Tourism: think sustainability, think international trade remarks by the executive director, itc

16 September 2015
ITC News
UNWTO special event on financing of tourism for development
15 september 2015

Ladies and gentlemen

I am delighted to be here, and to be able to announce the partnership the International Trade Centre (ITC) is launching together with the UN World Tourism Organisation (UNWTO) on a topic central to today’s discussions, namely, Aid for Trade to international tourism. Which, as we argue, has the potential to be an important source of financing for maximising the development potential of tourism.

I am proud to share our new joint publication, “Tourism and Trade: A Global Agenda for Sustainable Development.” As the publication says, International Tourism is International Trade.

And international trade is a key driver of growth and employment in developing countries. This why ITC has as its mission, to empower small and medium-sized enterprises (SMEs) to become more competitive and connect to international value chains.

As the UN summit on Financing for Development in Addis Ababa made clear this summer, development finance has three pillars: international solidarity, in the form of development assistance; domestic resource mobilisation, which is to say revenue collection including fighting against illicit financial flows; and the power of private sector.

The data clearly indicates that not enough of the first pillar is going into tourism.
Let’s look at some figures.

Tourism directly or indirectly accounts for nearly 10% of global GDP, and one in eleven jobs worldwide. International tourism is only a subset of this of course, but in 2014, it still generated $1.25 trillion in tourist receipts in destination countries and an additional $220 billion in passenger transport. International tourism generates 30% of world services exports and 6% of all exports- goods and services combined.

For several developing countries, especially for small island developing states (SIDS) in the Caribbean and the Pacific; and LDCs including Burkina Faso, Cambodia, Rwanda, Nepal and Tanzania, tourism is a top export earner. For many more, it is a leading earner of foreign exchange. If we take the developing world as a whole, tourism is responsible for more exports than any sector other than fuels, food, and textiles and clothing. Even for some low-income countries where tourism accounts for a lower share of output than it does for the world as a whole, it accounts for 4% of GDP.

And yet, tourism is largely underrepresented in Aid for Trade. Over the period 2006 to 2013, only 0.4% of total Aid for Trade flows were directed to tourism development.

You might suggest that this is only normal for a sector that already brings $500 billion in revenue and hundreds of thousands of jobs to developing countries and is projected to grow at annual rates of up to 4% through 2030.

But the fact is that the status quo patterns of investment do not guarantee that the resulting economic growth will be inclusive. Foreign investors will not automatically invest in developing the backward linkages to food and beverage procurement, local products, or cultural tourism that generate spillovers for the communities in which tourist developments are located. Developing country governments might be wary of promoting such linkages too vigorously, for fear of dissuading potential investors. Aid for Trade, therefore, has a unique role to play in catalysing the greater inclusiveness ‘bang’ for each ‘buck’ invested in tourism.

More than most sectors, tourism contributes to youth and women’s employment. It represents a source of high productivity jobs and income for communities. As we have seen, it has the potential for strong linkages to other sectors. Yet too often, tourism’s enormous development potential gets downplayed, or marginalised. We have also seen this in our own work at ITC. We have worked with partners to develop projects to create jobs, improve the performance of tourism SMEs, and increase incomes in Uganda, Senegal, Gambia, Tajikistan and other countries. But many of these projects are often made a lower priority than other sectors, even when the latter may have a smaller cumulative impact on the economy.

How can we help unlock the full potential of tourism? Perception change is critical for highlighting tourism’s potential as a development tool. Quite often there is simply insufficient awareness of the contribution and potential of the sector.

Beyond that, however, is the identification of strategic priorities, and the development and implementation of clear and relevant action agendas. This in turn requires effective, responsive and committed governance structures and processes that support tourism. The private sector and other stakeholders must be fully engaged alongside governments.

Such engagement must be informed by all the relevant facts, while setting goals for tourism-led inclusive growth that are both ambitious and realistic. In partnership with UNWTO, we are working to make this a reality.

What are some key things we can do?

First, look at tourism from a trade and value chain angle to examine and understand the possibilities. The joint UNWTO/ITC paper shows the stages of a tourist’s journey at which international transactions take place, while presenting linkages between the tourist value chain and a wide range of trade and other policy issues. These linkages speak of the complexity, but also the potential, of tourism in economic development.

We need the trade policy community to understand that tourism is not just about hospitality services and Foreign Direct Investment (FDI) under the WTO agreement on services (GATS). It’s about transport, financial services, insurance, construction, water and sanitation, food processing, and more. WTO rules for merchandise trade affect, for instance, whether hotels can access foreign goods to improve energy efficiency. Investment and visa policies also have a huge impact on tourism. Offers to liberalize trade in tourism for LDCs as part of the LDC services waiver are an interesting recent development in this area.

Second. Unlocking tourism potential requires strategies that go beyond traditional Tourism Master Plans to include policy dimensions that fall within the arena of international trade and FDI. In addition, these strategies must identify action requirements at the national level and the firm level to improve the tourism business environment. To emphasize the international trade aspect of tourism, such strategies could be Tourism Export Strategies, which is a term that explicitly acknowledges the goal of integration into international markets. ITC has developed such strategies in Myanmar, Kyrgyzstan, Palestine and in other economies.

Third. Support better data and analysis. Statistical information on the multiple facets of the tourism sector is pivotal in advancing knowledge, monitoring progress, promoting results-focused management, and highlighting strategic issues for policy decisions. A number of existing data collection exercises relevant for the tourism industry are under way. The UNWTO has done great work in improving the compendium of tourism statistics and the Tourism Satellite Account (TSA). ITC, building on its work analysing non-tariff measures for goods, will be developing a survey on barriers to trade in tourism to support policymakers in their decision making related to regulation and trade policy for tourism.

Fourth. Reinforce specialized institutions supporting SMEs. Given the large proportion of small and medium-sized enterprises in tourism, governments need to build mechanisms for business dialogue and consultation and for SME support. Coalitions of Services Industries (CSI) can be important vehicles for representing services sector concerns in multi-stakeholder consultative processes. ITC’s recent experiences in Saint Lucia have seen CSIs focusing on key tourism industry issues, such as erratic and seasonal demand.

Fifth, as I noted before, it is imperative to focus on the inclusion and retention of local value added. We need to look at all the potential linkages between tourism developments and local value added, and to focus on making those offerings more competitive. These range from crafts to clothing and accessories, to local foods, flowers and services. ITC is working with the horticulture sector in Tanzania, the food sector in Myanmar and a variety of agriculture and food sectors in Fiji to improve quality, volumes and value-addition in foods supplied to the hospitality sector.

Finally, conduct joint advocacy on the importance of tourism. This is what we are doing today. As a result of the efforts of many of the people in this room, the word is getting out that tourism has enormous development potential that is still going un-seized. Tourism is embedded in the SDGs. It has been featured prominently in international development frameworks from Rio+20 to the agendas adopted by UN conferences on LDCs, small island development states, and landlocked developing countries. Together with the World Trade Organization, ITC is committed to raising awareness of the importance of tourism as part of the services policy dialogue in Geneva. Tourism will be a focus sector at our World Export Development Forum in Qatar this October, with a strong B2B component. I invite all of you to join us in Doha.

Tourism should also be a priority in the new phase of the Enhanced Integrated Framework for Least Developed Countries (EIF) to which you are invited to make pledges during the upcoming World Trade Organisation Ministerial Conference taking place in Nairobi, Kenya in December.

In a nutshell, we need to put more trade in the tourism community and more tourism in the trade community so that the two synergise their actions for sustainable, inclusive growth- just as ITC and UNWTO are doing today.

Thank you.