Tourism-economic growth correlation

The perspective of Rangamati

The perspective of Rangamati

People around the globe travel from one place to another either for the purpose of recreation and relaxation or economic activity. This act of intentional mobility involving a set of social, cultural, and economic doings on their part can be defined as tourism according to UNWTO. But does this set of activities contribute to a country's economic growth? The evidence that emerges from a wide range of studies indicates an emphatically affirmative answer. To elucidate, the tourism sector is seen to have contributed to the growth fundamentals of a country through employment generation, investment-driven resource mobilisation, and capital deepening. This essay will analyse the relationship between tourism and economic growth, drawing on established theories of growth. I argue that tourism leads to economic growth, and to accelerate growth, focusing on technology that enriches the spectrum of labour forces relating to tourism-related enterprises is critical. I apply this line of argument in explaining the tourism potential of Rangamati, the largest district of Bangladesh.
Tourism and Growth Nexus:
Various Hypotheses
The past studies in literature present four major hypotheses regarding the tourism-economic growth relationship. First, tourism drives economic growth, and the direction of causality runs from tourism to growth. This unidirectional causality is known as Tourism-led Growth Hypothesis (TLGH) in the literature. Second, economic growth causes tourism development, and the unidirectional causality runs from growth to tourism. Third, bidirectional causality exists between the two variables: i.e., Tourism and Growth drive each other. This means both tourism and economic growth positively affect each other. The fourth hypothesis finds no causality between the two variables. This essay will focus mainly on the TLGH to unearth the tourism scenario, particularly after Covid-19 pandemic, in Rangamati-a large and rich district full of mountains and lakes-in Bangladesh.
The Global Scenario
Several studies have previously been conducted on the TLGH across the world, and almost all these findings reveal that a long-run positive relationship exists between tourism intervention and development in a country or region and its economic growth. The countries that have recently been recorded to have experienced tourism-induced economic growth range from high-income countries to BRICS countries to island and landlocked countries to developing countries from Africa and South Asia.
The tourism industry contributes to the world's Gross Domestic Product or GDP, global trade, and total employment generation by 10 per cent, 7.0 per cent, and 10 per cent respectively, which accounted for 8.9 trillion US dollars of global GDP in 2019, according to World Tourism Organization. Moreover, in terms of employment generation in the USA, the visit of 67 people creates one new direct job while generating indirect 0.43 jobs as per the 2015-data from the Bureau of Economic Analysis. The global phenomenon is much more inspiring as the tourism industry generated 1 in every 4 jobs available all over the world during 2014-2019, although in 2020 the ratio became 1:11. In contrast to developed countries, developing countries significantly benefit from this sector as it leads to their infrastructural improvement and constitutes a source of foreign exchange earnings. In sum, investing in tourism-related export services is worth it in every way.
There are many countries whose lion-share of revenue comes mainly from the tourism industry. A few countries mostly depend on this sector in the sense that tourism constitutes the higher share of their national income. Figure-1 shows the countries that depend most on tourism sector in terms of employment and GDP.
Indeed, there are some countries where tourism plays a vital role in their earnings.
The global scenes of tourism corroborate the fact that it leads to higher output of a country in terms of capital accumulation, job creation, and leveraging innovative ideas.
Tourism Scenario in Bangladesh
Bangladesh is blessed with a good number of natural attractions sporting scenic beauty, appealing to tourists and travellers from all over the world. There is enough to suggest that the tourism industry can help expedite the economic growth of a country. According to World Travel and Tourism Council, for example, the contribution of the travel and tourism industry to the GDP of Bangladesh was about 4.4 per cent in 2018. The sunny side of this promising sector in Bangladesh can be inferred from the rising number of foreign tourist arrivals for the four consecutive years before the onslaught of the Covid-19 pandemic. Figure-2 indicates an upward trend in the arrivals of foreign tourists in Bangladesh from 2016 to 2019.
