Understanding the Tourism Industry in Phuket, Thailand

by: Ajaya Kusum, SPI

Tourism plays a critical role in the economic development of Thailand. The government views the tourism sector as a critical driver of the economy, positively influencing employment, poverty alleviation, and public sector revenues. As an active economic contributor for the past two decades, this sector has made Thailand one of the most prosperous nations in the world. Furthermore, according to the Office of the National Economic and Social Development Council, the tourism sector´s contribution to the GDP has remained paramount. In 2019, the sector showed impressive figures, accounting to 20% of the total GDP and it is expected to increase to more than 30% of the total national GDP by 2030.¹

This document provides a brief insight into the tourism industry in Phuket, Thailand, top destinations, the underlining challenges and the path forward. Therefore, the document provides relevant information for EU companies who want to:

Further their understanding of the tourism landscape in Phuket, and Thailand as a whole;
Gain an overview of the Thailand-EU relationship; and
Have a potential interest in investing in Thailand´s tourism sector.

Overview

Until the mid-1950s, Thailand did not have an organised tourism industry and the government did not plan strategies to foster tourism. But of course, the global economic situation then was bleak at best. Globalisation had not yet taken place in full swing and labour mobility was still a foreign concept. But in the early 1960s, the first Thai governmental tourist authority was formed and over the next decade, the number of annual foreign visitors grew exponentially, rising to 12 million annually by the turn of the 21st century.² After the 1980s, when globalisation was fully operational and economies became more open, Thailand´s tourism sector boomed. In 2013, Thailand was the 10th "top tourist destination" in the world tourism rankings with 26.5 million international tourists³. It was also one of the most visited destinations in the world. In 2019, Bangkok was ranked first, surpassing Paris and London as identified by the "Global Destination Cities Index 2019" with 22.78 million visitors.

Thailand is recognised for its cultural tourism and its vibrant cultural heritage and beauty. Elephant tourism, for instance, has been a major attraction for tourists. Also, for combat athletics, enthusiasts and practitioners, Thailand´s Muay-Thai and boxing remain an essential experience. Furthermore, the country is unfortunately also known for sex tourism. A generation back, it was estimated that the country had 30,000 sex workers. The number has however ballooned up to one million. The tourism minister in 2014 introduced a pilot project in an effort to neutralise the sex tourism industry. In a more positive light, medical tourism has also been at the forefront. Thailand has an affordable and reliable health care system. This has contributed significantly to the increasing number of annual foreign visits. In 2017, Thailand registered 3.3 million foreign visits seeking medical attention. In 2018, this number grew to 3.5 million.⁴ The government policies in the health-care sector are liberal, which attracts foreign nationals of countries with tighter policies around medical treatments.

The next levels will provide an overview about the tourism landscape in Phuket, and the EU- Thailand bilateral relationship.

¹ Theparat, Chatrudee (19 September 2019). "Prayut: Zones vital for growth". Bangkok Post

² Baker, Chris; Phongpaichit, Pasuk (2009). A History of Thailand (2nd, paper ed.). Cambridge University Press. pp. 149, 204. ISBN 9780521759151.

³ "UNWTO Tourism Highlights". UNWTO (2014 ed.). Madrid: UN World Tourism Organization (UNWTO). 2014.

⁴ Otage, Stephen (12 February 2019). "Uganda: What Uganda Can Learn From Thailand's Medical Tourism". Daily Monitor. Kampala

Understanding Phuket

Phuket is one of the southern provinces of Thailand. It consists of Phuket Island, the country's largest island, and another 32 smaller islands off the west coast of Thailand in the Andaman Sea.⁵ Phuket Island is mostly mountainous with a mountain range in the western part of the Island that runs from the north to the south. It is estimated that over 5.3 million tourists flock to Phuket Island annually to experience the picturesque mountain ranges and beaches.

