1. Viability of International Tourism Symposium on Tourism Services World Trade Organization, Geneva, February 23, 2001 Iain T. Christie MIGA ichristie@worldbank.org World Bank Group

2. WTTCs estimates for 1999: Travel and Tourism:11.7% of global GDP Tourist expenditures: 8%of global exports Employment: 8%jobs worldwide Tourism Satellite Accounts (TSA) Source: World Travel and Tourism Council (WTTC) TOURISM IN THE GLOBAL ECONOMY World Bank Group

3. Tourism is designated as significant when: > 2% of GDP, or > 5% of exports TOURISM IS SIGNIFICANT IN: - 11 of the 12 poorest countries of the world (< US$1/day) - half of the lowest income countries - almost all lower middle income countries Source: DFID: Tourism and Poverty Elimination: Untapped Potential TOURISM & POVERTY World Bank Group

4. World Bank Group TOURISM PROJECT DATA REQUIREMENTS Tourism Satellite Account If you can afford it -- go for it! Modular approach Data requirements for sustainability: Pricing, conservation of scarce, fragile resources Value added & leakage Linkages to other sectors Investment, local and foreign Job creation and quality Poverty alleviation, creation of wealth and growth.

5. DEMAND from client countries IFC finances tourist establishments MIGA provides guarantees and investment promotion Bank/IDA Formerly financed tourism, including: Infrastructure & site development Hotel credit Tourism training Cultural heritage Renewed interest, spurred by: Environment & Ecotourism -- GEF Poverty alleviation Community participation & social inclusion Cultural heritage & preservation WBG CONTEXT World Bank Group

6. TOURISM IS A PRIVATE SECTOR ACTIVITY Entrepreneurs finance hotels & other businesses Opportunity to make profits Cross sectoral with wide business linkages SUCCESS DEPENDS ON A PERFORMING PUBLIC SECTOR Policy & regulatory framework (economic, social & cultural) Infrastructure services, public & private Key services: public health, security & rule of law PUBLIC/PRIVATE PARTNERSHIP DONOR COMMUNITY THE ACTORS World Bank Group

7. RIO EARTH SUMMIT AGENDA 21, 1992 - one of few economic activities capable of providing economic incentives for preservation of the environment - potential major source of continuing employment for women and the unskilled COMMISSION FOR SUSTAINABLE DEVELOPMENT 19 SUSTAINABILITY economic benefits of tourism have the potential to alleviate poverty in the developing world, but capacity building is needed at the local level to achieve the goal World Bank Group

8. POVERTY ALLEVIATION INTERDISCIPLINARY NATURE OF TOURISM FINANCIAL AND ECONOMIC Create the opportunity for owners, investors to make profits Economic catalyst - Expenditure outside tourist enterprises Leakages or linkages? Employment Tax revenues Regional development Ownership SOCIO-CULTURAL Inclusion of local people in benefits Interpretation, protection of cultural heritage ENVIRONMENTAL Conservation and mitigation Eco-tourism, coastal zone management (CZM), wildlife management EXTERNALITIES SUSTAINABILITY & DEVELOPMENT

9. MACRO POLICIES Foreign exchange Monetary policy Tax and trade policy Employment INSTITUTIONAL FRAMEWORK Public/private partnerships NGOs Community participation Investment promotion Marketing & sales Consumer preferences Public awareness FINANCING FDI Hotel SME & micro-credit Infrastructure Risk mitigation CAPACITY BUILDING Foster enterprise learning Operating, financial, commercial and marketing management. Training and professional development. REGULATION & COMPETITION Competition Environment & physical planning Privatization Property rights & contract enforcement Judicial reform Security Health MICRO ISSUES Sector policy Infrastructure & service costs Employment creation & income generation Hotel Standards SECTORAL LINKAGES Agriculture Infrastructure Education & health Manufacturing Construction Handicrafts TOURISM: AN ENTRY POINT TOURISM AS AN ENTRY POINT World Bank Group

10. TOURISM VULNERABILITIES: MYTHS AND REALITY Myths:1.Leakage of foreign exchange 2.Volatility of demand 3.Foreign ownership and management 4.Not pro-poor Reality:1.Compare leakage between sectors -- focus on linkages Pricing of fragile tourism resources 2.Volatility usually based on conditions pertaining locally, not commodity prices 3.Evidence of high level of local investment Training of local staff in large chains Tourism requires international experience 4.If local communities included, tourism is powerful stimulus for job, wealth creation FINANCIAL & ECONOMIC SUSTAINABILITY

11. ERRs ON HOTEL PROJECTS (sample of 46 IFC hotel projects)  12% = average of all IFC projects  8 hotel projects had ERR>20%  9 projects between 1995-1997, ERR median 16%  >ERR for IFC as a whole World Bank Group Composition Charter Scheduled Of Package (%) Two week Three week (E. Philip English) Long-haul Short-Haul LDC DC Package: Tour operator -- 21 -- 11 Air transportation 4 39 9 9 Hotel & Transfer 19 -- 27 -- Other expenditures17 -- 44 -- Total40 60 80 20

12. Turkey: South Antalya Tourism Project Projected Completion at appraisal (1990) Total costs (US$ millions) a/ Infrastructure 65.0 43.0 Accommodations (beds) b/ 1,050 (existing) 6,100 10,350 Room occupancy (%) 75 60 Domestic tourists (%) 20 37 Economic rate of return (%) 17.2 10.5 c/ Jobs created (1990)12,500 7,300 d/ a/ Rapid devaluation resulted in higher TL costs than at appraisal b/ Includes hotels, vacation villages, guest houses, etc. c/ Lower expenditures than forecast outside hotel, as well as lower occupancies; does not include benefits to local populations d/ Excludes construction industry and reflects seasonality World Bank Group

13. Dominican Republic: Puerto Plata Projects (Infrastructure and Hotel Credit) Projected Completion at appraisal (1990) Total costs (US$ millions) First project 36.0 49.5 Loan 21.0 20.9 Second project 71.0 71.0 Loan 25.0 21.5 Superstructure N/A 180.0 (Period of rapid devaluation and inflation in 1980s (>40%) ) Accommodations (rooms) 1,600 3,300 Room occupancy (%) 65 76 Cost per room ($)44,000 75,000 Cruise passengers (000s) 3.2 47.9 Economic rate of return (%) 17.5 (low) 12 (Role of tourism incentive law) (upper) 26 Jobs created Direct6,00012,000 Indirect N/A28,000 Forex earnings (US$ millions) 100 (1980) 1,000 World Bank Group

14. DOES TOURISM HAVE A COMPETITIVE ADVANTAGE? IS IT VIABLE? - Specific context, given endowments, socio-cultural, economic, and environmental considerations MAINSTREAM TOURISM BY: - Building multi-sectoral teams - Launching pilot projects to demonstrate capacity - Working with partners, stakeholders WBG: WHEN TO INTERVENE? - Public good content - Market failure - Other gaps in competitiveness MIGA: Investment promotion, guarantees IFC: Transactions World Bank: Policy framework, public lending, business environment - Lending or non-lending? CONCLUSIONS World Bank Group