Keywords

Introduction

Tourism is one of the world’ s largest economic industries that create jobs, drives exports, and increases more income all over the world. According to World Travel & Tourism Council (WTTC) (2019a), this industry comprises a wide range of industries, with the aim to serve and support domestic, international business, and leisure visitors. Companies with different size ranges and industries ranging from accommodation and transportation to food and beverages, retail and, culture, sports and recreation, all create a positive influence on this industry. This paper will try to explain the scope and areas to spend in the tourism industry of Bangladesh and what factors investors should be considered. However, it is also important to understand what this travel and tourism are contributing worldwide and why investing here can be a good idea for the investors. From the reports of WTTC (2019a), it can be noted that travel and tourism have contributed the USD 8.88 trillion to the global economy, which is equivalent to 10.4% of global Gross Domestic Product (GDP). In 2018, it was also the second-fastest-growing industry (i.e. 3.9%), only marginally behind manufacturing, which grew by 4%. Domestic visitors hold an account for 71.2% of the tourism expenditure, compared to international visitors, which is 28.8%.

Capital Investment: Some Theoretical Analysis

As per any business, investment is a strategic variable in the determination of the level and growth of income. According to UKEssays.com (2019), it refers to any act of spending with a prospective to yield. It refers to the process of capital formation whereby there is a net addition to the existing assets in the pipeline of production. According to World Tourism Organization (UNWTO) (2019), tourism is one of the most important drivers of economic and social development as it creates jobs and enterprises, export revenues, and infrastructure development. According to Parveen (2013), capital investment is an important criterion to flourish in tourism, like it is needed in any other industry. From Itic.ie (2017) report, it is suggested that capital investment a prerequisite for economic growth. Furthermore, it is stated to provide the physical and organizational building blocks for the society, where people and enterprises need to perform. It also creates connectivity between those people and enterprises, makes more smooth and easier commercial and transactional exchange among them. Nawaz and Hasan (2016) stated found from their research that investments being a part of aggregate demand as well as a source of capital formation, while the tourism industry has been given less attention.

Capital Investment: The Global Context

A study made by Dritsaki (2004) proved that tourism has a long-run economic growth effect in Greece. This statement is further enforced by Balaguer and Cantavella-Jorda (2002) from their validity of the tourism-based growth hypothesis for the long-run economic performance of Spain. Other studies conducted by Sinclair (1998) and Dieke (2004) found that tourism is an important and essential part of economic growth and development strategies as it serves as a scarce source for financial resources, job creation, foreign exchange earnings, and technical assistance in many developing countries. The global investment, according to Blomstrom (2014), the host countries gain more technological benefits from foreign direct investment, this capital investment from companies (i.e. multinationals) has also lead to employment and export generation (Fig. 5.1).

Fig. 5.1
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Global capital investment in travel and tourism. (Source: WTTC, 2019b)

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According to the report of WTTC (2019a, b), travel &tourism is expected to have attracted capital investment of USD 940.9 billion in 2018. This global increase in capital investment is expected to rise by 4.4% in 2019 and rise by 4.2% per annum over the next 10 years to USD 1489.5 billion in 2029.

Relevant case of capital investment: The Indian tourism industry, Kumaon region of Uttarakhand and Steps Taken to Promote Tourism Capital Investment

 According to Khondker and Ahsan (2015), in India, the tourism industry plays an important role in the Indian economy by creating opportunities for jobs, revenue, and foreign exchange, as well as the growth or expansion of other industries such as construction, hospitality, handicrafts, and so on. Indirectly aided by the growth of tourism, industries that are impacted include agriculture, construction, education, hotels, and restaurants. India serves as an excellent example of Asian tourism because of her history and culture as the primary pull for the tourists. Since investments in less useful facilities such as transportation, accommodations, and the overall infrastructuration of the economy are taking place, all the other investments must be paid off faster. Due to India’s tourism policies, a new interest in traveling to Kumaon region helps growing the tourism industry.

