IMPACT OF TOURISM IN JORDAN

Transcription

1 IMPACT OF TOURISM IN JORDAN MAY 2013

2 INDIRECT IMPACT OF TOURISM IN JORDAN May

3 TABLE OF CONTENTS 1. INTRODUCTION 3 2. METHODOLOGY FOR ESTIMATING THE INDIRECT IMPACT 4 3. THE INPUT-OUTPUT TABLE Background Estimating the Multipliers 8 4. FINDINGS 11 APPENDIXES APPENDIX 1: NATIONAL ACCOUNTS 13 APPENDIX 2: BASIC PRICE, PRODUCER PRICE & PURCHASERS PRICES 14 APPENDIX 3: INTER-INDUSTRY TRANSACTIONS MATRIX 15 APPENDIX 4: A MATRIX 16 APPENDIX 5: LEONTIEF INVERSE MATRIX 17 2

4 1. INTRODUCTION The USAID-funded Jordan Tourism Development Project has been working with the Government of Jordan on the strengthening of their tourism statistics and the development of a Tourism Satellite Account (TSA) since An Experimental TSA was put together for the Reference Year 2006/2007 and subsequently updated to the Year The TSA process follows a standard internationally recognised methodology as put together by the UNWTO (United Nations World Tourism Organisation). This methodology is set out in the TSA:RMF 2008 (TSA: Recommended Methodological Framework) published by UNWTO. The TSA:RMF methodology is focused upon the direct impact of tourism expenditure/ consumption and reaches key measures such as the TDGVA (Tourism Direct Gross Value Added). By convention, the economic impact of tourism expenditure is divided into direct, indirect and induced impacts. These different components are illustrated below. Direct Impact Indirect Impact Induced Impact Expenditure of tourists at establishments such as hotels, restaurants, transport operators, tour operators, travel agencies, shops, etc. Expenditure by businesses (who have benefitted from direct expenditure) on goods and services from other businesses. For example laundry services from hotels, purchases of food at markets by restaurants. Expenditure by local residents whose income has been increased by direct and indirect income generated by the original tourist expenditure. Whilst the TSA measures the direct impact (Tourism Direct Gross Value Added TDGVA), the question that is being addressed in this study is that of an estimate for the indirect impact. The Department of Statistics (DOS) in Jordan has developed a range of statistics that has enabled the development of the TSA. Also DOS has completed an Input-Output Table for the Jordanian economy for the Year In this study the Input-Output Table has been used as the basis for making an estimate of the indirect impact of tourism expenditure on the Jordanian economy, taking forward the estimate of the TDGVA developed in the Experimental TSA. 3

5 2. METHODOLOGY FOR ESTIMATING THE INDIRECT IMPACT Unlike the TSA direct impact, which has a specific recommended international methodology in the TSA: RMF, there are various methodologies for estimating the indirect impact which are seen as technically sound, but none enjoys the status of a recommended methodology. One technique that is used to estimate the indirect impact is the standard technique using what is known as the Leontief Inverse. In effect the relationship between the direct impact and the indirect impact is estimated by assuming a change in demand and thus output on the part of the sectors relevant to tourism and the response by the other sectors in the economy to this increased demand/output. The base for estimating the indirect impact is the inter-industry Input-Output Table of the Jordanian economy put together for the Year 2006, which estimated the interrelationship between the 81 industrial sectors of the economy. The Input-Output Table has captured the relationship between all the different sectors. On the Input side, it captures the inputs required to achieve the outputs of the sector in question, which involves: Intermediate consumption from other sectors (e.g. from agriculture, from manufacturing, from services etc). Value added (which is broadly the inputs required from labour and from capital). Imported Inputs. For the purposes of making the estimates of the indirect impact of tourism expenditure in Jordan, the I-O Table for 2006 was reduced to 23 sectors from the 81 sectors. The reasons were: Simplification. The technical coefficients are more stable over time with fewer industrial sectors. This study focuses upon identifying the income multipliers (value added multipliers) that are associated with the indirect impact. These are often described as Type 1 multipliers as opposed to the Type II multipliers which include the Household sector. The Type I multipliers refer to direct and indirect impacts, whilst Type II multipliers refer to direct, indirect and induced impacts. The methodology uses the static input-output model, where the linkage between final consumption and total output can be expressed as follows: X = (I - A) -1 F Where X is the column vector of total output for n sectors, I is the identity matrix, A is the input coefficient matrix, and F is the column vector of final demand. The matrix (I - A) -1 represents the Leontief inverse matrix. The "A" matrix gives the direct inputs required for the production of one unit value of each output. The Leontief inverse matrix gives the direct and 4

