Sample Paper on The economic impacts of tourism on the Seychelles

The economic impacts of tourism on Seychelles

Overview of Seychelles economy

In recent times, the economy of Seychelles has increased to comprise a number of industries, with the boom of tourism becoming the main focus. However, during the earlier days of development, Seychelles grew as well as thrived based on its exports. Most of the revenue collection in Seychelles came from the selling goods harvested on the various plantations in Seychelles. These plantations included Cinnamon, Copra, and Vanilla. In addition, while these plantations still act as the sources of revenue for Seychelles, they are no longer the driving force behind the economic development of Seychelles.

Traditionally, the economy of Seychelles was founded on the above-named plantations as the major exports. In the year the 1960s, approximately 34% of the Seychelles population worked on these plantations, while about 20% of the Seychelles population worked in the public sector. During the year 1995, the economy of Seychelles connected to the outside world, which mainly included excellent telegraphic services, monthly visits of about 10,304 British people, and weakly seaplane services from areas such as Mombasa, in Kenya. Seychelles provided the voyage stopover venue for ships from Kenya and Bombay (Doan, p. 288-304).

In the year 1972, with the opening of an international port in Seychelles, tourism became the dominant industry in Seychelles. Seychelles’ tourism sector paid off better and led to a decrease in the plantation of the sector. As the plantation sector in Seychelles declined significantly, the tourism and fishing sector increased and became the major revenue sectors in Seychelles.  Since Seychelles’ independence in the year 1976, its per capita output has had to increase to about seven times that of the old one. Growth in Seychelles has been majorly led by the tourism industry in Seychelles, which employs approximately 30% of the labor force as well as offers more than 70% of revenue earnings in Seychelles. In recent days, the government of Seychelles has tremendously encouraged foreign investment in its efforts to upgrade hotels as well as other tourism services within the country. During the same period, the government of Seychelles has moved forward to discourage the dependence on tourism by promoting the growth as well as the development of fishing, small-scale manufacturing, farming, and most lately, the offshore industry. Moreover, the vulnerability of the tourism industry in Seychelles was depicted through the sharp drop in the period 1991-1992, largely due to the Gulf War. However, even though the tourism sector of Seychelles has significantly rebounded, the government of Seychelles recognizes the growing need for upgrading the tourism sector in Seychelles in the face of still competition from the international platform. The government of Seychelles in struggling to encourage the tourism sector faces a number of issues, including curbing the budget deficits as well as further, privatizing its public enterprises (Burgan & Mules, p.700-710).

The growth of the tourism industry in Seychelles

The number of visitors coming to Seychelles Island has increased from a total number of 771 visitors in the year 1967 to almost 3,175 visitors in the year 1971. This increase in the number of visitors in 1971 was mostly attributed to the development and opening of an airport in Seychelles. Moreover, the number of visitors reached a total of 37,321 in the year 1975. This remarkable growth in the number of tourists to Seychelles has matched an equally quick growth of expansion in the number of hotels as well as the beds that are available for tourists. Although there is no official figure on this, it is highly possible that the gross earnings from the tourism sector could have exceeded the total visible exports of Seychelles in 1972. On the other hand, working on the same set of assumptions, it is also possible that by the year 1974, these earnings were almost half of the value of the total goods that were imported into Seychelles that year.

Moreover, tourism packages in Seychelles, including accommodations are highly popular. A great number of tourists visit the Seychelles islands every year, mostly from European nations. The revenues as well as other earnings from tourism, account for almost 20% of the gross domestic product of Seychelles, thus bringing in more than six hundred million dollars in a typical year.  In addition, more than 15% of the people in Seychelles have jobs that are related to tourism. The government of Seychelles continues to think about methods as well as ways of expanding the existing tourism strategy in an effort to make Seychelles more appealing as a destination.