 Following Akihito (2017), with the state government’s support, investment in capital equipment was provided to the project to enhance capabilities. The government place tourism as a primary pillar of its economy in the late 1980s with the belief that it would contribute significantly to India’s economy. The conclusion is drawn from the research of Nakani (1996) that the policy was developed based on the belief that a good trade can be made from tourists visiting India. At that time, the Indian government viewed the country’s economic opportunity in the global arena as important. Also, the Indian government thought that the foreign currency and travel markets can have significant impact on the overall economy. The Indian government has come up with five-year economic plan, and started continue this yearly rolling plans for tourism. Starting in the 1970s and continuing through the 1980s, the government placed emphasis the growth of tourism infrastructures and hotels. India undertook a lot of work to enhance transport infrastructure.

 In particular, there are some selective developed regions where many foreign visitors have their key interests. Uttarakhand is rich with natural beauty and a healthy climate with plenty of playgrounds for sports, adventure, and eco-tourism. According to Jaiswal and Bisht (2017), river rafting, trekking, rock climbing, and camping etc. are among some new activities. These are presenting significant opportunities for tourism businesses. Starting in the 1990s, the government placed more focus on social infrastructure in order to encourage Indian tourism, which helped the private sector to grow (Akihito, 2017). Apart from concentrating on the construction of designated tourist sites for tourists, the government also invested on the locals. The plan started to create new tourism products in Uttarakhand and surrounding areas (Kumar, 2017). The diversification of tourism services was started from traditional historical and cultural heritage sites to more modern such as trekking in national parks and wildlife sanctuaries, nature exploration, and resort construction.

Akihito (2017) again informed that Naukuchiatal has received a large number of domestic tourists as a result of new growth and capital investment in hill resorts. As a result of Uttarakhand’s close proximity to lake based tourism resources, the area saw an increase in the growth of lodging accommodations by residents and hotel capital from both inside and outside of the state. As a result, a certain influx of capital to the local economy was observed for residents and merchants in that area (working for logging accommodations, providing necessary services, and demanding material). Tourists from almost all over India have visited Uttarakhand in recent years, and this number is increasing with such government and business spending. It was obvious that many tourists came from India’s north and southwest regions. A significant number came from the greater Delhi metropolitan area (Budget.uk.gov.in, 2019). Religious pilgrimage is one of the most popular reasons for locals to visit the region, followed by holiday for a growing number of visitors in hill resorts. It is thought that the majority of these visits are the outcome of middle-class peoples’ leisure time. With so many tourism opportunities in surrounding lakes, Uttarakhand has seen an increase in the number of residents and hotels or lodges. The establishment of the lodging accommodation industry in Naukuchiatal accelerated quickly at the beginning of 2005 with various lodging services and room rates (Fig. 5.2).

Fig. 5.2
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Indian Government Expenditure in tourism. (Source: Budget.uk.gov.in, 2019)

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From Fig. 5.2, it can be seen that the graph shows an overall increase in total expenditure due to a huge increase in capital expenditure and a slight increase in revenue expenditure incurred by the government. It can also be noticed that the initial trend in the year 2011–2012 revenue expenditure was greater than capital expenditure. However, the scenario changes after the year 2013–2014 and depicts a reverse picture. This indicate government has been more focusing on infrastructural development and trying to reduce more day-to-day expenses.

From their empirical findings, Selvanathan, Selvanathan, and Viswanathan (2012) concluded that Foreign Direct Investment (FDI) and tourism may be intertwined and have two effects on each other’s development. Increased foreign tourists who come to India for business from companies that have invested in India visit places of tourist interest during their side trips, as seen in the case of India. As a result, it is important for India’s government to draw attention of more international visitors and, as a result, it would generate more FDI. The Ministry of Tourism of India is a government body that drives the tourism industry with well-planned marketing campaigns and looks after the travel trade, such as travel agencies and tour companies.

According to Khanna (2011) and De and Chakraborty (2018), India’s branding policy is known as “Incredible India”. The government spent a lot of money for this strategy, and the country has taken a lot of steps to develop tourist attractions and promote them, particularly to tourists from the western countries who have a thought of India as a dangerous or boring location. The government has taken a more proactive approach to develop tourist destinations, with a particular focus on improving infrastructure in and around those areas. One of the key issues with India is her uncontrollable and fraudulent practices against international tourists, which has deterred many foreign visitors from visiting the country in the past. However, as part of the campaign, the government has taken some precautionary steps and provided opportunities for small and subsidiary businesses, such as tour operators and travel agencies, to register with the Ministry of Tourism. This registration has benefited both the initiative and the travel traders. The government encourages tourists to use services from government-approved traders or businesses to reduce the possibility of fraudulent activities. Heritage and archeological tourism are also promoted as part of the “Incredible India” campaign. Other forms of tourism are also established by the government.

