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A RESEARCH PROPOSAL ON
CHALLENGE AND OPPORTUNITY OF INVESTMENT IN TOURISM: IN CASE OF
ARBAMINCH TOWN -----REGIONAL STATE, ETHIOPIA
BY:
SHAMBEL DEMLIE
ID: - SSHR/1909/12
2023
ARBAMINCH, ETHIOPIA
Acknowledgments
First of all, my Praise goes to the Almighty God without whom nothing would have been thought
and done. My sincere appreciation and gratitude also goes to my Advisor Mr Tefera--------- for
his continuous follow up, comment and in-depth and constructive advice. I am also indebted to
appreciate my friends who are giving me useful and fruitful comments and advices for my study.
Abstract
The main aim of this study is to examine the challenge and opportunity of investment in
tourism in the selected area. Arbaminch has potential for attracting tourists because the city is
the entry point for most of international tourists and the transit point of lower omo river,
hamer and konso . Although the city has also much to offer, investment is not sufficient for
upgrading its attractions and tourist service providing institutions. The main purpose of this
study is to present specifically a situation of tourism investment in Arbaminch. The study will
assess challenges and opportunities of investment in tourism sector in the town. The design of
the study is descriptive and has employed both quantitative and qualitative research
approaches.
Table of Contents
Acknowledgment.............................................................................................................................2
Abstract............................................................................................................................................3
CHAPTER ONE..............................................................................................................................6
INTRODUCTION...........................................................................................................................6
1.1 Background of the Study........................................................................................................7
1.2 Statement of the Problem.......................................................................................................8
1.3 Objectives of the Study..........................................................................................................9
1.3.1 General Objective..........................................................................................................9
1.3.2 Specific Objectives.........................................................................................................9
1.4 Research Questions................................................................................................................9
1.5 Significance of the Study.......................................................................................................9
1.6 Scope of the Study...............................................................................................................10
1.7 Limitations of the Study.......................................................................................................10
1.8 Organization of the Research...............................................................................................10
CHAPTER TWO...........................................................................................................................11
REVIEW OF RELATED LITERATURES...................................................................................11
2.1 The Definition and Concept of Tourism Investment...........................................................11
2.2 The Importance of Tourism Investment...............................................................................11
2.3 Investment Opportunities in Tourism..................................................................................13
2.3.1 Investment in Tourism Infrastructure......................................................................13
2.3.2 Investment in Tourist Attraction Developments......................................................14
2.4 Factors that Affect Tourism Investment..............................................................................14
2.5 Conceptual Frame Work......................................................................................................15
2.6 The FDI Emperical Framework in Ethiopia........................................................................15
CHAPTER THREE.......................................................................................................................16
RESEARCH METHODOLOGY..................................................................................................16
3.1 Description of the Study Area..............................................................................................16
3.1.1 Geographic Position and Location.............................................................................16
3.1.2 Population....................................................................................................................16
3.1.3 Topography and climate.............................................................................................17
3.2 Research Design and Sources of Data.................................................................................17
3.3 Target Population.................................................................................................................17
3.4 Instruments of Data Collection............................................................................................18
3.5 Sample Size and Its Techniques...........................................................................................18
3.7 Data Analysis Methods........................................................................................................19
Time and cost breakdown..............................................................................................................19
4.1 Time breakdown..................................................................................................................19
4.2 cost breakdown....................................................................................................................20
Reference.......................................................................................................................................21
CHAPTER ONE
INTRODUCTION
At the same time, tourism investment is not without its challenges. The industry is highly
sensitive to external factors such as natural disasters, political instability, and global economic
downturns. The COVID-19 pandemic has had a profound impact on the tourism sector, resulting
in a steep decline in international tourist arrivals, loss of jobs, and revenue for the industry
(UNWTO, 2020). Additionally, tourism investment requires significant upfront capital and can
be a highly competitive industry, especially in popular tourist destinations where competition for
resources such as land, labor, and cultural heritage is fierce.
According to WTTC (2020), the tourism industry contributes 10.4% of the global GDP and
provides job opportunities for one in ten individuals worldwide. Developing countries, in
particular, see tourism as a means of poverty alleviation as it creates jobs and supports local
economies. However, inadequate infrastructure, lack of access to finance, and insufficient human
resources constrain the development of tourism in many regions around the world
(Fetscherin,2019).
Therefore, the challenges of tourism investment require strategic planning and management to
mitigate the negative impacts while taking advantage of the opportunities. By leveraging the
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potential for economic growth and social development through responsible tourism practices,
governments, and businesses can overcome these challenges and promote sustainable tourism
(Hall, 2019).
