TIJARA

PROVINCIAL ECONOMIC
GROWTH PROGRAM

TOURISM SERVICES IN IRAQ

AND GATS NEGOTIATIONS
RECOMMENDATIONS AND IMPACT

April 2009

DISCLAIMER

The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency
for International Development or the United States Government.
USAID TIJARA
PROVINCIAL ECONOMIC
GROWTH PROGRAM
APRIL 2009

TOURISM SERVICES IN IRAQ

AND GATS NEGOTIATIONS
RECOMMENDATIONS AND IMPACT

DISCLAIMER

The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency
for International Development or the United States Government.
 TABLE OF CONTENTS
 
 

ACRONYMS 
1. INTRODUCTION AND METHODOLOGY ................................ 1 
2. SUB-SECTOR CONTEXT IN GATS AND VALUE CHAIN
DEVELOPMENT ...................................................................... 3 
2.1 WTO Definition and Framework ................................................................... 3 
2.2 Tourism Services in 2007 in the World ........................................................ 4 
2.3 Trends in the World Tourism ........................................................................ 5 
2.4 Tourism in the World Economy – one of the most important industries ....... 5 
2.5 Examples of WTO Members’ Commitments on Tourism ............................. 7 
2.6 Non-GATS related Barriers Affecting Tourism ............................................. 8 
2.7 Tourism Value Chain: Linkages between the Tourism Industry and
Other Sectors ............................................................................................ 10 
3. IRAQ AND TOURISM ............................................................. 14 
3.1 Economic, Social and Regulatory Environment ......................................... 14 
3.2 Iraqi Tourism Industry ................................................................................ 14 
3.3 Role of the Iraqi Private Sector in Tourism and GATS Negotiation ........... 18 
4.  RECOMMANDATIONS ........................................................... 20 
5.  IMPACT ON IRAQI POSITIONS ON GATS / TOURISM
NEGOTIATIONS .................................................................... 23 
5.1 General Issues ........................................................................................... 23 
5.2 Economic Impact........................................................................................ 24 
5.3 Social Impact.............................................................................................. 24 
5.4 Environmental Impact ................................................................................ 26 
BIBLIOGRAPHY .......................................................................... 27 
ANNEXES SERVICES COMMITMENTS OF BENCHMARKED
COUNTRIES .......................................................................... 29 

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq

ACRONYMS
COSIT Central Organization for Statistics and Information Technology
CPA Coalition Provisional Agency
FDI Foreign Direct Investment
FSU Former Soviet Union
GATS General Agreement on Trade in Services
GDP Gross Domestic Product
GOI Government of Iraq
ICT Information and Communication Technologies
ID Iraqi Dinar
ILO International Labor Organization
IT Information Technologies
MFN Most Favored Nation
OECD Organization for Economic Co-operation and Development
SME Small and Medium Enterprise
UNCTAD United Conference on Trade and Development
UK United Kingdom
USAID United States Agency for International Development
USD US Dollar
WEF World Economic Forum
WTO World Trade Organization

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq

1. INTRODUCTION AND METHODOLOGY
The purpose of this series of documents on various sub-sectors under services is to prepare
the Government of Iraq (GOI) for the submission of the services chapter to the World Trade
Organization (WTO). It also seeks to assist the GOI to better understand the context in
which each sub-sector operates in the economy. WTO accession is hardly an end in itself.
Instead, WTO Accession is the beginning of a process of serious economic reform.
Accession to the “club” of WTO requires serious commitments to liberalization, as well as an
understanding of the impact of these commitments on the economy at large and its broader
benefits.

Each of the sub-sector reports is broken into five parts:

1. Introduction and methodology – the key analytical elements applicable to the sub-sector;
2. Sub-Sector Context within the General Agreement on Trade in Services (GATS) and
Value Chain Development – the sub-sector in the context of GATS, international best
practices, and value chain development of the sub-sector;
3. Iraq and the role of the specific sub-sector, including the regulatory environment, data,
and the role of the private sector in WTO negotiations;
4. Recommendations for Iraq in the negotiations of the sub-sector;
5. A general discussion of the impact of the proposed liberalization commitments on Iraq in
the sub-sector.

Section 2 describes the framework, or the “lens” through which the Iraqi Government
Services Committee should consider in the analysis of their sector. The WTO framework, its
modes, horizontal commitments and value chain underpin the essence of preparation, and
are the main content of impact analysis.

Sections 3-5 provide a more detailed analysis of the sub-sector itself and its role and overall
impact on the Iraqi economy.

There are five key methodological tools and concepts used to analyze the role of services in
Iraq. These include:
a. WTO framework (definition of “modes”);
b. International best practices;
c. Regulation;
d. Mode analysis;
e. Most Favored Nation (MFN) status, National Treatment and Market Access.

In each case we need to make sure that the GOI clearly understands the framework and
context of the sub-sector analyzed and its relationship to the Four Modes contained in
GATS.

Iraq applied for WTO accession in December 2004 and submitted a Memorandum on the
Foreign Trade Regime in September 2005. The Working Party met for a second time in April
2008 to continue the examination of Iraq’s foreign trade regime, however Services
negotiations did not commence.

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 1

This study has been prepared as a background paper supporting Iraq’s accession to the
WTO. As part of the WTO accession process, Iraq must negotiate offers/commitments for
Trade in Goods and for Trade in Services. The Iraqi Services sector is likely to be of
particular interest to WTO members, due to its significant economic potential. An extensive
consultation process underpins this study, which involved attending relevant meetings to
make presentations and exchange information, meeting with experts in the government and
civil society, and undertaking dialogue in an electronic discussion.

This study will be presented at various meetings of the GOI Services Committee. In addition
to this paper, there are several lengthy presentation materials prepared by the Trade
Division that will discuss various aspects of this paper in greater detail. Working Committee
meetings will include members of civil society, as well as trade negotiators from Iraq. In the
writing of this paper, consultation was undertaken in the form of face-to-face meetings with a
range of stakeholders representing national and regional organizations.

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 2

2. SUB-SECTOR CONTEXT IN GATS AND
VALUE CHAIN DEVELOPMENT
2.1 WTO DEFINITION AND FRAMEWORK
The classification system that is used in the GATS by WTO members divides Tourism and
Travel Related Services into the following four categories:

1. Hotels and Restaurants -including catering- (corresponding CPC: 641-643);

• Hotel and motel lodging services
• Holiday center and holiday home services
• Letting services of furnished accommodation
• Youth hostel services
• Children’s training and holiday camp services
• Camping and caravanning site services
• Sleeping-car and similar services in other transport media;
• Hall residence of students
• Meal serving services with full restaurant services
• Meal serving services in self-service facilities
• Other food serving services
• Beverage serving services for consumption on the premises

2. Travel Agencies and Tour Operators Services (CPC: 7471);

• Travel agency services
• Tour operator services

3. Tourist Guide Services (CPC: 7472);

• Sightseeing excursion services
• Sightseeing services, aircraft or helicopter
• Tourist guide services
• Guide services (mountain, hunting, fishing)

4. Other
• Tourist information services (including travel information, advice and planning
services provided by tourist offices; accommodation reservation services; and airline,
train, bus and other reservation services relating to travel)

The four modes of supply are all relevant for tourism:

• Mode 1/ Cross-border supply: the possibility for non-resident service suppliers to
supply services cross-border into the Member’s territory.
• Mode 2/ Consumption abroad: the freedom for the Member’s residents to purchase
services in the territory of another Member.
• Mode 3/ Commercial presence: the opportunities for foreign service suppliers to
establish, operate or expand a commercial presence in the Member's territory, such as a
branch, agency, or wholly-owned subsidiary.
• Mode 4/ Presence of natural persons: the possibilities offered for the entry and
temporary stay in the Member's territory of foreign individuals in order to supply a
service.

