The Economic Impacts of Cruising in the Middle East - Coursework Example

HЕ ЕСОNОMIС IMРАСTS ОF СRUISING IN МIDDLЕ EAST Name: Professor’s name: Institution: Date: Abstract The report presented below tends to find out and quantify the economic implications of cruising. The coverage provides an in-depth analysis of most of the countries in the Middle East. From the report, it is also possible to identify a set of investment opportunities that will promote the growth of the tourism sector and the entire economy, and in particular in the Middle East. The report can be used as a platform by the government, the donor partners and the private sectors to help and support further strategiesDaher (2007). It can also be used in targeting the development of the cruising sector. Even though data on tourism, and in particular cruise tourism, is not readily available in some countries of the middle east, the report is an attempt to help and capture the initial economic information about the cruise industry. It manages to provide a point of departure for additional research targeting the economic, environmental and social impacts related to the industry. The industry is recorded to exhibit robustly increased demand tends dated over the last few decades. The tourism segment can be determined as one of the crucial building blocks in the broader Middle East. Most of the data and ideas presented in the paper majors on the economic impacts directed by the cruise industry in the Middle East. Doing the analysis relies on the current benefits and imperative contributions that cruise industry contributes to the local economies Gaouette (2010). Identification is made of the major driving forces leading to the evolution of the industry and in particular, in the Middle East. Some of the findings presented by the research include the scarcity of the reliable market for the cruiser business. In trying to overcome some of these challenges, the empirical approach implemented focuses on past research and diversified data input obtained from various sources. Some of the sources include the tourists’ spending patterns questionnaires together with interviewing the experts related to the fieldAyalon (1993). Table of Contents ТHЕ ЕСОNОMIС IMРАСTS ОF СRUISING IN МIDDLЕ EAST 1 1.0 Introduction 4 1.1 Economic Impacts of Cruising in the Middle East 5 1.1.1Direct spending Impacts 5 1.1.1.1Visitor export 5 1.1.1.2 Domestic Travel & Tourism spending 6 1.1.1.3 Government individual spending 6 1.1.1.4 Internal tourism consumption 7 1.1.1.5 Business Travel & Tourism spending 8 1.1.1.6 Leisure Travel & Tourism spending 9 1.1.2 Indirect and induced impacts 10 1.1.2.1 Capital investment 10 1.1.2.2 Government collective spending 11 1.1.2.3 Supply-chain effects 12 1.1.2.4 Induced contribution 13 1.1.3 Other Indicators 13 1.1.3.1 Outbound Expenditure 13 1.1.3.2 Foreign Visitors arrivals 14 1.1.4 Conclusion 14 1.0 Introduction In the Middle East, cruisers are becoming popular mostly in the tourism sector. Its developments are however affected by some visa-related impediments. For instance, a cruise stopping in Dakar and some other related countries are charged close to $ 250 in addition to the normal fee. That is considered to be the visa costs, and it has tremendously affected the growth of the sector. There have been complications in getting visas for certain nationalities in the region. In the Middle East, cruisers are considerable interest to Australians. For example, visa complications prevent many Australians from purchasing and tour operators and travel agencies for selling cruises in the region (Great Britain, 2007). Apparently, a change in the situation has been noted in the past decades. There has been a campaign in reducing the bureaucracy by establishing a low-cost and fast-track transit visa system for cruise passengers. The advancement was one of the key development strategies set by the Emirates. They had a view that they should be exempt from regular formalities and visas if they are only going to be in port for a shorter period. For the case of Dubai, they have worked out a deal in which cruise lines can be accredited with a 9-hour transit visa for the entire shipload of passengers directly based on the passenger manifest list. Such individual no longer require visa applications. As a way of attracting more tourists, there is a talk in other Gulf countries to implement and embrace the concept of fast-track visa systems for cruise passengers. Economically, it has the benefit of increasing the rate at which tourists will come into the different countries. That will result in a direct improvement on the GDP. 1.1 Economic Impacts of Cruising in the Middle East 1.1.1Direct spending Impacts 1.1.1.1Visitor export In the Middle East, the rate and level of spending by the International have improved the total amount of money in circulation. These tourists normally spend their money on business activities, such as investments and leisure trips. For instance, the realization of a business opportunity will encourage private developers from different countries to