MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | Dr. Joseph Ha
PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | Dr. Joseph Ha
Regional Vitality in the 21st Century
April 6-10, 2001 — Tokyo, Japan
Dr. Joseph M. Ha
What is the largest and the fastest growing industry in the world today? Surprisingly, it is not agriculture or telecommunications. By every measure the largest industry, in number of jobs or total revenue, is tourism. Tourism is a service-oriented business which has evolved in the latter part of the 20th century. It includes accommodations, catering, entertainment, recreation, transportation, capital investment, and gifts and souvenir industries. It accounts for 11% of all the jobs around the world in the year 2000. It generated over US$4.5 trillion of economic activity and 260 million jobs (directly and indirectly). The global impact of the tourist industry is far reaching, and its economic influence on national economies grows every year. In the last twenty-five years, international tourism has grown more than 500%. By 2010, it is expected to grow to over US$10.0 trillion of total demand and 328 million jobs. In 1998 tourism generated US$2.1 trillion of total revenue and 88.8 million jobs (directly and indirectly) in the Asia Pacific (APEC) economies. By 2010, it is expected to total US$4.6 trillion of total revenue and 123.9 million jobs. A reliable calculation indicated that the APEC economies generated an average of 10.6% of direct and indirect GDP from tourism in 1998. By 2010, this contribution should total 10.8%. Indications are that the total demand of tourism is expected to grow 44.8% in real terms, between 1997 and 2010 (3.7% per annum). This industry is a major exporter, with international visitors injecting foreign exchange directly into the economy. In the APEC economies, international travel expects to make up an increasingly important share of tourism GDP products. Of total national exports, services, and merchandise, tourism accounted for 11.7% in 1998. Tourism is a catalyst for construction and manufacturing. In 1998, the public and private sectors combined spent US$779 billion in the worldwide (11.8%) of total capital investment. By 2010, it will grow to US$ 1.8 trillion (12.0%) of total capital investment. In the APEC economies invested US$363.3 billion in 1998, or 9.8% of total APEC investment. By 2010, this total is expected to each US$ 789.2 billion, or 9.5% of total. Tourism is both a generator and receiver of government funds. Globally in 1998, it generated US$ 802 billion of taxes (10.6% of total), while receiving US$ 253 billion of government expenditures (6.8% of total). By 2010, taxes should increase to US$ 1.8 trillion and government spending to US$ 542 billion. In the APEC economies, tourism received US$ 89.5 billion (4.2% of total) in government operating expenditures in 1998. By 2010, government spending is expected to grow to US$179.0 billion (4.3% of total). Within the APEC economies, the U.S. is the largest absolute producer of tourism revenue with US$1,110 billion estimated for 1998. Japan is the second largest producer of tourism revenue at US$ 498 billion estimated for 1998. The third largest economy is Canada, totaling US$ 111 billion in 1998. The U.S. and Japan account of 75.9% of the total APEC tourism revenue of US$2.1 trillion. The growth of tourism is a result of several factors. Rising income in many countries makes recreational travel possible for an ever-increasing segment of the world's population. The number of East and South East Asian tourists has risen much faster than the global average, reflecting the economic boom in many of the Pacific Rim countries. Leisure time available to potential travelers is increasing through longer paid vacations, earlier retirement, and longevity. Countries have opened their borders, businesses have globalized their markets, and technology has produced faster, cheaper transportation. Infrastructure continues to expand as hotel and resort capacity increases as much as 8% annually, along with new or enlarged airports. Hong Kong, Kuala Lumpur (Malaysia), and Seoul (opened, March 28, 2001) are among the cities recently opening new airports. Tokyo is contemplating an additional airport. Cruising is one of the tour industry's fastest-growing segments. Until the 1960's ocean-going liners provided transportation rather than recreation, but that era ended with the advent of the jet plane. Today, cruise ships up to 135,000 tons -- several times larger than their predecessors -- carry as many as 3000 passengers on vacation cruises that began and end at the same port. One cruise ship carrying 2000 passengers on a week-long cruise can accommodate 100,000 passengers per year, generating US$100 million in gross revenues while keeping 1200 officers and crew employed. Cities from Tokyo to Sydney have added cruise terminals complete with shopping malls and restaurants. The tourist industry has transformed downtowns, ports, hinterlands, parks, and waterfronts; high-rise, ultra modern hotels dominate urban skylines from Tokyo to Brisbane. Theme parks, such as Disney's establishments in Tokyo, Paris, Florida, and California, draw millions of visitors and directly and indirectly employ thousands of workers. Once-remote wildlife parks and natural reserves in South Asia and East Africa now receive thousands of visitors, requiring expanded facilities. Once isolated beaches are now lined with high-rise hotels and resorts. In the Pacific and Caribbean, some entire islands have been taken over by tour operators. Employment directly connected with tourism includes those jobs with face-to-face contact with visitors (airlines, hotels, car rental, restaurant, retail, entertainment, etc.) Industry indirect employment includes those jobs associated with industry suppliers (airline caters, laundry services, food suppliers, wholesalers, accounting firms, etc.). Tourism is human-resource