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JOE PERI, Ph.D., Full Professor MAJA NIKI RADI, M.Sc., Assistant majanr@fthm.

hr Faculty of Tourism and Hospitality Management, University of Rijeka Primorska 42, p.p. 97, 51410 Opatija


Tourism-related capital investment has grown massively during the last few decades and is predicted to continue growing after 2010. Also, there is increasing motivation on the part of all stakeholders in tourism sector to make this investment more sustainable. Foreign direct investments (FDI) are one of the possible funding sources in the tourism sector, particularly in developing countries. Developing countries, if they wish to promote sustainable development in the context of tourism, should be extremely cautious in attracting FDI in this sector. It is necessary to attract sustainable FDI. Central questions which will be addressed in this article are what is meant by sustainable FDI in the tourism sector, what the basic dimensions of such investments are and why should developing countries need them. These questions will be addressed through the literature review of FDI in tourism sector and their relationship to principles of sustainability, the results of up to date researches of this topic. The authors will try to draw the attention of IPAs in developing countries to the main components of all four dimensions of sustainable FDI in tourism sector. The final aim of the authors is to inspire the IPAs in developing countries to enter the fourth generation of investment promotion in hope that this will ensure the sustainability of tourism sector in such countries. Key words: foreign direct investment, tourism sector, sustainable development, competitiveness JEL Classification: F 21, F 23, L 83, Q 01

INTRODUCTION In developing and transition countries tourism sector represents a promising path towards an economic and social development. Further development of tourism sector in such countries is in need of FDI (see Hardin and Holmes 1997, 2; UNCTAD 2007, 13; Endo 2006, 613). It is necessary to keep in mind that the tourism sector, more than any other sector, has to base its development on the principles of sustainability. Given that tourism development in developing countries is based on FDI, it is logical that they must also be sustainable. The purpose of this research is to examine all

dimensions of sustainable FDI in tourism sector as well as the main components of these dimensions. The paper is divided into four chapters that comprise one coherent text. Having presented the introductory remarks, the paper continues to demonstrate the general tourism investment trends in developing countries. This is followed by the second section which draws attention to the core characteristics of FDI in tourism sectors and their importance for the development of the tourism sector in developing countries. Section 3 investigates the main dimensions of FDI in tourism sector needed to be called sustainable and explains why sustainability may be at risk when FDI flow in tourism sector. Finally, section 4 provides some basic guidelines to ensure the sustainability of FDI. Lastly, the conclusions and final remarks will be presented and a complete list of references will be included. 1. TOURISM INVESTMENT IMPORTANCE, TRENDS, ALTERNATIVES Global FDI inflows record a significant growth during the period 1980-2008. FDI began it strong growth in 1980 and intensified it till the end of the 20th century. After uninterrupted growth in FDI activity till 2000, global FDI inflows dropped in the period 20012004. FDI inflows begins its growth again 2005 and since then recorded a constant growth till the end of 2007. After a decline in global FDI inflows from a record of about US$2 trillion in 2007 to around US$1.7 trillion in 2008 and to US$1.2 trillion in 2009, flows are expected to stage only a modest recover in 2010. The following figure shows above mentioned trends in global FDI. Figure 1: FDI inflows, global and by group of economies, 1995-2010

Source: Global and Regional FDI Trends in 2010, Global Investment Trends Monitor, UNCTAD, No. 5, 17 January 2011 *preliminary estimates