invest in their new countries of residence. However, it should be noted that spending excludes those on education. The spending is consistent with the total inbound tourist expenditure. Dubai is considered as the regional hub for the Middle East; it has been recorded that almost 24% of tourists traveling around the Middle East regard Dubai as their best destination. Over the past few decades, a lot of investment opportunities are created for the economy that impacts positively on their GDP and employment level Oren & Petro (2004). The government has been systematically promoting tourism with the aim of capitalizing on major locations in the Middle East. In the Middle East alone, tourism contributed to about 9.2% of GDP and employed 16.7% of the workforce. Such statistics keeps on increasing yearly at a rate of 2%. In 1998, Citizens from Saudi Arabia traveling to Bahrain across the causeway between the two countries accounted for 1.9m of Bahrain’s estimated 2.9m, visitor’s arrivals. In 2006, an increase of 10% was noted which implied a significant growth in the infrastructural development as well as economic growth of the countriesLibrary Information and Research Service.(1978). 1.1.1.2 Domestic Travel & Tourism spending It does not necessitate that only international visitors constitute part of the Middle East tourism sector. Spending within a country by their residence for both business and leisure trips impacts positively on the economy. That as well leads to the growth of the GDP since the citizen helps in building the economy. The Middle East does not include the multi-user consumer durables since they are not directly linked to purchases for tourism purposes. In determining the economic impacts of the economy, the outbound spending by those residents abroad is not included since they do not result to direct local spending. However, they are identified separately since they help in determining the overall GDP. For instance, in 1999, the government signed an agreement with the private Delilah Real Estate and Tourism Development Company of Saudi Arabia for the 50-50 joint venture Durrant al-Bahrain tourism development project on the southern Gulf coast, costing an anticipated US $800m. The development strategies were to embrace local investors who were to benefit from job creation and reduced monopoly. Travelling cost when moving within the Middle East countries has reported a significant improvement in their GDP. Local tourists pay for certain cost such as accommodation cost. Between 2000 and 2010, there has been an increase in the number of travelers to the Middle East. According to United Nations World Travel Organization. Out of the 60% increase in the number of travelers, it was noted that 25% were local. The increase in their number has resulted in the advancement in infrastructure that promotes the overall economic development. 1.1.1.3 Government individual spending The government has been spending many funds on the travel and tourism services linked to the visitors across the globe. For the case of Saudi Arabia, a budget of $1.1 m is allocated annually to cater for some of the expenses required for the development and implementation of these servicesIvanovic&Wassung (2009). Cultural services and recreational services are being constructed by the government to help and promote the infrastructure needed for efficient and effective coexistence within the Middle East. Again, the Middle East air carriers have experienced much growth over the past few decades within many customers and tourists having Dubai as their final destination. The growth accounts for the increase in government spending to cater for the growth rate. There is a need to improve and construct new terminals that will accommodate new tourists and other visitors. Economically, such investments account for the infrastructural development of major countries within the Middle East. Unfortunately in the Middle East exporting price signals often fail to work. Normally, the supply inflexibility by public sector industries on short-term profit taking by those in the private sectors is some of the major contributors of the same. The challenge is to have export profits taken back into investment to bring about further export growth World Bank (2009). 1.1.1.4 Internal tourism consumption Within the Middle East, a lot of revenues has been generated from industries dealing directly with tourists. Iraq and Iran for the past decades have received a substantial amount of revenue from the visitors’ exports, domestic spending and individual government spending. Substantial trade deficits are the norm for Egypt, Jordan, Morocco, and Tunisia. In the case of Jordan, imports are almost three times greater than exportsIvanovic&Wassung (2009). For Egypt, imports are over twice as great as exports despite protectionist policies. Due to the small size of Egypt, approximately 80 million, it has been noted that other Middle East countries such as Israel have managed to accommodate a large number of tourists. They tend to import more for the local consumptions of their