intensive, creating quality jobs across the full employment spectrum. Travel spending and investment not only directly create millions of jobs, but also indirectly act as a dynamic catalyst for employment in a myriad of other industries -- from air traffic control to hotel construction, from rental cars to taxi industries, from financial services to cruise ship builders; from farmers to clothing manufactures; and from telecommunication to retail stores. The bottom line is that directly and indirectly tourism is driving more than 11% of employment today, globally, regionally, and nationally. No other sector of the economy offers the same job creation potential. Tourism is a complex industry. The consumer generally decides on a trip for business or leisure, targeting a destination rather than a product. There is no large single transaction, but a wide range of purchases, i.e. transportation, accommodations, food and beverages, admission to attractions, gifts and souvenirs. These purchases occur at various times and locations. Similarly, there are indirect beneficiaries - the supplier of goods and services, each a direct recipient of the travelers' spending. Critics of Tourism The tourist industry invites all sorts of criticism. Critics argue that tourism does not benefit the host countries' economy. Multinational corporations own many hotels and other tourist facilities, such as theme parks. Those corporations earn enormous profits that revert back to their headquarters in the home country. Yet the investment made by the host country is substantial, with considerable financial burden. The importing of building materials and equipment often strain a country's supply system, and funds are diverted to hotel construction that should be spent on other necessities, such as housing for citizens. Tourists consume an inordinate amount of food, water, and electricity. Much of the generated income must be reinvested into the construction of airports, cruise ports, and other amenities. Critics argue that, in the last two decades, the three main organizational branches of tourism -- transportation companies, the hotel sector, and tour companies -- have become increasingly global in their operations and dominate the development of tourism in the Third World. These global firms' revenue becomes the size of an individual country's entire GDP. They are a powerful influence in the development of the Third World economy. The structure of the tourist industry tends to become a monopolistic business. The sectors themselves are not mutually exclusive. There is an increasing trend toward the vertical interaction of the varied tourists industries into large corporate entities. Britannica Airways, for example, is a subsidiary of Thomson Travel. Tour companies are the final main organization branch of the tourist industry. For example, half of UK tourists traveling overseas do so on inclusive tour packages. Since 1950, tour operators have revolutionized international tourism through their successful packaging of transportation, accommodations, and additional services. They can lower costs by negotiating lower airfares and hotel accommodation prices through their ability to guarantee block bookings. The top three U.K. operations in 1993 were Thomson, Airtours, and Owners Abroad, accounting for over 70% of UK inclusive market. The monopoly nature of the tour business is more likely to be concerned with profits than with the impacts on host environment and population. Air transportation is one of the key operations in international tourism. In most Third World countries, over 70% of tourist arrive by air. Remote island locations where 90% of all tourists arrive by air, such as Hawaii or French Polynesia, are even more dependent on airline operations. Airlines based in the developed countries are by far the dominant carriers. Third World airlines, such as Kenya Airways, carry less than 10% of vacation visitors arriving in Kenya. A similar monopoly also exists in the cruise and car rental business. Hertz and Avis are most ubiquitous. Firms such as American Express and Thomas Cook also dominate the flow of tourism finances. The hotel industry shows a similar pattern of dominance by global firms based in the developed world. Of the top fifty hotel chains in the world, thirty have their headquarters in the U.S. and account for more than half of the total rooms provided by that top fifty. As an estimated 100,000 hotel rooms are added every year to the total in hotels owned or managed by these major chains, their global significance is undeniable. These top chains have extensive interests in Third World locations. Tourism frequently strains the fabric of local communities. The invasion of poor communities by wealthier visitors sometimes creates hostility among the hosts. Moreover, tourism can have the effect of debasing local culture, which is adapted to please the visitors' tastes. Cultural anthropologists are concerned about the social and cultural impact on the local way of life, and disturbance of social structures. With the "McDonaldization" of the world, the impact of tourism on a host country's socio-cultural uniqueness has been sacrificed to suit the tourist industry. Local employees say that working in the tourist industry is demeaning because it demands display of friendliness and servitude that they find insulting. Many environmentalists argue that tourism contributes to sand mining, beach and sand dune erosion, soil erosion, urbanization and airport building leading to land degradation, loss of wildlife habitats, deterioration of scenery, etc. Marine recreational activities (scuba diving, snorkeling, sports fishing) damage coral reefs and subsequently impact coastal protection and fisheries. Tourism facilities heavily consume water resources for hotels, swimming pools and golf courses. Tourism also puts excessive demand on other local resources such as energy, food, and raw