Is Tourism A Significant Driver Of The Economy In Underdeveloped Nations?

The tourism sector is a crucial economic driver for developing countries, providing opportunities for job creation, innovation, conservation of natural and cultural assets, and economic empowerment, particularly for women. The World Economic Organization (WEO) reports that economies with large travel and tourism sectors show strong economic growth. Tourism is a major source of income for countries that specialize in this sector, generating 5.8 of the global GDP in 2021.

The Forum’s Global Future Council (GFC) on Sustainable Tourism recommends that tourism destinations prioritize nature conservation. The most important economic feature of activities related to the tourism sector is that they contribute to three high-priority goals of developing countries. With over one billion tourists traveling to international destinations every year, tourism has become a leading economic sector in OECD countries and beyond.

Over the past two decades, tourism exports have been a major driver of economic growth in many emerging and developing countries. In 2023, the Travel and Tourism sector contributed 9.1 to the global GDP, an increase of 23.2 from 2022 and only 4.1 below the 2019 level. However, increased tourism has been found to worsen income inequality in developing economies, while tourism does not have a significant effect on income.

In conclusion, the tourism sector is a significant contributor to economic prosperity, jobs, income, and wellbeing in developing countries. Inclusive growth is a promising idea to investigate for the tourist sector of developing countries, as it contributes to three high-priority goals.

What plays a major role in most economies particularly in developing countries?

Small and Medium Enterprises (SMEs) are crucial for global economic development and job creation, accounting for 90% of businesses worldwide and more than 50% of employment. In emerging economies, formal SMEs contribute up to 40% of national income, with informal SMEs contributing significantly more. The International Finance Corporation estimates that 65 million firms, or 40 of formal micro, small and medium enterprises (MSMEs) in developing countries, have an unmet financing need of $5. 2 trillion annually, equivalent to 1. 4 times the current level of global MSME lending.

SMEs are less likely to obtain bank loans than large firms and rely on internal funds or cash from friends and family. The International Finance Corporation estimates that 65 million firms, or 40 of MSMEs in developing countries, have an unmet financing need of $5. 2 trillion every year, which is equivalent to 1. 4 times the current level of global MSME lending.

In Bangladesh, the Access to Finance for Women SMEs Project aims to create an enabling environment to expand access to finance for women SMEs by supporting the establishment of a credit guarantee scheme (CGS), issuance of SME Finance Policy, and strengthening capacity of the regulator and sector. The project supported the issuance of Bangladesh’s maiden SME Finance Policy in September 2019, which aims to boost SME financing.

With nearly 10 million SMEs contributing to 23 of the GDP, 80 of jobs in the industries sector, and 25 of the total labor force, the SME Finance Policy will play a pivotal role in enhancing SME financing.

What is the main economic activity in most low income countries?

Improved domestic agricultural productivity is a significant driver of income growth in many developing countries, which heavily rely on the agricultural sector for economic growth. This growth reduces poverty and improves food security. Enhanced agricultural efficiency generates greater food availability, increases demand for industrial goods and services, and could result in higher export earnings. As agricultural productivity increases, a supply-demand cycle may be generated between agriculture and the rest of the economy, stimulating income growth.

As agricultural efficiency improves, labor and capital are released to seek higher wages in other economic sectors, facilitating overall economic growth. Developing countries like India, Indonesia, and Colombia have achieved growth in agricultural productivity while increasing US agricultural imports.

What are 3 main negative impacts of tourism?

Tourism often leads to over-consumption of natural resources, causing soil erosion, pollution, habitat loss, and increased pressure on endangered species, especially in scarce areas and putting immense stress on local land use.

How much does tourism contribute to global economic growth?

In 2023, travel and tourism contributed to the global GDP by 4%, reaching 9. 9 trillion U. S. dollars. This figure is predicted to reach 11. 1 trillion U. S. dollars in 2024, surpassing pre-pandemic levels. GDP, the total value of goods and services produced in a country, is an indicator of a country’s economic strength. The United States and China were the leading travel markets before and after the COVID-19 pandemic, followed by Germany, the United Kingdom, and Japan.

