Motivation and Challenges of Middle East Investment in the Ethiopian Tourism Sector
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Date
2022-06
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Addis Ababa University
Abstract
This thesis intends to assess Middle East Investments in Ethiopian tourism Sector, the driving factors and the challenges in the Ethiopian Tourism Sector. To conduct this research, qualitative research approach and purposive sampling design was employed. Both primary and secondary data were used. To gather the primary data, mix of interview questions, interviews and questionnaires were used. Accordingly, 45 licensed investment projects from Middle East between 1992 and 2020 were identified based on data from EIC. In general, responses of 14 informants were gathered from key relevant government institution through survey questions and interviews where necessary. Among questionnaires distributed to 7 investment projects considered as a sample, 3 have got responses. Based on the data gathered, the major interest area of investment engagement by the Middle East investors has been the hotel, lodge, and restaurant and tour operation. With regard to their current status, few of them- 5 Hotels and 3 Restaurants, 1 lodge and 1 tour operator were operating/under implementation. With regard to motivating factors, according to informants in government institutions, location advantagesmarket size, geographical proximity, incentive package, religious ties & Islamic religious heritages, UNESCO registered heritages, diverse culture and natural attractions are major ones. From investor’s point of view, ownership advantages such as knowledge of the tastes and requirements of the customer were drivers that highly encouraged two out of three in restaurant business. Firm size, international experience, trade mark and brand image, size and structure of home industry transaction and, economies of scope and joint supply are encouraging for at least two of them. When it comes to location advantages- access to land, custom duty exemption and easy facilitation of investment visa were the factors that highly encouraged the investors in restaurant business while destination market size and availability of basic infrastructure and Market internalization are also encouraging to them. Regarding challenges, regular power blackout and fluctuation, lack in access to loan, access to hard currency and profit repatriation, frequent change in government regulations, lack of good governance, lack of necessary infrastructures at destinations, limited promotional efforts, image of Ethiopia in the Middle East, tradeoff between political & economic interest, and absence of sovereign guarantee for investors were among the challenges identified from the opinion of key informants & literature review. Among these, in the investor’s view, difficulty in profit repatriation, access to loan and foreign currency are serious problems. In conclusion, with all the difficulties and challenges, investor’s perception is positive given the potential that Ethiopia and the Middle East have. But this doesn’t mean that the attitude of all the licensed investors in the period the research covers is positive as only 22% of them survived and hence it needs hard work to exploit full potential and reduce negative perception that may result from the challenges if not addressed.
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Engagement, Motivation, Challenges, Middle East Investment, Ethiopian Tourism Sector