- Email: [email protected]
The Economic Contribution of Tourism in Mauritius
862
RESEARCH NOTES AND REPORTS
Belsile, J., and D. Hoy 1980 The Perceived Impact of Tourism Residents: A Case Study in Santa Marta, Colombia. Annals of Tourism Research 7:83–101. King, B., A. Pizam, and A. Milman 1993 The Social Impacts of Tourism on Nadi, Fiji as Perceived by its Residents. Annals of Tourism Research 20:650–665. Lewis, B. 1993 Islam and the West. Oxford: Oxford University Press. Liu, J., P. Sheldon, and T. Var 1987 Resident Perception of the Environmental Impact of Tourism. Annals of Tourism Research 14:17–37. Milman, A., and A. Pizam 1988 Social Impacts of Tourism on Central Florida. Annals of Tourism Research 15:191–204. Monshipouri, M. 1998 The Modern Encounter with Islam: From Discourse to Reality. Journal of Church and State 40(1):25–56.
Submitted 20 November 2000. Resubmitted 4 January 2001. Resubmitted 25 March 2001. Resubmitted 6 July 2001. Accepted 20 August 2001. Final Version 12 September 2001. PII: S0160-7383(01)00092-5 Annals of Tourism Research, Vol. 29, No. 3, pp. 862–865, 2002 2002 Elsevier Science Ltd. All rights reserved Printed in Great Britain 0160-7383/02/$22.00
The Economic Contribution of Tourism in Mauritius Ramesh Durbarry Nottingham University Business School, UK
Mauritius lies in the Indian Ocean around 2,200 kilometres east of Africa and has a land area of 2,040 square kilometres. It is a small and densely populated island with an ethnically diverse and highly literate population. Its gross national product per capita has risen tremendously over the last three decades, from $280 in 1970 to $3950 in 1998. The economy, which was heavily dependent on one agricultural commodity (sugar) for the bulk of its income, employment, and export revenue up to the 60s, has a well developed manufacturing sector and a fast expanding tourism industry today. From 1950 to 1970, sugar dominated economic activities, on average accounting for 35% of GNP, more than 95% of total export earnings, and provided over 50% of total employment. With output growth stagnating to around 1% by the late 50s and with an unprecedented increase in population to around 3% per year, sugar provided bleak prospects for further employment and economic growth. The limitations of sugar for generating additional jobs was recognized and it was recommended that manufacturing be promoted. However, the country is poor in raw materials, the scale of its domestic market is small, and thus the lack of financial institutions and the dearth of technical know-how presented a formidable challenge to any large-scale manufacturing venture. Although the
RESEARCH NOTES AND REPORTS
863
government initiated some new industrial activities through a series of incentives, it became clear by the late 60s that the amount of employment and economic growth which could be generated by such strategy in a small economy was insufficient. No more than 1,200 jobs were created between 1964 and 1968 and per capita income stagnated. With political independence in 1968, the new Mauritian government was determined to usher the country into an era of economic prosperity. First, the Export Processing Zone (EPZ) was established in 1970. With the availability of cheap and skilled labor, it is attractive to foreign investors. Second, the government became actively involved in the development of tourism, by capitalizing on the country’s unique blend of scenic diversity, white sandy beaches, and year-round subtropical climate. While the success of the EPZ is widely recognized (Durbarry 2001; World Bank 1989; Yin, Yeung, Kowlessur and Chung 1992), tourism, though successful, has been less documented. Tourist numbers, which were only around 27,000 in 1970, exceeded 550,000 by 1998. Fig. 1 depicts arrivals and their growth rate during the period 197098. Tourism receipts for the same time period increased from $6.9 million to $492 million, respectively. The success of the industry originates from the first five-year development plan, 1971–75, when the government provided numerous fiscal and other incentives to attract local capital (mainly from sugar