Komsan Suriya 30.07.2009 A preliminary report presented at ZEF

1. An Economic Analysis of Community-based Tourism in Thailand: A case study of Mae Kam Pong Village Komsan Suriya 30.07.2009 A preliminary report presented at ZEF

2. Enjoy the presentation(30 minutes) • Five minutes tour to the village • Introduction to the survey • Merits of community-based tourism • The Kuznets’ curve effect • Problems of tourism • My road ahead

3. 1,300 meters above sea level 50 kilometers from downtown 127 households Local Northern native Speak Northern Thai and official Thai 3 Source: www.travelblog.org

4. 1. Tourism Economy of the village Thai Baht 2006 2007 2008 Figure 1:Tourism income (Thai Baht)

5. Winter Seasonal index Winter Summer Rainy Figure 2:Seasonal index of tourism income

6. Figure 3:Income share of tourism in terms of retained value added in households (disposable income)

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

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

9. Figure 6:Decomposition of tourism and tourism-induced income in terms of retained value added in households (disposable income)

10. Figure 7:Decomposition of tourists

11. Figure 8:Ratio between individual tourists and study visits

12. 2. The survey August 2008 – January 2009: 116 households

13. Major output: Social Accounting Matrix (SAM) Based on Shankar Subramanian in Taylor and Adelman (1996)

14. Social Accounting Matrixof Mae Kam Pong village, Thailand Reference period (RP): May 2007 – April 2008

15. 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.

16. Mrs. Puth in 2003 Mrs. Puth in 2007

17. 3. Merits of tourism 3.1 Induced industries and infrastructures 3.2 Poverty reduction? 3.3 Better income distribution?

18. 3.1 Induced industries, infrastructures and facilities

19. 3.1 Induced industries, infrastructures and facilities Tourism promotion Direct Tourism income Tourism induced industries and jobs Infrastructures and facilities Souvenirs production Coffee shop Enhancement of Commercial sectors Buy agricultural products as inputs

20. Growths during 2003 – 2007 (4 years) in terms of retained value added in households Tourism promotion Direct Tourism income Tourism induced industries and jobs Infrastructures and facilities Souvenirs production Growth= 545 % G= 952% G= 702% Coffee shop Enhancement of Commercial sectors GDP village Growth= 64 % Buy agricultural products as inputs G= -5 % GDP Thailand Growth= 44 % Growth= 554%

21. Multipliers in major sectors(3 rounds) Tourism promotion Direct Tourism income Tourism induced industries and jobs Infrastructures and facilities Souvenirs production Multiplier=1.22 M=1.75 M=1.68 Coffee shop Enhancement of Commercial sectors Buy agricultural products as inputs Multiplier= 1.03 to 2.04

22. Retained value added rate in major sectors Tourism promotion Direct Tourism income Tourism induced industries and jobs Infrastructures and facilities Souvenirs production RVA=48% RVA=22% RVA=49% Coffee shop Enhancement of Commercial sectors All sectors RVA=48% Buy agricultural products as inputs RVA=86% RVA= 14%

23. 3.2. Tourism and poverty reduction 2007 2003 8% Headcount index Poverty gap index Squared poverty gap index 47.46% 38.61% 20.64 39.42% 40.22% 21.69 Without tourism and induced industries 4% Headcount index Poverty gap index Squared poverty gap index 44.23% 43.80% 25.27 48.31% 39.81% 21.52

24. Did tourism income help reduce poverty in a household? 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 Model : Among the poor Y = 1 if Turn to be Non-poor Y = 0 if Still be poor

25. Poverty status shift among the poor

26. This is simple. When tourism income did not go to the poor, how could it help them?

27. Tourism income concentrated in the rich households.

28. 3.3 Good news, after 4 years, situation was better. Tourism income in 2007 flowed backward from the richest group to the 3rd and 4th Quintile. Gini Tourism 2003 =0.53 Gini Tourism 2007 =0.44

29. 4. The Kuznet’s curve effect

30. Market size Threshold of natural spillover Natural spillover occurs when the market size exceeds the capacity of old members. 2007 2003 Time

31. 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.

32. 1 The poorest 40% ( households in 2003) have never gained more than 13% of tourism income.

33. 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.)

34. 2 Gini Souvenir 2007 =0.53 Gini Coffee shop 2007 =0.60

35. Why the problems? • The poor mentioned that they are not ready. 2. Barriers to entry in some important industries.

36. Problem I: Non-readiness on the poor’s side • Distance from the tourism node 2. No operational capital 3. No hospitality skills

37. Problem 1.1: The Distance Center Outer cluster(31 HHs) Middle cluster(18 HHs) Upper Middle cluster (38 HHs) Inner cluster (48 HHs) Entrance

38. Homestay income does not flow to the outer cluster. 43% 6% 0% 11%

39. 27% of households in the outer cluster are in the poorest class which is more than other clusters. 14% 19% 0% 27%

42. Problem II: Barriers to entry 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

43. Conditions for voting “YES” to the member expansion policy 1. Our income must not be less than the current level. We are serious on our conditions. 2. Only financial investment is not acceptable. New members have to spend working hours for the service to the group.

44. 7. My road ahead

45. To make the rich pass the ball to the poor. To make the poor ready to receive the ball.

46. To make the rich pass the ball to the poor. • Mechanisms • Shuttle bus • Microcredit • Capacity building To make the poor ready to receive the ball. Autonomous mechanism after the market size exceeds their capacities.

47. 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.

48. 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.

49. Market size Carrying capacity Maximum tourism income distribution that can be achieved My thesis will be finished here. Time

50. Goalof thesis To find the maximum tourism income distribution Why I am on the same side with the poor? When all villagers share burdens of tourism, they should have opportunity to share benefits from it.