materials. Pollution and waste generated by tourism is considerable. A tourist produces an average of about 1 kg. of waste per day. Others include sediment run off, pollution from land-based hotels and marinas, waste and litter linked to marine sports and cruises. For example, in 1995 it was estimated that cruise ships in the Caribbean alone produced more than 70,000 tons of waste each year. Transportation for tourists increases the air pollution, and air conditioning and heating for tourist facilities help to contribute to global warming. Environmentalists' concern can be summarized to global warming, loss of biodiversity (disappearance of plant species), water and air pollution. Biologists voice their concern about the disruption of wildlife habitats, clearance of vegetation for tourism development, increased threat to endangered species due to trade and hunting; heavier demand for firewood, and greater risk of forest fires. Tourism has a negative impact on fragile ecological areas such as the rain forests, wetlands, mangroves, coral reefs, sea grass beds, parks and natural world heritage sites. Positive Initiatives and Results The tourism industry has developed a number of voluntary initiatives for addressing environment issues. Especially hotels are being widely promoted and progress is being made in waste reduction handling, management and disposal, energy and water consumption. UNEP has taken part in these efforts. Travel and tourism contribute favorably to the environment through financial contributions and heightened ecological awareness. Most host countries have a conservation policy and government levy user fees to support the preservation of areas such as parks, protected areas, cultural and natural sites. These fees are passed on to the tourists. For example, the Bonier Park in the Dutch Antilles was one of the first protected marine areas in the Caribbean to have become entirely self-financing through levying of admission fees on scuba divers. Fees support on-going active management of the park's coral reef, sea grass and mangrove ecosystems, as well as educational activities and orientation sessions for divers, who are the largest user group in the park. The system has been an unqualified success since it was introduced in 1992. Tourism has played a key role in education and cultural diversity. The world heritage designization of important cites by UNESCO is largely the result of tourism. Political barriers to international travel have fallen dramatically. With the exception of North Korea, even repressive regimes such as Myanmar invite tourists to spend their currency. Other political impacts include the opening up of Vietnam, and the changes in Central America, notably Nicaragua and El Salvador, as well as Cuba. There is no question that, as I already pointed out, its economic contribution to local and global economy is enormous. It provides all ranges of jobs from construction engineers, architects, pilots, to housemaids, beauticians, nurses, gifts and souvenir clerks. Although the critics argue the monopolistic nature of tourism and travel industries, business is local. Global companies execute business with partnership of host countries and local sub-contractors. In such arrangements, all parties have a slice of the pie and enjoy the taste of it. Tourism provides scarce foreign exchange earnings to the world. Small states and islands' economy depends heavily on the tourist trade in the Third World. For example tourist economy constitutes 43% of the export earnings of Kenya. Even in an advanced economy such as Iceland, tourism is the second largest industry, embracing 13% of its GNP. Tourism is Hawaii's number one industry. Tourism provides an opportunity for economic diversification away from over-reliance on primary products which are very vulnerable to the variables of the global economy. An example is the Caribbean island of Dominica where agricultural products account for 60% of merchandise exports and bananas alone account for 90% of those agricultural exports. The removal of protection for Windward Island fruits in the UK, as consequence of the establishment of the Single European market, will have dire ramifications for the Dominican economy. The island is consequently promoting tourism based on its natural attractions as an attempt to diversity away from a virtual monoculture economy. Such movement is also happening in the Amazon Rain Forests. Tourism also helps raise awareness of the local population with regards to the financial value of natural and cultural sites, making them proud of their heritage and allies for its conservation. More widely, the involvement of local communities in tourism development and operation appears to be one important condition for the conservation and sustainable use of biodiversity. UNEP has recently proposed "Principles for Implementation of Sustainable Tourism." The Principles are being designed to provide a coherent framework for more specific guidelines to be prepared by the various conventions: Biological Diversity, Climate Change, Regional Seas Action Plans, and other international agreements that have already or will address tourism issues; and to help governments intergovernmental, private-sector, and other organizations in applying the general concept of sustainable tourism in practice. Tourism has undoubtedly contributed to the shrinking of the world in a physical time - distance sense, in a socio-cultural context, and in the ties of interdependence that binds locations around the globe. Recognitions I am indebted to Professor Gil Latz of Portland State University for research materials and information. I liberally quoted figures provided by the World Travel & Tourism Council and the APEC Tourism Working Group 1998 study on The Economic Impact of Travel and Tourism Development in the APEC Region. I also consulted the following reference books:
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