6 indirect requirements. The conventional input-output model is expanded through the introduction of a tourist expenditure vector in the final demand. 3. THE INPUT-OUTPUT TABLE 3.1 Background The Input-Output Table is an 81 by 81 inter-industry transactions matrix for The summary figures for Intermediate Consumption, Final Demand, Total Industry Output, Exports and Imports are presented in Table 3.1. Table 3.1 Summary of Input-Output Table 2006 (Figures in JD thousands) Total Intermediate Demand Household Consumption Non-Profit Institutions Serving Household Government Consumption Gross Fixed Capital Formation Changes in Stock Exports Total final Demand Total Industry output Total Intermediate Inputs Compensation of Employment (Wages) Indirect Tax less Subsidies Operational Surplus & other Value added 7,470,800 6,531,322 69,011 2,430,948 3,104, ,198 3,428,539 15,736,186 23,206,986 3,744, ,283 7,127,519 Imported Goods 4,292,995 1,485,005 36, ,192 1,146,583-53,785 2,265,522 5,060,441 9,353,436 Total Primary Input Total Inputs/ Outlay 11,443,191 23,206,986 8,016, ,935 2,611,140 4,250, ,413 5,694,061 20,796,627 Source: DOS/Ministry of Planning and International Cooperation The Total Industry Output in the Input-Output Table for 2006 is JD 23.2 billion. The latest National Accounts revisions (See Appendix 1) indicate that Gross Output at basic prices for 2006 is JD 23.7 billion. So the differences are minimal and not significant for the purposes of estimating the indirect impact of tourism expenditure. So the overall exercise is in accord with the National Accounts. By convention, Input-Output inter-industry transactions are shown in Producers prices. The relationship between the different prices (basic, producers and purchasers ) is shown in Appendix 2. The Input-Output Table 2006 indicating inter-industry transactions (deriving from the Absorption Matrix) has been reduced from an 81 by 81 matrix to a 23 by 23 inter-industry transactions matrix. The 23 industry sectors and their relationship to the original 81 sectors is shown in Table 3.2. The new inter-industry transactions matrix (23 by 23) is shown in Appendix 3. 5

7 Table Industry Sectors No. Industry Sectors (New) Comprising From The 81 Sectors 1 Agriculture, Livestock & Fishing Oil, Gas, Mining & Quarrying Food Products Manufacturing Drinks Manufacturing Tobacco, Textiles, Wood & Other Refinery & Refined products 30 7 Other Manufacturing Industries Electricity & Water Construction Trade Hotels & Restaurants Road Transport Rail, Pipeline, Sea Transport Air Transport Transport Services, & Storage Travel, Tour Operators Services Post, Telecoms and Computers Banking, Finance & Business Services Real estate Ownership of Dwellings Education & Health Public Administration and Defense Others Services 81 The Input-Output Table gives a full picture of the inputs required from the different industry sectors in order to produce output. It also indicates the primary inputs (basically labour and capital) that are also needed as inputs to produce the output from the particular industry. Finally it shows the imports required also to produce the output. This process is shown for one of the key tourism sectors, namely hotels and restaurants, in Table 3.3. In this Table it is possible to see that the Hotel and Restaurants sector in 2006 required JD million as intermediate consumption from the 23 industry sectors (which includes itself) to produce the Output of JD million. In addition it required imports of JD 30.1 million and primary inputs of JD million. The latter represents the value added in the process of producing this output. 6

