Introduction
The rise in oil prices in the international market, and global shift in energy consumption from natural resource, like oil and petroleum towards renewable energies, plays a critical role in devising policy at top-leadership level in Kingdom of Saudi Arabia (KSA) that aims to expand tourism and non-petroleum sectors of the economy. Tourism sector in KSA is growing, but the overall composition of the sector in economic pie is significantly low. However, recent policy reforms has increased the overall visitors to KSA through instant tourism visa for forty-nine countries worldwide; and China ranks top in the list of countries with most tourists visited from any country since the introduction of policy.
Analysis
Waheed et al. (2020, p. 49) research utilizes empirical evidence for understanding the impact of tourism industry, and non-petroleum exports, on the overall economic growth of Kingdom of Saudi Arabia (KSA) for the years 1980-2017, and the data is on quarterly basis. Authors argue that the impact of “non-petroleum exports” and tourism industry on the overall economic growth of KSA is positive, which directs the policy-makers to invest more in the tourism sector, coupled with non-petroleum exports. Moreover, sustainable development is the twenty-first century mantra, and enhancement of exports in non-petroleum products is an effective strategy for ascertaining long-term and sustainable economic growth, and resultantly the economic reliance on petroleum products decline. The critical nature of renewable energy and tourism for economic growth in KSA highlights the importance of investment in tourism facilities and renewable energy production, while the empirical findings of Waheed et al. (2020, p. 51) also suggest presence of integration between capital, renewable energy, tourism, and consequently the economic growth of KSA.
The two primary reason for increasing tourism industry share in the overall economic pie of KSA are reduction in dependency on petroleum products, while ensuring sustainable growth. Nonetheless, as per IMF statistics, capital formation is central to the enhancement of tourism, along with other non-petroleum exports. Lastly, fiscal deficit challenges due to reduction of oil prices result in 7.8 percent budget deficit for the year 2019 alone, while the non-oil exports growth stands at 2.6 percent, which means greater need for diversifying economic portfolio. Author further states, “…capital formation in Saudi Arabia can be positively used to enhance investments on renewable energy, tourism policies, establishing of new industries” (Waheed et al. (2020, p. 56). In a similar way, Jamel (2020, p. 30) research findings also emphasize that there exists positive relations between economic growth and tourism sector in the context of Kingdom of Saudi Arabia, However, author further states, “CO2 emissions and financial development impact positively the tourism sector, while trade openness predicts a negative effect on tourism” (Jamel 2020, p. 36).
Global tourism is one of the rapidly growing global industry, which direct and indirectly contributes to the economic growth of national economies. Tourism industry generates employment through economic activities in an organized manner, and contributes positively to economic growth. Similarly, Alam et al. (2017, p. 4093) states, “the growth of tourism area appears to have been as important as the growth of other areas of the economy of Saudi Arabia.” As per World Tourism Organization (UNWTO), the growth patterns for the last ten years suggest an upward trend due to integration of economy and society at global level, which includes religion as a critical player, such as the role pilgrimages and visits to holy sites in Kingdom of Saudi Arabia (KSA) from Muslim population around the world. One of the critical function of tourism is the creation of utility in other sectors and sub-sectors, which includes transportation, culture, health, communications, education, and infrastructure. Ali (2018, p. 418) utilizes secondary sources and defines inbound tourism as, “travelers of other nations come to visit place/places of the country for non-economic purposes,” while defines outbound tourism as, “the nationals moving outside of the country for visiting purposes.”
The sustainability of tourism industry is evident form the fact that the Islamic provisions makes it mandatory on each Muslim to visit holy places of Madinah and Makkah, as part of annual pilgrimage in the month of Ramadan, at least once in lifetime; exception only to the individuals that finds it financial, or otherwise, impeding to support the visit. However, the overall growth pattern of Saudi Tourism are lower when compared with the world tourism’s average. On the other hand, the prices are increasing while the demand for petroleum products in the international market is on decline over the last decade, while the economy of KSA is significantly dependent on petroleum products. The transition from oil-led economy to non-oil-led economy in Saudi Arabia is the number one concern of policy makers in enhancing and sustaining the national GDP over the long-run. For the year 2016, the direct contribution of travel and tourism in KSA’s GDP is only 3.1 percent, which is 2,306 billion U.S. dollars. For the same year, total contribution of tourism and travel industry in KSA’s national economy (GDP) is 10.2 percent, which equates to 7,613.3 billion U.S. dollars. At global level, the total employment level of tourism and travel industry, as part of Global Employment level, stands at 9.6 percent. Additionally, total direct employment from the tourism and travel sector at global level comprises of 3.6 percent of total employment, and accounts for 108,741,000 individuals employed (Ali 2018, p. 423).
