SYSTEM DYNAMICS MODEL OF

THE ENVIRONMENTAL IMPACTS

OF THE ECO-TOURISM INDUSTRY
IN PALAWAN
DEC 140: CORPORATE MODELS AND DECISION SUPPORT SYSTEMS

Abstract
Developing environmental sites as tourist destinations has its boons and
banes. On the one hand, developing these places would generate income or
revenue for the local government and provide jobs for the people. Also, it will
encourage more people to go out to enjoy the great outdoors and appreciate nature
a little more. Eco-tourism has been seeing a steady growth in the industry in these
past few years and has been benefitting from it ever since. On the other hand,
overdevelopment and lack of proper management would endanger the very thing
eco-tourism aims for, the protection and conservation of the environment.
Haphazard decisions made for the sake of developments may produce
unintended consequences. The model will simulate the state of the environment in
Palawan in order establish a relationship between developing sites for eco-tourism
and its effect on the environment.

Keywords: Eco-tourism, employment, government, Palawan, revenue

Introduction
Being an archipelago, the Philippines have been blessed with vast natural
resources and wonderful sites. Palawan is one of the well-known and most visited tourist
destinations in the country. It prides itself with its natural beauty spread around its 1,768
islands and islets. Palawan covers a total land area of 1,489,655 hectares and is
subdivided into 23 municipalities and one city. Palawan offers an extensive variety of flora
and fauna which are considered as one of the factors as to why it is one of the sought after
tourist destinations for foreigners and locals alike.
Tourism in Palawan has seen continuous success with its steady growth. This
growth is evidenced by the fact that more and more people have been coming to Palawan.
Last 2013, readers of Travel + Leisure voted Palawan as the Worlds #1 Island, beating
the very robust island of Boracay. Aside from the accolades that it received for being a
wonderful tourist destination, Palawan has also been tagged as the Last Ecological
Frontier. It only means that Palawan is one of the few ecologically diverse areas in the
world that remains undisturbed by overdevelopment or other deteriorating effects caused
by human activities.

Problem
A report based on 2009 data, the tourism revenue of Palawan doubled the following
year. Jumping from P3.2 billion to P6.2 billion. The continuous growth of Palawan has its
boons and banes. Their economic growth reflects the success of the tourism industry and
provides job opportunities for its local community. It also indicates that more and more
people and have their interests leaned towards ecotourism. However, it is a basic fact that
an area only has its limited carrying capacity. Once it goes beyond its limit, it faces the
threat of degradation if not properly managed. Like Boracay, increase footprints or tourist
activities in Palawan threatens the areas ecology and biodiversity. It was reported that the
famous underground river has already exceeded its carrying capacity of 780 tourists
causing the local government to promote other tourist attractions.

Scope and Limitation

The model only covers five main aspects of ecotourism industry in Palawan: local
population, infrastructures, tourist traffic, government revenue and attractiveness of the
area. Most of the data gathered dates as old as 2009, therefore, use of forecasting tools
may have been inaccurate. Certain rates and other quantitative data specific to Palawan
are unavailable and data from other areas, specifically Metro Manila and neighboring
locations, were used as basis for the model. Finally, most numbers used in the model are
rough estimates based on averages from data provided by the National Statistics Office.

Assumptions

Infrastructures (residential and commercial buildings, and hotels) are assumed to

have a useful life 50 years, after the time has elapsed, those infrastructures shall be
closed or demolished.

There is no malversation of funds and the government allocates 0.01% of its

revenue on the maintenance and management of tourist attractions.

Only jobs related to tourism were included. Professional occupations were not
accounted for. People are not taking multiple jobs.

The average number (1,250) of tourists arriving in Palawan was used for the entire
year. There are no fluctuation on the traffic during down and peak seasons.

A tourist stays in Palawan for an average of 4.5 days.

30% of industry revenue goes to the local government. 12% of local government
revenue is deducted for the national government.

Retirement age of the population is 65, which is 3.6% of the population.

System Dynamics Model

Stocks

Tourists (Tourists): The amount of tourist arriving and leaving Palawan.

Jobs Available (JobsAvailable): The level of available tourism jobs in Palawan

in relation to the difference between total employees needed and the number of
people already employed.

