FHTA Tourism Talanoa: Debunking the Myth of Tourism Leakages in Fiji

FHTA Tourism Talanoa: Debunking the Myth of Tourism Leakages in Fiji

FHTA, 27 April 2023 – Tourism generates billions of dollars in revenue and employs thousands of people across the country, making it a vital contributor to our economy.

The backbone of the economy which was once sugar, is now tourism.

However, despite the many benefits that tourism brings, there is a common perception that its economic benefits do not trickle down to the grassroots level, leaving small, rural communities without any meaningful gains.

This perception is rooted in the belief that tourism profits are siphoned off by large, foreign-owned companies, and that only a small fraction of the money spent by tourists actually stays in the local economy.

This idea of “tourism leakages” has become so ingrained in public discourse that many Fijians view tourism with suspicion and even with distrust sometimes.

But is this perception grounded in reality that is evidenced by strong data, or is it a myth that needs to be debunked because it is based on repeated narratives, often perpetuated by academics and economists using data from 20 years or more ago, because it makes them sound more relevant to simply toss these negatives around?

This week, let’s explore the notion of tourism leakages in Fiji and examine how community-based tourism initiatives are helping to bridge the gap between tourism revenue and grassroots development.

Leakages refer to the money that is lost from the local economy due to the outflow of funds to foreign-owned businesses, individuals, and governments overseas.

The leakages occur when the revenue generated by tourism is spent outside the local economy, instead of being reinvested in local businesses, infrastructure, and services.

Critics argue that the importation of goods and services from overseas, such as food, beverages, and luxury items, results in revenue leakages as the money spent on these items goes out of the country instead of staying within the local economy.

However, others argue that the importation of these goods and services are necessary, if not critical aspects of the industry, as it allows the country to offer a wider range of products and services to tourists – based on demand, which ultimately enhances their experience and generates more revenue for the country.

The importation of goods and services from overseas is a necessary aspect of Fiji’s tourism industry and a need that is only replaced when a local manufacturer can provide a similar service or product.

While it is important to promote local businesses and products, the reality is that Fiji’s economy cannot sustain the entire tourism industry on local products alone.

Therefore, importing goods and services from overseas is a vital strategy to ensure the industry remains competitive, attracts more tourists, and generates more revenue for the country.

Other than for tourism, basic items have to be imported for Fiji to function as a thriving economy – again based on demand from every industry and the general population and include fuel, construction material, basic food items (flour, rice, oil, canned food, frozen goods) and includes the raw materials that are required for many industries – fabric, plastic, timber, steel, clinker for concrete, metals, etc. Even fresh produce from agriculture or fisheries that is not sustainable, insufficient or not available in the quality required, must be imported.

Then there are the items we might take for granted like vehicles, boats and vessels, aircraft, panels, glassware, ceramics, cookware, white good, and our mobile phones, amongst other items.

Professor Paresh Narayan of Monash University and the president of the AsiaPacific Applied Economics Association (APAEA) said at a recent lecture that there is an importance to understanding revenue leakages in Fiji’s tourism industry.

He also stated that identifying and addressing leakages is crucial for maximizing the economic benefits of tourism for the local communities and the country as a whole.

Allow us to help with that understanding.

It is equally important to appreciate that leakages in Fiji’s tourism industry come from various sources, such as imports, dividends, profits, and service fees.

Where foreign-owned businesses (in any industry) import goods and services or when the profits and dividends earned by these businesses are repatriated to their home countries, this adds to the already basic leakage issue because Fiji is a small Pacific Island that must import almost everything.

There is an incorrect notion that a significant portion of high-end hotel facilities and related industries in Fiji is foreign-owned. Yet 75% of hotels and resorts are locally owned (the bulk of these by the worker-supported Fiji National Provident Fund) and over 90% of tourism businesses in marine and land transportation, activities, experiences, tours and supply chains are locally owned with significantly high numbers of local workers.

This would mean that a considerable amount of revenue generated by these businesses does not just remain in the country in the form of profits and dividends, it also forms the lion’s share of taxes Government receives, while also trickling down through wages, salaries and payment for services and goods, into the communities, supply chains and through to the rural and urban communities to pay for family commitments.

In response to visitor demand, and to remain as competitive as the industry strives to be, any goods and services that are not available locally, are imported to ensure we can enhance their experience and satisfaction, leading to positive reviews and repeat visits.

This might mean larger, more fuel and cargo-efficient aircraft for the national airline, safer and faster transfer vessels for getting visitors around the maritime islands, sleeker, luxury transfer vehicles for tour operators, the best technology and IT support for reservations and finance systems for resorts or the most hygienic options for food storage and delivery for restaurants and resorts.

Similarly, importing specialized equipment and technology may be necessary to provide high-quality services and facilities that meet international standards.

All of these must therefore be imported; but their use and impact on an industry that has been able to continue to improve its efficiency, grow its markets and effectively contribute as the strongest industry to the economy is underappreciated.

What has also changed over the last 20 years, is that Fiji has been able to retain more revenue from tourism due to several factors.

These factors include the promotion of locally-owned businesses in the tourism sector which currently sits at over 75% and the encouragement of domestic tourism.

Between 1992 and 2017, Fiji’s earnings from tourism increased from FJD 290 million to FJD 1.7 billion, and exceeded FJD 2 billion by 2019, representing a significant increase in tourism revenue retention.

Government’s increasing efforts to support the growth of locally-owned businesses in the tourism sector, particularly in rural areas has also been welcomed. Coming at a time when post-pandemic research has clearly shown the preference of international visitors to choose destinations where experiences and connections to nature and culture are preferred.

This support has taken the form of financial assistance, training, and other forms of capacity building for SMEs to either strengthen their marketing efforts and impacts in the industry or to increase the current number of businesses using their natural resources that will respond to the demand for natural or culturally based experiences and bring critical earning capacities for the many communities they are operating out of.

As a result, Fijian-owned businesses now play more significant roles in the tourism industry and contribute to comprehensive revenue retention in-country, both directly from within the industry, as well as indirectly as critical support businesses as part of the large supply chains that the industry needs to survive.

It is worth noting that despite the positive change of more locally owned businesses, one area that the industry has lagged in is in being able to sufficiently meet the increasing demand for more rooms. With the demand for Fiji progressing positively post-pandemic and the advent of the long-term fleet expansion plans for Fiji Airways coming to fruition with the delivery of two more wide-bodied aircraft in the next few months, the issue of why Fiji has not been able to convince foreign or local investors to build more hotels is being explored with more enthusiasm than in the past.

As a developing country, Fiji must be able to attract the right type of foreign direct investments and ensure that local businesses have the confidence to reinvest as well. With the right supportive investment climate, there are many opportunities for Fijians, as well as foreign nationals, to own and operate tourism-related businesses.

With the increasing focus on ecotourism as a preferred sustainable tourism that aims to preserve natural areas while promoting responsible travel, we have the potential to open up areas that are conducive to this and increase how we can continue to ensure benefits trickle into our furthest communities.

No other industry is as prepared, has the sophisticated infrastructure, marketing and experience to make this economic impact as broad-based as it can and must be, or has the tenacity and grit to make it work for all Fijians.

Because tourism has had the most historical experience and understanding of leakages, is just one of the many reasons it is where it is now.

Fantasha Lockington – CEO, FHTA (Published in the Fiji Times on 27 April 2023)