The Social and Economic Effects of Tourism in Developing Countries

free essayTourism has now become one of the largest and dynamic sectors of external economic growth of all countries across the world. Its enormous growth with inflow of significant volumes of foreign currency, infrastructural development, and introduction of economic reform systems that affect several sectors of economy, undoubtedly contribute to the economic and social development of the country as a whole.

Typically, tourism can be considered as a bundle of services and goods combined in an appropriate proportion. The reason is that tourists cannot substitute transportation for hotels, food or other services. Most of the developed European countries, such as France, Austria, and Switzerland have improved their social and economic reforms on profits from tourism. According to the latest statistics, tourism itself employs almost one tenth of the world’s workforce and contributes to approximately 10 percent of the world’s total income (Mill 2007).

The actual and potential effect of tourism proved astounding, as many developing economies view tourism as a powerful source of foreign exchange, an approach to balance foreign trade, the industry without any manufacturing process and much more benefits. Although, tourism has proved to be a significant contributor in development of nation’s economy, there are several positive and negative aspects of tourism boom for local communities, which advocates of tourism perspective fail to consider (Britton 1982).This paper discusses whether the economic benefits and costs of tourism reach everyone in one way or another and highlight social and economic impacts of tourism at the country level.

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The Social and Environmental Impacts of Tourism

Socially tourism renders a powerful impact on the host countries. Tourism in itself can be both a source of international peace, amity, and a tool of improving relations with other countries, but at the same time a source of ecological destruction, a destroyer and corrupter of indigenous cultures, and an assault on people’s dignity, privacy and authenticity. The positive impacts of tourism:

  1. Tourism develops a positive attitude among nations;
  2. Tourism helps in learning cultures, traditions and customs of different nations;
  3. Tourism reduces negative beliefs, perceptions and stereotypes;
  4. Tourism develops pride, friendship, appreciation, mutual respect, and tolerance of culture;
  5. Cooperation in economic and financial assistance;
  6. Tourism enhances the image of the host country.

The social contacts and understanding among tourists and local communities enable mutual understanding, awareness, tolerance, family bonding, respect and positive attitudes. Residents obtain knowledge and information of events occurring in the world without leaving their country, while tourists gain knowledge of their distinctive culture. Further local communities receive benefits through contribution by tourism, such as improvement of social infrastructure, schools, health care facilities, libraries, internet cafes, hotels and restaurants, entertainment parks. Moreover, if local culture is the basis for attracting tourists, then it enables in preserving the local traditions, handicrafts and old monuments (Mathieson 1992).

For example, in several regions of Uzbekistan such as Buhara, Horezm, and Samarqand, tourists enormously contribute in the preservation of traditional handicrafts, hammered copper work, wood carving, handmade carpets and fabrics, as well as maintenance of historical and architectural monuments. Since Uzbek proclaimed its independence in the year 1991, the government initiated efforts in renovating, and preserved monuments and museums for promoting the national traditions, and acquainting the world with its culture. The increased interest in this culture and values offers the citizens proud of their cultural wealth besides survival of local cottage industry and employment.

On the other hand, tourism can accelerate hostility, tension, and suspicion, and its claim as a vital tool for peace will remain exaggerated. In fact, the evidence does not show that tourism is bringing the world together. In this context, social and economic influences on the citizens depend on how much revenue generated by the influx of tourists go to the host communities. The most of the revenue earned from tourists goes to the hotels, travelling agencies, airlines and other international companies, whereas local people and workers do not receive many benefits (Archer 1995). The unsuccessful development of resources can further lead to several negative effects, such as assimilation, conflicts, and unpleasantness among host country and tourists. While presenting a traditional culture to tourists may help to preserve the culture, it can also destroy or dilute. Negative effects from tourism occur when the influx of tourists is greater than the ability of the environment to cope with this situation within the acceptable limits of change. The conventional uncontrolled tourism leads to potential threats to several natural areas in the developing countries. It can render enormous pressure on an area that may lead to increased pollution, soil erosion, natural habit loss, discharges into sea, increased threat on endangered species and vulnerability to forest fires. Further, it often creates a strain on water resources, thereby forcing local population to compete and manage the resources for their own use (Archer 2000).

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The Economic Impacts of Tourism on Developing Countries

Tourism produces a variety of economic impacts. The host country receives a significant contribution from tourists in terms of sales, profits, tax revenues, jobs, and increased income in an area. The prime direct impacts occur within the main tourism sectors, such as transportation, restaurants, lodging, retail trade, and amusements. Through secondary impacts, tourism affects most sectors of the economy. An economic effect analysis of tourism activity usually reflects on changes in sales, employment, income in a region, occurring from activity of tourism. The effects of tourism can be described as more than the result of a certain tourist activity, facility or an event. The impacts appear as changed human behavior that originates from the interactions between the subsystems and agents of change on which they impinge. The connectivity between the various categories of tourism effects such as physical, social and economic are extremely close and difficult to measure and plan. The potential economic advantages of tourism have always been a prime attraction for developing nations due to three pro-tourism arguments. First, the increasing trend in demand for international travel continues to grow at an astonishing rate due to the travel preferences and economic stability of people in the developed countries such Europe and North America. Secondly, the income flexibility of demand for tourism points that as the incomes of people in the developed nations increase, more disposable income will move towards travel. Finally, developing nations require foreign exchange to fulfill their economic development initiatives and for satisfying the demands of their own citizens (Pleumarom 1999).

There are various categories of economic influences that are not usually included in economic impact evaluations, at least not directly. For instance:

  1. Changes in prices – The tourism industry has a tendency to inflate the cost of housing and retail prices in the region, frequently on a seasonal basis.
  2. Changes in the quantity and quality of goods and services – The tourism can lead to a wider array of products and services of either lower or higher quality than without tourism.
  3. Changes in housing property and taxes – The taxes covering the cost of local services may be lower or higher during the presence of tourism activity. In several cases, taxes collected indirectly or directly from tourists may result in reduced local taxes for roads, schools and rehabilitation of poor and needy. On the other hand, there can be a likelihood that the taxation on local people may increase to cover the additional infrastructure and service costs.
  4. Economic dimensions of environmental and social effects – There are several economic consequences of most environmental and social impacts that can be positive or negative. For instance, the traffic congestion may result in increased costs of movements for both businesses and households. Improved amenities, which attract tourists, can also encourage withdrawal or other kinds of business activities to locate in the area (Wahab 1997).

One of the most significant economic impacts is on balance of payments. The BOP account is a record of economic transactions during a certain time between residents of the host country and the rest of the world. The income a nation derives from tourism can assist to balance the nation’s BOP. This owns a significant consideration, as the nation then gains foreign currency. The impacts of BOP are the most powerful economic impacts on the tourism industry. The BOP account incorporates the value of all gifts, loans, gold, and foreign aid that comes in or leaves the nation. Tourism influences the BOP in two ways: impacts within the nation and impacts on international tourism. This is necessary to know in order to calculate foreign exchange earnings in the BOP and compare them with costs. In other terms, it helps to know if more money is leaving the country than earned from international tourism (De Kadt 1997).


Tourism has always been regarded in most developing economies as a powerful support to other economic sectors, ranging from manufacturing to resource industries. Indeed, in the past decades of economic reforms, revenue earned from tourism remained hidden in several service categories. This paper discussed some of the social and economic impacts of tourism that results for developing countries in either loosing or gaining significant revenues. The crucial needs of maintaining tourism incomes in developing nations are necessary in order to derive the richer objectives of sustainable tourism development. For developing nations, there is a need to explore financial resources to dilute the negative social and environmental impacts occurring from tourism in the long run.

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