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explain how economic leakages can occur in a country that has tourism as a major part of the economy

Question

Explain how economic leakages can occur in a country that has tourism as a major part of the economy

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Solution

Economic leakages can occur in a country that has tourism as a major part of its economy in several ways:

  1. Import Leakage: This happens when a country must import goods and services to satisfy the needs of tourists. For example, a country might not have enough local food production to feed all the tourists, so it has to import food from other countries. This means that a significant portion of the money spent by tourists doesn't stay in the local economy but goes abroad to pay for these imports.

  2. Export Leakage: This occurs when foreign companies own the tourism services like hotels, airlines, and travel agencies. Profits from these businesses may go back to the foreign company's home country, rather than staying in the local economy.

  3. Employment Leakage: This happens when the jobs created by tourism are low paying and seasonal. This can lead to a situation where the local population doesn't benefit much from the tourism industry, as they are not earning a living wage.

  4. Government Leakage: This occurs when the government spends more on infrastructure and services for tourists than it receives in tax revenue from the tourism industry. This could include things like building airports, maintaining roads,

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