Journal of International Business and Cultural Studies
International financial institution investments in tourism and hospitality JOŽE PERIĆ University of Rijeka, Croatia ELVIS MUJAČEVIĆ University of Rijeka, Croatia MISLAV ŠIMUNIĆ University of Rijeka, Croatia ABSTRACT International Financial Institutions (IFI’s) like World Bank Group and other regional developing banks helps reduce poverty and promote investments in less developed countries. This article outlines the role of IFI’s in financing projects in tourism and hospitality industry in developing countries, in terms of how much has been invested in these countries, type of investment, the effects of these investments on local economy and the results of these investments. Article opens with background on the tourism sector in developing countries its role in the economy. As the demand for tourism services has increased among World Bank Group member countries, so has the World Bank technical assistance focused on attracting foreign direct investment (FDI) in the tourism sector. So, in the second part of the article a brief analysis of policy and instruments used by the IFI’s to finance projects in less developed countries has been made especially by the International Finance Corporation which investments and advisory work in countries served by International Development Agency (IDA) now account for 40 percent of it’s projects. The next section focuses on investment promotion activity, including the work of Multilateral Investment Guarantee Agency (MIGA) and International Finance Corporation (IFC). An overview of the investments made by IFC in projects in tourism and hospitality industry in developing countries and guarantees issued by MIGA has been made. Article analyses total investments made by the IFC and guarantees issued by MIGA in tourism and hospitality industry for the period from 1991 – 2009, in developing countries. Keywords: IFI, World Bank, IFC, MIGA, hotel investments, tourism and hospitality industry, developing countries, tourism financing.
International financial institutions investments, Page 1
Journal of International Business and Cultural Studies INTRODUCTION For many developing countries, tourism is a significant vehicle for economic progress that creates jobs, foreign exchange, and tax revenues - all of which contribute in one way or another to improving poor people's lives. While poor countries command only a minority share of the international tourism market, tourism can make a significant contribution to their economies, says the UK's Department for International Development (DFID). "Tourism can play a critical economic role in developing countries, especially for those with limited income-generating alternatives," says Motomichi Ikawa, executive vice president of the Multilateral Investment Guarantee Agency (MIGA), a private sector branch of the World Bank Group. "While tourism accounts for less than 1 percent, or $269 million, of our cumulative guarantees portfolio, we believe this sector offers our developing member countries tremendous growth potential", says Motomichi Ikawa (MIGA, 2009). Tourism is one the world's fastest growing industries, expected to overtake agriculture as the world's largest industry by 2010. In the past year, an estimated one out of every 13 workers was employed either directly or indirectly by tourism, according to the World Travel and Tourism Council. In the year ahead, the travel and tourism economy is expected to contribute $3.5 trillion to world GDP and account for 11.6 percent (or $1.1 trillion) of total world exports, the council says.
1. THE ROLE OF THE TOURISM SECTOR IN EXPANDING ECONOMIC OPPORTUNITY Travel and tourism is a vital sector of the world economy. Extensive data and literature point to the particular and growing importance of tourism in developing countries. The UN's World Tourism Organization (UNWTO) cites the following statistics (Caroline Ashley, et. al. 2007): Growth in tourism...
Please join StudyMode to read the full document