Impact of tourism leakage on the growth of economic sectors, employment and income distribution in Bali, Indonesia

Abstract

Not all of the revenue generated from tourist expenditure in a tourism destination such as Bali reaches the tourism actors and community in the area, because part of it goes outside the region or abroad; this is commonly referred to as "leakage". The purpose of this research was to simulate the impact of this tourism leakage on the growth of economic sectors, employment and income distribution. The simulation, based on the Social Accounting Matrix (SAM) for Bali 2012 (109x109), required primary data obtained directly from primary sources such as households and hotels, and secondary data obtained from government agencies such as BPS Statistics Indonesia - Bali Province, etc. Data analysis methods comprised: (1) descriptive analysis, and (2) analysis of the simulation. The results of the research show that the highest percentage of tourism leakage was found in 4 and 5 star chain hotels (55.31%). Lower levels were found in 1, 2 and 3 star hotels (15.66%), followed by 4 and 5 star non-chain hotels (7.14%), with the lowest leakage being in non-star hotels (2.0%). The average leakage across all types of accommodation was 19.48%. The result of the simulation shows that as tourism leakage increases, economic growth is reduced, employment in the production sectors declines, and income distribution becomes increasingly unequal. Conversely, when tourism leakage is reduced, economic growth increases, employment expands, and income distribution becomes more equal.

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International Journal of Economic Research
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ARDI GUNARDI
Dept. of Management,
Faculty of Economics & Business,
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Indonesia
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Hassan Aly, Ohio State University, USA
TaradasBandyopadhyay, University of California, Riverside, USA
Dyuti Banerjee, Monash University, Australia
DerrekBjonback, Purdue University North Central, USA
BhajanGrewal, Victoria University, Australia
YilinHou, Syracuse University, USA
Elias Khalil, Monash University, Australia
ShravanLuckraz, University of Nottingham, U.K.
Paul McGrath, Purdue University Calumet, USA
Chang Woon Nam, Ifo Institute for Economic Research, Germany
AnindyaSen, Indian Institute of Management, Kolkata, India
Laurent Simula, Uppsala University, Sweden
Mohammad Alawin, The University of Jordan, Amman, Jordan

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1International Journal of Economic Research
Impact of Tourism Leakage on the Growth of Economic Sectors, Employment and Income Distribution in Bali, Indonesia
International Journal of Economic Research
ISSN : 0972-9380
available at http: www.serialsjournal.com
© Serials Publications Pvt. Ltd.
Volume 14 • Number 8 • 2017
Impact of Tourism Leakage on the Growth of Economic Sectors,
Employment and Income Distribution in Bali, Indonesia
Agung Suryawan Wiranatha, Made Antara and I Gusti Ayu Oka Suryawardani
Doctorate Program in Tourism Udayana University-Bali-Indonesia
Corresponding author: balitruly@yahoo.com; gungdani@gmail.com
Abstract: Not all of the revenue generated from tourist expenditure in a tourism destination such as Bali
reaches the tourism actors and community in the area, because part of it goes outside the region or abroad;
this is commonly referred to as “leakage”. The purpose of this research was to simulate the impact of this
tourism leakage on the growth of economic sectors, employment and income distribution. The simulation,
based on the Social Accounting Matrix (SAM) for Bali 2012 (109x109), required primary data obtained directly
from primary sources such as households and hotels, and secondary data obtained from government agencies
such as BPS Statistics Indonesia – Bali Province, etc. Data analysis methods comprised: (1) descriptive analysis,
and (2) analysis of the simulation. The results of the research show that the highest percentage of tourism
leakage was found in 4 and 5 star chain hotels (55.31%). Lower levels were found in 1, 2 and 3 star hotels
(15.66%), followed by 4 and 5 star non-chain hotels (7.14%), with the lowest leakage being in non-star hotels
(2.0%). The average leakage across all types of accommodation was 19.48%. The result of the simulation
shows that as tourism leakage increases, economic growth is reduced, employment in the production sectors
declines, and income distribution becomes increasingly unequal. Conversely, when tourism leakage is reduced,
economic growth increases, employment expands, and income distribution becomes more equal.
Keywords: tourism leakage, accommodation, economic sectors, employment, income distribution.
INTRODUCTION
Background
Bali is one of the 34 provinces in Indonesia. It has a strategic location in the middle of Indonesia, flanked
by the Australian and Asian continents, and by two vast oceans, namely the Indian and the Pacific Oceans.
Moreover, its unique customs, culture and natural beauty have made Bali island a popular tourism destination,
as evidenced by an increase in tourist arrivals every year. The number of foreign tourists visiting Bali each

