Pacific Money | Economy | Southeast Asia

Doubling Down on Tourism Today will Constrain Cambodia’s Policy Options Tomorrow

COVID-19 has given Cambodia an opportunity to rethink its reliance on tourism. Will the government take it?

Doubling Down on Tourism Today will Constrain Cambodia’s Policy Options Tomorrow
Credit: Depositphotos

Anyone following the news out of Cambodia is likely to have encountered two conflicting sentiments regarding the current COVID-19 situation.

On the one hand, in late July, the spokesperson for the Ministry of Health and the chairwoman of the COVID-19 Vaccination Committee proclaimed that the country is at a critical  “redline,” an assessment which led to government-mandated lockdowns in Siem Reap starting in the middle of September.

On the other hand, thanks to swift vaccination progress, the country’s tourism leaders are already preparing for a potential re-opening of Siem Reap to vaccinated tourists in the last quarter of 2021, with the government hinting at the possibility of reducing quarantine measures for incoming visitors.

Although only about 82,000 foreign tourists were reported to have visited Cambodia in the first four months of 2021, the government is already making arrangements with foreign partners, including requesting that the Philippines encourage more tourists to visit Cambodia and making plans with Singapore to organize a tourism fair. More importantly, the Ministry of Tourism has set up an online tourism vocational school registration system to encourage participation in its training program for workers in the tourism sector.

Local authorities have also described tourism as an indispensable path towards economic recovery in the post-pandemic world. According to the Roadmap for Recovery of Cambodian Tourism During and Post COVID-19, the government envisions a reformed tourism sector that emphasizes quality, safety, and sustainability, while also planning to bring back 7 million international tourists each year by 2025 and 11 million domestic tourists by 2023.

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One thing that this health crisis should have revealed to the government, however, are the ways in which an economy which is over-reliant on travel and tourism is unsustainable and susceptible to shocks. More importantly, this development approach defies experts’ calls for economic diversification into higher value-added sectors. Without deliberate consideration, policies undertaken during the COVID-19 pandemic might lock Cambodia in a loop of perpetual underdevelopment and over-reliance on tourism.

Therefore, before doubling down further on the tourism sector as a COVID-19 recovery strategy, the Kingdom must understand how its decisions will impact the range of future policy options.

Path Dependency and Tourism

The path dependency theory argues that history matters and that decisions made in the past can affect those possible in the future. This phenomenon is caused by “lock-ins” or self-reinforcing processes that continuously force an actor to make the same decision or oppose changes despite having other viable options.

A nation can be locked onto a fixed development path because of its dependence on the existing structures: namely, assets, competencies, institutional patterns, and power relations. As a result, the cost of switching to a different path is so high that it is not even worth considering. For instance, if investment is poured into tourism-specific infrastructure or projects such as tourist attractions, the local community and authorities will have less room to diversify their economic activities out of the tourism sector unless they have access to a large pool of public or private funds.

On the other hand, lock-ins can also be reinforced by the increasing returns generated from the chosen path. For example, the profits generated from pro-tourism policies are more likely to keep businesses doubling down on their investment in the sector and limiting incentives to invest in other productive or higher value-added industries.

Nonetheless, destinations can still break free from existing lock-ins and create new paths toward a more sustainable development trajectory. This would require local authorities and major actors in the tourism and non-tourism industries to choose the right path during a “critical juncture,” a situation of extreme challenge and uncertainty in which policies and institutional reforms may result in lasting changes.

The Case of Central Australia

Central Australia is an interesting case study that Cambodia should investigate, particularly related to this idea of “critical juncture.” Central Australia is a sizable and sparsely populated desert region that experienced a tourism boom from the 1980s. It became the center for large-scale tourism projects with limited diversification into other economic activities and products, making it substantially vulnerable to the boom-and-bust cycle. Foreseeably, the region was significantly impacted by the global financial crisis in 2008 and continued to experience a significant slump until 2012.

