Tourism: An Economic Tide That Can Lift All “Boats”

Boat on Lake Sevan. Photo: Astghik Babayan/Wikimedia Commons, August 2013

Bluntly stated, the geostrategic position of Armenia may properly be described as being between a rock and a hard place. Two of its neighbors (Turkey and Azerbaijan) will always remain implacable enemies of Armenia and Armenian culture. To the north lies Christian Georgia which, at best, is a reluctant good neighbor; and to the south is Iran, a country that has proven to be a good neighbor.

Given this reality and Armenia‘s proximity to the Black Sea, most goods that enter or leave Armenia over land must rely primarily on the vacillating intentions of Georgia. This places Armenia in a vulnerable position. However, when it comes to the movement of people, landlocked Armenia is connected to all parts of the world through the vast ocean of air that engulfs our planet. 

BACKGROUND

Since independence in 1991 the Armenian economy has strived to overcome the effects of a command economy that was based on achieving Soviet political and strategic objectives rather than being structured on basic market-oriented economic principles applicable to an independent country. Armenia’s artificially maintained economy was devastated by the implosion of the Soviet Union. During the chaotic post-independence period, what little remained of Armenia’s former economy was hijacked by self-serving  “entrepreneurs” who shamelessly bled the country and its workers for their personal gain. Under Prime Minister Nikol Pashinyan, Armenia looks forward to an effective restructuring of an antiquated system created and maintained by corrupt politicians and their equally corrupt “business partners.” As long as these oligarchs continue to hold their ill-gotten wealth and influence, Armenia can never achieve its full potential.

ADVERSE IMPACTS OF THE POST-INDEPENDENCE ECONOMIC MALAISE

The results of Armenia’s lengthy economic malaise have been devastating. Unemployment and marginal wages affect roughly 40 percent of the workforce (maybe more). Young people (especially men) have sought work in foreign countries, and many families have permanently out-migrated seeking a better life. It doesn’t end there. The remaining population is comprised of a disproportionate percentage of elderly; family formation is adversely affected, inhibiting market expansion, while the pool of men and women available for military service has shrunk. Presently Armenians comprise approximately 18 percent of the total population (of about 17 million) in the south Caucasus. This is a serious disparity.

Given this situation, job creation is the top economic priority. We cannot continue to hemorrhage population through migration. If out-migration had not been a factor since independence, Armenia’s population would have increased to a conservative estimate of roughly 4.4 million. Today, Armenia has a population slightly less than three million, a loss permanently or temporarily of about 1.4 million. This represents a dramatic 30 percent decrease. 

THE SOLUTION

The question that must be answered is simple enough. Is there a single industry that can significantly contribute to the country’s Gross Domestic Product (GDP) and serve as a platform on which the Armenian economy can continue to develop and expand? The answer is yes; the tourism industry.

Armenia’s two greatest resources are its people and a combination of its history, natural beauty and geographic diversity. Armenia is also home to six UNESCO World Heritage Sites. Crammed into its small size (which facilitates visiting diverse venues), Armenia has a great deal to offer visitors. In 2018 over 1.5 million tourists entered the country. Each year has seen a steady increase in the number of visitors. According to the United Nations Tourism Organization (UNWTO) some 1.2 billion people presently travel internationally each year. It is cited as one of the fastest growing economic sectors in the world. This includes approximately 127 million Chinese tourists (2017) from their rising middle class in a country with which Armenia enjoys cordial relations. 

Although Armenia has a tremendous pool of potential visitors to draw from, its geographic size and population limit the number of tourists the country can accommodate throughout the year. However, distribution of the flow of tourists throughout the year can be controlled by instituting variable rates based on seasons, venues, attractions and activities which are highlighted, as well as special promotions. Armenia has already embarked on expanding its tourist industry. However, while it has the opportunity during this incipient stage, development should follow a carefully crafted master plan to avoid many of the  problems or pitfalls commonly associated with a laissez-faire approach. 

