Boosting Local Economies Through Sustainable Tourism in Madagascar’s Parks

The World Bank’s study on Madagascar’s nature-based tourism reveals its significant economic benefits, particularly for local businesses and poor households, while highlighting the need to reduce leakages and strengthen local supply chains. Strategic investments in park management, local sourcing, and workforce development could further amplify tourism’s impact on poverty reduction and economic growth.

The World Bank’s report, Measuring the Local Economic Impacts of Nature-Based Tourism in Madagascar, conducted in collaboration with Kagin’s Consulting, the University of California, Davis, and the University of Georgia, explores how tourism contributes to local economies. Madagascar’s protected areas attract thousands of visitors annually, but until now, little data has been available on the economic impact of nature-based tourism. This knowledge gap has made it difficult for tourism ministries, park authorities, and local governments to make informed decisions on how to maximize the benefits of these protected areas. The study uses the Local Economy-Wide Impact Evaluation "Lite" (LEWIE-LITE) tool to analyze how tourist spending circulates through local businesses, households, and employment. The research focuses on two of Madagascar’s most visited protected areas: Ranomafana National Park, a biodiversity-rich rainforest reserve in the south-central region, and Nosy Tanikely National Marine Park, a famous snorkeling and diving destination off the northern coast.

Tourism as a Driver of Local Economic Growth

Field surveys conducted among tourists, businesses, local governments, and households show that nature-based tourism significantly boosts local incomes. At Ranomafana, each tourist dollar increases local GDP by $0.71, while at Nosy Tanikely, the effect is even greater, at $2.48 per dollar. The disparity arises from the higher economic leakages in Ranomafana, where businesses rely on external suppliers rather than sourcing locally. In contrast, businesses in Nosy Be, the gateway to Nosy Tanikely, retain a greater share of tourist spending within the local economy.

One of the most significant findings is that poor households receive a substantial share of tourism revenue—32% at Ranomafana and 56% at Nosy Tanikely—highlighting tourism’s role in poverty alleviation. The study also reveals that tourism-related businesses create more employment opportunities for women, particularly in hospitality, but gender disparities persist in other sectors such as agriculture and fishing, where male employment is dominant. Government investments in park management also generate high economic returns. In 2022, tourism at Ranomafana generated $3.2 million in economic benefits against a park budget of just $234,000, while Nosy Tanikely’s tourism sector produced $23.2 million with a budget of $352,000.

The Ripple Effect: How Tourist Spending Multiplies

Using the LEWIE-LITE tool, researchers simulated the effects of increased tourist spending. A $100 increase in spending generates $175 in total economic activity at Ranomafana and $436 at Nosy Tanikely, showing how even small boosts in tourism can have significant ripple effects. Park management investments also create strong returns, with a $100 increase in park spending leading to a $106 GDP gain in Ranomafana and a $281 increase in Nosy Be. Similarly, local government spending is highly impactful, as every additional $100 spent by local authorities generates $123 in GDP at Ranomafana and $230 at Nosy Be.

Community project spending, however, has a lower economic impact due to high leakages, particularly in Ranomafana. A $100 increase in community spending produces only a $22 gain in GDP in Ranomafana, compared to $110 in Nosy Be. This suggests that community projects should prioritize local sourcing to maximize their economic benefits. The report also finds that investments in local agriculture and nonagricultural production generate strong returns. A $100 increase in demand for agricultural goods leads to a $105 GDP increase in Ranomafana and $313 in Nosy Be, demonstrating that strengthening local supply chains could help amplify tourism’s positive effects.

Employment, Wages, and Economic Inclusion

Another key focus of the study is how tourism affects employment and wages. The simulation results show that raising wages for unskilled female workers has a particularly large effect on the local economy, especially in Nosy Be, where retail, services, and tourism sectors are strongly interconnected. Skilled female workers also see significant income gains when wages increase, further reinforcing the importance of workforce development initiatives.

Despite tourism’s positive employment effects, leakages remain a major challenge. At Ranomafana, businesses purchase a high percentage of their goods from outside markets, limiting tourism’s impact on the local economy. At Nosy Be, however, businesses are better integrated with local suppliers, allowing a larger portion of revenue to remain within the community. Addressing these leakages by encouraging local sourcing and strengthening regional supply chains could help communities capture a greater share of tourism’s benefits.

Maximizing the Benefits of Nature-Based Tourism

The findings offer crucial insights for policymakers seeking to optimize the economic impact of tourism. Encouraging hotels, restaurants, and tourism businesses to source more goods locally could reduce economic leakages and create more jobs. Expanding revenue-sharing mechanisms between parks and local communities while ensuring funds are spent locally could further increase tourism’s economic benefits. Investments in skills training, particularly for women and unskilled workers, would help them capture more of the employment opportunities that tourism generates. Additionally, improving infrastructure and marketing efforts could attract higher-spending visitors, boosting the overall economic benefits of tourism.

Madagascar’s protected areas are not only vital for biodiversity conservation but also serve as powerful economic engines. By leveraging data-driven policies and strategic investments, the government and stakeholders can harness nature-based tourism as a sustainable driver of economic development. Strengthening local supply chains, increasing local sourcing, and investing in community projects are key steps toward ensuring that tourism’s economic benefits are more equitably distributed. If effectively managed, nature-based tourism has the potential to significantly reduce poverty, create jobs, and support sustainable economic growth in Madagascar’s rural communities.