8 Table 3.3 Input-Output for the Hotels and Restaurants Sector Economic Activity supplying the Hotels and Restaurants sector Inputs to Hotels & Restaurants Total Intermediate Demand Total Final Demand Total Industry Output Agriculture, Livestock & Fishing 6, , ,139 1,179,026 Oil, Gas, Mining & Quarrying 4 286, , ,398 Food Products - Manufacturing 42, ,375 1,299,341 1,550,716 Drinks - Manufacturing 12,952 14,167 95, ,667 Tobacco, Textiles, Wood & Other 1, ,557 1,235,770 1,496,327 Refinery & Refined products 7, , ,720 1,643,709 Other Manufacturing Industries 2,514 1,524, ,428 2,520,313 Electricity & Water 10, , , ,452 Construction 2, ,270 2,612,704 3,098,975 Trade 10, , ,763 1,418,844 Hotels & Restaurants 1,324 38, , ,594 Road Transport 2, , , ,447 Rail, Pipeline, Sea Transport 0 132,236 60, ,908 Air Transport , , ,233 Transport Services, & Storage ,019 43, ,771 Travel, Tour Operators Services ,923 55,292 Post, Telecoms and Computers 3, , ,425 1,016,750 Banking, Finance & Business 14, , ,021 1,172,237 Services Real estate 11, ,555 2, ,100 Ownership of Dwellings 0 975, ,409 Education & Health ,923 1,407,058 1,480,981 Public Administration and 1 3,825 1,550,329 1,554,154 Defense Others Services 9, , , ,683 Total Intermediate Inputs 142,935 7,470,800 15,736,186 23,206,986 Value Added 232,562 Imports 30,097 Total Inputs/Outlay 405,594 Source: Derived from DOS/Ministry of Planning and International Cooperation The inputs (which can be described as purchases) by the hotel and restaurant industry includes the intermediate demand inputs, the largest of which comes from the Food Products Manufacturing industry in Jordan. The next largest are the inputs required from the Banking, Finance and Business services industry, followed by Drinks Manufacturing and by Real Estate. The outputs (which can be described as sales) by the Hotel and Restaurant industry of JD million go in a minor proportion to intermediate consumption (JD 38.8 million) by other industries, with the majority going as final demand, including as exports. Similar details are available for all the 23 sectors, and this is seen as a strength of the Input- Output methodology in that it takes into account the whole of the economy. 7

9 Table 3.4 Value Added as a Proportion of Output No. Economic Activity Value Added as Percent of Output Propensity to import as percent of Output 1 Agriculture, Livestock & Fishing 52.9% 13.7% 2 Oil, Gas, Mining & Quarrying 61.0% 6.2% 3 Food Products - Manufacturing 40.9% 15.3% 4 Drinks - Manufacturing 35.2% 24.1% 5 Tobacco, Textiles, Wood & Other 40.9% 37.2% 6 Refinery & Refined products 5.2% 88.3% 7 Other Manufacturing Industries 36.1% 25.3% 8 Electricity & Water 36.2% 8.4% 9 Construction 18.8% 21.8% 10 Trade 62.5% 5.1% 11 Hotels & Restaurants 57.3% 7.4% 12 Road Transport 58.9% 6.0% 13 Rail, Pipeline, Sea Transport 24.9% 54.8% 14 Air Transport 18.5% 5.5% 15 Transport Services, & Storage 67.8% 2.0% 16 Travel, Tour Operators Services 27.9% 0.5% 17 Post, Telecoms and Computers 61.7% 1.1% 18 Banking, Finance & Business Services 76.7% 1.3% 19 Real estate 90.5% 0.2% 20 Ownership of Dwellings 95.0% 0.0% 21 Education & Health 65.3% 9.3% 22 Public Administration 100.0% 0.0% 23 Other Services 77.9% 1.6% Source: Derived from DOS/Ministry of Planning and International Cooperation Value added by the different sectors (23) is shown in Table 3.4 along with the propensity to import in relation to Output. These are significant variables in developing the multipliers for the different sectors. 3.2 Estimating the Multipliers The actual process of estimating the indirect impact is to use the Leontief inverse which is a matrix algebra process for solving a series of linear equations. The inter-industry transactions matrix is converted into an A Matrix which presents the inputs necessary to achieve the output as a series of technical coefficients (See Appendix 4), such that total input equals 1, and the individual inputs are the ratio of their value to the total input. 8

