What investors look for in tourism sector

Vipula WANIGASEKERA

The tourism industry by nature makes a valuable contribution to the economy of Sri Lanka through direct and indirect employment. The present statistics cannot bring out the true figures without a proper satellite information gathering system.

The tourism industry is a combination of products and services and has linkages with other sectors namely catering, arts and crafts, visitation to archaeological and cultural sites, recreation, and of course conference services, which require additional services, etc

It is known that investment proposals come with their demands such as tax holidays, preferential tariffs, soft loans, free land, infrastructure subsidies etc. In fact many countries offer such facilities to attract investors and it is time a serious attention is paid to the needs of investors in the tourism sector whether foreign or local, as there is a sense urgency when the existing rooms get filled up with the increasing tourist arrivals.

By now, the country should be well positioned to offer investments plans and packages to investors in order to reap the full benefits of the peace that was achieved with sacrifices of thousands of lives for which the gratitude can be paid by the tourism sector with job opportunities for their unemployed youth and tourism is one sector that can do this before any other industry.

Foreign direct investments (FDI) no doubt have their merits particularly for developing countries. They can open new markets and bring with them new technology, skills and of course finance which can provide an impetus to economic development.

Opponents of FDI however point out that multinational conglomerates are able to wield great power over smaller and weaker economies and can drive out local competition. Apart from the concession to allow the profits to be taken out , they argue that total privatization would, in the long run may decrease the control of the Government.

Leaving this aside, the tourism sector is now looked at by investors , both foreign and local as an area that cannot go wrong in view of the fact that the country has hosted nearly half a million visitors even during the conflict hence the potential for growth after the end of terrorism.

The first important aspect is the availability of a land bank from which the potential investor can opt for a location depending on his concept, theme and design and the target market. The land bank is expected to give a full account of the availability, clearance status, survey reports, title reports and ownership, values and terms and conditions. The authorities are already working on this.

The second stage is the ability for the investors to raise adequate finance with or without collateral and in the case of a local investor, whether there is a system where the investor could obtain financial assistance from banks with sufficient equity offered to the bank, is still a question. The Government may intervene perhaps on case by case, depending on the viability of the project based on the recommendation of authorities.

The next stage is the most vital area when it comes for investments into tourism sector. The delays in the process have discouraged investors with the amount of approvals necessary. The

'one stop shop' slogan needs to be put into a reality where the investor must be able to find out exactly where he stands within a short period of time.

If Sri Lanka claims to be the most liberalized economy in South Asia with preferential tax rates, constitutional guarantees on investment agreements, exemptions from exchange control and 100 percent repatriation of profits, the facilities need to be extended until up to the project takes off the ground and comes into operation.

There have been investments made during the difficult times on boutique resort hotels targeting up-scale clients and there is much to learn from them as to what areas of difficulties they had gone through, without making academic assumptions. Fortunately, the Kalpitiya project has taken a pace which will ensure time is not lost in the present conducive environment.

The land that is made available in the east for tourism has created considerable interest. The acquisition and the rest of the process would hopefully make the investments realize their goals within a shorter period. The whole purpose is to achieve the real benefits to the people through direct and indirect employment opportunities.

In the recent past, one hotelier was complaining that he had to obtain over 20 approvals which took him nearly two years to take the project off the ground. Another pointed out that the banks have not been favourable to his proposal even after pledging the property as a guarantee. Yet another project was halted for a long time by just one person of a Pradeshiya Saba, for which higher authorities had to intervene.

This may be the tip of an ice berg. Any undue delay without a proper reason can discourage who could be potential investors in the coming months. The writer however does not mean that the gates should be opened wide and rules must be bent. The Government has laid down a clear policy of regulations that will ensure 'local interest' such as engaging local construction companies when building hotels.

The industry needs to move much faster if the country has to reach the goal of 2.5 million tourists. The Sri Lankan tourism is gearing itself for increasing arrivals and investment needs. But there are areas that are beyond the control of the tourism authorities hence the demand for a high powered task force to move the projects on a fast track.

That said, a huge task also lies on the investor which entails recruitment, training, finding new markets, suitable clientele etc apart from realizing the return on their investment over the expected period.

No investor comes in for charity. It is through a successful venture that all other benefits would derive. They need to work on the realistic financial projections.

The time factor then becomes critical particularly for tourism industry which has turned out to be for the betterment of country's economy.