Editorial: Deepening linkages with tourism
The debate has long expired over whether there is worth to the Jamaican economy in tourism. And we know who won.
The sector accounts for approximately seven per cent of Jamaica's gross domestic product (GDP) and directly employs more than 30,000 people. Jamaica entertains around three and a half million people annually and the business generates just over US$2.2 billion in foreign-exchange earnings. Perhaps 10,000 new hotel rooms will be constructed on the island over the next decade.
What has not been resolved is how to extract greater economic value from what now exists of the sector and from the expansion projected for well into the 2020s. Performance details of how the hotel construction boom of the early 2000s drove growth are not readily available, but the anecdotal evidence suggests that the achievement was not as good as it might have been. It is conventional wisdom that tourism is insufficiently integrated with the rest of the economy; that there has been a failure to create backward and forward linkages with other sectors.
Hopefully, a recently released study, conducted on behalf of the tourism ministry by the Centre for Leadership and Governance at the University of the West Indies (UWI) at Mona - shortcomings notwithstanding - will help policymakers, but more critically businesses, address the problems. At the very least, it provides a basis for ongoing discussion on the issue, as well as information that firms can use to begin to plan marketing and sales forays into the sector.
The researchers, unfortunately, did not achieve the level of participation from tourism enterprises so as to allow for a direct estimate of the value of goods and services demanded by the tourism industry. They, however, accumulated sufficient data to complete a simulation, whose outcome could act as a proxy for the consumption of goods and services across the industry.
There are two significant findings in the report:
- That Jamaica's tourism sector imports between J$1.64 billion and $5 billion of the agricultural products it uses, or between nine per cent and 26 per cent of total demand; and
- That it spends around J$63.5 billion on the importation of manufactured products, accounting for about a third, in terms of value, of the goods it consumes.
Put another way, Jamaica's tourism industry spend had, at the time of the study, an import bill of around J$70 billion for agricultural and manufactured products. In other words, tourism's importation of manufactured products was more than eight times what Jamaica manufactured in 2014, while that for agricultural goods was five per cent of the country's overall food imports,
Some of what is consumed by the tourism sector may be incapable of production in Jamaica, but the numbers suggest there are great opportunities for import substitution by Jamaican farmers and manufacturing firms that are innovative, strategic, competitive and are willing to invest the capital, time and effort in forays into the tourism sector. Indeed, an important element of this report is that it provides not just over an overview of the demands of the sector, but goes into granular detail about what is used, the quantities required, as well as the broad contours of the supply chain.
It is likely to be a serious point of debate whether tourism businesses that receive tax incentives - representing leakage to the sector - should be required, as the researchers suggest, to buy more of their goods and services in the domestic market. But businesses intent on engaging the sector have information with which to prepare.