Is Tourism a Sustainable Haven for Economic Growth in North African Countries? Evidence from Panel Analysis

Efforts have been made by scholars to analyse the ability of tourism to promote sustainable development. This study therefore adds its voice to the already existing studies by evaluating the relationship between economic growth (GDP) and tourism receipts in North African countries between the years 1995-2016. For robustness, the study includes merchandise exports, inflation and dummy variable which captures the Arab spring of 2011. The study adopts the Pooled Mean Group (PMG) estimate to anlayse this relationship. It shows that tourism has the capacity to drive economic growth both in the short run with a coefficient of (6%) and in the long run with a coefficient of (29%), hence, the study joins the tourism led growth school of thought.


Introduction
African countries are often synonymous to the paradoxical saying of poverty in the midst of plenty. This is because most African countries are naturally endowed but still not performing at their peak economically, socially and politically. Andersen and Nina (2001) argued that developing nations experience poor economic condition accompanied by huge multilateral public borrowing from both domestic and foreign agencies. He explained that Heavily Indebted Poor Countries (HIPC) initiative reported that of the 41 countries that are heavily indebted in the world, 33 of them are Africans with a debt of $156 billion.
With the enormous resources domicile in Africa, UN (2015) reported that all developing regions except African countries have achieved the Millennium Development Goals (MDGs) of halving poverty between 1990 and 2015. Corroborating these assertions, Addae-Korankye (2014) opined that the richest natural resources are deposited in Africa and yet it is poor-stagnant in growth and development. He explained that in spite of her heavy human and material wealth, Africa remains the world's poorest continent.
The reality is that most of the African countries run mono-economy which summarizes the degree at which the endowed resources are underutilized. Cattaneo (2009) explained that a number of developing countries depend on exports of single or few commodities. Hence, they are highly volatile to fluctuations in the international prices of products in the external market.
As a way of escape African countries embrace diversification which is the order of the day in developing countries (Bature, 2013).
This study therefore intends to look at tourism as a root of escape to boosting the economic performance of North African countries by asking whether tourism could be a sustainable haven to economic growth in these countries. The study is outlined as follows: Section one describes the introduction to the topic in question and section two explains the background to the study.
The critical review of relevant literature is done in section three while section four deals with the methodology and analysis of results and conclusion is revealed in section 5

Background to the study
Electronic copy available at: https://ssrn.com/abstract=3323486 Azeez R. Oluwaseyi (2019): is tourism a sustainable haven for economic growth in North African Countries? evidence from panel analysis

The Economy of North Africa
North African countries are countries mostly found in the Sahara Desert of Africa. They include Algeria, Morocco, Egypt, Tunisia and Libya (this study, however, excludes Libya due to the presence of outliers). These countries speak Arabic as their major language, practice Islam as a religion and share common climatic and geographical conditions. However, they differ in social, political and economic development. Reports have it that a very large population of Egypt, Morocco and Tunisia is heavily involve in agriculture, variety of manufacturing activities, remittances and tourism as a means of foreign exchange earnings while Algeria and Libya solely depend on oil and gas driven economy (Dadush et al., 2017;Africa Development Bank, 2018). Andrew & Martin (2018)  Algeria on the other hand, was left with the headache of cushioning the effects of fall in oil prices which had an adverse effect on her economy. Hence, the government responded to the fall Electronic copy available at: https://ssrn.com/abstract=3323486 The Figure 2 below shows that these countries recorded consistent increase in real gross domestic products where Egypt seems to be very strong until after 2014 when Tunisia and Algeria witnessed a fall in real gross domestic products while Egypt experienced a decline in real gross domestic products after 2016.  1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000  2001  2002  2003  2004  2005  2006  2007  2008  2009  2010  2011  2012  2013  2014  2015  2016  2017 algeria egypt tunisia morocco Source: Author

Tourism from the Global Perspective
The contribution of the service sector to the global economic growth cannot be over emphasized. Gauci et al. (2002) argued that the global market for services has experienced a growth on the average rate of 5 percent annually and expected to grow at about 3 percent in the nearest future.
A beautiful content of the service sector to behold is tourism and its roles in the pivotal economic development of the world trade is worthy of investigation. This prompted the United Nations to declare year 2002 as The United Nations Eco-Tourism day. Shakouri et al. (2017) argued that tourist destinations around the world yielded receipts which grew by 3.6% in 2015 as international tourist arrivals increased by 4.4%. They explained that international tourism grew consistently faster than world merchandise trade as the share of

