i CERTIFICATION I certify that the research has not been submitted for any degrees. I certify that, to the best of my knowledge, I have acknowledged all sources of information and support. The study does not necessarily reflect the views of the University of Economics Ho Chi Minh City or the Fulbright Economics Teaching Program. Author Hoang Tu Uyen ii ACKNOWLEDGEMENT My deep gratitude to Dr.Pincus for his thoughtful and patient supervision and encouragement.
My special thanks to Dr. Vu Thanh Tu Anh, Phan Chanh Duong and the teachers at the Fulbright Economics Teaching Program for their inspiration. Love to family and friends. iii ABSTRACT This thesis studies the competitiveness of the tourism sector in An Giang province, using the cluster approach.
The thesis applies an adjusted Michael E.Porter model to evaluate the competitiveness of the tourism cluster in An Giang and finds that even though An Giang province attracts a large number of tourists every year, revenue from the tourism sector is relatively small compared to its competitors, and the activities in the cluster target the low-end market segment. Moreover, spiritual tourism in An Giang province does not demonstrate much growth potential. The tourism sector in An Giang province is duplicating the offerings of other destinations and does not have clear competitive advantages. Therefore, the thesis recommends that the government should not invest heavily in promoting spiritual tourism but should improve the business environment by enhanced infrastructure, education and promotional campaigns.
The thesis also suggests that the province should shift its focus from spiritual tourism to heritage tourism. Key words: tourism sector, cluster, spiritual, heritage iv CONTENTS CERTIFICATION. vi LIST OF TABLES. vii LIST OF CHARTS.
viii LIST OF FIGURES. Background of the problem. Clusters & the competitiveness of clusters. The Tourism cluster in An Giang.
Organization of the Research. An Giang as a gateway to the Mekong Delta. The performance of the current tourism cluster. Determinants of regional competitiveness in tourism.
Given local nature endowment. Competitiveness at the regional level. Competitiveness at the firms level. The diamond model of competitiveness.
Related and supporting industries. Context for firm strategy and rivalry. DISCUSSION, CONCLUSIONS, RECOMMENDATIONS. Summary of the current situation.
The choice of mutual development. Investment in infrastructure. Consideration of the proposed An Giang airport. Investment in education.
Creation of tourism business associations. Creation of heritage tours. Less investment on spiritual tourism projects .56 vi ABBREVIATIONS 2009 Census 2009 Population and Housing Census AGPC People Committee of An Giang province AGU An Giang University An Giang An Giang province ATIPC An Giang Trade and Investment Promotion Center FDI Foreign Direct Investment GSO General Statistics Office HCMC Ho Chi Minh City ICAO International Civil Aviation Organization MDTA Mekong Delta Tourism Association PCI Provincial Competitiveness Index SME Small and medium size enterprise vii LIST OF TABLES Table 1.1: South Carolina industries’ dependence on tourism .1: Tourism destinations in An Giang (listed by district) .2: Airports in the Mekong Delta .3: Structure of An Giang’s enterprises (2004 – 2009) .4: Structure of An Giang’s enterprises (divided by size of capital and number of employees) (2004 – 2009) .34 viii LIST OF CHARTS Chart 3.1: An Giang’s demographic structure in 2010 .2: Total retail sales of goods and services – current prices (1995 – 2010).3: Composition of An Giang’s economy from 2000 to 2010 .4: Number of tourists served by the hotels in An Giang (2001 – 2010).5: Structure of domestic tourism in 2009 .6: Average expenditures per day of domestic tourists in 2009.7: Tourists’ average daily expenditures in An Giang from 2000 to 2010 .8: Number of tourists served by the accommodation units and length of stay .9: Revenue from tourism activities (2009 – 2011) .10: Revenue per tourist in 2011.11: GDP per capita (constant prices) of An Giang, Can Tho, Kien Giang, Tien Giang and Tay Ninh from 2000 - 2010 .12: Volume of passengers in An Giang, Can Tho and Tay Ninh (2001 – 2010) .13: Percentage of drop – out students from 5 to 18 years old in 2009 .14: Proportion of development investment expenditure of An Giang from 2000 – 2010 .15: PCI of An Giang province in 2010 and 2011 .16: Revenue of the enterprises in tourism sector in An Giang (2001 – 2010) .17: Increase of foreign tourists from 1996 – 2011 .39 ix LIST OF FIGURES Figure 1.1: Determinants of regional competitiveness.2: Diamond model of competitiveness .3: Cluster development ladder .2: Map of the transport network from An Giang to larger Mekong Delta .3: An Giang tourism’s cluster map .4: Determinants of regional competitiveness in tourism in An Giang .5: Distances from An Giang and Tay Ninh to HCMC and Phnom Penh.6: Percentage of high school graduates.7: Locations of An Giang, Can Tho, Ca Mau, Rach Gia and Phu Quoc airports .8:Location of industrial zones and tourist sites in An Giang province .9: Diamond model of competitiveness in An Giang .1: Promotional campaigns targeting at tourists. Background of the problem 1.
Clusters & the competitiveness of clusters Clusters as a new economic concept “Cluster” is an emerging term in today’s economics. Porter (1998) claims that clusters have a prominent role in maintaining the competitiveness of nations. He defines a cluster as a “geographic concentration of interconnected companies and institutions in a particular field,” which includes suppliers of specific inputs, providers of specialized infrastructure, manufacturers of complementary products and companies in related industries (Porter 1998, 199). He also states that when the companies and institutions get together in clusters, their whole value is greater than the sum of each separate part, and “clusters, broader than industries, capture important linkages, complementarities, and spillovers of technology, skills, information, marketing, and customer needs that cut across firms and industries” (Porter 1998, 205).
