

nomic variables such as GDP, expenditure,

investment, and so on. Employment usually

starts recovering after a considerable time period

during which investment and expenditure have

already taken place. When the investors and

businesses find confidence in what is making

their business and profit, they then start hiring

and creating employment opportunities. So it is

likely for Malaysia that the country was then able

to generate less number of jobs due to fewer

amounts of domestic and foreign investments.

But the indirect and induced impacts of tourism

were not as badly affected as the employment

was primarily affected for low direct effect of

tourists expenditures resulted from economic

downturn during the aforesaid period.

The above findings, however, may reasonably

vary from the ones obtained earlier by Rashid

and Bashir (2004). In fact, the study by Rashid

and Bashir (2004) clearly pointed out that the set

of multipliers they estimated did not represent

complete multipliers, which we think was a

major limitation for their study. Our study has

estimated the complete multiplier by including

household consumption and household income

vectors as the important contributing sectors.

Rashid and Bashir’s (2004) study used the input

output table of 1991, but we used the latest and

updated one of 2000. There has been a consider-

able time gap of 10 years between two studies

and during this period Malaysia’s all economic

variables have changed significantly. For exam-

ple, Rashid and Bashir (2004) found the highest

output multiplier for the hotel and restaurant sec-

tor (which was estimated to be 1.76) while our

study found the highest multiplier for the food

and beverage sector (which was estimated to be

1.82). Furthermore, Rashid and Bashir (2004)

mentioned that increasing arrivals of West Asian

tourists will benefit significantly to Malaysian

economy in terms of value added, tax revenue,

and import generation. Even though we acknowl-

edged the contributions made by West Asian

tourists in our study, our empirical findings

reveal their contribution is not significantly

higher than those of tourists coming to Malaysia

from its contiguous inbound markets.

Value-added impact

In 2006, RM36.3 billions of inbound tourism

receipt generated about RM20.3 billions in the


form of value-added by the tourism business

sectors as represented in Table 1. Among the

types of tourist businesses, the shopping sector

generated the highest value-added impact of

RM7 billions, accounted for about 34 percent

of total value-added impact. The accommodation

sector accounted for the second highest resulting

in about 33 percent of the total value-added

impact. The sectors of food and beverage and

tour and transport were respectively the third

and fourth most important sectors in terms of

value-added representing 15.8 percent and

14.5 percent of total value-added, correspond-

ingly. The findings also reveal that shopping

and accommodation sectors accounted for the

largest value-added impact on Malaysian econ-

omy, together account for more than 67 percent

of total value-added. Miscellaneous services

sector and entertainment sector were the least

important sectors in generating value-added

impact, representing their less capability in gen-

erating value-added (less than 5 percent).

Import impact

A total of approximately RM8 billion of imports

was required to satisfy inbound tourist consump-

tion and approximately 72 percent of total

imports were caused by direct import impact,

while the shares of the indirect and induced

impact were about 24 percent and 4 percent,

respectively (Table 1). Final imports generated

by tourism expenditure accounted for 15 percent

of the total output reflecting that an approxi-

mately 85 percent of tourist demand was satisfied

by the local production. It is also clear that

import of intermediate goods equivalent to an

amount of RM1.9 billion of tourist consumption

was significant to attain local production. Fur-

ther, to achieve local production, incomes paid

to the households generate RM355 million worth

of inbound tourist consumption as induced

import impact. The direct and indirect imports

accounted for 96 percent of all imports in Malay-

sian economy. This situation seems explaining

that induced impact of imports was the least con-

tributor to the total import impact.

The accommodation sector, however, was

found to be the highest import oriented sector,

importing RM3.2 billion worth of goods and ser-

vices from abroad and tour and transportation

sector generated RM1.8 billion imports, which

accounted for more than 60 percent of the total

imports together. Food and beverage sector was

the third most important sector in terms of

imports, whereas miscellaneous services sector

and entertainment sector were the two least

import oriented industries. It is important to note

that the sector that generated higher output

impact was found to be more import-prone.

Contribution of inbound markets toMalaysian tourism industry

In this section, the economic impact of tourism

contributed by the inbound tourist markets on

Malaysian economy in the year of 2006 has been

analyzed with emphasis given for estimating

contribution to output, income, employment,

value-added, and import. Each column in the

Tables from 2 to 6 is calculated by multiplying

per capita expenditure made by each inbound

tourist market on any business sector with the

number of tourists of the same inbound market

for the same period (Appendix, Table B). The

outcome is then again multiplied by the output

multiplier obtained for that sector (Appendix,

Table A). All figures in Tables from 2 to 6 are

calculated by applying the same method.

