Impactsof Foreign Direct Investment in Burma
Astudy of Foreign Direct Investment’s impacts on tourism andhospitality industry in Burma
ForeignDirect Investment is one of the main factors to improve trade inevery country to boost the economy. The Foreign Direct Investmenttrend has significantly changed by the move of inflows from developedstates to developing states for many years. In the states ofdeveloping their ultimate potentials, Burma appeared as a newlyopened market amid the most idyllic FDI destination in terms ofhospitality and tourism industry (Asirvatham, Rasiah, & Adamu,2016). This thesis aims at analyzing the impacts of Foreign DirectInvestment of hospitality and tourism industry in Burma. Theobjective directs the formulation of the theoretical framework in thehospitality and tourism industry which helps build the analysiscriteria. The research is carried out using both secondary andprimary data through archival approach of research. Moreover,descriptive and deductive research approaches are exploited inconcurrence with qualitative study methods to set the frameworksystematically.
Thefindings fulfill the research objectives and provide valuable andreliable review sources for making investment decision. The resultsand recommendations are useful research sources for further studylike industry based or product the based study projects in theprovided states.
Backgroundof the study
Thischapter encompasses the study background, research objectives andresearch problems. It also contains the value of the study showingthe importance of this research to various people and organizations.
1.1Foreign Direct Investment (FDI)
ForeignDirected Investment was an aspect that was highly appreciated by thegovernment of Burma as an important source of income for the tourismand hospitality industry so as to enhance the economy of the country.In history, Burma has been struggling to be at par with other underdeveloped nations in term of expansion. The flow of Foreign DirectedInvestment in this state had an unsteady trend in the early yearsbecause at the establishment of its development, from 1980-2009, thestate experienced a slim increase of foreign funds invested.Conversely, after 2009, the Foreign Directed Investment inflowdecreased. Since 1980, the Burma government had finally comprehendedthe foreign investment importance in Burma. As at 2015, the Burmesegovernment has established a vital law that articulates the aspect ofthe foreign investment which states that the government encouragesand welcomes the foreign people are to the country, whereas tostrengthen and to ensures its stability within the developing states.Burmese government has prioritized those sectors and to start as theprivate ventures, natural resources, entrepreneurial activities, andinitiating the foreign operations, which aims to inspire the state’sfinancial system in a long-run (ForeignInvestment Law Myanmar, 2012).
1.2FDI in tourism and hospitality
Witha perspective to inspire both international and local investments inthis industry, the state has allowed 100% Foreign Direct Investment(FDI) in the habitual route thus allowing full FDI into allconstruction expansion projects that includes hotel and resortconstruction, recreational facilities and regional and city levelinfrastructures. The quantity of Foreign Direct Investment (FDI) togrowing States has for the initial time exceeded that of thedeveloped nations. Foreign Direct Investment (FDI) has clearlypositive impacts on the Burma local tourism and hospitality firms andthat the Foreign Direct Investment (FDI) recipients’ economy atlarge by offering benefits such as management capability,technological transfers, economic growth and job creation. Burma hasbeen an attractive destination for Foreign Direct Investment (FDI)because of diverse motivating forces of FDI in the aspect ofeconomics, society, and politics (Park,& Roland-Holst, 2015).
