A WTO-GATS-Tourism Impact Assessment Framework for Developing Countries

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2 A WTO-GATS-Tourism Impact Assessment Framework for Deveoping Countries Church Deveopment Service- An Association of the Protestant Churches in Germany (EED) The Church Deveopment Service (EED), promotes the programs of partner organisations, monitors deveopment poicies of Governments and Mutiatera Institutions with an aim to ensure Peace, Justice and Human Rights. EQUATIONS, India EQUATIONS was founded in 1985, in response to an urge to understand the impacts of tourism deveopment in the context of iberaised trade regimes, the opening up of the nationa economy and initiation of economic reforms. We envision tourism that is non-expoitative, where decision-making is democratised and access to and benefits of tourism are equitaby distributed. Evangeischer Entwickungsdienst (EED) Urich-von-Hasse-Strasse-76, Bonn, Germany Te: +49 (0) , Fax: +49 (0) E-mai: This study has been authored by EQUATIONS, India, with K T Suresh as team eader and Vidya Rangan as principa researcher and writer. EQUATIONS gratefuy acknowedges inputs from Nina Rao, Ashok Rao, Shamai Gutta, Biswajit Dhar, Benny Kuruvia, Shefai Sharma and comments from Jane Kesey and Professor Antony Cayton. The cover page depicts a section of a beach in Beka, India, cordoned off by a uxury hote for private use. EQUATIONS 23-25, 8th Cross, Vignan Nagar, New Thippasandra PO Bangaore , INDIA Ph: +91 (80) / / Fax: +91 (80) E-mai:info@equitabetourism.org Layout Design: CBEYOND Design Pvt Ltd, Bangaore, India August 2005

3 EED and EQUATIONS August 2005 A WTO-GATS-TOURISM IMPACT ASSESMENT FRAMEWORK for Deveoping Countries

4 Tabe of Contents Executive Summary Introduction Methodoogy Poicy Impacts Economic Impacts Environmenta Impacts Socia Impacts Institutiona Impacts Recommendations Annexure: Expanatory Note on the GATS References Endnotes

5 GA GATS EXECUTIVE SUMMARY Why shoud Tourism be taken seriousy? According to the Word Trave and Tourism Counci, the combined direct and indirect contribution of the trave & tourism economy is expected to tota 10.6% of word gross domestic product (GDP) in 2005, which wi be a staggering figure of around USD 4.5 triion. The goba trave & tourism industry is expected to produce 2.1 miion direct new jobs in 2005 over it s 2004 eve to tota 74.2 miion jobs or 2.8% of tota word empoyment. Accounting for another 2.1 miion jobs that wi be created in the sectors indirecty associated with the trave and tourism industry a tota of miion jobs dependent on Trave & Tourism or 8.3% of tota empoyment wi be created by the end of Tourism sector can make or break economies. In countries such as Vanuatu, Madives, Bahamas, Barbados, San Marino and Andorra this sector contributes more than 50% to the GDP. On the other hand, tourism receipts become insignificant for some. Exampes are Bangadesh, India, Burundi, Cameroon, Haiti and Suriname wherein, tourism contributes ess than 5% of their GDP. Interestingy, a trend that became ceary visibe in the decade of the nineties and which continues to manifest itsef ti date is: Tourism exports has emerged as a primary foreign exchange earner in 49 east deveoped countries (LDCs) Tourism is now a principa export earner for 83% of deveoping countries and the principa export earner for one third of them. More than 20% of the popuations in around 20 of the 49 LDCs are engaged directy into tourism activities. Loca communities, economies and Tourism What attracts tourists to these destinations? Least deveoped and a host of deveoping countries attract tourists due to their rich heritage, biodiversity and ecoogy and traditiona knowedge. Countries such as India and Sri Lanka are fast emerging as eaders in heath-tourism, wherein traditiona scientific therapies are being used to sooth sou and bodies of tourists. Intensifying tourist-vaue of these ecoogicay diverse and heritage tourist destinations within deveoping and east deveoped countries has spun a web of economic gains for their respective governments, arge hote-chains and service providers with internationa presence. Have these economic gains been shared with oca communities who have been historica guardians of these ecoogica and heritage sites? In many cases, one finds oca and indigenous communities, have either been forciby disenfranchised of their egitimate economic and socia right over these spaces or have been paid menia compensations that have in a way commodified the cutura importance of these spaces in the iveihood of these communities. It is not ony oca societies that are experiencing stress but oca economies are aso under pressure. The atter s support systems, viz. sma oca manufacturing enterprises are finding it increasingy difficut to sustain their identity and financia viabiity - thanks to poicies that are being pushed by arger, verticay integrated and mightier tourism-business entities compeing the Davids to fight with Goiaths on a unequa terrain. In many cases, the State and its agencies wiingy coaborate with arge business, as such coaboration ends a poitica opportunity to the State for showcasing its incredibe past to hide its tumutuous present. GATS, Tourism expansion and critica questions As activists we shoud then ask ourseves whether the commitments that our respective governments are making on tourism services under the Genera Agreement on Trade in Services (GATS) are arresting proiferation of such a phenomenon and promoting sustainabe tourism (as envisaged under Convention on Bioogica Diversity, Commission on Sustainabe Deveopment) by: Addressing the socia, ecoogica and cutura concerns of communities and indigenous peope directy impacted by pressures of tourism; Aowing communities and peope un-hindered access to natura resources which they have protected for centuries; 1