The estimation, however, reveals that Singa-

porean tourists generated about 51.63 percent of

total output (Table 2). The second, third, and forth

largest output impacts were made by the tourists

respectively from Indonesia, Thailand and Brunei,

representing 6.14 percent, 5.94 percent, and

5.4 percent of the total output impacts, corre-

spondingly. The inbound markets of Belgium,

Norway, and Denmark retained the least output

impact generating country with shares ranging

from 0.07 percent to 0.08 percent.

Singaporean tourists’ expenditure had also the

largest sectoral output impact (34 percent) on

accommodation sector. The results also reveal

that rest of the sectors was also highly benefited

from Singaporean inbound market. Inbound mar-

ket of Thailand accounted for the second largest

output generator on accommodation, food and

beverage, and tour and transport sector, responsi-

ble for 37 percent, 23 percent, and 16 percent of

the total output, respectively. China inbound

market was the second largest output impact gen-

erating market on entertainment sector, while

Brunei and Indonesia inbound markets created

the second largest output impact on shopping and

miscellaneous services sector, respectively.

Although Rashid and Bashir (2004) pointed out

that the West Asian inbound markets tourists

spent largest share of their expenditure on shop-

ping. But the observations from this study reveal

that largest output impact generated by this

Mazumder et al. 39

inbound market attributed to accommodation

sector, not shopping sector. Belgium, Norway,

and Denmark were the three inbound markets

of Malaysian tourism industry generating least

output impact on each of the six tourism related

sectors.

The inbound market of Singapore accounted

for the largest household income impact (Table 3)

generating 52 percent of the total household

income. With shares of 6 percent and 5.6 percent,

Thailand and Indonesia became the second and

third largest income impact generating inbound

markets. The inbound market named as ‘others’

created (not shown in the table) the fourth largest

impact on household income, while the income

impact made by the Brunei market was the fifth.

The rest of the tourists’ inbound market gener-

ated between 3 percent and 0.08 percent of the

total household income. The Singaporean mar-

ket promoted the highest income generating

58 percent of total income of accommodation sec-

tor, while Thailand market generated 61 percent

of total income impact. The table also explains

that Singaporean market was the highest income

provider to households among the sectors.

The Singaporean market represented 52 percent

of total income of the accommodation sector,

56 percent of total income of the food and bever-

age sector, 40 percent of total income of the tour

and transportation sector, 57 percent of total

income of the entertainment sector, 48 percent of

total income of the shopping sector, and 66 percent

of total income of the miscellaneous service sector.

The largest employment impact was made by

the Singaporean tourists, generating 51 percent

of the total employment (Table 4). The second

largest employment impact was made by the

Indonesian inbound market, generating about 6

percent of the total employment impact. The

tourist markets of Brunei, Thailand, and others

were the following consecutive inbound markets

generating about 5 percent of the total employ-

ment. The rest of the inbound markets repre-

sented the total employment impact of less than

3 percent to 0.07 percent. The Singaporean tour-

ists attributed the largest number of full-time

equivalent employment to all tourism business

sectors. This market contributed 52 percent of

the total employment of accommodation sector,

56 percent of the total employment of food and

beverage sector, 40 percent of the total employ-

ment of tour and transportation, 57 percent of

the total employment of entertainment sector,

48 percent of the total employment of shopping

Table 2. Output impact generated by inbound markets

Impact Accomm.1 F & B2Tour &Trans.3 Entertain.4 Shop.5 Misc.6 Total

High-yieldMarket

Singapore 9 089.16 6 681.35 2 462.61 1 097.23 5 426.25 2 044.59 26 801.2 (51.63%)Thailand 1 129.76 714.55 500.96 87.4 570.18 78.04 3 080.89 (5.94%)Indonesia 940.81 540.95 369.64 87.8 863.01 387.12 3 189.33 (6.14%)Brunei 590.4 469.11 321.78 68.62 1,161.34 195.52 2 806.77 (5.4%)Others

ASEAN264.75 158.12 119.86 42.13 168.12 13.16 766.13 (1.48%)

China 518.2 296.03 219.76 124.38 318.94 20.03 1 497.35 (2.9%)Australia 557.87 375.01 199.78 35.08 277.32 27.5 1 472.55 (2.8%)United

Kingdom491.99 378.26 197.29 31.83 174.55 34.89 1 308.8 (2.5%)

Japan 438.69 251.49 204.82 21.15 155.69 21.36 1 093.21 (2.1%)India 341.61 203.5 158.22 48.33 255.8 18.69 1 026.14 (1.9%)USA 297.85 162.59 86.43 20.9 88.64 43.59 700 (1.35%)Saudi Arabia 244.03 154.34 126.77 21.3 203.24 8 757.67 (1.46%)Low-yield