As can be seen from figure, developing and transition economies, for the first time, absorbed more than half of global FDI flows. According to the World Bank classification, developing countries are countries with low or middle levels of GNP per capita as well as five high-income developing economies - Hong Kong (China), Israel, Kuwait, Singapore, and the United Arab Emirates. On the other hand, transition economies are countries moving from centrally planned to market-oriented economies. These countries (which include China, Mongolia, and Vietnam, former republics of the Soviet Union, and the countries of Central and Eastern Europe) contain about one-third of the world's population. Several countries with transition economies are sometimes grouped with developing countries based on their low or middle levels of per capita income, and sometimes with developed countries based on their high industrialization. More than 80 percent of the world's population lives in the more than 100 developing countries (World Bank). In the 1990s, FDI inflows became the primary source of external capital in many developing and transition countries. Country after country in the developing world, advised by international organizations, made attracting FDI the heart of its development strategy. But this strategy was risky on three issues: 1. FDI flows might not happen. Of the quarter of global FDI flows which go to developing countries, 80 per cent are concentrated in only 12 middle-to-large countries. 2. There was the risk that FDI would disrupt or destroy existing agricultural and/or industrial production, but not deliver the promised benefits of sustained economic growth and technology transfer. 3. There was the risk that FDI inflows would overcome domestic capacities for environmental and social oversight, generating net costs rather than benefits to local communities and national revenue flows (Zarsky 2005, 4). Simply put, the role of FDI as an elixir, a panacea or a miracle drug for development was to demanding (Yingqi and Balasubramanyam , 66, OECD 2002, 6, Zarsky and Gallagher 2010, 13). Developing countries seek to attract FDI in order to promote development. In order to achieve this goal, they have already gone through several phases of developments. It is possible to distinguish four generations investment promotion functions and strategies (VCC&WAIPA 2010, p. 10). The first generation investment promotion involved the liberalization of FDI regimes and adoption of market-friendly policies. First stage was a passive stage in terms of seeking investment, but it was necessary for ensuring that host countries would be open to receive FDI. At the second generation of investment promotion many IPAs were established to facilitate foreign investors, and investment promotion became pro-active through the marketing of the host country as an investment location. Third generation investment promotion is this stage in which many IPAs are today. Its main characteristic is the targeting of specific industries that are deemed to be a good match for the host country. Now began the fourth stage or a fourth generation of investment promotion, in which IPAs focus on attracting sustainable FDI. This last stage resulted from a growing awareness that not all FDI is equally desirable. Investment is the lifeblood of economic growth sustainable or otherwise (Zarsky 2005, 1). Capital for investment may come from two sources: domestic and foreign. Domestic sources are the largest, but foreign investment can be strategically decisive in two ways:

transnational corporations (TNCs), the primary source of FDI, can potentially transfer technologies, skills and global market links which are lacking domestically, thus stimulating industry growth; buying into the rules which govern international investment can dramatically shape both the domestic investment climate and domestic policy options (Zarsky 2005, 1). Foreign tourism companies, beside the injection of fresh capital for new tourism infrastructure, also help to attract foreign tour operators and tourists, and there are many emerging tourism destinations competing for these objectives (Yunis, 2008, 105). But it is always convenient to adopt a two-split approach promote both foreign and domestic investment in the sector to avoid becoming over-dependent on the former (Yunis, 2008, 105). Domestic investments in tourism usually provide a better reflection of the cultural characteristics of the country and this is a key element in emphasizing the unique natural characteristics of any destination and hence in offering tourist a unique selling proposition (Yunis, 2008, 105). Attraction of FDI is progressively more important for developing countries because FDI is important source of development finance. But it should be kept in mind that FDI is simply a source of capital. The impact of FDI is dependant on what form it takes (Gardiner 2002, 2). The nature of FDI is complex and it is always a crucial question how FDI might be better applied to support more sustainable forms of development. Tourism is a specific sector and it must develop in sustainable manner. An important element of sustainable tourism industry is economic viability, not only social and environmental viability. Tourism development is essentially driven by business. Governments play a significant role as partners in tourism development to an extent which is not replicated in most other industries through their extensive engagement, by all levels of government, in tourism planning and strategy, marketing, infrastructure development, land use planning and responsibility for parks and public and natural attractions, and through their role in managing environmental and community impacts of tourism (Dwyer and Spurr 2011, 1). Tourism investment supports tourism development. It is very important both to the individual firm, ensuring its future productive viability, and to the destination, adding strongly to the economys overall capacity to satisfy tourism demand (Dwyer, Forsyth and Dwyer 2010, 459). 2. FOREIGN DIRECT INVESTMENT IN TOURISM FDI is often considered one of the most effective engines for harnessing capital, infrastructure, knowledge and access to global marketing and distribution chains. All of the above is a critical for the tourism (Peri and Niki Radi 2010). Foreign direct investment in tourism (TFDI) is a category of international investment whereby an entity resident in one economy (direct investor) acquires a lasting interest in a tourism specific enterprise engaging in tourism growth fixed capital formation (a direct investment enterprise) resident in an economy other than that of direct investor (UNWTO, 2004, 22). Determinants of TFDI are the same as in the other industries. These determinants include cultural/historical/geographical distance, political and/or economic risks, level of economic development, socio-economic environments,

