REGIONAL INTRA TOURISM MARKET IN ASEAN AFTER THE ESTABLISHMENT OF THE AEC: PERSPECTIVES AND POLICY IMPLICATIONS FOR VIETNAM

FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS ---***---GRADUATION THESIS Major: International Business Economics REGIONAL INTRA TOURISM MARKET IN ASEAN AFTER THE ESTABLISHMENT OF THE A

FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS

-*** -GRADUATION THESIS Major: International Business Economics

REGIONAL INTRA TOURISM MARKET IN ASEAN AFTER THE ESTABLISHMENT OF THE AEC: PERSPECTIVES AND POLICY IMPLICATIONS

LIST OF ABBREVIATIONS i

LIST OF FIGURES ii

LIST OF TABLES iii

INTRODUCTION 1

CHAPTER 1: THEORETICAL BACKGROUND ABOUT REGIONAL INTRA TOURISM 5

1.1 Basic concepts related to regional tourism market 5

1.1.1 Definitions of tourism 5

1.1.2 Definitions of regional tourism 7

1.1.3 Definition of regional tourism market 7

1.1.4 Definitions and classifications of tourists 8

1.2 Demand tourism in theoretical aspects 8

1.2.1 Demand tourism in Maslow theory 8

1.2.2 Gravity framework 10

1.3 Determinants to build up regional intra tourism market 11

1.3.1 Demand of regional tourism market 11

1.3.2 Supply of regional tourism market 12

1.4 Factors affecting to regional tourism market 12

1.4.1 Factors affecting to supply of regional tourism market 12

1.4.2 Factors affecting to demand of regional tourism market 17

1.5 The impacts of regional economic integration on the intra – regional tourism 18

1.5.1 Levels of regional economic integration 18

1.6 Experiences of developing regional intra tourism market 24

CHAPTER 2: STATUS QUO AND PERSPECTIVES OF ASEAN’S INTRA – REGIONAL TOURISM MARKET IN THE CONTEXT OF THE AEC ESTABLISHMENT 27

2.1 Overview about the AEC 27

2.1.1 Background about the AEC 27

2.1.2 Characteristics and goals of the AEC 27

2.2 Reasons considering regional tourism as a priority compared with other kinds of tourism 30

2.2.1 Growth of GDP and economic similarity of AMS 30

2.2.2 Cultures of nations in ASEAN 33

2.3 Situation of regional tourism market in ASEAN before the AEC establishment 33

2.3.1 The size of regional intra tourism in ASEAN 33

2.3.2 Situation of intra – ASEAN tourist arrivals in each AMS 39

2.4 Prospects of ASEAN regional tourism after establishing the AEC 43

2.4.1 Strengths and weaknesses to develop regional intra tourism in ASEAN 43 2.4.2 Opportunities for regional intra tourism in ASEAN after forming the AEC 45

2.4.3 Challenges for intra – ASEAN tourism after the AEC establishment 49

CHAPTER 3: POLICY IMPLICATIONS FOR VIET NAM IN THE CONTEXT OF ESTABLISHING THE AEC 52

3.1 Situation of intra – ASEAN tourist arrivals to Vietnam 52

3.2 Orientation of developing Vietnamese tourism in the context of forming the AEC 54

3.2.2 Orientation to develop tourism products 57

3.2.3 Orientation towards supply source of tourism service 58

3.3 Recommendations for developing Vietnamese regional tourism market while establishing the AEC 60

3.3.1 Recommendations for legal framework 60

3.3.2 Recommendations for infrastructure 62

3.3.3 Recommendations for human resource in tourism sector 68

CONCLUSION 73

REFERENCES 75

APPENDICES 83

LIST OF ABBREVIATIONS

3 ASEAN Association of South East Asia Nations

5 CLMV Cambodia, Lao PDR, Myanmar, and Viet Nam

11 ICT Information and Communication Technology

13 MICE Meeting, Incentive, Convention, Exhibition

15 OECD The Organization for Economic Co-operation and

development

16 R&D Research and Development

17 SMEs Small and Medium Enterprises

19 UNWTO United Nations World Tourism Organization

24 WTTC World Travel & Tourism Council

LIST OF FIGURES

PAGE

Figure 1.2: Gravity model in international tourism flows 11Figure 1.3: Creation effect of regional economic integration on regional

Figure 2.9: Airport numbers in ASEAN countries between 2008 and

LIST OF TABLES

PAGE

Table 1.2: Levels of regional economic integration and its characteristics 20Table 2.1: GDP and GDP forecast of AMS from 2010 to 2016 31Table 2.2: Proportion of ASEAN tourist arrivals from 2008 to 2013 37

Table 2.4: Intra – ASEAN visitor arrivals by country of destinations from

2009 to 2013

40

Table 2.5: Ranking of doing and starting business in ASEAN countries 50

Table 3.2: Intra – ASEAN tourism arrivals to Vietnam in the first three

1 Rationale

Tourism industry has expanded and diversified quickly This kind of servicestands among one of the most rapidly developing industries all over the world andgreatly contributes to the whole economy GDP According to World Travel &Tourism Council (WTTC) (2014), total contribution of travel and tourism to GDPwas more than 7000 billion USD in the year of 2013 (around 9.8% of the wholeeconomy GDP) More importantly, international tourism makes up for 29% of theworld’s exports of services and also 6% of overall exports of goods and services.Furthermore, the tourism sector can be considered as key driver of growth andleading role in solving employment WTTC (2014) has also pointed out that traveland tourism had created 100,894,000 jobs in 2013 which accounted for 3.4% oftotal employment This includes employers working in hotels, travel agents, airlinesand so on It is estimated that tourism will generate more than 126 million jobs – arise of 2% per annum over the next ten years These all above data demonstrate theessentiality of the tourism industry in the economy