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 3

Within this framework, barriers affecting the trade in tourism services include the following:

• Market access limitations across all modes of supply including horizontal commitments
(for all services). 1 Six types of limitations on market access must be scheduled under
GATS if they are to be maintained:
1. Limitations on the number of service suppliers whether in the form of numerical
quotas, monopolies, exclusive service suppliers or the requirements of an economic
needs test;
2. Limitations on the total value of service transactions or assets in the form of
numerical quotas or the requirement of an economic needs test;
3. Limitations on the total number of service operations or on the total quantity of
service output expressed in terms of designated numerical units in the form of quotas
or the requirement of an economic needs test;
4. Limitations on the total number of natural persons that may be employed in a
particular service sector or that a service supplier may employ and who are
necessary for, and directly related to, the supply of a specific service in the form of
numerical quotas or the requirement of an economic needs test;
5. Measures which restrict or require specific types of legal entity or joint venture
through which a service supplier may supply a service; and

6. Limitations on the participation of foreign capital in terms of maximum percentage

limit on foreign shareholding or the total value of individual or aggregate foreign
investment.

• National treatment limitations across all modes of supply and horizontal commitments 2 ;

• Domestic regulations concerning in particular the right of establishment (related to

mode 3) have to be considered even if they do not represent barriers to trade 3 . Even
though the preamble of the GATS acknowledged the right of WTO Member States “to
regulate, and to introduce new regulations, on the supply of services within their
territories in order to meet national policy objectives”, GATS article VI demands that
domestic laws and regulations “are administered in a reasonable, objective and impartial
manner” and that they should not constitute unnecessary barriers to trade in services
(Art. VI.4).

2.2 TOURISM SERVICES IN 2007 IN THE WORLD

International tourist arrivals reached 903 million in 2007, up 6.6% from 2006. International
tourism receipts grew to USD 856 billion in 2007, corresponding to an increase in real terms
of 5.6% over 2006, according to the World Tourism Organization 4 . Worldwide, around 235
million people are employed in the tourism sector.

In the Middle East, 2007 counts for 39 million tourist arrivals and USD 28 billion receipts.

1
Article XVI GATS
2
There is no closed list of measures subject to scheduling. However, any measure which affects
competition to the detriment of foreign services suppliers must be scheduled (article XVII GATS)
3
Domestic regulations are not subject to scheduling. There are important, such as the government
control of new foreign companies though the issuance of licenses or permits
4
World Tourism Organization: www.unwto.org

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 4

2.3 TRENDS IN THE WORLD TOURISM
The World Tourism Organization published its long term forecast, called Tourism 2020
Vision. International arrivals are expected to reach nearly 1.6 billion by the year 2020. Of
these worldwide arrivals in 2020, 1.2 billion will be intraregional and 378 million will be long-
haul travelers.

The total tourist arrivals by region shows that by 2020 the top three receiving regions will be
Europe (717 million tourists), East Asia and the Pacific (397 million) and the Americas (282
million), followed by Africa, the Middle East and South Asia. Middle Eastern countries are
forecasted to record growth at rates of 6.7% per year, compared to the world average of
4.1%.

2.4 TOURISM IN THE WORLD ECONOMY – ONE OF THE MOST IMPORTANT

INDUSTRIES
Tourism ranks in the top five export categories for 83% of countries, according to the World
Tourism Organization, notably in Europe, the Middle East and the Americas, and is the
leading source of foreign exchange in at least one in three developing countries. One in
every 10 workers worldwide is employed in the travel and tourism sectors. These sectors are
often cited as the most important industry for emerging nation economies and account for
10% of world GDP, 8% of jobs, and 12% of global investment annually. In the Middle East,
they account for 10% of employment. In Egypt, for example, 1.5 million people work in travel
and tourism industries.

Tourism also has the highest potential for growth of any industry – currently running at more
than 4% per year 5 . It is one of the largest and fastest-growing industries. It plays a key role
in poverty alleviation, bringing jobs for unskilled or semi-skilled workers in hotels, resorts and
at cultural sites, as well as encouraging job creation in supply industries 6 .

We have completed a benchmarking exercise to compare the tourism sector in Iraq to nine
other countries in the region: Algeria, Egypt, Georgia, Jordan, Libya, Pakistan, Saudi Arabia,
Turkey, and Tunisia. These countries were chosen on the basis of shared characteristics
with Iraq, which are listed across the horizontal bar of Table 1 below.

Table 1. Benchmarking characteristics shared with Iraq

Cultural Religious New Advanced
Country Proximity Unstable
sites tourism member tourism sector
Algeria ● ●
Egypt ● ● ● ●
Georgia ● ● ● ●
Jordan ● ● ● ● ●
Libya ● ●
Pakistan ●
Saudi Arabia ● ● ● ● ●
Turkey ● ● ●
Tunisia ● ● ●

5
World Economic Forum: the Travel and Tourism Competitiveness Report 2008, available at:
www.weforum.org/ttcr08browse/index.html
6
OECD Policy Brief: Opening up trade in services; key for tourism growth. February 2008.

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 5

Table 2. Economic role of travel and tourism industries in benchmarked countries
International tourist International tourism
% of total GDP % of total
Country arrivals receipts (USD millions)
2007 est. employment
(thousands), 2006 2006
Algeria 1.5 1.4 1,443 184
Egypt 8.7 7.3 8,646 7,591
Georgia - - 983 313
Jordan 8.6 8.2 3,225 1,642
Kuwait 1.1 1.6 91 203
Libya 2.2 3.1 149 250
Pakistan 2.4 1.9 898 254
Saudi Arabia 1.9 2.6 8,620 4,961
Syria 5.9 6.7 4,422 2,025
Tunisia 9.3 9.1 6,550 2,227
Turkey 4.9 2.8 18,916 16,853

Source: Data from Country Reports in World Economic Forum 7

Many developing countries today are looking to tourism as a potentially promising avenue for
economic and human development (through the application of backward and forward
linkages). This perception is relatively new for some of these countries, and reflects the rapid
increase in tourism arrivals, numbers and revenues for many developing countries in recent
years.