Despite these challenges, tourism investment remains a key driver of economic growth and
development. Governments, investors, and industry players have a critical role to play in
developing sustainable tourism policies and strategies that balance the needs of tourists, local
communities, and the environment. By leveraging the opportunities presented by tourism
investment and addressing the challenges, countries can reap the benefits of this expanding
industry.
At the national level, governments need to implement policies that will encourage the domestic
tourism industry and attract foreign direct investment and relevant technologies. Those policies
should ensure that tourism is properly 'planned and managed so as to minimize its adverse
economic, social, cultural and environmental impacts. Therefore, appropriate attention and
priority should be attached to the integration of tourism policies with the policies of other
government agencies so that tourism develops in harmony with overall economic, social and
environmental goals.
Arbaminch is a popular tourist destination in Ethiopia, known for its stunning natural beauty,
diverse wildlife, and rich cultural heritage. However, like any other tourist destination, there are
both challenges and opportunities for tourism investment in Arba Minch. so this research find
out the town challenges and opportunity of tourism sector in investment
In Arbaminch tourism sector, investments have already been made by many tour operators,
restaurants and hotels groups (Paradise Lodge, Haile Resort, tourist hotel etc.) Arbaminch town
administration to attract other major international hotel chains to the country to address the
shortage of high-quality hotel facilities currently available. Overall, while there are challenges to
tourism investment in Arbaminch, the region's natural beauty and cultural heritage offer
significant opportunities for investors in the tourism sector
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Tourism has become one of the major industries across the globe, and it provides numerous
opportunities for economic development and job creation. Arbaminch town, located in the
Southern Region of Ethiopia, is known for its unique natural resources and cultural heritage,
making it a potential tourism destination. However, despite the town's vast potential, there is a
lack of investment in the tourism sector, which limits the town's economic growth. The problem
that this study addresses is the challenges and opportunities of tourism investment in Arbaminch
town and the factors that limit investment in the town's tourism sector.
Gap in previous study Previous studies have mainly focused on the tourism potential of
Arbaminch town and its impact on the community's livelihood. Studies have identified various
natural and cultural resources in the town, which can attract tourists. However, there is limited
research that has focused on the constraints and opportunities for tourism investment in the town.
Few studies have looked at the factors that limit and promote investment in the tourism industry.
Therefore, this study aims to address the gaps in previous studies will assess the challenges and
opportunities of tourism investment in Arbaminch town.
To find out the main tourism investment constraints and challenges in Arbaminch
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2.What are the main challenges and constraints that are affecting tourism investment in
Arbaminch?
Therefore, this research has the following significances: It provides information for all
concerned bodies of tourism investment such as policy makers, investors, local communities, etc.
It also clearly puts main investment opportunities in the city.
Particularly it helps the public sector to review its efforts dedicated for the sector in relation to
rules and regulations institutional framework, types of incentives it provides to investors. It will
give direction for further researches in Arbaminch and researches to be conducted in other
regional towns and tourist attraction areas.
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Nevertheless, the researcher will at least minimize such limitations by asking knowledgeable
professionals to indicate relevant materials and by working hard day and night.
CHAPTER TWO
Tourism investment refers to the allocation of resources, both financial and non-financial,
towards the development, improvement, and promotion of tourism-related infrastructure and
activities in a particular destination (Telfer & Sharpley, 2011).
Tourism investment is "the allocation of funds and resources towards the development,
maintenance, and promotion of infrastructure and activities that support tourism in a destination"
(Garcia-Falcon et al., 2018, p. 186).
Tourism investment refers to "the commitment of financial, human, and other resources to the
development, maintenance, and enhancement of tourism-related infrastructure, products, and
services for the purpose of generating economic growth and improving the quality of life for host
communities" (Mowforth & Munt,2015, p.243).
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Tourism investment refers to "funds used to initiate, generate or expand a tourism-related
business or project, including but not limited to capital outlays for the purchase of land,
construction of facilities or purchase of equipment and consumables" (Prideaux,2003, p. 386).
Tourism investment plays a crucial role in the economic development of a country by creating
job opportunities, increasing revenue, and enhancing the overall standard of living. According to
the World Tourism Organization (UNWTO), "investment in tourism infrastructure and services
is essential for the industry's sustainability and growth" (UNWTO, 2021). A study by the United
Nations Conference on Trade and Development (UNCTAD) further highlights the importance of
tourism investment, stating that "investment in infrastructure such as airports, hotels, and public
transportation, as well as in upgrading tourism products, can translate into higher revenues and
employment" (UNCTAD, 2019).