6 Maintaining the identity and financia viabiity of oca business ventures that support iveihoods in the region. Evoving a anaytica framework The issues raised in the buets above provide an effective and participatory framework for us to anayze the impact unfoding negotiations on tourism services wi have on constituencies and groups with whom we work on the ground. This pubication goes beyond provision of such a framework. By using the internationay accepted sustainabe tourism principes as a normative framework, it points out how unfoding negotiations on tourism services under GATS wi impact peope and poicies aong economic, environmenta, socia and institutiona axes in countries/regions such as Fiji, East Africa, Brazi & Mexico and India. : (a) Economic axis The anaysis under this axis has examined: Whether growth of tourism in the Fijian economy has inked itsef effectivey with improving the prosperity of Fijian oca communities; The roe of sma and medium enterprises in tourism expansion of Fiji. If encavization has resuted from impementation of Tourism Deveopment Pans; The impact of tourism industry on quaity and magnitude of empoyment generation; (b) Environmenta axis The anaysis under this axis has studied: The impact of tourism expansion on bioogica diversity in countries such as Kenya, Tanzania and Uganda in East Africa; How certain commitments under various modes can accentuate depetion of natura resources and further reduce access of peope to natura resources; The reationship between GATS commitments and poicy/egisative instruments to reguate poution and waste generation in Kenya; (c) Socia axis The investigation under this axis has examined: How commitments within GATS framework wi impact poicy space reevant for protecting the rights of indegenous communities within Mexico; The inkages between unfoding tourism expansion under GATS and reguations/ guideines/internationa principes, to prevent abuse of women and chidren; (d) Institutiona axis The examination under this axis covers: The interface between tourism and decision-making as we as reguatory powers enshrined with Panchayats in the Indian context; The importance of understanding the reevance of domestic institutions at the centra and sub-nationa eves in the context of unfoding GATS negotiations; The important egisations that wi have to be studied in the Indian context whie conducting anaysis of how negotiations on tourism services under GATS wi impact peope; Why is such anaysis critica? We have seen that caims made by us have been rejected on the basis of ack of empirica rigour. By engaging into such anaytica exercises the activist wi be armed with a strategic research based on empirica evidence. This empirica evidence wi provide much required anaytica musce to the demands of communities and moreover wi arm activist to go on the offensive, at the oca, nationa and internationa eve. In essence.. This report has juxtaposed the GATS against sustainabe tourism, to deveop a framework for anayzing the impacts of the former on the atter. This framework is deveoped with the intention of arming activists and governments to strengthen their research and boster their advocacy efforts. 2

7 GATS INTRODUCTION Tourism is the word s biggest and fastest growing industry and that it has the potentia to foster economic growth and deveopment gobay, is an irrefutabe argument. But athough it might be pursued for purey economic reasons, the impacts of tourism cut across a spheres to incude the socio-cutura, environmenta, institutiona and economic aspects of deveopment. Therefore there is a pressing need to ensure that gobay and ocay, tourism deveops in a sustainabe manner by conserving the resources that it depends on, respecting the democratic and socio-cutura rights of communities it affects and benefiting the region in which it deveops. Acknowedging this need, many internationa bodies have deveoped sustainabe tourism guideines and principes that address the sector in a its mutidimensionaity and which ceary articuate to the government, industry and communities, why and how it can be ensured that tourism deveopment is economicay, cuturay and environmentay sustainabe. Chief among these are the Goba Code of Ethics for Tourism deveoped by the Word Tourism Organisation (WTO-OMT), the Sustainabe Tourism Guideines drawn up by the United Nations Commission on Sustainabe Deveopment (CSD) at its Seventh Session hed at New York in 1999 and the Internationa Guideines for Activities Reated to Sustainabe Tourism Deveopment deveoped by the United Nations Convention on Bioogica Diversity (CBD) 1. Deveoped by internationa institutions and ratified by nationa governments, these guideines are refective of the growing goba commitment towards enabing sustainabe tourism deveopment. Nationa governments are aso signatories to the Genera Agreement on Trade in Services (GATS) -one of the many sub-agreements administered by the Word Trade Organisation and aiming to deveop a set of goba trading rues in services, incuding tourism. Within the ambit of this iberaisation, 125 out of the WTO s 148 members have undertaken commitments under tourism and trave-reated services the argest from amongst a service sectors. However, an understanding of how such sector-specific commitments wi impact the nature and form of tourism in deveoping countries remains uncear. The iberaisation of tourism under the GATS aso begs the question of what impications such a process wi have on sustainabe tourism initiatives enunciated by other internationa bodies ike the WTO-OMT, CSD and CBD; more so when commitments made by governments under the GATS are egay binding whie those made under the CSD or CBD are ony obigatory. Anaysing these two processes simutaneousy highights the two divergent forms of tourism being promoted one, a service to be traded freey and unconstrained between countries, and another, a genuine too to be used sustainaby to achieve oca and coective deveopment. The need to undertake this anaysis in the context of deveoping countries is even more imperative as tourism is the principa export earner for 83% of the deveoping word and the principa export for one-third of it (Pro-Poor Tourism 2004). But whie the dependence on tourism is high, the share of deveoping countries in this goba tourism pie remains dismay ow 2. Within the WTO, deveoping countries have argey payed 3

8 a margina and defensive roe (EQUATIONS, 2002) and trading decisions continued to be infuenced by corporate interests and poitica cout. Given the economic chaenge they are aready faced with and the need to pursue it responsiby, deveoping countries have to seriousy consider the ong-term impications of their sector-specific GATS commitments on the sustainabiity of their domestic tourism sectors. Towards fufiing this need, this report presents, expains and iustrates a framework that has been structured to aid deveoping countries to anayse the impacts of the GATS on tourism in their region aong five dimensions: poicy, economic, environmenta, socia and institutiona. In deveoping this tempate and the indicators therein, the report has used as its normative framework, the sustainabe tourism guideines deveoped by the WTO-OMT, CSD and CBD. Section II introduces the framework, the methodoogy foowed for choosing the indicators and the case studies. Section III describes in detai each dimension of impacts by expaining the indicators deveoped and the anaysis made through the ens of countries sector-specific GATS commitments. Section IV summarises the anaysis under a few main points of recommendations. 4

