Foreign Investment In Tourism In Dubai - Coursework Example

Foreign investment in tourism in Dubai Introduction Dubai has grown as a tourist hot spot over the years. Foreign investment is flowing into the tourism sector of Dubai due to the unlimited support and aspiration from the government and private sector to improve infrastructure and thereby increase the number of visitors year after year. Dubai envisages witnessing 15 million visitors by the year 2015. A report by Reed Exhibitions indicate that the United Arab Emirates is the leading nation in the Gulf Cooperation Council to have developed tourism projects with 85% share out of the total investment set aside by the council to develop the tourism sector. The United Arab Emirates has proposed to spent AED 858 billion to complete tourism linked projects by 2018 while the amount spent by other GCC members like Bahrain, Saudi Arabia and Kuwait stands at AED 20.77, 16.44 and 12.67 billion respectively. These amounts invested in tourism are exclusive of the amount proposed to be spend on infrastructure development like transport networks and power plants. These details were published in a survey conducted by Reed Exhibitions Middle East. The survey also points out that the UAE has devoted more land area to develop tourism linked projects. The ongoing tourism projects account for 558 million square meters. Out of the total area under tourism related development, more than fifty percent of the projects amounting to AED 450 billion is invested in Dubai. United Arab Emirates is clearly a leader in gearing up commitments and efforts to develop pioneering tourism landmarks and has been attracting investments from around the world. Investors are also anxious to know about new tourism projects and involve in discussions for investment when projects are in the planning stage. Universally known operators of tourism are aggressively involved in setting up joint ventures in Dubai and these tourism destinations are looking forward for targeted visitors. These factors clearly indicate the popularity of Dubai as a tourism and investor friendly destination that is always ready to improve its infrastructure and exhibit projects at the planning stage to invite more foreign investors, financial institutions, operators, global brands and planners into this sizzling tourist destination (UAEs tourism project investments exceed 85% of GCC total 2007). Objective of the research The objective of the research is to reinstate the importance of foreign investment for the development of national economy and the development of the tourism sector with specific emphasis to Dubai. Literature review Foreign investment Foreign investment has gained momentum with the privatization of public enterprises in developing countries. Several countries have been successful in attracting substantial amounts of investment from foreign countries by selling state owned companies to buyers from abroad. Strong privatization policies of nations have also witness the influence of factors other than sale of public enterprises for foreign joint ventures. Foreign investment has a particular fervor in the privatization of infrastructure development and the host nations are successful in attracting the foreign investor’s decision to invest through convincing advertisements that project the nation as an investment friendly destination (Sader, F. 1995 p.v). Foreign investment is invited into the privation programs of a nation to improve the future viability of the companies and to improve the result of the sell offs. It has been an essential factor for may companies to collaborate with multinational entities to acquire the much required management expertise, investment finance and technical skills unavailable in the nation (Sader, F. 1995 p.vi). Foreign investment is effected through direct sale to investors and through public offerings in international and local stocks. This method is opted since foreign investors can practice the desired amount of control on the enterprises. However, foreign investment is also effected through methods like lease agreements, concessions and joint ventures. These methods are used when governments do not prefer to transfer the ownership of public enterprises but require the participation of private sector to better the management and efficiency of the enterprises. Foreign investment is of specific importance in improving and privatizing infrastructure facilities like telecommunication, transportation and energy supply with lease agreements and concessions as the methodology (Sader, F. 1995 p.viii). Foreign investments differ between regions. Central Asia and Eastern Europe shares the highest rate of foreign investment amount to 57 percent. Transforming economies in former Soviet nations and Eastern Europe amount 77 percent. The reason for foreign investment in these nations is the inadequate resources for domestic investment (Sader, F. 1995 p.14). Techniques used in foreign investment Direct Sale: Direct sale of a company to the foreign investor group or investor in conducted through an auction or tender process to earn a fair price for the government’s assets while maintaining a balance for prospective buyers. This is also in the interest of investors to gain maximum stake and control over the future of the enterprise. Public offering: Public offering is a technique used by financially sound, large enterprises by offering shares because a single investor or investor group cannot acquire the company due to the size. This method is also used to disperse the control and ownership of the company with the option to list the company domestically and internationally. Joint Venture: Joint Venture alleviates the financial crisis of a company through foreign investment while not transferring the power of the company to the investor but by offering control over a part of the function (Sader, F. 1995 p.19). Lease agreements and concessions: This method is used by government when natural resources and infrastructure is involved in the enterprise and hinders a complete sale. Therefore, the government gives the assets for rent for a specified period whereby the ownership will be with the government while the operations are carried out by the private operator (Sader, F. 1995 p.20). In short, foreign investment evolved out of the need of young countries to invest