COVER STORY
Tourism in LICs and MICs: Opportunities and challenges
Opportunities Tourism brings a range of advantages, many of which are extremely helpful to LICs and MICs that have few economic advantages due to their small size, geographic isolation, lack of manufacturing comparative advantage and limited capacity and knowledge to develop revenue generating activities. 1. Economic growth and employment Tourism is often one of the largest sources of foreign exchange in LICs and island MICs. It can stimulate the economy by creating jobs in hotels, restaurants, tour operations, transport and the cultural sector. For SIDS like the Maldives, Fiji or Saint Lucia, tourism can account for more than 30 percent of GDP. The sector also promotes indirect employment in agriculture, handicrafts and other supply chains. 2. Infrastructure development To accommodate tourists, governments and private investors often fund the construction of roads, airports, water systems and communications infrastructure. These improvements can benefit local residents by increasing accessibility to basic services and reducing isolation, especially in rural areas and island communities. 3. Cultural exchange and global awareness Tourism fosters greater global understanding and appreciation of local cultures, traditions and heritage. In many countries, cultural tourism encourages the preservation of indigenous languages, crafts, music and historical sites. This is especially important in SIDS, where unique cultural identities are both a key attraction and a vulnerable asset. 4. Incentives for environmental conservation Tourism can provide financial incentives to preserve natural areas and biodiversity. Ecotourism initiatives in countries like Costa Rica and Belize have helped protect rainforests and marine ecosystems. Marine-based tourism in island states can encourage the establishment of marine protected areas and promote sustainable resource use.
Challenges
4. Social and cultural disruption Mass tourism can lead to the commodification of culture, the erosion of traditional lifestyles and rising inequality. In some regions, the influx of tourists has caused inflation, land displacement and increased real estate prices, pushing locals out of their communities. Cultural performances and rituals may be altered or performed solely for tourist consumption, leading to loss of authenticity. 5. Infrastructure strain and overtourism In popular destinations, infrastructure may not be able to cope well with the seasonal influx of tourists (Venice is a prime example). Overcrowded transport systems, water shortages and strained health services can degrade the quality of life for residents. SIDS with limited land and resources are particularly vulnerable to these pressures. The impact on essential infrastructure can hit the local population severely with even basic supplies becoming increasingly scarce and unaffordable.
At the same time, tourism can exacerbate problems in already fragile and weak countries. The idea of tourism driving development can often be discounted due to its exclusivity, overuse of scarce resources and diversification of limited funds to a small section of the (temporary) population at the expense of most locals, often the poorest that are in greatest need. 1. Economic dependence and volatility Relying heavily on tourism makes LICs and MICs vulnerable to external shocks such as pandemics, natural disasters and geopolitical tensions. The COVID-19 pandemic devastated tourism-dependent economies, especially SIDS, where travel bans and lockdowns caused unprecedented economic contractions. Such dependence also diverts attention from the need for more sustainable economic diversification. 2. Limited local benefit Tourism revenues often do not stay in the local economy. Foreign-owned resorts, airlines and tour operators may repatriate
profits, leaving only low-wage jobs for locals.
In conclusion
A sustainable tourism strategy is essential for maximizing the positive impacts of tourism while minimizing its negative effects.
Tourism in LICs, MICs and
This phenomenon, known as “leakage,”
SIDS offers a powerful tool for economic advancement and cultural promotion – if developed responsibly. However,
reduces the net benefits of tourism. In some LICs and MICs, this leakage can be as high as 80 percent.
without careful planning and regulation, its benefits can be undermined by environmental harm, social disruption and economic vulnerabilities. A sustainable tourism strategy – one that emphasizes community participation, environmental stewardship and economic inclusivity – is
3. Environmental degradation Tourism can often put pressure on fragile ecosystems, especially
in small islands where space and resources are limited.
Overdevelopment, waste generation, coral reef damage from cruise ships and increased freshwater use are common issues. Unregulated tourism has contributed to beach erosion and pollution in destinations such as Bali and the Caribbean.
essential for maximizing the positive impacts of tourism while minimizing its negative effects. While this may sound obvious, it is more difficult to deliver in what are already fragile and weak countries.
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