9 GATS FRAMEWORK and METHODOLOGY The objective of this report is to present a framework that aids deveoping countries in their research and anaysis of the impacts of the GATS on sustainabe tourism. To arrive at this tempate, this report has used as its normative framework, the three sets of principes governing sustainabe tourism deveoped by the Word Tourism Organisation, Commission on Sustainabe Deveopment and the Convention on Bioogica Diversity. Against the background of these principes, the framework anayses the impacts of the GATS on tourism aong five important axes poicy, economic, environmenta, socia and institutiona by identifying indicators under each of these. Section III of this report iustrates each indicator of the tempate represented in Tabe 1, with case studies of tourism impacts from across the deveoping word that highights the significance of the indicator. The methodoogy foowed for identifying the case studies and researching them is detaied in the foowing section. Tempate to Assess the Impacts of GATS on Sustainabe Tourism in Deveoping Countries Case studies g FIJI EAST CARIBBEAN BRAZIL MEXICO INDIA AFRICA Indicators i I. POLICY IMPACTS II. ECONOMIC IMPACTS P 1. Percentage of Tourism Receipts retained ocay P 2. Tourism as an Export Mono-crop P 3. Encavisation P 4. Empoyment Potentia P 5. Roe of Sma and Medium Enterprises P III. ENVIRONMENTAL IMPACTS P 6. Loss of Biodiversity P 7. Depetion of and Access to Natura Resources P 8. Poution P IV. SOCIAL IMPACTS 9. Indigenous Peope P 10. Chidren P P 11. Cutura impacts P 12. Gender perspective P V. INSTITUTIONAL IMPACTS 13. Constitutiona Framework P 14. Domestic Poicy and Reguatory Framework P 15. Internationa Reguatory Framework P 16. Internationa Institutions P 5

10 Methodoogy for identifying the Case Studies The process of identifying case studies to iustrate the different dimensions of this tempate invoved many steps, which have been outined in this section. Step 1 Broad Banding of Countries based on Share of Tourism in the Nation s Gross Domestic Product The growing importance of tourism indicated through its increasing share in macroeconomic indicators ike a country s Gross Domestic Product, Export Earning, Investment Expenditure and so on are often quoted as the reasons to promote it rigorousy. The first step towards choosing case studies to highight the sustainabiity concerns that this report is raising, was to get an overview of the importance of tourism to different economies as indicated by its share in a nation s GDP. The foowing tabe cassifies countries into different bands on the basis of the share of tourism in their nationa GDP (WTTC, 2004). % Share of Trave and Tourism Economy in tota Gross Domestic Product (GDP) Region O C E A N I A <5% 5-10% 11-20% 21-30% 31-40% 41-50% 50-75% >75% Soomon Isands Austraia New Zeaand Tonga Fiji Kiribati French Poynesia Paau Guam Fed Is. of Poynesia Vanuatu Region % Share of Trave and Tourism Economy in tota Gross Domestic Product (GDP) < 5% 5-10% 11-20% 21-30% 31-40% 41-50% 50-75% >75% A S I A Bangadesh I n d i a Burma Nepa Pakistan Sri Lanka Brunei Cambodia Indonesia Laos Phiippines Singapore Vietnam Iran Israe Kuwait Saudi Arabia Syria U.A.E Yemen Oman Maaysia Papua New Guinea Thaiand Jordan Lebanon Qatar Bahrain Cyprus Madives 6

11 % Share of Trave and Tourism Economy in tota Gross Domestic Product (GDP) Region N A O M R E T R H I C A <5% 5-10% 11-20% 21-30% 31-40% 41-50% 50-75% >75% Mexico United States Canada Region A F R I C A % Share of Trave and Tourism Economy in tota Gross Domestic Product (GDP) < 5% 5-10% 11-20% 21-30% 31-40% 41-50% 50-75% >75% Burundi Cameroon Centra African Repubic Cote d Ivoire Guinea Uganda Ageria Libya Benin Botswana Burkina Faso Chad Ghana Lesotho Madagascar Maawi Mai Namibia Tanzania South Africa Egypt Morocco Tunisia Cape Verde Comoros Ethiopia Gabon Kenya Mata Angoa Gambia Mauritius Region C A R I B B E A N % Share of Trave and Tourism Economy in tota Gross Domestic Product (GDP) <5% 5-10% 11-20% 21-30% 31-40% 41-50% 50-75% >75% Haiti Curacao Cuba Martinique Puerto Rico Trinidad & Tobago Bermuda Dominica Dominican Repubic Grenada Guadeoupe Cayman Isands Jamaica St.Kitts & Nevis St.Vincent & the Grenadines Virgin Isands Saint Lucia Aruba Bahamas Barbados Anguia Antigua & Barbuda British Virgin Isands 7