in their opportunities using the excess fund of old countries to reap the benefits when the former lacked funds for investment. Foreign capital inflow thus increases the rate of employment income of the host country (Twomey, M.J. 2000 p.6). For example, Cuba has been able to invite foreign investment to build motels and hotels through joint ventures in the field of tourism. The law of Cuba that allows the collaboration of foreign companies with 49 percent stake is a major reason for the success of foreign investment in tourism. Special law to manage foreign capital in tourism allowed investors from around the world set a favorable ground for foreign investment. The provision of special exemption for international tourism as joint ventures from license and tax attracts more investors to the tourism sector. This gives more job opportunities in the host nation though managers are from foreign (Gayle,D.J. & Goodrich, J.N. 1993 p.105). Several nations have revised their law and policies to encourage foreign investment in tourism owing to the international market for tourism. State monopolies gave way for the participation of private sector joint ventures and liberalized the economy to attract foreign investments. This has highlighted the significance of private sector in developing the tourism industry. The role of the government is restricted to important functions like enabling while the operational side is carried out by the private sector. Tax holidays and investment incentives stimulate the contribution of private companies to fully utilize available resources and infrastructure (Sharpley, R. & Telfer, D.J. 2002 p.58). The profile of tourism as an investor friendly section was initiated by the World Bank to increase the mobility of nations with tourism as the main resource for economic development and thereby disperse economic activity across the nation. Investment in tourism is of special significance to economies in transition and the sustenance of development by opening up the sector to private operators, financial assistance for the up gradation of existing infrastructure and the construction of hotel infrastructure to boost business development (Sharpley, R. & Telfer, D.J. 2002 p.57). Though there are several advantages for foreign investment, there are certain disadvantages also. With the rapid change and expansion of foreign investment in diversified sectors across the globe disputes are also common. Investment disputes are cleared by the ICSID (the International Centre for the Settlement of Investment Disputes). ICSID was set up in 1965 and handled an average one case per year in the first thirty years of its inception. Disputes arise even in the case of bilateral investment treaties. The International law standard is now established to control foreign investment using standard of conduct for the states to deal with foreign investors (Bishop, et al 2005 p.2). Foreign investment in tourism in Dubai Foreign investment in tourism in Dubai can be researched through quantitative methods to analyze financial facts and figures that serve as a basis to ascertain the profitability of investment and qualitative research may be used to find out tourist behavior like the preference of Dubai as a tourist destination and the extent of leisure available in Dubai. Dubai is gaining significance as a tourist destination with rapidly growing infrastructure, luxurious facilities, and accessibility for visitors from all corners of the world and unrivalled weather. The Dubai Development and Investment Authority have stated that tourism is a fastest growing industry in Dubai’s economy which contributes a whopping 11.6% to the GDP. The demand in Dubai’s tourism industry is set to increase by 4.9 percent per year till 2017. The vision of the Government is to improve the number of people visiting Dubai to 10 million by 2010 as against the 2.8 million people who visited Dubai in the year 2000. Dubai is all set to achieve the figure by 2010 since it has already had 6 million visitors in the year 2006. Foreign investment in tourism in Dubai would gain appropriate returns since Dubai continues to grow as a preferred tourist destination with much sporting activities in the Dubai Sports City that brings high profile events and associated visitors (Tourism booms 2008). The development of new facilities of tourism in Dubai is of special benefit to investors in property. The growth of tourism in Dubai even threatens to downsize the tourist destinations in Europe. This indicates that foreign investors in private sector projects like property and hospitality can also benefit from their investments in Dubai (Dubai-tourism-could-boost-investment-potential). The advantageous location of Dubai is one of the prime reasons for its popularity and ever growing tourism industry. Dubai serves as a connection between the Indian subcontinent and Europe, Africa and the Far East and also serves as an intermediary role for the extensively different cultures. Arab hospitality and the pleasant winter climate is complemented with crime free environment and sophisticated infrastructure that has contributed to a suitable atmosphere for the growth of tourism. The extensive coastline, varied landscape and sandy beaches are suitable for numerous activities that range from sand skiing to powerboat races. Dubai also boasts of golf courses, cultural centre and traditional sports like camel racing, horse racing and falconry attracts tourists of all sorts to indulge in varied activities. In addition to tourism, Dubai offers splendid opportunities to host international and region conferences and exhibitions. Dubai has also become a suitable sports destination to host Dubai Desert Classic Golf tournament, cricket competitions, Dubai World cup and polo. These events tend to attract people as participants and audience from various parts of the world. In addition to that Dubai is a hot spot for property investors. The consistent progress of Dubai’s tourist industry is usually explained in superlatives like stellar, incredible, outstanding, triumphant, phenomenal and inspiring. This may sound as a marketing hype but it is a fact that tourism is booming in Dubai. The success of tourism in Dubai is expected to exceed the revenue from oil exports in the near future. Dubai is projected as a perfect tourist destination and a prosperous