According to Anholt (2006), the Indian government has taken a strategic approach to the growth of these tourism sources, like development guideline for each source as well as employment schemes for potential job seekers in each sector. According to Raj and Nayak (2019), in addition to history and culture-based tourism, India is also attempting to draw high-value tourists by promoting creative or niche products and services such as golf tourism, polo tourism, rural tourism, and cruise tourism.

Factors That Influences Capital Investment

One of the objectives of this study is to look into the main factors that affect capital investment decisions in the tourism industry. To better understand, Enoma and Mustopha (2010) clarified that at the company level, the process has usually been shown to be a multi-criterion process that takes into account a variety of variables. The country’s internal (i.e. micro) and external (i.e. macro) factors have significant impacts on capital investment.

As stated by Zarnowitz (1992), from a macro viewpoint, business investment accounts for the bulk of the fluctuations in the Gross Domestic Product (GDP). From a micro viewpoint, it emphasizes on individual company growth by rising productivity and lowering unit costs. This also stresses on interest rates (the cost of borrowing), economic growth (changes in demand), confidence/expectations, technical advances (capital productivity), and the availability of finance from banks. According to Pettinger (2019), these are some other points to consider as depreciation, wage costs, inflation, infrastructure, government policy; while external/macro factors include “interest rate”, “economic growth”, “technological advancement”, “availability of finance from banks”, and “other factors”; internal factors include “trust or expectation”, “firm size”, “availability of capital”, and the efficiency with which hotels/firms compete.

Enoma and Mustopha (2010) went on to say that, in addition to economic and risk factors, political, environmental, and government regulations are all relevant considerations. In general, the impact of these factors on individual corporations’ decisions varies greatly. Bialowolski and Weziak-Bialowolska (2014) argue that investors value knowledge transparency and trustworthiness in a country or market based on their findings. Kahraman (2011) made a similar claim about investor trust, claiming that factors such as market volatility, a lack of market awareness, and a lack of investment expertise are likely to cause companies to underinvest.

Furthermore, the size of firms available in a country is an important factor for influencing capital investment. Carr et al. (2010) show the results that financial factors are more important about the investment process for small firms. Since they have very limited access to capital markets, they have to depend more on internal funds such as personal savings, funds borrowed from relatives or friends, and retained earnings (Gill et al., 2012). Furthermore, the studies of Ekanem (2005) showed that smaller firms tend to reinvest from their retained earnings to grow, avoid taking the risk of extra investment to grow more. On the other hand, large companies (i.e. limited companies and big partnership companies) have access to external funding such as better collateral and credit terms, etc. Laux (2008) claims these companies use better techniques to appraise their investment such as through capital budgeting.

According to Nelson (2005), to make the investment process work, the investment has to be implemented according to the needs of companies, which the firms can comply with and follow. However, Karim and Azmand-Sainib (2013) point out that sometimes the firms are ready to invest and use new technology, but due to barriers often created from external factors influences, investment decisions are made observing the external factors of the country.

Capital Investment in the Tourism Industry of Bangladesh

Tourism, according to the United Nations World Tourism Organization (UNWTO) (2019), is one of the most significant drivers of economic and social growth because it generates employment and businesses, as well as export revenues and infrastructure development. According to a study conducted by Dritsaki (2004), tourism has a long-term economic growth impact in Greece. Balaguer and Cantavella-Jorda (2002) support this assertion by demonstrating the validity of the tourism-based growth hypothesis for Spain’s long-term economic success. Other studies by Sinclair (1998) and Dieke (2004) found that tourism is a significant and necessary component of economic growth and development strategy in many developing countries, as it provides some source of financial capital, job creation, foreign exchange earnings, and technical assistance.

According to Parveen (2013), capital investment is an important criterion to flourish in tourism, like it is needed in any other industry. From Itic.ie (2017) report, it is suggested that capital investment a prerequisite for economic growth. Furthermore, it is stated to provide the physical and organizational building blocks for the society, where people and enterprises within it need to perform. It also creates connectivity between those people and enterprises, makes more smooth and easier commercial and transactional exchange among them. Nawaz and Hasan (2016) stated found from their research that investments being a part of aggregate demand as well as a source of capital formation, while the tourism industry has been given less attention.