producers) and foreign investment in tourism facilities. Both the government and the people generally view tourism favorably as a source of jobs and economic growth. As the employment rate is around 95%, tourists are not overwhelmed by beggars and the crime rate is exceptionally low. Mauritius makes a positive impression on tourists as a busy, well-organized place and offers ethnic diversity. In 1998, the main tourist generating countries were France (29%), Reunion (15%), South Africa (9%), the United Kingdom (9%), Germany (8%) and Italy (7%). Tourism contributions (measured by funds from the hotel and restaurant category to GDP) was meagre in 1958: $0.4 million, representing only 0.3%
Figure 1. Tourist Arrivals: Number and Growth Rate (1970-1998)
864
RESEARCH NOTES AND REPORTS
of GDP. During the 80s, the industry firmly established itself as the third largest foreign exchange earner. Using constant 1992 prices, over the period 1990–98, tourism experienced an annual average growth rate of 9.8%, while manufacturing and agriculture grew by 5.6% and 0.6%, respectively. Recent figures show that tourism is now the second largest foreign exchange earner, after manufacturing, with sugar in the third place. Tourism earnings as a percentage of total exports increased from 5.9% in 1975 to 14.9% in 1990 and to 19% in 1998. These earnings represented 3.3%, 10%, and 19% of GNP in the respective years. Value added in tourism was estimated at $168 million in 1998, representing 5% of GDP. Mauritius has been aiming at high quality tourism in the “upmarket” bracket. Average expenditure of tourists has increased significantly, from $840 in 1990 to $1,054 in 1998. High spending tourists originate mainly from Europe. For example, in 1998, the average UK spending was $1,338, Switzerland $1,220, Germany $1,136, and France $812, while tourists from Reunion spent only $425. The impact of tourism on the economy depends, among other things, on the extent to which foreign exchange receipts are retained in the national economy. Although no figures are available, it is argued that the degree of leakage is small since most hotels have been built using local capital and are operated by local management (World Bank 1989). In cases where foreigners are involved, the hotels are owned in joint ventures with local shareholders; hence not all profits leak out. Other outflows of foreign currency are in the form of debt repayment and overseas promotional expenses. Available figures on direct employment in the industry, namely in hotels, restaurants and tourism businesses, show some significant increases (Table 1). These figures, however, are an underestimate of the true position, first, because they relate to large establishments only (employing 10 or more people) and second, they take no account of the number of people employed indirectly and in the informal sector. The 1996 Mauritius Economic Review estimated an induced and indirect multiplier effect factor of around 2.7 on employment. This suggests that in 1998 employment in tourism-related sectors was about 61,000, representing around 13% of total employment in the country. It is thought that the tax contribution from tourism is understated since the indirect content is often unaccounted for. Revenues generated directly from the hotel and restaurant sectors, which were $13.4 million in 1990, have increased to $36.4 million in 1999 (AHRIM 2000). Indirect revenues, on the other hand, include those generated as a result of airport charges, fuel duties, value added taxes, and other duties on goods and services used by tourists. An initial estimate by Cleverdon (1992) indicated that direct revenues from tourism constitute around 53% of total tax revenue received from the indusTable 1. Employment in the Tourist Industry (1994-1998)a Sectors
1994
1995
1996
1997
1998
Restaurant Hotel Other Tourism Businesses Total
1,157 9,082 3,419 13,658
1,000 9,340 3,515 13,855
1,154 9,666 3,596 14,416
1,118 10,575 3,732 15,425
1,389 11,177 3,924 16,490
Source: Ministry of Tourism and Leisure (1998). a As at the end of March in large establishments only (employing 10 or more persons).