12 % Share of Trave and Tourism Economy in tota Gross Domestic Product (GDP) Region E U R O P E <5% 5-10% 11-20% 21-30% 31-40% 41-50% 50-75% >75% Bearus Bosnia and Herzegovina Latvia Lithuania Macedonia Poand Romania Russian Fed Yugosavia Begium Denmark Finand Germany Ireand Netherands Sweden Norway Turkey Abania Bugaria Czech Repubic Hungary Montenegro Sovakia Sovenia Ukraine Austria France Greece Itay Luxembourg Portuga United Kingdom Iceand Switzerand Spain Croatia Estonia Gibratar Jersey Monaco Mata San Marino Andorra Region L A T I N A M E R I C A % Share of Trave and Tourism Economy in tota Gross Domestic Product (GDP) <5% 5-10% 11-20% 21-30% 31-40% 41-50% 50-75% >75% Suriname Argentina Boivia Brazi Chie Coombia Ecuador E Savador Guatemaa Honduras Nicaragua Paraguay Peru Uruguay Venezuea Costa Rica Guyana Panama Beize The dependence on tourism differs greaty between deveoped and deveoping countries and within the deveoping word itsef. With the exception of traditionay strong tourism economies in Western Europe, in the majority of the deveoped word, tourism accounts for between 5-15% of nationa GDP. The difference is starker in the deveoping word where a arge share of countries fas into the extreme bands (either < 5% or >50%), signifying the goba diversity in the nature of the industry. The choice of case studies (which has been highighted in 8

13 the tabe) was consciousy made so that the tempate represents countries from a the bands from those east dependent to the most dependent on tourism. Accordingy the countries/regions identified are Fiji, East Africa, India, the Caribbean, Brazi and Mexico. As the choice indicates, the case studies incude both individua countries and regions. A regiona anaysis is usefu to undertake as the physica proximity and simiarity in cimate, environment and topoogy resut in simiar, if not identica impacts of tourism. Even from the negotiating point of view, many regiona economic aiances (ike the CARICOM and MERCOSUR) negotiate jointy at the WTO where both regiona and country-specific concerns are voiced. Step 2 - Choosing the case studies for each Axis The decision of choosing case studies to correspond to each axes of the tempate (Economic, Environmenta, Socia, Institutiona and Poicy) was taken based on two criteria a) a study of the country s specific GATS commitments and b) research which highighted the kind of impacts of tourism that were significant in the region. It must be stressed here that the choice of one region for anaysing one axis of the framework was ony to make the strongest arguments concerning the impacts of the country s GATS commitments on that specific dimension of tourism. Therefore, athough the range of tourism impacts existing in these regions might be diverse, for the purpose of this report, ony one such dimension is being focused upon. Based on this methodoogy, Section III does a detaied anaysis of the impacts of the GATS on sustainabe tourism in these countries. Each dimension begins with an introduction to the iberaisation cimate of the country/region chosen as the case study which is foowed by an anaysis of the impacts of this on the deveopment of tourism using the indicators. The anaysis has been done through the ens of countries specific commitments made under tourism services in the GATS and therefore, the egay binding GATS commitments (as undertaken at the end of the Uruguay Round, 1994) have been inserted for better understanding 3. But as the GATS is an ongoing process, moving towards progressive iberaisation of the sector, the anaysis of the impacts of the GATS has not been restricted to members egay binding commitments aone; requests and offers made in the new round of negotiations which began in February 2000 have aso been referred to in the anaysis. The Annexure provides a summary of the main features of the GATS and the negotiating process. 9

14 DEVELOPMENT OF A WTO-GATS-TOURISM IMPACT ASSESSMENT FRAMEWORK STEP FLOWCHART COMMITMENT CONCERN The muti-dimentiona impacts of the GATS through the ens of sector-specific commitments POLICY ECONOMIC FIJI SOCIAL BRAZIL & MEXICO ENVIRONMENTAL EAST AFRICA SUSTAINABLE TOURSIM PRINCIPLES SUSTAINABLE STRATEGIES INSTITUTIONAL INDIA Possibe ways ahead on how best to protect sustainabiity interests at the negotiating tabe 10

15 GATS POLICY IMPACTS Poicies are statements of intent highighting the position, pans and priorities of the government with respect to a particuar sector in the country. But unike other areas, cross-sectora activities, mutidimensiona impacts and a compex institutiona framework render poicy-making in tourism a particuary chaenging task. Sustainabiity in tourism requires governments, especiay in deveoping counties, to overcome this chaenge and formuate poicies that address the reaities facing tourism and then direct its deveopment in an informed, participatory and consutative manner. The abiity to comment on or critique the tourism poicy of a specific country demands extensive prior knowedge of many factors the process behind poicy formuation, the eve of consutation with reevant stakehoders and an in-depth knowedge of the status of tourism in the region. This section does not attempt this task by focusing on the tourism poicy of a particuar country but highights few points on the roe that the GATS pays in infuencing poicy and conversey, the roe that a weformuated and focused poicy can pay in managing the impacts of the GATS domesticay. The Commission on Sustainabe Deveopment s tourism guideines in their reference to poicy instruments state that - For sustainabe patterns of consumption and production in the tourism sector, it is essentia to strengthen nationa poicy deveopment and enhance capacity in the areas of physica panning, impact assessment, and the use of economic and reguatory instruments, as we as in the areas of information, education and marketing. The roe of poicy and poicy-making is heightened in the context of anaysing the domestic impications of an internationa trade agreement ike the GATS on sustainabe tourism. As poicies...make tourism iberaisation and responsibe toursim mutay supportive... (WWF poicy statement, 2001) are issued by g o v e r n m e n t agencies and are regarded as the primary document d i r e c t i n g deveopment in the sector, they are an important medium through which to spread awareness among the pubic on issues pertaining to sustainabe tourism. A good tourism poicy must prioritise sustainabe tourism and outine concrete strategies to achieve it. In this respect, strategies and impementing mechanisms are centra to convert the poicy from a paper document to being a practica too to foster change. Therefore a good tourism poicy shoud strive to bridge rather than widen the gap between objectives and ground reaities facing tourism deveopment. Acknowedging the GATS The deveopment of a domestic strategy to face the chaenge of the GATS must begin with acknowedging its presence as an infuencing factor in the poicy space. For exampe, the pan for tourism deveopment in the Madives, incorporated in the country s Sixth Nationa Deveopment Pan ( ) expicity outines the threats that the isand nation faces from iberaization The exposure to exogenous threats requires negotiation of specific economic concessions, both at biatera and mutiatera eves which takes cognizance of the country s environmenta vunerabiity. This woud be an increasingy difficut task as trade iberaization 11