The impact of tourism of the Seychelles economy

Tourism expenditure

In reflecting Seychelles’ aggressive economy that is buoyed by the economic upturn in Europe, tourism receipts in Seychelles kept raising from the year 1983 through 1990. In the period 1990s, the tourism industry reached its peak and highest ever, which was almost double that of 1985. In terms of US dollars, the $126 million in tourism revenue in 1990 represented a jump of about 33% over 1989. After the period 1990s, receipts from tourism in Seychelles started a downward trend and by the year 1995, revenues from tourism stood at a total of US$82 per day as compared with the expenditure of US$120 per day.

Despite the huge arrivals of visitors in 1993, the gross earnings from the tourism industry increased merely by 0.3 % to SR607 million, while the average tourist expenditure per head also fell by about 14% as compared with the previous years. Almost half of all the arrivals in the year 1993 were made up of transit passengers, who often spend a short period of time in Seychelles. Thus, their average expenditure amounts are likely to be very low. This depicts the escalating problem that Seychelles has in trying to maximize the gains from the tourism industry. The Seychelles’ government policy for maintaining an overvalued rupee renders the Seychelles one of the most exclusive destinations.    Many of the tourists also tend to opt for all exclusive packages and thereby, decreasing the amount of local expenditure.

The same picture was repeated in the year 1994 when the gross earnings from the tourism sector plummeted to US$101 million, which was considerably below the average level that was obtained during the previous years. The figures that were obtained in the period 1994 as well as 1995, forced the government of Seychelles to compare the performance of Seychelles tourism sector with that of its competitors, including Mauritius, which was able to achieve over 7% in the year 1994. Major focus has been placed on the quality of service as well as value for money in Seychelles. In the period 1996, with an eye to develop the Seychelles as a low or duty free destination, the government decided to reduce duty on items such as cameras, binoculars, perfumes, as well as watches to about 5%. This acted as a relief to many of the visitors, who found the Seychelles destination a bit costly. In the period 1990, the average visitors spend about SR616 a day, but in 1995 this figure decreased tremendously. It is apparent that the Seychelles islands are now attracting less wealthy tourists. Moreover, these tourists do not often use the official channels for currency exchange. It also seems that the devaluation of the overvalued rupee currency would more effectively mirror its purchasing power parity as well as become a benefit to the tourism industry, which is the nation’s main exchange earner.

A survey carried out in Seychelles concerning tourism expenditure in the year 1995 portrayed that 69% of the tourist expenditure was mainly on hotel bills as compared to that of 1995 which was 64%. The local cash expenditure also fell to 31% in 1995. Despite the many efforts made by the government in order to encourage more spending on the Seychelles local products, the survey depicted that the expenditure of tourism was mainly concentrated on foods with extremely elevating import content. Furthermore, the expenditure on the local handicrafts, even though rising by 79% between the period 1985 and 1995, its percentage share, in terms of total expenditure declined from 4.2% to 3.2%. It was also realized that the majority of the visitors seldom toured to the outer islands, which remained fundamentally underdeveloped as well unspoiled. The government has to critically consider expanding as well as improving on the country’s inter-island ferry services within Seychelles in order to attract as well encourage inner island tourism. One of the Seychelles island’s richest resources, fish industry, remains severely untapped and further holiday packages, which can combine the sea, sun, and fishing may expand the appeal of the Seychelles to many of the European tourists (Wilson, p.23-25).

Impact on the balance of payment

In addition to the balance of payment figures, the central bank of Seychelles publishes its own reviews on a quarterly basis, in which external receipts, as well as payments by the banking system or treasury, are recorded. By combining the information that was provided by the two set of tables, it was possible to come up with the following table, in which the relative importance of tourism, as well as other related activities, may be demonstrated below (Wilson, p.22).

The relative importance of tourism to the balance of payments (1990 &1994) in million rupees

  1990              1994
Total exports

of which,

Copra

Cinnamon

Canned Tuna

Others

302.2

 

1.6

0.4

55.3

884.6

249.2

 

0.2

2.3

89.2

157.5

Total imports of which,

Food and live animals

Beverages and tobacco

Fuels

Manufactured foods

Machinery and transport equipments

Others

 

132.4

22.3

162.9

140.7

223.4

202.9

 

162.1

16.4

138.0

174.3

205.2

255.8

Receipts

Tourism earnings

Ticket sales to non-residents

USAF ticketing station

Foreign embassies

 

645.5

87.1

35.1

16.4

 

637.3

218.1

36.4

12.0

 

 

The tourism industry in Seychelles creates the need for additional imports in terms of the elements such as direct, indirect, as well as induced imports that are discussed below.

