Can Tourism Deliver?

Can Tourism Deliver?Can Tourism Deliver?

With oil and gas prices in freefall, it is apparent that Iran’s revenues from energy exports in the coming months will be of the descending order the ramifications of which are visible in the March 2015-2016 budget bill to be sent to the Majlis next week. One question of immediate importance is ‘’ how is the nation going to compensate for the massive loss in oil revenues,’’ and avert a budget deficit. Almost 35 percent of the price of oil has been wiped out since summer.

With Iran’s economy largely dependent on oil, those at the middle and higher echelons of power are seeking ways to move the economy forward with less pain. In searching for viable alternatives the need for developing the tourism sector keeps on popping up in the halls of political power.

Policymakers were already eying the much neglected tourism industry that found an elevated status in the 2015-2016 budget and the Sixth Five-Year Economic, Social and Cultural Development Plan (2016-2021). Considering Iran’s largely untapped potential tourism, refocusing on this sector could and should well be the demand of economic wisdom.

The potentially huge benefits of tourism have often been reiterated by the head Iran’s Cultural Heritage, Handicrafts and Tourism Organization (ICHHTO). Masoud Soltanifar believes that if elevated to its rightful status tourism has the potential to generate income proportionate to crude oil exports. To make his point, he cites official statistics. ‘’ The average income from each foreign visitor last year was approximately $1300 and with 4.7 million tourists arriving during the same period, the total looks like $6 billion,” he has been quoted as saying.

 At the same time the senior tourism official, who doubles as vice president, notes that eventually the  number of incoming foreign tourists should reach 20 million within five years starting from 2020. The problem with Soltanifar’s statement is that even under the most optimistic projections and best circumstances in the coming years, the figures (earnings from tourism) do not even come anywhere close to catching up with oil revenues.


“It is too soon to make such claims…In 2012 Iran’s oil revenues reached almost $60 billion which renders the figure presented by the tourist organization rather insignificant,’’ says Dr. Zahed Ghaderi a Tehran University lecturer. Dr. Ghaderi told the Persian economic daily Donyaye-Eghtesad that the current data on Iran’s earnings from tourism are not logical. “According to the World Tourism Organization our country could have made barely $2 billion to $3 billiion from tourism which is half the amount claimed in official statistics.’’  

Ghaderi says the average income that each visitor generates is $850 to $900, according to global standards. He says the figures provided by Soltanifar are taken from the tourism income of South Asia, 70- 80% of which belongs to India, hence the inaccuracy of that figure for Iran. “We should also consider the fact that from the 4.7million visitors who entered Iran in the previous year, some came as normal travelers (for family meetings, conferences, official gatherings…)  and cannot be considered as tourists per se,’’ Ghaderi noted.

He recalls that for now Iran’s revenues from oil are almost 20 times over and above tourism income and calls for a realistic approach to address the wide gap between the two. He ruled out the possibility of tourism replacing oil anytime in the near future. ‘’In the short term, it’s simply inconceivable.’’ If and when there is a realistic and wise approach, “we can hope to one day replace tourism with oil- but this would take at least another 20 to 30 years.

Plummeting crude prices has created a predicament that was foreseen by many experts. It is just a matter of time for single-product economies to plunge downward when crisis hits. The country should not have dragged until now to think of alternatives for oil revenues.

To sum up, experts believe that if the Rouhani administration continues the declared path of boosting non-oil exports and tourism promotion, it can hope to contain some of the losses in national revenues.  This, however, is subject to strong commitment, responsible management, efficient infrastructure and normal working relations with the outside world.