The number of international tourist arrivals increased significantly in 2023, with France welcoming 100 million visitors, followed by Spain and the United States. However, the number of international tourist arrivals did not catch up with pre-pandemic levels.

What are the disadvantages of tourism in developing countries?

Tourism can lead to economic inequality, social tensions, and competition with foreign brands, causing a concentration of wealth. It can also lead to overreliance on one industry, making the local economy susceptible to fluctuations due to tourist arrivals. Factors such as economic recession, political instability, and natural disasters can affect the local economy. Despite its benefits, tourism also has significant disadvantages.

Underdeveloped countries need to follow sustainable tourism practices to mitigate these negative impacts and ensure tourism contributes positively to their development. While tourism is an important sector for all nations, underdeveloped countries must adopt sustainable practices to ensure the growth and development of their tourism industry.

How does tourism exploit poorer nations?

The tourism industry exploits migrant workers, who provide cheap labor, endure harsh conditions, and are less likely to join trade unions, while women in the industry face the most dehumanizing and low-paying jobs globally.

Is tourism good or bad for developing countries?

Tourism’s economic significance is largely due to the rapid growth of world travel demand compared to merchandise exports. Between 1958 and 1967, international tourist receipts increased by an average of 11. 2%, compared to 7. 4% for world exports. In developing countries, the demand for international tourism is higher than for traditional exports, contributing to national income through foreign exchange earnings.

Tourism is labor-intensive and generates employment, affecting all sectors of the economy, including service and construction, and generating additional demand for local products. The expansion of the tourist sector can contribute rapidly to development, as most tourist investment projects have a short gestation period.

How does tourism influence economic development?

Tourism is a significant source of income for countries specializing in this sector, generating 5. 8 of the global GDP in 2021 and providing 5. 4 of all jobs worldwide. However, the Covid-19 health crisis has significantly reduced tourism data. Prior to the pandemic, tourism represented 10. 3 of the worldwide GDP and 10. 2 of the global total. With the pandemic’s evolution and regained tourist trust, it is estimated that by 2022, approximately 80 of the pre-pandemic figures will be achieved, with a full recovery expected by 2024.

Many countries consider tourism as a tool for economic growth. Numerous studies have analyzed the relationship between increased tourism and economic growth, with some studies showing that tourism contributes to economic growth while others suggest that the economic cycle influences tourism expansion. International organizations like the OECD and UNCTAD suggest that tourism not only promotes economic growth but also contributes to socio-economic advances in host regions, which may be the real importance of tourism, as the ultimate objective of any government is to improve a country’s socio-economic development.

What are the problems with tourism in developing countries?

The main challenges identified include inadequate infrastructure, poor product development, poor marketing, poor local economy linkages, insufficient institutional and technical capabilities, and shortage of specialized personnel.

What is the role of tourism in economic development of a country?

Tourism activities are crucial for developing countries as they contribute to income generation, employment, and foreign exchange earnings. The sector can play a significant role in economic development, with its impact depending on each country’s specific characteristics. The complexity of tourism consumption makes its economic impact felt across other production sectors, contributing to accelerated development. However, defining the boundaries of the tourism sector is challenging due to its interdependence with other sectors.

The lack of reliable statistical data hinders the identification of growth mechanisms and potential for development. However, in cases where analysis and research have preceded planning, tourism’s priority in competing for scarce investment funds has been established, leading to the design of long-term programs for tourism development.

How does tourism affect the economy of developing countries?

Tourism generates direct and indirect benefits, including accommodation, transport, and attractions, as well as supporting activities like construction and retailing. It also enhances a country’s global image and attracts foreign investment. However, challenges like limited infrastructure, political instability, and a lack of local tourism products persist in emerging markets, where small island communities rely more on foreign tourism for job creation and economic opportunities. Online travel agencies can address these challenges to maximize their potential.