MarketSpain 20.59 14.23 9.52 1.44 10.9 1.3 57.98 (0.11%)Denmark 17.81 11.35 7.69 1.34 5.81 0.96 44.95 (0.09%)Norway 17.07 9.82 5.96 1.52 5.76 1.03 40.66 (0.08%)Belgium 16.21 10.9 7.57 0.77 4.12 1.08 40.66 (0.08%)

Source: Authors’ calculationNote: Accomm.1¼ accommodation, F & B2 ¼ Food & Beverage, Tour & Trans.3 ¼ Tour & Transportation, Entertain.4 ¼Entertainment, Shop.5 ¼ shopping, Misc.6¼ Miscellaneous.


sector, and 66 percent of the total employment of

miscellaneous service sector. The rest of the mar-

kets’ share ranged from 13 percent to below to all

tourism business sectors.

The Singaporean tourists also generated

the largest value-added impact (Table 5) on

all tourism sectors, representing 51 percent of

total value-added. The second largest total

Table 3. Income impact generated by inbound markets


High-yieldMarket

Singapore 4 147.81 1 046.97 327.78 614.92 823.58 143.64 7 104.7 (51.99%)Thailand 515.56 111.97 66.68 48.98 86.54 5.48 835.22 (6.11%)Indonesia 429.34 84.77 49.2 49.2 130.99 27.2 770.69 (5.64%)Brunei 269.43 73.51 42.83 38.46 176.27 13.74 614.23 (4.49%)Others ASEAN 120.82 24.78 15.95 23.61 25.52 0.92 211.6 (1.55%)Australia 254.58 58.76 26.59 19.66 42.09 1.93 403.62 (2.95%)United

Kingdom224.52 59.27 26.26 17.84 26.49 2.45 356.83 (2.61%)

China 236.48 46.39 29.25 69.71 48.41 1.41 431.64 (3.16%)Japan 200.2 39.41 27.26 11.85 23.63 1.5 303.85 (2.22%)India 155.89 31.89 21.06 27.08 38.82 1.31 276.06 (2.02%)USA 135.92 25.48 11.5 11.71 13.45 3.06 201.14 (1.47%)Saudi Arabia 111.36 24.19 16.87 11.94 30.85 0.56 195.76 (1.43%)Low-yield


Source: Authors’ calculationNote: Accomm., F & B, Tour & Trans., Entertain., Shop., and Misc. – as indicated in Table 2.

Table 4. Employment impact generated by inbound markets.


High-yieldMarket

Singapore 1 103.29 434.08 367.13 145.31 909.87 255.15 3 214.83 (50.6%)Thailand 137.14 46.42 74.68 11.57 95.61 9.74 375.16 (5.9%)Indonesia 114.2 35.14 55.11 11.63 144.71 48.31 409.1 (6.44%)Brunei 71.67 30.48 47.97 9.09 194.73 24.4 378.33 (5.95%)Others ASEAN 32.14 10.27 17.87 5.58 28.19 1.64 95.69 (1.51%)Australia 67.72 24.36 29.78 4.65 46.5 3.43 176.44 (2.8%)China 62.9 19.23 32.76 16.47 53.48 2.5 187.35 (2.95%)United Kingdom 59.72 24.57 29.41 4.22 29.27 4.35 151.54 (2.38%)Japan 53.25 16.34 30.54 2.8 26.11 2.67 131.7 (2.07%)India 41.47 13.22 23.59 6.4 42.89 2.33 129.9 (2.04%)USA 36.15 10.56 12.89 2.77 14.86 5.44 82.67 (1.3%)Saudi Arabia 29.62 10.03 18.9 2.82 34.08 1 96.44 (1.52%)Low-yield



Mazumder et al. 41

value-added impact generated by tourists from

Brunei and Indonesia (6.3 percent and 6.2

percent respectively). The third largest value-

added impact was made by tourists from

Thailand, responsible for 5.8 percent of total

value-added. The value-added impact generated

by the rest of the tourist inbound markets ranged

from 3 percent of the total value-added for the

China market to 0.07 percent of the total value

added for the Belgium market. The miscella-

neous service sector retained the largest value

added from the Singaporean market, represent-

ing 66 percent of the total value-added. The

Indonesian market accounted for the second larg-

est value-added impact on this sector, generated

13 percent of the total value-added of this sector.

The entertainment, food and beverage, accom-

modation, shopping and tour and transport sec-

tors were also highly benefited in generating

value-added from the Singaporean market. The

Singaporean inbound market contributed over

57 percent of the total value-added on the enter-

tainment sector, 56 percent on the food and bev-

erage sector, 52 percent on the accommodation

sector, and about 48 percent on transport sector.

