countries in SSA,<sup>94</sup> but more targeted (vertical) policies<sup>95</sup> that seek to identify activities using Hausmann- Hidalgo or other techniques may fail to groom the tradable products that will lead to big hits. In that spirit, the following section examines the scope for further developing services that have an established track record but where local capabilities are still lagging.

# **6. Tourism and Natural Capital**

Among the services with the most medium-term potential for the landlocked East African countries, tourism heads the list. Faber and Gaubert (2016, p.1)<sup>96</sup> observe that “Tourism is a particular form of market integration. Rather than shipping goods, tourism involves the export of otherwise non-traded local services and amenities by temporarily moving consumers across space. These tourism exports have become an important channel of global integration especially in developing countries. Over the past decade, tourism exports have exceeded manufacturing exports for 40 percent of developing countries and exceeded agricultural exports for half of them.” Mexican regions benefitting from tourism registered higher rates of employment, wage increase and GDP growth.

Global tourism is an unusually robust industry that has grown by close to 4 percent per annum since 2010 and in 2015, generated over $1.23 trillion in revenues (not including $210 billion in exports from non-resident passenger transport services). International tourist arrivals climbed by 4.4 percent to reach 1,184 billion in 2015 up from 278 million in 1980. Tourism accounts for 30 percent of worldwide services exports and 7 percent of total trade in goods and services, the third largest item after fuel and chemicals.<sup>97</sup> The average contribution of tourism to global GDP is about 5 percent and it creates (direct and indirect) employment for 6-7 percent of the global workforce,<sup>98</sup> however, depending on the country, the contribution of tourism can range from 2 percent of GDP to 20 percent or more and in the case of small island economies. The UNWTO projects a 3.3 percent per annum growth in international tourist arrivals through 2030.<sup>99</sup>

> 94 Looking ahead, automation could lead to a shrinking of value chains that are based on immobile and low-cost labor that is a major input into the sewing of garments and the assembly of footwear. Both activities are being automated with Adidas for example opening an automated shoe factory in Germany and Nike also exploring the possibility. <u>https://www.theguardian.com/world/2016/may/25/adidas-to-sell-robot-made-shoes-from-2017;</u> Economist (2015)  http://www.economist.com/news/technology-quarterly/21651925-robotic- <u>sewing-machine-could-throw-garment-workers-low-cost-countries-out; http://www.bizjournals.com/portland/blog/threads_and_laces/2015/05/5-nike-patents-that-showhow-u-s-manufacturing.html</u> 95 Industrial policy dichotomies – hard vs. soft; horizontal vs. vertical – are reviewed by Harrison and Rodriguez Clare (2009) http://www.nber.org/papers/w15261.pdf

> 96 <u>http://voxeu.org/article/tourism-and-economic-development-evidence-mexico-s-coastline</u> 97 World Tourism Organization (2016) http://media.unwto.org/press-release/2016-05-03/exports- <u>international-tourism-rise-4-2015</u>

98 Direct employment is estimated at 3.3 percent. World Bank, The State of Tourism in Africa (September 2011).

> 99 - UNWTO (2016) http://www.e <u>unwto.org/doi/pdf/10.18111/9789284418145</u>

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