16 under the Word Trade Organisation gains further momentum. The government aso has to pay a proactive roe in contributing towards the deveopment of a goba order that protects the environment and compensates its vunerabe members. But in many cases, it is disheartening to note that even this primary objective is eft unfufied. The Nationa Tourism Poicy (2002) of India, whie addressing the need for sustainabe tourism does not even make a cursory mention of the GATS. This apse often resuts from government departments and agencies understanding and executing their roes in a restricted manner without adopting a hoistic approach to sectora deveopment. Poicy-making Process The extent to which any government respects the democratic fibre of its society is ceary refected in its poicy- making process. Poicies must be the outcome of a participatory and consutative process whereby a stakehoders and most importanty oca communities are informed of and invoved in the process of poicy formuation. In recognition of this principe, CSD guideines urge governments to consut, as appropriate, with a major groups and oca communities in the tourism deveopment process, incuding poicy formuation More often than not, poicies that are formuated without appropriate consutation are hoow in their understanding of the compexities of tourism deveopment and fai to achieve significant oca participation at the impementation stage of projects. It has aso been noticed that when governments do induge in participatory methods, it is often under the garb of stakehoder participation where consutations are hed with very short notice and where the participants mainy comprise experts and professionas with negigibe representation of the oca community. Therefore caution must be borne that communities and civi society is not co-opted into such pseudo participatory mechanisms and that the process of consutation is thorough and authentic, where impacted communities can directy voice their apprehensions and concerns. It is equay important to ensure that whie sector-specific poicies might be the mandate of a particuar government department/agency, a comprehensive poic for tourism cas for extensive consutation amongst a departments invoved in tourism activities. Lobbies infuencing Tourism Poicy Poicy formuation is a poitica process and is therefore susceptibe to considerabe infuence by interna and externa obbies that might manipuate it to pursue vested interests. Such infuence begins by reegating the government to the roe of a catayst or faciitator in tourism deveopment and even in situations where the government is to take the ead, to pace the onus of deveopment and conservation on the private sector (EQUATIONS 2002). The infuence of externa agencies is expicit with the Word Tourism Organisation caing itsef a goba forum for tourism poicy issues and the Word Trave and Tourism Counci categoricay asserting that there must be a fundamenta change in the government s attitude towards the deveopment of the accommodation sector. The government must stand forth as a faciitator, not a reguator or a roadbock (WTTC 2001). The infuence of the domestic tourism industry on mouding poicy to serve their own needs is aso quite apparent in their requests for dereguation. For instance in India, the Coasta Reguation Zone Act (1991) is a powerfu piece of egisation in the reguatory framework of the country that aims to reguate a activity in coasta areas by cassifying them on the basis of their sensitivity and fragiity into different zones 12

17 of deveopment. From the time of its announcement, this egisation has come under severe criticism from nationa and internationa industry bodies that have overty pushed for its diution whie coverty vioating it. The WTTC states that the coasta reguation zone act, which instead of protecting the environment has become one of the biggest stumbing bocks to the deveopment of sea-side resorts. As a resut, many tourism poicies of state governments in the country refect the same sentiment the Karnataka State Tourism Poicy ( ) asking to simpify the impementation of CRZ ; the Andhra Pradesh Tourism Poicy (1992) seeking to examine projects that fa within Coasta Reguation Zone Areas and suggest remedies to faciitate eary cearances from the Ministry of Environment and Forests and the Tami Nadu Tourism Poicy note ( ) to try and remove the CRZ restrictions especiay in the specia tourism area. A these statements point to the effect that powerfu industria obbies can have on the existing reguatory framework through the instrument of government poicy. Which Tourism Poicy? The question is an important one to ask in federa frameworks, which give both centra and regiona governments the authority to formuate sectora poicies. In such situations, even if a certain degree of compatibiity is achieved between poicies at different eves, in the context of the GATS, regiona poicies wi be turned redundant as the GATS recognizes ony commitments and concerns refected by nationa governments. The roe and standing of regiona poicies is questionabe in such a framework and there is no simpe soution to this diemma except that governments make efforts to coordinate poicies they deveop. Within the framework of the GATS it remains uncear as to how the agreement is going to pay out for sustainabiity and participatory initiatives in tourism. In its current form, itte can be said on the status of negotiations in the new round and what the impications of their outcomes are going to be on domestic reguatory and poicy-making spaces. But what can be said with utmost emphasis is that a comprehensive tourism poicy is a prerequisite to sustainabe initiatives in any country. Lacunae in tourism poicy that arise out of improper consutation or poor impementation can ead to non-fufiment of the very objectives that the poicy outines. Poicies, if deveoped by governments as an appropriate too for information dissemination, coordination and awareness buiding can aso hep mitigate the adverse impacts of tourism aong many dimensions which the foowing sub-sections detai. 13

