Can’t rely on cherry on the cake
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Colombo city where there is a limited night life.
If you carry your money to a desert, it is not strange that you may not find anything worth there to spend your money; you may return with your money. As far as tourist arrivals are concerned, there are similar places on earth, not only deserts. People who have money, wish to travel and spend, but the problem is whether they may find anything worth to spend their money on.
A couple of years ago, one of my foreign friends – a female academic, who visited Colombo with her husband – asked me an unexpected question: “When a foreign tourist comes to Colombo, what are the things available here to do or to see?”
I tried to figure out a reasonable answer to that question, but to my embarrassment, I couldn’t. Colombo does not have any sort of theme parks or any entertainment sites like in many other Asian countries in the neighbourhood. Neither has it street food areas or shopping sites or a multitude of restaurants with international cuisine like in many Southeast Asian cities.
There are no shopping arcades either and even Sri Lankans long to do their shopping in cities like Dubai, Bangkok or Singapore. There is no nightlife in Colombo, because the city goes to sleep as early as possible. Colombo is also one of the cities that remain in darkness in the night due to inadequate nightlight because of lower electricity usage for city lighting. In fact, Sri Lanka has a poor record of electricity usage, due to inadequate industrialisation and urbanisation as well as relatively high energy cost. In one of the recent seminars which I participated, the notion that “tourism versus culture” was brought in for discussion. After listening to the discussion, I was wondering how some of the West Asian cities – including Dubai as the number one among them – have promoted tourism industry so well without creating a conflict between tourism and culture. In fact, Dubai attracted over 16 million tourists in 2019.
Sun, sand and scenes
In response to the peaceful environment free from the war, Sri Lanka has seen increasing tourist arrivals since 2010. The number of tourist arrivals, which remained less than half a million a year prior to that increased to 2.3 million by 2018 – the year with the best performance in terms of the tourism industry.
Next year in 2019, there was a remarkable drop in tourist arrivals due to the Easter Sunday terror attack. The following year was marked by a decline in inbound tourist arrivals in the world by more than two-thirds due to the COVID-19 pandemic issue.
Tourists visit Sri Lanka primarily for “nature” – sun, sand and scenes. Although there are many other areas for promoting tourism such as MICE tourism, health tourism, culture tourism and many other new areas, Sri Lanka’s performance in these areas is yet to taste success. When we look at the tourist attractions, it is difficult to think of anything that has been “man-made” additions.
In spite of all weaknesses in the tourism industry, Sri Lanka has seen a rapid increase in tourist arrivals, while for the majority of them it is nature that has been the centripetal force. And the convenient arrival procedures for visitors adopted by Sri Lanka have also facilitated the increasing tourist arrivals.
Cushioning trade deficit
However, by regional standards Sri Lanka’s tourism industry has a long-way to go. Compared with the Sri Lankan record of tourist arrivals – 1.9 million in 2019, Cambodia has reported 6.6 million, Singapore 14.6 million, UAE 21.6 million, Malaysia 26.1 million, and Thailand almost 40 million.
In the absence of a better export performance, even the small size of the growing tourism industry was important for
Sri Lanka. Quite often, we used to say that, though we have a worsening trade deficit, tourism earnings together with worker remittances cushioned the current account.
For instance, in 2018 Sri Lanka’s export income was US$12 billion and import expenditure $22 billion, resulting in about $10 billion trade deficit. But, thanks to $4.4 billion from tourist earnings and over $7 billion workers’ remittance, the current account deficit remained at $2.8 billion. These numbers clearly show that the country’s foreign exchange situation is already extremely fragile. When both tourism earnings and worker remittances collapsed due to the pandemic, Sri Lanka was unable to stand on its feet with respect to meeting its foreign payment obligations. During the 2-year period under COVID-19 stress (2020-2021), in all of the tourist destination countries the tourism industry collapsed. But their export growth was strong enough for the countries to sail through the troubled waters.
Thailand experienced a decline in its massive tourism industry that accommodated 40 million arrivals in 2019, but export growth continued recording nearly $25 billion increase over 2019 level, reaching $271 billion in 2021. Similarly, Malaysia increased its exports earnings by over $60 million during the same period, reaching $299 billion by 2021.
Singapore increased its exports earnings by about $15 billion, reaching $457 billion by 2021. Vietnam increased its exports earnings by $71 billion, reaching $336 billion by 2021. Compared with all of the popular tourist destination countries, Sri Lanka could increase its export earnings only by $0.6 billion, reaching $12.5 billion.
Harvest of hopelessness
The main foreign exchange issue, which I often argue as the fundamental cause of the country’s current crisis, is Sri Lanka’s over-dependence on tourist arrivals and migrant workers for foreign exchange earnings. The tourism industry is beautiful and attractive, but it’s like the “cherry on the cake”. What’s more important is baking the cake first and, then leave the cherry on the top of its icing.
Tourism doesn’t require rigorous policy reforms either. Nevertheless, it is an industry which is highly volatile and vulnerable to local and global security conditions. That’s exactly what happened, when the pandemic hit the world, over 1.4 billion world tourist flows dried up overnight. The countries which depended too much on tourism were hit hard.
The private remittance flows from migrant workers is a “miserable” source of foreign exchange for a country. Although it would bring some foreign exchange, as big as $7 billion in Sri Lanka, compared to just $12.5 billion export income, it’s the “harvest of hopelessness”. People start leaving the country for foreign employment, when they are faced with “hopelessness” for themselves and their families. Sri Lanka has even created political authorities as well as a section of bureaucracy in order to administer foreign employment, because they bring the “harvest of hopelessness”.
Its export growth
By the way, we are again overwhelmed after seeing some signs of tourism revival during this peak time of the year 2022. It’s beautiful and, we must create more centripetal factors to attract tourists in the millions in the years to come. However, instead of baking the cake with export growth, we can’t rely on the cherry alone.
Even if we double our 2018 tourist arrivals reaching about five million in the near future, it would generate less than $10 billion a year. We should improve our export growth and, for that matter foreign investment in 100s of billions of dollars as the tourism industry would not put Sri Lanka on a long-term growth path. Neither would it be done by workers’ remittances.
(The writer is a Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk and follow on Twitter @SirimalAshoka).
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