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TOURISM SECTOR PERFORMANCE ON INDONESIA’S ECONOMIC GROWTH Happy Febrina Hariyani Department Economic Dvelopment, Faculty Economic and Business, University of Muhammadiyah Malang Email: happyfebrina@umm.ac.id Abstract Tourism is believed to be a booster for economic growth in developing countries. The tourism sector in Indonesia is one of the sectors that has the highest contribution in foreign exchange to the economy. Tourism activity in the form of export trade in services is the only sector that constantly make a positive contribution in the balance of trade in services in Indonesia. This study aims to analyze the influence of tourism consumption, tourism investment and government spending to economic growth. The results of this study indicate that, in the long run, those variables affect economic growth. While in the short run, they do not influence economic growth. Key words: tourism, economic growth, investment, consumption, government expenditure INTRODUCTION contribute USD3.8 trillion to world GDP The tourism sector is believed to with 262 million jobs in 1997. In a decade, provide a boost to the economic progress of the figure grew to USD7.1 trillion with 383 developing countries. The development of million jobs. Tourism growth has almost the world tourism sector cannot be doubled faster than world GDP (Prabowo, separated from trade liberalization as 2009). another form of globalization. The progress The tourism sector is one of the of this sector goes hand in hand with main sources of foreign exchange in at least openness that occurs in various countries. one of the three developing countries that The activity of trade in tourism services has have made the tourism sector a priority contributed greatly to the state revenues, (Nath, 1998). Several studies have especially through foreign exchange highlighted the potential of the tourism earnings from foreign tourists through the sector in encouraging growth, creating jobs expansion of job opportunities. and generating income for the government The World Tour and Tourism (Lea 1988; Sinclair 1998). Tourism is one Council (2014) stated in its report that of the most important activities in the world tourism has become the world's largest and is the sector most widely found in industry and the largest job creator. The developing countries that have not been worldwide tourism industry is estimated to fully exploited. Before the terrorist attacks Tourism Sector Performance on Indonesia ………..………………. (Happy Febrina Hariyani) in September 2001, the world of tourism In 2010, the contribution of foreign had grown at an average arrival rate of 7% exchange from the tourism sector reached per year and revenues of 12% (WTO, USD 7603.45 million towards Indonesia's 2003). In 2002, international tourism GDP and was ranked fifth as the sector with revenues reached USD 474 billion (WTO, the largest income earner of foreign 2003). It also estimates that tourism exchange. The total contribution of foreign contributes USD3.7 trillion to the global exchange increased from year to year until economy. Tourism has made important in 2014. It reached USD 11,166.13 million contributions to socio-economic and the ranking of the tourism sector rose to development in several countries that have fourth position (Ministry of Tourism, chosen the tourism sector as a development 2014). strategy. The tourism sector is a very labor- Traditionally, primary product intensive sector and has a spill-over effect exports have formed major export activities on other economic sectors. in developing countries such as Indonesia. The tourism sector in Indonesia is Unfortunately, developing countries have one of the sectors that contribute the highest made various efforts to promote the export foreign exchange in the Indonesian of manufactured goods but this has often economy. Tourism activities in the form of proved to be less successful. The main export trade services are the only sector that reason, among many other factors behind consistently contributes positively to this lack of success can be summarized as Indonesia's service trade balance lack of competitiveness, inability to catch- (Lumaksono et al. 2012). The tourism up with the latest technology, and low sector is also the only service sector quality. Currently, many developing included in the ten export commodities with countries that traditionally rely on income the largest contribution to the country's from primary product exports receive net foreign exchange earnings. Other leading currencies as a result of diversification into export commodities are oil and gas, palm tourism, while the others try to generate oil, processed rubber, apparel, electrical additional income by increasing tourists equipment, textiles, paper and paper flowing from abroad (Sinclair and Stabler, products, processed foods, and chemicals 1997). Foreign exchange earnings from (Ministry of Tourism, 2012). goods exports are often hindered by imports of capital goods for investment purposes. Jurnal Ekonomi Pembangunan Vol.16, No.01 Juni 2018 46 Tourism Sector Performance on Indonesia ………..