1.3Foreign Direct Investment (FDI) in hospitality and tourism sector inBurma
Tourismand hospitality sectors hold vast potential for Burma economy sinceit can offer momentum to other sectors via forward and backwardconnection and can also make huge income earnings for the state.Foreign Direct Investment (FDI) impacts are thoroughly conceptualizedin the Eclectic Paradigm theory. This particular theory analyzes theForeign Direct Investment (FDI) impacts at macro and micro level toestablish the main basis and locations of big firms based in Burma.The nation is considered to be one of the most attractive and liberaldestinations for Foreign Direct Investment (FDI) that has beenfacilitated by the Investment Law that basically permits 100 percentforeign rights with only partial number of firm closed to foreignfirms. Besides, the nation assurance to influential economics andpolitical reforms since 2005, FDI has facilitated Burma to become anew tourism and hospitality potential in Asian continent (Jones,2014).This aspect resulted to the abolishment of economic sanctions fromdeveloped states such as European Union, USA, and other Westernstates and has opened chances for firms so as to carry out diverseinvestment in the nation. Foreign tourist arrival in the country isprojected to grow to 15 Million by 2016-2020, and the local tourismis also anticipated to increase by 16% to 22% over the subsequentlysix years according to the state Tourism Ministry expectations basedon the expansion in the last ten years. From the past research, wecan see the significance that FDIs plays in the state’s tourism andhospitality industry. Burma greatly appreciates Foreign DirectInvestment as a prime aspect that reduces the expansion gap in itstourism and hospitality industry in the state. Foreign venturesresponded positively to these actions in the prior years, and ForeignDirect Investment into Burma steadily increased in the period from2004 to 2015. Conversely, before 2003 Foreign Direct Investmentinflow was drastically reduced until 2004 when in inflow grew at aunique rate that reached the top level in the history of the country.It is specifically more significant in the country because FDI isconsidered to be a gateway for the state to develop as it enables thecountry to fully channel most of their resources which lead to a biginflow of capitals that allows the country to utilize on moreprojects development. Realistically it is valuable for a sustainableadvancement than other types of developments experienced by thenation. Foreign Direct Investment (FDI are the fundamental techniquesfor the export-led growth strategy for majority of the Asian statesespecially Burma giving facts on how the FDIs stimulates the localtourism and hospitality volume. According to Moron Carranza (2004),the FDI offers an increase of 12% in tourism and hospitality economicgrowth and between 5% – 10% of national income.
Thisstudy sought to carry out a survey of Foreign Direct Investment (FDI)and determines the impacts on the tourism and hospitality sector inBurma.
Thegeneral objective of this study is to research on Foreign DirectInvestment (FDI) and determines the impacts on the tourism andhospitality sector in Burma. The specific objectives are
To understand the impacts of Foreign Direct Investment (FDI) in tourism and hospitality in Burma (Yuka, 2016).
To evaluate the relation between FDI and tourism and hospitality.
To determine the contribution of FDI to the tourism and hospitality the economy of Burma.
Which are the impacts of FDI on the tourism and hospitality in Burma?
Why do nations prefer FDI influx to others?
What does Burmese government do to reduce the barrier for FDI in this country?
1.8Value of the Study
Thestudy findings will assist the country and the tourism andhospitality sector in formulating strategies that will enhance theirproduction. This will, in turn, increase the revenues collected bythe sector to beneficiaries. The findings of the study will alsoassist investors who would be interested in investing in tourism andhospitality sector, to make objective decisions on which FDIfacilities to invest in, and which facilities to include in theirinvestment. This research will also help emphasize the problemsencountered by FDIs in abiding by the guidelines set by Burmagovernment that are preferred by the investors. Finally, thisresearch will add value to the tourism and hospitality sector bytightening the gap of earlier studies done in the Foreign DirectInvestment (FDI).
Fora research project, the design is articulated by the research theory.Research designs that are appropriate substantively support thefindings that encapsulate the research questions. The approaches ofresearch are articulated in three groups inductive, deductive andcombination. In this research proposal, the deductive research isadopted because the flow of information takes place in the directionof general to specific (Bissinger,2012).The theoretical framework of the hotel and tourism industry heightensthe identification of key FDI determinants. The inductive approach isdifferent from deductive approach because the theory is pragmaticallydeveloped through data collection and analysis of the empiricalfindings, then the findings are tested to prove their accuracy. Theresearch proposal also adopts descriptive research which is used tofinding answers to the questions Who, When Where and How. Theapproach of the research concentrates on the gathering and analysisof events or situations in Myanmar tourism and hotel industry tosubstantively support the final decision making process.
Theresearch project describes a type of market research. The marketresearch can be carried out by using quantitative and qualitativemethods of research. Nevertheless the research proposal adopted thequantitative method which encompasses the use of numerical,standardized data and analysis derived from statistics and diagrams.Qualitative method on the other hand accentuates a phenomenon wherethe non-standardized data is summarized, categorized and restructuredto substantively create a meaningful analysis.
