20.12.2009
The Road Map of an Anti-Crisis Strategy
№4 2009 October/December

Among many scenarios envisaging a post-crisis world, one depicts
the world economic system collapsing under the blows of
protectionism, retaining only ties in the energy and tourism
sectors. Despite the fantastic nature of this prediction,
noteworthy are the invariants of the economic system, chosen by
experts, which resist even global challenges. Apparently, it takes
some extreme circumstances to make obvious the factors that ensure
the functioning of the world social and economic system. In any
case, it is not often that tourism is assigned the main role in the
struggle for influence on geopolitics.

Meanwhile, the degree of freedom and the intensity of human
migration have long been the main characteristics of human capital,
which is one of the most important resources of any economy. The
development of an anti-crisis strategy implies not only the
settlement of global contradictions but, more importantly, the
definition of a format for the future development of social and
economic structures.

GLOBALIZATION AND TRUST

An unbiased system analysis shows that the present global crisis
is rooted in the fundamental concept of national economic
development – “differentiate or die.” It is time to change this
concept for “integrate or die.” It should be remembered, however,
that integration processes do not rule out differentiation and even
increase it: the value of any element of a community depends on its
uniqueness and difference from others which increase its overall
effectiveness. And this is what integration serves to
facilitate.

However, there are big difficulties with implementing these
principles. The main prerequisite for integration is the
globalization of production systems which, in turn, requires
maximum openness of the economy. Answering questions from members
of the International Business Council at the recent World Economic
Forum in Davos at the height of the global crisis, Russian prime
minister Vladimir Putin emphasized this factor as a measure aimed
at overcoming its consequences in Russia: “We will make our economy
and our country open to the world.”

Experts have named many factors that provoked the crisis, yet
they all boil down to one thing: loss of trust. It only seems that
this is a purely humanitarian and psychological concept that cannot
be measured. The significance of this seemingly ephemeral feeling
for the regulation of market relations is yet to be studied in
depth; on the other hand, volatility has long become a recognized
characteristic of the financial market, which conceals the
incompleteness of the technical analysis of the current state.

Nevertheless, we can already say that trust belongs to the rare
set of characteristics that are equally inherent in the mega-,
macro- and micro-levels of interaction between states, nations,
regions, groups, businesses and individuals. In this sense, tourism
acts as a mediator of these relationships, and as such it is
unrivaled.

Remarkably, Francis Fukuyama, who has a subtle perception of
latent tendencies in historical development, dedicated one of his
books to the phenomenon of trust. One of the main conclusions which
he makes in Trust: The Social Virtues and the Creation of
Prosperity, where he analyzes world history from the perspective of
social and economic mechanisms of trust, is that “capital today is
embodied less in land, factories, tools and machines than,
increasingly, in the knowledge and skills of human beings” as well
as in “people’s ability to associate with each other.” Tourism
creates social and cultural prerequisites precisely for the
development of this ability.

If we speak about trust at international level, then the example
of Russia and the European Union, which are looking for acceptable
terms for signing a new bilateral treaty to replace their
Partnership and Cooperation Agreement, shows that focusing
attention only on economic interaction issues, such as energy,
leads into a deadlock. It would be much more promising to focus on
other outstanding issues, for example, cross-border migration.
Solving these problems would contribute to the establishment of a
regime of trust as much as traditional, albeit conflict-laden,
issues would.

Obviously, the failure of attempts to quickly overcome the deep
crisis is rooted in the gap between the globalization of the
consumer market and the globalization of the production of goods
and services. Meanwhile, it is consumers that are the engine of the
economy. About 60 percent of global GDP is spent on the purchase of
goods and services.

The cynicism of economic nationalism is manifested primarily in
appeals to buy domestic products. Meanwhile, the ability of
domestic manufacturers to produce products that would meet the
growing requirements of buyers directly depends on their
involvement in the international division of labor.

RUSSIA’S GROWING POTENTIAL

Tourism services are the only economic sector where national
differentiation plays a positive role. Moreover, the more intense
the internationalization of production, the higher the demand for
special products.

Contemporary tourism is an industry that satisfies people’s
social and communication needs, which have a clear and distinct
tendency to increase. Therefore, the proposal of Russia’s Ministry
of Sport, Tourism and Youth Policy to provide tax deductions to
citizens who have bought travel vouchers to visit places in Russia
is a real anti-crisis measure which has a serious cumulative
effect.

