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• -• --- - ____ ., RESTRICTED TAR:TON 24244 ASIAN DEVELOPMENT BANK This Report has been prepared for the exclusive use of the Bank. TECHNICAL ASSISTANCE TO THE KINGDOM OF TONGA FORA NATIONAL TOURISM PLAN January 1991 CURRENCY EQU I VALENTS (As of 15 November 1990) Currency Unit = Tonga Pa'anga T$1. 00 = US$0.771998054 US$1.00 = T$1.295340 The Pa'anga is pegged to the Australian dollar. For the purpose of calculations in this Report, an exchange rate of US$1.00 = T$1.30 has been used. This was the rate prevailing when the technical assistance was formulated. ] ABBREVIATIONS AIDAB - Australian International Development Assistance Bureau EC - European Community GNP - Gross National Product MLCI - Ministry of Labour, Commerce and Industry NTP - National Tourism Plan SDP - Sixth Development Plan TCSP - Tourism Council for the South Pacific TTA - Tonga Tourist Association TVB - Tonga Visitors Bureau VFR - Visiting Friends and Relatives WTO - World Tourism Organization GLOSSARY Tourist A temporary visitor spending at least one night in a country, whose stay does not exceed one year (WTO definition; synonyms: visitor, arrival). Seat Capacity The total number of airline seats on regularly scheduled airline services available to a certain country. Dedicated Seats Seats allocated by an airline operator to a certain destination, either as a result of aviation agreements, or as part of commercial deals with travel agents. Primary Tourism The part of the economy producing basic tourism services (mainly accommodation). Secondary Tourism - The part of the economy producing optional services for tourists (restaurants, attractions, transport, shopping). NOTE (i) The fiscal year (FY) of the Government ends on 30 June. (ii) In this Report, $ refers to US dollars. 1 I. INTRODUCTION 1. In December 1989, the Government of the Kingdom of Tonga requested advisory technical assistance to help prepare a National Tourism Plan (NTP) for the country. A Fact-Finding Mission visited Tonga from 12 to 19 June 1990 and held discussions with Government officials and private sector representatives. The Mission confirmed the need for the advisory technical assistancel/ and reached agreement on both the objectives and scope of the consultant's terms of reference, cost estimates and the financing and implementation arrangements. The technical assistance first appeared in ADB Business Opportunities in September 1990. !1 II • BACKGROUND A. General 2. The Kingdom of Tonga, an archipelago of 171 islands of which 36 are inhabited, is located 3,500 kilometers northeast of Sydney, Australia and 1,900 kilometers north of Auckland, the capital of New Zealand. The three main island groups are, from south to north, Tongatapu, Ha'apai and Vava'u. Nuku'alof a, the capital, is located on Tongatapu, the largest island in the country. The total population amounts to about 99,500 (mid-1989 estimate). It is estimated, however, that about 32,000 Tongans live overseas, mainly in the United States (14,000) and New Zealand (9,000). The 1986 census counted 24,000 people as economically active in the monetary sector, or 25.7 per cent of the total population; about ten per cent of those were unemployed. 3. The Tongan economy, providing the population with an average per caput GNP income of US$910,2/ has been seriously affected by declining world market prices for its major agricultural products, notably coconut and its derivatives, bananas, fish and vanilla. This led to a decrease in exports and larger trade deficits as imports continued to increase. Foreign exchange remittances from overseas Tongans have met the trade deficit to a considerable extent. Also foreign exchange earnings from tourism have grown in importance as a means to reduce trade imbalances and balance-of-payment deficits. 4. Tourism's contribution to the national economy is not accurately known. Estimates made for 1987 range from T$8.0 million ($6.2 million) by the World Tourism Organization (WTO), to T$10.6 million (US$8.2 million) by the Tourism Council of the South Pacific (TCSP)3/ and T$14.6 (US$11.2 million) by the Bank of Tonga. For 1989, the Ministry of Finance estimated the foreign exchange earnings to amount to T$11.5 million ($8.8 million). Comparing these figures with the 1987 1/ Under TA No. 1298-TON: Tourism Development, for $65,000, approved on 15 May 1990, suggestions for Terms of Reference for a possible National Tourism Plan had been drafted. 2/ World Bank, September 1990. 3/ In a regional context, Tonga is a member of TCSP. This EEC-sponsored organization initiates, and where possible, coordinates tourism development efforts for all its South Pacific member countries. Most overseas representations of the South Pacific countries in the major travel markets are financed with TCSP funds. 2 total export earnings (including re-exports) of T$9.6 million ($7.4 million), it can be said that tourism as a source of foreign exchange is of major importance to the economy of the country. 5. Other direct and indirect tourism benefits to the Tongan economy are quite significant as well, More than 1,600 Tongans (about 7 per cent of the economically active population) are estimated to have been employed directly in the tourism industry. Further, the Government has estimated that: (i) for each dollar spent by a tourist, an additional income of 42 cents was generated elsewhere in the economy; (ii) for each job created in the accommodation field, 1.42 additional jobs were created elsewhere; and (iii) each tourist dollar would yield 30 cents in Government revenue, It was also estimated that between 10 per cent and 15 per cent of the Government's estimated revenue for FY 1987/88 of T$29.4 fl million ($22.6 million) was directly attributable to tourism. 6. Tourism revenues are derived mainly from air visitors, who numbered about 21,000 in 1989. Excluding cruise ship visitors (which unrealistically inflate tourism numbers, but stay only for very brief periods on shore and spend limited amounts only), tourist traffic has crept slowly upwards in the past two decades. In 1969, only 3,300 tourists arrived. For the years between 1985 and 1989, growth in air visitors averaged about 10 per cent a year. 7. At present, there are about 530 rooms of varying configurations and standards available in 37 hotels and guesthouses for tourist use in Tonga. A unique feature of the Tongan tourism industry is the almost total local ownership of the accommodation establishments. This and the fragmented nature of the accommodation field probably has increased the accrual of local economic benefits. However, the absence of large-scale resorts capable of providing a promotional focus and feeding smaller resorts has been a deterrent to more rapid growth, utilizing the considerable tourism potential in the country. 8. Due to the relatively high incidence of small scale accommodation attractive to young back-packers, who tend to have long length of stays (more than two weeks), the leakage of foreign exchange into imports for tourism is relatively small, ranging from 3 per cent for guesthouses to 46 per cent in regional hotels. For the larger, foreign-owned and operated hotels and resorts catering to more wealthy tourists in other South Pacific countries, imports typically absorb 60 to 80 per cent of all foreign exchange spent by tourists.1/ 9, Historically, the USA, Australia and New Zealand have been the major source markets, but their combined share of the market has declined somewhat, from 63 per cent in 1965, to 60 per cent in 1985 and 54 per cent in 1989. Increases in arrival numbers from Europe and Asia (mainly Japan) have compensated for this decline. As the numbers for individual countries are small or not available, and f1uctuate widely from year to year, conclusions about arrival trends from other markets are not warranted. The majority of all visitors arrive at Fua'amotu International Airport, Tongatapu, recently upgraded, with Japanese assistance, to receive B-747s. This airport is served by four international carriers, which provide a total of 1,332 in-bound seats per week and link Tonga with Honolulu, Auckland, Sydney and Nadi (Fiji). j/ See, for instance: Dwyer, L. "Import Content of Tourist Hotel Food and Beverage Purchases in the South Pacific", 1988.
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