TANZANIA: ATTRACTING INVESTMENT IN TOURISM

Transcription

1 TANZANIA: ATTRACTING INVESTMENT IN TOURISM As shown on next page: Case study of Tanzania's successful touism tageting plan, whose main components wee an investment foum suppoted by a follow-up investo outeach pogam. Souce: Multilateal Investment Guaantee Agency (MIGA) Copyight 2005 Multilateal Investment Guaantee Agency. All ights eseved. No pat of this wok may be epoduced in any fom without witten pemission fom the copyight holde. Requests fo pemission to epoduce should be sent to the Diecto, Opeations, the Multilateal Investment Guaantee Agency (MIGA), Wold Bank Goup at fdicente@woldbank.og

2 Attacting Investment in Touism Tanzania's Investo Outeach Pogam Investing in Development Seies Multilateal Investment Guaantee Agency 2005

3 Copyight 2005 The Wold Bank Goup/MIGA 1818 H Steet, NW Washington, DC All ights eseved Manufactued in the United States of Ameica Fist published in Octobe 2005 Available online at Fo moe infomation contact: MIGA Opeations 1818 H Steet, NW Washington, DC t f See also The mateial in this publication is copyighted. Requests fo pemission to epoduce potions of it should be sent to MIGA Opeations at the above mentioned addess. The Multilateal Investment Guaantee Agency (MIGA) of the Wold Bank Goup was established in 1988 to pomote the flow of pivate foeign investment to developing membe counties. MIGA offes political isk insuance coveage to eligible investos fo qualified investments in developing membe counties. MIGA also offes technical assistance pogams to develop and implement effective stategies fo attacting and etaining foeign diect investment. This hands-on technical assistance focuses on thee pimay aeas: dissemination of infomation on investment oppotunities and business opeating conditions in developing membe counties though online sevices; capacity building of the oganizations and institutions involved in the pomotion of foeign investment; and, investment facilitation activities suppoting the effots of developing counties to identify and attact investment.

4 Attacting Investment in Touism Tanzania's Investo Outeach Pogam Investing in Development Seies Multilateal Investment Guaantee Agency 2005

5 The Investing in Development seies of case studies is intended to stimulate discussion and leaning egading investment pomotion agencies. It is not meant to povide complete o compehensive case histoies, but athe to highlight impotant aspects elevant to investment pomotion. The Multilateal Investment Guaantee Agency is not, by means of this publication, endeing accounting, business, financial, investment, legal, tax, site selection, o othe pofessional advice o sevices, and shall not be esponsible fo any loss sustained by any peson, company o oganization that elies on this publication as a substitute fo such pofessional advice o sevices. Befoe making any decision o taking any action that may affect you business, you should consult a qualified pofessional adviso.

6 Table of Contents Content Synopsis... 7 Intoduction... 9 A tadition of hospitality... 9 Backgound... 9 Touism s ole in the economy... 9 Assets and infastuctue The Stategy The Touism Maste Plan Building competitive advantage The Playes Poject sponsos Govenment The Tanzania Investment Cente Pesidential Paastatal Secto Refom Commission The pivate secto Investment Pomotion Activity MIGA in Afica The investment foum The Investo Outeach Pogam Ceating a pocess Pogam pioities Moving fowad The Kilimanjao Kempinski Hotel A new level of sevice Next Steps Questions fo Discussion Annexes Annex 1: Aconyms & Glossay Annex 2: Tanzania Statistical Data Annex 3: Tanzania s Institutional Famewok fo Touism Annex 4: A Shot Histoy of the Kilimanjao Hotel Annex 5: Evaluating The Investo Confeence as a Pomotional Tool Endnotes... 45

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8 Synopsis Touism is one of Tanzania s thee leading expot sectos, along with mining and agicultue. As the demand fo touism sevices has inceased among Wold Bank Goup membe counties, so has the Multilateal Investment Guaantee Agency s (MIGA s) technical assistance focused on attacting foeign diect investment (FDI) in the touism secto. MIGA has seveal investo outeach pogams in Afica and suppots these activities with a eseach pogam that benchmaks competitiveness factos fo FDI in seveal sectos. One of the investo outeach pogams, the MIGA-Swiss Patneship Pogam fo Investments in Sub-Sahaan Afica (MSP) with Tanzania, is financed in patneship with the Swiss govenment and focuses on impoving investment in the touism industy. This pogam is showing esults that can be taced to eplicable investment pomotion activities. The MSP patneed with the Govenment of Tanzania to oganize an investment foum fo touism in 2002, held at the Ausha Intenational Confeence Cente, and continues to povide follow-up suppot though an investo outeach pogam to geneate futhe oppotunities fo investment. The pogam has poduced a numbe of investments and elated activities (pivatizations), including a landmak investment in the Kilimanjao Hotel in This case study highlights aspects of the undelying foundation that Tanzania ceated in tageting touism as a gowth secto, and focuses on key elements of the investo outeach pogam suppoted by the MSP. In paticula, two inteelated elements illustate the specifics of Tanzania s pactical appoach: the investment foum that led to the acquisition and econstuction of the Kilimanjao Hotel, and the oveall investo outeach pocess of which the foum was a pat. This appoach, along with the Govenment of Tanzania s commitment to the development of touism, seved to attact the inteest of seveal new investos and to help solidify the county s eputation as a seious contende fo investment in an intensely competitive secto. investing in development tanzania touism

