Touristic strategy for civil society and local administration workshops Financial and economic incentives for investors in tourism and tourism related sectors Brussels March, 2012 Dr. Frederic Thomas – Tourism Economist EIREST – University of Paris 1, Pantheon - Sorbonne

Financial and economic incentives for investors in tourism and tourism-related sectors The investments realized in a certain period of time, affect the equilibrium level of production, employment and total income. Investments shape the size and structure of disposable capital, which correspondently affects the production capability and the development perspectives of the economy Investments constitute one of the most crucial economic variables in a country’s development process, Investments’ aforementioned double role and their great importance for a country’s economic development have led to the need of private and public sector cooperation (Kousoulakos, 1994)

About tourism A basic Component of the national economy? A part of the private sector?

The government’s role regarding tourism development financing policy Finance and often carries out those investments that can not or are unproductive to rest upon market mechanisms. Finance general infrastructure through public investment aiming at satisfying the needs of both the region’s residents and the tourists. Finance special tourism infrastructure as well as innovative tourism enterprises, aiming at attracting further private interest Indirect support to private tourism investments (incentives) Source: Gouvis, Vlami, Tsamos (2004)

Investment incentives – a definition Investment incentives as defined by Jenkins (1982) are “legislative provisions which are introduced to attract investment funds by offering concessions, usually of a fiscal or financial nature, to enhance the probability of earning a satisfactory rate of return on capital employed, but also general in nature that aim at safeguarding the security of an investment”.

Categories of investment incentives Investment incentives Financial incentives Reduction of capital costs Reduction of operating costs Investment Security Monetary, legislative and social stability Bureaucratic easement

Financial incentives Capital grants, “soft” loans with preferential terms, Public sector participation Provision of infrastructure and land on concessional terms, Tariff exemption on construction materials, e.t.c. Reduction of capital costs. Tax exemptions or reductions, Labor or training subsidies, Special depreciation allowances and subsidized tariffs on key inputs such as energy or imported materials. Reduction of operating costs.

Main purposes for using incentives Using incentives for? Acceleration Remove/overcome obstacles Discrimination