Tourism investment & finance 21 Unit 2: Evaluate Investment Environment

I
NVESTMENT 
 
Many investment barriers have a greater impact on domestic investors than foreign. In Asia, 
the Asian Partnership for Cooperation (APEC) recently completed a study of these “behind-
the-border” barriers cover a raft of domestic policies, rules, procedures, and laws (or lack 
thereof) that unnecessarily impede investment in domestic businesses. 
The barriers come in many forms from excessive regulation, unclear property rights, and 
poor legal systems to a lack of appropriate laws that foster competition. All these barriers 
have a deleterious effect on investment and impede growth through one of three channels. 
•
They can unnecessarily increase costs
, 
making businesses less profitable and 
therefore less attractive for investment. Examples would be excessive regulation, 
complex licensing procedures, and poor infrastructure such as inadequate roads that 
increase transport costs. 
•
Barriers can increase risk
 
that chills the incentive to invest. Examples would be 
unclear property rights, poor contract enforcement, and the uncertainty of 
government policy and its enforcement. 
•
Barriers can limit business competition
 
that, while perhaps helping a favored few 
firms obtain monopoly status, increases costs for other firms, impeding their 
competitiveness and stifling innovation.
www.apec.org/Groups/Committee-on-Trade-and-
Investment/~/media/Files/Groups/IEG/07_cti_ieg_BTB_Study.ashx
 

---

TOURISM INVESTMENT & FINANCE
27 
 
Figure 2.1. Travel & Tourism Competitiveness Index (World Economic Forum, 2011) 
Much as with the IFC Doing Business Reports, several countries use this annual ranking to 
implement reforms and improve their competitive position. While all these variables have an 
impact on the investment environment, most present long-term challenges that can often only 
be addressed through major investments in infrastructure, training, and programs to promote 
tourism awareness.
Many developing countries simply do not possess the resources to make these kinds of 
investments, so short- and medium-term efforts should focus primarily on the first column, 
improving the regulatory framework. One of the most important — and one that many 
developing countries fail to do — is to make tourism development a national priority. 
O
VERCOMING 
C
OMMON 
B
ARRIERS 
 
Overcoming investment barriers is a complex, long-term task, typically beyond the reach of 
individual investors. The most reasonable approach investors and project promoters can take to 
overcome investment barriers involves 
•
Understanding which major barriers their project will likely face. 
•
Identifying tools to mitigate those barriers, e.g., political risk insurance. 

---

TOURISM INVESTMENT & FINANCE
28 
•
A realistic assessment of whether or not a project has a reasonable chance of being 
implemented with the time and resources available. 
•
The odds of being able, through negotiation, to overcome specific barriers, e.g., the 
terms of a concessions agreement or ownership requirements. This process begins with 
a discussion with government officials related to the specific barrier and with other 
investors who have attempted to overcome similar barriers. 
For development practitioners that seek to engage governments regarding investment climate 
and competitiveness, a number of tools and templates are available.
For sustainable tourism investment, UNEP’s chapter on tourism in the latest Green Economy 
Report outlines typical barriers to developing sustainable tourism and recommendations for 
improving the policy environment. Annex 2 outlines the drivers and likely implications of 
sustainable investment.
Seven strategic areas — energy, climate change, water, waste, biodiversity, cultural heritage, 
as well as linkages with the local economy — correspond to specific sustainability drivers. 
Recommendations include the following.