Factors Affecting Investment Capital Attraction and Investment Location Selection in the Tourism Industry

In many countries around the world, tourism is one of the key economic sectors. Tourism is the “golden goose” and tourism is becoming one of the leading industries in the future. Therefore, constantly increasing investment attraction in the tourism industry is an objective necessity, for the following reasons:

- Attracting investment capital into tourism development contributes to economic growth.

The Harrod - Domar model has shown that the investment capital of the economy has a direct impact on the growth rate: GDP growth rate = investment capital / ICOR. To grow at a high annual rate, it is necessary to increase the investment level and reduce ICOR or limit it from increasing. Thus, attracting investment will increase the investment capital, and therefore the output will also increase, contributing to promoting the development of the tourism industry in particular and economic growth in general.

- Attracting investment capital into tourism development contributes to economic restructuring.

Maybe you are interested!

Economic restructuring is the process of development of economic sectors leading to different growth between sectors and changing the correlation between them compared to a previous time. Investment is the means to ensure that the economic structure is formed reasonably. The tourism industry is a component of the economy, so attracting investment capital into the tourism industry will affect the economic restructuring.

Along with the roles in the process of industry restructuring, attracting investment capital into the tourism industry also has a strong impact on regional restructuring, forming and promoting the role of key regions, while strengthening economic potential for disadvantaged regions, promoting inter-regional economic connections and exchanges, ensuring sustainable economic development.

Appropriate orientation and measures to attract investment capital also affect the structure of economic components, and the relationship between state and private sector investment. State public investment must have an attractive and leading effect without reducing or overwhelming private investment.

- Attracting investment capital into tourism development contributes to enhancing science and technology.

techniques and improve business management capacity.

Attracting investment capital to develop the tourism industry will increase the scientific and technical level of the tourism industry through implemented investment projects, replacing outdated equipment and technology. For developing countries, although capital and technology accumulation is low, there are also advantages of latecomers in absorbing, adapting and mastering available technology, thereby shortening the time and reducing risks in applying new technology. At the same time, attracting investment capital to develop tourism will contribute to improving the management level and operational capacity of some businesses.

- Attracting investment capital into tourism development contributes to creating jobs for the locality and increasing revenue for the state budget.

Attracting investment capital also contributes to creating jobs, reducing unemployment, developing human resources in both quantity and quality; at the same time creating conditions for effective exploitation of natural resources and contributing to increasing state budget revenue.

1.4. Factors affecting investment attraction and investment location selection in the tourism industry

1.4.1. Economic, political - social stability and investment law

This is a prerequisite to minimize the risks of investment capital beyond the control of the investor. Economic and political instability not only causes investment capital to stagnate and narrow, but also causes domestic investment capital to flow back abroad, seeking new, safer and more attractive shelters.

- About policy

The investment legal system of the host country must ensure the safety of capital and personal life for investors when their investment activities do not harm national security, ensure the legality of private property and a healthy competitive environment, and ensure the transfer of profits to investors. The more synchronous, strict, and advanced the content of the legal system is,

But the more open, in accordance with international law and practice, the higher the ability to attract investment capital.

- Economically

+ Market factors

Market size and growth potential are important factors in attracting investment. When referring to market size, total GDP - an indicator measuring the size of the economy - is often of interest. According to UNCTAD, market size is an important basis for attracting investment in all countries and economies. Many studies show that investment capital is a function of the market size of the country inviting investment. Other studies also show that GDP growth is also a good signal for attracting investment capital. In addition, many investors with a "shortcut" strategy will also boldly invest in places with high expectations of rapid growth in the future and opportunities to expand to neighboring markets. When choosing a location to invest in a locality, investors also target densely populated areas - their potential market.

+ Profit factor

Profit is often seen as the ultimate motive and goal of investors. In the era of globalization, establishing companies abroad is considered a very effective means for MNEs to maximize profits. This is done through establishing close links with customers and markets, providing support services, sharing business risks and avoiding trade barriers. However, in the short term, profit is not always the top consideration.

+ Cost factor

Many studies show that most investors invest in countries to exploit the potential of resources, landscapes, and cost advantages. In particular, labor costs are often considered an important factor when making investment decisions. Many studies show that for developing countries, labor cost advantages are the most important.

Low labor costs have been an opportunity to attract foreign direct investment in recent decades. As labor costs rise, foreign investment tends to decline markedly.

In addition, investors are also interested in minimizing transportation costs, directly controlling the supply of raw materials at low prices, receiving investment and tax incentives, as well as land use costs. In addition to transportation costs and other cost aspects. Meanwhile, the most important factors that help attract foreign investment to Thai localities are low labor costs, preferential investment conditions of local governments and the availability of natural resources.

1.4.2. Advantages of local natural resources and tourism resources

Human resources

When deciding to invest in the tourism industry in a developing country, companies also aim to exploit the young and cheap human resources in these countries. Usually, the source of unskilled labor is always fully met and can satisfy the requirements of companies. However, it is only possible to find good managers, as well as qualified and experienced technical staff in big cities. The motivation and working attitude of workers are also important factors in considering and choosing a location for investment.

