12 November 2007

Data conundrum prevents deeper analysis

By Eric Jansson
Published by Financial Times, 12 November 2007

When the chef at the Hilton Imperial Dubrovnik sources ingredients for his menu, especially vegetables, he looks across the Adriatic to Italy. Italian produce is "better quality at a lower price", says Andreas Jersabeck, the hotel's general manager, an Austrian.
Similarly, when new hotels spring up on the coast or old ones are refurnished, domestic furniture makers compete for contracts but rarely win. Some 90 per cent of furniture purchased by Croatian hotels and resorts is imported, according to estimates by local industry leaders at Ambienta, a furniture fair held in Zagreb last month.
Such anecdotes do not surprise local economists. Croatia imports more than twice as much as it exports - and not just food, labour and furniture.
However, anecdotal evidence of import dependency challenges the rosy picture of tourism as an important driver of production in the national economy. The more local tourism services depend on imports, the more tourism's economic rewards are exported.
Everyone agrees that tourism plays an important role in Croatia's economy. It accounted for 18 per cent of gross domestic product (GDP) in 2006, and this year has been even busier, service providers say. Visiting tourists - typically 90 per cent of them foreign - stimulate activity in other sectors, notably transport and trade but also construction and agriculture. They also bring with them a fresh supply of hard currency, restraining the growth of a current account deficit that widened last year to 7.6 per cent of GDP.
But the impact of tourism across the economy remains impossible to measure precisely, sector by sector, says Oliver Kesar, a specialist in tourism economics at the University of Zagreb. This is because local statistical resources fall short.
Analysts at the Croatian National Bank and the Institute for Tourism in Zagreb have estimated that 30 per cent of what tourists consume in Croatia is imported, "but without in-depth analysis and complete data these are very rough estimations," Mr Kesar says. By this measure, of the €50 the average tourist spends each day, €35 goes toward domestic goods and services, and €15 toward imports.
How the €35 breaks down by industry locally is guesswork. Current analysis of tourism's impact on individual industries depends on a breakdown of tourist consumption published by the Institute for Tourism in its TOMAS 2004 research project, the most recent research of its kind.
Based on a survey of tourists, this research indicated that of every €50 spent in Croatia, €15 goes toward accommodation, €13 toward food, €6.50 toward transport, €4 toward drinks, €3 toward shopping and smaller amounts on entertainment, excursions and other recreation.
But to know how each of these categories breaks down into domestic and imported goods, to tighten up analysis and forecasting, Croatian economists need to build an input-output matrix of the national economy. They have yet to do so.
"Croatia has experts for partial analyses, but we need an outside expert who has built an input-output matrix before, who can lead such a huge and delicate project," Mr Kesar says.
Such an effort would once have been futile, because a substantial volume of tourism receipts flowed into Croatia's grey economy. A significant portion still does, but a crackdown on tax evasion is gradually pushing such business into the light. Authorities conducted 28,200 inspections of tourism service providers this year, finding 4,400 irregularities along the way.
With efforts like these, data improve, economists say. The result could soon be a truer picture of how Croatian tourism works, and for whom.

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