International Journal of Economic Research 2
Agung Suryawan Wiranatha, Made Antara and I Gusti Ayu Oka Suryawardani
year continues to increase. From various data sources, such as Bali Government Tourism Office (2015) and
Bali Statistical Office (2015), it can be seen that the number of foreign tourists visiting Bali has increased
rapidly from only 11,278 people in 1969, to 490,729 in 1990, 1,412,839 in 2000 and 3,278,598 in 2013.
During the period from 2007 up to 2015, the average growth rate in foreign tourist direct arrivals to Bali
was 15 % per year (Bali Government Tourism Office 2015). This has led to a substantial increase in total
expenditure by tourists as injectors of funds intoBali’s economy, with this increase expected to have a
multiplier impact that creates income and employment in the economic sectors in the province of Bali.
However in reality the total tourist expenditure in Bali over a certain period of time has not all
translated into incomes for the local tourism actors and community, because part of it has leaked out
before entering the Balinese economy. It can be seen from a study by Suryawardani (2014) and Suryawardani
et al. (2016) who calculated tourism leakage on accommodation in Bali based on macro analysis by using
Social Accounting matrix (SAM) found that (i) Leakage from Non-star rated hotels was 2.0%, (ii) Leakage
from 1, 2 & 3 Star-rated hotels was 15.7%, (iii) Leakage from 4&5 Star-rated non-chain hotels was 7.1%,
(iv) Leakage from 4&5 Star-rated chain hotels was 55.3%, and (v) and average leakage from all types of
hotels was 19.5%. The results of calculation of tourism leakage of accommodation in Bali based on micro
analysisby Suryawardani et al. (2014) showed that imported beverages, imported foods, imported fruit and
vegetables were sources of leakage in all types of hotels. Meanwhile, profit transfer for foreign owners was
also the main source of leakage in 4&5 Star-rated chain hotel followed by management fees paid to
international chain management, payment for online fees, payment for foreign employees. These leakage,
especially in the accommodation sector, is caused by the import of various products and services from
abroad for needs ranging from durable products to consumable products such as agricultural products
(Suryawardani et al. 2014). So tourism leakage will obviously impact on the Balinese economy.
Research Objectives
The purpose of this research was to simulate the impact of tourism leakage on growth in various sectors
of the economy, employment and income distribution.
LITERATURE REVIEW
Tourism Leakage
Many countries have chosen tourism as a tool for economic development. Economic leakage is a
phenomenon that always occurs in the tourism industry of every country. Although this issue has been
mentioned for over a half century, it seems that only a few researchers have done a thorough analysis of
this subject. Despite this fact, it by no means implies that economic leakage should be underestimated
because if a high level of leakage prevails in a region, it could decelerate that region’s movement towards
economic sustainability (Krugmanand Obstfeld 2006; Polenske1989; Supradist 2004).
Leakage is used to refer the amount spent on importing goods and services to meet the needs of
tourists. Leakages occur when the local economy is unable to provide reliable, continuous, competitively
priced supply of the required product or service and of a consistent quality to meet the market demand
(King, 1985; Lorton 2015; Round1989). Thus, leakage is the way in which revenue generated by tourism is
lost to other countries’ economies. It is an intrinsic component of international tourism and thus is present

3International Journal of Economic Research
Impact of Tourism Leakage on the Growth of Economic Sectors, Employment and Income Distribution in Bali, Indonesia
in every country, to widely varying degrees. Leakage may be so significant in some developing countries
that it partially neutralizes the money generated by tourism. Leakage occurs through six different
mechanisms(Unluonen et al. 2011):
(1) Goods and services. Many countries must purchase goods and services to satisfy their visitors.
This includes the cost of raw materials used to make tourism-related goods, such as souvenirs.
For starting tourism industries, this is a significant problem, as some countries must import as
much as 50% of tourism-related products;
(2) Infrastructure. Some less economically developed countries do not have the domestic ability to
build tourism-related infrastructure (hotels, airports, etc.). The cost of such infrastructure then
leaks out of the country;
(3) Foreign factors of production. Smaller countries often require foreign investment to start their
tourism industry. Thus, profits from tourism may be lost to foreign investors. In addition, travel
agents outside of the destination country remove money from that market as well;
(4) Promotional expenditure. Many countries spend considerable sums of money for advertisements
and publicity. Maintaining a presence abroad may increase the volume of tourists to a country
but also represents a considerable loss of money into foreign markets;
(5) Transfer pricing. Many foreign companies manipulate their pricing to reduce taxes and other
duties. In smaller or less developed countries, where many tourism-related companies may be
foreign owned, this can represent a substantial loss of income;
(6) Tax exemptions. Countries with a small tourism industry may have to give tax exemptions or
other offers to increase foreign investment. While this may enlarge the tourism industry there, it
must be taken into account as an instrument of income loss (Archer and Fletcher 1996;
Krugmanand Obstfeld 2006; Unluonen, et al. 2011).
Leakages are payments made outside the destination economy: in other words, the proportion of the
total holiday price that does not reach or remain in the destination. Some leakage happens internally, where
tourists spend money at the destination but this pays for imported goods and services. Other tourism
leakages are external payments that never make it to the destination country, such as travel agent commissions,
tour operator profits and foreign airlines (Eldis 2015).
Estimation of tourism leakage has also been reported by UNEP. In Thailand, tourism leakage was
estimated at about 70%. It means that much of the money spent by tourists ended up leaving Thailand via
foreign-owned tour operators, airlines, hotels, imported drinks and food, etc. Estimations for other third
world countries were found to range from 80% in the Caribbean to 40% in India. The average import-
related leakage for most developing countries was between 40% and 50% of gross tourism earnings for
small economies, and between 10% and 20% for most advanced and diversified economies (UNEP 2010).
As a result of the leakage effect, tourism industries in developed countries often are much more profitable
per dollar received than tourism in smaller countries. In countries such as Turkey and the United Kingdom,
the benefit to the economy from tourism is twice the dollar amount spent by tourists. In smaller places,
such as Micronesia and Polynesia, that benefit is half the dollar amount spent. Islands, in particular, suffer
from significant leakage. While some locations have managed to nullify the leakage effect almost entirely –