Employed (Employed): The number of people already employed.

Labor Force (LaborForce): The amount of people in the labor force. This
computed by determining the percentage of the population aged 15-65.

Local Population (LocalPopulation): The level of population in Palawan.

Commercial Buildings (Commercial): The estimated number of commercial

buildings in Palawan.

Houses and Residential Buildings (Residential): The number of houses in

Palawan. This is computed by dividing the population and average household size.

Arriving Tourists in the Hotel (Arriving): Conveyor for the number of tourists
checking in.

Tourists Occupying the Hotel (Checked in): The number of tourists

occupying the hotel rooms.

Rooms Under Construction (ACC under construction): Number of hotel

rooms being constructed. This is determined by the discrepancy between the
rooms available and the number of tourists checked-in.

Rooms Available (Rooms available): The number of unoccupied rooms.

Total Revenue of Palawan (Revenue): Total revenue of the tourism industry in

Palawan.

Government Revenue (GovtRevenue): 30% of the total revenue.

Government Attractions (GovernmentAtt): Valuation of the governmentowned or public tourist attractions.

Development of Attractions (Development rate):

Flows and Converters

Arrival of Tourists (Arrival): Determined by the stock of tourists, density of the

area and the average tourists per day.

Departing Tourists (Departure): Determined by dividing the tourist stock by the

average number of days a tourist stays in the area.

Job Inflow (Job inflow): Incoming available jobs determined by the number of
employees needed and the number of people actually employed.

Population Birth (Birth): Local population multiplied by the birthrate.

Population Death (Death): Local population multiplied by deathrate.

Area Density (Density): Number of tourists and population size divided by the
total land area (sq. km.).

Inflow of Labor Force (Labor): Local population multiplied by the labor force
rate or fraction.

Labor Force Rate (LFFraction): Determined by NSO data specific for the
Province of Palawan (57%).

Retiring Population (Retirement): Determined by the labor force and fraction of

the population aged 65 and above.

Rate for New Commercial Construction (ConstructionRateCOM): The rate

is determined by the observed growth in new constructions. The rate is multiplied by
the total number of existing commercial buildings.

Commercial Building Demolition (Demolition): Computed by the estimated

useful life.

Construction Rate for Residential Infrastructures (CRRes): Determined by

dividing the local population and average household size from NSO.

Residential Demolition (ResDemolition): Computed by using the estimated

useful life.

Tourist Spending (Tourist spending): Computed by multiplying the number of

tourists, average days, and average daily spending.

Government Taxes (Government Taxes): Computed by the average rate

businesses pay and the total revenue from tourism.

Outflow to National Government (National Govt): Determined by multiplying

VAT (12%) and revenue of the local government.

Arriving Hotel Guests (Arrive): Calculated by taking the total number of tourists
per year as the base and the average guest arrival per day.

Check-Out (Check out): Hotel guests divided by the average number of days of
stay in Palawan.

Accommodation Construction Plan (ACPlan): A function of the discrepancy

between the available rooms and occupied rooms.

Hotel Demolition (ACCdemolition): Rooms available divided by average useful

life.

Development of Attraction (Development rate): Determined by the amount

allocated for development divided by the days of the year.

Decay of Attraction (Attraction Decay): Determined by the total amount

spent on development divided by the estimated depreciation or decay.

Model

The model is divided into ten (10) parts: flow of tourists, jobs and employment, total
labor force, hotel accommodations, residential and commercial buildings, government
revenue, government-owned attractions, total number of employees needed, local
population, and the density of Palawan.

The amount of incoming tourists is determined by the reported average (1200-1500)

of arriving tourists per day and is affected by the density of the area. The graphical function
is used in such a way that the higher the density, the less people would want to go to
Palawan. The outflow for the Tourist stock is determined by dividing the stock by the
average number of days (4.5) a tourist spends in Palawan.

The local population is determined by the usual growth model discussed in class.
The birthrate and the death rate is from the data reported by the National Statistics Office
for September 2014. The birthrate is 0.3819 while the death rate is 0.0548. The stock for
LocalPopulation was used in order to determine the total labor force of Palawan. It was
computed by acquiring the percentage of the population aged 15-64. The rate of retirement
is determined by taking the percentage of the population aged 65 and above.

