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FEASIBILITY STUDY ABOUT

FOREIGNERS INVESTING INPHILIPPINE 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 oftourism. 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

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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.