Import impact (Table 6) limits the output

impact as import generates leakage for the econ-

omy. The largest import impact was made by the

Singaporean tourists accounted for 52 percent of

the total import. The Thailand and Indonesian

markets generated the second and third largest

import impact, representing about 6 percent of

the total import. The inbound market of Brunei

generated the fourth largest import impact, com-

prising of about 4.7 percent and 4.3 percent of the

total import due to tourist consumption, while

Australian market accounted for 3 percent of

the total import. The rest of the inbound markets

contributed less than 3 percent of the total

import. Unlike the other impact on all sectors, the

Singaporean tourists generated the largest import

impact on all sectors, the highest on miscella-

neous service sector with 66 percent of the total

import impact and the least on tour and transpor-

tation sector with 40 percent of the total import

impact. The second largest import impact on

miscellaneous service sector, shopping sector,

tour and transportation sector, accommodation

sector, food and beverage sector, and entertain-

ment sector, accounted for the tourist market of

Indonesia, Brunei, Thailand, and China, represent-

ing 13 percent, 10 percent, 8 percent, 6 percent,

6 percent, and 6 percent of the total import impact

on those sectors, respectively.

From the above discussion, it is noticeable that

tourist inbound markets with higher average per

Table 5. Value added impact generated by inbound markets


High-yieldMarket

Singapore 3 345.00 1 737.07 935.94 634.29 3 513.89 461.29 10 627.47 (50.53%)Thailand 415.78 185.77 190.39 50.52 369.23 17.61 1 229.31 (5.84%)Indonesia 346.24 140.64 140.49 50.75 558.86 87.34 1 324.32 (6.63?%)Brunei 217.28 121.96 122.3 39.67 752.05 44.11 1 297.37 (6.17%)Others

ASEAN97.43 41.11 45.55 24.36 108.87 2.97 320.29 (1.52%)

China 190.71 76.96 83.52 71.9 206.54 4.52 634.16 (3.02%)Australia 205.31 97.5 75.93 20.28 179.58 6.2 584.8 (2.78%)United

Kingdom181.06 98.34 74.98 18.4 113.03 7.87 493.69 (2.35%)

Japan 161.45 65.39 77.85 12.23 100.82 4.82 422.54 (2.01%)India 125.72 52.91 60.13 27.94 165.65 4.22 436.56 (2.08%)USA 109.61 42.27 32.85 12.08 57.4 9.83 264.05 (1.26?%)Saudi Arabia 89.81 40.13 48.18 12.31 131.61 1.8 323.84 (1.54%)Low-yield




capita expenditure did not produce the significant

output, income, employment, value-added, and

import impact on tourism sectors in Malaysia.

Rather, it is the contiguous inbound markets that

produced the significant impact on each of the

macroeconomic variables under consideration.

For example, although Singaporean inbound mar-

ket generated the largest output impact, the share

of expenditure made on this sector by this inbound

market was relatively less than other inbound

markets, such as the inbound market of the US,

Italy, Norway, Japan, Belgium, Denmark, and

Finland. The data also show that though the

inbound market of Belgium, Denmark, and Fin-

land generated the least output impact but these

inbound markets made larger share of their expen-

diture on this sector. It is important to note that

tourist inbound markets that retained the highest

average per capita expenditure did not necessarily

produce highest output impact. For example,

although average per capita expenditure of Saudi

Arabian tourist was four times higher than

Singaporean inbound market, tourist inbound mar-

ket of Saudi Arabia ranked eleven in terms of total

output impact. On the contrary, Singaporean

inbound market yielded the largest output impact

but this country was the fifth least average per

capita expenditure market.

When comparing the sectoral multipliers with

the total impact, the analysis reveals that the sector

that generated the highest multiplier did not

produce the highest impact. Rather the sectors that

generated relatively lower multipliers would gen-

erate greater impact on output, income, employ-

ment, value added, and import. For instance,

though accommodation sector generated the third

lowest value added multiplier but this sector gener-

ated the second highest value added impact which

was also mostly contributed by contiguous

inbound markets. Among the impacts estimated

at direct, indirect, and induced levels for Malaysian

tourism, the indirect and induced impacts were

found to be significantly higher than direct impact

as respective sectors have higher inter-industrial

linkages with other sectors of the economy. The

higher the inter-industrial linkages between

the sectors of an economy, the higher would be the

indirect impact. Therefore, it results higher

induced impact as well. The economic impact pro-

cess begins with direct impact and ends with

induced impact, hence, generated the total eco-

nomic impact. The importance of secondary (indi-

rect and induced) tourism multipliers and their

impacts is also evident in the literature of Fletcher

(1989), Vaughan et al. (2000), Archer (1995), Liu

et al. (1984) and Lee and Kwon (1995).

Table 6. import impact generated by inbound markets.