The total amount of infrastructures and rates are gathered from the comparative
data provided by the NSO for September 2014 and last two quarters of 2013. Another data
from NSO shows that the average household size in Palawan is 4.65. This value was used
in order to calculate the inflow for residential infrastructures or houses. Finally, the average
estimated useful life for these two are place at 50 years.

The basic idea for

this part of the model is
that the number of tourists
affects
rate

the
of

construction
new

accommodations

hotel
or

rooms. The discrepancy

between

the

rooms

available and the rooms to

be occupied will determine
the future plans for the
construction of new rooms. It is important that there is an assumption that the average
useful life of a room is only 50 years. After that, the management will close it down.
Renovations were not factored in for this model.

This model provides the revenue generated by the local government for the tourism
industry only. Total flow for tourist spending is determined by the average number of days
of stay, the total number of tourists and the average daily spending of tourists. The average
spending used was from a value gathered from Metro Manila. The revenue the local
government earns is 30% of the total revenue, which is the average income tax imposed in
the Philippines. Finally, 12% of the local government revenue goes to the national
government. The rate is based on the value added tax (VAT).

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The total employees needed for the infrastructures determine the jobs available in
Palawan. Meanwhile, employment is determined by the rate of the participating labor force
and the jobs open for these people. The job outflow is determined by the average attrition
rate.

Graphs

The environmental impact is valued using the governments allocated budget for its
development. As we can see form the graph, the decrease in arriving tourists affects
government revenue, which consequently affects the amount reserved for the preservation
of the natural attractions.

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We can see how the number of incoming tourists affected the construction of new
rooms. Thus, closing the discrepancy between the number of rooms available and the
occupied rooms. As the number of tourists decline, the number of new rooms constructed
also decreases together with the number of people checking in. We can see a wide
discrepancy since the newly constructed rooms are no longer used.

Conclusion
By placing a monetary value on the government-owned tourist attractions in
Palawan, we can determine how tourist traffic affects its decay and development, and the
overall economic activities in the province. The density of the area reflects how resources
are being distributed, in effect, if the distribution is not sustainable and equitable, it will
eventually cause a degradation of the ecosystem because of the potential overshoot in the
areas carrying capacity. The average density in region IV-B is 93, however, the model
illustrates how it exponentially increased. Soon it becomes comparable to NCRs density. If
the inflow of tourists, in addition to the continuous growth of the population, is not managed
by the government in its early stage, the worlds Last Ecological Frontier may no longer
be.

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References
Tourism income for Puerto Princesa seen at P9.8B in 2011. Palawan. Palawan: Discover
the Wonders of Palawan, 1 March 2012. Web. 13 Oct. 2014.
http://www.palawan.nfo.ph/tourism-income-for-puerto-princesa-seen-at-p9-8b-in2011/
Devanadera, Nelson Palad. Ecotourism in Palawan: A Case Study. 183-190.
Honggang, Xu and Bao Jigang. A System Dynamics Study of Resort Development Project
Management in Tourism Region: A Case Study of Guilin. 250-256.
Commission on Audit. Annual Audit Report on the Province of Palawan for the year ended
December 21, 2012.
Philippine Statistics Authority. Quickstat Palawan as of September 2014.