International Journal of Economic Research 4
Agung Suryawan Wiranatha, Made Antara and I Gusti Ayu Oka Suryawardani
New York City, for example, claims to generate seven dollars for the local economy per dollar spent by
tourists – it has been estimated that only 5% of money spent on tourism remains in a developing country’s
economy.
For many countries, some sources of leakage are unavoidable. Foreign-owned hotels and airlines are
necessary for all but the most established of tourism industries. However, encouragement of domestic
involvement in a country’s tourism industry may reduce leakage in the long run. Currently, the most popular
measure taken to reduce leakage is to set restrictions on spending. Countries may limit the use of foreign
currency within their borders, reducing the effect of transfer pricing. Many countries require visitors to
have a certain amount of money before entering.
Meanwhile, according to Lorton (2015) and Cohen (1989), when the local economic linkages are
weak, the revenue from tourism receipts in a local economic area tends to leak out. Engaging with local
suppliers, using local capital and resources and developing the skills necessary to deliver consistently at an
appropriate quality and at a competitive price can reduce such leakage. One of the best ways to enhance
economic benefits to the local community and to increase the contribution to poverty reduction is to
increase the extent of linkages between the formal tourism sector (hotels, lodges, restaurants, tour operators
and transport providers) and the local economy. Increased integration can develop strong linkages between
tourism and other economic sectors including agriculture, fisheries, manufacturing, construction and crafts
production. In addition, the creation of local linkages needs to be part of the overall tourism development
strategy in the planning, construction and operational phase. Three key sets of factors are important in
enhancing the extent of local linkages, i.e.:
1) The creation of employment at all skills levels and particularly where there is existing capacity
2) New attractions created through anti-poverty tourism development strategies need to be integrated
into the tour programmes of the ground handlers and inbound operators. Creating mutually
beneficial linkages between the formal and informal sectors is critical. Local government needs
to ensure that micro-enterprises and emerging entrepreneurs are promoted in local tourism
marketing initiatives where they are often neglected.
3) The requirements of new micro-enterprises for credit, marketing skills and a thorough
understanding of tourist expectations need to be met. Micro enterprises may have particular
difficulties in meeting health and safety, licensing and other regulatory requirements. Such
regulations themselves need to be crafted to encourage inclusion through assisted education and
training to ensure engagement by the poor in the industry.
Economic linkages can minimize leakages. Buying supplies from people in the host country allows
the benefits to remain. Many developing countries now encourage local farmers to supply fresh fruit and
vegetables to hotels. Labor is often the most important linkage between a hotel and the local economy,
through the payment of salaries and wages. Even a foreign owner will recruit locally to minimize costs.
Hotels enhance economic linkages by working with informal tourism businesses (such as a local taxi
company). Governments and tourism companies in destination countries can support initiatives to reduce
leakages by:
• using locally-owned accommodation (this can be up to half of the total holiday cost)

5International Journal of Economic Research
Impact of Tourism Leakage on the Growth of Economic Sectors, Employment and Income Distribution in Bali, Indonesia
• endorsing destinations that integrate tourists into the local economy, where they can purchase
local products
• promoting resorts that employ local staff and pay reasonable salaries
• Using airlines from the host country, for long-haul destinations this may constitute one-third of
the total package cost (Eldis 2015)
Lacher and Sanjay (2010) say that tourism in the rural areas of developing countries is expanding at a
rapid pace and is often a primary means of income in these areas. However, high levels of leakage dramatically
reduce the economic impact of such tourism. While the problem of economic leakage in rural peripheries
is well documented, there is a paucity of research on strategies to reduce leakage. Strategies that can be
employed at the village level may be especially useful as they do not require the co-operation of outside
stakeholders who may profit from the leakage out of the village. Lacher et al. (2010) found three strategies
employed in rural villages in northern Thailand and uses the case-study method to evaluate their effectiveness.
It concludes with a discussion of the applicability of these strategies to other locations.
Zheng (2000) states that for countries in Indo-China embarking on tourism for economic growth,
their success hinges on minimizing three types of tourism leakages, namely financial, structural, and
operational leakages. He suggests that Indo-Chinese developing countries should target fairly-developed
countries in Asia as their main capital markets and tourist feeders at the early stage of tourism development.
In later phases of tourism growth and expansion, they may seek tourism capital and tourists from both
fairly-developed and well-developed countries. The recent Asian financial crisis has presented new challenges
to Asia Pacific tourism. It may, however, create opportunities for developing countries in Indo-China to
attract more regional tourists and investors and reduce tourism leakages.
Social Accounting Matrix
A Social Accounting Matrix (SAM), also called the National Social Accounting Matrix by Bali Statistical
Office (2000), is an economic account of a traditional double-entry shaped partition matrix that records all
economic transactions between actors in an economy, especially between sectors in the production block,
sectors within the institution block (including households), and sectors within a production factors block
(Pyatt and Round 1985a, 1985b). Thorbecke (1985) developed the accounts in the SAM into six types,
namely: (1) the balance of the production activity, (2) the balance of commodities, (3) the balance of
production factors, (4) the balance of the institutions, (5) capital account (capital ), and (6) the balance
sheet Rest of the World.
Thorbecke (1985) breaks the institutions account down into three accounts, namely: (1) households,
(2) company, and (3) government. Household account rows include income on labor compensation, return
on capital, transfers between households, acceptance of transfers from companies (such as insurance),
government transfers, and transfers from abroad. Meanwhile, the household accounts columns include
consumption expenditures, transfers between households, transfers to companies, the payment of direct
taxes, and savings on capital account. Furthermore, the company accounts row (revenue of company)
includes retained earnings, transfers from households, and government transfers.
Table 1 shows the SAM can describe the linkages between sectors, the income distribution (factorial
distribution and income distribution), and the effect of consumption, investment, and export-import on

