Final report on participatory tourism value chain analysis in Da Nang, central Vietnam

Nội dung text: Final report on participatory tourism value chain analysis in Da Nang, central Vietnam

1. VPSSP VCA Tourism Danang 26 November 2007 Note: Value of tourism exports is based on estimate that 40% of total tourism value chain of $42m is derived from overseas tourists There is, however, a robust rationale for selecting tourism to initiate a value chain exercise. First, looking at tourism only as an ‘export’ excludes domestic tourism. The official definition of ‘tourism’ as the activity taking place in hotels, bars and restaurants and the transportation sector is also restrictive – as the value chain analysis indicates. We estimate that tourists in Da Nang in 2006 contributed some $42m to the local economy - suggesting that tourism is a much more significant sector in the local economy in Da Nang than Figure 4 suggests. Second, a comprehensive and robust analysis of Da Nang’s economy assessed the five most promising sectors in the local economy for a value chain intervention (textiles and garments; wooden furniture; fisheries; transportation; and, tourism) against three main criteria:
   relevance to programme indicators (importance of the sub-sector in terms of jobs and SME involvement);
   growth potential (underlying competitiveness of the sub-sector based upon current performance and future potential); and intervention potential (opportunity for project interventions to achieve change at the local level). Figure 5 Analysis of tourism sub-sector in Da Nang, 2006 Safety Critical Success Factor Analysis: Prices Facilities • Safety • Facilities • Business network Business Innovativeness network • Human resources • Customer services Customer Human services resource • Innovativeness • Prices Danang International buyers Source: MCG (July 2006) Da Nang Economic Potential Study In this assessment, it was concluded that tourism should be the first-ranked sector. Tourism was assessed as having:
   relevance: tourism workforce of 3 225 and 177 Small and Medium Enterprises; 4
2. VPSSP VCA Tourism Danang 26 November 2007
   growth potential: Figure 5 indicates that tourism has strong alignment between the perceptions of local producers and international buyers; the sector has strong government support; a high level of private investment and significant impacts flowing from Vietnam joining the World Trade Organisation in November 2006; and
   intervention potential: mainly possible at local and regional level; the level of co-operation between enterprises and authorities is expected; and, the sustainability and systemic nature of change are considered achievable. This study supports the main thrust of the rationale for tourism in the Economic Potential Study. It is shown later that tourism generates many more jobs and enterprises than the official figures suggest. The potential for deliberate intervention to stimulate rapid tourist growth is underlined in the strategy section of the Report. Third, tourism has lower barriers to entry than many non-agricultural sectors of the economy. The consequence of this, combined with the labour intensity of the sector, is that tourist development often stimulates pro-poor growth (a pattern of economic growth which benefits poor people). As Vietnam is a low income country it is logical to prioritise the selection of an economic sector that has the potential, not only to grow the provincial economy, but also to include poor people as direct beneficiaries in this growth. It is these reasons which contribute to the robust justification of the choice of tourism for the first value chain analysis under the VPSSP. 1.3 Value chain approach Value chains are a way of representing the series of transactions from the provision of inputs for a primary product to primary production, transformation, marketing to final consumption and subsequent recycling. In addition to being a way of representing a sequence of productive processes, value chains can also be:
   a tool to describe the inter-relationships between a range of functional activities, service providers, customers, supporting institutions and supply chains. The need to simplify reality can be fully appreciated with even a cursory view of the complexity inherent in a typical tourism stakeholder map (see Figure 13);
   conceptualized as an institutional arrangement linking and coordinating input suppliers, processors, traders and distributors of a product or service; and
   regarded as an economic model which describes how technology and factors of production may (or may not be) combined to allow producers to successfully access the market. The tourism value chain developed by participants for Da Nang is described in more detail in Section 3. 1.4 Why Rapid Appraisal? When local actors embark on a local economic development initiative, they want results, and they need them quickly. Conventional approaches often require a huge up-front investment in terms of time and money. 5
