An Economic Analysis of Community-based Tourism in Thailand:

A case study of Mae Kam Pong Village

Komsan Suriya30.07.2009

A preliminary report presented at ZEF

Enjoy the presentation (30 minutes)

1. Five minutes tour to the village

2. Introduction to the survey

3. Merits of community-based tourism

4. The Kuznets’ curve effect

5. Problems of tourism

6. My road ahead

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1,300 meters above sea level

50 kilometers from downtown

127 households

Local Northern nativeSpeak Northern Thai and official Thai

Source: www.travelblog.org

1. Tourism Economy of the village

Figure 1: Tourism income (Thai Baht)

Thai Baht

2006 2007 2008

Figure 2: Seasonal index of tourism income

Seasonal index

Summer Rainy

Winter

Winter

Figure 3: Income share of tourism in terms of retained value added in households (disposable

income)

Figure 4: Income share of souvenirs and coffee shop in terms of retained value added in households (disposable income)

Figure 5: Decomposition of tourism income in terms of retained value added in households (disposable income)

Figure 6: Decomposition of tourism and tourism-induced income in terms of retained value added in households

(disposable income)

Figure 7: Decomposition of tourists

Figure 8: Ratio between individual tourists and study visits

2. The survey

August 2008 – January 2009: 116 households

Based on Shankar Subramanian in Taylor and Adelman (1996)

Major output: Social Accounting Matrix (SAM)

Social Accounting Matrix of Mae Kam Pong village, Thailand

Reference period (RP): May 2007 – April 2008

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Another output: The panel data 2003 and 2007

Panel data 2003: Social Research Institute, Chiang Mai University. Conducted in 2004, 118 Households

Panel data 2007: This study

Conducted in 2008, 116 Households

104 households out of 118 households (88%) are matched.

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Mrs. Puth in 2003 Mrs. Puth in

2007

3. Merits of tourism

3.3 Better income distribution ?

3.1 Induced industries and infrastructures

3.2 Poverty reduction ?

3.1 Induced industries, infrastructures and facilities

3.1 Induced industries, infrastructures and facilities

Tourism promotion

Infrastructures and facilities

Enhancement of Commercial

sectors

Tourism induced industries and jobs

Direct Tourism income

Souvenirs production

Coffee shop

Buy agricultural products as inputs

Growths during 2003 – 2007 (4 years) in terms of retained value added in households

Tourism promotion

Infrastructures and facilities

Enhancement of Commercial

sectors

Tourism induced industries and jobs

Direct Tourism income

Souvenirs production

Coffee shop

Buy agricultural products as inputs

Growth= 545 % G= 952%

G= 702%

Growth= 554%

GDP village Growth= 64 %

GDP Thailand Growth= 44 %

G= -5 %

Multipliers in major sectors (3 rounds)

Tourism promotion

Infrastructures and facilities

Enhancement of Commercial

sectors

Tourism induced industries and jobs

Direct Tourism income

Souvenirs production

Coffee shop

Buy agricultural products as inputs

Multiplier=1.22 M=1.75

M=1.68

Multiplier= 1.03 to 2.04

Retained value added rate in major sectors

Tourism promotion

Infrastructures and facilities

Enhancement of Commercial

sectors

Tourism induced industries and jobs

Direct Tourism income

Souvenirs production

Coffee shop

Buy agricultural products as inputs

RVA=48% RVA=22%

RVA=49%

RVA= 14%

RVA=86%

All sectors

RVA=48%

3.2. Tourism and poverty reduction

2003 2007

Headcount index

Poverty gap index

Squared poverty gap index

39.42%

40.22%

21.69

47.46%

38.61%

20.64

Without tourism and induced industries

48.31%

39.81%

21.52

44.23%

43.80%

25.27

Headcount index

Poverty gap index

Squared poverty gap index

8%

4%

Did tourism income help reduce poverty in a household?

Model : Among the poor

Y = 1 if Turn to be Non-poor

Y = 0 if Still be poor

Income changes during 2003 - 2007

Agriculture = Chang of agricultural income

during 2003 – 3007

Souvenir = Change of souvenir income

Homestay = Change of homestay income

Coffee shop = Change of coffee shop income

Commerce = Change of commercial income

Other_nonagri = Change of other non-

agricultural income

Other_tourism = Change of other tourism

income

Financial = Change of financial income

Poverty status shift from poor to non-poor

Poverty status shift among the poor

This is simple.

When tourism income did not go to the poor,

how could it help them?

Tourism income concentrated in the rich households.

Tourism income in 2007 flowed backward from the richest group to the 3rd and 4th Quintile.

3.3 Good news, after 4 years, situation was better.

Gini Tourism 2003 =0.53

Gini Tourism 2007 =0.44

4. The Kuznet’s curve effect

Time

Market size

Natural spillover occurs when the market size exceeds the capacity of old members.

Threshold of natural spillover

2003 2007

5. Problems of tourism

5.1 Tourism income haven’t yet flown to the poorest class.

5.2 Income of tourism induced industries concentrates in the richest class.

The poorest 40% ( households in 2003) have never gained more than 13% of tourism income.

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The poorest 40% (households in 2007) gained less than 7% of tourism income. (They gained 23% of agricultural income and 7.5% of non-agricultural income.)

Gini Souvenir 2007 =0.53

Gini Coffee shop 2007 =0.60

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Why the problems?

1. The poor mentioned that they are not ready.

2. Barriers to entry in some important industries.

Problem I: Non-readiness on the poor’s side

1. Distance from the tourism node

2. No operational capital

3. No hospitality skills

Outer cluster (31 HHs) Middle cluster (18 HHs) Upper Middle cluster (38 HHs)

Inner cluster (48 HHs)

Entrance

Problem 1.1: The Distance

Center

Homestay income does not flow to the outer cluster.

0% 6% 11% 43%

27% of households in the outer cluster are in the poorest class which is more than other clusters.

27% 0% 19% 14%

The extension of members in homestay, souvenirs and coffee group have to be agreed by the old members.

Preliminary votes:

Homestay group => YES

Souvenirs group => NO

Coffee group => NO

Problem II: Barriers to entry

Conditions for voting “YES” to the member expansion policy

1. Our income must not be less than the current level.

2. Only financial investment is not acceptable. New members have to spend working hours for the service to the group.

We are serious on our

conditions.

7. My road ahead

To make the poor ready to receive the ball.

To make the rich pass the ball to the poor.

To make the poor ready to receive the ball.

To make the rich pass the ball to the poor.

Mechanisms• Shuttle bus

• Microcredit

• Capacity building

Autonomous mechanism after the market size exceeds their capacities.

On the poor’s side

• Use “Spillover model” to prove that these measures will make some poor households ready for tourism:

• Shuttle Bus Service

• Microcredit for operational capitals

• Capacity building

• Use Logit model to predict which household will participate into tourism.

• Use Tobit model to predict the tourism income that the participating households will earn.

On the rich’s side

• Find the threshold.

• Find the carrying capacity.

• Simulate with Village CGE how much the market expansion will benefit the poor.

Carrying capacity

Time

Market size

Maximum

tourism income distribution

that can be achieved

My thesis will be finished here.

To find the maximum tourism income distribution

Goal of thesis

When all villagers share burdens of tourism, they should have opportunity to share benefits from it.

Why I am on the same side with the poor?