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Economics of Hajj: Hajj and Umrah Are Expected To Generate US Dollar150 Billion of Income in Saudi Kingdom over the Next Five Years

By Tooba Mujtaba

July 31, 2019

Every year millions of pilgrims from around the globe trek to Makkah to complete the Hajj, the sacred pilgrimage that all Muslims must complete in their lifetime at least once if they are able to. According to a Prophetic narration cited in Bukhari, “Whoever performs Hajj and does not commit any obscenity or transgression will return free from sins as he was on the day his mother gave birth to him.” The sheer scale of demand by Muslims all around the world to complete their Hajj has given rise to consumers – capitalist models of religious on an unprecedented scale. The cost of Hajj has increased significantly in recent years generating billions of dollars for the Saudi economy.

Until the introduction of modern transport system, most Muslims beyond the Arab world had little expectation of completing this vital Islamic obligation. Before the mid-1950s, the number of overseas pilgrims rarely exceeded 100,000 and modern Saudi institutions were still developing. Yet by the early 2000s, the total number of Hajj pilgrims had passed the two million mark, reaching a recent peak of just over three million in 2012.New opportunities for pilgrims in the jet age has put immense pressure on the infrastructure of Mecca. Hundreds have lost their lives during periodic disasters, including fires and stampedes, most recently in 2015, when a stamped and crush of pilgrims in Mina killed at least 2426 people, according to an Associated Press count. With growing pressure, the Saudi authorities have invested huge sums in continually seeking to improve facilities and the overall management of the hajj.

The millions who come to Makkah every year bring billions of dollars to the Saudi economy. Restaurants, travel agents, airlines and mobile phone companies all earn big bucks during Hajj, and the government benefits in the forms of taxes. The Saudi economy which is scrambling to find other sources of revenue besides oil, has always benefited from the influx of pilgrims, so much so that revenue from the pilgrims makes up an estimated 3% of Saudi Arabia’s GDP. Pilgrims usually arrive several days in advance, and often stay on for a week or more, generating around eight billion US dollars in revenues and making the Hajj Saudi Arabia’s second largest income earner after hydrocarbons.

Millions also travel every year to perform the Umrah, the non-obligatory pilgrimage that can be performed at any time of the year. Umrah attracted eight million pilgrims in 2017 and generated a further four billion dollars for Saudi Arabia. Under its Vision 2030 strategy, the government plans to attract 30 million a year for Umrah. According to the Makkah Chamber of Commerce and industry, 25% to 30% of the private sector income I the region around Makkah and Madina depends on pilgrimage. However, there is little broader data and research on the economic impact of the Hajj as a whole.

The kingdom’s Vision 2030, published by Crown Prince Salman in 2016, underlines that the Islamic tourism market has a significant role to play diversifying Saudi Arabia’s non-oil-based economy

”It is difficult to work out the economic impact of Hajj as it is so all encompassing, touching on almost every aspect of the economy- not just Makkah and Madina, but all the Saudi Arabia”, says Thomas Wigley.

The hajj also has a spill over effect throughout the Middle East, for aviation services in the particular. Government policy changes on pilgrimage quotas have added to the difficulty of estimating average annual for the kingdom from the pilgrimage. In total, it is estimated at US $ 16 billion, but it could be much more than that. Saudi Arabia sets Hajj quotas Based on an international Organisation of Islamic Cooperation agreement, allowing 1000 pilgrims per million of the total Muslim Population in each sending country, although Saudi Arabia is flexible over the caps.

According to the Sean McLoughlin, senior lecturer in religion, anthropology and Islam at the University of Leads in the UK, 75% of non-Saudi Hajj pilgrims come from eight countries: Indonesia, Bangladesh, Pakistan, India, Iran, Egypt, Turkey and Nigeria, all with Muslim-majority population. But quotas in Muslim-minority countries are disproportionately higher. Muslims in the West is as privileged as they can go on demand unlike poorer countries like Indonesia, which homes more than 220 million Muslims. It’s one of the Muslim majority country where a government agency handles Hajj pilgrimages by holding deposits on behalf of future pilgrims who may wait 30 years or more for a Hajj visa. The deposits are held in a fund used to help subsidies poorer pilgrims. In the UK Hajj packages average around 4750 pounds, whereas for Umrah the equivalent figure is 1050 pounds. The cost of Hajj- going has increased by around 25% in recent years, and the average profitability for operators is said as 100 to 200 pounds per pilgrim, although it’s sure this is much higher. Unlike Muslim-majority countries, Muslim- minorities in the West are not restricted to a Hajj quota of 1000 pilgrims.

The kingdom’s Vision 2030, published by Crown Prince Salman in 2016, underlines that the Islamic tourism market has a significant role to play diversifying Saudi Arabia’s non-oil-based economy. An investment of US$50 billion in new transport and other infrastructure also aims to double the size of the Hajj by the end of next decade, and the Hajj and Umrah are expected to generate US$150 billion of income in the country over the next five years, creating the further 100,000 permanent Hajj- related jobs.

As Saudi Arabia seeks to move economic dependency of hydrocarbons and recognizes the economic potential of Hajj and Umrah, we are likely to see a greater number of Muslims visiting Makkah and Madina. In addition to this the arrival of new technologies if deployed effectively could help to ease the logistical challenge. But Hajj will always remain one of the most sacrosanct visits a Muslim will make in his life and demand is only likely to increase further as Islam remains the fastest growing religion in the world. How the economics of Hajj look like in the future remains to be seen.

Tooba Mujtaba is a Biotechnologist

Source: The Daily Times, Pakistan