High-yieldMarket

Singapore 6 305.36 860.26 572.38 81.83 731.42 372.81 8 924.05 (51.60%)Thailand 783.74 92 116.44 6.52 76.86 14.23 1 089.78 (6.03%)Indonesia 652.66 69.65 85.92 6.55 116.33 70.59 1 001.69 (5.79%)Brunei 409.57 60.4 74.79 5.12 156.54 35.65 742.07 (4.29%)Others ASEAN 183.66 20.36 27.86 3.14 22.66 2.4 260.08 (1.50%)Australia 387.01 48.28 46.43 2.62 37.38 5.01 526.74 (3.05%)China 359.49 38.12 51.08 9.28 42.99 3.65 504.6 (2.92%)United

Kingdom341.31 48.7 45.86 2.37 23.53 6.36 468.13 (2.71%)

Japan 304.33 32.38 47.61 1.58 20.99 3.9 410.78 (2.38)India 236.98 26.2 36.77 3.6 34.48 3.41 341.45 (1.97%)USA 206.62 20.93 20.09 1.56 11.95 7.95 269.1 (1.56%)Saudi Arabia 169.29 19.87 29.46 1.59 27.4 1.46 249.07 (1.44%)Low-yield



Mazumder et al. 43

Conclusions and policy implications

Input-output technique that has been used in

this study is not only estimating the economic

impact of inbound tourists’ expenditure but was

also useful in identifying the economic poten-

tial of inbound markets for Malaysian tourism.

Inbound tourism in Malaysia has a high poten-

tial for generating foreign exchange earnings,

and multiplier effect of inbound tourism

receipts helps eradicate the economy’s balance

of payment deficits. Inbound tourist expendi-

ture generates the higher average total multi-

plier of 1.42 on output and lower 0.17 on

employment (Appendix, Table A). These reveal

that tourism sectors with larger multiplier do

not necessarily produce larger total impact on

the economy. For instance, although the shop-

ping sector retains the least output multiplier,

this sector generates the third highest total out-

put impact whereas this sector with second

least income multiplier retained the third high-

est total impact on income. In fact, tourism sec-

tors with lower multiplier could have larger

total impact on an economy. Therefore, the

value of lower multipliers should not be

ignored as a valuable tool in policy making and

implementation purposes. Accommodation sec-

tor generated highest output, income, employ-

ment, and import impacts among the tourism

related sectors whereas largest value added

impact was accounted for shopping sector.

Tourism policy makers can be benefited from

this analysis in deciding which sectors should

be given more priority with regard to their eco-

nomic contribution. The importance of second-

ary (indirect and induced) effect is also evident

in generating output, income, employment,

value-added, and import. In fact, Malaysian

tourism policy makers would benefit from such

multiplier analysis as it represents what is the

change in sales, jobs, income, value added, or

import resulting from some public action.

When considering expenditure pattern of

inbound tourists, tourists from Saudi Arabia

and United Arab Emirates were the highest

spender in terms of per capita for most of the

sectors except miscellaneous services sector

while tourists from Singapore, Indonesia, and

Thailand were consecutively the largest spender

in terms of total expenditure though they

were the least spender in terms of per capita

(Appendix, Table B). In fact, tourists usually

come to Malaysia from the contiguous coun-

tries (Singapore/Thailand/Indonesia) do not

have to spend much for transportations, foods

and lodgings. This is because these tourists

come to Malaysia using relatively inexpensive

means of transportation compared to long-haul

tourists from countries such as China, India,

North Asia, Middle East, and Australia. Contig-

uous countries tourists are usually familiar with

tourism products and such familiarity is proven

as a monetary advantage for them. On the other

hand, the tourists from the above long-haul

countries have to spend more for everything

including their airfares, hotel charges for resid-

ing in and around tourist places, eating in and

around their residential hotels, using mostly

taxi cabs for visiting places of attractions, and

so on. So if focus is given on the higher per

capita tourist expenditure, Malaysia has to

attract long-haul tourists more than their con-

tiguous counterparts. But in terms of total

expenditure, the importance of attracting the

contiguous countries’ tourists lies at foremost.

From the results, however, it is also evident

that relative contributions of direct tourists’

expenditure from each of the inbound markets

are different when per capita expenditure and

total expenditure were compared. Malaysia’s

contiguous countries’ tourists were found to

be generating the greatest impact on each of

the component of Malaysian GDP though

highest per capita expenditures was made by

long-haul tourists, especially from the Middle

Eastern countries. Based on this, tourism pol-

icy makers could prepare appropriate policy

through the observation of low yield and high

yield tourists.

