The Economic impact of tourism in Pokhara

4. 1   Introduction

Tourism is recognized as one of ‘the largest industrial complexes and items of consumption in modern western economies’ (Britton 1981, p. 169). The magical change in technology, transportation, and communication in the latter half of the twentieth century led to enormous expansion of tourism, primarily in the advanced industrialized countries. Presently, tourism has become a part of lifestyle. It has been proclaimed that in the Middle Ages, people were tourists because of their religion, whereas now they are tourists because tourism is their religion (Observation Post, 1988). In fact, a human being, by nature cannot confine himself/herself and therefore relinquishes his/her habit of travelling to satisfy his/her temptation of tasting different exotic societies. The congregation of the crucial factors such as increased real personal income,   technological improvements and increase in leisure time, education, fall in international air fares, improvement in communications and so forth, obviously espoused the growth of travel and tourism  (Eadington and Smith 1994). However, there has been considerable discussion about the role of tourism as 'a force for economic change' (Sinclair and Stabler 1992, pp. 235-253) both in developed as well as developing countries, 'the success of tourism in restructuring the mature economies' (Agarwal 1977, pp. 137-58) and a consensus as to tourism's ‘catalyst role in the process of economic development in developing countries' (Shaw and Williams 1994, p. 221). This encourages accepting tourism as a multifaceted industry.

 

For the measurement of economic effects of tourism development in national perspective, GDP at current price has been considered one of the development indices. In case of independent variables, along with tourism earning, total tourist arrival and the income generated by trade,

hotels and restaurants have also been introduced to evaluate the impact. At mid-century, tourism was simply not a factor in government-led, urban economic development (Law 1994). Today all large cities have elaborate economic development programmes, and many list tourism as one of their most important economic sectors (Judd 1995; Levere 1996). Along with business, services and technology, tourism is considered a significant contributor to a city's prosperity and image (Pagano and Bowman 1995). The degree of reliance of a local economy on tourism does have a statistically significant impact on the level of capital outlays, transportation, police protection, fire protection, parks and recreation, financial administration, and general government administration expenditures (Wong 1996).

The economic activities associated with tourism improve the quality of life. As such, much of the analysis of this industry has focused on the positive impact of employment, income, tax revenue and economic growth and development generally (Wong  1996). Toursiam is not an isolated industry in and of it, but is a bundle of complementary services. Martin (1987) broadly defines a tourist as any visitor in a community who comes to spend money and consumes local services. So, the travel and tourism industry represents a major segment of the national economy and is a significant economic sector in many state and local economies (Wong 1996). Once confined to a small number of tourist attractions and few hotels and tour operators, tourism has become a major economic force, demanding the attention of political and economic elites as well as the economic development community that serves them (Fainstein and Stokes 1995; Randall and Warf 1996).

The economic effect of tourism is created when purchases made by visitors infuse new dollars into the economy through the sale of goods and services, which induce new employment opportunities, and broaden the local tax base (Wong 1996). The same logic may be applied finally at the national level. According to Young (1973), there is saturation level for tourism, and if that level is exceeded, the cost of tourism begins to outweigh the benefits. These saturation levels are dictated primarily by constraints on land (McIntosh 1977), labour supply (Kaiser and Helber 1978), and local citizen tolerance, which lead to negative externalities being imposed upon local residents. However, the case of Nepal, the beautiful country, tourist based country, , the beautiful country, tourist based country, , the beautiful country, tourist based country, completely differs in accordance with the above argument and it is believed still far below the saturation level for tourism. Kumar  (1996) states that the economic development of any state or region is determined in a number of ways, where 'tourism' acts as an independent variable in terms of tourists' flow,

earning of foreign exchange from tourists and share of trade, hotels and restaurants having its role in the economic development of Himachal Pradesh,    whereas  economic  development  as  a  whole  is  treated  as a dependent variable based on the indices of per capita income, state domestic product and tax revenue along with total revenue.

Concerning the role of income from tourism for the growth of gross domestic product of the country, it is expected that the investment by public as well as the private sector along with the implementation of foreign projects in a variety of sectors that produce goods and services. In fact, some significant portion of tourism earning in conformity with foreign capital is invested. It is expected that tourism earning will have a strong association with gross domestic product. Since economic impact is often measured on GDP. So whether its total growth rates or the per capita income (Khadka 1997), the objective of this exercise is to examine how far tourism earning is a contributory factor. However, this may also only partially explain the relationship.