Traditionally, tourism has been given lower priority than agriculture or manufacturing since it
has not been considered a significant or appropriate source of growth. However,
increasingly, the sector is identified as a means of earning export revenues and generating
jobs promoting economic diversification (something resource rich countries desperately
require if they are to avoid the Dutch Disease). Further, a more service-oriented economy
revives declining urban areas and cultural activities, and opens up remote rural regions. The
primary vehicle to produce these gains from service industry growth is foreign direct
investment (FDI).

Table 3. Number of foreign-owned hotels by economy, 2006

Source: UNCTAD: FDI in tourism- the development dimension,2007. No figures available for Libya.

7
See World Economic Forum at www.weforum.org/ttcr08browse/index.html

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 6

2.5 EXAMPLES OF WTO MEMBERS’ COMMITMENTS ON TOURISM

Tourism commitments have been made by nearly 130 WTO members, more than in any
other services sector. This reflects their willingness to expand tourism and attract foreign
direct investment. Not all the countries benchmarked with Iraq, are WTO members. The
following table summarizes their status.

Table 4. Membership in the WTO

Country name Status Towards the WTO
Algeria Observer since June 1987
Egypt Membership: 30 June 1995
Georgia Membership: 14 June 2000
Jordan Membership: 11 April 2000
Kuwait Membership: 1st January 1995
Libya Observer since July 2004
Pakistan Membership: 1st January 1995
Saudi Arabia Membership: 11 December 2005
Syria Not a WTO member
Tunisia Membership: 29 March 1995
Turkey Membership: 26 march 1995

With respect to GATS commitments, tourism in the benchmarked countries is one of the
most liberalized services sectors. All the benchmarked countries have made GATS
commitments in this sector. However, commitments among them differ from one tourism
sub-sector to another and from one mode of supply to another. All have made commitments
for “hotels & restaurants” and “travel agencies & tour operator services”, however few have
done so for “tourist guide services”. Among the seven countries, only Egypt has made
commitments in all four tourism sub-sectors.

Table 5. Specific GATS commitments:

9A Hotels & 9B Travel Agencies & 9C Tourist
Country Restaurants Tour Operators Services Guide Services
9D Other TOTAL

Egypt ● ● ● ● 4
Georgia ● ● 2
Jordan ● ● 2
Kuwait ● ● ● 3
Pakistan ● ● 2
Saudi Arabia ● ● ● 3
Tunisia ● ● 2
Turkey ● ● 2

Source: WTO

Trade barriers exist mainly under Mode 3 (commercial presence) and mode 4 (temporary
movement of persons).

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 7

Under Mode 3 – commercial presence – foreign investors may face limitations on market
access and on national treatment, as it is the case in Egypt, Jordan and Turkey. Table 6
below summarizes those limitations for a sub-set of benchmark countries:

Table 6. Limitations of Market Access and National Treatment—Selected Countries

Country Limitations on market access Limitations on national treatment

Egypt • License required ● Training of Egyptian employees required

• Foreign capital equity under 49% in Sinai
• Limitation of the number of services operators
depending on economic needs tests
• Casino services are permitted only in 5-star
hotels

Jordan • 50% foreign equity limitation for restaurants and

travel agencies
• Foreign travel agents must have their tours
conducted by a local company
• The nationality of the Director of Travel agencies
must be Jordanian

Turkey • The amount of guarantees required for foreign

travel agencies exceed the one applying for
Turkish
• Foreign companies should have a minimum
amount of capital to be brought to be granted
Operation Certificate by the Ministry of Tourism

On Mode 4 – Movement of natural persons, most of the positions are unbound 8 , leaving
countries free to introduce or maintain restrictions and/or refer to horizontal commitments
such as inter alia working permits (for a specific period, position, or skill level when qualified
nationals are unavailable) 9 .

2.6 NON-GATS RELATED BARRIERS AFFECTING TOURISM

The Travel and Tourism Competitiveness Report published by the World Economic Forum 10
defined a Travel and Tourism Competitiveness Index based on many indicators which
should be considered for the development of tourism in any country. These indicators,
identified as “pillars” by the WEF, are as follows:
• 1st Pillar: Policy rules and regulations
• 2nd pillar: Environmental sustainability
• 3rd pillar: Safety and security
• 4th pillar: Health and hygiene
• 5th pillar: Prioritization of Travel & Tourism
• 6th pillar: Air transport infrastructure

8
Where a Member wishes to remain free in a given sector and mode of supply to introduce or
maintain measures inconsistent with market access or national treatment, the Member has entered in
the appropriate space the term UNBOUND.
9
An annex to the GATS makes it clear, that the agreement has nothing to do with individuals looking
for employment in another country, or citizenship, residence or employment requirements. Even if
members undertake Mode 4 commitments to allow natural persons to provide services in their
territories, they may still regulate the entry and stay of the persons concerned, for instance by
requiring visas, as long as they do not prevent the commitments from being fulfilled (WTO)
10
www.weforum.org/ttcr08browse/index.html

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 8

• 7th pillar: Ground transport infrastructure
• 8th pillar: Tourism infrastructure
• 9th pillar: ICT infrastructure
• 10th pillar: Price competitiveness in the T&T industry
• 11th pillar: Human resources
• 12th pillar: Affinity for Travel & Tourism
• 13th pillar: Natural resources
• 14th pillar: Cultural resources

GATS commitments provide the opportunity to open up tourism services to foreign

competition, which will benefit consumers as well as stimulate job creation over the long run.
In addition, in order to see widespread benefit of these investments and increased
competition in the sector, it is recommended that GATS compliance be combined with
linkages to other national policies to attract FDI and tourists. However, there are several
different types of barriers often present that obstruct these linkages. These barriers thwart
the benefits of GATS compliance. For this reason, it is recommended that service sector
reform be integrated as part of an economy wide reform that focuses on barrier reduction,
often known as administrative barrier reductions.

Some of the most important obstacles to the benefits of comprehensive trade reform are:
• Lack of security – war, terrorism, etc
• Absence of the rule of law – lack of contract enforcement
• Lengthy procedures for the issuing of licenses and bureaucratic “red tape” associated
with new travel and tourism projects
• Restrictions on commercial presence is aggravated by the possibility of recourse to the
economic needs test, which are cumbersome and discriminatory licensing requirements
that foreign suppliers of tourism services must meet
• Land acquisition problems and property rights not adequately guaranteed
• Poor infrastructure: water supply, electricity networks, telecoms, transportation etc.
• Lack of open air transport (either limited access or poor infrastructure)
• High costs of production, including mandatory high wages, high costs of local and
imported inputs, high import duties, high costs of distribution, etc.
• Inadequate information and marketing, and an inability to source these data easily

Apart from making GATS commitments, any country willing to develop its tourism sector
should try to address those bottlenecks and to define a global economic strategy that
accommodates tourism and its accompanying backward and forward linkages. The removal
of these administrative barriers will serve to insure that the linkages can work more
effectively, allowing full leverage of tourism sub-sector reform and GATS compliance.

