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JULY

09

THE                          
TOURISM 
DEVELOPMENT  
DILEMMA 

Question: 
 
Developing countries that face economic problems often turn to tourism as a means 
of survival. Critically examine the short‐term and long‐term benefits and challenges of 
tourism development. Is the dependence on tourism a viable option? 
 

 
 
Essay for Human Geography (GGRA02H3 Y) class 
at University of Toronto 
 
Alex Rascanu 
alexandru.rascanu@utoronto.ca 
www.rascanu.com 
INTRODUCTION

Tourism has increasingly become a favored


The World Tourism Organization, the

development approach for many developing nations (Telfer only multinational tourism

organization officially recognized by


and Sharpley 2008), but how can policy-makers in these
the United Nations, defines tourism as
countries ensure that its benefits outweigh the related costs?
“the activities of a person outside of

The relative ease of entry and the economic benefits that can his or her usual environment for less

than a specified period of time and


be generated have determined most developing nations to
whose main purpose of travel is other
enter the tourism market as destinations. However, the socio-
than exercise of an activity

cultural and environmental costs associated with tourism remunerated from the place visited”

(Chadwick 1994).
development must also be considered. This then is the tourism

development dilemma that public policy-makers from developing countries must address.

The following discussion is organized into three sections. In the first section, general

notions and data highlighting the relationship between globalization and Third World

development are presented. In the second section, under the guidance of the notions highlighted

earlier, specific positive and negative impacts of tourism development on the Third World are

stressed. In the third section, strategies are suggested for the developing countries as approaches

that their policy-makers can use to minimize the negative impacts and to maximize the positive

impacts of trade development.

GENERAL RELEVANT FACTS

Many developing nations see tourism, especially international tourism, as a large

potential source of revenue and are diversifying their production and marketing strategies to

attract increasing numbers of foreign tourists. However, the boom of international tourism does
not necessarily represent a blessing for many Third World countries. There are clear economic

benefits of tourism, but there are also socio-cultural and environmental costs.

The Tourism Vision 2020 (UNWTO 2001) highlights that East Asia, the Pacific, South

Asia, the Middle East and Africa are forecasted to record international tourist growth at rates of

over 5% per year, compared to the world average of 4.1%. The two countries experiencing the

fastest growth in international tourist receipts between 2004 and 2005 were the developing China

and Turkey. In terms of arrival numbers, three out of the top ten receiving countries are

developing nations: China (ranking 4th), Mexico (7) and Turkey (9). Some developing countries

experienced remarkable growth in 2005: Laos (65.1%), Cambodia (34.7%), Papua New Guinea

(17%), Honduras (25.9%), Venezuela (45.2%), Swaziland (82.8%) and Senegal (15.3%). We

note though that the figures are volatile and often start from a low base (IOM 2008).

The increased prevalence of many “Third World” destinations in the global tourism

market is observed not only in an increase of international tourist flows, but also in trends such

as inter-regional and inter-organizational alliances, and foreign direct investment, largely

because of their pristine nature, diverse culture, inexpensive goods and services, cheap labor, and

other resources (Zhao and Li 2006). It is also relevant to recognize that “the dominant official

concept of tourism in developing countries often focuses on wealthy foreign visitors from the

industrialized North” and neglects “the potentials - as well as the problems - related to mass

tourism involving domestic and regional tourists” (Ghimire, 2001).

Developing countries that serve as

destinations for tourists both benefit and suffer

while providing the aspects that constitute the

tourism system: attractions, facilities,


infrastructure, transportation, and hospitality. Each attraction’s socio-cultural and/or unique

characteristics (e.g. Havana, capital of the revolutionary Latino-culture Cuba) draw visitors to

the host developing country. These attractions can, to a large extent, be developed anywhere and

act as a growth inducer, but we note that who owns them has great implications for the

developing countries where they are located. In locations where the public or the non-profit

sector supervises the operation of attractions, the orientation tends to focus on social good and

historical preservation. On the other hand, private ownership of attractions is oriented towards

profit making. Developing countries must thus ensure that private owners are regulated to ensure

that the short-term profit maximization focus of the attraction is not detrimental to the long-term

success of the destination area (Mill and Morrison 2002).

EVALUATION

Tourism development can be a policy alternative to


“Tourism is not necessarily desirable

promote economic growth and diversification within or feasible for every place. Each

community should examine whether it


developing countries. Traditionally, the developing countries
has adequate resources for tourism,
tended to rely on agriculture and other natural resource-
whether it needs tourism to reach

based industries for economic growth. However, over- economic development objectives.”

(McIntyre G., 1993).


dependence on a few specific types of crops or products can

have significant negative consequences due to price unpredictability, weather and diseases, as

well as outside manipulation by large buyers from developed nations. The tourism system can

prove to be a positive option since many developing countries have the “raw materials” (e.g.

sight-seeing locations) for tourism, since there are usually fewer restrictions on international

travel than international trade, and since the time and monetary costs to travel these locations is
decreasing due to advancements in technology and increased competition in the transportation

industry (Mill and Morrison 2002).