privatization of the industry, liberalization of FDI regime, taxation, investment incentives, availability and quality of hard and soft infrastructures and corporate strategies or company-specific factors (Endo, K., 2006, 601). It is possible to distinguish three trends that characterize TFDI in developing countries and economies in transition (UNCTAD, 2007, 13). Firstly, even though tourism is the largest industry in many countries, it appears to be one of the least globalized. Contrary to perceptions, FDI in tourism is still rather low in developed as well as developing countries compared to the levels of FDI in other economic activities, including other services industries. This is partly because TFDI is concentrated in just a few of the many related activities covered by the definition of tourism, mostly hotels and restaurants, and car rentals. As can be seen from the following table, there is very little FDI in high-profile and important activities such as tour operations, reservations systems and airlines. Table 1: Most frequent tourism FDI activities TSA component Frequency with which FDI appears to occur Most frequent Occasional Rare Hotels and similar Restaurants and similar Second homes Passenger transport rental equipment Railway passenger transport services Air passenger transport services Road passenger transport services Water passenger transport services Passenger transport supporting services Travel agencies and similar Cultural services Sports and other recreational services
Source: FDI in Tourism: The Development Dimension, UNCTAD, 2007, p. 14

Secondly, tourism FDI is concentrated primarily in developed countries. The third trend is that tourism related FDI to developing countries is increasing. This growth can be expected to continue over the next five years, according to respondents to the UNCTAD survey of international hotel investors. Despite the small global FDI in tourism, many developing countries cannot ignore the potential roles played by tourism TNC (Endo, K., 2006, 613). FDI allows host countries to be integrated into international tourism networks which will lead to increase in the flow of tourists and generating more income from tourism-related activities (Endo, K., 2006, 613). TFDI plays a quite important role in tourism sector of many developing countries. The need for foreign investment in developing countries will depend on a number of factors: political orientation, the level of current foreign investment, general economic and tourism development levels and the type, scale and stage of tourism

development required (Kusluvan and Karamustafa 2001, 187). Foreign investment and know-how are seen as essential elements in creating and upgrading tourism-related infrastructure (FDI Editor, 2007). It is also important to note that foreign investment can give rise to more investment in tourism in total (Forsyth, Dwyer, 2003, 72). 3. SUSTAINABILITY AT RISK As already mentioned, investment promotion agencies (IPAs) are moving toward the fourth generation of investment promotion targeting sustainable FDI. Sustainable FDI is FDI that contributes to a host countrys sustainable development. It also must be kept in mind that the contribution of FDI to development differs considerably depending upon the sector: FDI in natural resources, FDI in infrastructure, FDI in agribusiness and horticulture, FDI in manufacturing and FDI in services (Moran 2010, 4). The main components of sustainable FDI in tourism sector shows the following figure. Figure 2: Four dimensions of sustainable FDI in tourism sector






Source: According to Investment Promotion Agencies and Sustainable FDI: Moving toward the fourth generation of investment promotion, Report of the findings of the VCC Waipa Survey on Foreign Direct Investment and Sustainable Development, June 25, 2010, p. 10

Sustainable FDI can be defined in terms of four dimensions: economic development, environmental development, socio-cultural development and good governance. For an investment to be considered sustainable it need to perform well on all of the sustainable development dimensions (VCC&WAIPA 2010, 10).