Theresearch proposal heightens the use of archival research method asthe primary method used for collecting data. According to McBurney etal. (2007) archival research concern a research where the use of datacollected is done without the participation of the researcher. Theresearcher assesses and selects the available data accumulated inexisting records or archives for analysis. The advantage of archivalresearch is that the collection of data by the researcher is notnecessary and experimentation of the research conducted is notapplicable. The disadvantage of the method is that the researcherdepends on the agency types of questions and the biases that exist inthe procedure used in collection of data.
Theempirical research in this research encapsulates the use of secondarydata. The archival research is used in collection of secondary data. The data is accessed through both the public internet ad researcharchives networks that are available from international agencies. Thedata is then categorized, interpreted and analyzed to assess thetourism and hotel industry in Burma with aim of indicating bettermarket for foreign direct investment.
FDIdata is generally compiled using two alternatives that is balance ofpayments indicators or carry out firm survey. The balance of paymentsdata encompasses measuring FDI as the fiscal stake of the parent in aforeign conglomerate. The benefit of the method is that the data canbe collected easily for virtually all countries. Firm survey howeverfocuses on the actual description of MNE. Firm survey provides abroad description of MNE activities and provides information aboutMNE characteristic. Unfortunately, the method is on available to veryfew countries such as the US and Germany.
Datafor FDI is presented as a stock or flow of value. FDI flow comprisesof equity capital, reinvested earnings and other capital. The data isdescribed on a net basis which accentuate that disinvestment has beencatered for in the figures provided. FDI inflows and FDI inward stockis as a result of investment undertaken in Myanmar by a foreign MNE.FDI outflows and FDI outward stock encompass investment in overseascountries carried out by MNEs based in Myanmar. The worth of FDIstock is calculated by use of the book charge in order to take intoconsideration the prices prevailing at the time the investments weremade. The research proposal encompasses an analysis of the impacts ofFDI in Myanmar by considering the hospitality and tourism industry.The source of FDI data is gathered and conveyed by variousinternational organization and Myanmar government website. IMFcompiles and report data on FDI from majority of the world nation andis based on balance of payment statistics (IMF,2012).UNCTAD publishes the World Investment Report which represents figuresfor both flows and FDI shares together with share of FDI in GDP.UNCTAD primarily collects statistics straight from national officialbases such as central banks and statistical offices for respectivenations (Simpson,& Park, 2013).There are also regional bodies such as ASEAN that provides FDI data.For the research project, data from World Travel & TourismCouncil is also admissible.
Datapresentation, Analysis and Research findings
2.0Foreign Direct Investment in Myanmar
Myanmarhas started to undertake major reforms after years of isolationtowards a system that is democratic and an economy that is marketbased. Reforms initiated include the liberalization of the bankingand telecommunication sectors. The government recognizes theadvantages of FDI and thus actively encourages FDI. Thisencouragement has been boosted by the signing of the ForeignInvestment Law which specifies that foreign nominees do not need alocal partner to commence a business. The investors also enjoy manyincentives in taxation. However, the law is considered opaque in someareas such as transfer of ownership and settlement on disputes.Nevertheless, introduction of such a law is considered a huge stepforward to the country.
2.1FDI Direction in Myanmar
Myanmaris hugely endowed with natural and human resources. The country hasvast lands that are cultivatable, long coastlines, rivers that arenavigable, huge amounts of mineral and forests and a population thatis literate.
2.2FDI inflows into Burma
Theinflow of FDI into Burma are greatly concentrated on naturalresources based and extractive sectors like oil and gas, mining andpower sectors (Asirvathamet al. 2016). Fromthe year 1990 to 2015 total amount of foreign direct investmentinflows into the country are much resolute in the power provisionsector (81.6%). Other inflows into the sectors include agriculture(0.27%), manufacturing (1.96%) and tourism and hospitality (2.36%)which is relatively low because the state have attractive features interms of resources may be constrained by diverse factors likesanctions imposed by EU and the USA, unfavorable rates of exchangeand FDI laws. Burma officiated foreign investment that total USD 8.01Billion from 200 firms for the 2014-2015 financial years acrossseveral sectors. Among the sectors that attracted the FDI during thefinancial year ending 31stmarch, gas and oil were high in the list at USD3.22 Billion, and thenfollowed by communication and transport with accepted capital of USD1.68 Billion and $1.5 Billion. The sector of real estate attractedapproximately USD 0.78 Billion and USD 0.36 Billion was approved forthe tourism and hotel sector.
