Microsoft Word 2007 ichrie conference Proceedings Final-Final 06-06-07. doc

INBOUND TOURISM DEMAND AND TAIWANESE ECONOMY 
Traditionally, Taiwan has been known as an exports-oriented economy (Sengupta & Espana, 1994), and the 
tourism sector has never been considered as a leading industry in Taiwan. Nonetheless, Kim et al. (2006) have 
showed that the tourism industry has been another major contributing factor of the Taiwanese economy. According 
to the annual statistics from the Tourism Bureau of Taiwan (2003, 2004), tourism revenues accounted for 4.39 
percent of the gross domestic product (GDP) in 1996 and 5.31 percent of the GDP in 2001. Those figures had 
exceeded the contribution of the agricultural sector to
 
GDP in each corresponding year, showing that the tourism 
industry has become one of the major industries in Taiwan. In 2002, the Taiwanese government introduced the 
Doubling Tourist Arrivals Plan in order to promote the Taiwanese tourism. The Doubling Tourist Arrivals Plan aims 
to double the number of foreign tourist arrivals to Taiwan, luring five million foreign visitors to Taiwan by the year 
2008, and hence, energize the job market and the overall economy via the tourism expansion. In 2005, an 
unprecedented 3.38 million foreign tourists visited Taiwan, moving a step closer toward the goal of the Doubling 
Tourist Arrivals Plan. To attract more foreign tourists, the Tourism Bureau further introduced another tourism 
promotion plan in 2005, the Tourism Flagship Plan, to promote the nation's top attractions and cultural festivals 
(Tourism Bureau of Taiwan, 2005).
As shown in Tables 1 and 2, Taiwan’s tourism demand, measured by the total tourist arrivals, demonstrates 
a sustained growth over the last ten years, except for the years 1998, 2001, and 2003, due to the 1997–98 Asian 
financial crisis, September 11 terrorist attacks in 2001, and the outbreak of severe acute respiratory syndrome 
(SARS) in 2003, respectively. The number of foreign tourist arrivals in Taiwan increased from 2,358,221 in 1996 to 
3,378,118 in 2005, with an average growth rate of 4.81 percent. During the ten-year period, the number of tourist 
arrivals by country of origin (nationality) in Table 1 shows the dominance of the Japanese market, which accounts 
for 34.7 percent of all visitors. Hong Kong is the second largest market (13.7 percent), followed by the U.S. (12.8 
percent), Thailand (4.5 percent), South Korea (4.0 percent), and Singapore (3.8 percent). The tourist arrivals from 
the top six markets account for 73.4 percent of all foreign visitors to Taiwan for the period from 1996 to 2005. We 
further find that the tourist arrivals from Japan, South Korea, and Malaysia/Indonesia dropped during the 1997–98 
Asian financial crisis, and that the tourists from the U.S., Thailand, South Korea, the Philippines, Malaysia/ 
Indonesia, Europe, and other inbound markets decreased due to the terrorist attacks in 2001. Moreover, the tourist 
arrivals from most of countries, except for South Korea, the Philippines, and others, were seriously impacted by the 
SARS outbreak in 2003 (the overall decreasing rate: 17.55 percent). The tourist arrivals from Singapore, 
Malaysia/Indonesia, South Korea, and Hong Kong expanded over the ten-year period, and their corresponding 
average growth rates (10.75 percent, 9.60 percent, 7.41 percent, and 7.02 percent, respectively) were all greater than 
that of the total tourist arrivals (4.81 percent). It is also observed that the standard deviation (volatility or risk) in 
most of the individual markets, except for Thailand, is higher than that of the overall foreign tourist market. 
Especially, the volatility of the South Korean market is more than twice of the aggregate market volatility. 

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