The countries selected in this report that have tourism as one of the largest shares of their
output – Turkey, Egypt, Saudi Arabia and Tunisia – in each case are also (relatively)
politically stable. These countries have specific and well-defined policies to liberalize tourism
and other sectors. They have done so to attract not only tourists, but also longer-run benefits
of FDI. They have accomplished this, in part, through large investments in infrastructure,
especially air transport, roads, electricity, and ICT networks.

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 9

2.7 TOURISM VALUE CHAIN: LINKAGES BETWEEN THE TOURISM INDUSTRY
AND OTHER SECTORS
The tourism sector is probably the only service sector that provides concrete and quantified
trading opportunities for all nations, regardless of their level of development 11 . For many
developing countries, tourism is one fundamental pillar of the development process, because
it is one of the dominant activities in the economy. For others, particularly islands and some
small economies, it is the only source of foreign currency and employment, and therefore
constitutes the platform for their economic development. The tourism value chain is complex,
and involves many sub-sectors, which can play a major role in tourism development (see
Chart on the tourism value chain below).

The tourism sector is a major direct employer in many countries of the world and supports a
much wider indirect employment base in supplying industries. It generates significant
economic activity through linkages with other industries.

It is also important to note that tourism plays a critical role in poverty alleviation in many
developing countries. The sectors producing goods and services are linked backwards with
tourism, such as catering for the needs of tourists and tourism operators. Other examples
include i.e. agriculture and food-processing industries, and manufacturing industries
providing furniture, construction materials, and other articles required by tourism
establishments. Similarly, many other services, such as transport, business services,
financial services, professional services, construction design and engineering, environmental
services, security services, government services, and telecommunication and ICT, also
ensure the efficient performance of tourism operators 12 .

Each element in the core-tourism value chain is discussed below, while the chart details the
ancillary effects of forward and backward linkages that derive from the industry itself.

2.7.1 Tour Operators Systems

Tour operators create so-called “package tours” by combining two or more components of
the tourism product (e.g. transport, accommodation, catering, entertainment, sightseeing)
and selling them to final consumers – tourists – through travel agencies or directly. The sales
take place in the country of origin of the tourists. They do not produce tourism services
themselves (unless they own a hotel, aircraft or airline); rather, they act as distributors or
wholesalers of these services. Services are produced by airlines, hotels, local transportation
and tourist service companies (sometimes called incoming tour operators) and local guides,
which tour operators contract ahead of time. Tour operators may have a limited number of
staff to receive their clients in some countries.

The main impact of tour operators is that they are instrumental in sending large numbers of
tourists to destinations worldwide, thus creating the volume of tourist traffic that could not be
achieved through individual visitors.

2.7.2 Airlines
Airlines are an integral part of the tourism industry, linking tourist demand with supply of
tourism services in a destination country. By some estimates, globally, 30-40% of all
international tourist arrivals are by air. While a number of developing countries have their

11
David Diaz Benavides: The viability and sustainability of international tourism in developing
countries, UNCTAD, 2001
12
Benavides, The viability and sustainability of international tourism in developing countries,
UNCTAD, 2001

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 10

own airlines, the large majority relies on major international airlines for tourist arrivals. For
developing countries, which are often excluded from the regular international flights served
by major airlines, charter flights can be an alternative to ensure an adequate and frequent
supply of airplanes at competitive prices. The operation of charter services is highly
dependent on the volume of passengers carried to a destination, being viable only when a
critical mass of tourists is reached.

As in other tourist activities, developing countries face many constraints in the international
air transportation markets, which can affect the competitiveness of their tourism products. Air
transportation is often the largest component in value of the tourism product.

In countries relying on major international airlines for tourist arrivals, traffic can be
monopolized by one airline (on the basis of an air service agreement), resulting in its ability
to set unreasonably high air fares. This consequently reduces tourist demand in the home
country of the airline (as air fares to other similar destinations can be much cheaper). In
addition, the quality of airport infrastructure, high landing fees, and other charges can deter
airlines from flying to a country.

The arrival of low-cost air travel has radically transformed tourism as a whole. 13 According to
the World Travel and Tourism Council, 14 “aviation protectionism pulls customers away from
the whole travel and tourism chain – from hotels, resorts, car rentals, computer reservations
systems, entertainment, cultural attractions and all the rest of our industry.”

2.7.3 ICT
The expansion of the use of the Internet and other forms of electronic communication opens
up significant opportunities for countries to develop their tourism and air transport sectors.
Their service suppliers can reach consumers around the world directly, offering both
package tours and individual air and land services. They therefore eliminate the costs of
intermediaries (e.g. agency fees) and transaction costs, and avoid the need for a direct
commercial presence and its associated costs. Nevertheless, electronic marketing and
trading have their own costs in terms of human and physical capital requirements. In
countries where these requirements are in relatively short supply, the cost of electronic
marketing and trading can be reduced if individual suppliers pool their resources. This could
be coordinated, for instance, by national tourist authorities. 15

Global information and distribution systems, and increasingly the Internet, are key networks
in the international tourism infrastructure, as they bring buyers and suppliers of tourism
products into direct contact. They not only facilitate transactions in tourism services, but also
provide information on prices, services and destinations, making the international tourism
market more transparent. Tourists can now go online to determine the price and availability
of services of their preferred destinations and compare them with other destinations in
minutes. They can also take virtual tours of hotels or resorts, as well as natural attractions.
Information technology has reduced airline booking costs, increased the productivity of travel
agents, and facilitated direct access of tourism service suppliers (i.e. hotels) to customers.
Connection to a global network is crucial for reaching a larger market and bypassing
intermediaries.

13
World Trade Organization: “Tourism Services”, Council for Trade in Services. S/C/W/51, 23
September 1998.
14
www.wttc.org
15
Naturally, the increased use of electronic means to develop tourism involves solving pending issues
that are implied by all forms of electronic trade, such as access to infrastructure, confidentiality, safety
of data transmission, consumer protection and taxation.

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 11

2.7.4 Other
There are also important forward linkages that include, in addition to hotels, the production of
goods or services used by tourists, such as handicrafts, shopping, musical performances,
spa or health treatments and the employment of tour guides.

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 12

Chart 1: Tourism value chain:

Source: Gollup and al. (2003) in UNCTAD, current study on FDI and development

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 13

3. IRAQ AND TOURISM
3.1 ECONOMIC, SOCIAL AND REGULATORY ENVIRONMENT
Iraq Key Indicators:
Population: 28,9 million GDP, Composition by sector:
GDP in 2006(PPP): USD 94.1 billion1 • Agriculture: 5%
GDP real growth rate 2007: 5% (est.) • Industry: 68%
GDP per capita (PPP) 2007: USD 3,600 (est.) • Services: 27%

Although the security situation is improving in Baghdad, the lack of security in the Iraqi
territory is still critical. This has consequences for the economic stability and growth
prospects and represents the main obstacle to FDI attraction.

