Foreign Direct Investment and Transnational Corporations in Tourism in Developing Countries

FDI in Tourism: The Development Dimension, UNCTAD Current Studies on FDI and Development, No. 4 (New York and Geneva: United Nations, 2007)

93 Pages Posted: 12 May 2014

See all articles by Zbigniew Zimny

Zbigniew Zimny

Vistula University, Faculty of Business and International Relations

Date Written: 2005

Abstract

International tourism is one of the largest export industries in a great number of developed and developing countries. In many of the latter it is the main source of foreign exchange revenues. The tourism literature tends to ascribe to transnational corporations (TNCs) and foreign direct investment (FDI) a large and often dominant role in international tourism of developing countries. References – usually general, not substantiated with data – to a very high or even excessive dependence of developing countries’ tourism on foreign ownership are frequent. This contrasts with an almost total lack of interest in tourism in TNCs and FDI literature. Except for a few articles, usually very old, on the hotel industry, the TNC literature, which typically examines thoroughly industries with significant TNC roles, has not paid much attention to tourism. Furthermore, an increasing number of developing countries has been trying, with mixed success, to attract FDI into tourism. Is there then too much or too little FDI in tourism in developing countries? This may, of course, vary from country to country, but if there is "too much", what would be policy implications? Should countries with too much FDI try to reduce it or, at least, not to let it grow, by imposing, for example, entry restrictions on foreign investors in tourism? This would be out of line with the dominating trend in developing countries’ FDI policy, which has not only been, for some two decades, its liberalization, but increasingly, also FDI promotion. The purpose of the paper is, applying concepts, definitions and methodologies from the TNC literature, to look into some of these puzzles, especially those related to the role of TNCs and FDI in tourism in developing countries. Given the prominence attributed to TNCs, how globalized is tourism in terms of foreign ownership and the role of foreign affiliates, as compared to other industries? If TNCs are so dominant in tourism in developing countries, and tourism is a large or often one of the largest activities in these countries, tourism should also be one of the largest FDI industries, accounting for a high share of foreign capital inflows. The paper, after addressing these questions, examines also the impact of FDI in the hotel industry and includes a case study on the role of FDI in Tanzania’s tourism.

Keywords: Tourism, Foreign Direct Investment, Transnational Corporations, Developing Countries, Tanzania

JEL Classification: F21, F23

Suggested Citation

Zimny, Zbigniew, Foreign Direct Investment and Transnational Corporations in Tourism in Developing Countries (2005). FDI in Tourism: The Development Dimension, UNCTAD Current Studies on FDI and Development, No. 4 (New York and Geneva: United Nations, 2007), Available at SSRN: https://ssrn.com/abstract=2435668

Zbigniew Zimny (Contact Author)

Vistula University, Faculty of Business and International Relations ( email )

ul. Stokłosy 3
Warsaw, 02-787
Poland

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