Malaysian Tourism Truths – Petronas Powers or Treatment Triumphs?

​The exchange rate at time of posting: 1 GBP (British Pound) = 5.53 MYR (Malaysian Ringgit).
 
We are all aware of the growing tourist industry.  South-east Asia is aware of it.  Malaysia is emerging as an international tourism destination, attracting tourists from various cultures, backgrounds and companies.  I, myself, visited Malaysia and neighbouring Borneo as part of a World Challenge [1] expedition; the goal being to explore and live within the confines of a developing society.  Travel and tourism (T&T), in 2016, generated a total contribution of MYR 167.5bn to Malaysia’s GDP, composing 13.7% of it.  This contribution is due to rise to approximately MYR 174.6bn by year end (2017).  Further into this article, we explore the real causes of this growth.

It is important to note that tourism (in total) contributed 12.0% of total employment, 1,700,500 jobs, in 2016.  Not only is this forecast to rise by 1.8% in 2017, but investment in T&T is due to rise by 8.2%, also.  These rises are just between the last two years – and there has only been one fall in total contribution (between 2007 and 2008) – but it has been on the rise since then.  If you take a look at the graph [2] (below), you can see that, since 2008, the total contribution of travel and tourism to GDP has been on the consistent rise; notice the projected rise by 2027, to almost a 300-billion-ringgit contribution to GDP.

WTTC graph

When we refer to travel and tourism and their total economic contribution, we do not solely refer to their direct impact, but also their indirect and induced impacts.  There is a simple diagram [2] which differentiates between what is included in each section:

WTTC representation

​Although the UN Statistics Division-approved Tourism Satellite Accounting methodology [3] only quantifies the direct contribution of travel and tourism, the World Travel and Tourism Council (WTTC) recognises the total contribution.
 
In Hundt’s [4] work on the impact of tourism on third world nations, she claims the tourism sector to be the fastest-growing around the world.  Outreville’s [5] work has told us, however, that the healthcare sector has grown even faster in developing countries due to increasing foreign direct investment (FDI).  This is obviously increasingly important for a vast quantity of third world countries worldwide.  FDI refers to the movement of capital amongst countries, and the growing scale of globalisation has given rise to it.  Clearly, Malaysia gains from this globalisation, as its growth as a medical tourist destination has attracted not only tourists, but in fact, trained doctors from around the world.  This concept is vastly referred to as the ‘brain gain’ of human capital flight.

​Unfortunately, the converse is also true – ‘brain drain’ from Malaysia has been high [6]; pull factors such as compensation and push factors such as corruption and social inequality have resulted in many skilled Malaysians migrating overseas to destinations such as Singapore, the United States and the UK. Evidence of this in shown by the 305,000 Malaysians who migrated overseas between March 2008 and August 2009, in comparison to the 140,000 in 2007 [7].

There can be no doubt that foreign direct investment has joined international trade as a primary motor of globalisation.

 - Mr Renato Ruggiero (WTO Director-General, at the UNCTAD Seminar on foreign direct investment and the multilateral trading system in Geneva on 12 February 1996).
 
It was found that a 1% growth in the tourism sector would result in a 0.8% rise in economic growth in Mauritius – Durbarry’s findings [8] confirm that most developing countries will show growth with a growth in the tourism sector.  To add to this, Lee and Hung [9] found a long-run relationship between health and tourism sectors to Singapore’s GDP; as one rose, the other did too.  You might wonder how this applies to Malaysia – in the latter half of the last decade, Malaysia has evolved into a health tourism destination.  What is health tourism?  Health (or medical) tourism refers to people travelling to a country other than their own to receive medical treatment.  In the past, this usually alluded to those who migrated from developing countries to key medical centers in developed countries seeking treatment which is unavailable to them at home.  However, in recent years it may equally refer to those from developed countries who travel to developing countries for lower priced medical treatments.  The motivation may be also for medical services unavailable or illegal in the home country [10, 11, 12, 13, 14].
 
