Calculating The Cost Of Donald's Idea

Donald Trump has proposed that Muslims be barred from entering the U.S. We know the firestorm this has created among political pundits, social commentators, and civil rights activists. But beyond the question of what is politically correct or socially just or legally possible, there's the question of dollars and cents. What would be the economic impact of such a move? 

Let’s look at that. Practically everyone else has weighed in, so maybe we should let the numbers have their say. We won’t consider the cost of the necessary infrastructure and protocol changes and training at border entry points to implement such a change. That could involve an investment of several millions of dollars. Let’s just consider how this would impact potential revenue for the United States. (For related reading, see: Effects of the New Canada-U.S. Border Deal.)

Tourism

The industry most obviously impacted by the proposed ban would be, of course, tourism. Just like tourists of other religions or ethnicities, most Muslim tourists entering the U.S. are seeking recreation, and they're carrying money to spend—large amounts of it, reportedly. In fact, reports indicate that Muslim tourists spend on average $2,000 more than European travelers. The cartoon image being painted in some quarters of desert wanderers bent on destruction is pretty far from the reality; Muslim tourists are seeking entertainment and luxury goods just as much, if not more, than their counterparts of other faiths and nationalities (many Muslim visitors come from oil-rich nations with top-notch luxury sectors).

So, how big is the Muslim tourism pie that Trump suggests the U.S. should be taking out its pantry? Big enough to have countries such as Japan and Australia making adjustments in their tourism offering and inserting Muslim-friendly amenities just to get a slice. In fact, according to research done jointly by consultancy DinarStandard and rating agency CrescentRatings, by 2020 overall annual spending for international Muslim tourism is expected to reach $192 billion.

According to the study, in 2011, Muslims spent an estimated $126.1 billion on international travel, which constitutes 12.3% of all international travel. However, the trends indicate that this group's portion of total tourism spending is growing, since the study projects that until at least 2020 Muslim international tourism will increase at a faster rate (4.79%) than the average rate for international tourism (3.8%).

Stats from the National Travel and Tourism Office 2014 Market Profile of the Middle East show that in 2013, just over a million Middle Eastern tourists visited the United States and spent an average of $6,000 each (as mentioned, $2,000 more than the average European traveler), with total spending by Middle Eastern tourists amounting to $6.8 billion. But when it is taken into account that there are a lot of other predominantly Muslim countries outside the Middle East (Asian countries such as Malaysia and Indonesia, as well as Turkey), that figure is scaled up to $18.4 billion. It’s no wonder that Halal tourism is being called travel’s “largest untapped niche market.”(For more, see: Five Ways to Invest in Travel And Tourism.)

Investments and Finance

Furthermore, the ban's effects could extend into the realm of Arab investments that include, but are not limited, to the Muslim world. It's been cited on the website of the Aspen Institute that, in 2015, four out of the top ten sovereign wealth funds in the world could be traced to the GCC (Gulf Cooperation Council), which reportedly manages, in total, an estimated 2 trillion pounds in assets. It's even been noted by some analysts that during the period of the 2010 European Debt Crisis, which was on the heels of the Global Financial Crisis in 2007, the Gulf provided vital liquidity in European markets. Also worth considering is the fact that according to DinarStandard, 57 Organisation of Islamic Cooperation (OIC) countries represented a GDP in 2013 of $6.7 trillion and this is projected to grow in the period from 2015 to 2019 at a higher rate (5.4%) than the rest of the world (3.6%), in fact at a rate that exceeds that of the BRIC nations (3.9%).

It’s for this reason that David Cameron in 2013 readied himself to set up a new Islamic Index in the London Stock Exchange so that London could be a more central player in global Islamic finance, which is expected to be worth 1.3 trillion pounds. A ban on Muslim entry could affect investment and finance decisions of key players in this arena, perhaps blocking deals, or resulting in choices skewed away from U.S. business interests. When we think of Muslim financial players, a gamut of Muslim entities way beyond the nations embroiled in conflict must be kept in mind. Decision-makers must consider not just the wealthy Gulf states (Bahrain, Oman, Qatar, Saudi Arabia and the United Arab Emirates), but the Muslim populations in Asia — including economies on the rise like Malaysia. In fact, Malaysia, Indonesia, and UAE lead the inaugural 2015 Islamic Growth Market Investment Index. (For related reading, see: Working with Islamic Finance.)

Domestic Markets/Private Companies and Institutions

It's important to note that Muslim populations in these areas also represent potential markets, with doors at which our exports might have to go knocking. What purchasing decisions will they make? And what about the purchasing decisions being made right in the U.S. by our Muslim population – numbering between 6 and 8 million? It’s been reported by the U.S. Embassy in Iraq on its website, based on Pew Research numbers, that a significant portion of that population are immigrants, who tend to be more educated, and to make more money than the average American citizen. The Embassy notes that there are “strong concentrations of Muslims in professional, managerial and technical fields, especially in information technology, education, medicine, law and the corporate world”. And their purchasing decisions tend to lean toward American products, with research by the Pew Research Center showing that they are “decidedly American in their outlook,” and some studies indicating that they tend to buy American cars.

How would a ban affect these purchasing decisions?

Let’s not forget our higher education sector, with the U.S. Embassy itself noting that “state universities… often have sizeable numbers of foreign-born Muslim students and faculty.” How could these institutions be affected, and what would be the impact on their bottom line when they must deal with staffing challenges and costs, and possibly reductions in contributions and tuition inflows from those in the Middle Eastern community?

The Bottom Line

The safety of the American people is a paramount concern, but when considering possible policies to ensure homeland security, decision-makers must weigh the effectiveness of such policies against the potential effects on the country's economic and social wellbeing. Donald Trump's suggestion that immigration by Muslims into the U.S. be banned over security concerns, at least temporarily, could have far-reaching, and long-lasting effects on inflows of investments from certain regions and potential tourism revenue, as well as on certain parts of the U.S.'s private sector