Tourism Contribution to GDP in North African Countries
Having established that over the years Africa has enjoyed from the immense contribution of tourism to her GDP, it is important to analyse the share of tourism growth to the growth of North Africa economy. Ali and Hasi (2012) explained that historical and archaeological piece are dominant in Arab countries such as mild climate, the nature of a variety stunning, the strategic location of distinct and the shores of a long extended between the Mediterranean, the Red Sea, the Persian Gulf and Indian Ocean which makes the tourism sectors to attract both domestic and foreign investors boosting the national income and economic development of these countries.

Tunisia
El It is worth mentioning that in 2016 travel and tourism have directly contributed TND5,821.9 million to GDP which represents 6.6 percent of GDP and TND6,631.7 million in 2017 which represents 6.9 percent of GDP. A further projection of 4.2 percent rise to TND6,908.2 million in 2018 was made. This growth is attributable to the economic activities of the hotels, travel agents, restaurant and leisure industries directly supported by tourists. All things being equal, by 2028 Tunisia's tourism contribution to GDP will experience a growth of 3.0 percent annually to TND9, 246.6 million which represents 6.6 percent of GDP (World Travel and Tourism Council, Electronic copy available at: https://ssrn.com/abstract=3323486

Morocco
Vision 2010

Egypt
The history of tourism in Egypt is as old as the country herself dating back to when the Greeks

Tourism bottle Necks in North Africa
The tourism sector of North Africa was not exempted from the socio-political crisis that ravaged the region some years ago. For example, the Arab Spring of 2011 which started 2010 in Tunisia spread like a weird fire to other North African countries. During this period the current account balance of the region which comprises movement of goods and services is in deficit especially for Egypt, Morocco and Tunisia whose important tourism sector was sensitive to violence and internal unrest (Raschen, 2015;Ali and Hasi, 2012).
Electronic copy available at: https://ssrn.com/abstract=3323486 Azeez R. Oluwaseyi (2019): is tourism a sustainable haven for economic growth in North African Countries? evidence from panel analysis Ali and Hasi (2012)  contributor to most of these countries. The table above shows that comparatively North African countries are better than some selected Sub-Saharan African countries in terms of tourist arrivals and receipts. However, the degree of insecurity caused by political instability has dampened the efficiency of the sector which recorded a lesser percentage increase of 24.6% between 2016 and 2017, compared to 154% of the Sub-Saharan Africa in the same periods.

Theoretical Basis
In recent times efforts have been made to make case for tourism as the diversification needed to improve the gross domestic products of the world economies. Scholars have theoretically analysed the relationship between growth and tourism development. There are three extreme Electronic copy available at: https://ssrn.com/abstract=3323486 Azeez R. Oluwaseyi (2019): is tourism a sustainable haven for economic growth in North African Countries? evidence from panel analysis hypothesis of whether tourism predicts growth, growth predicts tourism or they predict one another. Lee and Chang, (2007) argued that the relationship between economic growth and tourism development to a great extent is dependent on the economic situation obtainable in individual countries under consideration (see Sak & Karymshakov, 2012;Chou, 2013;Alhowaish, 2016;Sokhanvar et al., 2018). Arslanturk et al. (2011) are strong advocate of tourism led growth hypothesis. After analyzing the relationship between tourism receipts and economic growth using time varying coefficient estimation method argued that tourism has positive predictive power for GDP and GDP cannot cause tourism (see Fayissa, 2007;Ajvaz, 2015;Makochekanwa, 2013;Samimi et al., 2011;Yusuff and Akinde, 2015). Bouzahzah and Menyari (2013) deviated a bit from the assertions above, as they explained that in the short run tourism drives growth but growth drives tourism in the long-run (see Akama, 2016)

The Model
This study is saddled with the responsibility of examining the tourism-economic growth nexus in North African countries. The paper employs a baseline model of Brau et al. (2004Brau et al. ( , 2007 adopted by Figini and Vici (2010). For the sake of this analysis the study further modifies the baseline model to accommodate the variables used.