On the other hand, the share of petroleum products in Kingdom of Saudi Arabia accounts for 92.5 percent of the total revenues in the national balance sheet, which accounts for ninety-seven percent of total earnings from export, and amount to fifty-five percent of national GDP. Policy makers are devising strategy for increasing the overall share of non-petroleum, coupled with tourism and travel share, in the total composition of national GDP due to approximately nine-fold increase in the oil prices of the last seven decades. For the year 2016, the total share for direct contribution of tourism and travel is 3.3 percent (21 billion U.S. dollars) of the national GDP while total contribution accounts for 10.2 percent of the GDP, that is, 65.2 billion U.S. dollars. Overall, 5.1 percent of total employment is associated with travel and tourism sector, and the total jobs due to travel and tourism activities accounts to 9.7 percent jobs nationwide. For the year 2017, estimates suggest that direct contribution of tourism and tour sector to GDP in Saudi Arabia stands at 3.8 percent, while 4.7 percent for the total contribution in national GDP. In a similar way, direct employment and total contribution stands at 3 percent and 2.5 percent, respectively. The estimates are higher than the expected growth for respective variables in the global tourism and touring sector, while 0.2 % decrease for direct contribution to GDP in Saudi Arabia (Ali 2018, p. 421).
The tourism industry of Saudi Arabia is second biggest in the Middle East with overall sixteen million visitors in the year 2017 alone. Recent policy reforms for promotion of leisure tourism in Saudi Arabia is followed as part of evidence based policy making, and the diversification of revenue portfolio within tourism and tour sector is critical for achieving long-term economic growth based on tourism industry. As per some analysts, the tourism industry of Saudi Arabia is the ‘white oil’ for nation, and a significant increase over the year suggest an approximately 25 billion U.S. dollars for the year 2019. Currently, the primary tourist destinations in Saudi Arabia are ancient ruins, Hijaz, Red Sea, and Sarawat Mountains. As per the year 2018 estimates of World Travel and Tourism Council (WTTC), the Saudi Arabia’s tourism and travel industry is worth 65.2 billion U.S. dollars, and contributes nine percent to the total economy. Alodadi and Benhin (2015, p. 11) states, “… tourism as a future engine for growth means that policy-makers should think of ways to improve the tourism sector,” while recommending measures of “solving regional conflicts, developing suitable infrastructures, and facilitating visa procedures” as instrumental in accomplishing the desired policy outcomes. In the recent move towards expanding the tourists base of KSA’s tourism and travel industry, Kingdom of Saudi Arabia initiated issuance of ‘tourist visa’ to forty nine countries from around the world at a flat fee of eighty dollars, and the issuance process can be online in the form of eVisa, or the already set tradition of ‘on arrival.’ Surprisingly, within ten days of the policy implementation, twenty-four thousand foreign nations visited due to instant tourism visas. China, UK, and U.S. comprise most of the recipients for instant tourist visa.
Conclusion
The primary factor behind transition from reliance on petroleum related products towards non-petroleum and tourism sector owes to the rising prices and reduce demand of oil-related products in the international market. Need for diversifying economic revenue portfolio for achieving sustainable economic growth in long-run relies on investment in the travel and tourism sector has the potential to yield desire policy outcomes. Moreover, Global Travel and Tourism industry is expected to grow at double digit figure, and one of the factors in acceleration of travel and tourism at international is closer integration of nations worldwide in socioeconomic terms.
References
Alam, A.F.T.A.B., Idris, E.A.A., Malik, O.M. and Gaadar, K.A.M.I.S.A.N., 2016. The relationship between tourism, foreign direct investment and economic growth: evidence from Saudi Arabia. European Academic Research, 4(4), pp.4091-4106.
Ali, A., 2018. Travel and tourism: growth potentials and contribution to the GDP of Saudi Arabia. Problems and Perspectives in Management, 16(1), pp.417-427.
Alodadi, A. and Benhin, J., 2015. Religious tourism and economic growth in oil-rich countries: Evidence from Saudi Arabia. Tourism Analysis, 20(6), pp.645-651.
Jamel, L., 2020. The Relation between Tourism and Economic Growth: A Case of Saudi Arabia as an Emerging Tourism Destination. Virtual Economics, 3(4), pp.29-47.
Khan, U., Khan, A.M. and Alam, M.S., 2020. Exploration of the Effect of Oil and Non-Oil Export on Economic Growth in the Kingdom of Saudi Arabia.
Khan et al. (2020, p.
Waheed, R., Sarwar, S. and Dignah, A., 2020. The role of non-oil exports, tourism and renewable energy to achieve sustainable economic growth: What we learn from the experience of Saudi Arabia. Structural Change and Economic Dynamics, 55, pp.49-58.