9 investing in development tanzania touism

10 Intoduction A tadition of hospitality The Kilimanjao Hotel in Da es Salaam, Tanzania opened its doos in 1965 as the Govenment s main hotel fo foeignes visiting the county. It was an imposing building on a pime site in the habo aea, designed to povide appopiate business sevice within the pevailing political climate of the time optimism fo a futue of self-detemination afte independence. It seved the county well fo 20 yeas, but lost its peeminence as the county s leading hotel when Tanzania s fotunes falteed in the late 1980s. The hotel was staved of funding and did not geneate the cash flow to cay out enovations o compete with newe, pivately owned hotels. It deteioated quickly, and in 1996, was foced to close its doos. Reduced to a shadow of its fome gandeu, the Kilimanjao was destined to become an ominous pesence fo nealy 10 yeas, casting a pall ove investment in downtown Da es Salaam and in Tanzania s touism secto as a whole. In a damatic tun of events and a new socioeconomic envionment, the Kilimanjao eopened as a five-sta hotel in August 2005, now owned by the Albwady Goup of Dubai and managed by Kempinski, the intenationally enowned hotel opeato. As an investment poject, the Kilimanjao is notewothy both as a bellwethe in a histoically significant secto in Tanzania, and as a tangible esult of the county s ecent effots in investment pomotion. Touism is a gowth secto in Tanzania that ceates lifelong jobs, including those at manageial levels and fo women. This case study opens with backgound on the touism secto in Tanzania: its ole in the economy, natual esouces and assets, and existing infastuctue in tems of built hotels. Next, the case highlights aspects of Tanzania s stategy and institutional famewok fo developing touism and intoduces the key public and pivate secto playes in the secto. The next section focuses on investment pomotion activity, including the Multilateal Investment Guaantee Agency s (MIGA s) wok with the Swiss Govenment in Tanzania, and specifically, the touism investment foum and investo outeach pogam. Finally, details of the Kilimanjao Hotel econstuction, as a poject and poduct, help illustate how Tanzania met the needs of a paticula type of investo. Ultimately, the high-pofile natue of the Kilimanjao poject would einfoce the county s oveall touism stategy and investment pomotion pogam, and influence seveal subsequent investos. Backgound Touism s ole in the economy In the ecent past, mining and touism have been the fastest gowing sectos in Tanzania with aveage gowth ates of 10% and 5.5% between 1998 and This gowth has coincided with a elatively stong pefomance in non-taded sectos such as constuction, tanspot and communications. Agicultue s pefomance was less notable, with gowth declining fom 5.5 to 4.0% in 2003, due to doughts in most pats of the county. Agicultue, howeve, emains the lagest secto of the economy, contibuting moe than 40% of the goss domestic poduct (GDP), 70% of employment, and a lage shae of foeign exchange eanings. Total employment in the touism secto was almost 200,000 in Fom an opeational point of view, oom occupancy was 53% in 2004 up six points fom 2003; the aveage length of stay was 11 days and the aveage daily expenditue was US$188 fo visitos on package tous and US$119 fo those taveling alone. investing in development tanzania touism

11 Total foeign exchange eanings fom touism wee US$746 million in 2004, moe than fom any othe secto in Tanzania. (See Table 2-3 in Annex 2: Tanzania Statistical Data.) Tanzania had no foeign diect investment (FDI) in 1990, but it ose apidly to US$240 million in 2000 and US$248 million in 2003, as shown in Figue 1. 1 Figue 1 Foeign exchange eanings fom touism (US$ millions) M. of Touism IMF BOP The tend lines eflect data fo touism eceipts fom two diffeent souces. Souces: Ministy of Touism; Intenational Monetay Fund Balance of Payments (BOP) Statistics The ising shae of touism within a national economy is sometimes consideed supising. As gowth sectos, manufactuing o agicultue ae typically undestood, but the ole touism can play as a souce of gowth, divesification and povety alleviation is not always ecognized. Rathe, touism may be peceived as a volatile industy that ceates only menial jobs, and which is dominated by foeignes whose pofits stay oveseas. In Tanzania, this chaacteization is cetainly not tue. Touism has been gowing steadily (with only slight deviation in 2001) fo 10 yeas. As an industy, it ceates life-long jobs, often equiing supeio people skills, including specialized positions at the manageial o supevisoy levels and caees open to women. Tanzanians own many hotels in Tanzania. The foeign-owned fims bing skills in maketing, finance and management with thei investments. Much of touism s evenue does emain in Tanzania, and the county has the potential to supply the industy moe via locally poduced goods. In evey yea since 1995, foeign exchange eceipts 2 fom touism have been the lagest item in Tanzania s expots of goods and sevices (30-45%). Within the domestic economy, the tade, hotels and estauant secto is the second lagest secto afte agicultue, accounting fo 16% of GDP between 1990 and (See Box 1: What s Diffeent About Touism?) While some uncetainties emain, touism is now gaining ecognition as a valid secto fo sustainable development. If managed popely, touism can contibute jobs and wealth, addess social issues and ensue consevation of natual and cultual esouces. Assets and infastuctue Tanzania is stengthening its capacity to host touists by impoving its built envionment and developing its spiit of hospitality. Investment in hotels and lodges has acceleated; thee has been a wave of pivatizations and sales of assets that is now eaping benefits in tems of injection of new funds to impove the standads of hotels in all categoies. Pivate investment in hotels has gown apidly, with the numbe of hotels ising fom 210 in 1995 to 476 in Inteest in touism in Tanzania continues to be high among Middle Easten and South Afican investos. Tanzania is the only county in the wold to have potected moe than 25% of its landmass as consevation aeas, and to have developed a fa-eaching pogam of coastal zone management to potect maine and coastal esouces. The county is endowed with wold-class touism assets (natual, cultual, histoic and acheological) that ae in high demand in intenational touism makets. Among the best known, including its six Wold Heitage Sites, ae: Ngoongoo Consevation Aea, Seengeti National Pak, Lake Manyaa, Selous Game Reseve, Mt. Kilimanjao and its national pak, Stone Town of Zanziba, and the uins of Kilwa Kisiwani and of Songo Mnaa. Tanzania has 12 national paks, 17 game eseves, and 50 game contolled aeas and maine paks. Additional natual esouces include the sandy 10 investing in development tanzania touism