International Journal of Economic Research 6
Agung Suryawan Wiranatha, Made Antara and I Gusti Ayu Oka Suryawardani
regional income and employment. From the SAM structure in Table 1, the following matrix equation for
the income and expenses of endogenous accounts aggregately can be formulated as follows:
XTY


(1)
The income distribution of endogenous and exogenous accounts can be formulated as follows:
14131 XTY  (2)
2422212 XTTY



(3)
3433323 XTTY  (4)
444342414 XXXXY  (5)
Equation (2) shows the factorial income distribution, equation (3) the distribution of institutional
income, equation (4) the total output according to factors of production, and equation (5) the other total
income (exogenous).
The expenses distribution of endogenous and exogenous accounts can be formulated as follows:
41211
'XTY  (6)
4232222
'XTTY  (7)
433323133
'XTTTY  (8)
443424144
'XXXXY  (9)
According to Thorbecke (1988), Cohen (1989), Round (1989) and Polenske (1989), the analysis of
multipliers in the SAM model is similar to the multiplier analysis of the inverse matrix of the Leontief
Input-Output Model. This means that analysis of the inverse matrix of the Leontief multiplier can be used
in this study to assess the impact of changes in several sectors in the economy.
In the SAM matrix it is assumed that the average expenditure Aij is a comparison between the
expenditure of sector j to sector i with total expenditure j (Yj); thus:
jijij YTA (10)
This can be expressed in the form of matrices as follows:











3332
2221
13
0
0
00
AA
AA
A
A(11)
If equation (1) is divided by Y, then:
YXYTYY  (12)

7International Journal of Economic Research
Impact of Tourism Leakage on the Growth of Economic Sectors, Employment and Income Distribution in Bali, Indonesia
Table 1
Simple Structure of Social Accounting Matrix (SAM)
Expenditure Endogenous Accounts
Income
Production Factors Institutions Production Sector Exogenous Accounts Total
Income 1 2 3 4 5
Production 1 T11 T12 T13 X14 Y1
Factors 0 0 Allocation of added Income of production Factorial income
value to production factors from distribution
Endogenous factors abroad
Accounts Institutions 2 T21 T22 T23 X24 Y2
Allocation of income Transfer between 0 Transfer from Institutional income
to institutions institutions abroad distribution
Production 3 T31 T32 T33 X34 Y3
Sector 0 Domestic Intermediate Export and Total output
demand demand investment according to
production sectors
Exogenous 4 X41 X42 X43 X4 4 Y4
Accounts Allocation of Saving Import and Other Total income of the
income factors indirect taxes transfers other accounts
to abroad
Total 5 Y’1Y’2Y’3Y’4
Total expenditure Total Total Input Other total
of production institution expenditure
factors expenditure
Source: Thorbecke (1985)

International Journal of Economic Research 8
Agung Suryawan Wiranatha, Made Antara and I Gusti Ayu Oka Suryawardani
Equation (10) is then substituted into equation (12), to become:
YXAI


XYAI


)(
XAIY 1
)( 
 (13)
If 1
)( 
 AIM a then:
XMY a
(14)
where:
A = direct coefficient describing the direct effect of some changes in one sector on another sector.
(I-A) = Matrix Leontief (Identity Matrix minus Matrix A)
The identity matrix is a matrix that has the number 1 in the diagonal.
(I-A) -1 = Ma = LeontiefInverse Matrix =multipliers= illustrates the impact of changes in one sector on the
other sectors of the entire SAM.
X = Vector of exogenous variables column. In this research, this is tourism leakage, mainly reduction
in imports of products and services by accommodation/hotel sectors.
Y = Vector of endogenous variable column. In this study, this is output of the economic sectors,
employment, and income distribution between groups of people.
Equation (6) shows the total expenditure of production factors (factorial), equation (7) the total
institutional spending, equation (8) total expenditure input by production sectors, and equation (9) the
total other expenses (exogenous). Equation (14) shows the matrix multiplication between the SAM multiplier
accounts matrix (Multiplier Accounts SAM) and the exogenous accounts matrix (X), which results in the
value of the endogenous account matrix (Y).
RESEARCH METHODS
The location for this research was in the province of Bali, which was chosen because this island is one of
the most popular tourist destinations in the world, and because tourism is the leading sector in Bali’s
economy, with tourist revenue being depleted by leakage through the import of goods and services by the
accommodation sector.
Bali’s economy is driven by the tourism sector. A snapshot of this is provided by using the Social
Accounting Matrix (SAM) model (109x109). The design of the SAM of Bali in 2012 used quantitative data
derived from primary and secondary sources, including: Bali input-output table, the national socio-economic
survey, the national labor force survey, Indonesian economic indicators, consumption surveys, and a special
survey of household, savings and investments.
The data collection methods used in this research were by interview and documentation. Face-to-face
interviews were conducted with the respondent households. Documentation involved the collection of
relevant data and information recorded in various documents from the regional Bali office of BPS Statistics
Indonesia as well as from other related agencies.

