Editorial | Tourism and production

We welcome the Government’s commissioning of what Edmund Bartlett has described as a “multidimensional impact assessment” of Jamaica’s tourism sector, in preparation for the industry’s planned construction of 20,000 new hotel rooms over the next decade.

Hopefully, this study will not narrowly advance the interests of the tourism industry. It must be a robust analysis of tourism’s current and future economic, social and environmental footprint and what, in the context of global warming and climate change, will be the island saturation point for the industry’s expansion.

Neither should this study stand on its own. It should fit within a broader matrix for pushing Jamaica up the production and productivity supply chain, so as to extricate itself from the low value-added, low-growth and low-wage environment in which it has been trapped for over four decades.

In other words, this study must be an integral part of an industrial policy that, among other things, establishes strong and competitive linkages between tourism and the rest of the economy.

There is little doubt about tourism’s importance to Jamaica’s economy – it directly accounts for around 13 per cent of gross domestic product – or of its resilience.

After its collapse during the COVID-19 pandemic, tourism arrivals have rebounded to the pre-pandemic level. An estimated 4.3 million tourists came to Jamaica in 2023-24. Sixty-nine per cent were stopover visitors.

The industry directly employs more than 100,000 people, or over 10 per cent of the employed labour force. That figure, according to Mr Bartlett, rises to over 350,000 when tourism’s impact across the economy is taken into the account.

CONTRIBUTION TO ECONOMY

Of equal, or even greater, significance is tourism’s financial contribution to the economy. In the last fiscal year, according to the minister, it grossed US$4.38 billion, an increase of 9.6 per cent on the amount for 2022-23. And Mr Bartlett said that 40 per cent ( US$1.752 billion, or over J$271 billion) of that income remained in Jamaica, meaning 40 cents out of every dollar earned by tourism is spent in the domestic economy or stays in Jamaican bank accounts (as opposed to the portion that goes to foreign goods and service providers) to keep the industry going.

The external costs include those associated with bringing tourists to the island, such as paying for airline tickets; marketing and advertising expenditures; the amortisation of foreign capital employed in developing the tourism infrastructure; repatriated profits; and the money spent on imports for the industry, including food and drink.

Some people will be surprised at that reported level of retention, which is higher than many of Jamaica’s Caribbean peers, although it lags behind global competitors with stronger industrial and agricultural bases.

While tourism’s gross earnings, US$4.38 billion, makes it Jamaica’s biggest earner of foreign exchange, Mr Bartlett’s estimate of a 40 per cent (US$1.75 billion) domestic retention places second, after remittances, as the sector with respect to direct circulation in the local economy. According to central bank data, Jamaicans abroad last year sent home US$3.1 billion, or 46 per cent more than tourism’s domestic retention.

However, the gross take from tourism was over 130 per cent more than the island earned from its merchandise exports, although the domestically retained portion was 92 per cent the value of all the island’s visible exports.

CLOSING THE GAP

However, Jamaica’s imports of US$7.7 billion worth of visible imports is more than four times its merchandise exports. Tourism plays a major role in closing the gap.

A significant chunk of those imports, though, are consumed by the tourists in much of the food they eat, the beds they sleep in, the vehicles which transport them – and even souvenirs they purchase.

According to Mr Bartlett, the industry has an annual demand for J$365 billion (US$2.34 billion) worth of visible goods. Some of what is now imported could, presumably, be offset with domestic production. That requires increased production and improved linkages between tourism and the rest of the economy.

Or, as Mr Bartlett said: “We have to invest more on the supply side, so that the 40 cents (on the dollar) that stays here can become 50 or 60, because the less we import is the more we retain.”

There are low-hanging fruits that Jamaica could pick with relative ease, starting with food. The island’s food import bill is US$1.4 billion, a large portion of which goes to feeding tourists.

Experts say that between a fifth and a quarter of the imported food could be substituted with domestic production, saving between US$280 million and US$350 million. Some of that money could be invested in modernising agriculture and agro-processing, or diverted to other areas of production.

But these things will not happen on a wish. And they ought not to be left to a slow evolution.

Partnerships between the Government, the private sector and other key sectors and institutions, including those involved in education and innovation, will help to hasten the creation of the necessary environment. Which makes studies like the one announced by Mr Bartlett important.

So, too, is the need to remove the shroud of indecency from the concept of an industrial policy.