ASEAN tourism market is one of the most dynamic markets all over theworld and has greatly contributed to the economical growth in this region Most ofthe countries in ASEAN have paid attention to develop tourism and some of themare becoming the most favorite tourist attractions such as Thailand, Singapore and

so on In the year of 2013, the total number of visitors travelling to ASEAN wasmore than 98 million – a rise of more than 9.8% compared with 2012 (ASEAN,2015a) Specifically, intra – ASEAN tourism (tourists from ASEAN countriesvisiting other ASEAN countries) account for 43% of all international touristsarrivals in ASEAN (World Economic Forum (WEF), 2012) From this figure, wecan see that regional intra tourism in ASEAN makes up for nearly half of the totalproportion of ASEAN tourists’ arrivals

In the context of regionalization, ASEAN has decided to build up theASEAN Economic Community (AEC) in the end of the year 2015 The finalpurpose of AEC is to increase the competitive ability of ASEAN, fully improve the

ASEAN economy in the world Undoubtedly, the AEC will open up moreopportunities for all the economic sectors in general and tourism in particular aswell as creates burdens for members in ASEAN From the point of establishingAEC, there would be changes in regional tourism market in ASEAN and inVietnam in particular

For all the reasons above, my topic “Regional intra tourism market in ASEAN after the establishment of the AEC: Perspectives and policy implications for Vietnam” was officially launched to research This study is conducted in order

to bring an overall picture of regional tourism market in ASEAN since the AEC isestablished and make some recommendations for Vietnam of how to adapt with anew context – establishment of the AEC

2 Research objectives

This thesis attempts to observe the regional intra tourism market in ASEANbefore and after the establishment of the AEC so as to suggest effective policy forattracting visitors to Vietnam in the case of establishing the AEC

The following questions will be answered:

 Why is regional tourism more important than other kinds of tourism in

 What are the benefits as well as challenges that AEC brings to Vietnam

regional tourism market?

 What can be implemented to develop tourism in Vietnam in the context of

establishing the AEC?

3 Research methods

My research is conducted by a number of methods namely comparison,description, interpretation, synthesis Data and information are mostly obtained

from the empirical studies of prior researchers, statistics and materials from existingreports as well as prestigious websites.

4 Scope of the thesis

My graduation thesis will focus on the following points:

 Observing the regional intra tourism in ASEAN in previous years

 Studying the AEC and its role in boosting regional tourism, perspectives that

regional tourism in ASEAN will be after establishing the AEC

 Examining the current tourism situation in Vietnam in terms of policy, the

numbers of intra – ASEAN visitors coming to Vietnam

 Give some policy implications for Vietnamese tourism in order to adapt with

new context when forming the AEC

5 Structure of the thesis

My thesis is divided into three chapters as following:

Chapter 1 commences with the theoretical background of regional intratourism by providing a variety of definitions and concepts related to tourism Sometheoretical models as well as determinants to build up regional tourism market willalso be mentioned The other part of chapter 1 brings an overview of the impacts ofregional economic integration to regional tourism market In the final part of thefirst chapter, experiences from some countries which successfully develop regionalintra tourism market in the context of regional economic integration will beintroduced

Chapter 2 firstly presents the background about the AEC by introducing indetail its characteristics which are considered to be greatly affected to regionaltourism market The next part covers the situation of regional intra tourism market

in ASEAN before the AEC establishment Then perspectives of regional intratourism market in ASEAN after forming the AEC are analyzed accordingly

Chapter 3 studies the situation of intra – ASEAN tourists to Vietnam as well

as the status quo of tourism infrastructure, human resource After that, orientations

to develop Vietnam tourism to attract intra – ASEAN tourists in the context of

forming the AEC will be mentioned From that, some policies will be given for

Vietnam tourism market so that we can adapt with new situation that the AEC willbring to economy in general and tourism in particular.

Upon completion of this thesis, I would like to express my great thanks to

my supervisor - Do Ngoc Kien, MPP for his insightful guidance and continuoussupport He has not only oriented topic for me so that it can match with currentsituation and my ability but also given me thorough comments for my research fromthe start Without his encouragement, my thesis would be hardly finished

CHAPTER 1: THEORETICAL BACKGROUND ABOUT

REGIONAL INTRA TOURISM

1.1 Basic concepts related to regional tourism market

1.1.1 Definitions of tourism

Before entering to know the meanings of regional intra tourism, it is essential

to have some basic understandings about tourism The definitions of tourism can beunderstood in many ways and different aspects To narrow it down, this researchfocuses on the concepts of the most popular organization regarding tourism

According to United Nations World Tourism Organization (UNWTO)

(2014a), tourism is a phenomenon It is defined as “a social, cultural and economic phenomenon which entails the movement of people to countries or places outside their usual environment for personal or business/professional purposes.” In

the first concept, we see criteria to characterize a travel belonging to tourism

 Displacement “outside their usual environment”, it means it can be

international travel or domestic ones

 Purpose: tourism can be occurred for personal purpose such as recreation,

visiting friends and family or relaxing or business ones (people who work in

a different place compared with their usual address)

In other definition, “Tourism comprises the activities of persons travelling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes not related to the exercise

of an activity remunerated from within the place visited.” (WTO, 2008) Under this

concept, the travel must occur for any purpose rather than earning money in theplace visited And, this can be understood that tourism can be enhanced toentertainment or recreation for people Furthermore, the duration or maximumlength of tourism is 12 hours Base on this concept, the subject matters of tourisminclude:

 Tourist: person who desires to travel decides destinations and activities to

join in one trip

 Business firms: they provide goods and services for tourism Tourism creates

chances for them to gain profit by meeting the demand of visitors

 Local authorities: they are the leader of destinations who recognize the

positive factors for economics of that region by income from tourism

 Local residences: they consider tourism as important elements to create jobs

and exchange culture However, tourism causes negative effects to localresidences such as destroying environment, disordering security

Finally, based on the Vietnamese Law of Tourism in 2005 article 4, “tourism

means activities connected with trips taken by people outside their habitual residences aimed at satisfying their needs for sightseeing, study, leisure or recreation in certain period of time”

In this thesis, tourism is defined as the synthesis of phenomena and relationships arising from interactions among tourists, business firms, local authorities and residences in the process of attracting and welcoming tourists

