Tourism held hostage
Hopes have plunged in Egypt's tourism sector after Bush's announcement of a prolonged attack on Iraq
When the war in Iraq first broke out, experts had estimated Egypt's tourism sector will shoulder a 40 per cent drop in hard currency receipts as a result of the attack, Niveen Wahish reports. But when US President George Bush announced last week that the war may be prolonged, industry representatives realised the estimates were optimistic.
Just before the war began, Minister of Tourism Mamdouh El-Beltagui had announced that tourism receipts are expected to drop to $2.25 billion this year, down from $3.8 billion in 2002 and $4.3 billion in 2000.
"Things are going to be a lot more different than we had imagined," said Elhamy El- Zayat, chairman of the chambers of tourism at the Federation of Egyptian Chambers of Commerce. During a meeting last week at the Egyptian Centre for Economic Studies (ECES), El-Zayat said the industry needed a helping hand.
He said a postponement of tax payments owed by the sector to the government is required, as well as enabling companies working in tourism to repay their dollar debts in local currency. El-Zayat said this has become especially necessary after the government last month made it mandatory for tourism companies to exchange 75 per cent of their foreign currency revenues through the banking system.
El-Zayat also suggested the activation of a crisis fund that would assist tourist companies in paying employee salaries during down periods. He called for a postponement of payment of social insurance premiums that employers disburse for their staff. He said banks should reduce the interest rate paid on loans to a rate closer to that paid on deposits.
On a similar note, Ahmed Maghrabi, board chairman of Accor Hotels in Egypt and board member of ECES, said current losses may not have been as huge if the sector's expansion was less haphazard. In terms of hotel capacity, he said there was a situation of over supply. Competition in a narrow market has resulted in sharp reductions in room rates. "We should limit expansion until the rate per room reaches a certain level," he said.
Meanwhile, the sector faces a dilemma. Whenever Egypt becomes less attractive as a tourist destination, hotels resort to offering excessive price cuts. A study presented during the ECES meeting by Mohamed Fathy Sakr, a professor of economics at Cairo University and advisor to the minister of tourism, showed that the cuts lead to another problem. "Tourism recovery is much faster in terms of arrivals than in terms of receipts," Sakr said.
Although the tourism sector is less volatile than other sectors, such as cotton exports, foreign direct investments and petroleum revenues, it is more important when taking into consideration the size if its contribution to Egypt's hard currency revenues. As Sakr put it, "What matters is not the extent of volatility of the industry per se, but the overall economic impact of the industry's contribution to the economy."
Egypt's tourism sector has not been able to catch its breath. During the past decade, it has been hit by numerous successive incidents starting with the second Gulf War, terrorist attacks, the Luxor incident, the Palestinian Intifada, 11 September and, now, the war on Iraq.