Moreover, tourism investment can also have a positive impact on the environment and cultural
heritage of a destination, if conducted sustainably. As stated by the UNWTO, "sustainable
tourism investment can contribute to protecting the environment, preserving cultural heritage,
and supporting local communities" (UNWTO, 2021). Therefore, it is evident that tourism
investment is crucial for the growth and sustainability of the tourism industry, as well as for the
economic and social development of the countries that rely on it.
Diversifying the regional economic base - tourism can broaden the economic base of regions that
have traditionally been reliant on a small number of employers or industries. This makes these
regions more economically self-reliant and less dependent on government support. It also softens
the impact of industry decline or a particularly bad year.
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2.3 Investment Opportunities in Tourism
2.3.1 Investment in Tourism Infrastructure
Investment in tourism infrastructure is a critical component of sustainable tourism development.
Tourism infrastructure refers to the physical and organizational structures that support tourism
activities, such as transportation systems, accommodation facilities, and tourist attractions.
Investment in tourism infrastructure can help to improve the quality of tourism products and
services, enhance the visitor experience, and increase the competitiveness of tourism
destinations.
There are several types of investment in tourism infrastructure, including public and private
investment. Public investment refers to government funding for the development of tourism
infrastructure, such as the construction of airports, roads, and public transportation systems.
Private investment, on the other hand, refers to investment by private companies or individuals in
tourism-related businesses, such as hotels, restaurants, and tour operators.
Investment in tourism infrastructure can also have positive impacts on local communities, such
as the creation of jobs and the stimulation of economic growth. However, it is important to
ensure that tourism development is sustainable and does not have negative impacts on the
environment or local cultures.
In order to attract investment in tourism infrastructure, destinations must have a clear tourism
development strategy and a supportive regulatory environment. This includes policies and
regulations that encourage private investment, as well as effective planning and management of
tourism infrastructure development.
2.3.1.1 Infrastructure Financing Possibilities
Tourism is a service sector but its development is highly dependent on development of
infrastructures common for other sectors or specific to the sector. In addition, it needs investment
on the destination development; be it natural resource or man-made attractions. Consequently, it
creates huge investment opportunities. Jamieson in his study implied the significance of potential
investment with the maintenance and additional increasing interest of investment opportunities in
tourism in pacific Asia region. According to him, this potential is often facilitated and
encouraged by deliberate policies of governments in the region (Jameison,2008). In addition to
general opportunities for investment and development, the range of opportunities comprises two
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types. First, there are infrastructure needs and opportunities in already established tourism
destinations or in new, less-developed destinations. Second, opportunities exist to invest in:
(a) Accommodation (from major hotels and integrated resorts to small, modest and low-cost
accommodation, and accommodation with indigenous communities);
(c) Support services (travel brokering, visitor advice and professional services);
(d) Tourism enterprises (diving, snorkeling, fishing, sailing and visits to historical sites).
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2.4 Factors that Affect Tourism Investment
There are several factors that can affect tourism investment, including:
1. Economic Conditions: Economic conditions, such as GDP growth, inflation, and exchange
rates, can have a significant impact on tourism investment. Investors are more likely to invest in
tourism when economic conditions are favorable.
2. Political Stability: Political stability is an important factor in tourism investment. Investors are
more likely to invest in countries with stable political environments, as political instability can
lead to economic uncertainty and risk.
4. Natural and Cultural Resources: Natural and cultural resources, such as beaches, mountains,
historical sites, and cultural events, are important attractions for tourists. Investors are more
likely to invest in destinations with unique and attractive natural and cultural resources.
5. Regulatory Environment: The regulatory environment, including laws and regulations related
to tourism, can affect tourism investment. Investors are more likely to invest in destinations with
favorable regulatory environments, as it can reduce risk and increase the return on investment.
6. Market Demand: Market demand is an important factor in tourism investment. Investors are
more likely to invest in destinations with high demand for tourism, as it can increase the return
on investment. These are just a few factors that can affect tourism investment. Investors should
carefully consider these factors when making investment decisions in the tourism industry.
