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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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istorically, tourism has been viewed as a non-productive sector that contributed little

to economic growth (Papatheodorou, 1999; Vanhove, 2011). However, this view has

gradually evolved as research reveals that tourism does contribute to economic growth.

In fact, the role of tourism in stimulating economic growth is acknowledged as the

tourism-led growth hypothesis.

Despite being a laggard in the tourism sector, Malaysia has moved swiftly in

establishing itself as a prominent tourism destination through a variety of tourist

friendly policies and tourist attracting initiatives. Consequently, international tourist

arrivals to Malaysia increased tremendously from 5.8 million visitors in 1991 to 24.6

million visitors in 2010. Since 1993, Malaysia has been ranked as one of the top three

most visited destinations in Asia (Cheah, 1995; Zain, 2005). Furthermore, the Tenth

Malaysian Plan (2011-2015) also seeks to set out to promote the tourism sector as one

of the National Key Economic Areas (NKEA) to transform Malaysia into a high-income

nation by 2020.

Nevertheless, there are criticisms that tourism may not significantly stimulate long-term

economic growth as tourism earnings is significantly less than tourist arrivals. For

instance, the UNWTO (2012) noted that Malaysia‘s ranking in terms of earnings was

much lower than the ranking by arrivals, and that from 1990 to 2000, the share of

tourism receipts to GDP in Malaysia only amounted to approximately 4 per cent. Such

misgivings about the tourism-led growth hypothesis are further compounded by data

suggesting that not all arrivals are genuine tourists as many informal agents bring in

illegal workers to Malaysia using the tourism channel as a conduit, and it is hard to


differentiate between genuine tourists and those who arrive in search of jobs (Kassim,

1997). This is attested to by the fact that the number of illegal foreign workers in

Malaysia more than tripled from 600,000 in 1995 to 2.1 million by 2011 (Augustin and

Lee, 2012).

In view of these counterfactual data, doubts have arisen regarding the economic policy

of emphasising tourism as one of the sectors that could plausibly drive economic growth

and thus assist in the attainment of a high-income status by 2020. This is because high

rates of arrivals may not necessarily equate to higher rates of tourism earnings, as not all

arrivals are genuine tourists. In view of these reservations, there is an urgent need to

examine and comprehensively establish whether the tourism-led growth hypothesis is

applicable to the Malaysian context so that policymakers can design more optimal,

relevant and sustainable policies that drive long-term economic growth.

In addition to the above, analysis of contemporary research output reveals that only a

few studies have analysed the tourism-led growth hypothesis and modelled the demand

for tourism in Malaysia (e.g. Salleh, Othman and Ramachandran, 2007; Salleh et al.,

2008; Lau, Oh and Hu, 2009; Lean and Tang, 2010). Thus, ascertaining the validity of

the tourism-led growth hypothesis is of utmost importance, because the findings can

provide justification for the Malaysian government to decide whether tourism can

effectively promote long-term economic growth. Additionally, there is the question of

whether prevailing investments in the tourism sector and the government incentives for

tourism and tourism-related projects constitute the optimal use of resources to yield

viable Returns on Investments (ROIs). Apart from that, modelling the demand for

tourism in Malaysia is also vital in ensuring that the relevant policymakers and tourism

industry stakeholders have the requisite input with which to design the appropriate


tourism marketing strategies and tourism policies. Hence, more genuine tourists would

be attracted to Malaysia. Finally, modelling demand for tourism will also help

policymakers and industry stakeholders to improve their tourism forecasting ability.

Therefore, assessing the tourism-led growth hypothesis and the demand for tourism in

Malaysia justifies immediate

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