Natural resources

The abundance of cheap raw materials is also a positive factor in attracting domestic and foreign investment. In the case of Malaysia, the country's natural resources have the strongest attraction for FDI. Foreign investors flock to this country to target its abundant resources of oil, gas, rubber, wood, etc. Especially in Southeast Asian countries (ASEAN), exploiting natural resources has been an important goal of many companies in recent decades. In fact, before the appearance of China in the field of attracting foreign investment, FDI was only focused on a few countries with large markets and abundant natural resources. There are only 5 countries

Brazil, Indonesia, Malaysia, Mexico and Singapore attracted more than 50% of the world's FDI during the period 1973-1984.

Resources, tourist landscape

The development of the tourism industry is closely linked to the exploitation of natural resources, historical and cultural relics, so natural resources such as mountains, forests, seas, islands, rivers, rapids, lakes, natural landscapes, historical relics, people... are very important factors affecting investment attraction in the tourism industry. Localities with many conditions for tourism resources will have many favorable conditions to attract investment capital in the tourism industry. Tourism resources are all factors that can stimulate tourists' motivations, which are used by the tourism industry to create economic and social benefits, all of which are called tourism resources.

1.4.3. Development of infrastructure

Technical infrastructure

The development of the economic infrastructure of a country and a locality receiving investment is always the top material condition for investors to quickly pass decisions and implement committed investment projects. A comprehensive development infrastructure must include a synchronous and modern transportation system with ports, roads, warehouses and means of transport capable of covering the country and having international scope; a postal and telecommunications system with modern audio-visual equipment, which can be connected to a unified national network and connected to the world; a complete and conveniently distributed electricity and water system for production and business activities as well as social life; a network system providing other types of services (healthcare, education, entertainment, customs services, finance, trade, advertising, engineering, etc.) that is widely developed, diverse and of high quality.

Social infrastructure

In addition to technical infrastructure, the investment attraction environment is also greatly influenced by social infrastructure. Social infrastructure includes the system

health and health care for the people, education and training systems, entertainment and other services. In addition, social ethics, customs, religion, culture ... also make up the general picture of the social infrastructure of a country or a locality. World Bank research shows that the investment trend in Southeast Asia has many positive changes thanks to "Discipline of the labor force" as well as "Political and economic stability" in many countries in this region.

1.4.4. Development of the labor force, science and technology level and domestic and local business system.

A highly skilled workforce is a very important condition for a country and locality to overcome the limitations of natural resources and become attractive to investors. The lack of skilled technical personnel, leaders, senior managers, talented entrepreneurs and backwardness in science and technology will make it difficult to meet the requirements of investors to implement their projects, slowing down and narrowing the flow of investment capital into a territory and locality.

A developed system of enterprises in the territory and locality, capable of absorbing transferred technology, and being an increasingly equal partner with investors is a necessary condition for the territory and locality receiving investment to be able to attract more and more effective investment capital flows.

1.4.5. Policy to attract local investment capital

A liberalized trade policy will ensure the ability to import and export machinery, equipment, production materials, and products, which means ensuring convenience and continuous connection of investment activities of domestic and foreign investors.

Credit support, along with financial services and guarantees from the Government, export credit agencies and multilateral financial organizations such as the World Bank, ADB... have played, are playing and will play a huge role in increasing investment flows, especially foreign direct investment, into countries and localities.

1.4.6. Development of national administration

The major obstacle that discourages investors is cumbersome and complicated administrative procedures that waste time and money, causing loss of investment opportunities. An effective administrative apparatus determines the success not only of attracting investment capital but also of the entire process of mobilizing and using capital for development investment of each country as well as each locality. That apparatus must be unified, compact, clear and responsive. For administrative procedures, legal regulations must be simple, public and consistent, implemented by highly qualified, well-educated, disciplined and law-abiding people.

1.4.7. Effectiveness of investment attraction projects implemented in the industry

Because the goal of capital investment is to make a profit, therefore, if the investment attraction projects have been implemented with high profit margins, it will encourage and strengthen the confidence of investors to continue investing in expanding production, and at the same time, they are also bridges to convince other investors to confidently invest. This will help the investment capital continue to increase. On the contrary, if the projects being implemented are not effective and often lose money, it will discourage investors, because they think that the investment environment is risky.

In short , investment capital has been, is and will be sought out by countries and localities with stable socio-economic conditions; a complete, open, but reliable investment legal system with high international standards; flexible and attractive investment incentive policies; well-prepared tourism infrastructure; highly qualified and cheap labor in the tourism sector; effective business; especially, the participation of that country or locality in regional and international economic organizations, as well as strict compliance with the regulations of the organizations... will be factors that ensure trust and attract investment capital flows, even stronger than offering high financial incentives... That is, investment capital only prefers to seek out safe investment places, where capital is used effectively, rotates quickly and has low risks.

1.5. Evaluation of investment attraction effectiveness

To evaluate the effectiveness of attracting investment capital, people are usually interested in the volume of investment capital, the ability to mobilize investment capital, the rate of capital growth, the increasing and decreasing trends of attracted capital over the years... specifically:

- Evaluate the volume of capital invested in a locality compared to other localities with similar conditions and positions using absolute and relative values.

Absolute difference = GTĐP1 – GTĐP2

Relative difference =

GTĐP1 x 100% GTĐP2

GTĐP1: Locality 1's attracted land value GTĐP2: Locality 2's attracted land value

- Investment capital mobilization:

Investment capital mobilization capacity =

Amount of capital raised Cost of capital raised

- Compare the increase and decrease of mobilized capital over the years

Absolute increase or decrease = GT n – GT n-1

Relative difference =

GT n – GT n-1 x 100% GT n-1

Growth rate bq =