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Viability of International Tourism Symposium on Tourism Services World Trade Organization, Geneva, February 23, 2001 Iain T. Christie MIGA

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Viability of International Tourism Symposium on Tourism Services World Trade Organization, Geneva, February 23, 2001 Iain T. Christie MIGA [email protected] World Bank Group. TOURISM IN THE GLOBAL ECONOMY. WTTC’s estimates for 1999: Travel and Tourism: 11.7% of global GDP

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slide1

Viability of International Tourism

Symposium on Tourism Services

World Trade Organization, Geneva,

February 23, 2001

Iain T. Christie

MIGA

[email protected]

World Bank

Group

slide2

TOURISM IN THEGLOBAL ECONOMY

  • WTTC’s estimates for 1999:
    • Travel and Tourism: 11.7% of global GDP
    • Tourist expenditures: 8% of global exports
    • Employment: 8% jobs worldwide
    • Tourism Satellite Accounts (TSA)
    • Source: World Travel and Tourism Council
    • (WTTC)

World Bank

Group

slide3

TOURISM & POVERTY

  • Tourism is designated as “significant” when:
          • > 2% of GDP, or
          • > 5% of exports
  • TOURISM IS SIGNIFICANT IN:
  • - 11 of the 12 poorest countries of the world
  • (< US$1/day)
  • - half of the lowest income countries
  • - almost all lower middle income countries
  • Source: DFID: Tourism and
  • Poverty Elimination: Untapped Potential

World Bank

Group

slide4

TOURISM PROJECT DATA REQUIREMENTS

  • Tourism Satellite Account
  • If you can afford it -- go for it!
  • Modular approach

Data requirements for sustainability:

      • Pricing, conservation of scarce, fragile resources
      • Value added & leakage
      • Linkages to other sectors
      • Investment, local and foreign
      • Job creation and quality
      • Poverty alleviation, creation of wealth and growth.

World Bank

Group

slide5

WBG CONTEXT

  • DEMAND from client countries
  • IFC finances tourist establishments
  • MIGA provides guarantees and investment promotion
  • Bank/IDA
  • Formerly financed tourism, including:
  • Infrastructure & site development
  • Hotel credit
  • Tourism training
  • Cultural heritage
  • Renewed interest, spurred by:
  • Environment & Ecotourism -- GEF
  • Poverty alleviation
  • Community participation & social inclusion
  • Cultural heritage & preservation

World Bank

Group

slide6

THE ACTORS

  • TOURISM IS APRIVATE SECTOR ACTIVITY
  • Entrepreneurs finance hotels & other businesses
  • Opportunity to make profits
  • Cross sectoral with wide business linkages
  • SUCCESS DEPENDS ON APERFORMING PUBLIC SECTOR
  • Policy & regulatory framework
  • (economic, social & cultural)
  • Infrastructure services, public & private
  • Key services: public health, security & rule of law
  • PUBLIC/PRIVATE PARTNERSHIP
  • DONOR COMMUNITY

World Bank

Group

slide7

SUSTAINABILITY

  • RIO EARTH SUMMIT AGENDA 21, 1992
  • - one of few economic activities capable of
  • providing economic incentives for preservation
  • of the environment
  • - potential major source of continuing
  • employment for women and the unskilled
  • COMMISSION FOR SUSTAINABLE DEVELOPMENT 19

“economic benefits of tourism have the potential to

alleviate poverty in the developing world, but capacity

building is needed at the local level to achieve the goal”

World Bank

Group

slide8

SUSTAINABILITY & DEVELOPMENT

  • POVERTY ALLEVIATION
  • INTERDISCIPLINARY NATURE OF TOURISM
  • FINANCIAL AND ECONOMIC
  • Create the opportunity for owners, investors to make profits
  • Economic catalyst -
  • Expenditure outside tourist enterprises
  • Leakages or linkages?
  • Employment
  • Tax revenues
  • Regional development
  • Ownership
  • SOCIO-CULTURAL
  • Inclusion of local people in benefits
  • Interpretation, protection of cultural heritage
  • ENVIRONMENTAL
  • Conservation and mitigation
  • Eco-tourism, coastal zone management (CZM),
  • wildlife management
  • EXTERNALITIES
slide9

TOURISM AS AN ENTRY POINT

SECTORAL

LINKAGES

CAPACITY BUILDING

MACRO POLICIES

Agriculture

Foster enterprise learning

Foreign exchange

Infrastructure

Operating, financial,

Monetary policy

Education & health

commercial and marketing

Tax and trade policy

Manufacturing

management.

