Pros and cons of Egypt’s tourism structural reform strategy: Will it fulfill the sector’s needs?

The Egyptian tourism sector makes up as much as 20 percent of the national output (Photo Courtesy of panoramio.com)

Egypt has long been known for its reliance on tourism as one of its economic engines; thus, improving the cash-generating sector is a catalyst for sustainable development.

Having been in the rocks for nine years now, the tourism sector, however, still outperforms other sectors in terms of GDP contribution. According to Minister of Tourism Rania Al-Mashat, the sector makes up as much as 20 percent of the national output.

With a view to boost the tourism sector, the Ministry of Tourism has recently launched its Structural Reform Strategy, aiming to promote tourism and leverage its global competitiveness.

Business Forward takes a look at the new ministerial strategy: to which extent can it push the sector forward and reinstate it to become one of the economic pillars Egypt has been known to depend on?

What is the plan?
According to the Travel & Tourism Competitiveness Report, commissioned by the World Economic Forum in 2017, Egypt was placed 79th amongst 136 countries, moving up 9 spots from the 2015 rankings.

The five-fold ministerial strategy is mainly concerned with enhancing tourism infrastructure, creating modernized, innovative tourism marketing campaigns, enforcing necessary sector-specific litigation, implementing feasible steps towards the sector’s institutional reforms and improving the sector’s competitiveness.

Eliminating red tape
Tourism expert and former member of the Egyptian Travel Agents Association Alaa Al-Ghamry tells Business Forward that the structural reforms are primarily meant to eliminate bureaucracy and old management traditions, adding that the government is pressing ahead with automating all services with respect to the hospitality and travel sectors, from booking to arrival.

He believes that the ministry is currently undergoing one of the most major reshuffles in its history, pumping new blood into its top echelons.

However, implementation challenges should be expected “Lack of full collaboration between relevant ministries is a stumbling block to the desired digital transformation,” he explains.

“Current tourism-related laws are old-fashioned and do not cater to modern-day technological advancement. They need to be scrapped,” president at Gezira Travel Egypt Nader El-Beblawi tells Business Forward.

El-Beblawi expresses delight over the fact that the currently implemented Structural Reform Strategy targets tourism laws and regulations, which he describes as “the main hinderance to having a blossoming tourism sector.”

The private sector contributes 98 percent to the total earnings of the tourism sector

Bolstering private sector involvement in decision-making processes
In previous press remarks, Al-Mashat explained that the private sector contributes 98 percent to the total earnings of the sector.

El-Beblawi explains that the lack of private sector investments in the tourism industry leads to the downfall of tourist inflows to Egypt.

“As a result of the slowdown in the business, and due to the economic crisis, many property owners opted for not spending too much money on the rejuvenation of their hotels or resorts, and in some cases, they had to completely shut them down – which ultimately shakes off the reputation of the country’s tourist properties as good-quality and well-established accommodations,” he adds.

According to the Tourism Ministry, the strategy is geared towards bolstering private sector involvement by ensuring the private sector’s representation in tourism chambers and federations.

Bringing skilled labor back to the industry
In 2017, over 1 million people were reported to be working in Egypt’s tourism industry, which corresponds to 3.9% of total employment, as canvassed in the Travel and Tourism: Economic Impact 2018 report, commissioned by the World Travel and Tourism Council.

The number of tourism-related jobs are projected to increase to 1.38 million in 2028, the report adds. According to the Ministry of Tourism, at least one person in every family works in the sector, either directly or indirectly.

“The industry is facing a tight labor market; the percentage of skilled workers and trained staff has been declining after the 2011 Revolution. Most of them already changed careers or left the country,” El-Beblawi says. “Easing labor pressures that are being felt across the industry lies at the heart of a successful reform structure plan.”

While the road to a full recovery is still bumpy, the tourism sector still has what it takes to bring the nation out of the bottleneck

A “centralized” industry and the “one-size-fits-all” solutions
Tourism is a segmented sector, which means that it is closely linked to other industries, such as agriculture, transport, aviation and others. Researcher at the Egyptian Center for Economic Studies (ECES) Layla Hussein argues that the ministerial strategy overlooks the necessity of having a full-fledged collaboration amongst the relevant ministries and institutions linked to tourism.

Chairman and CEO at Diva International Hospitality Group Abdelhamid Galal tells Business Forward that the strategy is not comprehensive enough to eradicate the sector’s major problems, but the elimination of centralization in the industry could do the trick. Not all destinations need the same solutions.

“Supporting provincial autonomy when it comes to policy-making processes in the sector is instrumental in the growth of the industry as a whole,” Galal adds, indicating the importance of empowering local stakeholders, integrating them in decision-making processes and fostering the linkage between the relevant parties and governmental bodies.

“Every destination is unique in its own, so this kind of one-size-fits-all solution would prove disastrous,” he adds. From the marketing perspective, the need to develop a creative marketing approach based on the uniqueness of each destination and its authentic identity must be accentuated, Galal believes.

Hussein argues that “the strategy can be confused with a program; since it lacks the most important ingredients of a strategy, such as mission statement, a general objective, specific qualitative and quantitative goals, as well as procedures associated with established targets and performance indicators.”

Although urgent, the ministry’s strategy, as Hussein explains, is not time-bound. She adds that it presents “big -old-sweep-across-the-board” solutions, adding that it falls short on providing well-structured and tailored answers that respond to the problems of each tourism type in Egypt.

Egypt’s tourism sector potential and impact
“The growth prospects of the economy depend heavily on a rebound in tourism activity to 2010 levels as GDP was found to grow annually on average by 1.6 percent higher over the period 2013-2020,” a study entitled “Shocks to inbound tourism in Egypt: a recursive dynamic assessment until 2020” says. Prepared by Abeer El-Shennawy and Khalid Siddig, the research add that “welfare improves by almost 50 percent for all income quintiles across both the urban and rural sectors,”.

Egypt’s share of tourist arrival surged 40 percent in the first nine months of 2018 year-on-year – its best performance since 2010, when the sector was at its peak, Al-Mashat told Bloomberg in November of the same year. Additionally, the sector’s revenues leapfrogged 77 percent in the first half of 2018, registering around $4.8 billion, Reuters reported, citing officials.

While the road to a full recovery is still bumpy, the tourism sector still has what it takes to bring the nation out of the bottleneck.

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