TOURISM INDUSTRY PERFORMANCE AND ITS ABILITY TO

ATTRACT FOREIGN INVESTMENTS IN RWANDA WRITTEN BY

NZAYISENGA ADRIEN

Tourism is one of the most important components of the global economy (Tosun, 2015). It
generates billions of dollars in revenues and millions of jobs worldwide and attracting the foreign
investors as well. It is considered by many societies, especially in emerging countries the only
tool for development, and the only chance for increasing the FDI is the tourism industry doing
well because tourism brings together people from different backgrounds, cultures and traditions
and promotes investment because the tourists are found gap to be invested in as if they are
visiting the regions, but at the same time, due to globalization, many tourists visit the nations to
find better place that can be fitted with the investment (Samimi et al, 2011)
In past two decades’ tourism was the attractive and profit oriented market for the investment to
developed countries includes countries like Brazil, Canada and Russia.(Milai, 2013). The
tourism industry performance in Iran seems attractive for foreign investors. It has become one of
the most popular investment objectives for foreign investors since the 1980s (Wen, 2002). With
the high growth in foreign tourist arrivals and tourism revenue, the tourism industry has become
more-and-more important in attract new foreign investors in Iran and India (Anderjassen &
Li,2015; Dehkordy et al, 2013).

Many countries make changes to their tourism industries in order to attract foreign investors and
United states of America is no exception. United states of America’s liberalization and
deregulation policies relating to tourism during the early 1990s have attracted a huge amount of
foreign investors in recent years. United states of America have been ranked as the first better
performed tourism industry that attracted more investors in the world, just behind China (Nowak
et al, 2017). Policy makers in many countries believe that tourism industry will lead their
country’s overall FDI development, including the economic sector. For a developing nation like
India, Tourism industry performance could play a significant role in its FDI in general and to the
communities in particular by improving India’s infrastructure such as international airports,
highways, hotels and modern technologies which are the keystones to attract new foreign
investors (Gao et al, 2015)

In the past several years, since the beginning of the nineteenth century, tourism has been gaining
momentum and the numbers of new foreign investors across African continent have been
reached to 1000 investors per years attracted by the tourism destinations (UNWTO, 2009). The
importance of the tourism sector to Kenya Foreign direct investment can also be seen from its
contribution (direct and indirect) to the economy, 6.2% to GDP and 8.8% to employment during
2007. Uganda’s tourism earnings increased from US$2.2 billion in 2002 to US$6.6 billion in
2006. (Endo, 2016). This has led to an increase in Uganda’s share of total world receipts from
0.6% to 0.9% during this period. Though a large proportion of the tourists are domestic there has
been an increase in foreign tourists as well. (About 1.4 million tourists arrived in South Africa in
2009 accounting for 0.34% of the world’s share of tourist arrivals. This number almost doubled
to 4.5 million in 2012 accounting for 0.52% of the world’s share (Garcia et al, 2008).

According to Chen (2010) asserted that since from 1990s up to now tourism was one of
Tanzania’s three leading export sectors, along with mining and agriculture. As the demand for
tourism services has increased among World Bank Group member countries, so has the
Multilateral Investment Guarantee Agency’s (MIGA’s) technical assistance focused on attracting
foreign direct investment (FDI) in the tourism sector. MIGA has several investor outreach
programs in Africa and supports these activities with a research program that benchmarks
competitiveness factors for FDI in several sectors. One of the investor outreach programs, the
MIGA-Swiss Partnership Program for Investments in Sub-Saharan Africa with Tanzania, is
financed in partnership with the Swiss government and focuses on improving investment in the
tourism industry (Hung et al, 2016)

The MSP partnered with the Government of Tanzania to organize an investment forum for
tourism in 2002, held at the Arusha International Conference Center, and continues to provide
follow-up support through an investor outreach program to generate further opportunities for
investment. The program has produced a number of investments and related activities
(privatizations), including a landmark investment in the Kilimanjaro Hotel in 2003. This case
study highlights aspects of the underlying foundation that Tanzania created in targeting tourism
as a growth sector, and focuses on key elements of the investor outreach program supported by
the MSP (Noriko et al, 2017)

According to Asafu (2014) The number of foreign tourist arrivals in Central Africa during 2006
was 3.5 million and increased to 3.9 million during the same months in 2007 also the number of
foreign investors shifted from 0.7% to 2% in the period of one years, this figures indicated that
the tourism industries in these countries attracted more investors who used to be only visitors in
this region before. This figures indicated that tourists visited the nations to see where there is
business opportunity to invest in.

The tourism sector in Rwanda has been on the top among the other sectors doing good since in
2010, because from this year many foreign investors created new businesses in Rwanda
including some visited a country to see the fantastic areas including Gisenyi, Kigali and
Musanze. (Borensztein et al, 2014). This tourism sector’s performance has undoubtedly
contributed to increase of FDI over the past decade, as a vital source of income and employment
(African Development Bank et al., 2013). The role played by tourism industry performance in
current FDI and the related economic growth of the country cannot be underestimated
(Nunnenkamp et al, 2014)
Since 2003, the vision of Rwanda’s tourism industry has been to create a globally competitive
eco-tourism destination that can contribute significantly to the overall increase of FDI in the
country. To that end, the Rwandan policy on tourism is centered on tourism promotion, on
improvement of tourist sites, on development of tourist infrastructure, as well as development of
entrepreneurship spirit and quality standards in the hotel and hospitality industries (UNWATO,
2009)

Western province is the one of Rwanda’s five provinces. It was created in early January 2006 as
part of government decentralization program that re-organized the country’s local government
structures it has seven district including Rubavu, Karongi, Ngororero, Nyabihu, Nyamasheke,
Rusizi, Rutsir. Tourism relate foreign investment in western province is now advanced compared
to many parts of the country because in the many districts made up this province there are
touristic attractions destinations as well new business opportunities in the parts of Gisenyi near
Kivu lake, Kibuye, Karongi Nyamasheke and Nyabihu. western province is one of the most
popular destinations to establish budget hotels. During the last 10 years, western province has
always been one of the top 10 regions that receive both the most tourists and the most tourism
receipts. Compared with the influence of FDI on hotel sector and tourism features, there is a little
influence in travel agencies in western regions. One reason is that most foreign-funded travel
agencies flow into western regions such as Gisenyi near Kivu lake, Kibuye, Karongi
Nyamasheke and Nyabihu where business travel and inbound tourism is prosperous, few moving
into inland regions because of relatively little tourism revenue from sightseeing tours. (Western
Province tourism report, 2016).

The increase of foreign investment needs tourism industry performance in many forms, this
introduces a causal link from foreign investment (to this sector and hence overall) to tourist
arrivals as this attracts greater numbers of visitors due to better amenities. A further indirect link
from tourism to foreign investment is through business tourists. (Pedrom, 2009). These are
entrepreneurs and managers from other countries who, while looking for opportunities to invest
in Rwanda as well as to promote and sustain business in Rwanda visit several tourist
destinations. This in turn is likely to boost foreign investment into this sector as well as other
related sectors to improve the quantum and quality of service provided wherever lacking. (Ram,
2015) Consequently, to foreigners, Rwanda is known for the genocide faced tragedy that
destroyed the country tourism destinations that attracting tourists, this triggered many of foreign
investors in previous years not invested their cash at the highest rate in the country because the
country tourism destinations were harmed because of Genocide against Tutsi. Therefore, this
study intends to show the ability of tourism industry performance in attraction of foreign direct
investment in Rwanda.