12 beaches noth and south of Da es Salaam, the spice islands of Zanziba, and abundant wates fo spot fishing off Pemba and Mafia, all locations ich in the Swahili and Aab cultues that dominated the East Afican coast fom the Aabian Gulf states as fa as Mozambique. Olduvai Goge, in the inteio of the Rift Valley, is Box 1: What s Diffeent about Touism? Touism as a set of sevices is not like manufactuing. Goods and sevice have diffeent attibutes; touism is cosscutting and involves many linked final goods. 1. The two fundamental tansactions fo touism poduction and consumption cannot be sepaated. Poduction and consumption take place simultaneously and in the same place; a touist must go to the place of poduction to consume touism sevices. Contast that with goods: goods ae poduced in one place and almost always tanspoted to anothe and maketed fo sale. In touism, thee is no inventoy of final goods waiting to be sold, o wok in pocess. Sales ae made by consuming fixed assets. It is a cliché in the industy that any oom-nights that ae not sold ae lost foeve. Moeove, once poduced, the supply of ooms is elatively igid ove time and thee is a pemium on getting it ight the fist time. To counteact this igidity and geneate evenues, hotels e-invest fequently in equipment and facilities to emain competitive and potect assets. This joint function of being an investment and poducing a steam of sevices is unique to sevices. Indeed, in touism, owneship of assets and thei management is often sepaated into owning companies and managing/leasing the buildings. Touism sevices also ae not a standadized, homogenous set. Thei quality vaies fom place to place: a fou-sta hotel in Tanzania may be vey diffeent fom a fou-sta hotel in New Yok, o one in Beijing. 2. Touism spans a ange of activities instead of being a single good. Touism is eally an agglomeation of elated but sepaate, cosscutting sevices: tanspot, lodging, food sevice, eceation and attactions. All these sevices ae assembled eithe individually by the tavele o commecially by a netwok of wholesale and etail sevices (tou opeatos, Global Distibution Systems, and tavel agents, etc.) into a touism package. Touism poducts epesent final commodities, and efficiency though competition in touism makets has epecussions thoughout the supply chains (meats, fish, poulty, daiy and vegetables, etc.) and manufactued goods, such as funitue and equipment. These backwad linkages can enhance o educe the economic etuns to touism and exet an influence on makets. Hotels, fo example, equie many inputs. To the extent that these inputs ae poduced locally, they can enhance value added; to the extent that they ae impoted, they geneate leakages of money flowing out of the economy. But thee ae also fowad linkages as poducts and sevices ae added outside hotels. Handicafts and shopping ae good examples. In the moden touism secto, the way in which these oppotunities add value, o diffeentiate the poduct, has an impotant impact on touism s oveall success. Whee that ceativity is lacking o thee ae no intemediaies (tou opeatos) to constuct innovative packages, touism is likely to be a shallow industy. An efficient and competitive touism secto will tanslate into economy-wide impovement in pivate secto investment and gowth via an impoved business climate and impoved maket discipline. investing in development tanzania touism 11

13 the site of discoveies of the taces of ealiest man. Tanzania also offes inteesting cultue and cafts, notably the Maasai cultue and Makonde wood sculptues. The gowth in touism and hospitality sevices in Tanzania is evident at seveal levels. In tems of capacity, Tanzania has 31,000 ooms with 56,200 beds. A numbe of new hotels have been built ecently, including lage intenational chain hotels 3 and many othe medium-sized hotels. The tavel industy, epesented by the tou opeatos and tavel agencies, has been impoving the poducts and sevices offeed in the county. Though the ceative packaging of diffeent expeiences, touists can now choose fom wildlife and beach vacations, niche poducts Map 1 Tanzania s National Paks and Reseves 12 investing in development tanzania touism

14 such as soft adventue, biding and hunting, and egional packages that involve multi-county visits. Tanzania also aims to aise the quality of sevice to a highe standad by focusing on vocational and manageial taining. The Stategy The Touism Maste Plan With financial suppot fom the Euopean Union, Tanzania poduced a Touism Maste Plan in 1996 that seves as a oadmap and stategic famewok fo the secto. The plan was updated in and is widely ciculated in Tanzania, seving as a useful document to guide the secto s gowth. The Touism Maste Plan focuses on: enhancement of the Nothen Cicuit and its extension to the Usumbaa Mountains in the east, with the Pangani Rive and the pot of Tanga; a stong Southen Cicuit building on the fou national paks in that aea; 5 devel- Box 2: Tanzania s Main Natual Resouce Attactions The Nothen Cicuit, and its extension to the Usumbaa Mountains, includes: Ausha, the main hub and also home to the Intenational Confeence Cente, a venue fo many wold-class meetings Ngoongoo Cate, the lagest cate in the wold with limitless wildlife Seengeti Plains, famed fo its mass movement of wildlife Lake Manyaa National Pak, home to the tee-climbing lions Taangie National Paks Mt. Kilimanjao, the highest mountain in Afica The Usumbaa Mountains, to the east of Ausha, poviding a tempeate mountain climate whee the Afican violet oiginates Olduvai Goge Southeast of Seengeti, the site of the discovey of the oldest human emains eve found The Southen Cicuit compises: Selous Game Reseve, uninhabited since the ealy 20th centuy, with its untamed natue and wildlife Ruaha National Pak, a gem in south cental Tanzania Mikumi National Pak, within a day s dive of Da es Salaam Udzungwa National Pak The Westen aeas close to o on the shoes of Lake Victoia include: Gombe Steam, known fo Jane Goodall s wok with chimpanzees Katavi National Pak, less well taveled but with its own cham Mahale Mountains on the shoes of Lake Victoia The Islands have a ich Swahili and Aab cultue and include: Zanziba, with its well peseved capital, Stone Town, and beautiful beaches in the notheast Pemba and Mafia Island with thei maine paks povide excellent diving and fishing Da es Salaam watefont includes: The Kilimanjao Kempinski Hotel as an ancho investment Othe majo eseves: Ugalla Rive, Uwanda, Moyowosi and Kigosi Game Reseves, less well taveled but with excellent potential fo development investing in development tanzania touism 13