This study also gives evidence to the effect

that short haul tourists were the biggest generator

of output, income, employment, value-added,

and import. Therefore it can be concluded that

tourism industry in Malaysia is heavily relying

on its contiguous countries tourists. Though tour-

ists from long-haul inbound markets were the

highest spender in terms of per capita, the overall

economic impact of inbound tourists’ expendi-

ture of these markets was found to be relatively

low. Thus, tourism policies should target these

groups of inbound markets so that influx of

these tourists increases and the sectors on which

these groups of tourists made their expenditure

should maintain the desired quality while concern

should also be given to the contribution made by

inbound market of contiguous countries.

The study found that distribution of multi-

plier, international tourist expenditure per capita,

and total impact in terms of total expenditure


were not equally distributed among the tourists’

originating countries. The above analysis could

have an importance to policy and decision mak-

ers, governments, and concerned bodies for set-

ting an effective marketing strategy and

identifying tourism sector and economic vari-

ables which require increased attention. If the

concern of the government, for example, is to

increase employment, accommodation sector

should be enhanced since this sector generates

the largest employment impact. Beside multi-

plier analysis, the analysis of inbound markets

is of significance when preparing appropriate

marketing policy for the benefit of the Malaysian

tourism industry. For instance, if the Malaysian

government wants an expansion of the entertain-

ment sector of the tourism industry, the inbound

market of China, beside contiguous countries,

should be promoted since this inbound market

generated the second largest output impact on the

entertainment sector. Although tourism multi-

pliers, per capita expenditure, total number of

tourist arrivals from the inbound markets, and

expenditure patterns of inbound markets all play

a crucial role in generating the total economic

impact of the tourism industry where the role of

per capita expenditure solely is very insignificant.

In fact, it is the number of tourist arrivals that

matters to generate significant economic impact

on tourism industry for a developing economy

like Malaysia. Nevertheless, each of the aspects

discussed above could be given importance

according to the priority based objectives to

realize higher economic impact from inbound

tourism.

Since capacity constraint of the resources for

tourism industry is still not an overwhelming

problem for Malaysian economy, therefore, inte-

grated utilization of these resources will benefit

specifically to the Malaysian tourism industry,

Malaysian economy in general. Such policy will

not only enhance the coefficient of tourism

multipliers but also assist in increasing the num-

ber of tourist arrivals (since quality of tourism

product improves), per capita expenditure, and

in reshaping the expenditure patterns of inbound

markets tourists. Inter-industrial linkages in the

form of backward and forward linkages will also

increase from such enhanced utilization of tour-

ism resources. Increased inter-industrial linkages

will reduce the dependency on imports and add

more value to the locally produced goods, hence,

greater economic impact of inbound markets

results.

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Appendix

Table A. Tourism Normal Multipliers (Output, Income, Employment, Value-added, and Import)

Tourism Sector Direct (1) Indirect (2) Induced (3) Total (1þ2þ3) Rank

Accommodation:Output 0.221319 1.167411 0.052769 1.441499 2Income 0.577679 0.069118 0.011026 0.657823 2Employment 0.127657 0.039962 0.007357 0.174976 3Value-added 0.354958 0.14878 0.026763 0.530501 4Import 0.192223 0.054504 0.007788 0.254515 2Food & Beverage:Output 0.427516 1.355483 0.040428 1.823427 1Income 0.153033 0.12425 0.008449 0.285732 3Employment 0.053314 0.059515 0.005637 0.118466 6Value-added 0.222055 0.231509 0.020504 0.474068 5Import 0.125245 0.103563 0.005967 0.234775 4Tour & Transport:Output 0.242699 1.106414 0.059392 1.408505 3Income 0.099546 0.075518 0.012411 0.187475 4Employment 0.150479 0.05122 0.008281 0.20998 1Value-added 0.347905 0.15729 0.030122 0.535317 3Import 0.252088 0.066525 0.008765 0.327378 1Entertainment:Output 0.154864 1.078079 0.049475 1.282418 5Income 0.646926 0.06144 0.010339 0.718705 1Employment 0.129114 0.033826 0.006898 0.169838 4Value-added 0.591758 0.124493 0.025093 0.741344 2Import 0.055624 0.032711 0.007301 0.095636 6Shopping:Output 0.104208 1.041693 0.054658 1.200559 6Income 0.139137 0.031659 0.011422 0.182218 5Employment 0.171271 0.022408 0.007631 0.20131 2Value-added 0.668509 0.081217 0.027722 0.777448 1Import 0.131783 0.021976 0.008067 0.161826 5Miscellaneous:Output 0.146621 1.069117 0.141362 1.3571 4Income 0.026586 0.039217 0.029539 0.095342 6Employment 0.118344 0.031298 0.019711 0.169353 5Value-added 0.129999 0.104488 0.071695 0.306182 6Import 0.192267 0.034321 0.020863 0.247451 3Tourism Average:Output 0.216205 1.136366 0.066347 1.418918Income 0.273818 0.066867 0.013864 0.354549Employment 0.12503 0.039705 0.009252 0.173987Value-added 0.385864 0.141296 0.03365 0.56081Import 0.158205 0.052267 0.009792 0.220264

Source: Authors’ calculation.Note: Rank 1 and rank 2, in terms of normal multipliers, signify the relative significance of each of the six tourism sectors, where1 is the most important and 6 is the least important correspondingly.

