Sri Lanka Tourism
Why Not An Export Industry?
The Debate of export status
There has been some debate, of late, on whether tourism qualifies to be an export industry. This argument has been fuelled by the age old definition of an export industry as one which ‘exports goods and services produced and purchased by residents of another country’.
The problem stems from the wording ‘…purchased by residents of another country’.
However, the modern day interpretations are different from the classical one. What is the harm if such goods and services, are purchased by ‘residents of another country’ in the same country of production, provided they pay for it in foreign currency? Would this actually not be better for the economy, in general? There would not be the burden of shipping costs, insurance and other overheads needed to ‘export’ such goods to foreign countries. This will result in such goods and services being able to be more competitive and add greater value.
Tourism has, therefore, been labelled as an ‘invisible export industry’
The key factor in this argument is that the payment should be in foreign exchange.
Tourism clearly conforms to all these requirements. The goods and services are produced in one country, and ‘sold’ and consumed in the same country itself paid for in foreign currency.
Hence, today, many countries already accept the fact that tourism is an export industry.
Recognition of tourism as an export industry-
- Australia has a Tourist Export Council (https://www.atec.net.au/)
- The World Travel & Tourism Council (WTTC) (https://www.wttc.org/publications/other/travel-and-trade-linkages/)
- Jamaica Tourist Board (http://www.tourismandmore.com/tidbits/tourism-is-export/)
- The Singapore Tourism Board (STB) is a statutory board under the Ministry of Trade and Industry of Singapore, which indicates the importance placed in it as an export industry
- The Indian Tourism Industry( proposed) (https://www.indiainfoline.com/article/news-union-budget-sector-analysis/union-budget-tourism-tourism-industry-be-given-industry-export-and-infrastructure-status-117020100273_1.html)
- Pakistan – deemed export status (http://www.tourism.gov.pk/pdf/ntp_1990.pdf)
Tourism – an ‘infinite ‘export
What specially makes tourism a valuable export product is that, if cared for properly, it is a sustainable and renewable resource. Unlike primary resources such as petroleum or minerals, tourism is not finite. No matter how many people use the sea, it remains the same, and no matter how many people view a mountain, its beauty remains undiminished. However, the tourism product must not be protected. Tourism, like any commodity, can be overused, exploited poorly or allowed to decline. Tourism also needs the support of the local community. Without this support, tourism often becomes an unsustainable product
The impact and depth of the tourism Industry
Gloria Guevara, President & CEO of The World travel & Tourism Council (WTTC) has gone on record as saying, “Travel and Tourism sector creates jobs, drives economic growth and helps build better societies. Governments around the world are realising the extraordinary benefits of tourism and I congratulate them for taking steps to maximise our sector’s potential.” For the seventh consecutive year, the Travel & Tourism sector has outperformed the global economy and, in 2017, was the fastest growing broad economic sector globally, showing stronger growth than all sectors including manufacturing (4.2%), retail and wholesale (3.4%), agriculture, forestry and fisheries (2.6%) and financial services (2.5%).
In 2017, the direct and indirect impact of travel & tourism accounted for:
- US$ 8.3 trillion contribution to global GDP (10.4%)
- 313 million jobs, 1 in 10 jobs around the world
- US$1.5 trillion exports (6.5% of total exports, 28.8% of global services exports)
- US$882 billion investment (4.5% of total investment).
With South Asia showing the largest growth trends it is said that the Asia Pacific region will see the biggest economic impacts from growth of the tourism industry. Due to its large trickle down and multiplier effects (see below) the tourism industry has even a greater positive impact on emerging economies such as Sri Lanka.
Tourism has a large multiplier effect
Tourism supports and nurtures a wide range of peripheral activities generating potential livelihoods for a wide cross section of the people in the informal sector. It is estimated that in addition to tourism contribution in the South-Asian region from direct earnings to the GDP, there could be as much as an equal amount that comes from the informal sector. (Ref: TRAVEL & TOURISM ECONOMIC IMPACT 2018)
A large trickledown effect
Tourism, unlike any other industry, has a large trickledown effect on the informal sector, generating many diverse job opportunities. Here again for every job in the formal sector (direct) there will be more than one job opportunity created in the informal sector (indirect).
Sri Lanka tourism and Foreign exchange earnings
- Sri Lanka Tourism revenue exceeds USD 3.5 billion in 2017
(Chairman, Sri Lanka Tourism Promotions Bureau, Kavan Ratnayake)
- 2017 ref CBSL Economic Research Department-06.04.2018
- Worker Remittances USD 2B
- Textiles & Garments USD 5.0 B
- Tourism USD 3.9 B
(In January 2018 Tourism moved up to third place. Tourism earnings in January this year amounted to 458 million U.S. dollars, up 12.7 percent year-on-year while garments grew 1.99 percent year-on-year to 434.8 million dollars in the same period.)
Worker Remittances are not something Sri Lanka should be proud of. “The pathetic side of these much fancied export manufacture revenue earned through FDIs, is told by migrant labour. Young women who slave for a pauper’s wage in the Middle East included, migrant labour remitted 7.1 billion USD the same year, which amounts to over 60 per cent of the total revenue from all goods exported.” (http://www.dailymirror.lk/article/Coming-out-of-this-Fools-Paradise–156769.html)
All raw material and accessories for apparel manufacture is imported at around 18 per cent of our total import expense (based on data from World Integrated Trade Solution) in 2017. This means from the USD 5.0 B earnings, about USD 3.9 B was imported raw material cost. Hence the real value added of Textile & Garments is in the order of USD 1 B only (http://www.dailymirror.lk/article/Coming-out-of-this-Fools-Paradise–156769.html)
In the case of the tourism industry in Sri Lanka, it is estimated that about 90% of all foreign exchange earnings are based on value addition, with only marginal imports.