The Baseline Specification
The baseline equation is specified as follows: Where Growth is average growth rate of per capita income, Tourism measures the degree of tourism specialization for the country, X is a vector of control variables which based on neoclassical growth assumptions, λ represents a vector of dummy variables which often captures non-economic variables and ε is the error term.

The Modified Model
The modified model captures real exchange rate to account for international trade and inflation to deflate both GDP and Tourism receipts both at current prices. This is expressed below: lnGDPit = β0 + β1lnTourit + β2 MERXit + β3lninflit + β4D2011it + εit Here, the number of countries i=1. . ., N; the number of periods t = 1, . . ., T; lnGDP is the natural logarithm of Gross Domestic Product which proxies economic growth at current prices lnTour is the natural logarithm of tourism which proxies tourism receipt as a percentage of GDP at current prices lnMerx represents the natural logarithm of merchandise export as percentage of GDP at current prices lninfl represents the natural logarithm of inflation 1Brida and Pulina (2010) in explaining the tourism led growth, theoretically, identified the demand sides model as used by Narayan (2004) and production function model originally used by Solow but expanded by Balassa (1978). 2 Figini and Vici (2010) affirmed basically two theoretical strands to the explanation of the relationship between tourism and economic growth. They explained that Keynesian theory of multiplier holds that international tourism is seen as an exogenous component of aggregate demand which is positively related to income and employment through multiplier on one hand and the application of endogenous growth theory to tourism on the other hand. 3 Narayan et al. (2010) asserts that 1% increase in tourism export causes 0.72% and 0.24% increase in GDP both in the long run and short run respectively.
Electronic copy available at: https://ssrn.com/abstract=3323486 Azeez R. Oluwaseyi (2019): is tourism a sustainable haven for economic growth in North African Countries? evidence from panel analysis D2011 represents the dummy variable that captures the Arab Spring of 2011 ε represents the disturbance terms

Estimation Techniques
This study employs pooled mean-group (PMG) estimator for non-stationary dynamic panels with heterogeneous parameters across the groups. The adequacy of this technique lies in the fact that the N and T dimensions are large (Salisu and Isah, 2017). This technique enables us to establish the short run and long run relationships among the dependent variable and the independent variables as it employs an autoregressive distributive lag (ARDL).

Data Issues and Sources
This study employs data covering the period 1995 to 2016 based on data availability for all the variables in question obtained from World Bank statistical bulletin. The study discovers that various measures have been used to measure tourism in the course of reviewing the literature (see Sequeira and Campos, 2005;Surugiu and Surugiu, 2013). Hence, tourism receipt (TR) as a percentage of GDP at current prices is employed by this study to measure tourism export as an independent variable while GDP at current prices is used to measure economic growth.
Merchandise export (MERX) is assumed to have a great influence on economic growth, inflation

Panel unit root tests
The determination of the non-stationarity of the series used is very essential, hence, we employ  The table 3 below reveals the test statistics and the probability values. The results for all the variables except inflation show that they are not stationary at level (at 5% level of significance) but rather at first difference.

Pooled Mean Group (PMG) Estimation
Having determined the non-stationarity of the series, we discover that the series are I(0) and I (1) series which validates the use of PMG. Hence, the study estimates short run and long run   0004 Note: the cointegration shows that there exist a long run relationship between the dependent and the independent variables. It is worth mentioning that the result implies that tourism while statistically significant and positive at 10% in the short run contributes just 6% to economic growth in North African countries but 28% in the long run at 5% level of significance (see Brida & Risso, 2010).
Electronic copy available at: https://ssrn.com/abstract=3323486 Azeez R. Oluwaseyi (2019): is tourism a sustainable haven for economic growth in North African Countries? evidence from panel analysis Note: the cross section analysis of individual countries shows that tourism contribution to economic growth for Algeria is significant and positive; Egypt is negative and insignificant, Morocco is positive and significant; Tunisia is positive and significant.

Conclusion
Sequel to the results of the analysis above, we may conclude that tourism is a viable potential through which sustainable development can be achieved in North Africa, if the share of tourismgrowth can be properly managed and tourism aids adequately provided. By tourism aids, we mean adequate security, political stability, adequate social and infrastructural facilities and accessibility to tourism sites among the host of others.