RESEARCH NOTES AND REPORTS
865
try. It is estimated that total tax generated from this source accounts for about 7% of government total revenues. The success of the industry resulted from a combination of incentives and the performance of the subsectors involved. Tourism in Mauritius comprises four main activities: accommodation and food, inland tour services, foreign travel, and handicrafts and shopping. While in 1971 Mauritius had 22 hotels with a total of 811 rooms, at the end of March 1999, there were 89 registered hotels with a total of 7,365 rooms. Of these, 21 proprties were inland and the remainder had a beach location. The percentage of tourists staying in hotels increased from 69% in 1990 to almost 78% in 1998. Around 13.9% opted for boarding houses and bungalows while the remainder stayed with friends and relatives. The reason for the increasing demand in hotels was due to the rising number of tourists from high-spending countries. To further strengthen its tourism industry, the government has continued its policy of according numerous fiscal and other incentives to investors. For example, now hotels pay a nominal corporate tax of 15% during the lifetime of the project (instead of the normal statutory rate of 30%) and dividends received by shareholders are free from income tax for a period of 10 years. The importation of some equipment is exempted from custom duty, with free repatriation of invested capital, profit and dividends, and preferential rates for loans and overdrafts. The 1988 White Paper on Tourism has set clear targets on the number of tourists based on the ratio of tourists to population of 1 to 3 and has put a limit on the size of each resort hotel complex. New hotels should not normally have more than 200 rooms and high-rise construction is prohibited. Such policies, aimed at high spending tourism, establish Mauritius’ upmarket image and avoid unacceptable environmental pressures. 왎 Ramesh Durbarry: Christel DeHaan Tourism and Travel Research Institute, Nottingham University Business School, Jubilee Campus, Wollaton Road, Nottingham NG8 1BB, UK. Email.
REFERENCES AHRIM 2000 Association des Hoteliers et Restaurant de l’ile Maurice: Tax Revenue from Hotel and Restaurant. Maurice: AHRIM. Mimeo. Cleverdon, R. 1992 Tourism Development Impact Assessment and Policy Formulation (Vol. 1). Mauritius: Ministry of Tourism and Leisure. Durbarry, R. 2001 The Mauritius Export Processing Zone. In The Mauritian Economy: A Reader, R. Dabee and D. Greenaway, eds. Chapter 6. Hampshire: Palgrave. Ministry of Tourism and Leisure 1998 Handbook of Statistical Data on Tourism 18. Mauritius: Mauritius Tourism Promotion Authority. World Bank 1989 Mauritius: Managing Success. Washington DC: World Bank. Yin, P., D. Yeung, D. Kowlessur, and M. Chung 1992 L’ıˆle Maurice et sa Zone Franche, la deuxie`me phase de de´ veloppement. Mauritius: 5-PLUS/T- Printers.
Submitted 11 May 2001. Resubmitted 7 June 2001. Resubmitted 25 July 2001. Revised 24 September 2001. Revised 13 October 2001. PII: S0160-7383(02)00008-7
RESEARCH NOTES AND REPORTS
Belsile, J., and D. Hoy 1980 The Perceived Impact of Tourism Residents: A Case Study in Santa Marta, Colombia. Annals of Tourism Research 7:83–101. King, B., A. Pizam, and A. Milman 1993 The Social Impacts of Tourism on Nadi, Fiji as Perceived by its Residents. Annals of Tourism Research 20:650–665. Lewis, B. 1993 Islam and the West. Oxford: Oxford University Press. Liu, J., P. Sheldon, and T. Var 1987 Resident Perception of the Environmental Impact of Tourism. Annals of Tourism Research 14:17–37. Milman, A., and A. Pizam 1988 Social Impacts of Tourism on Central Florida. Annals of Tourism Research 15:191–204. Monshipouri, M. 1998 The Modern Encounter with Islam: From Discourse to Reality. Journal of Church and State 40(1):25–56.