15 opment of coastal zones and the off-shoe islands; enhancement of Da es Salaam and its watefont; and ultimately, linking the Nothen and Southen Cicuits via a coido. It also emphasizes the impotance of encouaging niche poducts, such as soft adventue, biding, bette esot facilities and cultual/histoical poducts. The Touism Maste Plan also emphasizes the need fo clustes, aggessive management to stay abeast of tends and the impotance of diffeentiating poducts to add value. A daft touism plan fo Zanziba was also completed in (See also Box 2: Tanzania s Main Natual Resouce Attactions, and Map 1: Tanzania s National Paks and Reseves.) Tanzania s stategy called fo developing new maket segments and added value poducts to complement the county s image as an upscale destination that commands highe ates. Building competitive advantage In light of the fagility of its natual assets, as well as intenal tanspot limitations, the Govenment of Tanzania (GOT) has linked touism development and envionmental consevation to ensue sustainability. Tanzania has eaned a eputation as a highe piced destination much moe so than neighboing Kenya, which appeas to have opted to pusue the mass maket in ecent yeas. Tanzania aims to potect this image, but at the same time to extend its appeal to othe maket segments. Tanzania s stategy is to develop competitive advantage: (a) by adding value; (b) though maket segmentation; and (c) though poduct diffeentiation. This is an ongoing pocess that includes opening up new aeas in the south of the county, and even extending acoss the bode to neighboing Mozambique. Demand fo Tanzania as a destination fo intenational taveles is summaized in Table 1, below. (See also Table 2-1 and Table 2-3 in Annex 2: Tanzania Statistical Data.) In 2004, intenational aivals exceeded those of 2001 (the yea of 9/11). Although the county has not matched its peak yea of 1999, 6 the govenment expects that 2005 will be anothe banne yea. Leisue taveles account fo ove 80% of all aivals by land and ai. National paks hosted ove 500,000 visitos in 2004, anothe indication of the level of touist activity. The 20% of aiving business taveles fequent the business hotels, many in Da es Salaam, along with an unknown numbe of leisue taveles. With ecent gowth in new hotels in Da es Salaam, occupancies and taiffs have been soft; howeve, the mediumtem pospects ae good, especially if the confeence and incentive maket can be developed. A measue of Tanzania s competitiveness based on Wold Tavel and Touism Council (WTTC) 7 data suggests that Tanzania has plenty of oom fo impovement. (See Table 2-2 in Annex 2: Tanzania Statistical Data.) Nonetheless, with sound policies and impoving management, Tanzania seems set to enjoy continued gowth of its touism secto. Table 1: Tends in Intenational Aivals in Tanzania Yea Total Aivals Leisue National Paks , ,282 N/A , , , , , ,266 Souces: Ministy of Touism and Natual Resouces and the National Bueau of Statistics, Tanzania 14 investing in development tanzania touism

16 The Playes Poject sponsos The investo. Albwady Investment, 8 founded in 1976 by United Aab Emiates (UAE) national, M. Ali Saeed Juma Albwady, is the new owne of the Kilimanjao Hotel. With a cuent annual tunove exceeding one billion dihams (moe than US$270 million), Albwady Investment etains individual entepises in the goup with an autonomous management team, one company diecto on the boad and M. Albwady as the chaiman. The 40 o so companies in the goup, many with an ISO acceditation, ae in food distibution and logistics, industial constuction and engineeing, and leisue and lifestyle in Dubai, Euope and Afica. Befoe deciding on the Kilimanjao, Albwady had been looking to invest in a hotel in Zanziba (now unde constuction) and had contacted Chistie s in London, one of the lagest eal estate bokes in touism. In exploing Zanziba, the Selous (the Southen Cicuit) also came to Albwady s attention. Ultimately, one of the poject consultants in Dubai made contact egading the Kilimanjao. The management company. Kempinski Hotels 9 is a well-established, intenationally ecognized hotel management company owned by the Thai oyal family (85%) and Bahain inteests (15%). Founded in Gemany ove a centuy ago, Kempinski has appoximately 40 hotels in 20 counties, located in many of the wold s best-known cities. Some of its hotels ae gand and othes ae moden; a few ae olde hotels with individual cham. In addition to opeating many of the wold s fine city hotels, Kempinski also opeates intenational esots. In Afica, it opeates hotels in Mali and Moocco and has its Afican headquates at a esot in Dubai. Govenment Responsibility fo touism policy in Tanzania lies with the Ministy of Natual Resouces and Touism (MNRT). MNRT s key divisions ae: (a) the Touism Division, esponsible fo secto policy, planning, supevising the Hotel and Touism Taining Institute and the Touist Agency Licensing Authoity (TALA); and (b) the Wildlife Division, esponsible fo wildlife management outside designated national paks and fo issuance of hunting concessions and licenses. Also, the Tanzania National Paks Authoity (TANAPA) leases sites fo photogaphic safai lodges fom time to time, within and suounding national paks. The Depatment of Touism has been vey active in pomoting investment in touism, paticulaly in selling the potfolio of state-owned hotels and lodges, woking with the Pivatization Commission. The Tanzania Touist Boad (TTB), esponsible fo destination maketing, also plays a ole in investment pomotion. (See Annex 3: Tanzania s Institutional Famewok fo Touism.) The Tanzania Investment Cente The Tanzania Investment Cente (TIC) is esponsible fo investment pomotion in Tanzania unde the National Investment Act of 1997, 10 and has made substantial pogess in becoming a one-stop shop fo investos. To access the Incentive Code, investos must obtain a TIC Cetificate of Incentives. 11 The minimum fixed cost of investment fo new, ehabilitation and expansion pojects is US$100,000 fo pojects wholly owned by Tanzanian citizens, and US$300,000 fo all othes. Distinctions ae made between lead sectos (those aleady contibuting to investing in development tanzania touism 15