THE MINISTRY OF TOURISM

The present Ministry should adhere to a comprehensive and credible master plan that sets evolving guidelines for developing the tourism industry. The Ministry must be appropriately organized and staffed with people who have the requisite experience and/or education. The Ministry should not serve as an economic refuge for political hires. The mission of the Ministry is multifaceted. It should develop a strategic master plan, encourage and assist development, oversee project implementation and periodically evaluate its operation. Funds (however appropriated) should be available to spur small private enterprise. The small entrepreneur must be energized to participate. The master plan should

  1. Encourage and assist development in all appropriate geographic regions. Rural areas must share in the benefits with Yerevan.
  2. Provide a system for venue security, accessibility and maintenance.
  3. Encourage and assist local entrepreneurship. Small businesses traditionally create the greatest number of jobs.
  4. Create a functional waste management system for capturing, transporting and disposing of solid and liquid waste.  
  5. Create a human resource component to ensure the rights of workers with respect to wages/salaries, safety, scheduling, etc.
  6. Create policies and processes that address pollution, artifact, site and environmental degradation while ensuring efficient use of resources such as water and energy.
  7. Balance the needs (lifestyles) of local citizens (urban and rural) with the need to service the tourists. 
  8. Maximize domestic production of goods and services, some of which must be provided by foreign sources. However, Armenia should not become a “cash cow” for foreign investors/corporations. Many countries heavily dependent on the tourist industry experience up to 70 to 80 percent of industry profits flowing to foreign investors/corporations. However, this should not be a serious issue for Armenia.
  9. Create an Office of the Ombudsman to address issues between providers and consumers.
  10. As part of its responsibility, stringent anti-corruption, anti-bribery, and conflict of interest regulations should be in place and enforced preventing self-serving politicians and their colluding entrepreneurial associates from becoming a new wave of oligarchs that drain the benefits of the tourism industry for their personal gain. Collusive relationships will not die easily in Armenia. 

The tourism industry has tremendous economic, political and public relations potential for Armenia. It can become a significant handmaiden of Armenia’s foreign policy. Developing a strategic comprehensive master plan should ensure that Armenia and its workers are the primary beneficiaries of this burgeoning  industry.

NEGATIVE IMPACT OF THE TOURISM INDUSTRY

Much has been written about the deleterious effects of the tourism industry. That they exist is not debatable. However, knowing they exist allows efforts to be made to mitigate and even eliminate their impact.

  1. Many positions have limited upward mobility.
  2. Because a high percentage of workers need a limited skill set, wages are low.
  3. Tourism is a “hospitality”  industry. Service is the principal product. Some believe it places the culture of the host country subservient to that of the visitors.
  4. There is the unwanted modification of the host culture through interaction with the culture of the visitors.
  5. There is also the voluntary modification of local culture in response to meeting the needs and expectations of the visitors.
  6. Catering to the needs and wants of the visitors can adversely affect the availability and price of basic needs required by the local population.

POSITIVE IMPACTS OF THE TOURISM INDUSTRY

The tourism industry provides exceptionally diverse opportunities for employment and its multiplier effect in creating ancillary jobs is significant. Its positive impacts far outweigh its negatives. Consider

  1. That there are many opportunities for employment at the professional, university trained and experience level. This would include managers, publicists, chefs, entertainers, back-office staff, etc.
  2. That the industry offers opportunities for all age groups.
  3. That the industry offers opportunities for both men and women.
  4. That for many living in rural areas (especially women) this may be their first opportunity to participate in a money economy.
  5. That meaningful employment provides an incentive for self-improvement to prepare for advancement within the industry (or possibly outside the industry).
  6. That opportunity exists for entrepreneurial oriented workers to become self-employed either directly or indirectly related to the industry.
  7. That the tourism industry is a service industry providing for the needs and wants of visitors to Armenia. This includes their reception, processing, information dissemination, housing, transporting, feeding, entertaining, retail, etc.

Given that the tourism industry interfaces with all sectors of the economy, it has a significant multiplier effect creating opportunities that could produce a wide range of supporting goods and services. Because it is dependent on the national infrastructure, the tourism industry also serves as a catalyst for its maintenance and development (roads, bridges, reservoirs, power generation, communications, terminals, wastewater facilities, efficient solid waste disposal systems, etc.).

CONCLUSION

The United Nations Tourism Organization has cited tourism as one of the fastest growing economic sectors in the world. For Armenia, the tourism industry would provide a range of opportunities based on skill-sets, education, age and gender. The industry does not limit opportunity to any subsector of the workforce, however defined. And more importantly, it is an industry that can encompass all geographic regions of Armenia. Their expenditures are considered “exports” on Armenia’s Balance of Payment ledger. These “exports” are transactions that remain in Armenia. Obviously, the funds generated by the industry that pay for goods and services provided by foreign sources or are withdrawn by foreign investors and corporations are considered “imports” on the Balance of Payment ledger. Properly supported, maintained and evaluated, the tourism industry definitely can be an economic tide that can lift all “boats.”

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Michael Mensoian

Michael Mensoian, J.D./Ph.D, is professor emeritus in Middle East and political geography at the University of Massachusetts, Boston, and a retired major in the U.S. army. He writes regularly for the Armenian Weekly.

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