Asian Financial Crisis, Avian Flu and Terrorist Threats: Are Shocks to Malaysian Tourist Arrivals Permanent or Transitory?

Abstract

International visitor arrivals from Malaysia's ten major source markets are examined using Lagrange Multiplier (LM) unit root tests with one and two structural breaks to ascertain if shocks to the time path of tourist arrivals are permanent or transitory. The LM unit root test with one break is able to reject the unit root null for between 60 per cent of source markets where the break is specified as in the intercept and 90 per cent of source markets where the break is specified as in the intercept and slope. The LM unit root test with two breaks is able to reject the unit root null for all source markets, irrespective of how the break is specified. This result suggests that the effects of shocks on the growth path of tourist arrivals to Malaysia from its major markets are only transitory and that Malaysia's tourist sector is sustainable in the long run. While the effects of shocks are not permanent we do find that following shocks the growth in tourist arrivals from Malaysia's source markets have generally slowed. This result suggests there is a need to reduce the negative effects of slower growth in the recovery phase.

Issues of Safety and Security: New Challenging to Malaysia Tourism Industry

“…The cover of the February 11, 2002 edition of Time Magazine shadowed a showy profile of Osama bin Laden superimposed on Malaysia flag. The article claimed that Malaysia was a hotbed for terrorism activities [36]. Public apologised by Times regarding this issued doesn't meaning anything at all since Malaysia image already hit by that article.…”

“…In 2003, tourist arrivals in Malaysia decline to 10.58 million compared 13.29 in 2012 and government lose an income around RM 4.5 billion results of fears arising from SARS and bird flu epidemics in this region [41]. Regarding to The Minister for Tourism, Abdul Kadir Sheikh Fadzir is reported as stating the effects of SARS on Malaysia tourism were worse than the 9/11 attacks or the Bali bombings [36].…”

“…Following year, tragedy of 9/11 created more fears about the threat of terrorism in Malaysia. Since the incident, Malaysia reported detained more than 100 Islamic militant suspects, many of them of whom are alleged members of Jemaah Islamiyah (JI) [36]. And international media intention of JI presence in Malaysia brings a negative impact on tourism.…”

“…Regarding to [35][36] there a several episode that represent potential shock to international tourist arrivals in Malaysia; (1) Asian Financial Crisis; (2) Tension between Malaysia and Singapore; (3) Health scares; (4) Burning of forest in Indonesia; (5) Threat of terrorism; (6) Natural disasters; (7) Travel advisories issued by foreign government and (8) Media reports. When travelling internationally, tourist often experience a great degree of anxiety and scholars have found that risk perception significantly influence the intention to travel [37].…”

“…Started with out-break of dengue fever struck Penang in mid-1997, outbreak of Coxsackie B virus in Sabah and Sarawak, cholera epidemic, SARS and bird flu in this region give the big impact to tourism industry in Malaysia. China government in 2003, ordered travel agencies to stop Chinese tour groups to Malaysia, Singapore and Thailand because of the SARS [36]. According to the Culture, Arts and Tourism Ministry, total of tourist arrivals from China, Hong Kong and Taiwan have fallen some 80 percent because of outbreak of SARS [40].…”