citizens that help in promoting their economic growth. Some of the products consumed are however produced locally which helps in increasing the consumption within the country (Gopal, 2008). The UAE, which is one of the largest markets, have realized over three times some their consumptions compared to EgyptApostolopulos (2001). Despite sanctions presented in these countries, their level of internal consumption has remained significant in contributing to the level of economic growth. Despite the global downturn in the economic development, most of the UAE have realized a substantial economic growth, and it is noted that the economic outlook is positive. That is realized on the reservation made on the local consumption contributed by the tourism industryThe Cruise industry news quarterly (1991). 1.1.1.5 Business Travel & Tourism spending In the Middle East, the spending is attributed to residents and international visitors who contribute to the development of the economy. Various business agencies within the Middle East are becoming one innovative on the new ways of promoting tourism in their countries. The government, through various ministries, have provided a platform that ensures that business ideas are harnessed in the right manner. Such innovations are places in incubators and later used to develop the economy. The setting of up large restaurants in Dubai has led to the creation of business opportunities for the investors who consider investing in the city due to the increased number of tourists. From 2005 to 2014, statistics has shown that a large part of the Middle East, including Egypt and Israel, managed to implement more advanced business strategies to help in revenue generation. The spending on tourism has a direct impact on the economy of the countries found in the Middle East. Among the Middle East countries, Dubai is identified as the fourth-most visited city in the world. Statistics provided by MasterCard indicated that most of the tourists spend almost $ 10.9 billion overnight. That has a direct implication on that business that operate on the provision of guest houses in the Middle East. Such visitors normally spend a considerable number of days from the regions. As more people travel to the Middle East or pleasure during the recent years, there is a forecast of the growth by a good percentage to rank the Middle East as one the most visited regions in the world. The implication of these figure on the economy translates into an improvement in the GDP and a rise in the living standards of people from the Middle East. They can also learn from cultures not locally available from their regionHudman& Jackson (2003). 1.1.1.6 Leisure Travel & Tourism spending In the Middle East, there is a direct share of travel and tourism or employment and the development of the economy. Just like the export of other commodities, there is a direct income generation from the activities realized from visitors export. All the fixed investments spending is compared to the total GDP that is realized from travel and tourism spending. With countries like Turkey leading in the concept of Tourism, the Middle East has constantly laid much focus on ensuring the growth of their market. Dubai-based Almulla Hospitality comprise of 30 hotels and targeting Saudi Arabia, the United Arab Emirates, Jordan, Egypt, and Malaysia. On leisure travels alone, the world Tourism Organization indicated that the Gulf travelers spend $12 billion annually on leisure travels Harrison (2001). The money is widely incorporated into the GDP of most of these countries which helps in providing a substantial economic growth. The Arabian hospitality is one of the thriving sectors that is currently attracting significant attention and investment. It has been adopting the business practices and finance based on the Middle East principles. The trend is rapidly developing since there is reduced level of sections associated with it. With the improvement in the leisure activities, there is need to improve the legal practices that will encourage the movement of visitors from the Middle East. It is noted that such activities have a positive growth in the economy of most of the countries found in the Middle East. Iraq, for instance, recorded a growth rate of 3.4$ in the GDP for the last fiscal year (Heshmati& Squires, 2013). 