Impact of Climate Change and Financial Risks on Coastal Tourism in Bangladesh

Abstract

Bangladesh is embedded with diversified natural attractions, seasonal beauty, and different physiographic characteristics. Moreover, the country has a long coastline in the south with three major types of distinct land formations and biodiversity. These salient features of natural attraction ramify nature-based tourist destinations in the world. However, natural calamity along with the major threat of climate change induces natural disaster that threatens the top tourist destinations of Bangladesh, such Cox’s Bazar or Kuakata or the Sundarbans. It hinders the tourism growth of the neighboring countries of Bangladesh. Therefore, the research identifies the climate change impact on coastal tourism of Bangladesh, and the financial risks in coastal tourism arising from climate change. To conduct this research, mixed-methods research design that is predictive and explanatory in nature. Three distinct study areas had been selected for the research based on their physiographic condition. Two types of data were collected and analyzed: secondary data on climatic variables and images of vegetation coverage of the study areas, and financial data from five banks, all obtained from authentic and reliable sources. Moreover, a primary survey for an in-depth interview with 20 respondents had also been conducted. After triangulating and analyzing time series, results show that slow, gradual climate change is occurring across all climatic elements, triggering different types of calamities in the study areas. The Tourism Climate Index (TCI) model was used to analyze and predict future comfort seasons for travel in the study areas. Mostly, though the trend of rising temperatures is very low at present, it would be higher in the near future if Business As Usual (BAU) continues. As such, among the three regions, the top outdoor tourism and recreation destination of Bangladesh would experience the greatest rise in temperature, with prolonged and higher precipitation rates. Furthermore, the rise in hot weather has spread across the area over the last forty years, with a declining trend in v vegetation coverage across the whole area. There is an increasing rate of depositional landforms. Furthermore, TCI model shows that although Cox’s Bazar is the top-ranked outdoor tourism destination at present, it would gradually decline as it becomes less favorable to tourists because of the shrinkage of the tourist season, and the excellent tourist season would become moderate to tourists as climatic conditions will have higher temperatures, more cloudy sky, an increased rate of precipitation and windy weather. Consequently, analyzing credit risk by developing a model of TCI risk factors for bank loans, it has been identified that the risk factor for Cox’s Bazar will be the highest. Different banks will have different types of credit risks based on the model developed for the “Tourist Climate Index Value at Risk (TCI-VaR)”, which has found that credit lending for a prolonged maturity period would entail greater credit risk, which is currently neglected. It would be between 2.62% and 3.71% for 10-year and 5-year debt (10 million BDT), reflecting the impact of climate change. Kuakata would have a very low, rising trend in temperature and precipitation, though it is negligible at present. There is also widespread hot weather across the area. After using the TCI model to analyze tourists’ comfort in the study area, it shows that, though the tourist season would shrink, Kuakata would remain a more favorable place for outdoor or beach tourism, with excellent climatic conditions from November to March. In terms of investment, Kuakata would be least affected by climate change, as the TCI risk factor has been identified as negative. Thus, TCI-VaR credit risk will be -0.05% per 0.1 million BDT in debt for tourism. However, most banks do not lend money for tourism or recreational projects for tourists in this area, as Kuakata, as a tourist destination, is still neglected. Finally, the temperature and precipitation in Shatkhira show a rising trend upto year 2100. Moreover, the vegetation coverage has been gradually declining with wetlands. However, if other variables remain as control variables (such as deforestation, land encroachment, and vi hunting) due to climate change, this area would remain favorable for tourists, with very good climatic conditions from December to February, for the next eighty years. Furthermore, in terms of investment, the Sundarbans would be less affected by climate change, as the TCI risk factor has been identified as moderate. Likewise, Kuakata has also been neglected and has not burgeoned into a tourist destination. Banks would have to face a credit risk of 0.40% over 3 years for a 0.1 million BDT loan, which has been neglected as a aftermath of climate change. Therefore, from the research, it is clear that different study areas require different policy formulations for investments and tourism development zoning. The top tourist destinations in Cox’s Bazar are in a high-risk position for investment in outdoor or beach tourism due to climate change. Conversely, this research identifies other coastal destinations that would remain comfortable for outdoor tourism-based activities over the next hundred years. However, there might be other factors that degrade the destination; yet, policy formulation to keep the destination rich in natural resources is very urgent at present for sustainable tourism development. Besides, Cox’s Bazar, which is considered the top revenue-generating destination of Bangladesh, should be slowly transformed into an amalgamation of man-made and natural destinations to sustain development and preserve its top position.