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2.6 The FDI Empirical Framework in Ethiopia
The present regulatory regime governing FDI in Ethiopia is based on a series of Investment
Proclamations issued between 1996 and 1998, principally Proclamations 7/1996, 3711996,
35/1998, 36/1998 and JJ 611 998. In combination, these have established the financial limits and
requirements; the monitoring and reporting requirements; and the financial incentives that are
available. It is worth briefly summarizing the main features of the present regulatory regime in
each of the above areas (UNCTAD, 2002). In Ethiopia foreign investors are encouraged to invest
in all economic sectors. Indeed, according to the government's proclamation, some investment
areas are reserved for the state investment and domestic investors including foreign nationals
who are permanent residents in Ethiopia. For instance, in tourism, foreign investors are allowed
to invest in star hotels and tour operation and travel agencies, international restaurants,
infrastructures such as road and bridge constructions. On the other hand, Hotels other than star
designated; motels, tearooms, coffee shops, bars, night clubs and restaurants excluding
international and specialized restaurants; tour and travel operators; car-hire, taxis and
commercial road and water transport are reserved for domestic investors. According to the
report, Sectors reserved for Government at the end of 1999 included air transport (where
passenger seating exceeds 20 or cargo exceeds 2.7 tones); rail transport services; and postal
services and telecommunications (excluding courier services) (UNCTAD, 2008). The
government has indicated that it will continue to reduce investment exclusions for foreign
investors. Some sectors which will reserved for domestic investor, such as air transport, travel
operations and other services are advised to be open to increase the financial and trading skills to
stimulate domestic investors.
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CHAPTER THREE
RESEARCH METHODOLOGY
3.1.2 Population
As of April 1, 2023 the population (permanent residents) in Arbaminch is 95 373 people,
including children under the age of 6 - 9 478 people, teenagers (schoolchildren) aged 7 to 17
years - 11 314 people, young people from 18 to 29 years old - 11 385 people, adults aged 30 to
60 years - 41 070 people, elderly people over 60 years old - 20 791 people, and the centenarians
in Arbaminch over 80 years old - 1 335 people.
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describes the challenges and opportunities for the tourism investment of the town. The data will
be gather from both primary and secondary sources. Primary data will collect through the
research instruments designed. In addition, the researcher will be participated in different public
discussions and trade fairs conducted in Arbaminch in relation to tourism. The data will also
gather from different secondary data sources such as books, journals, magazines, brochures,
folders, CDs, internet etc.
Domestic and foreign tourism investors in Arbaminch (licensed and star hotels and tour
operation and travel agencies)
The researcher has prepared questionnaires and interview for the subjects accordingly. The
reason for selection of the above-mentioned subjects is that they are directly or indirectly
involved in tourism investment and/or responsible for tourism investment in Arbaminch.
Questionnaire:
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Both close-ended and open-ended questionnaires will distribute for the research subjects,
particularly, hotels and tour operators. Essentially, the types of questionnaires that will be
designed are different based on the backgrounds/ of respondents. The questionnaires designed
for both foreign and domestic investors will similar with slight difference. Close ended questions
will prepare in different styles.
Interview:
The researcher has conducted semi-structured and non-directive interviews with the
representatives of different concerned government and non-government bodies to get their views
about their services; and tourism experts and economists who can forward their professional
views about the performance of tourism investment. Interview will also conduct with Key
informants from Ethiopian Development Bank, Ministry of Culture and Tourism and Ethiopian
Investment Agency.
Non-Probability Sampling
On the other hand, purposive sampling will used for selecting respondents for interview from
different offices listed below. The same method will used for selecting experts. These are
purposely selected because the researcher plans to get detail information based on their exposure
and day to day experience regarding tourism investment in Arbaminch.
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of qualitative data analysis (organization, description and finally interpretation). Data collected
through interview, FGD and qualitative taken from documents will also use to substantiate
quantitative data. In addition, the researcher has employed quantitative methods predominantly
descriptive statistics such as percentage, frequency and mean average to analyzing data gathered
by distribution of questionnaires. Graphic representations such as line graph, and bar graph will
also, other methods of the research analysis employed to analyze numerical data collected from
documents
The main ethical consideration for this study is to provide respondents with information
regarding the purpose of the study, the issue of confidentiality, and the need for honesty in
collecting data. Prior to data collection, consent is requested from the relevant authority. In this
case, there will be written an official letter from Arbaminch university. Based on official letter
prior to follow research ethics and explained the purpose of the study to the participants, and also
informed the participants that the information they provided will be used only for research
purpose.
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7 Data analyzing
8 Data collection
of finding
9 recommendation
10 Submission and
presentation of
the study
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unwto.org/doi/epdf/10.18111/wtobarometereng.2019.17.1.1
Gooroochurn, & T. J. Knudsen (Eds.), The Routledge Handbook of Transport Economics (pp.
365-378). Routledge.
Hall, C. M. (2019). Sustainable Tourism: Widening Opportunities for Policy and Practice.
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WTTC. (2020). Economic Impact Research: World Travel and Tourism Council. Retrieved from
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UNCTAD. (2019). Investment in Tourism for Development. Retrieved from
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Honey, M. & Gilpin, R. (2009). Tourism in the Developing World. By the United States Institute
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