Accordingto the above table, it demonstrate that DICA’s data showed approvedFDI virtually doubled from USD4.1 Billion financial year 2013-2014 toUSD8.01 Billion in fiscal year 2014-2015. Burma anticipates receivingUSD6 Billion in the recent financial year. From financial year2000-2001 to 2014-2015, the amounts accepted of foreign investment inBurma reached a total USD54.23 Billion that come from 895 allowedfirms from only 40 nations.
2.2.1Countries investing the most of Burma
AfterBurma changing its economy from a centrally planned economy to themarket oriented one, the state government had made diverseliberalizing measures so as to promote and raise the investment levelin almost each sector of the economy and also encouraged privateindustries to actively participate in the FDI activities. After theenactment of the financial investment law, Burma has attracted 18foreign firms with the amount of $449.487 Million in 2000-2001 and 22foreign firms with $280.6 Million in 2014-2015. In brief, FDI inflowsinto the state gradually increased from 2000 to 2006, but the amountwas tremendously decreased continuously from 2006 to 2008 because ofthe global financial crisis in the period. Conversely, the amountagain increased from 2009 to 2014 because of the huge investment intourism and hospitality sector by Thailand (Mowforth,& Munt, 2015).In 2012 to 2013, the total foreign investment increases to an amountof $984.446 Million and again rose in 2014 with an amountapproximately to $19,997.45 Million. All the FDI during thisparticular period are considered to be mostly from UK, Asia andRussia. The approved sum of FDI is demonstrated in the table below.
Inaccordance to the data from the Central Statistical Organization, themost investing states in Burma are stated in the chart above.According to the chart, the top investing state is China and otherstates include Singapore, Thailand, Korea, Hong Kong, UK, Vietnam,Malaysia and Netherlands.
Diversehome states had been investing in Burma in several sectors thatinclude gas and oil, manufacturing, power, communication andtransport, real estate management, livestock and agriculture andhotel and tourism (Engvall,& Linn, 2014).The chart above demonstrates the comparison of FDI by sector.
Asof 2014 to 2015 financial year, approximately 566 existing foreigncompanies from over 30 states so far invested $47.56 Billion in 10sectors that include gas and oil, manufacturing, power, communicationand transport, real estate management, livestock and agriculture andhotel and tourism. The impact of FDI in Burma in the structure ofemployment is specifically true in labor thorough sectors such astourism and hospitality (Kohlhaas,& Moser, 2015)
2.3Tourism and Hospitality in Burma
TheWorld Travel and Tourism Council (WTTC) posits that the global traveland tourism sector contributes 11.1 percent to the regional GrossDomestic Product or USD 255.1 billion. The sector also accounts for8.8 percent of employment (25.4 million jobs) (WTTC, 2015). The hoteland tourism industry has emerged as one of the fastest growingsectors that significantly contribute to the global economic growthand development. Burma has for many years recorded tourist arrivalsof between 200,000 and 250,000 at the Yangon airport. The cumulativefigure which comprise of the border tourists has roughly beenestimated in the range of 600,000 and 800,000 tourists. The bordertourists describe visitors who cross into Burma borders and stay forless than a day. The only point of entry in Burma until 2013 wasYangon airport, but since August 2013 four other land border wereopened for entry of tourists.
Thetourist numbers since 2011 onwards started to increase dramaticallyand during the peak season there was shortage in the hotel room. 2013would record a high demand for room services. Burma’s hotelsituation has significantly improved with new hotels being built inYangon and Mandalay hence doubling the number of rooms as at 2016(Khin,2012).
Theabove graph highlights the cumulative tourist arrivals at Yangon,Mandalay and Naypyidaw international airports from 2006 to 2015 (Zaw,2014).
Thetable represents the cumulative hotel rooms in Burma. The touriststatistics excludes the border tourist. International tourism grew by25% in year 2013 and 15% in 2015. Asian countries are the majorsource market with 71%. Thailand tops the number of tourists with17.07%. China, Japan and Korea visitors account for 7.16%, Japan7.58% and 5.91% respectively. The other key international visitorsare from the USA, France and UK who account for 5.93%, 3.72% and3.51% respectively (WEF, 2012).