Employment

Construction

Training and

Handicrafts

professional development

.

REGULATION &

TOURISM:

FINANCING

COMPETITION

AN ENTRY POINT

FDI

Competition

Hotel

Environment & physical

SME & micro-credit

planning

Infrastructure

Privatization

Risk mitigation

Property rights &

contract enforcement

Judicial reform

INSTITUTIONAL

Security

FRAMEWORK

Health

Public/private partnerships

MICRO ISSUES

NGOs

Sector policy

Community participation

Infrastructure & service costs

Investment promotion

Employment creation &

Marketing & sales

income generation

Consumer preferences

Hotel Standards

World Bank

Group

Public awareness

slide10

FINANCIAL & ECONOMIC SUSTAINABILITY

TOURISM VULNERABILITIES: MYTHS AND REALITY

Myths:1. Leakage of foreign exchange

2. Volatility of demand

3. Foreign ownership and management

4. Not pro-poor

Reality: 1. Compare leakage between sectors

-- focus on linkages

Pricing of fragile tourism resources

2. Volatility usually based on conditions pertaining locally, not commodity prices

3. Evidence of high level of local investment

Training of local staff in large chains

Tourism requires international experience

4. If local communities included, tourism is

powerful stimulus for job, wealth creation

slide11

ERRs ON HOTEL PROJECTS

  • (sample of 46 IFC hotel projects)
  • 12% = average of all IFC projects
  • 8 hotel projects had ERR>20%
  • 9 projects between 1995-1997, ERR median 16%
  • >ERR for IFC as a whole
  • Composition Charter Scheduled
  • Of Package (%) Two week Three week
  • (E. Philip English) Long-haul Short-Haul
        • LDC DC LDC DC
  • Package:
  • Tour operator -- 21 -- 11
  • Air transportation 4 39 9 9
  • Hotel & Transfer 19 -- 27 --
  • Other expenditures 17 -- 44 --
  • Total 40 60 80 20

World Bank

Group

slide12

Turkey: South Antalya Tourism Project

Projected Completion

at appraisal (1990)

Total costs (US$ millions) a/

Infrastructure 65.0 43.0

Accommodations (beds) b/ 1,050 (existing)

6,100 10,350

Room occupancy (%) 75 60

Domestic tourists (%) 20 37

Economic rate of return (%) 17.2 10.5 c/

Jobs created (1990) 12,500 7,300 d/

a/ Rapid devaluation resulted in higher TL costs than at appraisal

b/ Includes hotels, vacation villages, guest houses, etc.

c/ Lower expenditures than forecast outside hotel, as well as lower occupancies; does not include benefits to local populations

d/ Excludes construction industry and reflects seasonality

World Bank

Group

slide13

Dominican Republic: Puerto Plata Projects

  • (Infrastructure and Hotel Credit)
  • Projected Completion
  • at appraisal(1990)
  • Total costs (US$ millions)
  • First project 36.0 49.5
  • Loan 21.0 20.9
  • Second project 71.0 71.0
  • Loan 25.0 21.5
  • Superstructure N/A 180.0
  • (Period of rapid devaluation and inflation in 1980s (>40%) )
  • Accommodations (rooms) 1,600 3,300
  • Room occupancy (%) 65 76
  • Cost per room ($) 44,000 75,000
  • Cruise passengers (000s) 3.2 47.9
  • Economic rate of return (%) 17.5 (low) 12
  • (Role of tourism incentive law) (upper) 26
  • Jobs created
  • Direct 6,000 12,000
  • Indirect N/A 28,000
  • Forex earnings (US$ millions) 100 (1980) 1,000

World Bank

Group

slide14

CONCLUSIONS

  • DOES TOURISM HAVE A COMPETITIVE ADVANTAGE?
  • IS IT VIABLE?
  • - Specific context, given endowments, socio-cultural,
  • economic, and environmental considerations
  • MAINSTREAM TOURISM BY:
  • -Building multi-sectoral teams
  • - Launching pilot projects to demonstrate capacity
  • - Working with partners, stakeholders
  • WBG: WHEN TO INTERVENE?
  • - Public good content
  • - Market failure
  • - Other gaps in competitiveness
  • MIGA: Investment promotion, guarantees
  • IFC: Transactions
  • World Bank: Policy framework, public lending,
  • business environment
  • - Lending or non-lending?

World Bank

Group

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