The Iraqi economy still suffers from the current conflict and is weakened by the preceding
years of centrally planned policy as well as the prolonged periods of war that have affected
all infrastructure. Many state-owned enterprises are bankrupt, but due to social reasons
remain neither eliminated nor privatized. Prices of many commodities are fixed, and the Iraqi
population faces pressure and shortages – most importantly in energy, water, and food-.
Around 2 million Iraqis have migrated to the neighboring countries since 2003.

Under the Coalition Provisional Authority 16 , a new legal environment has been defined with
the adoption of the Iraqi Constitution. The 1997 Company Law was amended in 2004 and
the New Investment Law was adopted in 2006. This new regulatory environment aims to
open widely the Iraqi market to FDI and applies to any sector with the exception of “oil and
gas extraction and production”, as well as “banks and insurance companies” 17 .

However, there remain many obstacles to trade and investment in Iraq, related to the
security situation, corruption, lack of transparency and law enforcement and to the absence
of functioning infrastructure. Services are generally very poor in Iraq, impacting the economy
as a whole.

3.2 IRAQI TOURISM INDUSTRY

3.2.1 Data
The Tourism industry is difficult to define and measure since it is comprised of a range of
businesses with many heterogeneous products and services. National accounts and industry
statistics fail to present tourism as a specifically-defined sector, nor does tourism appear
explicitly in typical economic input-output tables. OECD countries, as well as some
developing countries, adopted the Tourism Satellite Account, 18 which provided a common
framework to measure the contribution of tourism to a national economy. However Iraq has
not yet implemented this system.

16
www.cpa-iraq.org
17
Coalition Provisional Authority (CPA) Orders include CPA Order No. 40 promulgating the Banking
Law, CPA Order No. 18 prescribing Measures to Ensure the Independence of the Central Bank of
Iraq, the Central Bank of Iraq Law No. 64 of 1976
18
More information can be found at:
www.oecd.org/document/27/0,3343,en_2649_34389_1883547_1_1_1_1,00.html

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 14

There were 5 million visits to the holy shrines of Najaf and Karbala in Iraq in 2005 19 . The
revenues of the hotels sector in Iraq are estimated to have been ID 48,7 billion 20 in 2006.

1.43 million tourists were registered (as “guests” in hotels) by the COSIT. 21 The classification
was the following: 916,253 of them were Iraqis, and 517,827 were foreigners.

Chart 2: Tourists in Iraq, 2006

Source: COSIT

3.2.2 High Potential of Natural and Cultural Resources in Iraq

Iraq has some of the most significant shrines in Shiite and Sunni Islam, along with sites
associated with Biblical Judaism and Christianity: Babylon, Nimrud, Nineveh (archaeological
site) and Ur. Overall, Iraq has over 12,000 historical sites.

The Holy cities in Iraq – Karbala, Najaf, Samarra and Kadumia – are a major destination for
hundreds of thousands of pilgrims annually. The ancient ruins of Babylon, the Ziggurat of Ur
and other “wonders of the world” have tremendous appeal as destinations for tourists. The
scenic locations of Bekhma, Sarsink and Doukan in the Kurdistan region have been
traditional destinations for domestic tourists and can now be expanded to attract an
international clientele.

However, many of Iraq’s historical sites are in desperate need of protection, preservation,
signage, and trained staff on-site. Cultural sites – specifically archaeological and religious
sites – suffer from neglect, looting, and serious deterioration.

3.2.3 Accommodation
In 2006, Iraq reported a total of 505 hotels and 35,308 beds. 1.43 million guests were hosted
in Iraq, more than a third of which was reported in Najaf. The majority of hotels are “popular”
class, followed by three-star hotels and one-star hotels. There are three five-star hotels
currently operating in the country. However, hotel rating cannot be compared to the
standards of developed countries.

19
Izdihar: The tourism industry in Iraq, April 17, 2006
20
Source: COSIT
21
COSIT, Central Organization for Statistics and Information Technology: www.cosit.gov.iq

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 15

Chart 3: Accommodation in Iraq

Source: COSIT

Iraqi hotels reported a total of 3,349 employees in 2006 22 . In the largest Iraqi cities, the
most important hotels have state-owned participation (Palestine Hotel, the Sheraton Ishtar -
unrelated to the Sheraton hotel chain, Al Mansour Melia, Al Rasheed, in Baghdad, etc.).
Most of these are partially damaged and need to be renovated.

In Erbil and Soulaimaniya, which are part of Kurdistan, new private hotels were recently built.

A number of hotels were also built in some of Iraq’s holy cities in an effort to respond to
increasing demand for accommodations in those areas.

According to the World Tourism Directory, there are 48 travel agencies in Baghdad. It was
not possible to confirm how many of these are still open. In 2006, 38 travel agents were
given licenses to arrange Kurdistan tours 23 .

3.2.4 Air Transport

The airports in Baghdad, Basra, Najaf, Soulaimaniya and Erbil, are capable of accepting
international traffic. As of early 2006, at least 6,000 passengers arrive and depart daily from
Baghdad International Airport. 24 The rebuilding of Najaf airport has been completed in July
2008.

The national airline, Iraqi Airways, is a state-owned enterprise, and is the oldest in the
Middle East 25 . The state monopoly includes ground-handling, catering, and cargo. In May
2008, Iraq signed a USD 5bn deal with Boeing and Canadian plane maker Bombardier for
50 new aircraft in order to transform the industry. Iraqi Airways employs about 3,800 staff 26 .

At present, Air Austria flies from Vienna to Erbil, and Royal Jordan Airlines from Amman to
Baghdad, Basrah and Erbil. EgyptAir has developed numerous connections from Baghdad
to the neighboring countries, such as Egypt, Syria, and Dubai. Dubai is serviced also by
Jupiter Air and Sky Link Arabia. Flying Carpet and Iraqi Airways fly to Beirut.

22
Central Organization for Statistics and Information Technology: www.cosit.gov.iq
23
www.islamictourism.com
24
Iraqi National Investment Commission: www.investpromo.gov.iq/english/tourism.htm
25
Website: www.iraqiairways.co.uk
26
Michael Howard “Baghdad predicts blue skies ahead for struggling Inshallah Airways”, The
Guardian, 21 May 2008. www.guardian.co.uk/world/2008/may/21/iraq.theairlineindustry

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 16

Companies operating in Erbil are: Austrian Airlines (to Vienna), Zozik Air (to Frankfurt),
Kurdistan Airlines and Zagros Air (to Dubai), Atrosh Air (to Stockholm and Copenhagen), Fly
Air (to Istanbul), Royal Air Jordan (to Amman), Flying Carpet (to Beirut), Fly Iraq Una and
Olympic Airlines (to Athens). Those operating in Soulaimaniya are Zozik Air (to Munich),
Azmar Air (to Istanbul, Dubai and Tehran).

