Drug Tourism and the impact on the real economy

There is two definition made by the WTO to talk about the drug tourism: “Drug tourism can be define as the travel for the purpose of obtaining or using drugs for personal use that are unavailable or illegal in one’s home jurisdiction” or “Drug tourism can be also defined as the phenomenon by which one’s travel experience involves the consumption and usage of drugs that are considered to be illegal or illegitimate in either the visited destination or the tourist’s country of origin” (WTO annual report 1995). Today the only drug that is authorized to consume in some countries is the “marijuana”. But the legal consumption or not is attracting more and more tourist since the past decade, like for the sexual tourism I will take three different areas that are actually the same: Netherlands; southeast Asia and Latin America, and to see how the drug tourism impact the economy of those regions.

Netherland is the only European country that has a permissive regulation regarding the drug consumption before the end of 2012; Amsterdam and Maastricht were the two main European destinations for drug tourism. In Amsterdam 50% of the entire tourists visit the “coffee shop” (place where you can smoke marijuana, and 10% of all tourists come to Amsterdam especially for that. In the city of Amsterdam, the Coffee shop tourism represents a business of $2.5 billion US, which led to a $503 million in tax revenues for the city of Amsterdam. In another Dutch city, Maastricht that allowed before October 1st 2011, the selling and consumption of drugs in coffee shops for foreigners, saw its revenues due to the tax collection on this industry going down by $40 million dollar in 2011, the destruction of 3450 jobs and the lack of revenues that 1million tourist was spending on coffee shop and tourism activities during their trip to Maastricht; the reason? The municipality of Maastricht decided to restrict the access for foreigners to the coffee shop located in this city. The result was a big loss in revenue for the municipality and the destruction of job in Maastricht.
The Netherlands’s liberal approach to drugs has made it a very popular destination for foreign tourists. But with these tourists have come many problems. Many of the tourists come from bordering countries such as Germany, Belgium and the UK and visit the Netherlands to drink, smoke and ingest drugs and carouse. They cause problems with local residents, flout local laws and as a result, changes to the laws on drug use are imminent. As a results, the Dutch government wants to apply the same restriction to Amsterdam, but the economical consequences would be catastrophic, indeed people will continue to come to Amsterdam to buy drugs, but they would buy them on a black market and the revenues driven from those sales would be taken away to tax collection, as a result the city of Amsterdam would see its revenues going down, and loose all control of the drug supply in Netherlands.

Unlike Netherlands, there is other region of the world in which unfortunately, the drug tourism is exclusively on the hand of cartel and drug dealers, and all the revenues brought by tourists go directly to the informal part of the economy. In Latin America, for example, drug tourism is also the reason why a lot of tourists from western countries come and visit this area. I will take the example of Bolivia; even if the government has penalized the consumption and selling of drugs in the country, it is the first country to have a cocaine bar in La Paz (Route 36) in 2003, as a result, the number of tourists coming to La Paz in 2004 grew up by 43%. What are the reasons for most of the tourist to cross half of the world in order to consume a product they can have not far from where they live? The first reason is the price, in comparison 10g of cocaine costs €15 in La Paz while it costs between 50-70€ in Europe. Second reason is the quality of the product; the product’s purity is better than the one found in Europe, and finally (this reason doesn’t concern all tourists), most of tourists think that consuming drugs nearby to where it was produced would have less negative effect on their bodies than consuming it where they live.

The third region of the world that is famous for drug tourism is Southeast Asia, just as for sexual tourism. The main region for drug consumption that attracts tourists in Southeast Asia, are The Golden Triangle (between Thailand Laos and Burma) and Indonesia, according to the UN, 37% of the world consumption is made in Southeast Asia, and 2/3 are consumed by tourists. But it is also region of the world where it is risky to be caught with drugs, because you can risk the death penalty. Nevertheless the drug tourism had a positive effect on the 15% growth rate of tourism between 2011 and 2012, and the 2.3% increase in tourism revenues What is the real percentage that the Drug tourism brought, we don’t know, plus like in Latin America, the entire revenues directly related to drug consumption goes into the informal economies, and unlike the sexual tourism that allows people to spend the money they earn into the regular economy, and make the country’s economy benefits from that, here it is totally the opposite. But the policy of some Southeast Asian countries, such as Thailand made the consumption of drug easier for tourists because they have the purchasing power to buy what they want, and in poor countries you can have anything you want with money.