So views of tourism have supplemented together, but they are still based ondescribing phenomenon sticking with tourists And from the above definitions, wealso see nature of tourism – a form of service Because of that, it appears characters

of services, which are

 Intangible: Tourism is not a kind of goods, but it stands among different

kinds of services If consumers have the chance to see, touch, hear or smellthe goods before buying them, they cannot apply it to tourism They justevaluate whether they are satisfied from tourism services such as hotel,transportation or not

 Inseparability: Tourism is generally created or supplied simultaneously It

cannot be separated with other supporting services Tourism services andtheir providers are associated closely and thus, not separable For example,when we travel, we need to find air tickets in case of long distance betweentwo countries So the appearance of tourists must go together with airagency

 Heterogeneous: This character of services makes it tough to line a

customary for any service No doubt, different service suppliers will have

different quality And the perception of people at the extent of suppliers andconsumers is also distinct More importantly, each of people will evaluatetourism service differently based on their satisfactions and feelings Forinstance, the tourism quality in Thailand is different from that in Vietnam.Some tourists like coming to Thailand as it has many golden temples, on theother hand, some visitors love Vietnam more than Thailand as they feel moresafety to stay in Vietnam Because of that, it is quite hard to draw a standardfor tourism services In terms of consumers, because of different needs,suppliers have to adjust their services

 Seasonal: Of course, the consumption of tourism service will reach a peak in

some times Take Vietnam as a good example From May to July everymonth, the number of travelers is relatively higher than other months Thereason is that the former months is holiday for students Moreover, theweather climate in these months is also suitable for travelling

1.1.2 Definitions of regional tourism

Undoubtedly, regional intra tourism is one kind of tourism so it should becontained some basic characteristics of tourism, which are:

 Purpose: serving people in terms of entertainment, recreation or other

business purpose but not serving for earning money

 Duration: A trip will not be extended for more than one consecutive year

Furthermore, region refers to the countries within the geographical areaclassified by WTO which are Africa, America, Europe, East Asia and PacificRegion, Middle East and South Asia (Agarwal & Jpadhyay, 2006, p.19)

By these above points, regional intra tourism can be understood as tourist flow to and from countries for not more than one consecutive year in the same region of the global for leisure, business and other purposes in the member countries visited

1.1.3 Definition of regional tourism market

In a narrow sense, market is a medium that allows buyers and sellers of aspecific goods or services to interact to facilitate an exchange In economic sense,market is the interaction between supply and demand of goods and services In

other words, it is the place for people with the desire and ability to buy or use aspecific products and services

From the above understanding about market, regional tourism market can beunderstood as a medium where selling and buying transaction happen as well as themeeting point of supply and demand tourism More importantly, the transactionmust happen in a particular economic region such as ASEAN, Europe, and so on

1.1.4 Definitions and classifications of tourists

According to UNWTO (2008), tourists are who “traveling to and staying in

places outside their usual environment for not more than one consecutive year for leisure, business and other purposes” and they can be:

 International tourists: they can be inbound tourists (people who come from

another country travel to one country) or outbound tourists (people whocurrently stay in one country travel to a foreign country)

 Internal tourists: they are citizens and foreigners who currently stay in one

country travel to different destinations in that country

 Domestic tourists: include internal tourists and inbound tourists

 National tourists: include internal tourists and outbound tourists

Base on United Nations Statistical Commission (2008) a tourist is “a

traveler taking a trip to a main destination outside his/her usual environment, for less than a year, for any main purpose (business, leisure or other personal purpose) other than to be employed by a resident entity in the country or place visited”

1.2 Demand tourism in theoretical aspects

1.2.1 Demand tourism in Maslow theory

Maslow had given model generalizing people needs arranged by thefollowing order which illustrated in the figure 1.1 From the Maslow model, lowlevel needs such as physiological requirements and safety must be satisfied beforehigher level needs such as knowledge and understanding, self-actualization arepursue

Figure 1.1: Maslow’s hierarchy of people needs

Source: Maslow & Stephens (2000)

The first level is physiological needs which are those required to sustain lifesuch as food, water People will find this as the most important needs as theyrequire them to survive Once physiological needs are met, people’s attention turns

to safety and security so that they can avoid threats

When a person has met the lower level, higher needs become important Thefirst of which are belonging and love This means people need to interact withothers After a person feels a sense of “belonging”, the need to feel important arises.And they will find to aesthetics and knowledge needs Nguyen Van Dinh & TranThi Minh Hoa (2006) raised the view that when the economic growth is increasing,people needs will be not only physiological ones but also aesthetics, entertainmentand tourism stands among many methods to meet these above mentioned needs Atthat point, people find tourism as a way for them to explore new things, enhanceknowledge

In a nutshell, people always tend to satisfy the higher level needs when theyare fully met the lower level Moreover, the growth of people budget, of course, willmake them find a way to satisfy the higher level To some extent, the Maslow’shierarchy of people needs has viewed the demand of tourism where persons will

actualization

Self-Knowledge and understandingAestheticsEsteem Belonging and loveSafety and securityPhysiological needs

find tourism as a way to satisfy their needs of enhancing knowledge, understandingaesthetics

1.2.2 Gravity framework

The Newton law of gravitation states that two celestial bodies are subjected

to a force of attraction that is directly proportional to their mass and indirectlyproportional to their distance (Balali, 2007) Subsequently, the so – called “gravitymodel” has widely used in the economics to international trade flows

Tourism is a kind of service and its trade, for that reason, can be evaluated bygravity model Below here is model that affects to the level of tourism flows in aregion Complied and amended from the gravity model for international trade of TuThuy Anh & Dao Nguyen Thang (2008), author constructed gravity model forinternational tourism flow as specified in the figure 1.2

Based on the figure 1.2 which illustrates the gravity model in internationaltourism flow, there are hinder as well as attracting factors that have influence totourism flows between nations in the same region From the figure, distance factor

in gravity model has influence to tourism flows between two countries Moreover,there are attracted and hinder factors which have influence to intra regional tourismflows among countries in the same region namely tourism policy, infrastructure andhuman resource of countries in the same region

Balali (2007) had researched the factors affecting to tourism flows betweentwo countries by using gravity model with three explanatory namely economicgrowth measured by GDP, population of two countries and geographical distance