3.2.5 Iraqi National Development Strategy in Tourism

The Iraqi National Development Strategy aims to transform the structure of the Iraqi
economy, to allow a greater role for non-oil producing sectors. Tourism is seen as one of
these priority sectors.

The strategy defined the following objectives 27 :

• Establishing active tourist promotion offices in key international capitals, and streamlining
and simplifying visa and immigration procedures;
• Encouraging entry by the international hospitability industry (hotels, car rental agencies
and foreign exchange bureaus, etc.) into the Iraqi market;
• Developing marshes and lakes to an appropriate state for tourism, in order to attract
tourists and visitors;
• Developing the infrastructure of religious cities and maintaining the Holy shrines;
• Developing tourism education institutes;
• Developing tourism institutions, building the capacities of people working in the tourism
field through specialized training programs, and making use of the experiences of other
countries.

3.2.6 Iraqi Policies Governing the Field of Tourism

The Law No. 13 of 2006, also known as the Investment Law, was passed by the Parliament
and was published in the Official Gazette, Edition 4031 January 17, 2007. A National
Commission on Investment was established in addition to Investment Commissions within
the regions and governorates. 28 Commissions are supposed to define and publish
investment plans but this has not been finalized yet. Commissions also deliver licenses.

The Investment Law does not discriminate against foreign investors and provides equal
treatment to national and foreign investors.

However, the Iraqi Investment Law is not implemented in Kurdistan. Kurdistan has its own
investment Law, which contradicts the unity of the Iraqi territory. The situation should be
resolved to make investment rules clear. Whereas the Iraqi Investment Law does not allow
foreigners to own property – it only allows to lease land – in Kurdistan, foreigners can buy
land to run their activities.

According to Article 17 of the Investment Law, hotels and tourist institutions shall be granted
additional exemptions from duties and taxes on their imports of furniture, furnishings and
requisites for renewing and updating purposes at least once every four years. The
exemptions are provided on the condition that these items be brought into Iraq or used in the
project within three years from the date of the Commission’s approval of the import lists and
quantities, and that these items be only used for the imported purposes.

A sales tax is imposed on the values of goods and services supplied by the deluxe and first
class hotels and restaurants at a rate of 10% of the value of supplied goods or services.
27
Iraq National Strategy 2005-2007
28
9 governorates out of 15 have already established the structure.

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 17

3.2.7 FDI Projects
At the time this report was written 29 , the Iraqi National Commission delivered only three
licenses. The five-star Baghdad Two Rivers hotel project, based in the heart of the capital’s
fortified government and diplomatic Green Zone, was the first business proposal to be
licensed by Iraq’s new National Investment Commission. A US-based investment group laid
the foundation for USD 100 million 30 .

The city of Nadjaf and its surroundings have attracted foreign investors to the area’s tourism
industry. A company based in the UK reportedly invested USD 73 million to build a new
international airport in Nadjaf 31 . Firms from Kuwait and Lebanon have signed contracts to
build a large office tower complex in Baghdad that integrates retail space.

The chairman of Iraq’s Tourism Board is seeking investors who might want to spend
between USD 2.5-4.5 billion to build in Jazirat A’aras, an island in the Tigris across from the
fortified Green Zone and the new American Embassy 32 .

3.2.8 Main Constraints Affecting Tourism Development in Iraq

The regulatory environment adopted by Iraq – the Investment Law – appears to be in
compliance with the WTO requirements of non-discrimination and national treatment.
However, a solution should be found regarding the Kurdish Investment Law, since the Iraqi
Law must govern investment initiatives throughout all the Iraqi regions.

As a transition country, Iraq has a services sector that is rudimental and barely present
(similar to the former Soviet Union and Central and Eastern European states in the 1990s).
However, the main obstacles to tourism development in Iraq are the lack of safety –
murders, car bombings, hostage takings, etc. – and security. The business environment is
also insecure due to an absence of the Rule of Law, which is still a major concern.

Iraqi infrastructure suffered severe depreciation and damages during the Baathist years.
Electricity, water supplies, and sewage systems are still very weak, as are transport services
(including air transport), telecoms and IT, and financial services such as insurance.
Marketing and promotion as well as education and training in tourism are non-existent, and
qualified labor is unavailable. Some services simply do not exist in Iraq, such as car rentals.
More generally, the inability for foreign companies to buy land and the lack of guarantees on
property rights are an impediment on the fostering of FDI.

All of these bottlenecks need to be addressed in order to develop the tourism sector.

3.3 ROLE OF THE IRAQI PRIVATE SECTOR IN TOURISM AND GATS

NEGOTIATION

Tourism all around the world is primarily a private sector activity. Entrepreneurs finance
hotels and other businesses and opportunities to make high profits.

However, the private sector in Iraq is weak and most of the companies in the field of services
are either state-owned or infant industries. Consequently, Iraq’s private sector
representatives and business associations are also weak. This presents a major obstacle to
the definition of any strategy and position on trade policy issues, or in any other field.
29
October 2008
30
www.islamictourism.com
31
Iraqi National Investment Commission: www.investpromo.gov.iq/english/tourism.htm
32
“In Iraq’s rubble, a dream of tourist joy” by Erica Goode and Riyadh Mohammed. September 21,
2008 in New York Time News Services

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 18

It must be noted that the private sector should play a major role in WTO accession, and
should acquire the ability to understand trade policy rules and to define its position.
Generally speaking, trade ministries defend national business position at the WTO level.
Therefore, trade policy definition in Iraq should not take place without the point of view of
Iraqi businesses, and increasing its capacity in this field should be a major issue.

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 19

4. RECOMMANDATIONS
The following recommendations discuss commitments to tourism which are needed in areas
with requirements for further investment from trading partners, such as large hotels, or areas
with requirements for access to high-quality services by the tourism sector. (For example, a
commitment in WTO terms of “none” – see table below – represents the type of commitment
necessary to free up investment potential in Iraq.)

The chart below has several parts to it that are necessary to understand for ease of
reading 33 :

Modes:
• Mode 1/ Cross-border supply
• Mode 2/ Consumption abroad
• Mode 3/ Commercial presence
• Mode 4/ Presence of natural persons

Commitment Categories:
• “Unbound”: no commitment is defined. It means that the country can change anytime
its domestic policy.
• “None”: the country opens at the multilateral level its service to foreign competition
without any limitation.

Important options when scheduling GATS commitments include the opportunity to phase in
obligations over time (e.g. 5-10 years), thereby giving both foreign and domestic investors
sufficient time to prepare and adapt, while fully indicating the seriousness of government
policy intentions. Other possible GATS options include limiting the number of foreign
suppliers, adding joint-venture requirements, foreign-equity limitations, training requirements,
etc.