17 gowth), and pioity sectos (those the Govenment wants to encouage). As a lead secto, touism pojects ae exempted fom impot duties duing constuction and value added tax (VAT) is defeed. In addition, copoate tax is set at 30% and losses may be caied fowad fo five yeas. Up until 2003, TIC had appoved a total of 422 touism pojects, including new and upgaded hotels, tou companies and tavel agents and estauants. (Fo moe detail on TIC, see Annex 3: Tanzania s Institutional Famewok fo Touism.) Pesidential Paastatal Secto Refom Commission The Pesidential Paastatal Secto Refom Commission (PSRC) 12 was ceated in 1972 to implement the county s pivatizations and to: (a) impove the opeational efficiency of public entepises; (b) educe the buden on state finances; (c) expand the ole of the pivate secto in the economy; and (d) encouage wide owneship of poductive assets. As of June 30, 2004, 309 of a total 359 paastatals had been pivatized. Of the 309, Tanzanians own about half, foeignes own 28, and the est ae joint ventues (Tanzanians, foeignes and Govenment). Thee has also been substantial pogess on pivatization of state-owned hotels. Among the fist to be pivatized was the New Afica Hotel fom which the state withdew in thee stages moe than 10 yeas ago. Pivatization of hotels in Tanzania was quite slow until the MNRT patneed with PSRC in the late 1990s. The hythm of hotel pivatizations gatheed speed and now only thee hotels emain in public hands all involved in cout cases. The change of owneship and management of these facilities has impoved the quality of touism sevices and helped incease the contibution of touism to the national economy. The pivate secto Govenment policy ecognizes pivate secto investment as touism s engine of gowth. The Touism Confedeation of Tanzania (TCT), an umbella pivate-secto institution, has 14 industy associations as constituent membes. The Confedeation is the focal point fo dialogue between the Govenment and the pivate secto on touism. (See Annex 3: Tanzania s Institutional Famewok fo Touism.) Investment Pomotion Activity MIGA in Afica MIGA has been involved in investment pomotion in Afica fo some time. Wok on touism oiginally stated unde a MIGA pogam called Pomote Afica (PA), jointly sponsoed with the Govenment of Japan. 13 MIGA then launched a successo pogam co-funded by the Swiss Govenment, the MIGA-Swiss Patneship Pogam fo Investments in Sub-Sahaan Afica (MSP), focused on fou counties Tanzania, Mozambique, Ghana and Senegal. The MSP is a fouyea pogam, designed to focus on building capacity in investment pomotion agencies (IPAs), paticulaly by assisting them to undetake focused, well-pepaed investo outeach pogams. The MSP woked with the IPAs in each of the fou counties to pepae, undetake and follow up on investment outeach pogams. In Tanzania, the MSP built on ealie wok in touism and helped the IPA, the 16 investing in development tanzania touism

18 Tanzania Investment Cente, in coopeation with the Ministy of Natual Resouces and Touism, to pepae a touism investo outeach pogam, launched at a majo investment confeence, with subsequent follow up. The MSP contibuted to the pivatization of the Kilimanjao Hotel, among othe investments, and continues to suppot the investo outeach pogam. The investment foum MIGA, in patneship with the Depatment of Touism, TIC and TCT, decided that an investment foum would be a stong way of launching a pocess to encouage highe flows of FDI into touism and an efficient way of pomoting sustainable gowth in the secto. (See Box 3: Setting Up the Foum.) In geneal, the goup envisaged a foum of some 100 paticipants with a focused, tight pogam and a seies of site visits fo seious investos. The Pesident of Tanzania, his Excellency Benjamin Mkapa, was to lend his suppot to the confeence pogam, both as keynote speake and as an intelocuto with pospective investos. (See also Annex 5: Evaluating the Investo Confeence as a Pomotional Tool.) The initial planning goup envisaged a foum of some 100 paticipants with a focused, tight pogam and a seies of site visits fo seious investos. Coodinating the stakeholdes. Fo the pocess to succeed, it was essential fo the paties putting on the investment foum to wok togethe. To ensue pope coodination, a Steeing Committee and a Technical Committee wee fomed with membes epesenting fou key institutions: MNRT (Depatment of Touism), TIC, TTB and the Touism Council of Tanzania, unde the chaimanship of the Diecto of Touism. The Steeing Committee held monthly meetings with MIGA paticipating fom Washington by videoconfeence. MIGA staff also visited Tanzania on a couple occasions. The fist activity was to detemine how best to seek out investos who might be inteested in Tanzania. Afte discussion with the Steeing Committee, it was Box 3: Setting Up the Foum The investment foum was stuctued aound the following key paametes: The concept developed out of the "Pomote Afica" pogam MIGA, Depatment of Touism, TIC and TCT poposed an investment foum fo 100 paticipants A Steeing Committee and a Technical Committee wee set up: - Diecto of Touism, Chai - MNRT (Depatment of Touism) - TIC, TTB - Touism Council of Tanzania The Steeing Committee met by video confeence and staff tavel Two consulting fims wee hied to taget investos: - One familia with investos in Afica - One familia with investos in Euope and the Middle East The foum s date and content wee detemined: - Foum planned to take place in Ausha on Octobe 2, Pesident Mkapa would attend - Focused, tight pogam - Site visits investing in development tanzania touism 17