From TCdata360 (2019) it can be seen that Bangladesh has made steady progress and has performed much better than the world median standard. As from Fig. 5.3, it can be seen that Bangladesh has experienced a year on the average growth rate of 7.29% for the time of 1995 to 2028. The performance is good. However, when it came to regional analysis, the performance of Bangladesh was just marginally better (Knoema, 2019). In Fig. 5.3, it can be seen that, during 2000, 2008, and in 2014 Bangladesh, in terms of capital investment, has not performed poorly. Though during 2017 and 2018, the forecast for the next 10 years, Bangladesh is shown to perform much better, as per from World Bank at TCdata360 (2019) (Fig. 5.4).

Fig. 5.3
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Capital investment in travel and tourism in USD (Billions) in Bangladesh with world median standard. (Source: TCdata360, 2019)

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Fig. 5.4
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Capital investment in travel and tourism in USD (Billions) in Bangladesh with South Asian (Regional) standard. (Source: TCdata360, 2019)

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With the shortage of reliable statistics on different aspects of Bangladesh tourism, it does create a big problem for academicians, researchers, and policymakers. Still, it is widely recognized that Bangladesh is by natural beauty, heritage, and panoramic views, what a tourist wants to enjoy. Many reports have been collected and prepared from the recent data. Some of the key concerns for Bangladesh is its political instability and natural calamities. As mentioned by Hasan and Islam (2014), Bangladesh could not achieve satisfactory progress in the arena of international tourism. From the information produced by WTTC (2019a, b), it can be understood that Bangladesh is far behind from global standards, and even from their neighboring countries like India, China, Bhutan, or Nepal and except Myanmar when it comes to performing in travel & tourism (Figs. 5.5, 5.6, 5.7, 5.8, 5.9, 5.10 and 5.11).

Fig. 5.5
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Travel & Tourism’s total contribution to G.D.P. (Source: WTTC, 2019a)

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Fig. 5.6
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Travel & Tourism’ s total contribution to employment. (Source: WTTC, 2019a)

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Fig. 5.7
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Travel & Tourism’ s total contribution to total export from visitors. (Source: WTTC, 2019a)

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Fig. 5.8
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Travel & Tourism’ s total contribution to total capital investment. (Source: WTTC, 2019a)

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Fig. 5.9
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Top 20 countries – Travel& Tourism GDP growth, 2018. (Source: WTTC, 2019a)

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Fig. 5.10
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Fastest Growing (2019–2029). (Source: WTTC, 2019a)

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Fig. 5.11
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The Travel & Tourism Competitiveness Index 2015. (Source: World Economic Forum, 2015)

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In terms of total contribution to GDP, employment, earnings from foreign tourists, and the contribution from capital invest for travel and tourism, Bangladesh has underperformed and remained at the lower part of the table.

According to WTTC (2016), there are some encouraging signs for the economy of Bangladesh in 2016, as shown below (Table 5.1):

Table 5.1 Impact of Bangladesh tourism 2016
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With every passing year, Bangladesh has been performing better. WTTC (2019a, b) shows that the Asia-Pacific has experienced the most travel and tourism GDP growth in 2018. It is a good sign for Bangladesh as an Asian country. Furthermore, it is one of the top 20 countries with the most growth in travel and tourism in 2018 (see Appendix 1). The country ranked 11th and 9th for the fastest 10-year real growth from 2019 to 2029 (see Appendix 2).

From the above discussion, it could be noted that Bangladesh is having a steady progression when coming towards development in the tourism industry. However, if the performance of the industry as portrayed above is far from satisfactory, compared with neighbors, Asia-pacific countries, and as well from global averages, which does signify there are a gap and scope for Bangladesh to fill. For this, more and more capital investment is required from private and public industry and good long-term strategy from the government to Bangladesh to prosper in this area. Hence this paper will discuss the areas that influence this tourism and can promote more investment into this industry. Lonely Planet, the largest travel guide, published and ranked Bangladesh as 7th in the research for the top ten most affordable places to visit in 2019 (Gomes, 2019). As from Abakashparjatan.com (2019), Bangladesh Parjatan Corporation classifies tourism into six different types: tourism, business, office, study, religion, service, and other purposes. Bangladesh in Travel and Tourism Competitive index is at the bottom of the table, despite having two of the unique natural attractions of the world (i.e. Cox’ s Bazar and Sundarbans). It is important to learn how India has improved its tourism industry and what Bangladesh can do to attract more investors for tourism development.

