RICHARD HARTUNG Today Online 20 Aug 14;
Singapore faces a dire shortage of hotel rooms, so the Government needs to release more hotel sites, real estate consultancy Chesterton International pronounced recently. Given the importance of tourism to the country, building more hotels might indeed seem urgent.
From an economic perspective, the Singapore Tourism Board (STB) has said the tourism sector contributes 4 per cent to the country’s gross domestic product and supports about 160,000 jobs. And tourism is continuing to grow, with receipts rising 5 per cent year-on-year to S$6 billion in the first quarter of this year, driven especially by a 19 per cent increase in sightseeing, entertainment and gaming.
Beyond the numbers, the STB has said tourism plays an essential role in reinforcing Singapore’s status as a vibrant global city that is a “magnet for capital, businesses and talent”.
There are undoubtedly benefits to tourism, but downsides also exist. It requires bringing in more foreign workers to take on jobs that Singaporeans shun. There are also hidden costs such as higher food prices due to increased demand, money that flows out to buy supplies for tourists and an adverse impact on the environment.
So, rather than a continual push to bring in more tourists, perhaps it is time to rethink the strategy behind the long-held view that tourism growth must continue unabated and consider shifting the focus to other sectors that can add greater value.
THE CHALLENGES OF TOURISM
As far back as 1994, Singapore researcher Peggy Teo noted that while tourism had grown rapidly and was deemed economically beneficial, it also resulted in resentment against foreign workers and changes to the vernacular landscape that pushed out locals. Two decades later, similar issues loom even larger.
The tourism sector continues to rely on foreign workers, especially since Singaporeans are less attracted to jobs that are crucial to the sector, such as waiters, cleaners or chambermaids. While data on how many of the 160,000 jobs in tourism go to foreigners is elusive, anecdotal evidence suggests that the percentage is high.
At a time when Singapore is curbing the inflow of foreign labour, the need to recruit foreign workers to fill positions in new hotels will not only be a challenge, but also put a further squeeze on the tight labour market.
A hidden cost of tourism is financial leakage, which the United Nations Conference on Trade and Development (UNCTAD) describes as “the loss in tourism revenue due to the need to procure tourism-related goods and services from abroad”. Data from the UNCTAD showed leakages of 10 to 20 per cent in developed countries and as high as 70 per cent in developing markets such as Thailand. Singapore may have higher leakages than other developed countries since it imports almost everything it offers to tourists — from food, drinks and clothes, to buses for tours.
Another hidden cost, said the UN Environment Programme, is the “unfavourable economic effects on the host community”, as tourism could lead to price hikes for locals due to increased demand for basic services and goods.
While prices in the heartlands have remained affordable, and though tourism is not the only factor driving up prices in central areas, prices for almost everything — from meals in restaurants to clothes at boutiques in tourist areas — have risen relatively quickly. The Economist Intelligence Unit (EIU), in naming Singapore the most expensive city in the world, said it is the third-most expensive destination for utility costs and the priciest place in the world to buy clothes.
However, the Government has clarified that cost-of-living reports such as EIU’s are aimed at comparing the costs of living for expatriates and thus do not reflect the living expenses of a local resident.
Moreover, the UNCTAD has pointed out that tourism makes a country vulnerable to adverse environmental impacts. Research by Sustainable Travel International showed that an average hotel uses about 825 litres of water a day for every occupied room — for everything from showers and laundry to swimming pools. This compares with the average of 151 litres used each day by each resident in Singapore.
Water management practices should have improved since data were released in 2008. Still, Mr Choi Shing Kwok, Permanent Secretary at the Ministry of the Environment and Water Resources, highlighted waste management at hotels and water usage as still being key issues in a speech earlier this year.
A NEW WAY FORWARD
Tourism receipts also do not tell the full picture. Dr Douglas Frechtling, professor of tourism at George Washington University, explained that tracking tourism expenditures alone can be “quite misleading in evaluating the economic benefits or economic costs of travel and tourism”.
Tallying the hidden costs of tourism means that the economic benefits of tourism are, in fact, less than expected, and may exacerbate the issues related to foreign workers here.
Rather than continuing to bank on tourism, it may be a good time to hit the pause button and ask: Should Singapore focus on bringing in more tourists or channel its efforts into other industries that bring in skilled jobs, pay more and enhance job quality for Singaporeans? For instance, new investments in headquarters and professional services that the Economic Development Board attracted last year created 5,120 skilled jobs and added nearly 1 per cent to GDP.
Any change in focus would almost inevitably result in rebuttals from the tourism sector. While policymakers should not neglect this sector, stopping to review tourism more holistically and potentially focusing instead on higher-value-added industries could ultimately create better-paying jobs for Singaporeans and benefit the economy.
ABOUT THE AUTHOR:
Richard Hartung is a financial services consultant who has lived in Singapore since 1992.
