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The development and importance of travel service exports in South Africa

The development and importance of travel service exports in South Africa

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The development and importance of travel service exports in South Africa

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  1. The development and importance of travel service exports in South Africa Johan Fourie 30 October 2008 TIPS Conference Cape Town

  2. Session overview • Definition • Context • Hypothesis • Methodology • Data • Results • Conclusions

  3. Definition • Travel service exports one of a number of service sectors (WTO 2002) • Transport; travel; communications; construction; insurance; financial services; computer and information; royalties and license fees; other business services; personal, cultural and recreational services • Travel services are defined by the user of the service and not the type of good or service sold • Four modes – examples • Tourism = Mode 2

  4. Context • Early Cape economy dependant on travel service exports – services sold to passing sailors and soldiers • After discovery of diamonds and gold – very little attention to travel services • The value of South Africa’s (broadly defined) natural resources noticed early on – Kruger National Park founded in 1924 • However, not an important sector • High transport costs • Political and economic sanctions

  5. Context

  6. Hypothesis

  7. Hypothesis • South Africa has abundant labour and (broadly defined) natural resources • Hecksher-Ohlin: export labour, natural resource-intensive products. • Natural resource exports resembled in our existing trade structure • Hecksher-Ohlin assumes zero trade costs • SA labour-intensive exports have to compete with countries with significantly lower trade costs • Trade-in-services circumvents trade costs • Thus, SA has comparative advantage in labour- and natural resource-intensive services exports • Travel services

  8. Methodology • Revealed comparative advantage (Balassa index, 1965) • where Xij is exports of sector i from country j. • Three indicators: travel service exports within service exports, service exports within total trade, service exports within GDP. • (RCA – 1)/(RCA + 1)

  9. Data • Data for the analysis is obtained from the UNCTAD Handbook of Statistics 2007, available electronically (UNCTAD 2008). • The data covers 206 separate territories or countries for which GDP data is available. Travel service data is available for 147 of these countries.

  10. Results

  11. Results

  12. Conclusions • Other service sectors investigated • Financial sector (Butterworth and Malherbe 1999), construction (Teljeur and Stern 2002), transportation (Naude 1999), distribution services (Achterberg and Hartzenberg 2002) and communications (Hodge 1999) • Hodge (1997), using 1994 data, finds that travel service exports are the only service sector where South Africa has a comparative advantage. He predicts that this will be an important service export category for the future (Hodge 1997). • Seyoum (2007) also finds support for South African RCA in travel service exports

  13. Conclusions • Results support the hypothesis that SA has a comparative advantage in travel service exports • This is the only service sector where existing trends supports an RCA • Travel service exports is a growing sector – one of the fastest growing sectors in international trade • SA also supported by other African countries • Validates that South Africa investigates how the travel service industry can be supported • Can be an important tool for regional integration