Mazumder et al. 47

Tab

leB

.Per

Cap

ita

and

Tota

lExpen

diture

Pat

tern

sofIn

tern

atio

nal

Touri

sts

(Mill

ions

ofR

ingg

it),

2006

Countr

yof

Res

iden

ce

Acc

om

modat

ion

Food

&Bev

erag

eT

our

&T

ransp

ort

Ente

rtai

nm

ent

Shoppin

gM

isce

llaneo

us

Gra

nd

Tota

l

Cap

ita

Tota

l*

Cap

ita

Tota

l*C

apita

Tota

l*C

apita

Tota

l*C

apita

Tota

l*C

apita

Tota

l*C

apita

Tota

l*

Singa

pore

0.0

00653

6305.3

60.0

00379

3664.1

70.0

00181

1748.3

90.0

00089

855.5

90.0

00468

4519.7

70.0

00156

1506.5

90.0

01926

18

599.8

7T

hai

land

0.0

00414

783.7

40.0

00207

391.8

70.0

00187

353.5

40.0

00036

68.1

50.0

00251

474.9

30.0

00030

57.5

00.0

01126

2129.7

4In

dones

ia0.0

00536

652.6

60.0

00244

296.6

70.0

00214

260.1

50.0

00056

68.4

60.0

00591

718.8

40.0

00234

285.2

60.0

01875

2282.0

4Bru

nei

0.0

00522

409.5

70.0

00328

257.2

70.0

00289

226.4

00.0

00068

53.5

10.0

01233

967.3

30.0

00184

144.0

70.0

02624

2058.1

5Phili

ppin

es0.0

00808

170.5

30.0

00383

80.9

20.0

00254

53.6

80.0

00079

16.5

80.0

00331

69.8

70.0

00013

2.7

60.0

01868

394.3

4V

ietn

am0.0

00474

30.2

60.0

00217

13.8

30.0

00275

17.5

70.0

00120

7.6

90.0

00501

32.0

20.0

00042

2.7

00.0

01630

104.0

8O

ther

sA

SEA

N0.0

00529

16.9

90.0

00254

8.1

50.0

00300

9.6

30.0

00120

3.8

50.0

00522

16.7

60.0

00039

1.2

50.0

01764

56.6

2

Chin

a0.0

00818

359.4

90.0

00370

162.3

50.0

00408

179.2

20.0

00221

96.9

90.0

00605

265.6

60.0

00034

14.7

60.0

02455

1078.4

6T

aiw

an0.0

00641

116.5

60.0

00274

49.8

50.0

00417

75.8

70.0

00139

25.2

90.0

00526

95.6

60.0

00016

2.9

30.0

02014

366.1

6H

ong

Kong

0.0

01027

92.0

20.0

00555

49.7

60.0

00457

40.9

30.0

00182

16.3

20.0

00720

64.4

70.0

00042

3.7

50.0

02983

267.2

5Ja

pan

0.0

00859

304.3

30.0

00389

137.9

20.0

00411

145.4

20.0

00047

16.4

90.0

00366

129.6

80.0

00044

15.7

40.0

02116

749.5

9So

uth

Kore

a0.0

00728

137.9

80.0

00379

71.8

00.0

00451

85.4

30.0

00059

11.2

30.0

00398

75.4

10.0

00102

19.2

50.0

02117

401.1

0In

dia

0.0

00849

236.9

80.0

00400

111.6

10.0

00403

112.3

30.0

00135

37.6

80.0

00764

213.0

60.0

00049

13.7

70.0

02600

725.4

4Sa

udiA

rabia

0.0

02501

169.2

90.0

01251

84.6

40.0

01330

90.0

00.0

00245

16.6

10.0

02501

169.2

90.0

00087

5.8

90.0

07916

535.7

2U

AE

0.0

01623

56.9

90.0

00970

34.0

70.0

00836

29.3

50.0

00305

10.7

10.0

02294

80.5

60.0

00073

2.5

70.0

06101

214.2

5C

anad

a0.0

00793

27.5

30.0

00376

13.0

50.0

00334

11.6

20.0

00068

2.3

70.0

00403

13.9

80.0

00089

3.0

80.0

02062

71.6

3U

SA0.0

01185

206.6

20.0

00511

89.1

70.0

00352

61.3

60.0

00093

16.3

00.0

00423

73.8

30.0

00184

32.1

20.0

02750

479.4

1A

ust

ralia

0.0

01397

387.0

10.0

00742

205.6

60.0

00512

141.8

40.0

00099

27.3

50.0

00834

230.9

90.0

00073

20.2

60.0

03656

1013.1

1N

ew Zea

land

0.0

00952

33.0

90.0

00534

18.5

60.0

00429

14.9

30.0

00102

3.5

40.0

00695

24.1

60.0

00113

3.9

30.0

02825

98.2

0

Den

mar

k0.0

00967

12.3

50.0

00487

6.2

20.0

00427

5.4

60.0