Submitted 20 November 2000. Resubmitted 4 January 2001. Resubmitted 25 March 2001. Resubmitted 6 July 2001. Accepted 20 August 2001. Final Version 12 September 2001. PII: S0160-7383(01)00092-5 Annals of Tourism Research, Vol. 29, No. 3, pp. 862–865, 2002 2002 Elsevier Science Ltd. All rights reserved Printed in Great Britain 0160-7383/02/$22.00
The Economic Contribution of Tourism in Mauritius Ramesh Durbarry Nottingham University Business School, UK
Mauritius lies in the Indian Ocean around 2,200 kilometres east of Africa and has a land area of 2,040 square kilometres. It is a small and densely populated island with an ethnically diverse and highly literate population. Its gross national product per capita has risen tremendously over the last three decades, from $280 in 1970 to $3950 in 1998. The economy, which was heavily dependent on one agricultural commodity (sugar) for the bulk of its income, employment, and export revenue up to the 60s, has a well developed manufacturing sector and a fast expanding tourism industry today. From 1950 to 1970, sugar dominated economic activities, on average accounting for 35% of GNP, more than 95% of total export earnings, and provided over 50% of total employment. With output growth stagnating to around 1% by the late 50s and with an unprecedented increase in population to around 3% per year, sugar provided bleak prospects for further employment and economic growth. The limitations of sugar for generating additional jobs was recognized and it was recommended that manufacturing be promoted. However, the country is poor in raw materials, the scale of its domestic market is small, and thus the lack of financial institutions and the dearth of technical know-how presented a formidable challenge to any large-scale manufacturing venture. Although the
RESEARCH NOTES AND REPORTS
863
government initiated some new industrial activities through a series of incentives, it became clear by the late 60s that the amount of employment and economic growth which could be generated by such strategy in a small economy was insufficient. No more than 1,200 jobs were created between 1964 and 1968 and per capita income stagnated. With political independence in 1968, the new Mauritian government was determined to usher the country into an era of economic prosperity. First, the Export Processing Zone (EPZ) was established in 1970. With the availability of cheap and skilled labor, it is attractive to foreign investors. Second, the government became actively involved in the development of tourism, by capitalizing on the country’s unique blend of scenic diversity, white sandy beaches, and year-round subtropical climate. While the success of the EPZ is widely recognized (Durbarry 2001; World Bank 1989; Yin, Yeung, Kowlessur and Chung 1992), tourism, though successful, has been less documented. Tourist numbers, which were only around 27,000 in 1970, exceeded 550,000 by 1998. Fig. 1 depicts arrivals and their growth rate during the period 197098. Tourism receipts for the same time period increased from $6.9 million to $492 million, respectively. The success of the industry originates from the first five-year development plan, 1971–75, when the government provided numerous fiscal and other incentives to attract local capital (mainly from sugar producers) and foreign investment in tourism facilities. Both the government and the people generally view tourism favorably as a source of jobs and economic growth. As the employment rate is around 95%, tourists are not overwhelmed by beggars and the crime rate is exceptionally low. Mauritius makes a positive impression on tourists as a busy, well-organized place and offers ethnic diversity. In 1998, the main tourist generating countries were France (29%), Reunion (15%), South Africa (9%), the United Kingdom (9%), Germany (8%) and Italy (7%). Tourism contributions (measured by funds from the hotel and restaurant category to GDP) was meagre in 1958: $0.4 million, representing only 0.3%
Figure 1. Tourist Arrivals: Number and Growth Rate (1970-1998)
864
RESEARCH NOTES AND REPORTS
of GDP. During the 80s, the industry firmly established itself as the third largest foreign exchange earner. Using constant 1992 prices, over the period 1990–98, tourism experienced an annual average growth rate of 9.8%, while manufacturing and agriculture grew by 5.6% and 0.6%, respectively. Recent figures show that tourism is now the second largest foreign exchange earner, after manufacturing, with sugar in the third place. Tourism earnings as a percentage of total exports increased from 5.9% in 1975 to 14.9% in 1990 and to 19% in 1998. These earnings represented 3.3%, 10%, and 19% of GNP in the respective years. Value added in tourism was estimated at $168 million in 1998, representing 5% of GDP. Mauritius has been aiming at high quality tourism in the “upmarket” bracket. Average expenditure of tourists has increased significantly, from $840 in 1990 to $1,054 in 1998. High spending tourists originate mainly from Europe. For example, in 1998, the average UK spending was $1,338, Switzerland $1,220, Germany $1,136, and France $812, while tourists from Reunion spent only $425. The impact of tourism on the economy depends, among other things, on the extent to which foreign exchange receipts are retained in the national economy. Although no figures are available, it is argued that the degree of leakage is small since most hotels have been built using local capital and are operated by local management (World Bank 1989). In cases where foreigners are involved, the hotels are owned in joint ventures with local shareholders; hence not all profits leak out. Other outflows of foreign currency are in the form of debt repayment and overseas promotional expenses. Available figures on direct employment in the industry, namely in hotels, restaurants and tourism businesses, show some significant increases (Table 1). These figures, however, are an underestimate of the true position, first, because they relate to large establishments only (employing 10 or more people) and second, they take no account of the number of people employed indirectly and in the informal sector. The 1996 Mauritius Economic Review estimated an induced and indirect multiplier effect factor of around 2.7 on employment. This suggests that in 1998 employment in tourism-related sectors was about 61,000, representing around 13% of total employment in the country. It is thought that the tax contribution from tourism is understated since the indirect content is often unaccounted for. Revenues generated directly from the hotel and restaurant sectors, which were $13.4 million in 1990, have increased to $36.4 million in 1999 (AHRIM 2000). Indirect revenues, on the other hand, include those generated as a result of airport charges, fuel duties, value added taxes, and other duties on goods and services used by tourists. An initial estimate by Cleverdon (1992) indicated that direct revenues from tourism constitute around 53% of total tax revenue received from the indusTable 1. Employment in the Tourist Industry (1994-1998)a Sectors
1994
1995
1996
1997
1998
Restaurant Hotel Other Tourism Businesses Total
1,157 9,082 3,419 13,658
1,000 9,340 3,515 13,855
1,154 9,666 3,596 14,416
1,118 10,575 3,732 15,425
1,389 11,177 3,924 16,490
Source: Ministry of Tourism and Leisure (1998). a As at the end of March in large establishments only (employing 10 or more persons).