3. VPSSP VCA Tourism Danang 26 November 2007 It often takes a long time to come up with a series of proposals – and these are not always practical and compatible with the local mindset. Rapid appraisal, as a research method, has several distinct advantages over a slower, desk-based approach to research. First, as a trigger for progressive action by local stakeholders, long duration, desk-based research is remarkably ineffective. However comprehensive and rigorous the empirical analysis involved in detailed research projects, local stakeholders rarely embrace an analysis that they have not been instrumental in shaping. Second, rapid appraisal can galvanise energy and creativity in the development process. The initial diagnosis should normally take no longer than two weeks with the immediate presentation of findings. In contrast, long lasting conventional research processes sap energy and often fail to engage local stakeholders. In extreme cases, commissioning research studies may provide decision- makers with an alternative to taking action. Third, external consultants should not dominate a rapid appraisal process. They may play an important role in the first diagnosis, and they must be prepared to back-up local actors later on. In this study the first mission was highly participatory in terms of the research process and the diagnosis. However, the subsequent work which consisting of the implementation of concrete activities, and the subsequent mission in April 2007, was driven by the external consultants working closely with public decision-makers in Da Nang. Successful local economic development initiatives depend, first and foremost, on the motivation, dedication, and insistence of local actors. Identifying their attitude and motivation for action is a crucial task of a participatory rapid diagnosis, and any practical proposal must closely relate to the capabilities and the motivation of local actors. Finally, there is no inconsistency between rapid appraisal and strategic thought – as we hope to demonstrate in Section 8 of this Report. In the past, it was thought that Tourism Master Plans were the key tool for strategic thinking in the sector. However, more recently, there has been a growing recognition that Master Plans are sometimes weak in terms of analysing the strategic issues facing the tourist sector. Few Master Plans have made significant efforts to understand either the linkage between tourism and the non-tourist economy or the links between tourism and poor people. Rapid appraisal can interrogate the questions which concern policy-makers and, at least as important, can provide answers within a time-scale that reflects the realities faced by decision-makers. 1.5 Why Pro-Poor? The aim to reduce poverty through tourist development might seem unnecessary in Vietnam, a Country with one of the most successful records in poverty reduction internationally. For the two decades since the adoption of the doi moi economic reforms in 1986, real economic growth has averaged 7% a year – with per capita growth an impressive 5%. The consequence of this has been to reduce the national poverty rate from 58% to 29% in the ten years after 1993 3. Perhaps even more impressive than the economic record has been the steady increase in the human development in Vietnam. The consequence of this is that Vietnam has a level of human development that exceeds that observed in several of her middle-income neighbours. In addition to the objective economic success and human development performance, poverty features in very few discussions in Vietnam – with public officials, street vendors, hotel owners or taxi drivers. This subjective observation could reflect several factors. 3 World Bank et al (2004) Operationalising Pro-Poor Growth A Country Case Study on Vietnam 6
4. VPSSP VCA Tourism Danang 26 November 2007 After the trauma of the American War and economic collapse in the mid-1980s, it could simply be a human need to see poverty as a feature of the past and rather focus on a brighter future. Poverty is not mentioned because people do not want to be poor. Despite Vietnam’s dynamic growth performance it is still a poor country – ranked 169 th in the world according to a national income per head figure of $690 in 2005 4. A remarkable feature of Vietnam that is not captured in these economic data is the considerable social capital of the population. Taking the Human Development Index (which assesses the health and education of a population as well as its income) Vietnam’s international rank jumps to 109 – well ahead of middle income countries such as South Africa 5. Notwithstanding the rapid decline in poverty (however measured) and the considerable social capital of the population, it is important to keep a focus on the distributional aspects of growth strategies in Vietnam. The fact that the official poverty rate in Da Nang is just 7% reflects the low level of the national urban poverty rate (VND 300 000 or $18 per household per month) – rather than the prosperity of its citizens. As Figure 6 illustrates, defining who is ‘poor’ in Vietnam is problematic. Restricting ourselves to income poverty, the poverty rate in Vietnam in 2002 ranges from 58.2% to 6.9% - depending on the choice of poverty line against which people’s livelihoods are measured. Figure 6 Indicators of poverty in Vietnam 1993 to 2002 90 80 70 International $2 per day 60 National poverty rate 50 International $1 per day 40 MOLISA poverty rate 30 Food poverty rate 20 Poverty gap 10 0 19993 1998 2002 Source: WorldBank (2004) Operationalising Pro-Poor Growth: Country Case Study of Vietnam In this pro-poor analysis we have defined the ‘poor’ as non-managerial workers. This implies a poverty threshold which most closely approximates the international $2 per day rate. From our surveys in Da Nang an average non-managerial wage is about $93 per month across several categories of employment (from hotel and restaurant workers to taxi drivers and pavement café workers). For single person households, this income is sufficient to lift the household out of even the most generous definition of poverty. However, for the households comprised of two or more people, a wage of $93 per month is insufficient to lift the household from poverty. 4 World Bank (2007) World Development Indicators 2007 5 UNDP (2006) Human Development Report 2006 7