  1. Direct: being the level of goods as well as services that are imported directly through the establishment that receive tourism spending
  2. Indirect: being the additional imports to service the industries that supply goods as well as services to the tourists as well as those other establishment sales increases as a secondary outcome of tourist spending.
  3. Induced imports: being those that are required in order to supply households in Seychelles, whose level of incomes have increased due to the direct or indirect effects of tourism as well as to service those firms whose sales have increased because of a direct or secondary result of this improved household spending.

The following figure indicates the impact of tourism industry on the balance of payment on the Seychelles using a number of variables and measured in terms of million rupees.

                                                                                                                   1990               1994
Total tourism expenditure                                                                         646                                                                                                                   510

Less promotion abroad                                                                              22                                                                                                                   28

Less direct imports (11.6%)                                                                      75                                                                                                                   59

Less indirect imports (18.3)                                                                      118                                                                                                                   93

Net effect on the balance of payments                                                      431                                                                                                                   330

Value of induced imports (58.6%)                                                             518                     558

 

For the year 1981, it was reported that the direct imports were at 11.6% of the total tourism expenditure, indirect imports at 18.3%, while that of the induced imports stood at 58.6%. If these figures hold true today, the above net effects of tourism on the balance of payments for the year 1990 and 1994, then hold.

            Impact on the domestic product

The value of that is added by the tourism  industry in Seychelles is equivalent to 21% of the gross domestic product at the market prices in the period 1979, 15% in 1980, and 11.8% in the period 1993. A value of 54% has been generated by hotels as well as restraints starting from the year 1980w, which rose significantly to 73% through 1990s. Moreover, the contribution of the tourism sector to the gross domestic product in Seychelles is much higher as compared with the combined added values of fishing, agriculture, and forestry (Wilson, p.20).

Tourism and Seychelles development

In the period 1994, the tourism industry in Seychelles supported approximately 4,726 direct jobs which translated to over 18% of the total formal employment. Traditionally, the direct employment in the tourism sector increased significantly in the period 1973-1993, which averaged at around 4.6% annually. During this period also, female participation in the workforce increased, due to the many employment opportunities in the tourism sector. The private sector offered a total of 86% of all the direct jobs in the tourism industry in the period 1994, while the public firms accounted to about 14%. Compared to 1985 and other previous years, radical changes have taken place with many other entities abandoning their roles in owning as well as running the tourism industry (Archer & Fletcher, p.32-47).

Earnings  

Salaries as well as wages paid out in the hotels as well as restaurants are often below the average salaries and wages in other nations, but the earnings in the tourism related employment opportunities in transport and communication are considerably higher than the national average. In addition to the direct job opportunities that are generated in the tourism industry tourism expenditures creates as well as provides additional employment opportunities through the flow of tourist spending by the economy. It is estimated that a radio of 2.38 is generated by the tourism industry in Seychelles to the total employment. This implies that every direct job that is supported, an additional 1.38 secondary jobs are created (Archer, p.23-34).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Works Cited

Archer, Brian. The Economic Impact of Tourism in Seychelles. Guildford, Surrey, England: Dept. of Hotel, Catering, and Tourism Management, University of Surrey, 1982. Print.

Archer, B., & Fletcher, J. The economic impact of tourism in the Seychelles. Annals of Tourism Research, 1996, 23(1), 32-47.

Burgan, B., & Mules, T. Economic impact of sporting events. Annals of Tourism Research, 1992, 19(4), 700-710.

Doan, T, M. The Effects of Ecotourism in developing nations, Journal of Sustainable Tourism, 2000, 8 (4) pp. 288-304.

Wilson, D. Unique by a thousand miles: Seychelles tourism revisited, Annals of Tourism Research, 1994, 21, pp. 20 -45.