Poverty Reduction, the Private Sector, and Tourism in Mainland Southeast Asia

There have been two primary approaches taken in attempts to reduce poverty, income redistribution, and creating new opportunities through economic growth. While it has generally been agreed the results of income redistribution have been disappointing, poverty reduction has been highly correlated with economic growth, and economic growth has consistently been associated with increased economic freedom and integration into the global economy through international trade. It is suggested using a wealth creation approach, as opposed to using the traditional framework of thinking in terms of poverty reduction, might produce fresh and practical insights. While the principles of economic freedom and integration into global value chains have proven effective in improving the lives of people around the world, the practices used to implement these principles will vary based on local political, cultural, historic, and economic conditions. Successful additional poverty reduction in Mainland Southeast Asia will take place within the unique environments found in the region. Despite criticisms of the industry, it is proposed tourism has and will continue to play a major role in creating new economic opportunities throughout the region which will help create the jobs, economic growth, and connections with global trade needed to substantially reduce the impact of poverty on the populations of the region.

There seems to be a consensus that economic growth is a fundamental component of sustained and substantial poverty reduction. Despite some political rhetoric claiming otherwise, there is a significant amount of evidence showing what does and what does not promote the economic growth, which is essential to reduce poverty. History teaches us that the private sector ownership of the factors of production with a strong state creating a fair, but not overly intrusive, regulatory system, as well as a high level of international economic integration, helps produce conditions needed for sustained and substantial poverty reduction. Tourism has a role to play in creating economic growth, but it is more likely to help grow an economy while complementing and not replacing other industries. Macroeconomic environments in most countries fall far short of ideal conditions due to political concerns, attempts by entrenched elites to maintain the status quo and hold on to power, and other special interest pressures. But despite the less-than-perfect conditions, we have also seen significant economic growth leading to poverty reduction and wealth creation, driven by the value-creating activities of innovative private sector firms while operating in challenging political environments, especially in Asia, in recent years. While the role of economic freedom in economic growth is well established, the role of political freedom through engaging in democratic processes is less clear; therefore, the promotion of democracy might be more effective if it is decoupled from the debates over economic prosperity.

Foreign aid and redistributing resources from productive uses and locations to areas where poverty is widespread have been key components of many formal poverty reduction programs. However, there is a general consensus foreign aid and other forms of redistribution of resources have not been effectively in directly reducing levels of poverty, although there is evidence foreign aid designed to address more limited problems can have a positive effect on improving the quality of life of individuals in poverty in some circumstances. Remittances is another strategy used in combatting poverty, although effectiveness of a policy of sending some of a country’s best and brightest to engage in productive economic activities in another country is questioned. Microfinancing programs have grown in popularity, and while their usefulness is acknowledged, the impact of these programs on reducing poverty on a large scale has been disappointing. The most effective method of reducing poverty on a sustainable basis and substantial scale has been for individuals in poverty to engage in productive economic activity and experience economic growth. The creation of productive economic and economic growth has been most effectively encouraged through increased economic freedom and integration in global trading networks. In addition, evidence suggests the service sector including tourism activities can have an important role in reducing poverty and increasing economic growth in regions where investment into the manufacturing sector is limited.

The countries and regions of Mainland Southeast Asia (SEA) are linked together through their membership in the Association of Southeast Asian Nations (ASEAN), the Greater Mekong Subregion (GMS), and the Asian Infrastructure Investment Bank (AIIB). Yet the level of economic integration and political cooperation in the region remain relatively low. Mainland SEA has seen significant improvements in the average standard of living, but substantial levels of poverty remain in the region. The region is very ethnically diverse, and many ethnic minority communities, especially those living in remote mountainous regions, have not benefitted from economic growth to the same extent as have ethnic majority communities. While many ethnic minority communities throughout the region have shown resistance to accepting government programs designed to force conforming to the culture norms of the majority populations, when presented opportunities to engage in economic activities on their own terms linking the communities to global trading networks, the communities have willingly engaged in these non-traditional economic activities. As many of the people in these communities live in areas where manufacturing on a large scale is not feasible, tourism offers opportunities to engage in global economic activities, as employees or as microentrepreneurs, without having to abandon their cultural heritage or move to new locations.