TheBurmese Hotel and Tourism ministry 2016 forecasts that the tourists’numbers will grow from 4.68 million to 6 million. Approximatelyone-third came of the 4.68 million came through the internationalairport (Ford, Gillan, & Thein, 2016). The Tourism Master Planhas a middle growth scenario of 5 million visitors in 2020 while thegovernment insists on the high growth of 7.48 million visitors in2020.
Therates charged by Burma Hotels began to rise in 2012. The rise was inresponse to the demand of hotel rooms from arriving tourists.Comparing the rates from 2011, the charges in 2012 doubled andtripled in 2013. For example, Sedona Hotel in Yangon charged $50 pernight in 2009 and $280 in 2013. The incredible rise of hotel roomprices has since stabilized because new hotels were opened to improvethe situation though travelers have complained of overpriced rooms.Yangon has recorded an increase in the number of new hotels and hencethe occupancy rates have gone down. The large number of hotels whichhave opened since 2014 have resolved issues on accommodation
Thenumber of hotel rooms double in the last four years has doubled inthe main destinations with the exception of Bagan where thegovernment has restricted construction of new hotels because of theBagan archeological zone (Rich, & Franck, 2016). Burma as at endof 2011 had 731 hotels and by end of 2015, there are 1279 hotelswhich represent an increase by 75%.
Thehotel situation however is unclear in smaller areas. For example nohotels in Mrauk-U have been opened since 2011 while Hsipaw roomcapacity has improved from 52 rooms to 255 rooms in only threehotels. The perspective in Naypyidaw is interesting because thegovernment moved its offices to the area. This has led to numeroushotels coming up with the anticipation that many internationaldelegates would visit. The end result has been a massive supply with5100 rooms in 63 hotels but 1000 rooms are occupied.
Burmacharges double the hotel price compared to countries like India,Thailand and Cambodia who are its neighbors. However, the roomcharges have decreased in the last two years and in this case in theluxury hotels. Yangon and Mandalay luxury hotels in 2013 tripled andquadrupled their room rates at the top of the tourism rush but theroom prices have significantly dropped.
2.4FDI and Tourism and Hospitality
Thetourism and hospitality industry is among Burma top contributors tothe economy. The industry contributed $2.1 billion which was anincrease of 19% or a contribution of 4% on the GDP. WTTC project thatthe international tourist arrivals to total 3.385 million andgenerate revenue of $3.298 billion which is an increase of 10.1% p.a.(UNWTO, 2014).
Myanmarhas had limited supply of hotels that are considered suitable fortourists. Less than half of the hotel rooms in Yangon are adequatelyfitted in terms of facilities to cater for foreign visitors. As aresult the occupancy rates in Yangon are unrivalled soaring fromapproximately 60% at the end of 2010 to today levels of 90%.
Nearlyall the 700 locally run hotels are rated 3 stars or lower in 2010 andstruggled to survive due to the high operating costs and lowoccupancy rate (Sjöholm, 2014). This had major effect on themaintenance standards, quality of service and the development ofhuman resources. Limited capital resulted in these locally ownedhotels to have an average of 30 rooms each. The foreign owned hotelswhich accounted for 4% of the total hotels in Myanmar provided anaverage of 170 top quality rooms. Currently, the foreign owned hotelshave increased by 75%.
Foreigninvestment in the tourism and hotel industry has hence become vitalto replenish the constraint in quality hotel rooms that are suitablefor tourists in Burma.
Singaporeis the largest investor in the industry with investments of $598million. Other notable investors are Thailand, Japan, Hong Kong,Malaysia and the UK.
Thetable represents the ten largest foreign hotels in operation in Burmawith Singapore direct investment offering the largest proportion(Santos, Brochado, & Esperança, 2016).
Thegovernment has provided several initiatives to entice additionalforeign capital. Apart from revising the foreign investment law tooffer more incentives in tax and allow 100% ownership, Burma isoffering plots in prime locations in Yangon for investors to bid fordevelopment of hotels. With strong demand in hotels, first moversgained a significant advantage in commanding higher prices. Thereindeed have been development with interest form Singaporeans and Thaihoteliers plus other large global chains such as Marriot and Sofitel.