3.1. Economic development dimension FDI can potentially bring two broad kinds of economic development to developing countries: economic growth (increase in income, increase in local employment, increase in foreign exchange and improvements in income distribution) and productive capacities (transfer of technology and management practices, spillovers, externalities, stimulation of domestic investment, increases in productivity of domestic firms, increased integration in global markets and decreased cost/increased rates of R&D and innovation) (WWF 2003, 6). But there is also the risk that FDI will prevent the economic development process itself. FDI in tourism offers many opportunities but it can also lead to a number of costs. If developing countries want to take full advantage of FDI in tourism, a coherent and integrated policy framework is need. The impacts of FDI on the economic development can be traced through three main routes: employment, foreign exchange and technology transfer. Employment The major challenge is the need to develop human resources, particularly local personnel, both for reasons of delivering quality services to tourists and enhancing the general skills of the local workforce (Nsiku and Kiratu 2009, 23). The tourism sector can create and also destroy jobs. It creates jobs in two ways: immediately through employing local citizens in hotels, restaurants, and entertainment and tourist services that cater directly to tourists or through the multiplier effect (Haley and Haley 1997, 598). The tourism industry can also destroy jobs or reduce job creation, and to the extent that it does, policymakers have to adjust the multiplier effect. If tourism displaces farmers, loggers, fishermen or other productively employed individuals, it destroys these individuals jobs and those of individuals in related service and support industries (Haley and Haley 1997, 598). To the extent that TNCs may provide the first or the only hotels in some locations in developing countries, or the largest hotels, their contribution to employment may be significant. Moreover, even where domestic hotels dominate, foreign hotels can still make a positive contribution to complement the overall employment figures in the sector (UNCTAD 2007, 68). Foreign exchange For the majority of developing countries, tourism is one of their top five sources of foreign exchange, and for up to one third of developing countries, it is their main sources of foreign exchange (Arestis, Baddeley and McCombie 2007, 253). Additional tourism has potential to create a net benefit for a host country. Extra tourism earns foreign exchange which has a value to the economy higher than its face value because of the existence of trade distortions such as tariffs i.e. an extra $1 exchange can be used to purchase goods and services which are worth more to consumers than $1 since the market price (including the tariff) is higher than this (Forsyth and Dwyer 2003, 70). Multinational hotel companies may lead to decreasing economic benefits to developing countries from international tourism through the repatriation of profits, expatriate labours income, management and franchising fees and imports (Kusluvan

and Karamustafa 2001, 184). These outflows of capital decrease foreign exchange earnings that might have accumulated in the case of local ownership, management and employment and impact negatively on the balance of payment. In determining incremental foreign exchange outflows resulting from foreign investment in the tourism industry, it is necessary to specify what would have happened if this investment did not happen (Dwyer, Forsyth and Dwyer 2010, 522). Technology transfer FDI has a possibility to transfer a technology including managerial expertise. This transfer also includes a demonstration effect. According to UNCTAD (2007), most international hotels have elaborate training programmes for their staff, including formal modular education packages that can run from housekeeping skills to top level accountancy, arranging seminars in various parts of the world to bring hotel management in a particular region up to date on new techniques, methods and procedures in all phases of hotel operations, marketing and sales, and international placements within the chains different locations. In developing destinations increased skills levels of management have been essential in catering to the demands of foreign tourists and in maintaining the international competitiveness of the local product (Dwyer, Forsyth and Dwyer 2010, 521). 3.2. Socio-cultural development dimension Although multinational enterprises (MNEs) have become one of the key drivers of the world economy and their importance continues to grow around the world, the activities of multinational enterprises abroad have also stimulated much controversy and social concerns. The impacts of FDI on the socio-cultural development can be traced through three main routes: cultural consequences, transfer of software of skills and destinations positive image. Cultural consequences Considering that the tourism is more than an economic activity, it is necessary to manage growth of the sector and to have clear guidelines to ensure that growth brought about through FDI is compatible with national and sectoral objectives of a host country (Nsiku and Kiratu 2009, 23). Multinational hotels are often accused of transforming the developing world towards westernisation in value sys tems, beliefs, life-styles and consumption patterns (Kusluvan and Karamustafa 2001, 186). A degradation of physical, cultural and social environments will accelerate tourism developments fall and disrepute. The industry will also suffer if the degradation continues to destroy the areas physical and cultural attractions; it will curved into disgrace if the local authorities, desperate to maintain the industrys jobs and tax revenues, allow the markets to turn towards the more undesirable niches (Haley and Haley 1997, 601). The long-term social and economic effects could have enormously harmful consequences for host nations. Tourism may also produce positive community impacts relating to the growth of local cultural events, new attraction, support for community entertainment, protection of historic buildings, more community infrastructure and increased local or regional pride (Forsyth and Dwyer 2003, 71). It can also be a tool for education and increased knowledge as well as for enhancing and protecting unique cultural aspects of