According to research by Euromonitor International, the
attractiveness of Russia to foreign tourists is increasing: in
2008, Moscow ranked 18th in Euromonitor International’s Top City
Destinations Ranking, leaving behind such cities as Amsterdam,
Vienna and Prague. Unfortunately, Russia’s ratings in other
categories are not as good. In a recent Travel and Tourism
Competitiveness Report published by the World Economic Forum,
Russia ranked 59th among 133 countries. Russia’s tourism industry
accounts for slightly more than one percent of GDP and one percent
of all jobs. This economic sector requires radical changes,
especially with regard to the promotion of tourism services to the
world market. To this end, Russia has already launched a TV channel
named Russian Travel Guide. A feasibility study showed that the
costs of this project will be highly repaid.

Tourism deserves special attention as an industry with a great,
yet little-tapped, export potential. The present volume of national
exports is enough to ensure a favorable balance of payments and
state budget revenues, and the accumulation of foreign exchange
reserves. However, the export structure is still imbalanced in
favor of energy products, which makes Russia highly dependent on
the situation on the world market and which works towards continued
dominance of industries with low value added in the Russian
economy.

Tourism is an industry where the demand for products is stably
high on both domestic and foreign markets. This factor opens
opportunities for Russia (under certain conditions) to join the
ranks of niche leaders on the global market.

However, achieving this goal requires immediate measures to
improve the export regulation and encouragement system in general
and the tourism industry in particular. These measures should
include changing the functions of export duties from fiscal to
structural ones and the development of an effective export
crediting system. Despite the recognition of the role that
foreign-trade crediting plays in promoting exports of developed
countries and countries with economies in transition, the system of
state support for export crediting in Russia remains undeveloped
and access to it is very limited. The level of administrative costs
in obtaining export credits is actually prohibitive for travel
companies of any size.

In addition, the Russian government must provide direct support
for export-oriented travel companies. In particular, it should
oppose discriminatory practices of partner countries, provide
political support for contracts concluded by Russian exporters, and
provide information services concerning the situation on export
markets. The Ministry of Economic Development, in cooperation with
Russian diplomatic missions abroad, should inform Russian tour
operators about export opportunities in concrete national and
global markets. This information is essential for rapid response to
possible growth in exports, especially for small and medium-sized
businesses. In case Russian exporter companies make requests for
specialized reviews, these information services could be provided
free of charge.

Tourism as a sector of the economy needs a radical revision of
its organizational and economic foundations. At present, the
tourism industry is linked with many other sectors, such as
transportation, communications, trade, construction, the utilities
and food sectors, social and cultural institutions, and services.
Performance in each of these areas is directly linked with the
consolidation of businesses, which most often is done through
mergers or takeovers.

The consolidation of travel businesses has a limited and a
purely professional nature. Integration processes in this sector
must rest on other organizational forms that would be best suited
to using governmental support. Tourism has a stimulating effect on
industrial, construction and services sectors of the national and
regional economy and thus becomes an important factor of social and
economic development. For example, the decrease in sales in the
travel sector due to the crisis caused a downward revision of
aircraft production plans, which resulted in the closure of several
aircraft companies.

The mechanism of this effect inevitably comes into the view of
the state policy. Considering that tourism is not confined to
national borders and that the openness of the economy provides
equal opportunities to foreign agents as well, the competitiveness
of domestic producers of tourism services is becoming a target of
the economic policy. In particular, it would be wise to evaluate
the recreational potential of regions of the country, allowing to
reasonably hoard profits from tourism. Indeed, the treasures of
museums are not only material values – people wishing to admire
them create financial flows.

Hoarding is not a formal way of artificial capitalization of
producers of travel products; it creates additional conditions for
attracting bank loans, including long-term ones. In fact, such
attempts are already being made in an exclusive way to justify the
establishment of special recreational zones for tourists. They are
intended primarily to improve the investment attractiveness of a
given region and promote the development of the tourism industry.
For example, the presentation by Russia’s Krasnodar Territory of 27
tourism investment projects worth more than 2.7 billion euros at
the MIPIM-2009 exhibition has direct relation with plans to create
such a recreational zone.

TRANSFER OF HUMAN INTERACTION

At the state level, support for tourism can be provided within
the framework of cluster policy. This conclusion was drawn by
experts from EuropeAid working on measures to support the state
policy aimed at improving the competitiveness of the Russian
economy (2008). They have proposed working out a program for
creating territorial and sectoral clusters intended to ensure
international transition, i.e. providing universal services in the
tourism industry. It should be noted that the idea of such
universality is in the air. The president of Kazakhstan, for
example, proposed introducing a new currency, which he called
“transital,” as a sort of Noah’s Ark of capital for rescuing assets
in a new, post-crisis world.

