Who Formulates Policies?

Well, we’ve spoken about policies and the difference between policy and a plan. I’ve also looked at policies as wish lists and also thought about how they impact on the tourism sector. But one of the questions have not addressed yet, which is very important is who creates policieswho formulates policies. Nowthe first thing I would say to you that traditionally, particularly in developing countries, policies were formulated by government. So, what we call command policies, is that government decided that, this was going to be developed in tourism. You would do the private sector, or we would do it the government, things like that.

Now, what we find then is in tourism policy, like any other policy in a countrythe role of government is critical, because as I said before, government is not only responsible for the economy. It’s also responsible for social cohesion of the society. It’s also responsible for environmental considerations. It’s responsible for safety responsible for health, responsible for education. So, the role of government then, has always been a major feature of tourism development policy. If you likegovernment is the essential partner. As I said earlier on only government can change fiscal regulations. Only government can change visa regulations. Only government can give permission for foreign airlines to fly over or into the country.

So, a lot of things that people say well, government shouldn’t be involved in tourism is complete nonsense. Government must be involved in tourism because, it is a critical essential partner of the area. Now the next thing is going to tell you is that there’s a changing dimension in tourism that government now doesn’t play, in many countriesthe central role that is traditionally played. And to make this distinction then we need to use two phrases, one planning which comes out of a command economy and planning, which comes out of a market economy. Now the command economy is basically now the only four left. One will be China Second will be Vietnam, third will be Laos, and fourth still Cuba.

Now market economies on the other hand, you know Thailand Italy Australia are different. The structure maybe of economic development, and social development is set up by government. But these countries allow the private sector to lead the development. It’s the private sector then who invest in hotels, and in airlines and for example sometimes infrastructure like airports. Why? Because if you believe in the market economy, then what you’re believing in is that if you involved in the market, you are closer to what the customer wants. And obviously you’re a risk taker. Let me give an example, if you looked at say most countries of the world, they have national airlines. Ok.

And these national airlines then are developed because they help to foster trade and relationships between countries, but certainly is there’s a pride issue as well. At all the tail of the aircraft. You’ll have the flag of China, you have the flag of the United States, you know the flag of Britain whatever it might be. So, in this sense what we’re finding is that if I think about the airlines. What happens when airlines lose money? If they are owned by government, government bails them out. National airlines with very few exceptions, don’t go bankrupt. If you’re a private sector airline, and you lose money and lose money consistently, you go bankrupt. It’s exactly the same in hotels.

If the hotel is owned by government and it keeps on losing money, government might change the management, but it will keep the investment going. If you’re a private hotelier and you lose money, you go out of the business. So, this is the difference, I think between the command economies then and the so called market economies. And I know in China you talk about a socialist market economy. And I believe in that and I really do believe that it is happening. But the guiding hand in Chinese economic, and social development is the government. Whereas for example in many countries, I think in my own country Britain, then one of the things we’ve done over the last fifteen, twenty years is denationalize.

So, it’s still called British Airways, but it’s not owned by the government. It’s been privatized. So, we find that many of the hotels and the railways,

which would be called British Rail not privatized, 96 00:05:43.040 –> 00:05:45.664 used to own a lot of hotels and they have been privatized.

And this has given rise then to a saying which I always find quite intriguing. And that is government shouldn’t do what the private sector is able and willing to do. Government shouldn’t do what the private sector is able and willing to do. So, for example, if the private sector is prepared to invest and develop an airline why would government want to do it. If private investors are prepared to build tourist resorts and ski facilities in the alps or something like that. Why would the government want to do it? Because the argument here is very important indeed. And that is they say that if you involved in the market, you are involved with the customer.

So, your airline then is your passenger. Your hotel is your guest. Your noodle restaurant is the person, who comes in to buy the noodles. All right. You involved with these, you know what the market wants and if you can’t provide it, you will go bankrupt. So, you ask yourself the question, why is it then that government want to do this. And in most developed countries now you find that government, although they may have a stake in the national airline, they tend not to get involved in what we call revenue generating facilities, because often they’re not revenue generating but they are loss-making. Now this is an important issue, very important issue and of course it’s a political issue.

So, though you see changes in China, in Laos and Cuba the changes are very much organized by government, approved by government, otherwise they won’t take place.

Now, if that’s the case then, what has changed? Well, what has changed is our style of making policies, and our style of planning, and we use to descriptors as for this one is called top down, and the other one is called bottom up. What does this mean? Well, in the command economies and the four I’ve mentioned, planning is top-down, Government plans are there in the regions, and the local parties and various things undertake the planning, and the implementation of those plans. Very much like I was talking the development of MOOCS courses, ministry of education decides is what they want to do, and this is how it’s going to be done. So, that’s a top down approach.

And one of the criticisms against it is of course, top down means the decisions, the policies had taken essentially by politicians and by senior civil servants. What’s wrong with that? Well, what might be wrong with it? These are people have no contact at all with the customer, and it’s the customer then who sustains the business. So, if you can’t provide a good airline service customers go elsewhere. If you can’t provide a good hotel customers would go elsewhere. And, if your noodle shop is rubbish, then customers will go elsewhere as well. So, that top down approach that has now been moderated.

Many of the big international funding agencies, like World Bank and certainly in Europe would be the European Union, who are big investors in tourism development. What they’ve done? They’ve insisted that part of their loans then have to be used by the private sector. So, in African countries often they would borrow money, build hotels owned by the government run by the government. And they were a financial disaster. That’s changed. So, very often the lenders will see now, the private sector must be involved in this. Why? 170 00:09:50.751 –> 00:09:53.823 Because the private sector are risk taker,

if they misjudged the risk if they’re not profitable, they will go out of business. So the risk takers become very very important. And also if you work in the market, you are what we call market sensitive. You know what your customers are complaining about. You know what your customers are asking for. And you react to that if you don’t and they go elsewhere. So, I was in European country recently, and I looked behind the door in the hotel, and there was a list of prices of the rooms. And the prices were given in and out of season. But, those prices that would approved by the Ministry of Tourism.

So, if your hotel was empty, one of the things you need to do is reduce your prices, get people to the door. They couldn’t do it because of the structure of the regulation. So, think about the private sector then has been the risk-takers, they know where the market’s going at least they should. And they are prepared to invest the capital in order to achieve this. And then that brings us onto something else about the bottom up approach. So, not only are we involved in the private sector. but, we now use this word stakeholders. And stakeholders simply mean people, who have an interest in the development of tourism or agriculture, whatever it might be.

And the stakeholders then always include the communities. Because if you think about tourism, tourism takes place in communities in villages, in rural areas in city environments. So, these people say yes, we may want to develop tourism, but there are certain restrictions we want. And so, communities are stakeholders and there are many others. So you find in the rural development, may be the major stakeholder, would be the the most important landowner. In some African countries is the chiefs in other countries I can think of is the religious leaders.

But what this bottom up approach means is that, if you involve everyone, who has a stake in the tourism sector in our example, then it’s very likely that their views will help you to shape a policy which is not only a credible policy. But is one which is acceptable to them. Because if you get stakeholder in communities, who are antagonistic towards tourism, sometimes violent towards tourism. Then you find a situation that where tourists will stay away.

So this business of top down and bottom up approach simply means, we’ve gone from the command of the policy on the plan to the involvement of the community, and other stakeholders in actually helping to contribute towards the development of the plan, and towards the development of the policy.