19 decided to hie two consulting fims, one familia with investos on the Afican continent (DCDM) and the othe with expeience of Euopean and Middle Easten investos (TRI Intenational). The consultants tageted investos and identified ove 400 candidates, both fims and individuals. At the same time, DCDM was actively involved in the design of the foum. (Afte the foum, DCDM, in coopeation with a Tanzanian fim, DAIMA Associates, povided follow-up suppot fo the touism investo outeach pogam.) The event would take place at Ausha s well-known Intenational Confeence Cente, which had hosted many confeences attacting wold attention. A stakeholde meeting was then oganized to elicit esponses fom paticipants on the issues and oppotunities facing touism. (See Box 4: The Stakeholde Meeting.) This meeting was held in Da es Salaam 14 and attacted 100 paticipants fom all ove the county. They included both pivate secto inteests, such as epesentatives fom pofessional associations and individual entepeneus, and govenment officials fom MNRT as well as fom othe inteested agencies, such as the Ministies of Finance, Lands, and Public Woks, and agencies such as TANAPA (national paks). Among the issues discussed wee: peceived high levels of taxation (including pepayment of taxes in some cases and weak pocedues fo eimbusement of VAT); complicated and costly licensing pocesses and pocedues; and the need fo bette infastuctue and pomotion of the destination. 15 One subject spaked heated debate at the stakeholde meeting. Smalle investos opeatos of lodges, small tou companies and estauants aised the issue of whethe Tanzania eally needs big outside investos athe than the small and medium-sized entepises (SMEs) that typically chaacteize the touism industy. This led to an ageement to povide additional suppot fo SMEs in the fom of capacity-building sessions on how to pepae a business plan and caft a maketing pogam. The discussion also led to development of poposals fo a guaantee fund and a business incubato scheme, both of which wee adopted in a compehensive, Wold Bank-financed pogam to suppot the pivate secto. Box 4: The Stakeholde Meeting The Stakeholde Meeting, held in Da es Salaam, unfolded as follows: 100 paticipants attended fom all ove the county - Pofessional associations and individual entepeneus - Govenment officials fom inteested agencies Seveal issues wee aised - Peceived high levels of taxation - Complicated and costly licensing pocesses - Need fo bette infastuctue and pomotion SMEs questioned whethe Tanzania needed foeign investos - Ageement to povide additional suppot fo SMEs: - Capacity-building on how to pepae a business plan and maketing pogam - Guaantee fund - Business incubato scheme 18 investing in development tanzania touism

20 The mateial fom the stakeholde meeting was ultimately included in the secto study poduced by MIGA fo the foum. Entitled Touism in Tanzania: Investment fo Gowth and Divesification, it was both a policy-based document and a souce of infomation on investing in touism in Tanzania. Two thousand copies wee pinted and subsequently distibuted to attendees, donos and othe inteested paties. The secto study late became a efeence fo economic wok elated to the integated tade policy famewok fo Tanzania. 16 Planning the confeence. MNRT took the lead in oganizing the logistics, woking with a local confeence planne, Tanzania Confeence Sevices, Ltd., while MIGA pepaed the documentation, highlighting the oppotunities in the touism industy and coveing maketing costs. (See Box 5: Handling the Investment Foum Logistics.) Admission to the confeence was set at US$100 pe paticipant, consistent with the idea that a confeence of value is woth a fai admission pice. Thus, the bulk of the costs was met by the paticipants. Registations fo the foum wee vey slow at fist. Indeed, thee weeks befoe the foum, thee wee still no paid-up egistants. Howeve, in the last ten days, egistation was bisk and the initial taget of 100 attendees was quickly exceeded, ultimately eaching 280. The investment foum s agenda was aanged so that Pesident Mkapa could meet pesonally with investos, a key benefit noted in advance on the invitation. Duing the planning, one of the consultants pointed out that investos would not attend this sot of confeence unless specific investment poposals wee made available. The feeling was that good investos do not have the appetite fo long meetings; they want to get to the meat ight away. It was decided that the best way to offe specific investment oppotunities was to have business plans o feasibility studies eady to shae with potential patnes and financies. Then these poposals could be discussed on a sound basis. In fact, business poposals wee sought ahead of time but none mateialized, except those fo big pojects that wee aleady on the table. The Wildlife Depatment, esponsible fo concessions fo hunting, actually awaded seveal contacts befoe the foum and thus lost the oppotunity to auction lots unde competitive conditions. 17 MIGA eached out to othe donos 18 who ageed to povide budgetay suppot and esouce pesons to speak at the foum. This eniched the content of the final pogam by poviding a moe compehensive pespective on Tanzania fo investos. Fo instance, the Wold Bank discussed pivate paticipation in infastuctue pojects, paticulaly elated to weaknesses in infastuctue povision in Tanzania. Box 5: Handling the Investment Foum Logistics The logistics fo the investment foum wee handled as follows: MNRT aanged logistics though a local confeence planne MIGA pepaed the documentation, including touism oppotunities, and coveed maketing costs Two lettes of invitation wee sent unde the signatue of the Ministe of MNRT: - The fist one accompanied a flie announcing the Foum - The second went with a bochue and moe detailed infomation on Tanzania - Telephone follow-up calls wee made A foum website was set up investing in development tanzania touism 19

21 The Development Bank of South Afica (DBSA) addessed its Special Development Initiatives tanspot coidos designed to attact multiple investment activities. Intenational Finance Copoation (IFC) explained its expeience with investing in East Afica. The Euopean Union, which had povided an advise to the MNRT, pesented Tanzania s Touism Maste Plan and othe key documents. The confeence date of Octobe 2, 2002, was set as a function of Pesident Mkapa s availability. Two lettes of invitation wee sent unde the signatue of the Ministe of MNRT. The fist lette was attached to a flie announcing the foum, and the second lette was sent with a bochue and moe detailed infomation on Tanzania. Telephone follow-up calls wee made. A foum website was also set up that povided a contact point fo investo queies. It included geneal infomation on Tanzania, backgound studies including the MIGA secto study and the newly evised Touism Maste Plan, the agenda and potential investment sites. Following the foum, the website was updated and e-launched. Evaluating the esults. Two hunded and eighty delegates attended the foum. The lagest goup included epesentatives fom existing tou opeatos, hotels and ailines in Tanzania, as well as Tanzania-based epesentatives of intenational fims. About 30 intenational investos, mostly fom Afica, and a handful fom Euope, UAE and the USA also attended. The intenational investos epesented tou opeatos and hotels, and a few financial institutions. (See Box 6: Admission Fees and Attendance fo moe details.) Seveal speakes enlivened the foum s agenda. The Pesident of the Republic, the Honoable Benjamin Mkapa, opened the day with a ousing speech in which he welcomed both foeign and local investos and pesented his vision fo Tanzania. The Pesident of Zanziba, the Honoable Rais Kaume, deliveed his emaks to close the foum. Thoughout the pogam, numeous officials and the Deputy Secetay Geneal of the Wold Touism Oganization, D. Dawid de Villies, offeed thei pespectives. In a paticulaly inspiational anecdote, the Tanzanian owne of Box 6: Admission Fees and Attendance Key paametes of the foum s admission and attendance ae as follows: Admission was set at US$100 pe paticipant Most costs wee met by the paticipants attendance fees Registations wee vey slow at fist, but bisk in the last ten days Attendance eached 280, including: - Consevation Copoation of Afica, Holiday Inns, Seena Goup, Golden Tulip, Legacy Goup (now Mövenpick), Potea Hotels - 30 intenational investos (Ethiopia, Kenya, Mauitius, South Afica) - A few delegates fom Austia, Cypus, the Nethelands, Potugal, the UAE and the USA MIGA contacted institutions that povided funding and esouce pesons: - Wold Bank - IFC - Development Bank of South Afica - Euopean Union 20 investing in development tanzania touism