33
For a full explanation on reading the services charts expanded across five sectors see: Lewarne,
Stephen, Iraq Services Liberalization Study, USAID/Iraq IZDIHAR, November 2007

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 20

Position defined by the sub-committee on Tourism, February 2009
Sector or Sub- Limitations on Market Access Limitations on National Treatment
Other Remarks
sector

IRAQ
09. Tourism and travel-related services

Hotels and 1)Unbound* 1) Unbound* Horizontal section:

restaurants 2)Unbound* 2) Unbound* -According to the Iraqi Investment Law No.
(except bars, casino 13 on 2006, Foreign investors cannot own
and nightclubs) 3) None except as indicated in the 3) None except land in Iraq except in Kurdistan according to
(CPC 641-643) horizontal section -Foreign companies must provide training to Kurdistan Investment Law No. 4 on 2006
nationals -Foreign investors must respect public
4) None -As indicated in the horizontal section morality / holy cities in Iraq
4) None -Priority must be given to Iraqi nationals

Travel agencies 1) None, except that foreign companies 1) None, except that foreign companies Horizontal section:
and tour operators must work through an Iraqi service must work through an Iraqi service provider - According to the Iraqi Investment Law No.
(CPC 7471) provider 2) None 13 on 2006, Foreign investors cannot own
2) None 3) None, except : land except in Iraq except in Kurdistan
3) None, except : -Foreign companies cannot have more than according to Kurdistan Investment Law No.
-Foreign companies cannot have more 45% capital equity 4 on 2006
than 45% capital equity -Foreign companies must provide training to -Foreign investors must respect public
-As indicated in the horizontal section nationals morality / holy cities in Iraq
4) Unbound, except: Executive Director -As indicated in the horizontal section -Priority must be given to Iraqi nationals
of the company must be national 4) Unbound, except: Executive Director of
the company must be national

Tourist Guide 1) None 1) None

services 2) Unbound 2) Unbound
(CPC 7472) 3) Unbound 3) Unbound
4) Unbound 4) Unbound

Representatives from the Ministry of Trade, Ministry of Tourism, the Chairman of the Iraqi Hotels and Restaurants Association, and
the Chairman of the Iraqi Travel Agencies and tourism operators association are part of the sub-committee on Tourism.

1)and 2) *due to the lack of feasibility

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 21

Tourism liberalization can be an entry point. Due to the important linkages between the tourism
sector with other sectors, GATS commitments on tourism sector should be linked to further
liberalization of financial services and telecommunications. Commitments on those fields are
among the more readily attainable goals and can significantly contribute to the growth of
tourism 34 .

From the perspective of negotiating Trade in Services, the tourism sector would support further
liberalization of the following services (all of which are major inputs into industry products), if this
leads to more efficient services at lower cost:
• Air transport services: improvement of air transport is a prerequisite to fostering foreign
tourists.
• Banking services: increased competition in the sector should facilitate access to loans for
any economic sector and will promote tourist spending.
• Electricity services: further energy market liberalization is supported by the tourism private
sector if it results in lower utility costs, particularly for electricity.
• Telecommunications services: the increasing importance of internet reservation systems
and online marketing highlights the importance of low-cost telecommunications and internet
services for the future development of the tourism sector. Access to low cost
telecommunications services is particularly important for tourism SMEs.
• Environmental services (sewage, refuse disposal, sanitation, etc.): gaining access to higher
quality and lower cost environmental services would help meet the objective of minimizing
the adverse impacts on the socio-cultural and natural environment, and on other tourist
assets. Access to these services is essential for sustainable tourism development, and Iraq
has limited capacity in this services sector.
• Insurance services: negotiators should consider whether further liberalization will reduce the
costs and increase capacity of insurance for the tourism sector.
• Education services: could enhance education and qualification of tourism staff
• Construction and related engineering services: without a sufficiently capable and adequately
capitalized domestic construction sector, foreign firms might again be needed.
• Other services to promote:
o Business services including “Medical and dental services”, “Rental/leasing services
without operators”, “Advertising services”
o Health related and social services
o Recreational, cultural and sporting services

Concerning goods, tariff reductions on the following tourism inputs have been identified as being
of particular benefit in lowering the operating costs of the hotel and restaurant sub sectors:
furniture and linen, pasta, wines and spirits, bar and kitchen equipment (i.e. chillers and
freezers), specialty meats, fish and shellfish.

34
OECD Trade Policy Working Paper No.57: Services trade liberalization and tourism development. By
Massimo Geloso Grosso, Molly Lesher and Enrico Pinally. 12 Nov. 2007. TD/TC/WP(2006)37/Final

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 22

5. IMPACT ON IRAQI POSITIONS ON GATS /
TOURISM NEGOTIATIONS
5.1 GENERAL ISSUES

While GATS commitments alone do not guarantee FDI (or domestic investment) 35 will actually
take place, they can serve as a high-profile means of attracting worldwide investors. In a more
general sense, trade liberalization and integration into the world economy is not an end in itself,
but a powerful means to achieve the objective of sustainable economic growth and
development.

That said, trade liberalization is a necessary but not a sufficient condition to attain economic
development. Many other factors, such as geography, resource endowments, the protection of
property rights, and the quality of the institutional and regulatory framework, will determine
success.

Another crucial advantage of GATS commitments is the fact that they are legally binding upon
the country concerned, thereby fully demonstrating the predictability and certainty intended by
governments for both foreign and domestic investors. This higher level of certainty, such as
investment regulations and policies that cannot be suddenly reversed with the arrival of a new
government, is a powerful benefit.

The GATS impacts tourism via rules and regulations on the production, distribution and
marketing of tourism services (mode of supply), tour operators supplying services cross-border
in other countries (cross border supply), international visitors (consumption abroad), the flow of
international hotel chains, branches or full ownership of hotel chains and agencies in other
countries (commercial presence); and the activities of tour guides and hotel managers
(presence of natural persons). It also has impacts on air transport and communications.

FDI can introduce a diverse range of new technologies and skills into an economy, including
advanced management, and environmental and financial systems. These improve the
productivity and sustainability of the sector and economy and, potentially, lead to beneficial
spillovers to other firms and sectors. Such spillovers are hard to quantify, but examples include
the diffusion of knowledge and skills through staff movement to local firms, as well
demonstration effects. Similarly, FDI can help raise standards through advanced systems and
quality control.

Strong ties and linkages may also encourage the transfer of knowledge, technology and skills.
Related policies include the promotion of appropriate supply capabilities and standards in
relevant agricultural, manufacturing and service industries. As with value-creating policies, the
list of potential initiatives can be long, reflecting the cross cutting and extended value chain that
is associated with tourism.

35
An equally important or even greater role is played by such factors as social and political stability,
public security, economic stability, health and public sanitation, government regulation, taxation levels,
etc.

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 23

5.2 ECONOMIC IMPACT

Changes in the tourism sector tend to have impacts throughout the economy because of the
important linkages between tourism and a number of other sectors. However, liberalization of
trade in tourism services is not sufficient to ensure positive economic impacts and sustainable
tourism development. First, the lack of secured and safe environment is crucial, as well as the
improvement of air transportation, financial sector and infrastructures.