1.1.2 Indirect and induced impacts 1.1.2.1 Capital investment Tourism has ventured into very contemporary and recent transformations and changes within the region of the Middle East. There is an interest laid down by most researchers in determining the relationship between tourism and urban change. The urbanization concept leads to a diverse creation of vast business opportunities that tend to attract the interest of many investors. In most cities of the Middle East, there is a transformation of the urban scenes in the region, and most of the sites are gradually becoming business and tourists’ spectacles Page & Connell (2007). Within the Middle East, there is a constant marketing of these cities to seek new inward investments. That has contributed to the creation of new attractive spaces within the city as part of the development process. There has been a need for urban restricting in most of the countries from the region. Some recreational centers have been developed which ensure that they attain the required standards. It is fascinating to understand the effect of the circulation of global capital, the rise of new Arab elite, and circulating flagship tourism projects in Japan, Lebanon, and throughout the Arab region. New emerging urban islands of excessive consumption for the chosen elite where the city is becoming a place to play signifies the neoliberal urban restructuring in places such as downtown Beirut, Abdali in Amman, and in many other places in the Middle EastHalbach(1995). The improvement of most of the cities found in the Middle East has substantially improved the economic level of these countries. It became easier for businesses to set up due to the minimized restrictions placed by the governmentJoffé (2002). 1.1.2.2 Government collective spending The increase in tourist arrival in the second half of 2002 over the depresses levels during the same period in 2001 provides evidence of an incipient recovery from the sharp recession that begun in 2001 (tourism economics, 1995). However, the authorities remained concerned about the adverse impact that a Middle East war could have on the tourism and other relevant sectors affecting the economyUniversity of Pittsburgh., & American Political Science Association (1975). There was a recognition of the fiscal policies being pursued as far as possible, given their concern about the recent accumulation of public debt. The economy was making an appropriate shift to medium-term policies geared to fiscal tightening and structural reforms to achieve a sustainable growth. These policies helped in the reduction of fiscal deficit substantiallyWorld Travel & Tourism Council (1997). They also help in reforming the tax and pension systems. The taxation principles will help in the realization of a substantial amount of revenue once there is an appropriate allocation of finances to each of the departments. Staff supports these policies as broadly moving in the right direction. There has been a reduction in the government spending over the last few decades that was majorly contributed by the involvement of the private sector in tourism. Due to the improvement of the tourism sector among the countries of the Middle East, there has been external commercial borrowing by the public sector that aimed solely at reducing the costs and tightening the maturity of the public debt, as evident in Iraq (Navarra &Tubiana, 2013). The economic growth and development of these economies relies much on the tourism sector Alexander (2009). 1.1.2.3 Supply-chain effects In terms of food supply to the tourism industry in the most part of Saudi Arabia, mainly hotels and guest houses can usually source from a range of possible suppliers such as wholesalers and supermarkets. The tourism industry in most of the Middle East countries can now source imported brands from wholesalers or local retailers to supplement local produce. Due to mass tourism, Dubai has been able to design a business model of high volumes and accommodations to catering for the increased number of tourists. In terms of the food supply in Iran, accessibility to information is limited. However, according to Fawzy (2002), tourists expenditure on food was estimated to account for around 43 percent of their total spend in the economy. There is a shift in tourist spending in most of the Arabian countries from spending on eating and drinking in accommodation establishments to eating in restaurants, bars, and pubs. Since most of the distributions are done locally, the distribution of food in most of the Arabic countries have resulted in a significant growth in their economic growth and development (Tohamy et.al, 2000). Most of the agricultural products could be consumed locally hence reducing the level of importing foods. Since they produce their products at a cheaper price, they can make a substantial amount of revenues that they plow back into most of their economic developmentsDrewry Shipping Consultants (1993). However, the flows of tourism from Europe to the Middle East are occasionally threatened by socio-economic events such as terrorism. It may cause a sudden drop in tourism arrivals in the affected destinations and also influence the relationship between different agents offering package tours. It is imperative to note that the supply chain from the source market to the destination is governed by a lead firm. The tourism level chain is thus not governed by a particular firm, although package tourism can be clearly seen as a buyer-driven commodity chain (Thompson, 2001). 