………………. (Happy Febrina Hariyani) Meanwhile, the foreign exchange potential does not have predictive power for tourism of tourism and tourism-related activities revenue. However, tourism revenue has a creates a new pattern of production and positive-predictive relationship for the next trade. GDP. The study conducted by Eugenio- Meanwhile, Brida et al. (2008) Martin et al. (2004) regarding tourism and stated that international tourism is an economic growth for Latin American important foreign exchange earner and countries show that the number of tourism export for many years for low-income arrivals, the previous year's GDP, countries and developing countries. At investment from domestic income and state present, many developing countries pay stability have a positive effect on economic attention to economic policies to promote growth. Government spending and the level international tourism as a potential strategic of corruption negatively affect economic factor for development and economic growth. In this study tourism variables were growth. The tourism-led economic growth measured by the amount of investment and hypothesis (TLGH) stated that tourism tourism arrivals in the previous year. expansion leads to economic growth. The Studies related to the causal country's economic growth can be produced relationship between the acceptance of not only by increasing the amount of labor tourism and GDP have been carried out by and capital in the economy, but also Arslanturk et al (2010). The results of the expanding exports. study show a sensitive relationship to the Based on the discussion above, the countries analyzed, the sample period and main question examined in this study is the methodology used. Considering the whether the development in the tourism sensitivity of the causal relationship, then a sector which include: consumption, varied time estimation method is used to investment and government spending analyze Granger causality based on the affecting Indonesia's economic growth. To Vector Error Correction Model (VECM). answer these problems, the purpose of the The findings of the study indicate that the study is to analyze the effect of results of the full sample in the VECM consumption, investment and government model have no Granger causality between spending on the tourism sector on series, whereas the findings from the varied Indonesia's economic growth. time coefficient models indicate that GDP Jurnal Ekonomi Pembangunan Vol.16, No.01 Juni 2018 47 Tourism Sector Performance on Indonesia ………..………………. (Happy Febrina Hariyani) RESEARCH METHODS specifications for the model because the The type of data used in this study is existing economic phenomena are too secondary data in the form of annual data complex and often the relationships consisting of GDP, consumption in the between variables in a dynamic system tourism sector, investment in the tourism cannot be explained by just the single static sector, and government expenditure in the equation model. The Vector Autoregressive tourism sector. The period used for this (VAR) model can be used to overcome this study is 1988 to 2014. Data is obtained from problem in time series data. various sources including: World Tour and There are several forms of VAR Tourism Council (WTTC), Ministry of models, one of which is the Vector Error Tourism, World Bank, Central Bureau of Correction Model (VECM). VECM is the Statistics, and other relevant sources. restrictive VAR used for variables that are The analytical method used in this non-stationary but have the potential to be study is the Vector Autoregression (VAR) cointegrated. In VECM, additional econometric method if the data is stationary retention must be given because of the and not cointegrated, then followed by the existence of non-stationary forms of data at Vector Error Correction Model (VECM) the level, but cointegrated (Firdaus, 2011). method when the data is stationary and In VAR and VECM analysis, it is necessary cointegrated. In this study, the Y variable is to do several tests such as stationary test, defined as GDP per capita (GDP), while the VAR stability test, optimal interval test, explanatory variables are domestic cointegration test, VECM, Impulse consumption in the tourism sector (CONS), Response Function (IRF) technique, and capital investment in the tourism sector Forecast Error Decomposition of Variance (INV), and government spending in the (FEVD). tourism sector (GOV). The data stationarity test is carried Juanda and Junaidi (2012) stated out to fulfill the time series model that most of the time series econometric requirements, where the data used is models are built on existing economic stationary. Data stationarity test is done theories. Economic theory is the basis for using Augmented Dickey Fuller Test at developing relationships between variables level and first difference level. The data said in the model, but often economic theory has to be stationary is when the t-count results not been able to determine the exact are smaller than t-critical MacKinnon at the Jurnal Ekonomi Pembangunan Vol.16, No.01 Juni 2018 48
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