He concluded that the tourist arrivals between two countries were assumed toincrease along with GDP, decrease with the cost of transportation as measured bythe distance between two countries No doubt, the higher cost of transportation willmake tourists become less willing to travel and vice versa Another one isgovernment policy which also has potential impacts to tourism flows It canencourage or on the other hand, discourage tourists to travel to another country

Figure 1.2: Gravity model in international tourism flow

Source: Constructed by author based on gravity model in international trade of Tu

Thuy Anh & Dao Nguyen Thang (2008)

Another one is government policy which also has potential impacts totourism flows It can encourage or on the other hand, discourage tourists to travel toanother country Likewise, infrastructure and human resource of both countries willhave great impacts to regional tourism flows, which will be explained in detail inthe latter part

1.3 Determinants to build up regional intra tourism market

1.3.1 Demand of regional tourism market

As illustrated in the above part, when the sustainable needs such as foods,drinks are satisfied, people will find to higher level such as explore the world, relaxafter hard – working hours Demand of regional tourism market is the quantity oftourism services that tourists live in the same region can use and have ability to

Destination

Factor affects to regional tourism flows

Attracted/ Hinders factors

affecting to supply Attracted/ Hinders factorsaffecting to demand

Distance between 2countries

Tourism Policy,Infrastructure,Human Resource

make payment The higher the price for tourism services is, the lower level ofdemand curve is

Do Huong Lan et al (2013) regarded that the demand of regional tourismservice includes three main types The first one is “sustainable demand” It isdemand of tourists to travel, to eat and relax during their trips The second is

“particular demand” which indicates the tourists’ purposes during their trips such asvisiting purpose, studying purpose and so on The final one is “supplementeddemand” which is not listed out before their trip In other words, it arises out oftourist’ purpose such as shopping

1.3.2 Supply of regional tourism market

In a narrow sense, supply of regional tourism market is the ability to provideservices for tourists’ trips The supply of regional tourism market is performed by

 Selling tours agents: They can sell tours directly to tourists or indirectly to

other tourism company Normally, they will have a long relationship withtourism companies so that they can have a good source of buyers Nowadays,tour agents will issue full package tickets to tourists which include tourguides, transportation, meals and so on This, in turns, will help tourists cantake their trips easy while travelling

 Transportation firms: their duty is to provide transportation services from

tourist’s hotels to their visiting destinations

 Firms provide hotel, accommodation, restaurants services for tourists

 Firms provide supporting services for tourists such as insurance,

entertainment In reality, firms can perform all above tourism services such

as providing guides, accommodation, meals and so on This form of suppliers

is relatively popular nowadays as many tourists do not also want to care formany things by themselves in a different country

1.4 Factors affecting to regional tourism market

1.4.1 Factors affecting to supply of regional tourism market

There are lots of factors contributed to the supply of regional tourism market.According the World Economic Forum (WEF, 2012), the determinants affecting tothe supply regional intra tourism market of a nation can be divided into three main

categories namely regulatory framework, business environment and infrastructureand human, culture & natural resource From my point of view, factors affecting tothe supply of regional tourism market can be concluded with three main categorieswhich are regulatory framework, infrastructure and human resource Each of thesemention factors are analyzed in detailed as following

1.4.1.1 Regulatory framework

a) Policy rules and regulations

WEF (2012) has pointed out the effect of policy rules and regulations totourism flows Clearly, governments can have a huge influence on the attractiveness

of tourism as they create policies that support or even hinder the tourism’s sectordevelopment Policy framework of one government puts both negative and positiveimpacts on regional tourism market supply Some policies affecting to regionaltourism are the ease of starting a business, the tightening or freedom of visarequirements for countries in the same region, the openness of bilateral Air ServiceAgreements and so on

b) Safety and security

Safety security conditions are well-understood factor of the attractiveness ofregional tourism It is undoubtedly true that tourists are deterred from traveling todangerous regions where common crime, violence and potential terrorism can easilyhappen Any violence or pick pocket can potentially destroy the image of onecountry and this, in turns, put a seriously negative impact on tourism Travelerseven can cancel, postpone or change their plans to a more peaceful place because oftheir fear Acknowledge the importance of safety and security to tourism, regionssuch as ASEAN gives continuous efforts to ensure security for tourists withinASEAN territory

c) Prioritization of tourism

The extent governments prioritize the tourism sector also has a substantialinfluence on a nation’s tourism attractiveness When government makes clear whichsector is a preference, of course, a government will arrange national budget for thatsector more than the other ones Moreover, they can give funds to importantdevelopment projects

The priority for tourism sector can be reflected by the way governmentmakes effort to collect and make tourism data on a timely basis, or invests more for

it or even commission for marketing campaigns All of below measures can maketourism sector become highlighted for one nation

1.4.1.2 Infrastructure

a) Air and ground transport infrastructure

Transport infrastructure plays a crucial importance in boosting economicdevelopment for both regional integration as well as international ones Itcontributes to improve a country’s connectivity, its accessibility to other nations

Of course, without air transport, tourism activity can hardly happenespecially for those travelling to a nation which is far from their own country.Transport in general and air transport in particular is no doubt extremely essential as

it creates linkages between nations and facilitates movement among these countries.The quality of airline infrastructure can be measured by the capacity the passengercarries, the length of route, the number of departures, the services in one flight and

so on And air transport is increasingly becoming essential for tourisms Above half

of international tourists arrived by airline in 2010 while the remaining percent(approximately 40%) belongs to the rest means of transportation (UNWTO, 2012)

However, it cannot be denied the importance of ground transportinfrastructure For those who travel in short distances, ground transportation is apriority Ground transportation includes roads, railroads and port Its quality can bemeasured by the quality of the above mentioned means of transportation as well asthe easy accessibility to tourist attractions

b) Tourism infrastructure

Some indicators are measured for tourism infrastructure namely the numberand quality of hotel rooms per tourists, the popular or density of five – star hotels inone country, the ratio of two star hotels compared with the total number hotels ofone country, the presence of companies providing car rental services or tourservices