The modern country of Cambodia is generally considered to be the ancestor of the ancient Angkor Empire which was the most technologically advanced and powerful political center in ancient Southeast Asia. After the decline of the Khmer empire and existing as a buffer state between the more powerful Thai and Vietnamese kingdoms, Cambodia became a French colony and after gaining independence, the country was pulled into the regional conflicts centered in Vietnam. In 1975, the country was overrun by the armies of the Marxist-inspired Khmer Rouge which resulted in one of the most horrific genocides in modern times. After being invaded by the armies of Vietnam in 1979, the country came under and remains under the political control of Hun Sen and his Cambodian People’s Party. While the country remains economically underdeveloped and dependent on foreign aid, extreme poverty has been considerably reduced with some foreign investment in the garment, mining, and tourism sectors of the economy. Politically, the country has been criticized for its authoritarian nature and high level of corruption. In recent years, economic and political ties with China have been strengthened. Tourism has become an increasingly important sector in the nation’s economy, with tourists visiting the amazing Angkor Wat complex and the country’s beach resorts in ever-increasing numbers.

Laos PDR is a fascinating landlocked and sparsely populated country with close cultural, linguistic, and religious ties with its neighbor Thailand. The first major political entity to arise in modern-day Laos was Lan Xang, which controlled much of Mainland Southeast Asia. After the fall of the Lan Xang Kingdom, the region fell into a period of political fragmentation, followed by an era of indirect control by the Thais before being incorporated into France’s Indochinese colonial sphere of influence. Shortly after gaining its independence, the country got caught up in the regional struggle between the forces of Communism and the forces opposed to Communism, with the result of the Communist forces coming out on top in the country’s civil war. The country remains under control of a government controlled by a handful of members of the Communist Party and while the country’s relatively small population is quite poor by international standards, the country has seen respectable economic growth over the past years driven to some extent by increases in foreign investment and tourism, although foreign aid continues to be a major component of the nation’s economy. The government has developed close political relations with China, while the tourism sector has seen steady growth in recent years and is expected to continue to grow into the foreseeable future.

Linguistic similarities indicate it is likely there was some immigration in ancient times into Myanmar/Burma from parts of India, Nepal, and Tibet. From an early time, Buddhism has been an important part of the country’s culture, and eventually, the Theravada form came to dominate. In addition to Mon-controlled civilizations, early kingdoms in the country included the Pyu, Bagan, and Ava. Military leaders who consolidated power and helped create the modern country include Tabinshweti, Bayinnaung, and Alaungpaya. Ethnic divisions have plagued the country for decades and might have been exacerbated by becoming a British colony. Upon independence, the country became a democracy led by U Nu, who tried to use a political philosophy built upon Buddhist and socialist ideals to govern the country. Dissatisfaction with the direction of the country resulted in a military-led government using the “Burmese way to socialism” as an economic foundation. The economy stagnated during the military rule which appears to be being replaced by a limited form of democracy. Despite optimism brought by the economic and political reforms, the country remains relatively poor with many challenges to overcome to accelerate economic growth. It is proposed an increased role of tourism in the country could have positive effects on economic growth and poverty reduction.

The modern country of Thailand has evolved from the earlier kingdoms of Lannathai, Sukhothai, and Ayutthaya. Thailand is the only country of Southeast Asia which has never been part of a European colonial empire. Despite the ending of the absolute power of the Monarchy in the 1930s, the Royal family remains an important feature of Thai society. Politically, the past 80 years have been dominated by a series of alternating democratic and military-led governments. Currently, the government is under military control, and there is a lot of uncertainty about the future political direction the country will take. The country saw fast economic growth and poverty reductions in the last years of the twentieth century fueled by increased levels of FDI and exports, but the country has in more recent years seen some of the slowest economic growth rates in the Asia-Pacific region while experiencing increasing levels of inequality and increasing income gaps between urban and rural areas. Tourism is a very important component of the Thai economy, and its importance has grown in recent years due to a slow-down in exports and incoming FDI. The experiences and opinions about the tourism industry of a few workers from a hotel in the northern part of the country are presented.