1.1.2.4 Induced contribution Tourism sector provides employment directly and indirectly to most stakeholders of the Arabian countries. That has been noted by different bodies to impact significantly on the GDP of such countries. Employment is being created directly to members that employed in the tourism sector. Tour guides, for instance, rely on the income from their services from the industry. Additionally, the economy also benefits when such earnings are taxed. In Egypt for instance and Morocco, for instance, the tourism industry is believed to contribute to almost 34% of the employment vacancies in the economy Fink (2010). It has been on the increase for the past one decade due to the improvement in their political stability. Apparently, it is also evident that the industry benefits other citizens not directly involved in the tourism industry. The GDP of most of the Middle East countries depend on the tourism industryCaribbean/Latin American Action (Organization) (1997). 1.1.3 Other Indicators 1.1.3.1 Outbound Expenditure The payments for the foreign carriers for the international transport has improvement the economy of most countries found in the Middle East. For the past one decade, an increase in the number of foreign visitors to the Middle East recorded a substantial increase leading to the improvement of their economy. The countries of the Middle East are close enough to the tourist generating markets of northern Europe to have developed a sizable tourism industry. It is imperative to note that it is only Israel and Dubai that have developed beach tourism on a scale comparable to other Mediterranean destinations. Economically, cultural tourism depicts clear growth in the GDP (eatrade cruise review, 1997). For instance, it has been recorded that it is Saudi Arabia and the Gulf States that managed to receive a considerable volume of business tourists, and this part of the Middle East is also a major generator of outbound international tourism. 1.1.3.2 Foreign Visitors arrivals There exist an upward move in the number of foreign visitors to the Middle East. Some of these visitors spend as long as overnight. In Dubai alone, it is noted that there has an increase in the number of new arrivals at their terminals. It is prudent to ensure that more advancements are made their clearance department to pave the way for a faster delivery of services. Historically, the Middle East lies a crossroad in world communication, where Europe, Africa, and Asia meet. Transport to and within most of the region is good, and highways and airports have been provided to meet the increased demand for international travel(In Nunes et.al, 2014). 1.1.4 Conclusion There is a need to embrace the tourism industry in the Middle East since it impacts positively on their economic growth and development. The current challenge facing the tourism industry in the Middle East is the bureaucracy experienced in the cost of the visa. There is a campaign that will ensure that the movement is made simpler with few legal requirements. The reduction in the time required to apply for the visa will help in improving the number of foreign visitors to these Arabian countries. Recently, there was a need to develop a system that will ensure that a universal visa is introduced that will ensure that the movement within the Middle East countries is made simpler. For the case of Dubai, the system is already working and will just require some minimal adjustments to make it more effective. The economy of the countries is expected to improve once they embrace their tourism sector and stabilize their political dimensions. In most Arabic countries, frequent fights have been the key contributor of the decrease in the number of foreign visitors. For instance, it was recorded that the number of tourists visiting Egypt between 2000 and 2005 reduced drastically due to the implications of war. The position of tourism in Iran mirrors the situation in the Middle East. Further growth will depend upon the extent to which modernizers can prevail over hardline fundamentalists in their efforts to revive the economy, effort reforms, and improve relations with the USA. There are many problems affecting the further growth of tourism. The prevailing warm, dry climate, allied to demographic pressures has put a severe strain on the region’s scares water supplies. The government needs to pay more attention to the conservation of the cultural as well as the natural resources for the tourism industry. The greatest threat, however, is the political instability of most countries in the region, fueled by religious fundamentalism, social and ethnic tensions. Resolving that will bring the Middle East to a greater milestone on their tourism sector. Reference Alexander, J. (2009). Pandora's locks: The opening of the Great Lakes-St. Lawrence Seaway. East Lansing, Mich: Michigan State University Press. Apostolopulos, G. (2001). Women as producers and consumers of tourism in developing regions. Westport, Conn. [u.a.: Praeger. Ayalon, A. (1993). Middle East contemporary survey: Volume XV, 1991. Boulder, Colo: Westview. Caribbean/Latin American Action (Organization). (1997). Caribbean basin profile. Washington, D.C: Caribbean Pub. Co. Daher, R. (2007). Tourism in the Middle East: Continuity, change, and transformation. Clevedon [u.a.: Channel View Publ. 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