Exploring Policies and Strategies to Minimize Economic Leakages in the Tourism Sector Experiences in Many Countries

Abstract

Economic leakage is considered to be the most difficult problem to overcome as the tourism sector will grow in a climate of liberalization that allows foreigners to do business in the domestic market, so economic leakage is inevitable. Economic leakage can come in the form of external, internal, and invisible leakage, with the three types of leakage caused by different factors. Leakage is inevitable under current free market or trade liberalization conditions, but economic leakage can be minimized in several ways and with different strategies. This study confirms that economic leakage in tourism sector development comes from the hotel sector as the biggest cause compared to others. The main reason is that the development of the hotel sector is more developed by an international network pattern that demands the same standards according to the established quality. This standardization ultimately requires a single manufacturer from a developed country as local destinations are unable to provide the products needed to develop the hotel sector. The best strategy is a cluster structure strategy that must be implemented by the government through international agreements, whether at the export level, supplier level, or the economic input level, which can be designed to reduce or minimize economic leakage. Although economic leakages in tourism development cannot be avoided, the government can reduce them with various policies and strategies. Domestic policies and local government policies can be enforced to allow the tourism industry to use local resources produced by local communities, such as agricultural products, fisheries, and small and medium-sized businesses that support tourism. The strategy that can be implemented can be in the form of incentives and rewards for entrepreneurs who run their businesses with local products, local natural resources, and also dominant local resources.