Riad Meddeb, Senior Principal Advisor for Small Island Developing States, UNDP
This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide. This blog is also a part of a thread looking more specifically at the impacts and responses to the COVID-19 crisis in Least Developed Countries (LDCs).
Small Island Developing States (SIDS) have experienced great success in expanding their tourism industries, particularly over the past 10 years. The industry is an economic lifeline and driver of development for many SIDS. Their rich biodiversity and beautiful ecosystems attracted around 44 million visitors in 2019. However, global travel restrictions imposed as a result of the COVID-19 pandemic have devastated SIDS’ economies. Compared to Gross Domestic Product (GDP), export revenues from tourism represent about 9% of SIDS economies. In countries like St. Lucia and Palau, tourism revenues make up 98 and 88 percent of total exports respectively. It is a vital source of revenue for community livelihoods, disaster recovery, biodiversity and cultural heritage preservation.
The sharp decline in international tourism is having a significant macroeconomic impact on island states. SIDS are facing a 3.6 percent decline in GDP in 2020, a rate much greater than the global average. Many SIDS, particularly Caribbean SIDS, are heavily dependent on export revenues from tourism to service their heavy debt burdens. Debt that is primarily a result of their disproportionate vulnerability to climate change. Many Caribbean SIDS are now facing debt to GDP ratios over the thresholds for sustainable debt defined by the IMF. SIDS leaders have expressed the severity of the situation, warning that what was a crisis of liquidity is evolving into a solvency crisis.
The sudden decline in visitors has left many SIDS without a key revenue source to sustain the welfare of locals. The industry is a major source of both formal and informal employment across SIDS. In Caribbean island states, tourism accounts for 27 percent of employment, while in Atlantic Indian Ocean and South China Sea (AIS) and the Pacific regions these levels are 24 and 20 percent respectively. The job losses occurring as a result of the crisis are impacting the most vulnerable workers, including those dependent on micro, small and medium enterprises as well as women (54 percent of global tourism employment) and youth.
While it is a driver of economic development, the sector has also historically contributed to the greatest crisis SIDS face: climate change. The global tourism industry contributes more than 5 percent of global greenhouse gas emissions and can lead to ecosystems degradation and biodiversity loss.
The crisis has forced us to reimagine existing practices and systems. As many have proclaimed, this pivotal moment presents an opportunity to rethink the way tourism interacts with societies, economies and ecosystems. So, how can we create a tourism economy that thrives in harmony with nature — a model which is integrated into national economies, promotes inclusivity and preserves the cultural and ecological dignity of islands? We propose three pathways that will support green recovery and catalyse transformational change.
Investing in blue economies for greener islands
The blue economy paradigm allows us to embrace a systems approach to explore how tourism can become a driver for restoration and recovery – capable of building economic resilience, anchoring local economies in sustainability and generating greener livelihoods. The key is to catalyse private sector investment at scale in activities that promote biodiversity conservation and reduce ecosystem degradation while generating growth. Diversifying tourism products through non-traditional, marine-based tourism (such as diving, surfing and wildlife tourism) is one option to help expand income sources for local communities. Implementing innovative blue finance mechanisms, such as reef insurance schemes, debt swaps, blue bonds or tourism taxes, can help fund innovation while empowering communities and enterprises, and easing the fiscal constraints of SIDS.
|Financing green recovery and protecting coral reefs through an innovative new multi-partner finance vehicle|
The Global Fund for Coral Reefs is a new, first-of-its-kind fund to save coral reefs, which are at high risk of extinction. The Fund was launched by a coalition of UN, philanthropic and private sector partners. This includes Prince Albert II of Monaco Foundation, Paul G. Allen Family Foundation (Vulcan Inc.), UN agencies (UNDP, UNEP, UNCDF), BNP Paribas and Mirova/Natixis Investments. The ambition of the Fund is to raise and invest at least USD 500 million for coral reef conservation by 2030. A blended finance instrument, it addresses the vast ‘coral reef funding gap’ by catalysing private sector support (providing risk equity capital, debt and grant funding) to deliver smart solutions at scale to save coral reefs and related ecosystems. It will also strengthen the resilience of communities and businesses that depend on coral reefs for their livelihoods and other services in the face of accelerating climate change and support economic recovery from the impacts of COVID-19. Additional partners and investors to support the Fund are actively and urgently being sought for greater finance and engagement.
Innovation and digital transformation
Digital transformation is a powerful accelerator for inclusion, competitiveness and sustainability. Digital upskilling and reskilling of workers is necessary, improving Micro, Small and Medium Enterprises’ access to technology enables full integration into the value chain of local stakeholders and allows them to become champions of innovation. Technologies like Big Data, Artificial Intelligence and Internet of Things can improve business insights as well as provide analytics to help reduce the industry’s environmental footprint. Finally, digital creative industries can introduce new non-exploitive tourism products, and social media can act as a tool to change consumer behaviour.
Communities first and responsible tourism
Community-led tourism that creates meaningful local ownership is crucial to ensuring the sustainability of the industry. People stand at the heart of tourism; many are deeply dependent on the industry and find themselves in extremely precarious employment situations. We need a tourism industry that acts as a driver of equitable and inclusive development. National tourism strategies must be people-centred, positioning communities in leadership roles that empower them to shape the future of the industry. Community-driven tourism also promotes responsible consumer behaviour by encouraging deeper cultural exchange and understanding than traditional sand-sea-sun tourism. We must not forget the importance of visitor awareness. Consumers are a powerful driver of change. Their voices and demands have the power to improve economies and well-being. We must recognise the importance of engaging in campaigns to foster responsible and sustainable tourism.
While the possibilities are great, so is the scope of the task. Such drastic change can only happen through effective, multi-sectoral partnerships involving governments, international organisations, the private sector, regional networks, civil society and local communities. Development requires an integrated, whole-of-society approach, and transformation of the tourism industry is vital for the future of SIDS. As island leaders insisted during the 75th General Assembly of the United Nations, this must be a time of action. Let us all come together and rise up for Small Island Developing States.