What the Australian government failed to grasp was the fact that the 2008 financial crisis was one of the aforementioned critical junctures. Consequently, their inaction in diagnosing tourism policies in Central Australia and initiating reforms prevented the region from achieving sustainable development.

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Rather than perceiving the consequences as a sign of structural weaknesses, the Australian authorities pointed almost exclusively to the external shocks as the cause of the extreme downturn. Hence, the government persistently poured more investment into maintaining the status quo through extensive marketing campaigns and infrastructure upgrades.

Local authorities overlooked the entrenched culture of overdependence on the government and external investors for capital, the lack of entrepreneurial capabilities, and the limited collaboration among key industry players on the creation of new products and services. As a result, Central Australia was trapped in a perpetual pattern of chasing the boom while having to bear the increasing costs of replacing decaying infrastructure, seeking new markets, and attracting attention from the central government.

Central Australia missed the opportunity to reassess its development path and mobilize support for a more productive trajectory during the global financial crisis. Cambodia should learn from an example like this and must not brush off the COVID-19 pandemic as just a random catastrophe, but consider it as a critical juncture for meaningful changes and reforms.

COVID-19 as a Critical Juncture

Essentially, the COVID-19 pandemic can be regarded as a critical juncture. While the consequences of the virus are widely known, many disregard the possibilities it presents for rethinking existing systems for a more sustainable and resilient future. This platitude about how every crisis presents great opportunities is often overlooked, despite the educational values of such experiences.

A country’s inability to mitigate the consequences of crises are symptoms of institutional shortcomings that are themselves defects of the established system. And actors engaging in the system generally have incentives to swiftly act because disaster recovery necessitates hard choices, strengthening political will and consensus for change.

This health crisis has catalyzed efforts to reassess the country’s healthcare system and the pandemic preparedness programs. It has spurred discussions on expanding social protection coverage, attracting investment for 21st-century classrooms, and encouraging digital adoption within the government and businesses.

So why miss the opportunity to reimagine the tourism sector and propose solutions for economic diversification for the post-pandemic world?

Here is what the pre-pandemic status quo looked like: Cambodia’s spectacular cultural and natural heritages became attractive destinations for both western and eastern travelers. As a result, investments are predominantly pulled into established destinations, such as Siem Reap and Sihanoukville. Nonetheless, this lack of diversification and the limited number of tourism destinations and products has led to the slowing growth of tourists visiting the Kingdom and a decline in daily spending.

More importantly, the surge in the number of Chinese visitors, which accounted for over 35 percent of all international arrivals in 2019, led local authorities to implement the “China-Ready” strategy that aims to attract 2 million tourists from China annually. This decision, in turn, pushed the Kingdom to create more tourism products catered towards the Chinese market. While it is uncertain what kind of experience is deemed suited for the Chinese travelers, recent development trends point to the dubious gambling industry as the number of casinos jumped by 53 percent in 2018.

As I have previously outlined, before the pandemic, Cambodia’s tourism was already facing several issues, including the notable economic leakages, the potential undermining of culture, and environmental impacts. However, I have also argued that there are other tourism approaches that Cambodia can investigate, such as Bhutan’s model of valuing quality over quantity.

Taking into consideration the Kingdom’s post-pandemic tourism plan, which generally accentuates the need to attract more tourists, I cannot help but worry that the government is overlooking the opportunity to use this critical juncture to reevaluate the current tourism model.

If the status quo is maintained, it could potentially exacerbate the nation’s dependency on the tourism sector and the Chinese market, contradicting the national priority of economic and market diversification. More importantly, it can also promote the emergence of contentious industries and mass tourism initiatives at the costs of social order and the environment.

Having a comprehensive post-pandemic recovery plan is essential, but what is most crucial for countries during this critical juncture is to choose the right development path. Fortunately, the past has already provided invaluable knowledge about the existing system that can inform this decision – if only the relevant authorities look back before taking their next step forward.