In terms of hotel rooms, tourist clearly tends to travel in peak seasons That

is why enough hotel rooms available are a requirement for attracting tourism in one

country Moreover, visitors consider they must receive conditions and other tourismservices for what they have paid for

The number of car rental companies as well as tour service stands amonggauges of a nation’s tourism attractiveness The reason is that tourists likely travelinside or outside nation’s destination and they also lack of knowledge about thatcountry That why they need guide group who can help them solve difficultiesduring the trip No doubt, if tourism sector in one country can serve this demand oftourists, the country can be easily attractive in tourism sector

c) Information and communication technology (ICT) infrastructure

ICT infrastructure includes fixed, mobile telephone penetration rates and therates businesses use the Internet as well Although a nation cannot totally depend ontechnology to gain connectivity, mobile technology and information still greatlytransforms economies and tourism as well

Chakraborty (2013) has pointed out the importance of ICT No doubt, theapproach and utilization of technological advances have further affected the tourismand travel industry It is currently feasible for suppliers such as tour or air agency toview and advertise different tourism alternatives on the web through moderncomputer Moreover, short informing administrations about delay of airplane forexample will give tourists a positive feeling about professional way of working.Furthermore, the broad use of modern telephones also help to boost tourism marketsupply as they permit tourists to get access to website to book tours or other tickets

on the web

ICT has clearly effects to tourism market supply as tourism is currentlygetting to be considerably more dynamic on online sources and social networks aswell Almost tourism services such as hotel, restaurant or booking agency have awebsite, or facebook pages They will use these sites to advertise themselves as well

as enhance relationship with tourists (Griffin, 2013)

Rahman & Haque (2013) pointed out that the essential needs of ICT totourism would be divided into three main stages as specified in the below table:

Table 1.1: ICT needs to tourism

Sharing, Documentation,

attachment

Source: Rahman & Haque (2013)

From the table, we can see that ICT will affect to tourism in three aspectsnamely pre – consumption, consumption and post – consumption To understandthis more clearly, let take a tourist travelling to Vietnam as a good example Before

he goes to Vietnam, he needs to use advance devices to search for place to stay and

to eat The variety of online sources together with reviews from previous touristswill give him a decision which is the ideal place for his needs After that, he will usecomputer or other devices to connect with suppliers or owners of hotel for example

to book rooms in advance While he finishes his trip in Vietnam and comes back tohis country, he can give review for that hotel on some social networks such asTwitter or Tripadvisor by sharing his experiences in that hotel so that he can helpother tourists to make decision From this instance, we can see the great impacts ofICT to tourism market supply

No doubt, poor digital connectivity prevents businesses, individuals, andeven governments from gaining the benefits for tourism such as opening newbusiness opportunities, enhanced productivity, improving access to fundamentalservices, and better governance

For that reason, ICT infrastructure is a worth determinant for any nation whowant to improve their tourism sector

have specific travelling knowledge such as communication, hospitality,management skills

The education and training for staff in tourism sector take into accounteducational attainment rate and the overall quality of tourism education system.Rather than formal educational system, it also takes into account how to increasethe availability of specialized training services and the number of staff training bytourism companies in the country

WEF (2012) focuses out the way that human assets are an essentialdeterminant of tourism advancement and competitiveness Human resource ishighly important to tourism because it creates a strong link with the tourists asservices users (JankovićMilić, et al., 2011)

Moreover, because of inseparable characteristic of tourism services, humanresource plays a key role Tourists normally have to communicate with suppliersfrom tour agency for example, so attitudes of servants will affect to the quality oftourism market supply

The reason why human resource is greatly paid attention as to some extent itwill measures the degree to which a nation welcomes tourism and visitors It isevaluated by the employee’s attitude toward tourists, the extent to which and thetourism openness Moreover, the friendlier environment of destination country is,the more attractive tourism it can have The way local people as well as employees

in hotels or tourist attractions treat tourists affects their decision as tourists, ofcourse, wants to be welcomed in a new nation

1.4.2 Factors affecting to demand of regional tourism market

1.4.2.1 Gross Domestic Product (GDP)

Of course, the demand of regional tourism only happens if tourist has freetime and full financial capacity GDP growth means economy of one countryincreases, this in turns witness the increase of household income On the other hand,the economy of one region is depressed; the demand towards tourism services alsogoes down

In the research of Balali (2007), using gravity model and panel data whichtested the tourists arrivals among ECO region (Iran, Turkey, Pakistan, Kirghizstan,

Azerbaijan, Turkmenistan, Afghanistan, Uzbekistan and Kazakhstan) with threeexplanatory namely GDP, population and distance, he concluded that the economicgrowth variable has positive effect to tourism arrivals in the same region The morethe economic growth of a country increases, the more easily civilians can take trips.

Moreover, he showed that economic similarities among countries in the same region

have significant impact to tourists’ arrivals Likewise, Karagoz and Saray (2010)concluded that GDP has positive effect on tourist inflows

In a nut shell, we cannot deny that economic growth measured by GDP willhave positive effect to the tourist inflows among countries in the same region.Moreover, the smaller income gap of countries in the same region will boost thetourist arrivals as travelers come from this country can have sufficient income fortheir trip to another country in the same region

1.4.2.2 Other factors

Another factor affects to the demand of regional tourism is the distancebetween nations The tourists of course tend to travel in a short distance as theymust pay lower cost for transportation When the distance among countries islonger, the lower tourist arrival is as travelers will not enough motivation to take atrip to the far distance countries (Balali, 2007) In a same region, this factor seems

to have a positive impact to regional tourism demand Nations in a region not onlyshare some similar culture but also near each other

Moreover, social factors include tourists’ ages, hobbies, family and so on Nodoubt, at each level of age, people will have different thoughts and hobbies For thatreason, they will find a kind of regional tourism service that fit to their needs (DoHuong Lan, et al., 2013) Moreover, people who have high literacy will find adestination where provides both social and theoretical knowledge that can help themenhance their understandings The rapid process of urbanization together with theincrease of population in big city also pushes people to find a more peaceful andclean place