00082

1.0

40.0

00379

4.8

40.0

00055

0.7

10.0

02397

30.6

2Fi

nla

nd

0.0

01081

21.5

40.0

00615

12.2

40.0

00413

8.2

30.0

00089

1.7

60.0

00429

8.5

50.0

00054

1.0

70.0

02681

53.4

0N

orw

ay0.0

01049

11.8

50.0

00477

5.3

90.0

00375

4.2

30.0

00105

1.1

80.0

00425

4.7

90.0

00067

0.7

60.0

02498

28.2

0Sw

eden

0.0

01006

36.5

10.0

00481

17.4

60.0

00438

15.8

90.0

00082

2.9

70.0

00417

15.1

40.0

00138

5.0

20.0

02563

92.9

9U

nited

Kin

gdom

0.0

01354

341.3

10.0

00823

207.4

40.0

00559

140.9

50.0

00098

24.8

20.0

00577

145.3

90.0

00102

25.7

10.0

03514

885.6

2

Ital

y0.0

01223

32.1

10.0

00547

14.3

60.0

00470

12.3

30.0

00152

3.9

90.0

00335

8.8

00.0

00138

3.6

10.0

02865

75.2

0Sp

ain

0.0

00941

14.2

80.0

00514

7.8

00.0

00445

6.7

60.0

00074

1.1

20.0

00598

9.0

80.0

00063

0.9

60.0

02636

40.0

1Bel

gium

0.0

01295

11.2

50.0

00688

5.9

80.0

00619

5.3

80.0

00069

0.6

00.0

00395

3.4

30.0

00092

0.8

00.0

03158

27.4

3N

ether

lands

0.0

01166

53.7

00.0

00752

34.6

40.0

00653

30.1

00.0

00095

4.3

90.0

00529

24.3

50.0

00089

4.0

80.0

03284

151.2

6Fr

ance

0.0

00913

45.1

10.0

00519

25.6

40.0

00440

21.7

20.0

00075

3.6

80.0

00368

18.1

60.0

00089

4.3

90.0

02404

118.7

0

(con

tinue

d)

Tab

leB

(co

nti

nu

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)

Countr

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Res

iden

ce

Acc

om

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Food

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l*C

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l*C

apita

Tota

l*C

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Tota

l*

Ger

man

y0.0

01009

66.7

60.0

00600

39.7

10.0

00515

34.0

90.0

00080

5.2

70.0

00361

23.8

90.0

00090

5.9

70.0

02655

175.7

0Sw

itze

rlan

d0.0

01117

20.4

70.0

00624

11.4

30.0

00451

8.2

70.0

00081

1.4

80.0

00387

7.1

00.0

00125

2.3

00.0

02786

51.0

5So

uth

Afr

ica

0.0

01202

24.2

50.0

00583

11.7

60.0

00515

10.3

80.0

00111

2.2

30.0

00730

14.7

20.0

00114

2.3

00.0

03254

65.6

4O

ther

sA

sia

0.0

00913

169.2

50.0

00497

92.1

70.0

00443

82.1

10.0

00102

18.9

90.0

01003

186.0

10.0

00057

10.6

10.0

03016

559.1

4O

ther

sA

mer

icas

0.0

00822

85.0

30.0

00326

33.7

00.0

00302

31.2

40.0

00086

8.9

30.0

00427

44.1

90.0

00199

20.5

30.0

02162

223.6

2

Oth

ers

Euro

pe

0.0

01159

128.3

30.0

00691

76.5

40.0

00468

51.7

90.0

00080

8.9

10.0

00480

53.1

10.0

00098

10.8

90.0

02975

329.5

7

Oth

ers

0.0

01004

553.2

80.0

00406

223.7

80.0

00435

239.6

40.0

00093

51.1

00.0

01184

651.9

50.0

00074

40.5

30.0

03196

1760.2

7O

vera

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0.0

009878

12

847.9

30.0

0052178

6786.9

00.0

00424

5516.6

20.0

00103

1342.8

60.0

00717

9327.4

50.0

00036

471.8

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02790

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293.5

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Documents

31 Journal of Vacation Marketing Identifying economically potential inbound markets for Malaysian tourism industry