Dutch Disease and Tourism - The Case of Thailand
Dutch DiseaseExportThailandTourismReal exchange rateInternational competitivenessEconomicsEconometricsEconomic theoryEconomic systemsEconomic policyNationalekonomiEkonometriEkonomisk teoriEkonomiska systemEkonomisk politikBusiness and Economics
Tourism is often being viewed as one of the worlds largest sectors and a great contribution to growth and development. There is a large motivation amongst developing countries to promote themselves as a tourist destination, since they expect the tourism to generate economic growth. The government of Thailand has been promoting tourism since 1960, and the number of foreign visitors has increased from 100 000 back then to 13.5 million in 2006. The purpose of this paper was to investigate weather the increasing tourism industry in Thailand has pulled resources away from other sectors of the economy towards the tourism sector, and in that way harming Thailand?s international competitiveness and causing deindustrialization. A theory called the Dutch disease has served as a framework, and the empirical evidence has been analysed according to this theory. The theory predicts an appreciation of the real exchange rate, as a result of a large inflow of foreign capital. For Dutch disease to occur the economy must rely heavily on the booming sector, in the case of this thesis, the tourism sector. The tourism sector is a large contributor to total GDP and is gaining more and more importance in Thailand, but, according to the investigation carried out for this thesis, it has not lead to Dutch disease. Thailand?s manufacturing industry is characterized by a great range of export products and the industry is the largest contributor to GDP and source of foreign capital inflow. Thus, Thailand is not solely depended on tourism to earn foreign capital. Nor has Thailand?s international competitiveness decreased as the theory predicts, as the manufacturing sector is more complex now then it was in the beginning of the industrialization.