The recent income rises in Malaysia have led to an increased spending on healthcare – during 2011 the spending on healthcare services was approximately MYR 31 billion.  The percentage of total tourist receipts to total GDP of Malaysia in 2012 was about 6.5%.  The Malaysia Healthcare Travel Council [15] claims that the three reasons for Malaysia’s popularity as a health tourism destination are its “value for tourist money”, its “multicultural society with great hospitality” and its “holiday advantages”.  In addition to this, not only is it cheaper, but also has a far lower waiting time than healthcare options in developed countries – not to mention that you are able to find treatments not available in many countries [10, 13].

I must also make clear that, from an economics standpoint, we must also look at the negative consequences of this growth in the tourism industry and Malaysian economy.  The primary issue which evolves from this rapid growth is the growing inequality.  When consulting data, you can see that, according to the Gini coefficient (the most commonly used measure of inequality), absolute poverty has decreased significantly over the past decade.  However, the overall income inequality has remained somewhat stable, even across the last few decades [16].  This shows us that, although the number of people living in absolute poverty has decreased, overall inequality has not followed.

​So, on the outset, Malaysia may seem to be defined by its largest twin towers hosted by the capital city.  However, there is another world of attributes to the tourist industry in Malaysia that is forming its roots through the help of international investment – the capital account of Malaysia being its primary focus in years to come.

Written by Omkar Dixit
Founder

Bibliography:
​[1] http://www.world-challenge.co.uk
 
[2]https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2017/malaysia2017.pdf
 
[3] https://unstats.un.org/unsd/tourism/
 
[4] Anna Hundt, BA: International Health Program, School of Public Health and Community Medicine, University of Washington, Seattle, Washington, U.S.A.
 
[5] J. F. Outreville. Foreign direct investment in the health care sector and most-favoured locations in developing countries. The Eur. Jor. of Heal. Econ., 8,4, 305-312 (2007)
 
[6] https://en.wikipedia.org/wiki/Human_capital_flight#Malaysia
 
[7] "Malaysia's Brain". Asia Sentinel. 2010-02-18. Retrieved 2011-04-28
 
[8] R. Durbarry, (2004). Tourism and economic growth: the case of Mauritius. Touri. Econ., 10,4, 389-401 (2004)
 
[9] C. G. Lee, and W.T.Hung.  Tourism, health and income in Singapore. Int. J. of Tour. Res., 12, 355-359 (2010)
 
[10] A Crooks, P.Kingsbury, J.Snyder and R.Johnston. What is known about the patient’s 
experience of medical tourism? A scoping review. BMC Heal. Ser. Res, 10, 266 (2010) 

 
[11] Johnston, V.A.Crooks, J.Snyder and P. Kingsbury. What is known about the effects of medical tourism in destination and departure countries? A scoping review. Int. Jor. for Eq. in 
Heal, 9,24, 9-24 (2010)

[12] M. Ormond. Shifting subjects of health-care: placing ‘medical tourism’ in the context of Malaysia domestic health-care reform. Asi. Pac. View, 52,3, 247-259 (2011) 


[13] S. Pocock, and K.H.Phua. Medical tourism and policy implications for health systems: a conceptual framework from a comparative study of Thailand, Singapore and Malaysia. 
Globaliz. and Heal., 7,12, 336-357 (2011) 


[14] Wikipedia, Health Tourism https://en.wikipedia.org/wiki/Medical_tourism       

[15] The Malaysia Healthcare Travel Council. (2013). Overall healthcare travellers 2007-2012. Retrieved on November 11, 2013 from http://www.mhtc.org.my/en/statistics.aspx.
​
[16] A. B. Atkinson, J. Hasell, S.Morelli and M. Roser (2017) – ‘The Chartbook of Economic Inequality’
Lonely Planet Malaysia, Singapore and Brunei https://www.amazon.co.uk/Lonely-Planet-Malaysia-Singapore-Brunei-ebook/dp/B01JR8CX1O/ref=sr_1_2?ie=UTF8&qid=1504448373&sr=8-2&keywords=lonely+planet+malaysia
 
The risk to tourism, The Economist http://www.economist.com/node/1389110