Potential economic impacts on developed countries that act as destination areas for

tourists include: (i) increased foreign exchange earnings, (ii) increased income, and

(iii) increased employment. The increased foreign exchange earnings generated can be used as

investments that finance growth in this and other economic sectors, but the extent to which a

destination can minimize leakage (value of goods and services that are imported to satisfy the

needs of tourism) will determine the real size of these earnings. Some developing nations that

desperately need foreign exchange earnings find that the import content of tourism is very high,

sometimes over 50%. The destinations can minimize the cost of goods and services that must be

purchased to satisfy the needs of visitors (e.g. Japanese visiting Nigeria wants to eat sushi and

the meat has to be imported), the value of goods and materials used for infrastructure and

buildings used in tourism development, the payments to foreign factors of production (e.g.

commission to overseas tour operators and travel agents), the expenditure on marketing abroad

(e.g. Jamaica’s cost of advertising itself in Canada as a tourist destination), and transfer pricing

(e.g. using credit cards means that foreign, not local, banks engage in the currency exchange).

Foreign exchange earnings can also be reduced when host developing nations exempt foreign-

owned companies from paying duties or taxes in order to attract investment (Mill and Morrison

2002). The increased income generated from tourism by host (developing) countries is measured

via the multiplier effect. This represents the chain of effects which follow after a change in

tourist expenditure (Baaijens, Nijkamp and van Montfort 1997), and it is the sum of three levels

of income: direct (spending by visitors in the destination area), indirect (expenditures by

businesses who receive visitor spending), and induced (subsequent rounds of expenditures after

indirect spending) (Mill and Morrison 2002). In many Third World countries, studies show that
that multiplier effects of international tourism are often overstated, and leakages are excessively

high (Cater, 1987; Harrison,1994). This is especially true for developing island-states such as

Fiji, Mauritius and many Caribbean countries, where their weak industrial bases do not allow for

domestic manufacturing of most industrial products that are asked for by tourists, and are thus

heavily dependent on imports (Zhao and Li 2006).

Tourism also generates increased employment of both a direct (lodging, restaurants, attractions,

transportation, and sight-seeing operations) and an indirect nature (in construction, agriculture

and manufacturing) (Mill and Morrison 2002). The UNWTO assesses that tourism is one of the
largest employment sectors in most countries and a fast entry vehicle into the workforce for

young people and women in urban and rural communities (UNWTO 2009). On the other hand,

tourism is considered to be more labor-intensive that other industries (Mill and Morrison 2002),

but some research conclusions point out that the cost per job created in tourism is no less than in

other economic sectors (Farver, 1984). The large costs associated with infrastructure and

building development considerably increase the costs of creating domestic jobs in tourism. It

must be acknowledged that multinationals and other foreign investors do create some jobs for the

locals and sometime the pay is above-average, but their activity in the developing nations’

tourism system also terminates many job opportunities by leaving less ‘space’ for local

entrepreneurs and their small family-owned businesses (Mill and Morrison 2002). Developing

countries must thus compare the relevant number of economic gains (e.g. increased foreign

exchange earnings) against the potential losses (e.g. leakage).

The social and cultural impacts of tourism in developing countries may be both positive

and negative. One positive impact arises when the destination area realizes that indigenous

cultures attract visitors and acts as a unique factor that distinguishes it from other destinations,

and it creates initiatives that help keep native culture and traditions alive. Sometimes, traditional

ways and goods are restored when buyers (visitors) are found, such as in the case of Aaraya

women of Cuna, Panama, who were re-taught (via a government-funded program) the lost skill

of sewing their culture’s traditional dresses. The local community can thus preserve part of its

traditional culture. Another positive impact is the fact that tourism acts as a medium for social

change, in the sense that the guest-host interaction allows both to learn more about each other

and thus contributes to a greater understanding between people. One of the most recognized set

of social problems is caused by sex tourism. Trade in human flesh leads to other problems,

including child prostitution and the spread of HIV/AIDS (Chon and Singh, 1994) in developing
countries like Thailand (Mill and Morrison 2002). Another relevant cost is encountered when the

tourists’ demands exceed the supply of goods and services in the area, which translates into

inflation. In such circumstances, the prices of goods and services (e.g. housing, food) increase,

thus increasing the costs of living for the population living in the region (Baaijens, Nijkamp and

van Montfort 1997). Other negative social consequences include overcrowding and reduced

access to residents to recreational areas and facilities, increased drug abuse, and encouragement

of behaviors such as begging. Negative social/heritage consequences of tourism in developing

nations include commercialization of traditional welcome and hospitality customs, overcrowding

and damage to archeological and historical sites and monuments, as well as decreases in cultural

authenticity (e.g. import of foreign cultural influences) (Mill and Morrison 2002). Developing

nations must thus weigh the social and cultural gains (e.g. revived local arts and crafts, exposure

to new ideas) against the larger number of potential losses (e.g. overcrowding, increases in

crime).

