Tourism and Foreign Direct Investment: An Analysis for Asean Countries

Abstract

Tourism and foreign direct investment (FDI) plays a role in triggers country economy performance. According to Elma and Adnan (2017), there was a positive relationship between FDI and tourism arrival. Furthermore, this study will investigate both relationship unidirectional and bidirectional yet study will focus on ten ASEAN countries between the year 2004 to 2017 by adopting and beautifying the tourism-led growth hypothesis. Tourism-led growth hypothesis state that economic activities will influence by tourism in the short run and the long run. Besides, panel data will be used with the Random-Effects model and a fixed effects model. The result found that there was a positive relationship between foreign direct investment and tourism, and for the causality also found a positive relationship between tourism and foreign direct investment. As a summary, increasing tourism arrivals will lead to an increase in foreign direct investment and vice versa. The results show that both FDI and tourism arrivals play a role in enhancing economic activity. These relationships as an important tool for policy implication in order to achieve sustainable growth in the tourism sector and for the economy as well and in the same time would give a definite improvement for government policy on foreign direct investment. Besides, the marketers would also benefit by focusing on specific issues mainly in the marketing campaign and learning from their own market trends. Recommendation for future research, we would like to include some variables such as environmental regulation as it is an important deciding factor on how consideration has to be made and mainly conserve the environment from being a polluted and beneficial impact on ASEAN tourism performance.