However, the Covid-19 pandemic took a heavy toll on this sector, because of which the contribution of tourism to GDP shrank to 1.7 per cent in 2020, and the loss to this industry in Bangladesh is estimated to be worth 2.03 billion U.S. dollars. A recent work in 2021 by a group of Bangladeshi researchers-Abdul Mahidul Khan, Adib Ahmed, Sakib Bin Amin, and Tanzila Sultana from Bangladesh University of Professionals, North South University, and Bangladesh Institute of Governance and Management, respectively-finds that a 1.0 per cent rise in tourism receipt of Bangladesh increases the economic growth by 0.19 per cent whereas a 1.0 per cent decline in this sector causes the economic growth to drop by 0.66 per cent. This indicates an asymmetric relationship between tourism receipt and GDP and points to the fact that negative shocks to GDP take more time to stabilise. Therefore, policy reorientation toward tourism-led economic development is critical for Bangladesh.
Tourism in Rangamati Hill District: Potentials and Challenges
The tourism scenario of Rangamati, the geographically largest district of Bangladesh, is almost identical to the bigger picture of the country-particularly in the aftermath of the Covid-19 pandemic. The pandemic-induced loss to this industry in Rangamati is estimated to be worth Tk 250 million (25 crore taka) according to a media report in 2020. Rangamati is a case in point because of its diverse places of natural attractions with rich, indigenous culture that can add heavily to the tourists' satisfaction. This district of exquisitely beautiful and panoramic views is home to numerous tourist destinations such as Kaptai Lake, Hanging Bridge, Sajek Valley, and many others. These tourist spots are visited by thousands of tourists and excursionists from home and abroad every year.
Post-lockdown tourism developments in terms of the number of visitors arriving and staying in the resort of Rangamati Parjatan Holiday Complex resumed. The number of visitors to the site of the Hanging Bridge and the revenues generated from this dropped in 2020-21 due to pandemic-generated shocks, which slowly surged again in the fiscal year 2021-22. Although the arrivals of tourists fluctuated before the pandemic-the number of visitors to the Hanging Bridge along with the revenue generated therefrom clearly rose after the lifting of pandemic restrictions.
The higher tourist arrivals after the lifting of lockdown-related restrictions can also be inferred from figure-3, which depicts the monthly bed occupancy rate of successive two years of local Parjatan Holiday Complex.
One of the many challenges that besets this industry is the lack of adequate capital available to local entrepreneurs for investment in this business. To make matters worse, commercial banks are not interested in providing loans to the entrepreneurs willing to invest in this sector. As such, the potential of turning local people into skilled and efficient tourism-related workforce, therefore, remains untapped. In sum, it is important to invest in the workforce development-improving their skills as well as access to better technology-in the tourism industry to induce tourism-driven economic growth in Rangamati.
Concluding Remarks
The tourism sector provides ample opportunities for helping economies, especially developing ones, to grow. However, negative shocks (e.g., the Covid-19 pandemic) to this industry can turn the tables overnight-with considerable implications for economic growth and human welfare on both global and local scales. In addition, negative shocks have been observed to take longer to stabilize in the case of Bangladesh-vis-à-vis her peers. Hence, to withstand these negative shocks to Bangladesh's tourism industry, a holistic approach to intervention involving both the government and private sectors is essential. As this sector remains largely labour-intensive, many countries rely heavily on this sector for employment and revenue generation. Developing countries that are labour-abundant, such as Bangladesh, can greatly benefit from this industry given the appropriate and timely intervention in tourism policies. Therefore, the expansion of tourism sector in Rangamati as well as across Bangladesh-a labour-abundant country-in general requires innovative ideas that can enhance the productivity of tourism-related activists, enabling them to have better access to improved technology.
One way to introduce sophisticated technology in the tourism arena of Rangamati could be to launch a few 'hopon hopoff' buses with entertaining guided tours-e.g., double-decker buses that ply between the tourist attractions in different cities. Such tourist facilities are widely popular in global cities like London, Liverpool, Brighton, New York, etc. These tourist buses will allow the tourists and excursionists to have a better view of different tourist spots in a more organized and efficient way. This will eventually create a demand for a group of local tourist guides well-versed in different languages, norms, and local culture. Overall, the successful expansion of tourism industry necessitates leveraging technology and unorthodox ideas, and this includes-but is not limited to-enhancement of institutional quality in terms of tourism management among the various agencies working in Rangamati.

Nuruddin Md Shibly Noman is a post-graduate student of Economics at BRAC University. Email: [email protected]

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