Impactsof FDI on the tourism and hospitality industry
Thebenefits of foreign direct investment frequently mentioned in theresearch papers as follows
2.4.1Positive impact of the local tourism investment
FinancialDirect Investment (FDI) inflow tend to lead to lead so as to developinvestment on country infrastructure and also improved localinvestment as domestic forms to get access to distribution channelsthat are opened by bigger foreign firms in the tourism andhospitality sector (Pwint,2013).
2.4.2Impact on revenue
FinancialDirect Investment (FDI) broadens the domestic tax base and also addsto the Burma government revenues so as to enhance its serviceprovisions (Tretter,2013). Countriesusually require enough funds so as to provide social necessities suchas school, medical care and security to its citizens. Foreign firmsthat invest in the country usually provide enough revenue to thecountry that will ultimately assist the country to provide socialservices to the citizens.
2.4.3Improved skills of labor
Foreigncompanies typically conduct more training than domestic companies,and they also engage in diverse events that use moderately high levelof skilled employees. These particular proficiencies can betransformed to other industry and events when workers hunt for newjobs or initiate their trade because FDI usually carries enhancedworking performance so as to develop the working situation and theworking surroundings.
Accordingto the research, Financial Direct Investment (FDI) in the country hasembraced development because of the association with high exportlevels since most of the overseas investors are usuallyexport-oriented individuals who usually initiate business in Burmaand then export their finished products to other countries.
2.4.5Weakened domestic monopolies at the local industry
FinancialDirect Investment (FDI) can reinstate local ineffective and monopolycompanies with more effective and efficient foreign companies thatcan result to enhanced client’s welfare (Ramirez,& Tretter, 2013).The adverse of Financial Direct Investment (FDI) inflows to Burmamust not be disregarded because big foreign companies may takeprevailing market shares thus dropping competition. In accordancewith the OECD details on FDI for growth, the benefits of FinancialDirect Investment (FDI) do not occur mechanically.
2.4.6Business integrity and corruption
Corruptionis considered a risk for foreign entities investing in Myanmar.Transparency International ranks Burma at number 146 out of 169 intheir annual Corruption Perception Index a position that has remainedunchanged since 2013. The President Thein Sein acknowledges thatcorruption and bribery is chronic and must be addressed by changingthe attitudes among the officials in government. Numerous aspects ofthe tourism value chain offer the possibility of corruption andparticularly those that concern land acquisition for hotels, awardingof transport or concessions (Li,2013).The lack of transparency in tender regulations over leasing hotelsowned by the state to individual investors has been reported withthose with close ties to authorities being given preferentialtreatment. The increase in investments by companies from Westerncountries may create pressure for some level of transparency,including their local partners. The pressure may accrue when it comesto acquisition of new sites. A number of Myanmar enterprises havestarted to implement the anti-corruption programs and in some caseshas led to foreign partnerships.
2.5Why foreign investors prefer investing in hospitality and tourismsectors in Burma
Foreigninvestors prefer investing in hospitality and tourism sectors inBurma because of financial liberalization that has provided a newstrength to the hospitality and tourism sectors (Jarvis,2012). Diverseforeign investors are able to enjoy several incentives that thegovernment provides because in doing this, the foreign investor willexperience a great hospitality which is at an increasing rate of 15%per year. Due to a stable social and political condition of Burma,there will be an increased in the number of tourists’ arrivals. Thecurrent administration in its process has taken a few plans such asopening the partial sky procedure that has permitted private localairline operators to fly on the Burma skies. The entry of theinternational investors into Burma’s market through the states FDIinitiatives assisted the state in enhancing its balance of trade byraising its trade in export (Steinberg,2013). Forinstance, Financial Direct Investment (FDI) increased the amount offinancial resources and the technical skills that Burma needed so asto exploit the tourism and hospitality sector. These tourism andhospitality sectors account approximately 70 % of the Burma incomethat is gained from business export per year that represents about 15% of the national Gross Domestic Product. Moreover, Financial DirectInvestment (FDI) that targeted the tourism and hospitality sectorspermitted Burma Myanmar to increase its proportion of export productssuch as clothing that are usually sold in the global market to 21 %from 13 %. By the country expanding its export trade, the country hasmanaged to enhance its economic productivity and improve its balanceof trade.