18 GA GATS ECONOMIC IMPACTS The indicators deveoped in this section are designed to provide an assessment of the impacts of the GATS on economic sustainabiity of tourism. These indicators have been identified keeping in mind the recent initiatives undertaken by internationa agencies to measure the economic impact of tourism using Tourism Sateite Account (TSA) Research 4. Whie TSA research is designed to measure the economic impact of tourism by coecting data on certain set macroeconomic variabes, the indicators in this tempate are designed to measure the economic sustainabiity of tourism for deveoping economies. The case study chosen for this assessment is Fiji, a country in which tourism, directy and indirecty accounts for 27.2% of tota GDP (WTTC, 2004). Status of Liberaisation in Fiji Fiji joined the WTO in 1996 and as part of the Uruguay Round of commitments it has bound a its agricutura tariffs, 43% of industria ines and undertaken commitment under the GATS in tourism services ony. As the tabe indicates, initia commitments made by Fiji in tourism cover ony two sub-sectors but with no imitations under Modes 1&2 and ony partia imitation under Mode 3. Fiji s Vertica Commitments in the Tourism Sector SUB-SECTOR Centra Product Cassification Code Modes of Suppy Limitations on Market Access Limitations on Nationa Treatment Hotes, Motes and other Tourist Accomodation Govt. approva & registration required Entry imited to a) management based and b) skied empoyees for 3 yrs where positions cannot be fied ocay Skied foreign empoyees to provide training to ocas Restaurants Govt. approva & registration Speciaity restaurants ony Entry imited to a) management based and b) skied empoyees for 3 yrs where positions cannot be fied ocay 4 Skied foreign empoyees to provide training to ocas 14

19 The forces of iberaisation have been working strongy in the country over the ast decade especiay in an attempt to get the economy back on track after the economic instabiity caused by the coups of 1987,1997 and In its report to the WTO Trade Poicy Review Body, the Fijian government, whie committing to iberaisation and whoe- heartedy supporting private enterprise, has expressed its apprehensions from hasty iberaisation because of its vunerabe geographic ocation, poor bargaining power and deveoping country status 5. With regard to tourism specificay, the government has committed to encouraging private participation in the industry and accordingy, ook into pertinent issues ike air access, infrastructure, structure of the accommodation sector and human resources deveopment. The government aso pans on bringing out a Services Sector Poicy that woud boost exports, streamine procedures and ensure greater transparency in government poicy. Fiji s new offer on the GATS, tabed in June 2003 to the Counci of Services has expanded the scope of the country s commitments under the GATS to incude business services and environment services, in addition to tourism. The new offer aso incudes a substantive portion under the horizonta commitments section where important imitations have been paced - ike making new foreign investors seek approva from the Fiji Investment and Promotion Board before entering the domestic market, taking into account factors ike eve of oca Fijian participation in the activity and its overa effect on the nation s financia and economic situation and giving the government the right to reject proposas if they found them to be against Fiji s nationa interest on any account. Surprisingy, the offer states that these imitations paced in its horizonta commitments section appy to a service sectors incuded in the schedue with the exception of tourism services. The reasons for this excusion need to be investigated, as the tourism sector is as much in need of these imitations to ensure its sustainabiity ocay as a other services. Indicator 1 The percentage of tourism revenues retained in the oca economy The economic rationae behind encouraging tourism is that through its inkages with other sectors of the economy, revenues generated from tourism activities can increase the economic prosperity of the oca peope. This argument woud not hod if revenue generated from tourism were not retained within the oca economy but were instead eaked out through repatriation or other means 6 thereby nuifying the potentia gains to the oca economy. An anaysis of the eakage effect vis-à-vis the inkage effect of tourism within the oca economy is vita to understand the benefits of increased tourism activity and how iberaizing trade woud in turn affect it. Therefore, whie the TSA provides data on the contribution of tourism to a nation s GDP, this indicator assesses the actua benefit to the oca economy. Both the WTO Code of Ethics and the CSD sustainabe tourism principes emphasise the point that tourism activity must benefit the oca economy and peope. The CSD, in particuar has invited the UN secretariat and the WTO- OMT to form an ad-hoc, informa openended working group on tourism to assess financia eakages and determine how to maximise benefits for indigenous and oca communities in consutation with reevant groups. The Assessment An officia estimate puts the eve of foreign exchange eakage from gross tourism receipts in Fiji at 56% - a staggering figure for a country so heaviy dependent on the 15