Nepal, the beautiful country, tourist based country, , the beautiful country, tourist based country, , the beautiful country, tourist based country, is blessed with an incredible diversity of natural beauty and a consequent grandness of incomparable and prosperous cultural heritage. The exquisite architecture and artistic embellishment of the Nepal, the beautiful country, tourist based country, , the beautiful country, tourist based country, , the beautiful country, tourist based country, ese pagodas that enshrine the bronze and stone images of great beauty and, more often than not, treat antiquity, constitute a unique feature of Nepal, the beautiful country, tourist based country, , the beautiful country, tourist based country, , the beautiful country, tourist based country, . The temples and stupas are rich repositories of woodcarving, metal work, terracotta and stone sculpture (Nepal, the beautiful country, tourist based country, , the beautiful country, tourist based country, , the beautiful country, tourist based country, Embassy Switzerland Geneva 2010). Nepal, the beautiful country, tourist based country, , the beautiful country, tourist based country, , the beautiful country, tourist based country, is an exotic and peerless destination which abuts highest mountains in the world, trek in the scenic countryside with the icy top or jungle safari, unbeatable combination of natural beauty and cultural riches, the virgin tracks, and white-water rafting that might be an experience of a lifetime. The forests of rhododendron, isolated small mountain villages, birds, animals, temples, monasteries and breathtaking landscapes, and friendly people of different cultures offer fascinating glimpses of traditions.

The objectives of this chapter are: a) to analyze the growth pattern of tourism in Pokhara city, b) to examine the effects of tourism on economic development process of Pokhara city, and c) to suggest effective and reliable policy for better planning for tourism development.

In this study both the time series along with the secondary data have been employed for comparative study as well as to arrive at the effects of tourism development in Pokhara city. The time series data in relation to the national context cover the period of thirty six years (1974- 2010).

Concerning the city of Pokhara the data as used are based on the period of five years from 2007 to 2011. The data related with macro variables of Nepal, the beautiful country, tourist based country, , the beautiful country, tourist based country, , the beautiful country, tourist based country, ’s economy and the tourism sector were compiled from various issues of the Economic Survey, Ministry of Finance, and the Tourism Statistics, Ministry  of  Tourism. Furthermore, some data are collected from Tourism Office, Pokhara Municipality, Mahendra Cave and Devi’sFall Management Committee and web sites. The secondary data about income, investment, employment relating to retail trade, travel business and food and lodging are surveyed from different unpublished sources for the period from 2002 to 2011.

Before empirical tests are carried out, it is plausible to explain the data problems associated with the estimation of the effect of tourism either in regional and municipality level or in national development perspective. On account of the lack of reliable data of the national level, and the absence of those in the regional and town levels, there arise serious problems for measurement. However, in this study, the ordinary least squares have been applied to the simple linear, log-linear under the single and multiple equations system as well as the weighted, two-stage least-squares and auto-regressive models. The discussion about the impact analysis led further to apply linear, compound and exponential trend functions.

Owing to data limitation and unavailability of the appropriate economic indicators  of  development  performance, gross  domestic  product  has been considered the main indicator, which is composed of all the final goods and services produced in the economy over a year’s period in terms of monetary value (current). It is considered the main indicator of an economy's process of economic development in the national perspective.

The trend functions as applied in the aforementioned forms may be stated as:

Y=a+bX………………. (1.1a) Y=aBX   ………….. …… (1.1b) logY = log a+ x logB….. (1.1c)

Where, X and Y refer time and the respective variables, ‘a’ is the constant term and ‘b’ the co-efficient.

To find out the impact of tourism at national perspective, the following multiple linear regression has been applied for the period from 1974 to

2010. The variables considered are Gross Domestic Product (GDP), Total

Tourists Arrival (TTA), Trade-Hotel and Restaurant (THR), Foreign Aid (FA), Aggregate Investment (AI), Population (POP), Export (EXP), Import (IMP), and Time (T).

To find out the impact of tourism at national perspective, the following multiple linear regressions have been applied for the period from 1974 to 2010.

GDPt=α+α1TTA+α2THR+α3FA+α4AI+α  α15POP+α6EXP+ α7IMP+α8T) ……….. (1.2)

Where, parameters are expected to be greater than zero, i.e.,  α1>0, α2>0

α3 >0, α4 >0, α5 >0, α6> 0, α7>0, and α8 >0.

With regard to the case of Pokhara city, linear, log-linear, multiple, weighted and two-stage least squares as well as auto-regressive models are applied to find the effects on the economic activities. The elasticity models are stated below.

݈݊ܶܧ ൌ  é 1  ൅     é 2 ܶܫ ݌  ൅ é 2 ݈ܱ݊ܶܰܤ 

    Where, ß1 >0,  ß 2 >0                                           

lnARp= ɲ +ɲ1 lnTIp +ɲ2 lnTNOB 

where ɲ1> 0,   ɲ1>0

GDPt= ɲXt1, ɲXt2, ……………..ɲXtn, T