To conclude this part, I would confront the two examples we had, on the first hand we have a region that legalize and control the drug consumption and flow, as a result a part of those revenues goes to the country, another part is used to create dynamism economic; on the other hand, we have countries that neither legalized nor control the drug flows and don’t perceived any revenues from that type of tourism. Consequently in some areas corruption had prevailed the government authority and dealers and gangs receive all the wealth created by this industry without any redistribution.

Medical tourism and Economic effects According to the 1st World medical Tourism congress in 2007, medical tourism can be defined by:” The patient movement from highly developed nations to less developed areas of the world for medical care by bypassing services offered in their own communities. Medical tourism is different from the traditional model of international medical travel where patients generally journey from less developed nations to major medical centres in highly developed countries for medical treatment that is unavailable in their own communities” (World Medical tourism report 2007).

This type of tourism is for western people in which the health care system, that doesn’t allow them to be operating, or the cost of the operation might be too high for them. So they go to other countries in which the cost of the surgery is almost 75% lower than in their country of origin. The two principle countries that send its people to be cured in other country are the United States and Canada, but they can also come from Japan; Middle East or Europe. Factors that drive demand for medical services abroad in the regions quoted before include: large populations, comparatively high wealth, the high expense of health care or lack of health care options locally, and increasingly high expectations of their populations with respect to health care. According to an article published on the San Francisco Chronicle the August 3rd 2008, 16 million of American citizen were planning to do a surgery on the next five years; and 1.5 million already went abroad to do their surgery, as a consequences revenues for health care company and private clinic went down by 19% on 2007.

On the other hand, some companies began to be profitable, and some countries started promoting themselves as destination for medical tourism; according to Paul M Gahlinger, the main destination for Medical tourism are: “Argentina, Brunei, Cuba, Colombia, Costa Rica, Hong Kong, Hungary, India, Jordan, Lithuania, Malaysia, The Philippines, Singapore, South Africa, Thailand, Saudi Arabia, United Arab Emirates, South Korea, Tunisia, Ukraine, and New Zealand”. But some countries and regions are more attractive than other in certain domains; for example for plastic and beauty surgery, most people would go to South America because they have the best clinics in Plastic Surgery, and the price of the intervention is lower than most of the price that you can have in western countries (for nose surgery, the intervention costs around $5,000 in France while it costs between 800 and 1,200 in Brazil or Colombia). But not all hospitals or clinics or countries can present themselves are medical tourist destination; you have to get an accreditation from the Joint Committee on Accreditation of Healthcare Organisations (JCAHO).

So by having an accreditation of the JCHAO, you can promote your establishment as a medical tourism destination, but what are the benefits for the region or the country. First of all, it brings a lot of foreigners that need to be cure and that consume local products, in Colombia the revenues driven from consumption of Medical tourists represent between 7 and 19% of the total spending for the intervention. Second of all it also brings a lot of foreign doctors, because the more foreign doctors the clinic has, the more languages is spoken in the clinic, and the more clients you can attract; because nowadays, people who go abroad to be cured, want to be cured by doctors that speak the same language as them. And third, when a region is considered as a Medical destination, it receives a lot of investment from the government to renew its installations, or have received investment in order to get the accreditation from the JCHAO. But the clinic or the region can loose its accreditation, indeed according to the Medical Protection Society : ” While some countries currently presenting themselves as attractive medical tourism destinations provide some form of legal remedies for medical malpractice, these legal avenues may be unappealing to the medical tourist. Should problems arise, patients might not be covered by adequate personal insurance or might be unable to seek compensation via malpractice lawsuits. Hospitals and/or doctors in some countries may be unable to pay the financial damages awarded by a court to a patient who has sued them, owing to the hospital and/or the doctor not possessing appropriate insurance cover and/or medical indemnity.” (Medical Protection Society, 11-20-2009). The direct consequences are the lost of the accreditation and the end of the economic dynamism brought by tourists and doctors.

Like in every type of businesses there are winners and losers; there are two winners here, the customer, that goes abroad to pay cheaper its surgery or its treatment, with the same or better quality than the one he would receive in its home country, and the medical destination country in extension to the number of clinics having an accreditation. It brings revenues to poor region and help their development by investments realized either by government, or by private laboratories for the research and development. But the main losers are probably the insurance, the health care companies and the private clinics, because now the are confronting a competition abroad that does the same job as they do (or better), for cheaper, which results in a decrease of consultation or sophisticated health care plan in countries where the health care system is not affordable to everyone.