22 the Peacock Hotel in Da es Salaam shaed his stoy of stating fom scatch with little education, but a lot of humility and peseveance, to build his business ove the couse of a lifetime. He ecounted how his son went on to ean a univesity education, the fist in his family to do so, and now uns the hotel and paticipates in touism associations. The pocess at the foum was faily unique. Rathe than the moe usual one-onone meetings between pospective investos and patnes, the lettes of invitation had suggested that inteested investos would be invited to meet the Pesident of Tanzania and epesentatives of TIC and MNRT. This poved to be a popula decision and seious investos wee intoduced to the Pesident. Two key meetings elated to the futue of the Kilimanjao Hotel. The govenment had been negotiating with an investo to buy the Kilimanjao, yet potacted discussions had continued long afte the investo s exclusivity peiod and the deal was expected to be confimed at the foum. When the deal could not be confimed, the Pesident advised the investo s agent that Tanzania consideed itself fee to poceed with othe investos. The next potential investo to meet the Pesident was a diecto of Albwady Investments of Dubai. He made a fim offe fo the Kilimanjao and immediately a deal was stuck. The Kilimanjao Hotel was sold fo US$3 million as a sale of assets. Although thee wee many factos leading to new investment announcements, the following pojects can be taced, diectly o indiectly, to the foum. Reflecting an expected total value of ove US$100 million, these pojects include: Puchase and edevelopment of the Kilimanjao Hotel (US$35 million) The fist investment in Kikoni camp in the Southen Cicuit (US$0.5 million) Zamani Hotel, Zanziba (US$36 million) 19 Finalization of sale of Mafia Lodge (an estimated US$0.6 million) IFA Hotels and Resots (a poposed US$50 million investment in Zanziba) Although not a esult of the foum, the Fench ambassado chose the occasion of the investment foum to announce that Fance would finance the constuction of a US$4.6 million Hotel School nea the State House in Da es Salaam. 20 Paallel financing fom the Euopean Union of US$3.1 million 21 has been secued fo cuiculum development and ecuent costs. This was cetainly welcome news; the school will meet a pessing need fo local taining and puts emphasis on Tanzania s quality of sevice in touism. The investment foum also eceived consideable fee publicity though local newspapes and the intenational media. Thee inteviews wee given on BBC.com: one fom Washington in advance of the confeence; the second to the consultant pepaing the confeence; and the thid to Pesident Mkapa, a 25-minute session that was handled expetly and seved to showcase Tanzania as an investment destination. These contacts wee aanged by a goup of specialists in New Yok closely associated with the Afica Tavel Association, whose pesident at the time was the Ministe of Touism fo Tanzania. The Investo Outeach Pogam Ceating a pocess The investment foum set in motion a fluy of activity that seved to futhe stuctue Tanzania s investment pomotion pocess fo touism. In paticula, the investing in development tanzania touism 21

23 foum aised a numbe of issues equiing follow-up, and helped to set pioities fo the investo outeach pogam. To supplement existing capacity in the coodinating institutions, a consotium of two consulting fims was engaged to facilitate the follow-up pocess. 22 Among the pessing issues following the foum, seveal took shape as actionable guidelines fo the pogam: The foum aised a numbe of issues equiing follow-up, and helped to set pioities fo the investo outeach pogam. The new Maste Plan should be implemented. (See Box 7: Locations fo Touism Investment and Touism Poducts and Chaacteistics fo an oveview of the sites fo touism investment and touism activities.) Expessions of inteest fom investos should be followed up. Infomation geneated at the foum should be made available fo a wide eadeship via a special website. Capacity building should include capacity fo pepaing business plans and fo locating facilitation and suppot mechanisms, and fo financing facilities fo pivate investos. MNRT would continue to wok with the pivate secto to find solutions to the outstanding issues and poblems that had sufaced at the investment foum. Mechanisms fo continuous dialogue between the public and pivate sectos would be stengthened. The Govenment should facilitate the stengthening of the TCT. At the opeational level, a Steeing Committee and a Technical Committee wee fomed with membes fom fou key institutions: MNRT, TIC, TTB and TCT. These committees would take esponsibility fo coodinating follow-up pomotion and facilitation of touism investments. Pogam pioities The investo outeach pogam was twice advetised in the local pess and esponses eceived fom local investos wee encouaging, including the investment pofiles descibed below. Seveal key elements helped to shape the pogam s sevices in woking with potential foeign and domestic investos going fowad. Many of these elements can be taced to specific needs identified as a esult of the initial stakeholde meeting that kicked off planning fo the investment foum. These key pogam elements include: Contact database. As noted ealie, two consultant teams identified a list of contacts. This list was subsequently stengthened with the addition of attendees at the confeence and othe new contacts and inquiies. The esulting compehensive list coves close to 200 investos, and is available fom MIGA. While it is pimaily intended as a database fo Tanzania, the list is also useful in othe counties in Afica, especially those in Easten and Southen Afica. Infomation on financing souces. Avenues of finance fo investos in touism ae still peceived as insufficient. Fo instance, while Tanzania claims ove 20 commecial banks, access to cedit so fa has been limited to a few high-value boowes with adequate collateal. (Lending on cash flow is not seen as likely in the nea futue.) Since 2002, howeve, with financial secto efoms, local banks have become moe aggessive and lending ates ae coming down; ates of 7-12% ae becoming moe common, compaed to 12-18% ates a couple of yeas ago. In addition, a few ventue capital, leasing, and cedit guaantee funds ae emeging. IFC ecently opened an office in Tanzania and is involved in leasing and suppot fo SMEs. 22 investing in development tanzania touism