RESEARCH NOTES AND REPORTS
865
try. It is estimated that total tax generated from this source accounts for about 7% of government total revenues. The success of the industry resulted from a combination of incentives and the performance of the subsectors involved. Tourism in Mauritius comprises four main activities: accommodation and food, inland tour services, foreign travel, and handicrafts and shopping. While in 1971 Mauritius had 22 hotels with a total of 811 rooms, at the end of March 1999, there were 89 registered hotels with a total of 7,365 rooms. Of these, 21 proprties were inland and the remainder had a beach location. The percentage of tourists staying in hotels increased from 69% in 1990 to almost 78% in 1998. Around 13.9% opted for boarding houses and bungalows while the remainder stayed with friends and relatives. The reason for the increasing demand in hotels was due to the rising number of tourists from high-spending countries. To further strengthen its tourism industry, the government has continued its policy of according numerous fiscal and other incentives to investors. For example, now hotels pay a nominal corporate tax of 15% during the lifetime of the project (instead of the normal statutory rate of 30%) and dividends received by shareholders are free from income tax for a period of 10 years. The importation of some equipment is exempted from custom duty, with free repatriation of invested capital, profit and dividends, and preferential rates for loans and overdrafts. The 1988 White Paper on Tourism has set clear targets on the number of tourists based on the ratio of tourists to population of 1 to 3 and has put a limit on the size of each resort hotel complex. New hotels should not normally have more than 200 rooms and high-rise construction is prohibited. Such policies, aimed at high spending tourism, establish Mauritius’ upmarket image and avoid unacceptable environmental pressures. 왎 Ramesh Durbarry: Christel DeHaan Tourism and Travel Research Institute, Nottingham University Business School, Jubilee Campus, Wollaton Road, Nottingham NG8 1BB, UK. Email
REFERENCES AHRIM 2000 Association des Hoteliers et Restaurant de l’ile Maurice: Tax Revenue from Hotel and Restaurant. Maurice: AHRIM. Mimeo. Cleverdon, R. 1992 Tourism Development Impact Assessment and Policy Formulation (Vol. 1). Mauritius: Ministry of Tourism and Leisure. Durbarry, R. 2001 The Mauritius Export Processing Zone. In The Mauritian Economy: A Reader, R. Dabee and D. Greenaway, eds. Chapter 6. Hampshire: Palgrave. Ministry of Tourism and Leisure 1998 Handbook of Statistical Data on Tourism 18. Mauritius: Mauritius Tourism Promotion Authority. World Bank 1989 Mauritius: Managing Success. Washington DC: World Bank. Yin, P., D. Yeung, D. Kowlessur, and M. Chung 1992 L’ıˆle Maurice et sa Zone Franche, la deuxie`me phase de de´ veloppement. Mauritius: 5-PLUS/T- Printers.
Submitted 11 May 2001. Resubmitted 7 June 2001. Resubmitted 25 July 2001. Revised 24 September 2001. Revised 13 October 2001. PII: S0160-7383(02)00008-7