20 sector (CSD, 1996). Research aso indicates that a arge portion of this eakage is attributabe to the accommodation sector the most important revenue earner for the Fijian tourism economy. The 2001 Visitor s Survey for Fiji indicated that accommodation (board and odging) accounts for 70.2% of a visitor expenditure and that out of this, 89% of visitors used hotes. Licensing statistics further indicate that out of the 215 icensed accommodation estabishments, ony 10% are owned by Fijians (41% by Fijian-Indians, 25% by internationa hote chains and the rest by other foreign companies). Whie a foreign-owned enterprises wi add to the eve of export eakage due to repatriation of profits, internationa hote chains in particuar can ead to high import eakage as we, as they strive to maintain internationa standards in accommodation and therefore resort to importing equipment, food, drinks and other resources. Recognising this disturbing trend, the Fiji Foreign Investment Act 2004 has identified tourism as a restricted activity 7 and paced imits on equity hodings by foreign estabishments. Some of these are - An operator of eisure cruises must have at east 51% equity hed by Fiji citizens. Any activity invoving investment in the cutura heritage of the Fiji Isands must have at east 51% equity hed by Fiji citizens A tourism business or venture or a faciity anciary to the tourism business must have at east Fijian$ 100,000 in fixed assets. These imitations are important, as they wi go to a significant degree in curbing the eve of export eakage of tourism receipts in Fiji. But the important question to ask is how a domestic aw such as this pays out in the context of the GATS and has Fiji ensured that these imitations are vaid by expicity pacing them in its commitments schedue as we. In its GATS commitments schedue, under the tourism sub- sector, Fiji has paced no imitations under Nationa Treatment whie it has imited Market Access ony to the extent that government approva and registration is required for two sub- sectors it has undertaken commitments in. Whie this imitation woud subject a foreign investors to the reguations of Fiji s Foreign Investment Act, the bone of contention is whether this is a vaid imitation for any country to pace in its commitments schedue. This is because Artice XVI of the GATS that pertains to Market Access permits governments to pace ony six kinds of imitations in their GATS commitment schedues - The number of service suppiers The tota vaue of transaction of transaction or assets The tota number of service operations or quantity of service output The tota number of natura persons The requirement of a certain type of ega entity or joint venture The participation of foreign capita As Fiji has not made expicit mention of its imitations on foreign capita in its schedue, but has put down government approva, it remains ambiguous as to what the standing of the Act is and whether it wi be recognised as a egitimate too for imiting market access. Further, the iberaisation of the accommodation sub- sector by Fiji, in a situation when the eakage rates are aready so high, coud seriousy jeopardise the economic benefits that Fiji hopes to gain through tourism as the entry of mutinationas might ony aggravate the situation. 16

21 Indicator 2 Tourism as an Export Mono-Crop? The Convention on Bioogica Diversity urges governments to reduce the dependence of the economy on tourism and assist indigenous communities to widen their economic base. Tourism is different from other services in that it takes the peope to the product and therefore the success of tourism in any destination is hugey dependent on the perception that the destination enjoys in the eyes of the tourist. Tourism is highy susceptibe to both externa and interna shocks thereby putting the revenue it earns and the empoyment it provides at stake. Therefore, whie the TSA statistics indicate how tourism ranks in comparison to other sectors of the economy, this indicator assesses to what extent the economy is dependent on tourism (for inmcome, export earnings and empoyment ) and what concerns this raises for sustainabiity. The Assessment 36.6% of Fiji s export earnings come from tourism (WTTC, 2004) indicating a high dependence of the economy on revenues from the sector. This dependence been increased because of the gradua erosion of the comparative advantage enjoyed by other Fijian exports ike sugar and cothing after the opening up of word markets and tariff reduction. Additionay, internationa tourism in Fiji has high seasonaity and reies on few countries ike Austraia (accounting for 28.2% of tota arrivas) and New Zeaand (19.1% of new arrivas) due to their proximity to the isand. The tabe beow provides data to substantiate the argument that tourism has come to pay a eading roe in the Fijian economy. Tourism foreign exchange earnings compared to other important sectors Year F($) mi Tourism F($) mi Food incudes sugar, fish, fruits and vegetabe Beverage and Tobacco Crude materias (incudes timber, yaqona) Animas Chemicas Manufactured and Goods vegetabe oi and products SOURCE : Report prepared by Tourism Department, Government of Fiji. 17

22 Its heavy dependence on tourism has made the Fijian economy pay a heavy price in the past. The miitary coups of recent years hit the tourism industry hard due to the perception of the isand as an unsafe tourist destination and caused the GDP of the entire economy to pummet by 2.8%. A main cause for this fa in tourist arrivas was the decision of Austraian and New Zeaand airines not to operate fights to Fiji during this period for poitica, economic and security reasons. Accessibiity by air is an important prerequisite for the good heath of the tourism sector in Fiji as it is a sma isand nation situated in the Pacific and the impact woud have been far worse were it not for Fiji s nationa airine, Air Pacific, which continued to py. Fiji therefore, is one of many exampes of economies, which, due to their increasing dependence on tourism coud jeopardise the prosperity of the entire economy due to interna shocks (poitica instabiity, epidemics, natura disasters) or externa infuences (poitica, economic decisions/shocks in countries sourcing the tourists). In such precarious situations, it is important to anayse the commitments made by countries under the GATS in conjunction with domestic iberaisation attempts and biatera trade agreements the country enters into. In the case of Fiji for exampe, athough the country has not made commitments under the trave agent, tour operator or transportation service-heads of the GATS, domesticay the Ministry of Aviation has voiced its intention to merge the nationa airine with QANTAS (Queensand And Northern Territory Aeria Services imited - Austraia s argest domestic and internationa airine) and Air New Zeaand 8. Whie this might serve the immediate purpose of increasing the scae of service to Fiji, the ong- term repercussions of eaving an essentia service in foreign hands must be taken into account. Therefore the indicator is important to assess the extent to which iberaisation aids the economy in widening its base by strengthening its inkages with other sectors, or, in contrast, whether it increases its dependence on one sector ike tourism. If tourism is an export mono-crop for the economy, the anaysis must be widened to see what processes are creating this singuar dependence and impeding other sectors (ike sugar, texties in the case of Fiji) from become major export earners as we. Indicator 3 The Roe of Sma and Medium Enterprises (SMEs) in Tourism In order to aow tourism to benefit and sustain the oca economy, mechanisms must be deveoped to encourage and support sma and medium enterprises that require ow eves of investment but provide high eves of empoyment to the oca abour force. CSD principes stress the need for this by urging governments to create a favourabe framework for sma and medium-sized enterprises by reducing administrative burdens and providing financia and technica support. This indicator woud hep assess the extent of oca participation in the tourism industry, the benefits that the oca industry derives from it and how sustainabe tourism is for the oca economy. The Assessment Fiji s tourism industry has representation from both oca enterprise and internationa payers with the atter having a significant presence in major tourist destinations ike Nadi Bay and cruise point Lautoka. Loca Fijians do however have a comparative disadvantage in terms of finance and technoogy to run tourism enterprises efficienty. The tabe summarises the requests received by the Fijian Ministry of Tourism from indigenous Fijians to set up or operate tourism businesses. The government of Fiji has taken severa measures to overcome this constraint ike initiating Human Resource 18

