Tourism, FDI, and environmental sustainability nexus in South Asia

Abstract South Asia is rapidly becoming a leading tourist hotspot and has played a significant role in the region’s growth. However, unexpected tourism and intensive energy-consuming development continue to pose increasing threats to environmental sustainability. This study examines the impacts of tourism, foreign direct investment, trade openness, and energy consumption on the environmental quality of six South Asian countries from 1995 to 2024, using the ecological footprint as a holistic measure of environmental sustainability. Using a panel quantile regression model, with the complement of augmented mean group, common correlated effects mean group, and system generalized method of moment estimation methods, the heterogeneous effects among the different countries and environmental conditions are captured. The results indicate that an increase of 1% in the intensity of tourism increases the ecological footprint by 0.12% at lower quantiles, confirming that the growth of tourism increases the environmental pressure on less sustainable economies. Trade openness and energy use also have a positive and significant impact on ecological footprints, indicating that both trade and energy consumption lead to environmental degradation. Conversely, foreign direct investment shows a negative correlation, meaning that it can minimize ecological stress. Therefore, the analysis underpins the urgency for these countries to embrace eco-tourism and green trade policies to achieve Sustainable Development Goal (SDG) 13, which emphasizes a sustainable environment.