5. VPSSP VCA Tourism Danang 26 November 2007 1.6 Structure of report This Report summarises the series of activities that took place under the VPSSP from 6 th to 17 th November 2006 and the way forward emerging from this process. The Report is structured to highlight the key elements of this analysis, including:
   Establishing the rationale for the process by placing tourism and the value chain approach in context;
   providing an overview of tourism in Vietnam;
   outlining the rapid, participatory value chain analysis process;
   outlining the analysis of the tourism sector in Da Nang;
   defining a tourist development strategy for Da Nang;
   highlighting the proposals; and
   defining an action plan to initiate the change process. As this bringing together of participatory LED techniques and more conventional empirical value chain analysis is highly innovative, we have left space in this Report to reflect upon the lessons learned by the team from the processes to share with participants. 8
6. VPSSP VCA Tourism Danang 26 November 2007 2. OVERVIEW OF TOURISM 2.1 Tourism demand There has been reasonable, if slightly erratic, growth in international tourism in Vietnam over the past decade. Foreign arrivals have increased from 1.3m in 1995 to 3.5m in 2005 – an average annual rate of growth of 10.3% over the decade. Figure 7 International arrivals in Vietnam in 2004 (millions) 3.5 3 2.5 2 1.5 1 0.5 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: World Economic Forum (2007) The Travel & Tourism Competitiveness Report 2007 The Vietnam National Tourism Administration anticipate 4. 4 million international tourist arrivals in 2007. Positive growth factors for Vietnamese tourism from international markets are illustrated in the Box below. Box 1 Positive growth factors for international tourism in Vietnam
   Vietnam is considered to b e a safe and peaceful destination with stable national policies
   Improving rel ationship with the United States and American Airlines services to fiv e US cities
   Free visas for arrivals fro m Japan and South Korea
   Success ful tourist campaigns o f Vietnam National Touris m Ad ministration (VNAT) and government
   Significant in frastructure invest ment ov er th e past four years
   Significant foreign direct invest ment in tourism Source: Euromonitor (June 2005) Travel and Tourism in Vietnam An analysis of international arrivals to Vietnam illustrates the large and rapidly-growing importance of the Chinese market, which accounted for over one-quarter of all international arrivals in 2004. 9
7. VPSSP VCA Tourism Danang 26 November 2007 More recent arrival statistics from 2006 indicate no change of this dominance. This has a particular impact on Northern Vietnam, which is a more accessible part of Vietnam to the Chinese market. Taiwanese arrivals have also almost doubled since 1999. Figure 8 International a rrivals i n Vietnam in 2004 30% 25% 20% 15% 10% 5% 0% a n A a n e ia ia in a S re a c l d h iw U o p n ra o C a K a ra st b T J F u m A a C Source: Euromonitor (2005) Travel and Tourism in Vietnam The United States has long been a significant source market for Vietnam. However, interestingly, the 1 st , 2 nd , 4 th , 5 th and 8 th rank source markets are all Asian countries. The rapid increase in visitor numbers to Vietnam from more affluent Asian countries will have important consequences for the tourist sector. For instance, whilst there is concern in the minds of some tourist stakeholders about a huge volume of low-value Chinese tourists ‘swamping’ Vietnam, tourist expenditure surveys demonstrate that visitors from Singapore have a higher daily tourist spend than any other nationality – including the Americans and all Europeans. Aside from the Chinese market – which because of its size, potential and other characteristics is in many respects rather unique - the existence of this rapidly growing and high-spending Asian regional market, raises exciting tourist opportunities that complement the burgeoning domestic and traditional international markets in the US and Europe. From the analysis of source markets, it is unsurprising that about 60% of international arrivals are by air. Arrivals by sea are rising rapidly – as are arrivals by land from neighbouring states. The most significant international tourist flows in Vietnam are in the South (through the HCMC gateway) at about 45% of arrivals and the North (through Hanoi at about 40% of arrivals). Only about 15% of international arrivals are in Central Vietnam 6, which is the location of our study area at Da Nang. The purpose of visit for international arrivals at Vietnam is well-diversified. About half arrivals are for leisure purposes and the rest are split fairly evenly between business and visiting friends and relations. This diversity of motivations to travel is important because it indicates different types of tourist flow with contrasting seasonal characteristics, sensitivities and choices of destinations within Vietnam. 6 JICA (February 2002) Comprehensive Study on Tourist Development in the Central Region of the Socialist Republic of Vietnam 10