23 Deveopment Programmes and Empoyment Creation Programmes. A significant measure to boost SMEs in tourism has been taken through the Foreign Investment Act 2004 which reserves severa activities connected to tourism provision for Fijian citizens ony. These incude setting up of a mik bar/cafeteria business; restaurant business other than speciaty restaurants; taxi/car hire or bus business; a handicraft business or setting up of a roadside sta. Paradoxicay, the domestic incentive structure for the tourism industry refects a bias favoring arge-scae enterprises in the tourism sector. The Hote Aids Act of Fiji has outined a Five- Star Hote Package that provides deveopers with arge incentives ike duty-free import of capita equipment, no payment of corporate tax for 20 years, the permission to carry forward osses for 6 years and duty concessions for importing items associated with resort deveopment ike fittings, furniture, water sports equipment, boats/vesses/yachts, kitchen equipment and cutery. With this divergence, it is important to see which kind of enterprise is strengthened by trade iberaisation through GATS and which weakened. With Fiji s nature of commitments, the vaidity of the Foreign Investment Act remains questionabe even in this case and therefore one cannot be sure to what extent it woud succeed in supporting SMEs by reserving activities for them. Aso, by pacing no imitations on nationa treatment, Fiji has committed itsef to treating foreign investors in tourism equay as their domestic counterparts. This woud permit a foreign enterprises to avai of the attractive incentive package drawn up to promote arge hotes, which coud have an adverse effect on domestic sma and medium service providers and coud we increase the eakage, reducing the benefit to the oca economy. If promotion of SMEs in tourism is a priority for the Fijian government and a necessity of the economy, it is difficut to say to what extend this wi be supported given the nature of commitments made in the GATS. A strong argument supporting iberaisation of trade in genera is that the spirit of competition it infuses by opening markets to foreign payers woud force a kinds of enterprises sma, medium and arge to function more efficienty, cost-effectivey and quaity consciousy. The ony caveat is that sma and medium enterprises, if not given sufficient time and assistance to enabe them to face foreign competition woud be obiterated even before the chaenge beings. Sustainabe tourism invoves supporting SMEs and to ensure this, countries must adopt a cautionary approach to committing under the G ATS so that these objectives are not defeated. Assistance Technica Financia Not Tota Requested Assistance Assistance Marketing Other Specified Accomodation Activity Others

24 Indicator 4 Encavisation Encavisation, in the context of tourism refers to the process of converting tourist destinations into encaves excusive isands where mass tourism can fourish - thereby detaching them from the oca environment, cuture and economy. Gobay, the process of encavisation in tourism has been a resut of the need to create excusive centres of mass tourism, which expoit oca resources but provide itte benefit to the oca economy. Encaves are aso often viewed as safe investments, which woud ensure a steady, continuous and reiabe, fow of income from tourism through a seasons. Poicy initiatives that identify regions as Specia Tourism Areas, Specia Tourism Zones, Specia Economic Zones and so on, trigger the process of encavisation by caing for intensive tourism deveopment in few chosen spots. Such concentrated deveopment, if not reined and reguated can have significant socia, cutura, environmenta and economic ramifications for the oca peope. The concept of encavisation can aso be interpreted to signify a creation of empoyment encaves where tourism deveopment provides certain kinds of empoyment to certain kinds of abour force, ocking peope in without providing them a chance to cimb up the empoyment adder. This paper has chosen to anayse the process from the economic perspective because of often-strong economic incentives and arguments that ay the ground for converting destinations to encaves. CSD sustainabe tourism principes ca for deveoping forms of tourism that are environmentay, sociay and cuturay compatibe. They aso urge the industry to design projects keeping nature in mind to see that they do not harm the environment. The Assessment As in most regions, deveopment of tourism in Fiji has ed to its concentration in a few geographic areas ike the Western and Southern Coast of the main isand of Viti Levu, which has popuar destinations ike Nadi Bay, Lautoka and the Mamanuca Isands. Together, these three destinations account for 80% of the tourists visiting Fiji (WWF, 2003) 9. Nadi Bay in particuar has the argest number of accommodation estabishments in Fiji and faces socia probems ike increased crime rates and prostitution that have been inked to tourism activity in the region. Another significant socia probem has been the widening of income disparities between different regions of the isands as tourism continues to deveop in aready affuent regions, contributing itte to poverty aeviation in backward regions of the country. This again vioates sustainabe tourism guideines that urge governments to maximise the benefit of tourism for the eradication of poverty. The Fiji Tourism Deveopment Pan ( ) aso identifies Nadi Bay and Mamanuca Isands as Tourism Deveopment Areas where tourism is going to be promoted in a integrated and consoidated manner by aowing singe-window cearance for projects, deveoping tourism infrastructure, maintaining quaity standards and giving easy and ease access to deveopers. Fiji s commitments under tourism services have not paced expicit zona imitations nor imited the number of service providers or quantity of service provided imitations that coud have reduced the concentration of tourism in aready congested regions. Pacing no imitations under nationa treatment woud aow foreign investors an equa right to invest in Tourism Deveopment Areas and utiise the incentives provided therein. Therefore, the imitations paced by Fiji may not be sufficient to contro the disturbing trend of encavisation that aready exists in the isand. 20