regions. Higher level of involvement of local communities in tourism development, events and activities guarantee development of beneficial social and cultural impacts and reducing of negative impacts. Transfer of software of skills Software of skills related to the tourism sector including personnel management, financial systems and marketing. The knowledge and skills transfer in the tourism industry is highly value because personal skills are critical at all levels of the tourism chain. MNEs often provide a systematic training programme to staff such as on-the-job training, films, lectures, courses at headquarters and instruction manuals (UNCTAD 2007, 71). However, it is also necessary to have in mind that employment opportunities, especially in managerial positions for locals, may be limited due to the use of the expatriate labour with limited opportunities for career advancement of local employees. In order to maintain firm-specific advantages, it is claimed that key management positions may be held by expatriates, and that only lower-level personnel requiring low skills are trained for reasons of service quality and performance (Dwyer, Forsyth and Dwyer 2010, 525). Destinations positive image Foreign-owned companies can help build a positive image of the destination. Because holidays are brought sight unseen, expect for repeat visitors, the knowledge that home-familiar hotels exist in developing countries encourage and reduce the information search cost of potential tourists (Kusluvan and Karamustafa 2001, 186). It is therefore understandable that multinational hotel companies with a good reputation of quality services enhance a destinations positive image. 3.3. Environmental development dimension The impacts of FDI on the environment can be traced through three routes: environmental performance of MNCs, economic growth and the environment and national and global environmental regulation (WWF 2003, 7; Araya 2010, 49; UNCTAD 2007, 84). Environmental performance of MNCs Two key strategic and management decisions of MNCs affect their environmental performance: the choice of technology (whether to invest in newer, cleaner best available or to dump older, dirtier technologies) and management practice (whether the corporate parent has embraced a strong EMS (environment management system) and enforced it throughout its overseas subsidiaries and supply chains). One of the promises of FDI for sustainable development is that MNCs, especially from the OECD, will help to drive up standards in developing countries by transferring both cleaner technology and better environmental management practices. Many developing countries lack the capacity and/or political will to enforce environmental supervision of industry. In this context, MNCs are able to selfregulate and have one of three choices: 1) follow local practice and norms; 2) comply with local regulations, regardless of local practice, 3) adopt company-wide global