8. VPSSP VCA Tourism Danang 26 November 2007 Domestic tourism is already important in Vietnam, and looks set to become more so. In 2004, domestic tourist spending was $1.8bn (VND29.5 trillion) edging ahead of the $1.6bn (VND26 trillion) for international tourist receipts 7. The prominence of domestic tourism in Vietnam is virtually unique for a low income country and hugely significant for Da Nang. In 2004 Vietnam generated 19.8m domestic trips – about seven times more than the number of international inbound trips. However domestic trips are typically short from one to three days – perhaps reflecting the relatively limited leave entitlement of 12 days annual leave and 8 days public holidays for most employees. Domestic tourism grew 23% in 2004 compared with 2003 and 126% compared with 1999. In order to reduce the outflow of foreign exchange resulting from outbound tourism, the Vietnamese Government is encouraging domestic tourism. Tourist events such as the Tourism Year of Dien Bien Phu, Festival Hue 2004, the Road of Central Heritages and Ho Chi Minh Trail, Hoi An Ancient Town, My Son-Holly Land of Champa and Phong Nha-Ke Bang have attracted very large numbers of domestic visitors. This is obviously important economically, but is also critical in enabling Vietnamese citizens to discover and understand their own Country. The enormous potential for future growth of Vietnamese domestic tourism is indicated by the fact that, on average, one out of every six Vietnamese people takes one trip each year. 2.2 Tourism supply The supply of tourist accommodation is growing rapidly in Vietnam in response to the increase in arrivals and the prioritization of the tourism industry as a key foreign exchange earner. In June 2004 there were approximately 3 800 hotels in Vietnam with 130 000 rooms. The Vietnam national Administration of Tourism (VNAT) estimates that an additional 50 000 more hotel rooms are needed in the next five years to cater for the 31 million tourists expected in 2010 (comprising six million international arrivals and 25 million local tourists). To facilitate this expansion of capacity, government is planning a series of tourism investment conferences, investor survey trips and – in coordination with Ministry of Planning and Investment – to bring out special preferential investment policies. 2.3 Enabling environment Notwithstanding the buoyant growth, a recent analysis cautions that Vietnam’s tourism business environment ranking is poor within Asia. Vietnam is judged to share a high long-term political risk with China and poor business environment with Indonesia. Euromonitor’s assessment that Vietnam has stable national policies seemingly contradicts the Business Monitor view that the country has a high level of long-term political risk. This different assessment could reflect the two organisations assessing risk against a different time scale or perhaps focusing on a different kind of risk or simply reflecting the views of different groups of stakeholders. What is more important from our pro-poor tourism perspective is the fairly consistent message across a range of external organisations that there is room to improve the business environment in Vietnam. 7 Euromonitor (2005) Travel and Tourism in Vietnam 11
9. VPSSP VCA Tourism Danang 26 November 2007 The low ranking Vietnam receives for its tourism receipts and high rank for visitor arrival growth simply reflects the fact that tourism in Vietnam is expanding rapidly from a low base. The investment environment reflects the extent of government, domestic and foreign investment in the tourism industry, relative to the sector’s contribution to GDP. The low ranking reflects Vietnam’s low investment base from which it is expanding rapidly. Table 1 Tourism business environment in Asia Country Long- B usiness International Visitor Investment Shock Composite Regional term environment tourism arrival environment factor score rank political receipts growth risk India 7 8 3 8 8 8 40 1 Singapore 8 8 4 4 5 2 31 2 Malaysia 5 5 6 2 6 6 30 3 Thailand 6 4 5 7 1 7 30 3 Hong 4 7 7 3 4 5 30 5 Kong China 2 3 8 5 7 3 28 6 Vietnam 1 2 1 6 3 4 17 7 Indonesia 3 1 2 1 2 1 10 8 Source: Business Monitor International Vietnam Tourism Report Q2 2006 Note: Low number = poor performance ranking on each criterion The shock factor captures the special factors that have a heavy bearing on the tourist industry, including vulnerability to natural disasters and terrorism – the middle-ranking reflects the low threat of terrorism being partly offset by health concerns. The headline conclusion of this is that, within an Asian context, the business environment for tourism in Vietnam is needs to be improved. The value of the World Economic Forum Travel and T ourism Competitiveness Index of 2007 analysis – represented overleaf - is that the analysis places Vietnam in a comprehensive international context of 124 countries and emanates from a very highly-regarded international organisation. Vietnam performs excellently on price competitiveness with a rank of 10 th out of the 124 countries in the Travel and Tourism Competitiveness Index. The Country has good safety and security (rank 51); perception of tourism by the national population (rank 51); and availability of qualified labour (rank 52) and reasonable prioritisation of travel and tourism strategies (rank 76). 12