Top Destinations in Phuket⁶

Big Buddha: The Buddha statue is one of the hallmarks of Phuket, standing forty-five meters tall in Nakkerd Hills. It is the third-tallest statue in Thailand narrowly behind the Great Buddha of Thailand and Luangpho Yai.
Karon Beach: It is a 3.5 kilometre long strand of golden sand and sapphire sea. The water is crystal clear.
Phuket Town: It is located on the South-Eastern coast of the Island on a picturesque bay. The architecture reflects the influence of Chinese and Portuguese immigrants, which provides a sharp contrast to traditional Thai architecture. Old Phuket Town incorporates well-maintained shop houses, Sino-Portuguese mansions and temples and shrines.
Rawai Village: This village provides a more authentic view of Phuket, and is known for people having a sea-gipsy lifestyle. It is a sought-after tourist destination.
Wat Chalong: It is the largest and the most popular of Phuket´s 29 temples. The temple embodies the murals of Lord Buddha´s journey to enlightenment.

Interesting Facts⁷

Phuket actually means mountain jewel.
Patong is the most visited beach in Phuket Island.
One of the islands in Phuket was used for the 1974 James Bond movie - The Man with the Golden Gun. The Island was eventually renamed to James Bond Island.
Phuket boasts one of the largest Buddha statues.
Approximately 3/4th of the Island is covered with mountains from the North to the South.
Currently, there are over 600,000 undocumented inhabitants on the Island, but in 2012 the official count stood at 360,905.
The Island has no major rivers.
In November during a full moon, Loy Kratong is celebrated by releasing little floats made of leaves, flowers and incense on the water.
Apart from tourism, Latex production and commodities such as frozen fish, pineapples, palm oil and cashew nuts are the main sources of income.
According to an Australian News Report, the Koh Hae Island in Phuket is one of the riskiest places to swim and scuba dive.

Tourism Trends and Challenges in Phuket

Phuket has proven to be the very model of a resilient tourism destination. Even though it is a top tourist-attraction site brimming with opportunities, its growth brings vulnerability. The Island´s popularity is largely predicated on being welcoming and having high value-for-money. On the other hand, it has remained unwilling to proactively address ongoing risks to tourists. Some of the challenges and trends are highlighted below.⁸

The Challenges	Recent Trends	Goals
The increase in the number of tourists has overwhelmed the Island’s ability to meticulously manage its environment and foster social development.	In the 2009 Phuket Gazette survey, it was found that 2/3 of the respondents deemed the current state of Phuket´s tourism as unsustainable. Worse, 35% believed the Island was beyond the hope of recovery.	To create a ‘Sustainable Tourism’ model that helps to generate positive growth of the tourism sector.
Lack of a green transport system and the lapse of infrastructure to support the green mobility alternatives.	Development of a public electric transportation system for the three main roads of the Island.	To catalyse the development of green transportation and green mobility infrastructures.
High consumption and dependency in non-renewable energy all sourced off the Island.	Thailand’s Renewable Energy Development Plan (REDP 2008 – 2022) has a renewable energy target of 20% of the total energy demand in the year 2022. Significant progress has already been made. Thailand is South East Asia´s largest solar power producer.	To make Phuket energy efficient and a low-carbon economy, that relies on renewable energy sources.
Rampant urban development in the coastal areas leading to a negative impact on terrestrial and marine ecosystems.	The sanctity of the ecosystem is getting lost due to urban development and rapid encroachment.	To have a more coherent and sustainable approach in urban planning principles and practices.
To encourage the private sector businesses in Phuket to embrace Corporate Social Responsibility (CSR) as a standard business practice.	A lot of SMEs and businesses are adhering to CSR activities and programmes to improve the tourism activities in Phuket.	To foster Phuket’s tourism sustainability through effective use of CSR activities and programmes.

To remedy the challenges mentioned above, proper government policies must be devised. In the fall of 2016, Tourism Authority Thailand (TAT) disclosed its Market Plan for 2017.⁹ The plan complements the Thailand 4.0 strategy, which helps to transform Thailand into a value-based economy through increasing knowledge and technology transfer. Furthermore, the plan helps to establish Thailand as a tourist hub and a successful destination. Globally and locally, Thailand is strategically placing itself as the tourism hub of South East Asia, incorporating the cultural, medical and sports markets.