10 The A Matrix is then subtracted from an Identity Matrix ( I ), which is the matrix equivalent of a 1 in algebra, and then inverted giving the key term (I-A) -1 (See Appendix 5) in the equation which can be described as the predictive multiplier. The procedure is illustrated in Table 3.5 for the Hotels and Restaurants Sector, deriving from the Leontief inverse. Table 3.5 Indirect Effects for Output and Income No. Income/Value-Added Multiplier for Hotels & Restaurants (11) Direct Effect Indirect Effect Income/ Unit of Income Direct Income Indirect Output 1 Agriculture, Livestock & Fishing Oil, Gas, Mining & Quarrying Food Products - Manufacturing Drinks - Manufacturing Tobacco, Textiles, Wood & Other Refinery & Refined products Other Manufacturing Industries Electricity & Water Construction Trade Hotels & Restaurants Road Transport Rail, Pipeline, Sea Transport Air Transport Transport Services, & Storage Travel, Tour Operators Services Post, Telecoms and Computers Banking, Finance & Business Services 19 Real estate Ownership of Dwellings Education & Health Public Administration and Defense Others Services TOTAL Income Multiplier Direct Effect Indirect Effect Source: Derived from the Input-Output Table reduced to 23 sectors. The same procedure is followed for the other 22 sectors, and this gives indirect effects for Output and Income (Value Added), as shown in Table 3.6. The Output Multiplier is given by adding a 1 to the indirect effect. So for Hotels and Restaurants the Output Multiplier is and the Income (Value Added) Multiplier is as shown in Table

11 Table 3.6 Indirect Effects for Output and Income (23 sectors) No Economic Activity Output Indirect Effect Income Indirect Effect 1 Agriculture, Livestock & Fishing Oil, Gas, Mining & Quarrying Food Products Manufacturing Drinks Manufacturing Tobacco, Textiles, Wood & Other Refinery & Refined products Other Manufacturing Industries Electricity & Water Construction Trade Hotels & Restaurants Road Transport Rail, Pipeline, Sea Transport Air Transport Transport Services, & Storage Travel, Tour Operators Services Post, Telecoms and Computers Banking, Finance & Business Services Real estate Ownership of Dwellings Education & Health Public Administration and Defense Others Services Source: Derived from the Input-Output Table reduced to 23 sectors. 10

12 4. FINDINGS The Input-Output Table and the Leontief inverse give multipliers that link direct impacts with indirect impacts. Once the direct impact is known in absolute terms, the multipliers can be used to estimate the direct and indirect effect in absolute terms. The equation X = (I -A) -1 F involves the increase in Final Demand (F) resulting in an increase in Output (X) which in turn results in an increase in income (value added). Calculating the income multipliers from the Input-Output Table allows a direct calculation between an increase in direct income (value added) with the indirect income. The Tourism Direct Gross Value Added (TDGVA) has been estimated at JD million for 2006/2007, as shown in Table 4.1. Table 4.1 TDGVA 2006/2007 (JD million) Industry Output Output TDGVA Percent Allocated to for Tourism Accommodation % Hotels & Restaurants Services Restaurants % Hotels & Restaurants Road and Sea % Road & Sea Transport Passenger Transport Air Passenger Transport % Air Passenger Transport Travel Agencies % Travel, Tour Operators Services All Entertainment % Other Services Other Industries 24, , % All Industries Total 25, , % Source: Experimental TSA for 2006/2007 Weighting each of the income multipliers according to the proportions of the stimulus into the different sectors of the economy allows an average income multiplier to be estimated, as shown on Table

13 Table 4.2 Indirect Part of Income Multiplier Sector Indirect Weight Hotels & Restaurants % Road & Sea Transport % Air Passenger Transport % Travel, Tour Operators Services % Other Services % All Industries % INDIRECT % The Income Multiplier is and this can be applied to the Tourism Direct Gross Value Added (TDGVA) from the TSA 1. Direct Gross Value Added equals JD million Indirect Gross Value Added equals JD million Direct plus Indirect GVA equals JD 1,469 million attributable to tourism expenditure 1 Note that input-output analyses have to be treated with caution for a variety of reasons, which include: Constant Returns to Scale - i.e. the production functions are considered linear; if additional output is required, all inputs increase proportionately. No Supply Constraints - i.e. an industry has unlimited access to raw materials and its output is limited only by the demand for its products. Fixed Commodity Input Structure - i.e. this structure assumes that changes in the economy will affect the industry s output but not the mix of commodities and services it requires to make its products. Homogenous Sector Output - i.e. the proportions of all the commodities produced by that industry remain the same, regardless of total output. Industry Technology Assumption - that an industry uses the same technology to produce all its products. i.e. an industry has a primary or main product and all other products are by-products of the primary product. 12

