Tourism's Role in Economic Development: The Case Reexamined

Abstract

In search of remedies for persistent balance-of-payments deficits, governments in developing countries and international aid agencies have been attracted to international tourism.1 This stemmed from a superficial view of the demand and supply conditions thought to characterize the trade in travel services. On the demand side, it has been pointed out that receipts from international tourism have been growing faster than world exports: there was an annual rate of increase between 1950 and 1970 of 11 percent as against 9 percent for world exports as a whole, and only 6 percent for those of primary products. As a result, by 1970 international travel accounted for 6.5 percent of total exports, compared with 3.4 percent in 1950. Other explanations for the popularity of this trade arise from a rather naive view of the industry's supply elasticity in developing economies. Tourism has been pictured as an economic activity of fairly simple technology, using resources such as sunshine, scenery, and manpower existing in some abundance in these countries. As a result, the case for tourism in a strategy of accelerated development has appeared overwhelming. It is argued that not only can tourism relieve the shortage of foreign exchange constraining industrial expansion and alleviate the growing problem of urban unemployment, but in the long run it will provide a price and income elastic substitute for staple exports facing less favorable demand conditions. Thus, in the 1960s international agencies like the World Bank, IFC, and IDA increased their loans for tourism purposes, and many less developed countries have been encouraged to give tourism a conspicuous place in their development plans.