Contribution of tourism to the national economy

Following are extracts of a speech made at the conference on Maximising the Economic Contribution of Civil Aviation, convened by the World Bank and the International Civil Aviation Organisation in Montreal from June 6 to 8.

by Dr. Ruwantissa Abeyratne, United Nations

The Secretary General of the United Nations, Kofi Annan, observed at a recent conference that tourism is one of the largest economic sectors in the world and that it could not be ignored in the overall scheme of work of the United Nations, particularly in the alleviation of poverty.

Tourism, which is arguably the largest industry in the world and perhaps the most important and influential in an economy of a nation primarily dependant on the foreign exchange generated by visitors, is inextricably linked to transport as transport is the necessary precondition of tourism.

Travel and tourism, the largest combination of industries and the largest creator of wealth, is estimated to generate $ 3.5 trillion a year in activity and potentially provides employment to 130 million people worldwide. This accounts for 10 per cent of the world's GDP, 10.3 per cent of the world's wages, 9.8 per cent of the profits and 11.7 per cent of indirect and direct taxes.

Tourism and air transport

The most salient fact in the context of air transport and tourism is that air transport has positively contributed to the opening of new tourism markets which are often not accessible either by road or sea. In 1990, air transport contributed US$700 billion to the world economy and the industry was responsible for employing 21 million people around the world. In 2000 the same figure rose to US $ 1200 billion.

The interdependence of these two industries and their emergence collectively as the travel and tourism industry is eminently visible in countries where tourism is a major foreign exchange earner, where, according to the World Tourism Organisation, the demand for tourism will keep increasing, particularly because it is no longer the domain of the rich.

In early 2005, the WTO and the International Civil Aviation Organisation (ICAO) conducted a study on Essential Service and Tourism Development Route scheme (ETDR). An ETDR concept focuses on the development of non-viable existing and potential international routes linking tourism-generating countries with less developed countries.

WTO takes the view that in a globalising, liberalising marketplace such international routes might be considered de facto equivalent to domestic regional routes currently supported for assurance of service and social and economic development purposes.

Promotion and implementation of an ETDR is a key element of a broad-ranging WTO programme entitled Sustainable Tourism - Eliminating Poverty (ST-EP). There has already been acknowledgement of the potential value of an ETDR concept by the European Commission, the New Partnership for Africas Development (NEPAD), the United Nations Conference on Trade and Development (UNCTAD) and the World Economic Forum.

Furthermore, collaboration has been established between WTO and Routes (the world route development forum) to promote network expansion for tourism in line with an ETDR concept.

The term essential air service (EAS) is defined as a passenger air service of a public or social service nature, which a State may consider needs to be provided and where the market may not have sufficient incentive to do so.

The term essential tourism development route (ETDR) is a concept developed by WTO-OMT focusing on international routes between specified tourism-generating markets and tourism-receiving markets in LDCs in particular, where an adequate level of passenger air service is not (fully) supplied, or is at risk, under existing market and regulatory arrangements.

These two concepts are based on principles regarding existing EAS schemes pioneered in liberalized markets EAS and ETDR share the following two inter-related objectives, although ETDR emphasises more the second objective.

The first objective is, in a narrow sense, to assure lifeline provisions of air services for remote or peripheral destinations of the world irrespective of the profitability of individual operations, especially in a situation of transition to liberalisation or in an already-liberalised market. In a broader sense, this objective may incorporate other social and political elements such as keeping international links to major destinations (especially for Small Island Developing States and Landlocked Developing Countries) and maintaining cultural contacts with concentrations of their overseas populations.

Since many air services to remote or peripheral destinations may not be commercially viable, mainly due to a very low traffic volume, they would not be provided by the market in the absence of government intervention. The result here is that choice may be limited or non-existent. Theoretically, if such air services could be supported by the State concerned in an efficient way, welfare (economic and social benefits) would be maximised with the continued provision of an adequate level of services.

An additional dimension is that in several instances the responsible authorities have clearly recognised the socio-political value of such initiatives both in terms of public satisfaction (for example, the Greek, Spanish and the U.K. Island services) or the need to secure widespread buy in to a liberalisation initiative (for example, the U.S. domestic deregulation and the liberalisation packages in the European Union).

The second objective is to facilitate and even drive economic development, primarily through stimulating inward tourism and investments. Tourism is increasingly being recognised by the international community and its institutions as a focal instrument for development, with particular emphasis on the capacity of the sector to assist poverty alleviation.

Tourism creates job opportunities; creates and can help spread wealth; and can help diversify the economy, especially in remote areas which attract tourists for their cultural, wildlife and landscape values. For many least developed countries (LDCs), in particular, tourism is often, or has the potential to be, their major export and offers one common comparative advantage that these States share in the services-dominated global marketplace.

In rationalising development support for the tourism sector, LDCs should identify tourism as a major plank of their Millennium Development Goal (MDG), Poverty Reduction Strategy Paper (PRSP) or Country Assistance Strategy (CAS) achievement plans. These are all strategies for individual States developed by international agencies. In this way, the need, commitment and follow-through on tourism would be tied into its broad poverty reduction plans.

Alleviation of poverty

A National Account Analysis, otherwise known as tourism satellite accounts incorporated in the United Nations statistical system, shows that tourism, as the central pillar of the global services economy, has grown forty fold in the past 50 years and is projected to increase 300 per cent over the next 25 years.

It drives some 8 to 12 per cent of the national gross domestic product (GDP), in employment, trade and investment for most countries. Well planned tourism can play an integral role in poverty reduction in the world's poorest countries, generating jobs and a higher proportion of GDP.

The tourism industry in action shows the consumer travelling to the destination, providing opportunities for the sale of local goods and services and enabling the local populace to become exporters. The wealth so created spreads across local economies where tourism facilities are established and local supply chains plugged in, including poor rural areas. To the local population, tourism offers better labour intensive and small scale opportunities than most other sectors.

Particularly it generates jobs for women and the young. Tourism could flourish in areas with few export or diversification options, thus diversifying the local economy. The high cultural, wildlife and landscape values in countries such as Sri Lanka attract tourists, bringing in employment opportunities and income.

WTO has launched an initiative to creatively develop sustainable tourism as a force for poverty elimination at the World Summit for Sustainable Development in Johannesburg in 2002.

The programme was launched in collaboration with UNCTAD, the UN Agency focusing on the world's poorest countries and will be extended to other partners as it evolves.

Called ST-EP (Sustainable Tourism - Eliminating Poverty), it will focus on longstanding work to encourage sustainable tourism - social, economic and ecological - which specifically alleviates poverty, bringing development and jobs to people living on less than a dollar a day. It will target the world's poorest countries, particularly in Africa and developing states in general.

ST-EP will have four components composed of an international foundation to attract new dedicated financing from business, philanthropy and government sources. A research base which identifies linkages, principles and model applications. An operating framework which both incentives and promotes good practice among companies, consumers and communities and an annual Forum to bring together stakeholders from public, private and civil society sources for information, exchange and buy-in

At WTO's Assembly in Beijing in 2003 a resolution was passed mandating the Secretary General to aggressively pursue the implementation of ST-EP. This resolution entrusts the Secretary General of WTO to take necessary measures to secure necessary funding and to implement the ST-EP initiative.