Foreign direct investment (FDI) plays an extraordinary and growing role in global business. It can provide a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing. For a host country which receives the investment, it can provide a source of new technology, capital, processes, organizational technologies, management skills and as such can provide a strong impetus to economic development.
Foreign direct investment, in its classic definition, is defined as a company from one country making a physical investment into building a factory in another country. In recent years, given rapid growth and ...view middle of the document...
Among the initiatives taken to attract FDI was the establishment of the Tanzania Investment Sector (TIC).
A new focus on tourism on tourism promotion and facilitation included the development of tourism policies and master plans. As a result, FDI in tourism began to grow, including the establishment of foreign-owned and operated hotels and tour operators,and the industry became a leading recipient of FDI.
2. Importance of FDI in Tourism
FDI in tourism brought about the following positive impacts;
The tourism sector is believed to have significant direct and indirect employment effects because of its extensive linkages with other sectors. The number of employees in the tourism sector has been increasing consistently since 1991, following a similar trend in the number of international visitors and earnings. Direct employment increased from 575,287 jobs in 2009 to 624,000 jobs in 2010 marking a level of 6.3% of total employment or 1 in every 15.8 jobs.
Although the level of employment appears to have been increasing over time, it has fluctuated markedly between the high and low seasons, particularly for casual or temporary employees.
▪ Tax Revenue
Wholly foreign-owned hotels and tour operators accounted for over 71 percent of the total tax revenue from tourism (table 1). Overall firms (local or foreign) did not consider tax rates to be excessively high. Rather, it was the administrative bureacracy and tax collection that was viewed negatively, especially by foreign enterprises.
Table 1. Tax revenue for firms (US $)
|Establishment |Local |Foreign |Total |% share of tax revenue |
|Hotels |163,800 |427,200 |591,000 |72.3 |
|Tour operators |93,896 |232,434 |326,330 |71.2 |
|Total |257,696 |659,634 |917,330 |71.9 |
▪ Technology and Skills
The application of knowledge, skills and innovation in tourism business is key to success. All hotels and tour operators provide intensive training to all their staff-skilled and unskilled. Three reasons are cited. Firstly, tourism-related skills of the local staff are inadequate and need upgrading. Second, each firm has goals, plans and strategies that each staff member needed to know about and understand so that all personnel work as a team for realizing objectives. Third, few workers had received the necessary training in customer service.
The following are the main areas and staff levels for which training is provided:
➢ Training and retraining of existing managerial staff.
➢ Training of middle management in supervisory skills for the different hotel services.