The Determinant of Tourist Arrivals in Malaysia: a Panel Data Regression Analysis.

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THE DETERMINANT OF TOURIST ARRIVALS IN MALAYSIA:
A PANEL DATA REGRESSION ANALYSIS.

TABLE OF CONTENT

CONTENTPAGE

Chapter 1- Introduction

Background of the Study 1
Problem Statement 2
Scope and Rational of the Study 2
Significance of Study 2
Research Objectives 3

Chapter 2- Literature Review

History of Tourism in Malaysia 4

Chapter 3- Methodology

Methodology 6
Model Specification 10

References
CHAPTER 1

INTRODUCTION

The tourism industry continued to contribute towards generating foreign exchange earnings, employment and income. Although in Malaysia, the industry was affected by the economic crisis in 1997 and 1998, its quick rebound contributed to the strong economic recovery of the nation. This was attributed mainly to the concerted efforts by the public and private sectors as well as the successful implementation of measures outlined in the National Economic Recovery Plan (NERP) to revitalize the tourism industry.

Tourist arrivals increased at an average rate of 6.5 per cent per annum during the Seventh Plan period. Tourist arrivals however declined in 1997 and 1998 mainly due to occurrences of haze, localized outbreaks of Nipah and Coxsackie viruses as well as the Asian financial crisis. The number of tourist arrivals to Malaysia declined by about 13 per cent in 1997 and 10.6 per cent in 1998. However, the tourism industry responded well to the measures taken to revitalize the industry, which included increased promotional efforts targeted at markets not affected by the economic crisis such as China, India, Middle East, Australia and Europe. As a result, the tourism industry recovered quickly as reflected by the rapid increase in the number of tourists to 7.9 million in 1999, which represented an increase of 43.6 per cent over the 1998 figure. In 2000, a record of 10.2 million tourist arrivals was achieved, which surpassed the target by 3.7 million tourists.

This paper uses a computable general equilibrium (CGE) model to analyze tourism in Malaysia. The development of the tourism industry in Malaysia has a long history. Before its dependence in 1957 and a few decades after, the Malaysian economy was heavily dependent on primary commodities mainly tin, rubber, palm oil and petroleum products. In the 1970’s, the government had seriously started to stimulate the development of the manufacturing industry in an effort to diversify the country’s economy. These two sectors, however, were highly export-oriented and their performance was directly influenced by changes of the world economic climate. The severe economic recession that hit most of the Asian region in the mid 1980’s had badly hurt the Malaysian economy and the government started to search for a more robust industry to broaden the country’s economic base. Tourism was identified as a potential industry that could encourage and stimulate the socio-economic development of the country especially as a supplier of foreign exchange earnings, and employment opportunities. Tourism sector also contribute to regional development, encourage the development of supporting sectors and reduction in rural-urban migration. After the severe recession in the mid 1980’s the government has given a very high priority to the development of the tourism industry. The seriousness of the government in promoting the tourism industry was manifested by the establishment of the Ministry of Culture, Arts and Tourism in 1987. In 2004, this ministry was restructured into three ministries and one of them is the Ministry of Tourism which was assigned to take care of, coordinating and implementing government policies and strategies pertaining to tourism development. Various tourism-related agencies at the state level were also set up, besides having some promotional activities such as the declaration of Visit Malaysia Year’ (VMY) in the 1990’s, 2000, and 2007, and active participation of...
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