The environmental impacts of tourism on developing countries include both positive

and adverse effects. Greater protection of certain ecosystems is put in place in some developing

countries to support tourism. Activities such as commercial fishing around reef systems, logging

operations and forests, and excessive clearing from agriculture are limited or eliminated. Some

of the foreign visitors’ expenditures to observe natural environments can be reinvested in

conservation research programs. A greater understanding among local people of environmental

issues can result from increased implication of the natural environment to support tourism.

Negative impacts usually occur when the level of visitors use is greater than the environment’s

capacity to cope with this use. One such adverse effect is the changing traditional land use,

which may translate into loss of open space, displacement of local residents, or deterioration of

community character. Air pollution and deterioration of natural ecology are two other negative
adverse effects. As an example, the increasing popularity of trekking in Nepal’s Annapurna

region is leading to pollution along the trails and contributing to deforestation. One other

negative effect is the disturbance of natural ecology. The nesting sites of loggerhead turtles in

Turkey are threatened by the development of tourism in this developing country (Mill and

Morrison 2002). Developing nations have to weigh the positive environmental impacts (e.g.

generation of funds for conservation research) against the overwhelming number of potential

losses (e.g. air pollution, deterioration of natural ecology).

RECOMMENDATIONS

To maximize tourism’s positive economic impact, developing nations should adopt

policies that maximize their foreign exchange earnings, income, and employment. Leakage can

be minimized via import substitution by developing ties between tourism and primary,

manufacturing and other domestic industries. This can be done by providing subsidies, grants,

and loans (to industries such as furniture), and by placing quotas or tariffs on imported goods

that can be developed locally. Such a strategy must be carefully calculated as to not result in

economic retaliation from neighboring countries. Furthermore, incentive programs can be

implemented to attract increased local and foreign capital needed to develop tourist destinations.

Since business-owned hotels, resorts and other facilities sometimes engage in practices that run

counter to the national or regional tourism goals, governments of developing nations must ensure

that the burden of risk (financial and otherwise) is borne not only by the government, but also by

the local and foreign investors.


With respect to the positive and negative socio-cultural and environmental impact of

tourism, developing nations can find an acceptable balance can be achieved by adopting the

principles of sustainable tourism development. The three main


“In the end, sustainable models of
principles of sustainable tourism development are economic development will only be worked out

sustainability (ensure that tourism development is economically when local communities have

control over their resources and are


efficient and that resources are managed so that they support
committed to preserving them. Such
future generations), social and cultural sustainability (ensure that a pro-environmental ethic is

tourism development increases peoples’ control over their lives, contradicted by the profit-seeking,

growth mentality of neo-colonial


is compatible with the culture and values of people affected by
entrepreneurs operating from
it, and maintains and strengthens community development), and outside the community.” (Mill and

ecological sustainability (ensure that tourism development is Morrison 2002)

compatible with the maintenance of essential ecological processes, biological diversity, and

biological resources). Sustainable tourism development policies, when adopted and followed by

developing nations, can improve the quality of life of the host community, provide a high quality

experience to the visitors, and maintain the quality of an environment that is highly relevant to

the host community (McIntyre, 1993).

CONCLUSION

Tourism can have significant and beneficial economic impacts on developing nations that

act as destination areas. The three main categories of economic impact are increasing foreign

exchange earnings, increasing income, and increasing employment. On the other hand, tourism

development in Third World nations often negatively and permanently alters the destinations’

social and cultural values. Furthermore, tourism development is an important contributor to

environmental degradation in developing countries.


It is vital that policy-makers from developing nations recognize and give appropriate

consideration to both the positive and the negative effects of tourism with respect to economic

development, as well as socio-cultural and environmental values. Furthermore, these policy-

makers need to ensure that locals inhabiting tourist destinations need to play key roles in

determining the future of tourism in their communities. And, most importantly, the principles of

sustainable tourism development need to be followed.

REFERENCES
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Multipliers.
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Tourism, and Hospitatlity Research: A Handbook for Managers and Researchers, J.R.B. Ritchie and C. R.
Goeldner. 2nd ed. New York: John Wiley and Sons Inc., 65-80.

Farver, J. A. M. (1984). Tourism and employment in the Gambia. Annals of Tourism Research, 11(2): 249–265.

Ghimire, K.B. (2001). The Growth of National and Regional Tourism in Developing Countries: An Overview. In
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International Organization for Migration - IOM (2008). World Migration 2008 – Managing Labour Mobility in
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McIntyre, G. (1993). Sustainable tourism development: Guide for local planners. Madrid, Spain: World Tourism
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Mill, R. C., & Morrison., A. M. (2002). The tourism system. 4th ed. Dubuque, Iowa : Kendall/Hunt Publishing, 19-
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from http://www.unwto.org/facts/eng/vision.htm

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Zhao, W., & Li, X. (2006). Globalization of Tourism and Third World Tourism Development - A Political
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