2.6Benefits of FDI to Burma
Thebenefits of Financial Direct Investment (FDI) to Burma are listed tounderstand very easily by constructing the table below (Park,Khan, & Vandenberg,2012)
Table:Benefits of Financial Direct Investment (FDI) to Burma
Create demand for export
Lower prices for consumers
Source:Ma Pwint Phyu Aung (2013), Ph.D Preliminary (Ba-2), “Impactof Burma country”,Assignment, Meiktila University of Econmics, Mandalay, Burma
2.7Barriers in Burma tourism and hospitality sector
FinancialDirect Investment (FDI) plays a major role in the country economicdevelopment. However, to attract Financial Direct Investment (FDI) isnot as simple and easy task. Significant number of barriers detersthe inflow of foreign direct investment into a specific developingstate, especially for a country that is least advanced because thisparticular barrier led to increased risks of foreign ventures thatcan overshadow the are specific benefits and resource donations ofLDCs. This aspect can hinder the Financial Direct Investment inflowinto the nation because foreign investors seek to get higher returnsfrom the venture to compensate bigger risk. The aspect of politicalinstability is considered to be one of the most vital barriers toFinancial Direct Investment (FDI). On the government front, theguidelines on land ownership and income repatriation are stilluncertain and varying from week to week. Composite regulations andrules from the decades-old hotel law will also persist to createbarriers for any new entrants (Mikic,Anukoonwattaka, Ferracane, & Tacken, 2012).The contractual prerequisite on a Build-Operate-Transfer basis withthe Burma state will be less attractive to some investors, inaddition. On the investment situation, investors may also faceimperfect access to cheap funding in the country given the high staterisks that are involved and the nature of trade with the vastup-front capital needed and long-term investment prospect. High costsof a land lease which have doubled in the past three years in maintourism cities like Mandalay and Yangon will further put investorsunder pressure. In addition, while local employees can be hastilytrained for semi-skilled or unskilled positions, there is still shortof infrastructures like international schools and eminence hospitalsto attract management levels from middle to senior hotel and theirrelatives to move to Burma.
3.0 Conclusions and ManagerialImplications and Applications and possible recommendations
Aspointed out in the introduction, Financial Direct Investment usuallyplays a vital role in intensifying the tourism and hospitalitysectors in Burma. This basically demonstrates a suitable strategy toexplore diverse plans and resources so as to expand new touristfacilities and venues that might need to be measured so as to meetthe rising demand for tourism in Burma anticipated from a constantstrong FDI (Telfer,& Sharpley, 2015).The tourism and hospitality sector provides an incredible chance toBurma in terms of GDP contribution and employment generation. Inaccordance to CII estimations, an extra 800 million tourists canassist generate income of USD 2,500 each year. Therefore, the Burmesegovernment strategies which would majorly focus on raising the numberof tourists’ arrivals into the nation and facilitate investment inhospitality and tourism development would definitely lead toconsiderably superior multiplier impact on the major economic factorsof the Burma economy.
Astourism in Burma grows rapidly, the industry needs to expand thenumber of destinations that are offered to international tourists.Many areas with promising potential destinations are inhabited byethnic minority groups who have little or no interaction withinternational tourists. Therefore there is need for foreigninvestment in these areas thereby increasing the tourism market.
Burmahas a huge amount of resources and many Western firms have showninterest in the need to invest in the lucrative tourism andhospitality industry (Rieffel,2013).Therefore there is need for the government to accelerate constructionof infrastructure in both rural and urban areas.
Thesupport of the political structure must be present towards theinvesting firms from abroad. This can be worked out when foreigninvestors put forward their interest for increasing FDI capital inthe tourism and hospitality industry. There is need for a commonground between the politicians and foreign firms investing in Burma.This would increase reforms in the FDI sector of the country.
Theintroduction of tax holidays would encourage FDI in the tourism andhospitality industry and make more players to set up hotels. Theperspective would bridge the gap of shortage of rooms especially tothose considered to adequately meet the standards required byinternational tourist.
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