standards based on home country standards or 3) adopt international standards or best practice norms for corporate social responsibility (Araya 2010, 28). But the evidence shows that MNCs perform no better than domestic companies. The environmental performance of a particular MNC in a particular locale depends on: 1) the strength of local regulation; 2) the industry it is in; and 3) the particular company culture with respect to environmental commitment and corporate social responsibility (WWF 2003, 8). Economic Growth and the Environment One of the potential benefits of FDI is that stimulates economic growth. Without adequate regulation, however, economic growth is likely to accelerate environmental degradation - even if MNCs are good performers - through scale effects. If FDI was channelled into sustainably produced and sustainably transported good and services, then the overall impact on the environment would presumably be neutral or low. While acknowledging that environmental impacts can worsen with an increase in the rate of growth, some economists argue that, over time, economic growth generates environmental improvements. Reasons include the substitution of less polluting consumer goods; changes in the structure of industry; and greater political demands for environmental regulation. National and global environmental regulation Environmental and resource management is largely the preserve of nationstates. How does FDI affect national (and sub-national) environmental regulation? There is evidence that MNCs themselves, wielding their substantial bargaining power, can help to drive local standards upor down. The asymmetric bargaining power of MNCs is most troublesome in the context of the intense competition for FDI in both developed and developing countries. Given the absence of global environmental standards, would-be host governments seeking to attract FDI are reluctant to make higher-than-average environmental demands on individual MNCs. They may even be tempted to offer lower-than-average environmental demands to enhance the attractiveness of an overall package. This problem, the impact of intense global competition for FDI - absent common environmental norms - is thus likely to inhibit the rise of environmental standards. Overall, it is possible to conclude that there is no consistent aggregate relationship between FDI and environmental quality: FDI can have positive, negative or have no impact on environmental quality. Inward FDI can possibly be associated with a worsening environment and can also be associated with an improved environment (UNCTAD 2007, 84). In distinction to other impacts, environmental impacts are typically not attributed to differences in the ownership and control of tourism facilities in host countries. Large-scale facilities, foreign-owned or domestic-owned, destroyed valued environments and have distanced local populations. The problem is not so much in the foreignness of the ownership but in the nature of the planning and zoning laws that permit such constructions (Dwyer, Forsyth and Dwyer 2010, 527). According to UNCTAD, key factors determining the extent of these problems include the type of tourism, physical planning and management, the capacity and quality of infrastructure,

regulations and their monitoring, and the degree of environmental awareness of all stakeholders governments, populations including local communities and the private sector. 3.4. Good governance dimension The IPA can play an essential role in developing sustainable tourism (UNCTAD 2010, 9). First, it can target foreign investors in economically, socially and environmentally sustainable projects. Second, in can work to enhance linkages between established investors and local firms in the tourism sector. Business linkages support local economic development and may serve to transfer knowledge in areas such as environmental conservation to suppliers and contribute to better working conditions for their employees. The table below provides examples for improving governance in FDI promotion and shows mechanism and tools in terms of the four building block of good governance in investment promotion. Table 2: Ingredients of good governance in investment promotion Requisites for Examples of how to Mechanisms/instruments/practic good improve governance es governance Predictability Clear policies and a legal Strong advocacy role of framework for investment investment promotion agencies (IPAs) Streamlined and simple rules and regulations Online road maps for investors governing investments IPA investment implementation Effective investment support services facilitation services Introduction of ethical Code of conduct Accountability standards for civil servants Client charters Anti-corruption instruments Anti-corruption legislation and and measures enforcement (anti-corruption Dispute resolution board) mechanisms for investors Investment ombudsman Easy availability of Investment regime data on Transparency information for investors website Timely disclosure of Investment guides information on changes in Online application and tracking the investment regime system for permits and licences Information collection and Client charters sharing of national data on Analysis of FDI data by IPA and FDI and impact of frequent publication of FDI international investment on trends and impact the economy Participation Regular public/private National business council and sector dialogue on efforts local chamber of commerce and to improve the investment industry

environment Consultations with civil society on legislative and regulatory changes that will influence businesses

Involvement of NGOs and labour organizations in consultations on policy decisions

Source: UNCTAD, Notes on Good governance in investment promotion, strengthening the investment climate: a blue book on best practices (Geneva, UNCTAD, 2004).