The global economy needs a global transfer of not only capital,
labor, technologies and goods but also of human interaction.
International transition performs such important social functions
as cross-cultural diffusion, the formation of tolerance in society,
verbal and aesthetic conversion of leisure, informational and
cognitive discourse, and the rehabilitation and restoration of
manpower. Losses from the poor condition and the lack of integrity
of the system that must ensure the fulfillment of these functions
are incommensurable with the costs of its creation and functioning.
One might as well launch another national project!

Now crisis management and post-crisis development programs are
being drawn up. Various recipes are being proposed for supporting
demand and creating new jobs. Tourism has a high multiplicative
potential in this respect. Its great advantage is its focus
primarily on domestic demand. As the world’s largest country,
abundant with its own natural resources, Russia can orient its
development to the domestic and regional division of labor. If
given strong government support, the travel industry can become an
engine that will drive the entire national economy. Years ago, the
automotive industry and road construction played the same role in
the United States, but let us not forget that the economy and the
social and political systems in those times were not as open as
they are now.

The present dependence of the Russian economy on raw materials
exports, which the government seeks to overcome, is primarily due
to the high external demand for metals, oil, timber and
fertilizers. But the success of efforts to change priorities
largely depends on the compensation of the external demand for
goods and services with internal demand. One can hardly hope for an
accelerated development of innovation sectors of the economy now,
and in any case this is a long-term task, whereas the travel
industry is much more receptive to development impulses and, due to
its multiplicative effect, can moderate the development of socially
oriented sectors of the national economy.

Special importance should be attached to the involvement of
regional economies in the modernization process. The easy-to-use
quality of travel products facilitates this involvement. In fact,
the main demand here is for information technologies, and it is
precisely these technologies that have been developing fast in
recent years.

However, words alone about an essential role of tourism are not
enough. The state economic policy needs to be drastically changed
in order to make the tourism industry a backbone one and thus
deserving special attention and support from the government. The
first steps have already been made: the so-called special
recreational zones for tourists have been given special status.
Yet, much more needs to be done.

Economists propose creating additional conditions for developing
and managing state-private partnerships in tourism. To this end, it
has been proposed including the tourism industry in the All-Russia
Classifier of Types of Economic Activity as a separate branch of
the national economy; making a register of state and municipal
property which can be used as tourist attractions within the
framework of state-private partnership projects; and establishing a
dedicated federal agency that would work out and propose new areas
and methods for developing the tourism industry with a view to
implementing a coherent state policy in the sphere of tourism,
aimed at improving the quality of life.

Another proposal includes establishing a Coordinating Council
for Tourism under the Russian government. It may have the following
managerial functions:

  • ensuring the balance of interests between businesses and the
    government by means of federal and regional programs for social and
    economic development and tourism;
  • organizing inter-agency and inter-branch interaction between
    municipal authorities and travel businesses; managing a data bank
    regarding joint projects; and identifying demand for tourism
    services and products in Russia and abroad.

In state-private partnerships, the state should pay more
attention to and allocate more funds for the development of
infrastructure, primarily the construction of hotels, roads, and
hubs for rail, road, air, sea and river transportation.

In accordance with its political and economic status and in line
with its policy for expanding its influence in the world, Russia is
actively participating in international development assistance
(IDA) programs. This country is engaged in a wide range of efforts
to build a respective national system. According to Russia’s
Foreign Ministry, about U.S. $500 million will be allocated for
this purpose annually in the next few years. The implementation of
the Concept of Russia’s Participation in International Development
Assistance, approved by the Russian president on June 14, 2007,
will help Russia strengthen its positive image, open new
opportunities for investment in promising sectors of the world
economy, and make Russian companies more competitive in the world
market.

IDA programs cover national health, social security and
educational systems. Russia’s IDA system could provide for measures
to develop tourism as a multifunctional sector of the national
economy. Within the frameworks of these programs, Russia could
assist domestic producers of travel services and joint
organizations established with countries involved in the IDA
processes.

The specification of a generally outlined route towards the
established goal is what we call a road map. With regard to
tourism, this formula has a literal meaning.

While the 2009 World Economic Forum in Davos focused, among
other issues, on the environment, Russia could propose devoting the
next forum to tourism as a road map towards a common civilizational
space. Let us not forget that the European Union grew out of the
European Economic Community. Similarly, a Common European Space can
begin with a Common Travel Market.