9International Journal of Economic Research
Impact of Tourism Leakage on the Growth of Economic Sectors, Employment and Income Distribution in Bali, Indonesia
Data analysis methods comprised a descriptive analysis and simulation analysis. The simulation
proceeded by manipulating the table in the SAM of Bali 2012 (109x109 matrix), but with the accounts
trade margins removed from the table (because these are already included in every type of account); so the
SAM of Bali table became a 108x108 matrix. Manipulation of this SAM table finally achieved the matrix
equation, Y = MA.X, where MA is the multiplier matrix (108x108), X is an exogenous variable, in this case
mainly the leakage from tourism (1x108), and Y is an endogenous variable, i.e. the output sectors of the
economy, jobs and the income distribution among groups of people in Bali (1x108). The simulations
applied eight scenarios, four of which involved an increase in tourism leakage and four a decrease, each
with a maximum interval of 10% to 40%. The aim was to see what impact each of these would have on
output growth, the growth of economic sectors, employment and income distribution.
RESULTS AND DISCUSSION
Impact of Tourism Leakage on the Growth of Economic Sectors
The simulation results presented in Table 3 indicate that a 10% rise in leakage, mainly from the tourism
accommodation sector, (scenario 1) would impact negatively by decreasing the growth of Bali’s economy
by an average amount of -0.44%. The largest decrease (-0.75%) would occur in the sector of services and
the smallest (-0.10%) in the sector of electricity, gas and water. With a 40% increase in tourism leakage
(scenario 4), the negative impact would be much greater, reducing Bali’s economic growth by -1.44%. The
largest decrease (-1.90%) would occur in the mining and quarrying sector, and the smallest (-0.32%) in
transport and communications.
However, if tourism leakage is reduced, the opposite occurs. Table 4 shows that a drop of 10% in
tourism leakage (scenario-5) would have a positive impact, increasing the demand for output from all the
economic sectors and improving economic growth by an average of 0.15%. A 40% reduction in tourism
leakage (scenario-8) would increase average economic growth by 1.02%. In both scenarios, the greatest
increase would occur in the services sector (0.25% for scenario-5 and 1.75% for scenario-8) and the smallest
in the mining and quarrying sector (0.03% for scenario-5 and 0.23% for scenario-8). The service sector
shows the largest growth compared to other economic sectors, which indicates that this sector can
compensate most for the decline of foreign demand for the service sector.
Impact of Tourism Leakage on Employment
The production factor account (labor and non-labor/capital) is one of the primary accounts in the Bali
SAM model 2012, in addition to the institutional, production sector and external accounts. The Bali SAM
model 2012 includes the labor production factors or labor utilization per sector or subsector, so simulations
can be made of how increased/decreased tourism leakage from the accommodation sector would affect
the absorption of labor by the economic sectors or subsectors in Bali.
Based on the simulation results presented in Table 5, an increase of 10% in tourism leakage, mainly
from the accommodation sector through foreign transactions, (scenario-1) would have a negative impact
by decreasing the employment in Bali’s economy by 4,013 people, from 2,272,235 to 2,268,222. A 40%
increase in tourism leakage (scenario 4) would have an even greater negative impact on the economy,
shrinking employment in Bali by 12,045 people, from 2,272,235 to 2,260,190. The impact on economic

International Journal of Economic Research 10
Agung Suryawan Wiranatha, Made Antara and I Gusti Ayu Oka Suryawardani
sectors in scenario-4 is similar to that in scenario-1, with agriculture, livestock, forestry and fisheries losing
the most jobs (4,372) and the electricity, gas and water sector losing the fewest (just 1 job loss).
However, if tourism leakage is reduced, the trend is reversed. The simulation results presented in
Table 6 indicate that a 10% decline in tourism leakage (scenario-5) would expand employment in Bali’s
economy by 1,338 people from 2,272,235 to 2,273,573, while a 40% reduction in leakage (scenario-8)
would expand employment by as many as 9,368 people from 2,272,235 to 2,281,603. Looking at the positive
impacts per sector, the greatest increase in jobs would occur in the agriculture, livestock, forestry and
fisheries sector, by 486 in scenario-5 and 3,400 in scenario-8. The smallest impact would occur in the
electricity, gas and water sector, with zero job increase in scenario-5 and just 1 extra person employed in
scenario-8. So the reduction of tourism leakage in the accommodation sector, through a reduction in
imports of various products and services from abroad, would increase the demand for local products and
services in Bali or from other parts of Indonesia. Then, if local producers of these goods and services
respond positively by increasing their production, this will increase employment in Bali’s economic sectors.
Impact of Tourism Leakage on Income Distribution
The simulation results regarding the impact of tourism leakage on income distribution are presented in
Tables 7 and 8. Table 7 shows that under existing conditions according to the Bali SAM 2012, i.e. before
simulation, the Gini coefficient (Gini Ratio, GR) was 0.43. When tourism leakage is increased by 10%
(scenario-1) the GR remains fixed at 0.43. However, when tourism leakage is increased by 40%, the GR
increases to 0.46, an increase in inequality of 0.3, which is still within the range of income distribution
inequality. This result suggests that increased tourism leakage causes the income distribution among social
groups to become increasingly unequal, as indicated by greater GR.
The opposite appears to happen when tourism leakage is reduced, as indicated by the results presented
in Table 8. A decrease in tourism leakage of 10% (scenario-5) to 40% (scenario-8) has a positive impact on
income distribution among social groups, leading to growing equality, which is shown by the GR getting
smaller. Under pre-simulation conditions the GR was 0.43. This GR then decreases to 4.1 when tourism
leakage is decreased by 10% (scenario-5) and to 0.38 when tourism leakage is reduced by 40% (scenario-8).
These results support the hypothesis that a reduction in tourism leakage will lead to a more equitable
distribution of income.
CONCLUSION AND RECOMMENDATION
Conclusion
The simulation indicated that tourism leakage would impact on the growth of economic sectors, employment
and income distribution. Impacts include the following:
a) Increasing the level of leakage from tourism in Bali would reduce growth in the economic
sectors. On the contrary, reducing leakage by reducing imports of various products and services
from abroad for the accommodation sector would have a positive impact by increasing growth
in the economic sectors.
b) Increasing the level of leakage from tourism in Bali would also reduce employment in the economic
sectors of production. In contrast, reducing leakage by reducing imports from abroad for the