The northern areas of today’s Vietnam were part of the Chinese sphere of influence for hundreds of years, while the political history of the central and southern regions shows more fragmented political control and more connections with other Southeast Asian countries. The different regions of today’s Vietnam were incorporated into the French Indochina colonial empire. Prior to World War II, an independence movement led by Ho Chi Minh supported by international Communist organizations emerged and became a major military and political force. In the years following World War II, a war for independence started pitting the Communist forces again the French, supported militarily and financially by the USA. The war ended in a partition of the region into two countries, North and South Vietnam. Hostilities resumed with the North being provided support from the Soviet Union and the People’s Republic of China, while the South was supported by the USA and some of its allies. Shortly after the USA removed its troops, the country was reunited under Communist rule. At first, the economy in the newly reunited country saw serious declines, but upon implementing economic reforms in the late 1980s, the country has experienced impressive levels of economic growth and even more impressive levels of poverty reduction. Tourism has in the past and is expected in the future to contribute to economic growth and reductions in poverty.

Yunnan province in China is often thought of as an area which can potentially connect the economy of China with the economies of Mainland SEA. While China has a history as a continuous civilization of over 2000 years, Yunnan has been considered for most of that time as a peripheral area where Chinese control and influence have waxed and waned. In the past, Yunnan was the home to a number of distinct civilizations and due to its location connecting East and SEA, it has been an incubator where new cultural identities have emerged. China has become a major economic player on the world stage through amazing economic growth and poverty reduction, although China remains on a per capita basis far below developed world standards and despite all the successes, millions of people in China still live in extreme poverty. Yunnan is one of the poorest regions of China and is also the home of many ethnic minorities. The tourism sector in the province is mostly based on exploiting the desire to experience the uniqueness and exoticism of the local cultures. The tourism industry has provided many livelihood opportunities for local people and has contributed to economic growth and reductions in poverty in regions actively engaged in the sector. Further and fairer development of the sector has the potential to even further reduce the number of people from ethnic minority communities living in poverty.

While there are some criticisms about the impact of tourism on quality of life for local residents, evidence shows tourism normally creates livelihood opportunities and economic growth. Many of the jobs created in the tourism industry do not require high levels of training or education, making the sector especially effective in combatting poverty. Tourism also creates many opportunities for microentrepreneurship and as the barriers to entry for most of these small businesses are low, tourism can provide opportunities for individuals to escape poverty by creating their own employment. Interviews with employees and microentrepreneurs throughout SEA were presented. Employees generally felt the jobs they chose to take were better options than their other livelihood opportunities and did not feel exploited by their employers and many workers had plans for the future. The microentrepreneurs also felt their choice of occupation was their best option, and often the personal freedom and flexibility of owning one’s own business were as important to the entrepreneurs as were the financial rewards. In general, the individuals interviewed shared in the opinion tourism was good for the country as well as for themselves as it provided additional choices of how to make a living. Also, an exploration of the intangible benefits tourists seek and often obtain was made.

There are no easy answers to eliminating global poverty, but there are some well-established ideas which have been proven to contribute to creating the wealth in poor communities needed to substantially reduce poverty. It is suggested international organizations, charities, and national governments providing foreign aid reconsider their approaches and base their decisions on empirical evidence and not political ideology or the desire to see the continuation of existing approaches and programs. It is suggested national governments work to increase economic freedom, integration in international trade, tackle corruption through reducing government control of an economy, improve the functioning of government officials, further integrate economically within the region, emphasis education, build the needed infrastructure, and create more democratic, transparent, and accountable institutions. The primary recommendation for private sector enterprises is to actively seek out opportunities to create jobs and economic growth in regions where poverty is widespread. Recommendations for consumers and tourists are to engage in economic exchanges with individuals and businesses in developing countries but to avoid making decisions based on simplistic and emotional appeals. Poverty is not only a problem for people living in poverty but also causes social problems and deprives societies of the talents and potential contribution of individuals who are never able to develop to their fullest due to lacking opportunities.