Clusters promote both competition and cooperation (Porter 1998). Clusters will affect productivity growth, with “productivity” defined as “the value created per day of work and unit of capital or physical resources employed” (Porter 1998, 209). Porter states that clusters are of foremost importance since they provide better access to employees, suppliers, specialized information, complementarities, institutions and public goods. Clusters also encourage improved measurement and motivation.
Besides, clusters also help drive the direction and pace of innovation as well as stimulate the formation of new businesses (Porter 1998). Ferreira and Estevão (2009) believe that clusters generate static externalities (cheaper access to product factors) and dynamic externalities (enhanced learning and motivation). The tourism cluster Tourism has recently been considered an “economic growth engine with particular focus at the regional level” (Ferreira and Estevão 2009, 1). Botti et al.
(2008) prove that the industry is a prodigious source of value creation and employment, especially in places with no other alternative economic advantages. 2 Ferreira and Estevão (2009, 5) define the tourism cluster as a “geographic concentration of companies and institutions interconnected in tourism activities”. Generally, tourism clusters are associated with tourism products and destinations. Tourism achieves positive economic outcomes through clustering (Roberts 2000).
The industry is extremely suitable to the application of the cluster concept because the satisfaction of the customers (tourists) comes from both the attraction of the destination and the quality of related businesses such as hotels, restaurants, shopping centers and transportation (Ferreira and Estevão 2009). Nordin (2003) observes that the experience of tourists is based on the overall impression of the destination visited, and every single factor needs systematic development. In general, destinations like clusters are formed naturally. However, to achieve their full potential, they need support (Nordin 2003).
Braun (2005) says that tourism clusters’ growth needs a critical mass of firms and also the important elements of strategic infrastructure such as hard, financial and human resource infrastructure. The competitiveness of tourism clusters Dominguez (2001, as cited in Ferreira and Estevão 2009, 9) states that the competitiveness of a tourism cluster depends on the tourism businesses’ capacity to attract visitors who “offset the costs of business development, and reward the capital invested, in an equal or above manner of the opportunity cost.” Some elements of tourism cluster competitiveness are invisible and immeasurable (Dwyer and Kim 2003). Objectively measured elements of the competitiveness of a tourism destination (tourism cluster) are visitor numbers, market share, tourist expenditure, employment and value added by the tourism industry, and the subjectively measured ones are “richness of culture and heritage” and “quality of tourism experience” (Dwyer and Kim 2003, 375). There are models that can be applied to measure the competitiveness of a destination and a specific cluster.
Determinants of regional competitiveness Adjusting Porter’s framework to a regional scale to analyze national competitiveness, Vu Thanh Tu Anh et al. (2011) mention three factors that affect the productivity of a region, namely: (i) regional natural endowments; (ii) competitiveness at the regional level; and, (iii) competitiveness at the firm level.1: Determinants of regional competitiveness Competitiveness at the firm level Business Cluster Business’s practice environment & development & strategies infrastructure Competitiveness at the regional level Cultural, social, Fiscal, credit medical & education policies & infrastructure Economic structure Given local natural endowments Geographic Scale of regional Natural resources position economy Source: Porter, E. (1990), adjusted by Vu Thanh Tu Anh et al. (2011) Natural endowments refer to the factors naturally owned by the regions such as natural resources, geographic position and scale of the local economy.
It is not always true that favorable natural endowments will lead to a high degree of competitiveness of a region and vice versa (Vu Thanh Tu Anh et al. Facing pressure from unfavorable conditions, such as lacking natural resources or having an adverse climate, necessary strategies and innovation will be generated, thus enhancing competitiveness. For example, Japan and Korea have proved that countries can create and maintain high competitiveness without the support of natural resources, while many countries blessed by nature such as Nigeria and many other African countries seem to suffer from the “curse of natural resources” (Sach and Warener 1995). Competitiveness at the regional level includes the infrastructure of culture, society, health and education, which is usually called “soft infrastructure,” together with fiscal and credit policies and the economic structure of the region.
The last determinant of regional competitiveness refers to competitiveness at the firm level. This determinant includes the business environment and infrastructure, the capacity of the clusters and the strategies and business practices in the region. 4 Diamond model of competitiveness Porter (1990) believes that the success of every company that competes in the market comes from the economic environment, institutions and government’s policies. He also emphasizes that the main indicator of competitiveness is productivity.
He proposes a framework of competitive performance, depicted as a “diamond model”, consisting of (i) factor conditions; (ii) firm strategy, structure and rivalry; (iii) demand conditions; and (iv) related and supporting industries. Porter later adds (v) government and (vi) change/chance as “events out of control of the company”.2: Diamond model of competitiveness A local context that encourages investment and sustained upgrading, e. intellectual property protection Open vigorous competition among local based rival Film Strategy Government Structure & Rivalry Factor Demand conditions conditions High quality, specialized inputs A core of sophisticated and available to firms: demanding local customer(s) • Human resource • Capital resources Unusual local demand in • Physical infrastructure Related & specialized segments that can • Information infrastructure Supporting be served nationally or • Scientific & technological Industries globally infrastructure • Natural resources Availability of capable, Customer needs that locally based suppliers and anticipate those elsewhere firms in related industry Presence of clusters instead Source: Porter, E. (1990) of isolated industry 5 The first facet of the model is about factor conditions, which Porter and many other authors place much emphasis on.
Factor conditions are also called “input conditions” – or raw materials. In tourism, factor conditions play such an important role that Nordin (2003) even claims that without these conditions, there would be no tourism activity.