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Tourism and Development in the Senian Context: Does It Help Or Hurt SIDS? the Case of Aruba

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Tourism and Development in the Senian Context: Does It Help Or Hurt SIDS? the Case of Aruba Journal of Tourism and Hospitality Management, May-June 2018, Vol. 6, No. 3, 100-108 doi: 10.17265/2328-2169/2018.06.002 D DAVID PUBLISHING Tourism and Development in the Senian Context: Does It Help or Hurt SIDS? The Case of Aruba Don Taylor University of Aruba, Oranjestad, Aruba Tourism is the lifeblood of many small island independent states and those that are categorized as small non-independent jurisdictions (SNIJs) such as Aruba. The question that this paper proposes to address is whether and how tourism helps or hinders island development. Research has been conducted on the economic effects of tourism in a global context; however, our approach is to look at its effect in one destination, Aruba, and to contextualize this research by situating it among other Caribbean islands. The rationale is that tourism is of more significance to the Caribbean in terms of economic dependence and tourism intensity. Because of the density of tourism in Aruba and its mono-economical development paradigm this makes for an ideal case study.1 Our methodology is based on an ontological review of the relationship between tourism and economic development utilizing a contextualized definition of development that fits within the philosophical position of Amartya Sen. In that context defined not just in terms of GDP growth but the enhanced social welfare of its citizens also in the Senian sense as distance from unfreedom. The concept of unfreedom for purposes of this paper is based on the extent to which there is an inertia to shift paradigms even if the existing paradigm enhances vulnerability, fragility and restricts opportunities to its citizenry. Therefore, despite its impact on the economy in terms of foreign exchange, investments, and employment, there are considerable and pervasive externalities which should be considered in conceptualizing the totality of tourism’s effect on economic and social development. In this essay, we consider Sen’s (2000) definition of development as freedom and situate it in that context and introduce the work of envelopment theory as conceptualized by Sankatsing (2016). Keywords: economic development, freedom, unfreedom, envelopment Introduction and Context Tourism development has been a significant factor in the economic growth of Aruba since the closing of its oil refinery in 1986 and the recognition of its status within the Dutch Kingdom. It has ostensibly increased economic growth, the economic welfare of its citizens and contributes substantially to gross domestic product (GDP). In 2016, tourism accounted for 88.1% of Aruba’s GDP and directly or indirectly supported 15,000 jobs (World Travel and Tourism Council [WTTC], 2017). Tourist arrivals are an integral component of that growth and its attractiveness is highlighted by its comparative advantage to other Caribbean destinations. Therefore, as GDP has grown, there is a broader wealth growth that reflects the impact of tourism within society which has enabled Aruba to become one of the few Caribbean countries with nominal GDP per capita of over USD 22,000.00. This has been remarkable considering that this has occurred within a generation. Don Taylor, Lecturer, Department of Hospitality and Tourism Management Studies, University of Aruba. Email: [email protected]. 1 IMF Report, IMF Country Report No. 17/155, June 2017, Article IV Consultation. TOURISM AND DEVELOPMENT IN THE SENIAN CONTEXT 101 Table 1 Economic Growth in Aruba: 2002-2010 Selected economic indicators Real sector 2002 2003 2004 2005 2006 2007 2008 2009 2010 Mid-year population ( 1,000) 92.1 93.1 95.1 97.6 99.4 100.1 100.9 101.6 101.9 GDP at market prices in USD 1,930 2,010 2,216 2,318 2,411 2,601 2,730 2,485 2,377 Real GDP in USD 1,749 1,783 1,924 1,948 1,968 2,008 2,011 1,783 1,724 Real GDP growth (in percent) -3.3 2.0 7.9 1.2 1.1 2.0 0.2 -11.3 -3.3 Nominal GDP per capita 21.0 21.6 23.3 23.7 24.3 26.0 27.1 24.5 23.3 ( USD 1,000) Real GDP per capita 19.0 19.1 20.2 19.9 19.8 20.1 19.9 17.6 16.9 ( USD 1,000) Tourist stay-over visitors ( 1,000) 642.6 641.9 728.2 732.5 694.4 771.8 826.2 810.1 822.3 Cruise visitors ( 1,000) 582.2 542.3 576.3 552.8 591.5 481.8 556.1 606.8 569.4 Cruise ship calls 337 315 318 311 314 315 299 327 314 Unemployment rate (%) 8.1 11.4 9.5 8.8 9.3 7.1 6.9 10.3 10.6 Consumer inflation 4.2 2.3 2.8 3.8 2.5 9.9 -1.9 6.8 -0.7 (end of period, in percent) Consumer inflation 3.3 3.7 2.5 3.4 3.6 5.4 9.0 -2.1 2.1 (period average, in percent) Note. Source: Central Bank of Aruba. GDP growth has slowed substantially after the recent recession because of the impact of the economy