Tourism's existing supply and distribution networks can be used to help grow domestic and regional manufacturing. Rather than initially chasing complex and constantly changing markets abroad, LDC manufacturing investment should first attempt to satisfy existing needs, including the large and rapidly growing national and regional-level tourism markets.
Regional approaches to investment in tourism-related light manufacturing could help achieve the necessary economies of scale to become more competitive with imported suppliers. This, in turn, could provide support for on-going efforts for regional trade liberalization and trade facilitation.
All LDC tourism enterprises require constant supplies of manufactured inputs, much of which is currently imported. Consequently, the supply chains are already established, stable and highly predictable in terms of both existing and future demand. As mentioned, applying dynamic comparative advantage could lead to steadily increasing levels of domestically manufactured tourism inputs, with the added benefit of increasing technological capabilities for further economic development. Instructive in this regard is the role that Joseph Stiglitz ascribes to external demand as a temporary mechanism to compensate for underdeveloped domestic markets, giving local firms the space to develop productive and technological capabilities.
It is important to note that tourism also provides extensive opportunities for the development of domestic services capacity due to high demand for such inputs as marketing, finance, construction, architecture and engineering services.
OPEN FOR OPPORTUNITIES
UNIDO and other international organizations recognize the linkages between tourism and agribusiness; the next step is to link tourism to overall manufacturing.
The 2016 UNIDO report to the G20 Development Working Group, Industrialization in Africa and Least Developed Countries, states, "By linking tourism and culture with agribusiness, high value added can be created generating social and economic returns such as innovation, diversification and jobs, especially in rural areas." To date, however, few development projects appear to focus on tourism and manufacturing directly.
Existing UNIDO projects include work in Tanzania to identify linkages between horticulture producers and processors and local hotels and restaurants with the goal to increase local production and to supply high-value agro-products, including organic items. UNIDO is also helping Haiti to develop agro-value chains and inclusive and sustainable tourism by creating a craft village to connect creative industries and agro-value chains, and offer new skills.
Insights from EIF's support to LDCs confirm the important potential and existing contributions of the tourism sector to economic growth and job creation in LDCs, particularly for women and youth. Many LDCs have adopted a value chain approach in developing tourism, but the development of strong linkages has been mostly limited to sectors such as transportation, accommodations, handicrafts, food, leisure and cultural services, rather than backward linkages to manufacturing.
Local sourcing is still very limited to food supply and is below potential levels. EIF’s Tanzania Diagnostic Trade Integration Study Update in 2017 showed that while 22% of all tourism spending in Tanzania is for food and beverages, only 60% of produce sold to the tourism industry is being sourced locally. Notwithstanding other inputs, the tourism sector especially offers an important growth opportunity for the food and beverage industry.
THE ANSWER IS "YES!"
The answer to the question in the title of this article is obvious. The major importance of manufacturing development for LDCs is widely agreed, and the benefits of tourism exports are also apparent. What is missing are clear strategies to create and develop the linkages, and to come up with synergistic approaches.
For this, a change in mind-set is required, meaning rather than solely focusing on expanding the cross-border exports of manufacturers, LDCs must also consider domestic and regional tourism markets as a stable and rapidly growing base for further expanding manufactured exports.
Dale Honeck, Senior Counsellor, Trade in Services and Investment Division, World Trade Organization.
Frank Van Rompaey, Representative to the UN and other international organizations in Geneva, United Nations Industrial Development Organization.
Hang Tran T.T., Senior Coordinator, Executive Secretariat for the Enhanced Integrated Framework at the WTO.