5.2.1 Contribution to GDP

Currently, there is no information on the current contribution of tourism to the Iraqi GDP. The
expected increase in tourist arrivals in Iraq is likely to involve an increase in the contribution to
GDP through visitor expenditure, depending on the tourism product.

5.2.2 Government Revenues

The potential increase in tourism contribution to GDP is likely to lead to an increase in
government revenues. However, this increase may be limited depending on the leakages
associated to the different tourism products. There is no question however that as violence
decreases and more hotel come on line revenue will rise to the Treasury. A separate hotel tax
is often imposed at the beginning of reconstruction regimes. This is already done by the Iraqi
Government. More generally, the benefits of increased tourism feed into the Treasury via
increased employment and wage taxes as businesses flourish with increased tourism “exports.”

5.2.3 Investment
The tourism sector is supposed to receive a significant proportion of both local and foreign
investment. Tourism offers significant opportunities for small-scale domestic entrepreneurship,
as in most countries it is dominated by SMEs.

Investment flows may increase in the tourism sector (mode 3) with the further liberalization of
the financial sector. This may lead to higher tourists number (mode 2) if also significant
improvement of air transportation take place.

5.2.4 Current Account Balance

The expected increase in the export of tourism services through further tourist arrivals (mode 2)
is likely to result in an improved balance of payments. Tourists need accommodation,
restaurants, shops, cultural events and sites to visit, etc.

5.3 SOCIAL IMPACT

5.3.1 Employment, Wages and Poverty

In response to the potential increase in tourist arrivals, employment in the tourism sector may
also increase. At present, the total number of people directly and indirectly dependent on
tourism for a living (including taxi drivers, bar workers, casinos, souvenir and other retails shops,

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 24

etc.) is difficult to calculate. 237,000 people in Iraq work in “wholesale, retail and hotels” sectors
and 247,000 in “transport, communication and storage” sectors 36 .

Tourism is a fundamental source of income and foreign exchange for a number of developing
countries 37 . Tourism has a higher multiplier effect than most economic sectors. It is widely
claimed that for each job created in tourism there are 9 jobs generated in other areas. To date it
is the only sector in the service area where developing countries have consistent surpluses.

Tourism has three types of effects on employment:

1. Direct effects resulting from expenditures by tourists
2. Indirect effects, such as the employment generated by firms that act as suppliers to tourism-
related enterprises
3. Induced effects on the economy as a whole, resulting from expenditures derived from the
direct and indirect employment effects

The greatest difficulties in assessing the impact on employment result from the problems of
defining and measuring tourism itself, considering that only a few services sectors are
exclusively devoted to tourism.

5.3.2 Education and Professional Training

In many cases, jobs in the tourism sector require lower levels of qualifications and training.
While this can offer jobs for unskilled labor, it is also consistent with an image of hospitality
industry generally offering low-paying work with little to offer in terms of careers and
advancement opportunities. However, this is changing. Information technologies are
transforming the travel and tourism industries requiring increasing numbers of skilled workers
and equipment. The lack of skilled workers is now seen as a weakness. Therefore, levels of
training and education will play a role in determining impacts on tourism on employment.

To take advantage of any emerging employment opportunities, it will be required that entrants
have higher skills. Therefore, positive impacts on employment and, more generally, on the
competitiveness of Iraq as a destination, will depend on the skill level and on the
professionalism of the workforce. The quality of local human resources in the sector may be
improved through the increasing movement of skilled persons (mode 4).

5.3.3 Gender Equity

According to estimates by the International Labor Organization (ILO), women account for 60 to
70% of the labor force in global tourism. Tourism thus seems to be a sector that offers women,
who are specifically affected by poverty, real opportunities. However, women in tourism are
usually in a worse position than men: while men dominate the formal sector, women are more
often hired as casual workers and have a larger share in the low-paid jobs, for example as
cleaners and un-skilled workers. They do laundry, work as receptionists, child-minders or as un-
skilled assistants in restaurants.

Overall, some women in various countries may gain financial autonomy and some measure of
economic independence from their participation in informal markets linked to the tourism

36
COSIT
37
World Tourism Organization: Tourism and Poverty Alleviation. Recommendations for Action, 2004.

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 25

trade 38 . On the positive side, increased employment in tourism can increase a woman’s
financial and economic autonomy. Likewise, increased revenue from the tourist sector into the
government coffers may be available for the promotion of social development.

Yet, even in comparable positions, women earn, on average, 20 to 30% less than their male
colleagues. Women predominate in small travel agencies while men dominate important sectors
such as airlines, railways, hotel chains, car rentals and travel magazines. Women with good
education and some capital, i.e.. Their own house to establish a Bed & Breakfast can effectively
benefit from tourism, as it offers them job opportunities and improved financial independence.
But many others suffer a heavier burden and increased exploitation. Women play a major role in
the marketing approaches taken by tour operators. Female presence is still marginal at the
executive and managerial levels.

Therefore, it is important to make sure that women are also able to benefit from jobs requiring
higher qualifications and skills in order to increase the benefits they would have from heightened
employment opportunities in the tourism sector. In addition, due to the existing gender
disparities, governments are called upon to empower women by introducing targeted measures,
such as specific training, qualified jobs and improved access to credit facilities for self-employed
women 39 . This would be a good example of a policy ensuring that increased tourism leads to
positive social development.

5.4 ENVIRONMENTAL IMPACT

The continuing increase in infrastructure to build resort tourism could aggravate impacts on
ecologically sensitive areas. On the other hand, it could contribute to the conservation of natural
areas and biodiversity, and promote social and economic advancement of local communities.
Tourism development could lead to the preservation and renovation of natural and cultural sites.

Resort tourism is generally associated with high levels of water and energy consumption and it
has negative impact on solid waste. However, resort needs could enhance the renovation of
environmental services.

38
International Gender and Trade Network, Economic Literacy Series: General Agreement on Trade in
Services # tourism liberalization, Gender and the GATS.
39
Williams, Mariama: The Political Economy of Tourism Liberalization, Gender and the GATS, Report for
the UN Commission on Sustainable Development, 7th Session, 1999.

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 26

BIBLIOGRAPHY

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2008 in New York Time News Services

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USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 27

World Tourism Organization: Tourism and Poverty Alleviation. Recommendations for Action,
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USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 28

ANNEXES
SERVICES COMMITMENTS OF
BENCHMARKED COUNTRIES

1. EGYPT

2. GEORGIA

3. JORDAN

4. PAKISTAN

5. SAUDI ARABIA

6. TUNISIA

7. TURKEY

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 29

 1. EGYPT

USAID Tijara Provincial Economic Growth Program Tourism Services in Iraq 30

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 2. GEORGIA

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 3. JORDAN

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 4. PAKISTAN

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 5. SAUDI ARABIA

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 6. TUNISIA

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 7. TURKEY

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