Financing Sustainable Tourism

7 Basic Facts on Tourism and Growth
The tourism industry is a 1 US$ trillion industry employing about 230 million people worldwide
It is an important source of investment in developing countries such as in:
  • Namibia -13% of total investments
  • India (Kerala) -8% of total investments
  • China - 9.9% of total investments
  • Malaysia -12% of total investments
  • The Caribbean- 15%-76% of total investment
The industry represents 9.5% of global total investments. More than 1.15 trillion US$.(3 years average; 2004-2006)
Tourism represents up to 40% of GDP in DC and LDCs. With statistical extremes going up to 66%
Tourism represents 33% of global "trade in services" and virtually all LDCs are tourism net exporters
Tourism can employ unskilled or semi-skilled labour and in outlying areas
"Mass leisure tourism" is unlikely to develop and considerably alleviate poverty

Tourism is recognized as the largest industry worldwide. It has grown rapidly and almost continuously over the past thirty years, and is now one of the world's most significant sources of employment and GDP. Tourism particularly benefits the economies of developing countries, where most of the sector's new tourism jobs and businesses are being created. This rapid growth has encouraged many developing nations to view tourism as key to promoting economic growth, and international development assistance agencies see it as having real potential to help achieve many of their own development assistance objectives.

A number of studies reports that the rich and diverse biophysical environments found in many of the world's least developed countries have started to suffer from an un-balanced tourism development and from large scale tourism development projects that are not following a solid basis of sustainable development criteria.

Within the financing initiatives, addressing environmental and social issues is now considered critical to the proper management of projects, portfolio management and reputation risks. The question is no longer whether investors, multi-lateral and bilateral donors and financing institutions should address the sustainability aspects of the tourism development activities they support, but how they should do it - what substantive standards should they apply? How should they implement them? And how should they assure compliance?

Investments in the tourism sector represent today almost 10% of all investments' value worldwide. In developing countries this figure could be as high as 50% (Caribbean region). At the same time there is a growing focus on tourism as a generator of foreign direct investments in developing countries. A recent UNCTAD study indicates that tourism is the number one priority and focus of the Investment Promotion Agencies in developing countries. Many investors are becoming also more conscious regarding the environmental and social sustainability of their investment choices. A wide range of issues that five years ago were considered "non-financial" such as climate change, biodiversity conservation and social issues are now coming to the fore as factors that can have a significant impact on investment value. Many investors, particularly pension funds with a remit to take a long-term perspective, are grappling with these issues, and there can be both hesitation and confusion as to how to integrate them in investment decision-making.

Within this framework and following the recommendations of a workshop on "Financing Sustainable Tourism Development" that took place within the 3rd meeting of the International Task Force on Sustainable Tourism Development the Sustainable Investment and Financing in tourism (SIFT) Network is being under establishment. Visit the SIFT Network page to learn more about this initiative.