14 APPENDIX 1: NATIONAL ACCOUNTS JORDAN - NATIONAL ACCOUNTS Source: DOS Gross Output by Kind of Economic Activity at Current Basic Prices, (JD millions) Economic Activity Cat. Agriculture, Hunting and Forestry A+B Mining and Quarrying C Manufacturing D Electricity and Water Supply E Construction F Wholesale and Retail Trade, Repair of Motor G Hotels and Restaurants H Transport, Storage and Communications I Financial Intermediation J Real Estate, Renting and Business Activities K Public Administration, Defense, and Social Security L Education M Health and Social Work N Other Community, Social and Personal Service Activities O Private Households with Employed Persons P Gross Output at Basic Prices = Net Taxes on Products Gross Output at Market Prices = Intermediate Consumption by Kind of Economic Activity at Current Prices, (Million JD) * Economic Activity Cat. Agriculture, Hunting and Forestry A+B Mining and Quarrying C Manufacturing D Electricity and Water Supply E Construction F Wholesale and Retail Trade, Repair of Motor G Hotels and Restaurants H Transport, Storage and Communications I Financial Intermediation J Real Estate, Renting and Business Activities K Public Administration, Defense, and Social Security L Education M Health and Social Work N Other Community, Social and Personal Service Activities O Private Households with Employed Persons P Imputed Bank Service Charges Intermediate Consumption = Gross Domestic Product by Kind of Economic Activity at Current Basic Prices, (Million JD ) * Economic Activity Cat. Agriculture, Hunting and Forestry A+B Mining and Quarrying C Manufacturing D Electricity and Water Supply E Construction F Wholesale and Retail Trade, Repair of Motor G Hotels and Restaurants H Transport, Storage and Communications I Financial Intermediation J Real Estate, Renting and Business Activities K Public Administration, Defense, and Social Security L Education M Health and Social Work N Other Community, Social and Personal Service Activities O Private Households with Employed Persons P Imputed Bank Service Charges Gross Domestic Product at Basic Prices = Net Taxes on Products Gross Domestic Product at Market Prices = 13

15 APPENDIX 2: BASIC PRICE, PRODUCER PRICE & PURCHASERS PRICES Source: SNA 93 14

16 APPENDIX 3: INTER-INDUSTRY TRANSACTIONS MATRIX No. TRANSACTIONS MATRIX (23 x 23) Agricultu re, Livestoc k & Fishing Oil, Gas, Mining & Quarryin g Food Product s - Manufac turing Drinks Manufa cturing Tobacco, Textiles, Wood & Other Refinery & Refined product s Other Manufac turing Industrie s Electricit y & Water Hotels & Restaura nts Road Transpor t Rail, Pipelin e, Sea Transp ort Air Transpor t Transp ort Service s, & Storag e Travel, Tour Operat ors Service s Post, Telecom s and Comput ers Banking, Finance & Business Services Owners hip of Educati Dwelling on & s Health Public Administ ration and Defense Construct ion Trade Real estate Others Services _ _ _ _ _ _ 6553 _ _ _ _ _ _ 8887 _ _ 0 0 _ 2 2 _ _ 22 _ _ _ _ 0 0 0_ 0_ _ _ _ 616 _ _ _

17 APPENDIX 4: A MATRIX No. 'A' MATRIX (COEFFICIENTS MATRIX) Agricultu re, Livestoc k & Fishing Oil, Gas, Mining & Quarryin g Food Product s - Manufac turing Drinks Manufa cturing Tobacco, Textiles, Wood & Other Refinery & Refined product s Other Manufac turing Industrie s Electricit y & Water Hotels & Restaura nts Road Transpor t Rail, Pipelin e, Sea Transp ort Air Transpor t Transp ort Service s, & Storag e Travel, Tour Operat ors Service s Post, Telecom s and Comput ers Banking, Finance & Business Services Owners hip of Educati Dwelling on & s Health Public Administ ration and Defense Construct ion Trade Real estate Others Services

18 APPENDIX 5: LEONTIEF INVERSE MATRIX (I-A)^-1 INVERSE MATRIX (LEONTIEF INVERSE) Oil, Agricultu Gas, Food Tobacco Refinery Other Rail, Transp ort Travel, Tour Post, Banking, Public re, Mining Product, & Manufac Hotels Pipelin Service Operat Telecom Finance Owners Administ Livestoc & s - Drinks Textiles, Refined turing Electricit & Road e, Sea Air s, & ors s and & hip of Educati ration k & Quarryin Manufac Manufa Wood product Industrie y & Construct Restaura Transpor Transp Transpor Storag Service Comput Business Real Dwelling on & and Others No. Fishing g turing cturing & Other s s Water ion Trade nts t ort t e s ers Services estate s Health Defense Services