Economic Contribution of Tourism in Kenya

Abstract

As in many other developing countries, tourism is one of the key drivers of Kenya's socioeconomic development. At independence in 1963, Kenya depended mainly on its exports of agricultural products such as coffee and tea for foreign exchange. However, with the decline in world market prices of these primary products, the country has turned to tourism as an alternative. In spite of the growing importance of tourism as a key industry, little information is available on the holistic economic impacts and the pathways through which these impacts are affected in the Kenyan economy. Without information on how tourism as a complex industry is linked to the other sectors of the economy, policy makers will be at a loss on how to effectively stimulate its growth, develop capacity, and enhance its positive impacts. This research proposes to use data from the Kenya Social Accounting Matrix (SAM) 2001 to examine the impact of tourism on production, value added, and employment. From the complete SAM model, whose exogenous components include government, international trade, and saving-investment accounts, you need 9.63% of total production, 6.70% of employment, and 10.57% of value added to satisfy the export for other private services. These results indicate that the private services sector in general and tourism in particular is an important economic activity with potential to play an even bigger role in spurring output, incomes, and creating employment. The enhancement of the tourism sector's backward linkages with the extractive sectors, equipping manpower with skills required for better employment positions, increasing the share of local ownership in the service sector, and the diversification of tourism attractions would be helpful policies to leverage tourism's potential.