Economic significance of tourism to developing countries

It is very difficult to measure the scale of tourism activity within an economy and hence itscontribution to GDP. This is because tourism is not traditionally measured in national accounts.To address this problem, WTTC have developed ‘satellite accounts’ (Box 3). However,construction of satellite accounts requires detailed data – which are unlikely to be robust in poorcountries. The accounts therefore are useful for providing indicative figures, for example tocompare across different countries or to highlight countries with major tourism sectors. But togain further information on the significance of tourism activity within any one country, local dataand local knowledge, for example discussions with the Ministries of Finance, Tourism, andStatistics are necessary.Table 6 illustrates the high contribution that tourism, thus measured, makes to the GDP in anumber of developing countries. Interestingly, this table shows a completely different set ofcountries from those highlighted in Section 3 as significant destinations on the basis of visitornumbers. The vast majority of these countries (except for Belize, Tunisia and Jordan) are smallisland states with a very well developed tourism industry and relatively few other economicalternatives. The Caribbean as a region is particularly strongly represented.Box 3: A caution on dataThis section is based on WTTC data drawn from satellite accounts which are used to produce twodifferent aggregates: those for the travel and tourism industry and those for the travel and tourismeconomy (see WTTC 2003).• The ‘Travel and Tourism Industry’ captures the explicitly defined production side ‘industry’equivalent, direct impact only, for comparison with all other industries;• The ‘Travel and Tourism Economy’ captures the broader ‘economy-wide’ impact, direct andindirect, of travel and tourism.The data used in this section refer to the tourism-economy as these provide a more comprehensiveaccount and obviously a much larger total figure. This seems to be important in relation to PPT asmuch emphasis is placed on linkages with suppliers such as agricultural suppliers etc.The WTTC also publishes ‘league tables’, which contain estimated data for most countries. Theseleague tables are useful in identifying the relative importance of tourism at the national level.However, the complexity of the process by which the figures are calculated and the nature of thestatistics upon which the calculations are based can diminish the impact of the data in analysis anddebate.19Table 6: Developing countries ranked according to the contribution that the tourism economy makesto the GDP in 1999 (all figures are %)8Contribution oftourism to GDP1990Contribution oftourism to GDP1999Growth inGDP 1990-1999% of ExportEarning in 19991 Maldives 72.8 87.7 20.5 74.32 Anguilla 82.0 71.1 -13.3 50.93 Saint Lucia 52.0 59.2 13.7 65.64 Seychelles 54.0 49.2 -8.9 41.25 Vanuatu 32.3 41.2 27.5 47.56 Barbados 41.0 41.2 0.4 50.47 St Vincentand theGrenadines 34.4 33.1 -3.845.18 Jamaica 28.3 31.5 11.1 43.79 Saint Kittsand Nevis 48.8 30.9 -36.850.210 OtherOceania 22.8 29.3 28.847.011 Fiji 22.4 27.7 23.7 35.312 Grenada 27.0 26.4 -2.4 40.813 Belize 21.1 26.2 24.2 32.214 Mauritius 22.6 24.4 8.1 31.815 Dominica 17.5 24.2 38.3 36.816 DominicanRepublic 20.2 23.6 16.833.917 Jordan 27.2 22.6 -17.0 35.218 Kiribati 17.9 21.0 17.1 15.419 Bahrain 6.3 16.9 169.8 16.620 Tunisia 16.4 16.1 -2.0% 22.9Source: WTTC 2003Note: Antigua and Barbuda has been taken out of the data-set because of errors in the data supplied by the WTTC, it is however expectedthat the country’s position will be among the top 5 countries with the highest contribution of tourism to the GDP.Tourism is important for many more developing countries than any other export. Its is in the topfive exports for more than 80 per cent of countries, and the principal export for a third ofdeveloping countries (WTO 1998). Table 6 also shows that many small developing countries arehighly dependent on tourism, to an extent comparable with the dependence on single primarycommodities long recognised as a risk to development. Five are dependent on tourism for morethan half their exports and 18 for more than 20 per cent. All the 25 countries with the highestshare of tourism in GNP are small islands. Some also have another commodity on which they arehighly dependent: St Lucia and St Vincent, Bananas; Jamaica, bauxite; St Kitts, Belize andMauritius, sugar; Kiribati, copra.Is dependence on tourism as serious a problem as dependence on a single commodity? In terms ofvulnerability to a sectoral shock, whether domestic (e.g. a hurricane) or international (e.g.security), clearly it is. But tourism has a high income elasticity and it is a many-sided product.These facts mean that it less vulnerable to the poor demand prospects which make commoditydependence so undesirable. As we will discuss below, for small countries Brau et. al. (2003) haveshown that tourism dependence leads to higher growth, in sharp contrast to commoditydependence. While the effects will be smaller for larger developing countries, it is likely to be inthe same direction.