The Forum for Partners in Iran's Marketplace

January 2018, No. 86


The Meager Share of Tourism in Iranian Economy

As a rule, when we talk about government involvement in tourism industry, we mean the infrastructure of this field, and the private sector naturally tends to be interested in this industry.

Dr. Mohammad Reza Farzin, economist says the latest report by the World Economic Forum shows that Iran has preserved its topmost global rank in the “price competitiveness” category, which shows how costly it is to travel or invest in a country. But in the business environment index from among 140 countries Iran ranked 119th, in prioritization of travel and tourism ranked 130th, in infrastructure ranked 93rd, in tourist service infrastructure ranked 119th and in cultural resources ranked 37th. These statistics show that we are in trouble in the tourism business.

The World Economic Forum has, for the past 11 years, engaged leaders in travel and tourism to carry out an in-depth analysis of the travel and tourism competitiveness of 140 economies across the world. The Travel and Tourism Competitiveness Index measures “the set of factors and policies that enable the sustainable development of the travel and tourism sector, which in turn, contributes to the development and competitiveness of a country”. The Travel and Tourism Competitiveness Index enables all stakeholders to work together to improve the industry’s competitiveness in their national economies.

What follows is an interview with Dr. Farzin: 

In your opinion, why has the Iranian tourism industry not been able to achieve this role, despite the many declarations it has made in advancing economic growth?

The tourism trade balance in Iran has always been negative; in the sense that in recent decades, the number of tourists traveling abroad is more than those who choose our country as a destination. However, the fact that we expected the number of incoming tourists to increase in the last few years, and this way, tourism could increase its contribution to economic growth, is another issue. This expectation came about in several respects. Increasing the share of tourism in the country is affected by various factors, partly due to the amount of investment in this field and the production of tourism products.

It should be noted, however, that what is now being discussed in this talk only goes back to the incoming tourism area, which, fortunately, has experienced a satisfactory growth in the last two-three decades. This growth has many reasons and requires separate examination. Iran has not succeeded in producing tourism products, and most of the products are not produced and therefore not supplied.

In the investment section, with a look at the budget of the Cultural Heritage, Handicrafts and Tourism Organization, the main part of which is spent on the cultural heritage, one can see its deep distance with other devices. In this way, little investment is made by the government in the field of tourism at least in the infrastructure. In order to encourage private investors, we also need a favorable investment environment; however, studies show that we have not succeeded in this regard. 

Where are our weaknesses and which areas need improvement?

The World Economic Forum releases annual reports on Travel and Tourism Competitiveness Index. According to the latest report published by the WEF, Iran ranked first in terms of cheap travel destination; 119th in the business environment index from among 140 countries; 130th in prioritizing travel and tourism; 93rd in infrastructure; 119th in the tourist service infrastructure and 37th in cultural resources. These rankings are disclosed while tourism as a type of trade is also considered an important business environment and infrastructure in investment. However, our situation in these areas is not favorable.

Today, most tourists entering Iran are pilgrimage tourists. Besides, due to the low cost of medical services, we also see the presence of health tourists, and some of them are motivated by trade and visiting relatives or friends.

¯These statistics show that we are in trouble in the tourism business and our issues are not resolved. Therefore, we need to be able to create the necessary business environment first and then create the appropriate infrastructure in this field. Taking the realities into account, we can say that we have not planted anything to expect harvesting now. So first we should plant something and then expect fruit.

Along with these issues, the political factor should also be considered. It’s natural that in different times, with changes in our relationships with other countries, the atmosphere has changed and, consequently, it has an impact on tourism. In fact, tourism is one of the areas directly and indirectly affected by political issues, and this is the case all over the world. 

Some state that the private sector investment in this area is unjustified when the government is not willing to pay the necessary infrastructure costs. What do you think?

As a rule, when we talk about government involvement in tourism industry, we mean the infrastructure of this field, and the private sector naturally tends to be interested in this industry. Part of the tourism infrastructure goes to public areas such as rail, road and air transportation. In other words, the development of such infrastructure does not only serve the tourism industry. The same is true for urban and rural development; that is to say besides helping the tourism industry it also serves the people living in the regions. Therefore, attention to the development of tourism infrastructure has manifold benefits.

Some infrastructures are only dedicated to this industry, but they do not, in any way, contribute to the welfare of tourists and people living in these destinations. However, it seems that we have not been able to make fundamental changes in the field of thinking, theory and doctrine by understanding the significance of tourism. So the government has not paid due attention.

Of course, one should not overlook the fact that the private sector is engaged in construction of many hotels across the country, which indicates that the situation is moving towards improvement, although there are many more needs in this area. To meet these needs, we are bound to provide the infrastructure, stability and development of services to investors by the government, which is currently not the case. 

Let’s get back to the statistics provided by the World Economic Forum. One of them is Iran’s topmost global rank in the “price competitiveness” category. But some experts are openly opposed to such a proposition. They argue that Iran is more expensive than other countries in the Middle East, such as Egypt and Turkey, and does not have a competitive advantage over these countries. Tour operators also complain about the costly hotel accommodation and transportation in Iran. They say that in high seasons, there are significant increases in these services which directly affect the tour prices.

Yes, in terms of price competitiveness the WEF has given us the first rank, and this is an international report. 

True it is an international report, but some believe that the data providers to the World Economic Forum are governments and therefore the data could be incorrect?

These figures are not provided by the governments; rather, the WEF usually provides statistics through communications with chambers of commerce or similar institutions. The forum provides a table and ranking system, and its various indicators should be considered for its accuracy. But as we face challenges in the business category and we accept the statistics, we can also cite the statistics at points where we have the advantage.

Regarding price competitiveness, even if we are not in the first ranking, we are certainly not at low ranks. Due to the cheapness of Iran’s money and its continued depreciation, our country is considered a cheaper destination than other countries; of course, what is said is for an incoming tourist who needs to change money. For example, if you compare Tehran to Istanbul as a rival, you will see that there are differences in the various indicators of these cities; sometimes some services in Tehran are cheaper and others in Istanbul are cheaper to buy. 

You put a lot of emphasis on tourism products. What do you have in mind when you talk about these products?

Today, most tourists entering Iran are pilgrimage tourists. Besides, due to the low cost of medical services, we also see the presence of health tourists, and some of them are motivated by trade and visiting relatives or friends. Europeans also travel to Iran in connection with Iranian history and culture and fall into the category of cultural tourism. In border towns, commerce, buying and selling and visits are more common. This is while there are no customers for leisure and coastal tourism in Iran. We have vast beaches in the north and south of the country which are not even used by domestic tourists.

Natural tourism is one of the other branches that has a lot of potentials in Iran but has not yet been worked on. In this section, we can produce dozens of products, such as various tours, so that tourists can use these products. In the cultural sphere, we can improve the services to increase our cultural tourism contribution. But all this requires the provision of travel packages and advertising in the global tourism market so that we can attract passengers and increase the share of the Iranian economy in entering the world tourism market. In this way, we need major travel agencies to operate overseas offices. The lack of large tourism companies also seems to be a challenge and the way should be opened for their arrival and development.


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  January 2018
No. 86