FEASIBILITY STUDY ABOUT FOREIGNERS INVESTING IN PHILIPPINE TOURISM

I. EXECUTIVE SUMMARY

Tourism is a key sector for economic development: it is a fast-growing and labour-intensive industry that involves many economic activities. Investment promotion agencies (IPAs) can play an important role in the development of a countrys tourism industry as growing international competition between tourism destinations and higher contestability of foreign direct investment (FDI) projects make effective promotion crucial to attract investors in the sector. Given the industrys social and economic impact and the vulnerability of many destinations, sustainability should be a main objective of tourism development. To this end, IPAs can target foreign investors that will contribute to sustainable tourism and work to foster linkages between these investors and domestic firms. Available data indicate that FDI in tourism is still quite limited, and that non-equity forms of investment are more frequently used as a mode of entry for transnational corporations (TNCs). Furthermore, tourism-related FDI is concentrated in a few activities, mostly accommodation, restaurants and car rentals. There is little FDI in high-profile activities such as tour operations, reservations systems and airlines. IPAs wishing to develop a strategy to promote FDI in tourism could be faced with a situation where there is already a national tourism strategy (developed by another body, such as a ministry of tourism). The role of the IPA will then be to support the commitment is required than in the former. Setting out to develop an investment promotion strategy, the IPA must first obtain an understanding of trends in the tourism industry at the global, regional, sector, and subsector levels. The next step is to map out the countrys current offer in the tourism industry at a detailed sector and subsector level, and to assess the industrys position in terms of its strengths, weaknesses, opportunities and threats. The IPA should then consider which tourism sectors and subsectors could generate internationally mobile projects, as well as their potential destinations. Once these sectors have been defined, a first filtering process can take place, where the IPA compares the endowments of its territory with the required assets for certain types of tourism. The IPA can now start to identify tourism sectors and/or subsectors within its territory that could be considered for targeted promotion, and to develop specific criteria for them. These criteria will be used to decide which opportunity areas to target now and in the future. After this is carried out, the IPA should benchmark its offer in those target

areas against key competitor locations for internationally mobile projects. The selection of opportunity areas can be finalized after a sense check with a group of experts and policymakers to ensure that the areas identified by the IPA are realistic to pursue. Once opportunity areas have been finally selected, the IPA can develop detailed targets for its investment promotion strategy and marketing strategies to achieve those targets. The IPA should then develop and implement contact strategies for targeted firms, and, finally, evaluate the results of its efforts and modify the approach if necessary.