24 Box 7: Locations fo Touism Investment and Touism Poducts and Chaacteistics The potential sites fo touism development in Tanzania ae well known and include: National Paks, Game Reseves, and Consevation Aeas: Sites ae available fo photogaphic and hunting safais (in well-sepaated aeas) in and aound Tanzania s national paks and eseves. The Coastline and Off-Shoe Islands: Tanzania has an 804-kilomete coastline, mostly of unpolluted beaches and shoes with good fishing and diving pospects. Mafia Island is now a maine pak devoted to big game fishing and diving. Zanziba and Pemba islands have beaches and histoical settings. The mainland cost also offes many oppotunities. Histoical Sites and Achaeological Teasues: Tanzania has a ich heitage of achaeological, histoical and ock painting sites, a numbe of which have been designated as Wold Heitage Sites (e.g. the Olduvai Goge, Kilwa Kisiwani, Bagamoyo and Zanziba s Stone Town). Mountains: Mount Kilimanjao, Afica s highest mountain and the wold s highest feestanding mountain, and the Usumbaa Mountains, have a teain and climate in stak contast to those of the coastal aeas. Lakes: The thee lage lakes with touist potential include Lake Tanganyika as one of the wold s deepest and longest lakes (772.4 metes deep); Lake Victoia as souce of the lagest eseve of fesh wate and the longest ive in Afica, the Nile; and Lake Nyasa. All thee lakes povide oppotunities fo wate spots. Touism Poducts and Chaacteistics Tanzania s touist poduct is geneally chaacteized by: its abundance, divesity, eliability and visibility (in the case of wildlife); quality and beauty of its envionment and sceney; low touist density at sites and paks; authenticity and the unique Afican expeience and fiendliness of the Tanzanian people; safety; and beaches. A standout-featue in Tanzania s touist poduct is its ability to offe a wide ange and packagable expeiences and activities. Given this potential, Tanzania pomotes the following touism poducts: Soft Adventue and Wildlife Safai Poducts: nealy 25% of Tanzania s land has been set aside as wildlife and botanical sanctuaies, fo consevational, educational, scientific, cultual and eceational puposes; Special Inteest Poducts: these poducts include the coastal and island esouces fo maine-based inteest; mountain climbing, hiking and walking; and possibilities fo those seeking to pusue aspects of cultual inteest; Resot Poducts: attactions exist to help develop esots on the coast and on the islands, in the mountains and by the lakes, which can povide the sevices and facilities fo quality esots; Cultual and Histoical Poducts: with its vaied cultue, Tanzania has the capacity to povide a ewading and satisfying cultual expeience fo a wide ange of touists. Pogams ae undeway to futhe conseve histoical sites and aeas alongside development of intepetative centes and pomotion of cultual activities. A good success stoy is the Cultual Touism Pogam in Ausha, which was developed via a Dutch aid poject. investing in development tanzania touism 23

25 Unde the investo outeach pogam, a seies of memoanda on institutions financing touism pojects was completed and made available fo investos. It includes 35 intenational and fou local financial institutions. Investment pofiles. The investment pofiles have poved vital fo keeping in touch with potential local and foeign investos, and fo encouaging the maximum involvement of business associations, such as TCT. Though this element, potential investos and local developes (pomotes) ae kept infomed of available investment oppotunities and pogams. In addition, investos can lean how to stengthen thei poposals and meet potential patnes. Following the media advetising in mid-2004 that invited local investos to send in poposals, 38 touism investment poject pofiles wee compiled and classified into five categoies as follows: beach touism; city popeties; wildlife esots; tou opeations; and othe. Investments ae in the ange of US$100,000 US$2,000,000 equivalent. Best effots wee made to ensue that the data supplied is accuate, but a full due diligence pocess was beyond the scope of the poject. The consultants eiteated the idea that an ancho poject would add inteest fo investos. At an ealie stage, a land eclamation and eal estate development on the Da es Salaam watefont had been poposed, but was subsequently withdawn as too politically sensitive. The Aga Khan investments on Zanziba (efubishment of Stone Town watefont; expansion of Seena Inn) wee placed on hold until afte the pesidential elections. Business assistance and capacity building. The MSP sponsoed a wokshop fo SMEs and povided technical assistance in developing business plans. MIGA developed poposals that wee adopted fo financing the business incubato and the guaantee fund unde Wold Bank assistance to the pivate secto. 23 The pogam also povided suppot to stengthen touism-elated associations, such as TCT, Tanzania Association of Tou Opeatos (TATO) and the Hotel Keepes Association of Tanzania (HKAT), which stepped fowad to play leadeship oles in patneship with TIC, MNRT and govenment. Howeve, moe discussion was equied and additional sessions wee scheduled to hamme out pogams on, fo example, linkages and localization of puchases. Investo outeach. To pepae fo investo outeach, a full-day stategy session modeated by expeienced intenational consultants was held in Da es Salaam. MIGA was pesent, along with othe stakeholdes. The session helped fomulate a stategy tageted at investment in the context of Tanzania s Touism Maste Plan. Following this session, two outeach missions wee completed: attendance at the Mozambique Touism Investment Foum in Maputo in Octobe 2004; and individual epesentation fo Tanzania at the Aabian Hotel Investment Confeence in Dubai in Apil The Maputo mission povided an oppotunity fo touism investos to inteact with like-minded individuals and companies fom Tanzania. As a esult of the Dubai mission, Tanzania was offeed a speaking slot fo 2006 and will be the featued county fo Aabian investments in sub-sahaan Afica. Moving fowad The cuent phase of Tanzania s investo outeach pogam, in coopeation with the MSP, will soon be completed, although pessing activities await implementation. It is impotant that the emaining sevices unde the investo outeach 24 investing in development tanzania touism