Vyacheslav Kopiev is Deputy Chairman of the Board of Directors of the Sistema Joint Stock Financial Corporation and a member of the Editorial Board of Russia in Global Affairs. He has a Doctorate in Law.

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.