Suggestions to Promote Capital Investment for Tourism in Bangladesh

To promote further capital investment in Bangladesh, it needs long term plan strategies and improvement laws and regulation. Travel and Competitive Index improves the investors’ confidence to invest more into a country that is ranked higher. This index is adapted from World Economic Forum that shows several areas that are identified to be critical for a sustainable tourism industry: transport infrastructure (air, port, and ground) and tourism service infrastructure. These factors to consider for Bangladesh to be more competitive to promote investment in travel and tourism, as shown in Fig. 5.6.

According to Rahman (2019), Bangladesh has been ranked 120 out of 140 countries in the Travel and Tourism Index, where other SAARC members like India, Sri Lanka, and Nepal were ranked 34, 77, and 102 and only 1 point above Pakistan, which ranked as 121. These fourteen pillars (shown above) are building blocks of this competitive index. The researchers claim that Bangladesh has performed poorly due to tourist service infrastructure, as it is one of the poorest in the world.

To focus on the natural and resources part of the index, Bangladesh can follow India’ s strategy and focus on developing alternative tourism products and giving more scope capital investment in tourism. It is more rationale for Bangladesh to follow the strategies implemented by India since, in many ways, Bangladesh has many similar geographical, demographic, and historical traits as India.

Bangladesh has given significant attention towards Enabling Environment part as Khondker and Ahsan (2015) state from their report that the Bangladesh government has several active policies and legislations for the tourism following under Bangladesh Tourism Board Act, Medium Term Budget Framework (MTBF), and the Perspective Plan 2021. These policies and legislations claim to have a positive influence to flourish the tourism industry. As Islam (2013) and Parvez and Kashem (2018) assure from their findings that, the role of the Bangladesh Government has encouraged and played a positive role in promoting domestic and international tourism from the private industry.

Other things that can be considered to increase investment are: first, to increase Marketing and Promotional Campaign- As it could see from the case study that India has taken “Incredible India” campaign to promote foreign tourists, Bangladesh can do the same and thus it would attract more investors to invest into Bangladesh. Second, to ensure an Adequate supply of Qualified Human Capital- Introducing proper measures to supply proper quantity and quality of the workforce in this field is important. Bangladesh is one of the heavily populated countries in the whole world. Hence the quantity of workforce should not be a problem. However, Bangladesh still has a long way to go to have a more qualified workforce. Third, to make easier and faster Visa services for the tourists- Ensure that international tourists can come and visit the target tourist spots with ease and are not subject to the overly strict procedure. Fourth, providing more incentives to investors by allowing tax breaks or subsidies to domestic or international investors can encourage them to invest more.

If Bangladesh follows this specific macro and micro measures for tourism, along with general macro measures like low-interest rate, higher economic growth, and others, it will then definitely attract more investors (i.e. domestic and international) to invest in Bangladesh. It is also true much of Bangladesh’ s potential in this tourism industry is yet to flourish poor awareness, and this is due to lack of proper development plan, promotion, and many potential tourist spots in Bangladesh is remained untapped (Dhaka Tribune, 2019).

Conclusion

From the research, it can be concluded that in Bangladesh, there is huge potential for tourism to flourish, as this offers immense scope in generating employment, poverty alleviation, and maintaining ecological balance. In recent years, the government of Bangladesh has realized the importance of tourism in its economic and social life. The economy of Bangladesh has been growing at an astonishing rate in the last decade, however much of its growth is dependent on manufacturing-based industries, like textile, pharmacy, steel, etc., but the service industry like tourism has not played any significant role in the national economy of Bangladesh yet as Das and Chakraborty (2012) point out the importance of tourism for its maintenance and growth of the economy. For this industry to grow and contribute more to the Bangladesh economy, more capital investment is required. This research has pinpointed what areas can be improved to motivate domestic and international investors to invest in the economy of Bangladesh. A case study of India on how it developed its tourism and industry was observed along with the travel & tourism industry, where it could be seen that Bangladesh lacked the infrastructure to be more competitive in tourism. If Bangladesh can give more attention to the Travel and Tourism Index and perform well, certainly more and more capital investment will flow into the economy of Bangladesh.