The bigger picture

Recently I had a refreshing discussion with a friend about the economic prospects of Oman.  Since tourism is very much my area of interest I was obviously a bit biased, something that is occasionally reflected in this blog as well.  But I trust in the critical judgment of the readers.

On the back of this discussion I just thought it is wise to put things into perspective here as well.  The bottom line is: tourism is not and will never be an alternative to oil.  Not only for Oman, for any oil rich country!  Nor even UAE will be able to rely on tourism alone. So no matter how much effort and investment goes into the development of tourism, it should only be enough to create a very strong, albeit complementary sector in the range sectors giving the future backbone of economy (chemical, heavy industry, construction, services etc.)

Currently (2011) the GDP contribution of tourism in Oman is a total of 6.5% (including direct, indirect and induced spending).  All-in employment is 70,000 people (including the whole tourism supply chain. If we take only direct employment is 35,000). This is expected to increase by approximately 5% p.a. for the next 10 years.  So, no matter how hard we try (assuming all other things unchanged) it will never be significantly higher than 10-15% of GDP, which is pretty much the world average!!!  Yes, it is kind of depressing but it’s a fact.  Obviously as the oil revenues are decreasing the share of tourism can increase beyond this level, but it won’t make the overall pie bigger.

The only countries that can have significantly higher contribution of tourism to GDP are the island-type destinations like Maldives, Seychelles etc. In fact the mini states in the Caribbean have the highest share of tourism contribution to GDP in the World, in some cases amounting up to 70% all in, like the case of Maldives.

So what? Let’s just assume that there is massive planning work happening to prepare the economy for a post oil sustainability, the time when tourism will have to be ONE major source of income, but it cannot be THE major  one, as it will just simple not be enough.  With that said, I still love this sector and I think Oman and tourism can have a long lasting and fruitful marriage. But in order for that to happen the love affair has to start now.

Stats from: WTTC’s latest Economic Impact Research