1. Tourism is a Priority Sector for Ukrainian Economy
Ukraine is currently facing the challenge to rebuild its economy after dramatic In order to return to the
recession caused by the crisis. Even though the necessity of general business sustainable growth path
environment improvement is not to be underestimated its economic effect Ukraine should consider
could well be increased if coupled by fostering the potential of a few targeted development of
promising sectors with high spillover effect. As the country is facing growing few high growth potential
sectors with substantial
world competition in its traditional export markets and is additionally
spillover effect on the rest
constrained by the bad state of government finance it is particularly important of the economy
to prioritise those sectors wisely. Ukraine’s beneficial geographical position
together with its historical and natural heritage is bringing tourism into the
radar of public discussion in that respect.
Does tourism have a high growth potential in Ukraine? Can the sector provide
significant return on investments in short to medium term? Is its development
in line with Ukraine’s long-term social and economic goals?
“For the motion” arguments
Tourism represents around a third of global service trade. In many countries Given its great tourism
tourism is the largest contributor to national GDP, for example, in Croatia it potential Ukraine should
contributes 17% to the country’s economy. Ukraine has a great tourism play its card right.
potential, which is based on its unique geographical position and a variety of
tourism sights, ranging from ski resorts in the Carpathians to the Kazantip
music fest and Black Sea beaches. However, this potential is currently heavily
underused. Around 20 mn people cross the Ukrainian border annually, while
the average amount spent per person is only $200 which is twice lower than in
Russian and 3 times lower than in Poland, reaching the level of Russia could
bring Ukraine additional revenue of $4bn a year.
The country can also benefit from indirect effects of tourism development. Tourism development has a
Tourism stimulates growth in related industries like retail trade and substantial economic and
construction, creates demand for higher value-added services, and encourages social spillover effect
development of small and medium enterprises. Furthermore, according to
statistics, in Ukraine creation one workplace in tourism is tenfold cheaper than
in manufacturing.
Experience of former socialist countries like Bulgaria or Croatia demonstrates Tourism development may
that emerging economies can become highly successful tourist destinations. not require significant
Effective promotion strategy and good site management can well be enough government spending at an
for a start. Moreover, preparation for the Euro 2012 Championship will help to early stage
solve problems with transport infrastructure, accommodation and recreation
facilities in the largest cities. It will also present a good opportunity to
promote Ukraine’s tourism brand worldwide.
Foundation for Effective Governance
23-F Koudryavskaya street, Kiev, 04053, Ukraine, tel: +380 44 501 41 00, fax: + 380 44 501 41 05
feg@feg.org.ua
www.feg.org.ua, www.debaty.org

2. “Against the motion” arguments
In order to attract high income tourists Ukraine should invest a lot into There are much better
infrastructure, building and renovation of hotels and other tourist facilities, value-for-money options
service improvement and country brand promotion. Considering low level of currently available both for
business sophistication and high share of shadow economy in the country, investors and the
those investments will take too long to payback and would not lead to government
substantial tax inflow into state budget; on the other hand, modernisation in
agriculture and manufacturing industries can provide high returns already in a
short run while taxes in those areas are much easier to collect.
Statistics demonstrate that tourism demand growth has slowed down in the World tourism market is
past few years and the market is potentially approaching its saturation stage. not going to be so attractive
With tourism supply continuing to increase the industry is not going to be very in the years to come.
attractive for newcomers unless they feel confident they could cut off
substantial market share from the incumbents. Ukraine should better look for
more promising high growth potential sectors.
The country does not really have any unique tourism attraction, which could Ukraine’s tourism value
compete with such worldwide renowned heritage sites as Egyptian pyramids proposition is not
or natural wonders. Moreover, bringing tourism infrastructure up to a competitive
reasonable standard would take years. Therefore, Ukraine is unlikely to be
competitive both in the world and regional tourism markets.
The question of whether tourism development should be prioritised in Ukraine will be discussed at the
public debate organised by the Foundation for Effective Governance in partnership with London-based
Intelligence Squared on 28th of October 2010 in Kyiv, Ukraine.
Foundation for Effective Governance
23-F Koudryavskaya street, Kiev, 04053, Ukraine, tel: +380 44 501 41 00, fax: + 380 44 501 41 05
feg@feg.org.ua
www.feg.org.ua, www.debaty.org