of the closure of the revived oil refinery which provided the only alternative to a total dependence economy. This means that the Aruban economy is essentially a monoeconomic entity with tourism as its only economic base and that is significant because that the level of dependency exacerbates the island’s fragility and vulnerability to external shocks. It also implies that unlike other Caribbean islands with a non-monoeconomic base, there is an imperative to drill further down into the tourism space in order to secure its competitive position. This is reflected in efforts to diversify and reinforce the tourism economy within the same paradigmatic framework that seeks to reinforce the country’s economic and development dependency and vulnerability. Significant and sustained efforts are not being made to substantially diversify the economy away from the tourism paradigm towards a more sustainable and robust economic development model. However, beyond robustness and sustainability, the challenge is whether tourism growth has translated into economic development that is reflected in increasing freedom for the society. According to Sen (2000), the focus on the economics of development with its emphasis on GDP, GDP growth, and per capita income is the wrong set of measures in which development should be judged. These are hard economic and objective assessments of development that omit the essential freedoms such as educational capacities and opportunities to exploit the potentialities of the society, the fairness and justice of the legal system that treats all members of society equally and fairly, and the distribution of wealth within that society. This also includes access to health and welfare benefits within the economy. Sen was not the first economist to highlight the schism between economic neoliberalism and economic development. Soedjatmoko (1985) also noted that there was too much emphasis on classical economic growth models in the developing world when attention should also be focused on institutional and structural issues along with broader socio-cultural and historical concerns. 102 TOURISM AND DEVELOPMENT IN THE SENIAN CONTEXT This paper intends to critically review Aruba’s dependence on tourism and highlight its impact on development and levels of freedom according to Sen’s (2000) perspective. The paper is structured as follows: in part two, we will critically outline the depth of tourism’s penetration in the economy and society. In part three, we will apply Sen’s (2000) analysis to determine the depth of the linkage between tourist arrivals and economic development. In part four, we will introduce the concept of envelopment theory and relate it to the Aruban context. Finally in part five, we will conclude the paper by making some policy suggestions and recommendations for further research. Market Depth of Aruba’s Tourism Tables 2-3 indicate the extent to which Aruba’s economy is structurally dependent on tourism and the pervasiveness of tourism as the driver of economic activity compared to other Caribbean islands. In this context, there is a structural overdependence on tourism that goes beyond the Caribbean norm. This in turn limits the potential for structural innovation outside the tourism sector and reinforces the dependency paradigm because it channels existing capacity and capability to the dominant and only significant economic sector. Alternative models of economic development are stifled as available resources are channeled or allocated to the primary driver of the current economic model. This results in policy making that seeks stability rather than disruption inherent in developing innovative economic models. Table 2 Tourism Depth in Aruba Caribbean Islands’ Travel & tourism Contribution to Contribution to total Visitor exports contribution comparative analysis contribution to GDP (%) employment (%) investments (%) to total exports (%) Aruba 88.1 89.3 32.0 65.7 Antigua and Barbuda 60.4 54.3 41.6 67.4 Bahamas 44.8 52.9 18.9 62.2 St Lucia 39.6 46.5 24.2 51.5 St. Kitts and Nevis 25.1 23.9 17.7 27.6 Grenada 20.2 18.5 13.8 39.2 Bermuda 13.9 17.3 4.9 15.3 Caribbean 14.9 13.4 12.3 20.7 Note. Source: WTTC Report. Table 3 Tourism’s Contribution to GDP in Aruba 2016 2016 2017 2027 Aruba USD mn % of total Growth USD mn % of total Growth Direct contribution to GDP 790.5 28.6 4.1 1,033.10 31.7 2.3 Total contribution to GDP 2,434.5 88.1 3.8 3,178.20 97.4 2.3 Direct contribution to employment (’000) 15.0 31.3 1.9 15.00 31.1 (0.4) Total contribution to employment (’000) 42.0 89.3 2.7 44.00 94.3 0.1 Visitor exports 1,656.7 65.7 4.4 2,218.50 69.2 2.5 Domestic spending 154.6 5.6 0.7 179.20 5.5 1.4 Leisure spending 1,669.5 26.1 4.4 2,222.40 29.1 2.5 Business spending 141.8 2.2 1.3 175.30 2.3 2.0 Capital investment 197.1 32 1.9 260.60 35.6 2.6 Note.
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