11 International Journal of Economic Research
Impact of Tourism Leakage on the Growth of Economic Sectors, Employment and Income Distribution in Bali, Indonesia
accommodation sector would have a positive impact by expanding employment in the economic
sectors of production.
c) Increasing the level of leakage from tourism in Bali would lead to increasing inequality in income
distribution among social groups. However, reducing leakage by reducing imports from abroad
for the accommodation sector would have a positive impact by leading to greater equality in the
income distribution among these groups.
Recommendation
Attempts to reduce leakage from tourism in Bali, especially in the accommodation sector, need to be
undertaken by the relevant stakeholders, both in the tourism industry itself and in government, so that less
of the revenue generated by tourism in Bali is transferred abroad, and more of it circulates in the Balinese
economy. This will eventually enhance the growth of the economic sectors, expand employment, and lead
to more equitable distribution of income among the social groups in Bali.
ACKNOWLEDGEMENT
We would like to express our appreciation and gratitude to Bali Statistical Office for providing data for this research,
Research Centre for Culture and Tourism Udayana University, Bali as well as Tourism Research Concortium Udayana
University, Bali for their support during this research.
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13 International Journal of Economic Research
Impact of Tourism Leakage on the Growth of Economic Sectors, Employment and Income Distribution in Bali, Indonesia
Appendix 1
Impact of Increasing Bali Tourism Leaka ge on the Growth of Economic Sectors
No Economic Sectors Scenario-1 Scenario-2 Scenario-3 Scenario-4
Before After Before After Before After Before After +/-
(Million (Million +/- (Million (Million +/- (Million (Million +/- (Million (Million (%)
Rupiah) Rupiah) (%) Rupiah) Rupiah) (%) Rupia h) Rupiah) (%) Rupiah) Rupiah)
1 Agriculture, Livestock, 11,482,658.95 11,451,724.08 -0.27 11,482,658.95 11,431,100.83 -0.45 11,482,658.95 11,410,477.58 -0.63 11.482.658,95 11,436,920.15 -0.40
Forestry and Fisheries
2 Mining and quarrying 421,974.95 421,560.78 -0.10 421,974.95 421,284.66 -0.16 421,974.95 421,008.55 -0.23 421.974,95 413,940.18 -1.90
3 Manufacturing 5,763,812.01 5,748,235.18 -0.27 5,763,812.01 5,737,850.62 -0.45 5,763,812.01 5,727,466.07 -0.63 5.763.812,01 5,723,073.16 -0.71
4 Electricity, Gas, and Water 1,275,735.40 1,274,406.09 -0.10 1,275,735.40 1,273,519.88 -0.17 1,275,735.40 1,272,633.67 -0.24 1.275.735,40 1,267,573.71 -0.64
5 Building 2,893,547.17 2,878,205.91 -0.53 2,893,547.17 2,867,978.40 -0.88 2,893,547.17 2,857,750.90 -1.24 2.893.547,17 2,883,880.98 -0.33
6 Trade, Hotels and Restaurants 21,888,673.19 21,780,366.00 -0.49 21,888,673.19 21,708,161.20 -0.82 21,888,673.19 21,635,956.40 -1.15 21.888.673,19 21,618,255.98 -1.24
7 Transportation and 7,093,880.06 7,062,386.29 -0.44 7,093,880.06 7,041,390.45 -0.74 7,093,880.06 7,020,394.60 -1.04 7.093.880,06 7,071,067.32 -0.32
Communication
8 Finance, Banking and 4,459,517.47 4,451,081.73 -0.19 4,459,517.47 4,445,457.91 -0.32 4,459,517.47 4,439,834.09 -0.44 4.459.517,47 4,405,460.80 -1.21
Corporate Services
9 Services 9,287,205.64 9,217,419.58 -0.75 9,287,205.64 9,170,895.53 -1.25 9,287,205.64 9,124,371.49 -1.75 9.287.205,64 9,231,765.30 -0.60
T o t a l 64,567,004.84 64,285,385.64 -0.44 64,567,004.84 64,097,639.48 -0.73 64,567,004.84 63,909,893.35 -1.02 64.567.004,84 63,637,997.40 -1.44
Note: Scenario-1: Bali Tourism leakage increase 10%; Scenario-2: Bali Tourism leakage increase 20%: Scenario-3: Bali Tourism leakage increase 30%: Scenario-4: Bali Tourism leakage increase
40%: Before means existing condition before simulation; After means condition after simulation.