⁵Amazing Thailand. Tourism Authority of Thailand, available at https://archive.is/20130705172143/http://www.tourismthailand.org/Where-to-Go/Phuket

⁶Top-Rated Tourist Attractions on Phuket Island, available at https://www.planetware.com/thailand/phuket-island-tha-pk-pkp.htm

⁷Interesting Facts about Phuket, available at https://www.thefactsite.com/phuket

⁸Phuket Sustainability Indicator Report, available at https://www.iucn.org/sites/dev/files/import/downloads/phuket_sustainability_indicator_report_22_nov_2013.pdf

⁹Tourism Authority of Thailand Marketing Plan, available at https://www.tatnews.org/2016/10/tourism-authority-of-thailand-2017-marketing-plan/

EU and Thailand Bilateral Relationship

The EU and Thailand have a Partnership and Cooperation Agreement (PCA), which provides a comprehensive framework for EU-Thailand relations, which opens up a variety of development areas in the two countries. Furthermore, the EU-Thailand Free Trade Agreement (FTA), established in 2013, addresses areas that are usually concerning for EU companies such as tariff and non-tariff barriers, Intellectual Property (IP) laws and regulatory issues and related policies. The relationship between the two entities is strong, which further encourages EU companies to invest in Thailand. The FTA and strong relationship have produced many results, such as:

In 2018, the total bilateral trade between the EU and Thailand amounted to €38 billion.
The EU is Thailand’s third largest trade partner, narrowly behind China and Japan, thus accounting for 9.1% of the economy´s overall trade. In parallel, Thailand is the EU’s 25th largest trading partner. In 2018, Thailand´s exports to the EU accounted for €22.9 billion.
The EU exported goods worth €15.1 billion to Thailand in 2018. Key EU exports to Thailand are machinery and transport equipment, chemicals and related products, and manufactured goods.
Thailand is one of the most important destinations of European investments within ASEAN with €21.2 billion of Foreign Direct Investment (FDI). The EU is the second-largest investor in Thailand after Japan in FDI.

Reasons to invest

The EU´s tourism focused companies should consider the following aspects in expanding to Thailand as the country holds lucrative investment prospects:

Location: Thailand is located in the heart of Asia and enjoys benefits from its geographical position. It mainly attracts tourists from India, China, the members of the ASEAN and other countries. This provides sufficient prospects for companies wanting to establish a presence within the tourism sector.
Government support: Since tourism has been the pipeline of the economy, the Thai Board of Investment (BOI) offers tax incentive schemes to foreign investors. The Special Economic Zones (SEZ) in 10 provinces in Thailand, including Tak, Mukdahan, Sa Kaeo, Trat, Songkhla, Chiang Rai, Nong Khai, Nakorn Phanom, Kanchanaburi, and Narathiwat give further incentives for the EU companies.
FDI Policies: Foreign direct investments are highly backed by government policies and liberalisation. Thailand has been constantly improving the policies in doing business. The country occupies the 21st position in the World Bank´s Doing Business 2020 ranking.
Infrastructure: Thailand boasts its abundant natural resources, skilled human assets, state-of-the-art transportation and communication facilities and improved IT networks, which makes a very smooth platform for EU companies to soft-land in Thailand.

The government of Thailand and the Foreign Affairs Council (FAC) of the European Union agreed to broaden their engagement and prepared for the signing of a Partnership and Cooperation Agreement for a liberalised trade agreement between the two. This will increase the mobility of capital and labour. Thailand can therefore be a lucrative investment haven for EU companies affiliated in the tourism sector and other sectors.

¹⁰ European Commission – Thailand Trade Picture- available at https://ec.europa.eu/trade/policy/countries-and-regions/countries/thailand/

¹¹ Thailand’s Special Economic Zones - new opportunity connected – available at http://www.boi.go.th/upload/content/Thailand_SEZ_34834.pdf

¹² Foreign Direct Investment in Thailand- available at https://www.nordeatrade.com/en/explore-new-market/thailand/investment