1.5 The impacts of regional economic integration on the intra – regional

tourism

1.5.1 Levels of regional economic integration

At first, regional economic integration is defined as “when multiple countries

coordinate their trade, fiscal and/or monetary policies” (Boney, n.d) These nations

must belong to “geographic region come together in some types of partnership to

foster trade and development” (Kehoe, n.d) From my point of view, regional

economic integration is when nations of the same region cooperate in terms ofeconomic issues in order to create the free movement of trade, labors and otherfactors which greatly contributes to the regional economic growth or even createschallenges for nations in that regions

Below here are different levels of regional economic integration togetherwith its general characteristics From the table, we can see some particularcharacteristics of each level of regional economic integration:

 The first level is FTA which allows the removal of tariffs, quotas and a

variety of non – tariff barriers Two examples of FTA can be named areEuropean Free Trade Association (EFTA) countries and North AmericanFree Trade Agreement (NAFTA)

 The second level is CU which adds one more characteristics compared with

FTA namelу the imposition of common tariff on non – member countries.For instance, all members of a customs union might agree to have a tenpercent tariff against non - member countries, while previouslу each countrуhad different and unique tariff levels Imposition of a common tariff implies

a convergence of trade policу across member countries and, through suchtrade policу convergence, a pooling of national sovereigntу

 The third level is CM which is a higher level of regional economic

integration because it is not restricted to commerce but also to the freemovement of labor, capital and service The establishment of the AEC will

be a good example for CM

 The fourth level is Economic Monetary Union which bears the

characteristics of the three above mention levels of regional economicintegration coupled with the unification of the monetary as well as fiscalpolicies which enables a common currency and forms a super – national

governing authority A good example for this case is European Unioncountries

Table 1.2: Levels of regional economic integration and its characteristics

Common external tariff

Free movement

of goods, labor, capital and people

United monetary and fiscal policy determined

by a center authority (and fixed exchanges)

Central parliament with the sovereignty

of a nation’s government

Source: International Monetary Fund (1998)

 The final level is political union which represents the most advanced form of

economic integration with common government This level bears all thecharacteristics of the above three level More specially, this level is also the

where the sovereignty of member country in the same region is considerablyreduced

1.5.2 Influences of regional economic integration on the intra – regional

tourism

It is clear that regional economic integration impacts have both sides:positive and negative ones There are limited sources of studies researching theimpacts of regional economic integration on the intra – regional tourism both interms of theoretical and empirical studies However, based on the previous study ontrade, we can still suggest the influences of regional economic integration on theintra – regional tourism

1.5.2.1 Gains of intra – regional tourism from regional economic integration

The first positive impact of regional economic integration to regional tourism

is creation effect which can be seen from the figure 1.3 below Author hasconstructed figure based on the model of Kwentua (2006) for trade creation effects

to a customs union to apply for regional integration to tourism The tourism can alsogain from the economic integration which will be explained as followed

Before the economic integration, the price of tourism service in country A is

PA The regional economic integration establishment, as specified in table 1.2,allows the removal of barriers It means that there will be some exemption orreduction such as visa requirement, lower transaction cost and so on For thatreason, the price of tourism service in country A now reduces to PB The quantity ofvisitor to country A is (Q4 – Q1) instead of (Q3 – Q2) So the number of visitors tocountry A increased (Q2 – Q1) and (Q4 – Q3) It is the sum of areas b and d So theintra – regional tourism will benefit from regional economic integration an amount

of (b + d) as illustrated in the figure 1.3 below

Figure 1.3: Creation effect of regional economic integration

on regional tourism

DA SA

Secondly, as specified in the table 1.2, regional economic integration unifiesseveral markets into one market From that tourists can have a variety of choices fortourism services because of the reduction or elimination of trade restrictions.Furthermore, in terms of trade, it will contribute to trade balance of a countrybecause tourists bring money from their country to destination nation, which can beconsidered as exporting tourism service For example, Vietnam and Singapore arecountries in ASEAN so Vietnamese and Singapore tourists will create regionaltourism in ASEAN When Singapore tourists travel to Vietnam, of course, they willbring Singapore dollars to Vietnam and exchange it into VND for personal purposesduring their trip This amount of money no doubt will contribute to trade balance ofVietnam Moreover, tourism contributes to the foreign currency reserves which areassumed as a national financial resource to develop economy However, this benefitonly achieves as long as international tourists consumes a greater amount of money

PA PB

a

Source: Constructed by author based on the “trade creation effect to a

customs union” model of Kwentua (2006)

Price

Quantity

than citizens of one country do In other words, revenue from exporting tourismservice is larger than importing ones.

The third point intra – regional tourism can gain from regional economicintegration is the improvements for tourism infrastructure as well as labor quality intourism sector Because of the free movement of capital, goods and laborcharacteristics as specified in the table 1.2, regional economic tourism will enablethe increase of investment flows for spotted branches and tourism is not anexception For example, some countries in ASEAN have lower level of economybut still possess nice attractions for tourism will have chance to develop their owntourism industry by receiving support from ASEAN or even its AMS Thus,regional tourism will open up opportunities for lower economy and attractinternational investment which helps to unify distribution of economicopportunities Moreover, the circulation of labor will force member countries inregion to improve their own human resource quality to catch up with other nations

in the same region

Last but not least, the most important influence of regional economicintegration on regional tourism is the development of this own sector and the wholeregion as well The linkages of tourism with other sectors of one economy namelyagriculture, manufacture, and other service industries will create golden chances foremployment opportunities Adekola & Agbonkhese (2014) by using regressionmodel has pointed out regional economic integration will have positive impact tothe economic growth of Least Developed Countries (LDCs) or developingcountries When the economic growth of these nations increase, as pointed out inthe tourism demand in the above part, this in turns will boost the increase of touristarrivals of the same region and thus enhancing the tourism development

1.5.2.2 Challenges of intra – regional tourism from regional economic

integration

The first challenge is the fierce competition among member countries of thesame region In order to survive with the new markets, each of member countries

must improve their own tourism service as well as re – consider the price of thisbranch