International Journal of Economic Research 14
Agung Suryawan Wiranatha, Made Antara and I Gusti Ayu Oka Suryawardani
Appendix 2
Impact of Decreasing Bali Tourism Leakage on the Growth of Economic Sectors
No Economic Sectors Scenario-5 Scenario-6 Scenario-7 Scenario-8
Before After Before After Before After Before After +/-
(Million (Million +/- (Million (Million +/- (Million (Million +/- (Million (Million (%)
Rupiah) Rupiah) (%) Rupiah) Rupiah) (%) Rupia h) Rupiah) (%) Rupiah) Rupiah)
1 Agriculture, Livestock, 11,482,658.95 11,492,970.58 0.09 11,482,658.95 11,513,593.83 0.27 11,482,658.95 11,534,217.08 0.45 11,482,658.95 11,554,840.33 0.63
Forestry and Fisheries
2 Mining and quarrying 421,974.95 422,113.01 0.03 421,974.95 422,389.13 0.10 421,974.95 422,665.24 0.16 421,974.95 422,941.36 0.23
3 Manufacturing 5,763,812.01 5,769,004.28 0.09 5,763,812.01 5,779,388.84 0.27 5,763,812.01 5,789,773.39 0.45 5,763,812.01 5,800,157.94 0.63
4 Electricity, Gas, and Water 1,275,735.40 1,276,178.51 0.03 1,275,735.40 1,277,064.71 0.10 1,275,735.40 1,277,950.92 0.17 1,275,735.40 1,278,837.13 0.24
5 Building 2,893,547.17 2,898,660.93 0.18 2,893,547.17 2,908,888.43 0.53 2,893,547.17 2,919,115.94 0.88 2,893,547.17 2,929,343.45 1.24
6 Trade, Hotels and Restaurants 21,888,673.19 21,924,775.59 0.16 21,888,673.19 21,996,980.39 0.49 21,888,673.19 22,069,185.19 0.82 21,888,673.19 22,141,389.98 1.15
7 Transportation and 7,093,880.06 7,104,377.98 0.15 7,093,880.06 7,125,373.83 0.44 7,093,880.06 7,146,369.67 0.74 7,093,880.06 7,167,365.52 1.04
Communication
8 Finance, Banking and 4,459,517.47 4,462,329.38 0.06 4,459,517.47 4,467,953.20 0.19 4,459,517.47 4,473,577.02 0.32 4,459,517.47 4,479,200.85 0.44
Corporate Services
9 Services 9,287,205.64 9,310,467.66 0.25 9,287,205.64 9,356,991.71 0.75 9,287,205.64 9,403,515.75 1.25 9,287,205.64 9,450,039.79 1.75
T o t a l 64,567,004.84 64,660,877.92 0.15 64,567,004.84 64,848,624.07 0.44 64,567,004.84 65,036,370.21 0.73 64,567,004.84 65,224,116.35 1.02
Note: Scenario-5: Bali tourism leakage decrease 10%; Scenario-6: Bali tourism leakage decrease 20%’; Scenario-7: Bali tourism leakage decrease 30%; Scenario-8: Bali tourism leakage decrease
40%; Before means existing condition before simulation; After means condition after simulation.

15 International Journal of Economic Research
Impact of Tourism Leakage on the Growth of Economic Sectors, Employment and Income Distribution in Bali, Indonesia
Appendix 3
Impact of Increasing Bali Tourism Leakage on Employment in Economic Sectors
No Economic Sectors Scenario-1 Scenario-2 Scenario-3 Scenario-4
Before After Before After Before After Before After +/-
(People) (People) +/- (People) (People) +/- (People) (People) +/- (People) (People) (People)
(People) (People) (People)
1 Agriculture, Livestock, Forestry 706,993 705,536 -1,457 706,993 704,565 -2,428 706,993 703,593 -3,400 706,993 702,621 -4,372
and Fisheries
2 Mining and quarrying 8,185 8,184 -1 8,185 8,184 -1 8,185 8,184 -1 8,185 8,183 -2
3 Manufacturing 309,358 309,076 -282 309,358 308,888 -470 309,358 308,700 -658 309,358 308,512 -846
4 Electricity, Gas, and Water 6,209 6,209 0 6,209 6,208 -1 6,209 6,208 -1 6,209 6,208 -1
5 Building 144,472 144,293 -179 144,472 144,173 -299 144,472 144,053 -419 144,472 143,934 -538
6 Trade, Hotels and Restaurants 626,987 625,879 -1,108 626,987 625,138 -1,849 626,987 624,400 -2,587 626,987 623,661 -3,326
7 Transportation and Communication 36,492 36,489 -3 36,492 36,487 -5 36,492 36,485 -7 36,492 36,483 -9
8 Finance, Banking and 113,832 113,776 -56 113,832 113,739 -93 113,832 113,701 -131 113,832 113,663 -169
Corporate Services
9 Services 319,707 318,780 -927 319,707 318,161 -1,546 319,707 317,543 -2,164 319,707 316,925 -2,782
Total 2,272,235 2,268,222 -4,013 2,272,235 2,265,543 -6,692 2,272,235 2,262,867 -9,368 2,272,235 2,260,190 -12,045
Note: Scenario-1: Bali Tourism leakage increase 10%; Scenario-2: Bali Tourism leakage increase 20%: Scenario-3: Bali Tourism leakage increase 30%: Scenario-4: Bali Tourism leakage increase
40%: Before means existing condition before simulation; After means condition after simulation.

