COMMITTEE: World Tourism Organization
(WTO)
TOPIC: Balance of Budget
Between Tourism and Public Services
ROOM: 214
CHAIR: Gancedo
Hernández Camilo y Merino Gil Karen Lissette
There are many hidden costs to tourism, which can have unfavorable economic effects on the host community. Often rich countries are better able to profit from tourism than poor ones. Whereas the least developed countries have the most urgent need for income, employment and general rise of the standard of living by means of tourism, they are least able to realize these benefits. Among the reasons for this are large-scale transfer of tourism revenues out of the host country and exclusion of local businesses and products.
Tourism is an attractive tool for economic development, specifically in the
developing world. Viewed as an export industry of three Gs -- "get them in, get their
money, and get them out" – tourism has assisted many developing countries to move
away from a dependency on agriculture and manufacturing (Tooman, 1997). Chosen for
its ability to bring in needed foreign exchange earnings, income and employment,
tourism has become a popular addition to economic development policies in many
African, Asian, South and Central American countries. Although tourism seems to be
adding substantially to the economic growth of many of these regions, many developing
countries are not reaping full benefits from tourism. Pleumarom (1999) writes that more
than two-thirds of the revenue from international tourism never reaches the local
economy because of high foreign exchange leakage. Understanding the many ways
that tourism profits can leak out of an economy, and devising strategies to minimize
leakage could make tourism a more effective economic development agent. The
purpose of this paper is twofold: to describe the nature and sources of leakage of foreign
exchange earnings from tourism, and to suggest strategies to maximize the economic
benefits of tourism in developing countries.
Tourism, like manufacturing, requires similar access to land, labor and capital
resources. Yet, tourism, in the way that the product is produced and delivered, may be a
more viable alternative for developing countries. Most countries have the basic raw
materials required to establish a tourism industry. Whether using its heritage,
architecture, landscape, water or people, the mix of natural and cultural resources is
what makes a destination unique and marketable to visitors. As international policy
agreements on trade of services advances, there are fewer restrictions on international
travel than trade (Edgell, 1999). Demand for tourism is expected to remain strong into
the new millennium and with advances in technology reducing the time required to
travel, the distance between the consumer and the tourism product is becoming
negligible. Finally, unlike other industries, tourism prices are more under the control of
the seller than the buyer. These traits combined, tourism is seen as an attractive
economic development option for many countries in the developing world. But, as the
OECD cautions, “there are few if any developing countries which could, or perhaps even
should, rely principally on tourism for their economic salvation”(Erbes, 1973).
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