commercial and business centre to prospective property investors. This initiative is taken by the Tourism and Trade Promotion Council (Tourism in Dubai 2008). The government and private sector of Dubai is equally enthusiastic to project Dubai as an year round tourist destination. Shopping is another attractive aspect of Dubai that invites tourists from around the world and events like the annual Dubai Shopping Festival stands testimony to this (Dubai Summer Surprises 2009). Tourism in Dubai has grown over the years and there are a number of companies that offer a perfect tourism in this destination. There are various entertainment options with innumerable race courses and golf courses. A few centres of entertainment are Arabian Ranches Golf Club, Dubai Country Club, Al Badia Golf Resort, Dhow Cruise, Wild Wadi, Dubai Summer Surprises and Dubai Zoo (Dubai Tourism Information). Methods for tourism research Qualitative research can produce theory from research by interacting with participants in social life settings and by interpreting most reliable results. A natural science technique is of lesser significance for social life research because qualitative research is conducted where science and art converge. There is an in depth requirement for the use of qualitative techniques in tourism research due to the requirement to research income generation, migration and market trends and the like. Qualitative research has a better potential to support and understand human dimensions in the society that has its roots in cultural and social implications. Qualitative methods enable a researcher to study factors in the natural set up, interpret phenomenon according to the respondent, gain an insider’s perspective and humanize problems. While considering qualitative approach as a different method of researching social life from that of the traditionally used outsiders approach Lincoln and Denzin have disagreed that qualitative approach is an appraisal of the primitive positivistic method of researching (Phillimore, J. & Goodson, L (2004) p.4). Qualitative research is a method of approaching and conceptualizing social inquiry while conducting a research. Tourism research has employed qualitative research as a collection of methods instead of employing a collection of thinking tools that help researchers to adopt different methods of uncovering new methods of discovery (Phillimore, J. & Goodson, L (2004) p.5). Though much is talked about qualitative research, quantitative research has its own advantages in terms of direct information. A good research is considered to be one with a rich dataset that includes large samples and respondents that are thoughtful and eloquent. But the lack of articulate answers in a research may indicate the honesty of a research. A research tends to be complex when it concerns questions of ethics. Ethics relates to the privacy of the respondents and researchers are required to exhibit respect to the respondent. However the matter of ethics is of less concern in the case of a questionnaire research conducted through postal surveys, since it is not mandatory for the respondent to give their name and address. Ethical issues do not arise because there is no face to face contact of the researcher with the researched and the latter would feel free to respond clearly (Ritchi, et al p.10). Tourism is a psychologically complex and broad ranging field that cannot be researched through a single research method. Therefore a clear tourism research with desired results can be achieved through the use of both qualitative and quantitative methods conjointly. A combination of research method through surveys and experiments using participant observation, case study, ethnographies and histories would yield a better answer to the tourism research. Case studies have an added edge by giving out more hypothesis based results and holistic paradigms that cannot be availed through other research techniques. Further, quantitative methods are widely used in tourism research. In general a social science is well researched when examined through multiple methodologies. This holds good for other social science subjects like anthropology, sociology and psychology where several research methods are used based on the nature of research questions and gives a basis of control on the researcher on certain behavior and events. There are several factors that indicate that the questionnaire method is a valid tool in tourism research (Ritchie et al. p.37). A combination of both quantitative and qualitative methods can be used for tourism research because the field of tourism includes socio- cultural as well as business perspectives (Ritchie et a. Back cover). Conclusion In conclusion, Dubai is a sizzling tourist destination with immense potential for prospective foreign investors to invest in tourism projects initiated by the government and the private sector. Both the sectors have equal importance since it has been a joint effort by the government and private sector to promote Dubai as a round the year tourist spot to invite investment in its projects. Further, the events of Dubai are also promoted to ensure visitor turn out which is growing at a steady pace year after year. While the return on investment can be researched through quantitative methods using questionnaire the attitude of the visitors and the reasons why Dubai keeps calling more visitors can be analyzed only through a qualitative interpretative research. Therefore, a combination of both quantitative and qualitative research method is essential to decide foreign investment in tourism in Dubai. Reference Bishop,R.D., Crawford, J. & Reisman, W.M. 2005. Foreign investment disputes: cases, materials, and commentary Bedfordshire: Kluwer Law International Dubai Summer Surprises 2009 heads to 43rd ITB travel exhibition 2009. Available: http://www.mydsf.com/dsf2009/index.php?option=com_content&view=article&id=740:dubai-summer-surprises-2009-heads-to-43rd-itb-travel-exhibition-&catid=63:news&Itemid=80. Accessed on March 21, 2009 Dubai-tourism-could-boost-investment-potential Available: http://www.propertyworld.com/Property-News/Dubai-tourism-could-boost-investment-potential-365. Accessed on March 21, 2009 Dubai Tourism Information Available: http://www.visit-dubai-city.com/dubai-tourism.html. 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