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APPENDIX AModel Equation

Commercial(t) = Commercial(t - dt) + (ConstructionRateCOM - Demolition)
* dt
INIT Commercial = 1000
ConstructionRateCOM = Commercial*.065
Demolition = Commercial/Estimated_useful_life
Residential(t) = Residential(t - dt) + (CRRes - ResDemolition) * dt
INIT Residential = CRRes
CRRes = Local_Population/Average__household_size
ResDemolition = Residential/Estimated_useful_life
Average__household_size = 4.65
Estimated_useful_life = 50
Employed(t) = Employed(t - dt) + (Employment - Job_Outflow) * dt
INIT Employed = 1300
Employment = (Participating_LF/Jobs_available)
Job_Outflow = Employed/8
Jobs_available(t) = Jobs_available(t - dt) + (Job_inflow - Employment)
* dt
INIT Jobs_available = 1200
Job_inflow = Total_employees_needed-Employed-Jobs_available
Employment = (Participating_LF/Jobs_available)
Participating_LF = Labor_force*Participation_rate
Participation_rate = 0.64
GovtRevenue(t) = GovtRevenue(t - dt) + (Government__Taxes National_Govt) * dt
INIT GovtRevenue = 100000000
Government__Taxes = Revenue*.30
National_Govt = GovtRevenue*.12
Revenue(t) = Revenue(t - dt) + (Tourist_spending - Government__Taxes) *
dt
INIT Revenue = 9800000000
Tourist_spending =
Tourists*Average_daily__spending*Average_number__of_days
Government__Taxes = Revenue*.30
Average_daily__spending = 3500
ACC_under_construction(t) = ACC_under_construction(t - dt) + (ACPlan ACC_Cons_Finish_rate) * dt
INIT ACC_under_construction = 0
ACPlan = GRAPH(Discrepancy*.003)
(0.00, 1.50), (10.0, 19.5), (20.0, 29.0), (30.0, 39.0), (40.0, 46.5),
(50.0, 56.5), (60.0, 65.0), (70.0, 71.0), (80.0, 75.0), (90.0, 87.0),
(100, 100)
ACC_Cons_Finish_rate = ACC_under_construction*(1/12)
Arriving(t) = Arriving(t - dt) + (Arrive - Processing) * dt
INIT Arriving = 1200,1200,1200,1200
TRANSIT TIME = 4
INFLOW LIMIT = INF
CAPACITY = INF
Arrive = ACPFactor
Processing = CONVEYOR OUTFLOW
Checked_in(t) = Checked_in(t - dt) + (Processing - Check_out) * dt
INIT Checked_in = Processing
Processing = CONVEYOR OUTFLOW
Check_out = Checked_in/COFactor
Rooms_available(t) = Rooms_available(t - dt) + (ACC_Cons_Finish_rate ACCdemolition) * dt
INIT Rooms_available = 6800
ACC_Cons_Finish_rate = ACC_under_construction*(1/12)

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ACCdemolition = Rooms_available/ACC_Useful_Life
ACC_Useful_Life = 50
ACPFactor = Tourists*0.002
COFactor = 4.5
Discrepancy = Rooms_available-Checked_in
Labor_force(t) = Labor_force(t - dt) + (Labor - Retirement) * dt
INIT Labor_force = Labor
Labor = Local_Population*LFFraction
Retirement = Labor_force*RetirementAge
LFFraction = 0.57
RetirementAge = 0.036
Local_Population(t) = Local_Population(t - dt) + (Birth - Death) * dt
INIT Local_Population = 771667
Birth = (Local_Population*Birthrate)
Death = Local_Population*Deathrate
Birthrate = 0.3189
Deathrate = 0.0548
Area = 14896
Density = Local_Population+(Tourists*.002)/Area
Government_Attractions(t) = Government_Attractions(t - dt) +
(Development_rate - Attraction_Decay) * dt
INIT Government_Attractions = 22
Development_rate = (GovtRevenue*Allocation)/Days
Attraction_Decay = Government_Attractions/Decay_Factor
Allocation = 0.01
Days = 365
Decay_Factor = 5
Commercial__employee = Commercial*20
GovtEmployee = (Government_Attractions*.15)/15000
Hotel_Employee = (Rooms_available/10)*8
Total_employees_needed =
Commercial__employee+GovtEmployee+Hotel_Employee
Tourists(t) = Tourists(t - dt) + (Arrival - Departure) * dt
INIT Tourists = 600000
Arrival = GRAPH((Tourists*Average_tourist__per_day)/Density)
(0.00, 94.5), (10.0, 90.5), (20.0, 76.5), (30.0, 67.0), (40.0, 59.0),
(50.0, 52.5), (60.0, 44.5), (70.0, 33.0), (80.0, 26.5), (90.0, 17.5),
(100, 0.00)
Departure = Tourists/Average_number__of_days
Average_number__of_days = 5
Average_tourist__per_day = 1250

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