The second challenge is the difficulties in employment for unskilled labors.The economic integration will allow the free movement of skilled as well asunskilled labors This causes difficulties for human resource management inmember countries Moreover, LDCs cannot have immediate budget income foreducating their own human resource immediately compared with developed nations.This, in turns, will create unemployment situation for unskilled labor who cannotmeet the standard given by tourism sector

The last one is domino effect happened to tourism sector Clearly, in thesame region, each of countries has different level of tourism growth When regionaleconomic integration is formed, the countries which have higher tourismdevelopment level as well as better quality will have more chances to gain benefitsfrom economic integration than those which have lower ones This, to some extent,can still cause a gap between LDCs and developed countries of the same region

1.6 Experiences of developing regional intra tourism market

There are some regions where they have developed and paid great attention

to regional tourism The first region which can be listed out here is European Union(EU) EU is considered as the number one tourist destination in the world with 563million international visitor arrivals (both intra EU and non- intra EU), whichaccounted for 52% of the world international tourist arrivals in 2013 (UNWTO,2014b) Regional intra tourism in Europe stands among one of the most importantsector of this region According to European Parliament (2014), regional intratourism has contributed to an increase of 5 to 10% of the whole EU GDP.Moreover, this sector created jobs for 15.2 million people While travelling within

EU, it is unnecessary to have visa as regional economic integration of EU hascreated chances for tourists to travel as many as European countries Moreover,citizens in EU use the same currency (EUR), which especially creates manyconveniences for visitors It is the policy of Europe countries that is increasingtourist flows within EU by concentrating on mainly seniors, youth and even fromthe third countries Furthermore, the main objective of EU tourism policy

framework is to make European Tourism Industry more competitive andresponsibly managed and the European destinations more attractive and sustainable.According to EU statistics, visitors of one European country travelling to other EUmember states pays EUR 575 on average for their trip per night Let see at the chartbelow for more details:

Figure 1.4: Average expenditure per inbound trip by residents from other

EU-28(*), 2012

Unit: EUR

(*) No data available for trips made by residents of Sweden

*Note: FI (Finland), EL (England), IT (Italy), UK (United Kingdom), MT (Malta), FR (France), HU (Hungary), EE (Greece), RO (Romania), PL (Poland),

CZ (Czech Republic), LV (Latvia), SK (Slovakia), NO(Netherlands)

Source: Eurostat (2014)

From the chart above, we can see that the EU Member States paid EUR 575

on average for a trip ranging from € 205 in Slovakia to € 834 in Finland In anutshell, regional intra tourism in EU has been developed for a long time and thepolicy as well as regulations of EU has greatly boosted the tourism sector of allcountries inside EU

Another region where regional tourism relatively develops is OECD region(see member countries in Annex 01) In order to develop regional intra tourism inOECD, the government policy of OECD member states greatly emphasizecompetitiveness by both boosting productivity and quality of regional tourismservices Moreover, they also encourage innovations so that they can attract moreregional tourists’ arrival OECD countries highly pay attention to member statetourism development before continuing to improve the whole region governmentapproach These OECD countries also increase co – ordination across centralgovernment ministries or private sector to tighten the relationship among thesenations in order to cooperate to develop regional intra tourism

ASEAN’S INTRA – REGIONAL TOURISM MARKET IN THE CONTEXT OF THE AEC ESTABLISHMENT

2.1 Overview about the AEC

2.1.1 Background about the AEC

ASEAN – the Association of Southeast Asian Nations was formed on 8August 1967 in Bangkok, Thailand, with the signing the first five members namelyIndonesia, Malaysia, the Philippines, Singapore and Thailand Later on, in 1984Brunei joined in ASEAN Vietnam, Lao PDR and Myanmar engaged in ASEAN in

1995 and 1997 respectively The final member countries in Southeast Asia joined inASEAN is Cambodia (in 1999) Until now, ASEAN includes 10 member countries(see in Annex 02)

The ASEAN Member States (AMS) declare to corporate in the economic,social, culture, technical, educational fields and other fields as well as in thecreation of regional peace, stability and prosperity Moreover, in the context ofglobalization, economy is highly paid attention to In order to create a competitiveeconomic region - fully integrated in the global economy, AMS has committed toestablish ASEAN Economic Community in 2015 This will bring golden economicopportunities but causes challenges for individual member countries in ASEANregion as well Therefore, the AMS highly pays attention to promote policies toboost the growth of economy as well as reduce the negative aspects of economicintegration in the region Together with this, ASEAN Leaders has unified toaccelerate “a single and coherent blueprint for advancing the AEC” and the AECBlue Print as an action plan signed in 2007 (ASEAN, 2009)

2.1.2 Characteristics and goals of the AEC

Taking into consideration the importance of trade in ASEAN, the AECenvisages some key following goals: single market and production base, a highlycompetitive economic region, a region of equitable economic development, andregion fully integrated into the global economy (ASEAN, 2008)

2.1.2.1 Single market and production base

The appearance of AEC will turn ASEAN into a single market andproduction base (ASEAN, 2008) This, in turns, will force ASEAN become moredynamic and competitive because of new mechanisms and measures whichtightened the current economic initiatives Moreover, these new measures alsopromote ASEAN integration in priority sectors as well as facilitate the movement ofskilled labors and talents

Priority integration sectors that the AEC proposed are agro – based products,air transport, automotive, e-ASEAN, electronics, fisheries, healthcare, rubber basedproducts, textiles, tourism, wood – based products, logistics, the food, agriculture,and forestry sectors

2.1.2.2 Highly competitive economic region

According to ASEAN (2008), another goal of the AEC is to create a stable,prosperous and highly competitive economic region Under the competitiveeconomic region, six key factors are paid attention, which are competition policy,consumer protection, intellectual property rights, infrastructure development,taxation and ecommerce

2.1.2.3 Equitable economic development

10 countries in ASEAN have different level of economy While Singapore orThailand has developed economy, Lao or Vietnam is still at lower pace of boostingeconomy For that reason, under the equitable economic development, two keyelements are mentioned by the AEC: Small and Medium Enterprises (SME)development and initiatives for ASEAN integration These initiatives focus both atSME level and economic integration of Cambodia, Lao, Myanmar and Vietnam(CLMV), which aims to enable all the AMS to benefits from integration process