International Journal of Economic Research 16
Agung Suryawan Wiranatha, Made Antara and I Gusti Ayu Oka Suryawardani
Appendix 4
Impact of Decreasing Bali Tourism Leakage on Employment in Economic Sectors
No Economic Sectors Scenario-5 Scenario-6 Scenario-7 Scenario-8
Before After Before After Before After Before After +/-
(People) (People) +/- (People) (People) +/- (People) (People) +/- (People) (People) (People)
(People) (People) (People)
1 Agriculture, Livestock, 706,993 707,479 486 706,993 708,450 1,457 706,993 709,421 2,428 706,993 710,393 3,400
Forestry and Fisheries
2 Mining and quarrying 8,185 8,185 0 8,185 8,186 1 8,185 8,186 1 8,185 8,186 1
3 Manufacturing 309,358 309,452 94 309,358 309,640 282 309,358 309,828 470 309,358 310,016 658
4 Electricity, Gas, and Water 6,209 6,209 0 6,209 6,209 0 6,209 6,210 1 6,209 6,210 1
5 Building 144,472 144,532 60 144,472 144,651 179 144,472 144,771 299 144,472 144,891 419
6 Trade, Hotels and Restaurants 626,987 627,357 370 626,987 628,095 1,108 626,987 628,836 1,849 626,987 629,574 2,587
7 Transportation and Communication 36,492 36,493 1 36,492 36,495 3 36,492 36,497 5 36,492 36,499 7
8 Finance, Banking and 113,832 113,850 18 113,832 113,888 56 113,832 113,925 93 113,832 113,963 131
Corporate Services
9 Services 319,707 320,016 309 319,707 320,634 927 319,707 321,253 1,546 319,707 321,871 2,164
T o t a l 2,272,235 2,273,573 1,338 2,272,235 2,276,248 4,013 2,272,235 2,278,927 6,692 2,272,235 2,281,603 9,368
Note: Scenario-5: Bali tourism leakage decrease 10%; Scenario-6: Bali tourism leakage decrease 20%’; Scenario-7: Bali tourism leakage decrease 30%; Scenario-8: Bali tourism leakage decrease
40%; Before means existing condition before simulation; After means condition after simulation

17 International Journal of Economic Research
Impact of Tourism Leakage on the Growth of Economic Sectors, Employment and Income Distribution in Bali, Indonesia
Appendix 5
Impact of Increasing Tourism Leakage on Income Distribution
No Social Groups Scenario-1 Scenario-2 Scenario-3 Scenario-4
Before After Before After Before After Before After
1 Peasants in the Village 1.40 1.37 1.40 1.32 1.40 1.27 1.40 1.22
2 Employers Who Have 6.46 6.39 6.46 6.26 6.46 6.14 6.46 6.03
Land in Rural Areas
3 Peasants in the City 0.46 0.45 0.46 0.43 0.46 0.41 0.46 0.39
4 Employers Who Have 8.32 8.22 8.32 8.05 8.32 7.88 8.32 7.73
Land in the City
5 Low class in the Village 13.51 13.44 13.51 13.31 13.51 13.20 13.51 13.10
6 Not Labor Force in 3.87 3.81 3.87 3.71 3.87 3.61 3.87 3.52
the Village
7 Top class in the village 15.20 15.14 15.20 15.05 15.20 14.96 15.20 14.88
8 Low class in the City 17.08 17.16 17.08 17.31 17.08 17.44 17.08 17.57
9 Not Labor Force in the City 5.26 5.18 5.26 5.04 5.26 4.91 5.26 4.79
10 Top Class in the City 28.45 28.83 28.45 29.54 28.45 30.19 28.45 30.78
Gini Ratio (GR) 0.43 0.43 0.43 0.44 0.43 0.45 0.43 0.46
Disparity: Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate
Note: Scenario-1: Bali Tourism leakage increase 10%; Scenario-2: Bali Tourism leakage increase 20%: Scenario-3: Bali
Tourism leakage increase 30%: Scenario-4: Bali Tourism leakage increase 40%: Before means existing condition
before simulation. After means condition after simulation.
Appendix 6
Impact of Decreasing Tourism Leakage on Income Distribution
No Social Groups Scenario-5 Scenario-6 Scenario-7 Scenario-8
Before After Before After Before After Before After
1 Peasants in the Village 1.40 1.50 1.40 1.58 1.40 1.67 1.40 1.76
2 Employers Who Have Land 6.46 6.69 6.46 6.87 6.46 7.07 6.46 7.29
in Rural Areas
3 Peasants in the City 0.46 0.49 0.46 0.52 0.46 0.54 0.46 0.58
4 Employers Who Have 8.32 8.64 8.32 8.88 8.32 9.15 8.32 9.45
Land in the City
5 Low class in the Village 13.51 13.73 13.51 13.90 13.51 14.08 13.51 14.30
6 Not Labor Force in the Village 3.87 4.06 3.87 4.21 3.87 4.37 3.87 4.56
7 Top class in the village 15.20 15.37 15.20 15.50 15.20 15.64 15.20 15.81
8 Low class in the City 17.08 16.81 17.08 16.61 17.08 16.39 17.08 16.13
9 Not Labor Force in the City 5.26 5.51 5.26 5.71 5.26 5.93 5.26 6.17
10 Top Class in the City 28.45 27.19 28.45 26.23 28.45 25.16 28.45 23.95
Gini Ratio (GR) 0.43 0.41 0.43 0.40 0.43 0.39 0.43 0.38
Disparity: Moderate Moderate Moderate Moderate Moderate Low Low Low
Note: Scenario-5: Bali tourism leakage decrease 10%; Scenario-6: Bali tourism leakage decrease 20%’; Scenario-7: Bali
tourism leakage decrease 30%; Scenario-8: Bali tourism leakage decrease 40%; Before means existing condition
before simulation; After means condition after simulation.