The impact of Covid - 19 on the local economy of Arugam Bay with a special focus on Surf Tourism

Abstract

Arugam Bay (AB) is a world famous Surf tourism destination serving guests from various parts of the world and providing livelihood for fishing communities characterized by low income, unemployment, underemployment and inequity. The COVID19 pandemic has completely disrupted surf tourism in AB and related tourism sectors of the value chain and this study is aimed at examining socioeconomic impact of the pandemic during the first two quarters of 2020 based on destination specific firm level micro data. The major economic losses due to the pandemic in terms of business hours, bookings, employment, income and investment are very high. For example, booking cancellations were 96% and 36% in foreign and local markets. The evidence on firm level responses to the crisis reveled reduced prices, discounts and preparation for COVID-19 threats as most successful strategies to overcome the challenges of covid-19. The findings on efficiency and effectiveness of existing institutional support system point to serious weakness of the system. For example, over 80% of respondents reveled that they did not receive any cash grants or deferment of EPF/ETF payments. Similarly, a significant proportion of respondents stated that they did not receive working capital at 4% interest (78%), tax concessions (69%) and assistance in market development (64%). On the positive side, over 67% of respondents stated that they received assistance in connection with labor relations (e.g. termination, salary negotiation etc.) and improving health standards. Based on this evidence, we have two major recommendations for policy makers: a) support firm level initiatives to overcome the challenges of COVID-19, and b) improve institutional support system at national, provincial and district level.