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May 14, 2013

Negative economic impacts of an international airport: from a tourism development perspective

Tue May 14, 2013

by ©Kenrick Chambers

The opportunity and possibility for St Vincent and the Grenadines to develop a sustainable tourism industry would considerably increase with an international airport. The country would be more accessible, and therefore take advantage of its natural resources — sun, sea and sand, with the conjecture that the tourism sector will improve with enhanced air accessibility. But there is a price to pay.{{more}} There are negative economic impacts from building an international airport.

The United Nations Environment Programme on Resource Efficiency and Sustainable Consumption and Production stated: “There are many hidden costs to tourism, which can have unfavorable economic effects on the host community.”

Frequently, rich countries are more inclined to profit from tourism than poorer countries. While least-developed countries have the most imperative need for income, employment and overall rise of the standard of living by means of tourism, third-world nations are least able to benefit from the development. The primary reason why less developed countries do not benefit from tourism development is the large-scale transfer of tourist revenues out of the host country and exclusion of local businesses and products — also known as economic leakage.

Economic leakage occurs when tourist spending goes to airlines, hotels, and international companies that are usually foreign; consequently, most of the spending does not circulate to local businesses and workers. For example, a study of tourism leakage, conducted by Sustainable Living, shows that 80 per cent of the money spent by tourists in the Caribbean ends up in the pockets of foreign-owned tour operators, airlines, hotels, imported beverages and food companies.

Leakages arise in two ways — generally: import leakage and export leakage.

Commonly, import leakage occurs when tourists demand standards of equipment, food, and other products that the host country cannot supply. Especially in less-developed countries, food and drinks are imported, since local products are not up to the hotel’s (i.e. tourist’s) standards or the country simply doesn’t have a supplying industry. Therefore, much of the income from tourism expenditures leaves the country to purchase imported commodities.

In developing countries, most of the infrastructural development projects (e.g. resorts, hotels, construction, etc) are usually financed by large foreign corporations, and accordingly they take their profit back to their home country (headquarters) — as a result, export leakage transpires.

Other negative impacts of an international airport are: infrastructure cost; inflation; and environmental.

“Tourism development can cost the local government and local taxpayers a great deal of money,” echoes the United Nations. Already evident in the case of SVG, for example, airport departure tax increased, and Prime Minister Dr Ralph Gonsalves presented Parliament with an EC$799.1 million national budget, encumbered with increased taxes — the inheritance — Vincentian taxpayers. Another costly impact is: developers (hotels and airlines) usually request that infrastructure, such as roads and airports, be improved, which can be expensive to taxpayers in developing countries.

Additionally, another pricy undesirable impact can present itself via inflation. I will clarify — due to tourism development, inflation can ensue when increased demand for goods and services by tourists increases local commodity prices, and, as a result, local residents whose wages do not adjust, therefore, would have to pay higher prices for goods and services.

Another adverse impact of an international airport is the environmental sacrifice. For instance, the assessment conducted by the German firm (KOCKS Consult GMBH) for the Argyle international airport specified “…off-site operation impact may affect legally protected migratory and resident species of birds at Milligan Cay, which lies in the direct approach corridor of aircraft.” Also, noise pollution is an undesirable effect of an international airport — particularly on children’s health and development. A study inspecting the impact of airport noise on children’s health found higher blood pressure in children living near Los Angeles’ LAX airport than in those living farther away. Moreover, a German study (1995) found there is a strong correlation between chronic noise exposure at Munich’s International Airport and elevated nervous system activity and cardiovascular levels in children living nearby.

Nonetheless, with unfavourable economic impacts and environmental issues looming SVG, there are pros and cons in every situation — therefore there are positive impacts which can be beneficial if the appropriate panacea of fiscal, monetary, and environmental policies are implemented by the government.

Next, the Positive Economic Impacts of an international airport