2.1.2.4 Integration into the global economy

In terms of integration into the global economy, ASEAN takes two measuresthat are:

 A coherent approach towards external economic relations through FTA

 Enhanced participation in global supply networks

In order to allow ASEAN firms to integrate in a global network, ASEANmust see beyond the perspectives of AEC

Specially, ASEAN is highly focusing on tourism development, it can be seenfrom the figure that describe the strategic directions and actions of AMS asspecified below

Figure 2.1: Strategic directions and actions of ASEAN s

Source: ASEAN (2011)

develop experiental regional products and creative marketing and investment strategies

strategically increasing the quality of services and human resources in the region

enhancing and accelerate travel facilitation and ASEAN connectivity

Strategic

directions

develop and implement a tourism

marketing strategy for the ASEAN

region

develop experiental and creative

regional/sub regional circuites and packages together with investmement

strategy

enhance the external relation policies

and procedures of ASEAN tourism

develop a set of ASEAN tourism

standards with certification process

implement the mutual recognition

arrangement on ASEAN tourism professionals and its requirements

provide opportunities for increase

knowledge and skill development advocate single visa for the ASEAN

region

work with ASEAN bodies to expand

connectivity through air, water, rail and ground transportation

Strategic

actions

We can see that AMS greatly pays attention to tourism by giving strategic

directions and its equivalent actions Firstly, in order to develop regional products

(tourism is not an exception from my point of view), ASEAN takes actions byenhancing tourism marketing strategies as well as regulations, policies of ASEAN

tourism Secondly, in order to increasing the quality of services and human resource

in ASEAN, AMS aims at developing standards for tourism as well as providingchances for persons who want to improve their skills and enhancing knowledge

Thirdly, in order to facilitate ASEAN connectivity, ASEAN aims at not only

advocating single visa within AMS but also expanding connectivity by air, rail androad transportation

2.2 Reasons considering regional tourism as a priority compared with other

kinds of tourism

2.2.1 Growth of GDP and economic similarity of AMS

As analyzed in the above part, GDP greatly contributes to tourist decision asthe more money a tourist has, the more willing they want to travel Moreover, theabove part also pointed out that the economic similarity among countries in thesame region will boost the number of tourist arrivals

The table 2.1 below shows the GDP of AMS in the period from 2010 to 2014

as well as predicts the growth of GDP of AMS during the next years namely 2015and 2016

As we can see from the table, all of AMS witnessed an increase in GDP from

2010 to 2014 The highest increasing trend in GDP can be seen from Indonesia,whose GDP rose from about 755 billion USD to over 888 billion USD between

2010 and 2014 while Brunei had the lowest increase in GDP during this period(from above 12 billion USD to over 15 billion USD) From the table 2.1, GDP ofeach AMS is also predicted to increase in the next two years Until 2016, Indonesia

is forecasted to have the highest GDP of all AMS (over 950 billion USD) On theother hand, GDP of Brunei is expected to increase minimally The upward trend inGDP of all AMS in previous years partly shows the economic growth, especiallythe ability that a person can spend for “high level” purpose rather than sustainablefoods

Table 2.1: GDP and GDP forecast of AMS from 2010 to 2016

Unit: Billion USD

Indonesia 755.256 892.59 919.002 912.502 888.648 895.677 951.943Thailand 318.908 345.672 365.966 387.253 373.804 386.291 412.295Malaysia 247.539 289.336 304.957 313.158 326.933 327.89 364.531Philippines 199.591 224.143 250.24 272.067 284.927 308.033 339.774Singapore 236.42 275.37 289.941 302.246 308.051 296.057 310.557Vietnam 112.771 134.598 155.565 170.565 186.049 204.493 219.807Myanmar 49.628 56.17 55.759 56.759 62.802 69.143 77.894Cambodia 11.232 12.818 14.057 15.362 16.551 17.814 19.392

Brunei 12.371 16.693 16.952 16.109 15.102 11.236 12.397

Source: International Monetary Fund (2015a)

Moreover, it can be clearly seen the GDP gap of AMS from the table 2.1.The most outstanding feature is that there are three main groups of GDP amongAMS The first group is Indonesia which was far exceeded the other AMS in terms

of GDP Compared with Thailand which is followed Indonesia, the GDP of the latercountry is predicted to a little bit double than that of former nation in 2016

The second group, from the table 2.1, includes Thailand, Malaysia,Philippines and Singapore The GDP of four countries in 2010 ranged from over

200 billion USD (Singapore) to over 300 billion USD Until 2016, it is expected tohave a narrow gap in terms of GDP of these four countries Singapore is expected tohave the lowest GDP of these four countries (over 300 billion USD) while thehighest level of GDP is not too much larger compared with Singapore (Thailandwith over 400 billion USD)

The third group includes Cambodia, Lao, Myanmar, Vietnam, and Brunei.These five countries recorded the lowest GDP compared with the other AMS.However, Vietnam which recorded the biggest GDP in 2010 (over 100 billion USD)

was just one – third of Thailand GDP in this same year Until 2016, this gap isnarrow; specifically Vietnam GDP is forecasted to be half of Thailand GDP

However, the GDP of almost AMS in general as represented from the abovetable pointed out that the gap of GDP among AMS was not so large (except forIndonesia) This shows that AMS are relatively similar in terms of economic growthmeasured by GDP Coupled with the GDP growth of AMS, it can be expected thatintra – ASEAN tourism will develop as the citizen has higher standard of living tomeet their higher needs as specified in chapter 1

Moreover, another chart below here shows the GDP growth of majoreconomies all over the world during the period from 2001 to 2013

Figure 2.2: Share in global GDP of ASEAN from 2008 to 2012

Source: International Monetary Fund (2015b)

A glance at the graph shows that the share in global GDP of ASEANincreased gradually from 2008 to 2012 Starting from 2.5 % in 2008, the share inglobal GDP of ASEAN had rose quickly to 3.32% in 2012 Furthermore, ASEAN