Growing attention to sustainable tourism makes it necessary for the IPA to consider how it can contribute to reducing negative impacts and ensuring that economic benefits increase to local communities (UNCTAD 2010, 59). If one developing country wish for FDI in tourism to be successful, wide-ranging collaboration and coordination between both public and private parties in the industry is required. 4. THE WAY FOREWARD An investment promotion strategy that is focused only at FDI volume will not automatically be successful in attracting sustainable FDI. Important starting point for the design of global or regional investment rules which promote sustainable development is one size doesnt fit all (WWF 2003, 23). It is also necessary to always keep in mind that four basic principles are embedded in sustainability (Shaw and Williams 2007, 214): development should be holistic; it should preserve essential ecological processes, protect cultural heritage and promote economic development; it should promote intergenerational equity; and it should also promote intragenerational equity. As already mentioned, sustainable FDI is investment that contributes deliberately and as much as possible to all the dimensions of sustainable development. While recognizing and encouraging the use of many internationally-recognized norms that provide voluntary codes of conduct for investors in specific areas within these dimensions of sustainable FDI, it is necessary to go well beyond these and develop approaches that establish principles, criteria and metrics for sustainable FDI (Sauvant and Davies 2010, 30). These would facilitate a greater understanding within a global, holistic and long-term perspective of how to improve the quality, and not just increase the quantity, of FDI in developing countries. CONSLUSION Tourism is a priority sector in the increasing number of economic strategies in developing countries. Developed countries today enjoy considerable competitive advantages in tourism. However for the very same reason developing countries can substantially improve their competitiveness in tourism by using some of the comparative advantages they still enjoy and which are absent or already over-exploited in the developed world. Many developing countries are looking to tourism FDI as a promising avenue for further development of tourism because they lack their own capital. But at the same time they must keep in mind the concept of sustainability. In order to truly harness the power of tourism growth as a driver for international development, such growth must be sustainable in nature. However,

developing countries, if they wish to promote sustainable development in the context of tourism, should be extremely cautious in attracting FDI in this sector. It is necessary to attract sustainable FDI i.e. investors that respect all four sustainable dimensions when they establish their infrastructures and operations. Attracting FDI in the tourism sector is often difficult, and there is a growing demand for support in this area among international promotion agencies. IPAs can play an important role in the development of a countrys tourism industry. But the problem is that most IPAs focused on attracting as higher as possible volume of FDI. If developing countries want to talk about sustainability in tourism it is time that their IPAs move toward the fourth generation of investment promotion targeting sustainable FDI. According to the authors' knowledge, this article for the first time examines in one place all four dimensions of sustainable FDI in the context of tourism - economic development, environmental development, socio-cultural development and good governance. Although in recent years many developing countries have become more open to FDI in tourism, their IPAs still have not entered into the fourth generation of investment promotion i.e. they are still not fully aware of the importance of attracting sustainable FDI in tourism. To what extents have the developing countries involved in their investment policy attraction of FDI in tourism sector, especially those in South-eastern Europe, and clearly bearing in mind sustainability dimensions, is an area for further research. REFERENCES Araya, M.: FDI and the Environment: What Empirical Evidence Does and Does Not Tell Us in Zarsky, L.: International Investment for Sustainable Development Balancing Rights and Rewards, Earthscan, London, Sterling, VA, 2005 Arestis, P., Baddeley, M., McCombie, J. S. L.: Economic Growth: New Directions in Theory and Policy, Edward Elgar Publishing, 2007 Dwyer, L., Forsyth, P., Dwyer, W.: Tourism Economics and Policy, Channel View Publications, Cheltenham, UK, 2010 Dwyer, L., Spurr, R.: Tourism Economics Summary, STCRC Centre for Economics and Policy, 2011 Endo, K.: Foreign direct investment in tourism flows and volumes, Tourism Management 27, 2006 FDI Editor: Cruise control, 2007, Forsyth, P., Dwyer, L.: Foreign Investment in Australian Tourism: A Framework for Analysis, The Journal of Tourism Studies, Vol. 14, No. 1, May 2003 Gardiner, R.: Foreign Direct Investment: A Lead Driver for Sustainable Development?, Towards Earth Summit 2002, Economic Briefing No. 1 Haley, U. C. V., Haley, G. T.: When the tourist flew in: strategic implications of foreign direct investment in Vietnams tourism industry, Management Decision 35/8, 595-604, 1997 Hardin, A., Holmes, L.: Service Trade and Foreign Direct Investment, Australian Government Productivity Commission, Industry Commission Staff Research Paper, November 1997

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