The Function of Foreign Investment in the Growth of Tourism

by | Nov 23, 2022

By Sam Stein

One of the riskiest and most difficult economic decisions is whether to invest since it involves a number of variables and components whose behavior and development tendencies are frequently impossible to predict.

In order to achieve economic and social development, foreign investment is a crucial and effective component. Any initial increase in foreign investment will result in double and cumulative increases in domestic investment through the so-called investment multiplier, and an increase in domestic income must be a component of that increase in order to increase foreign investment through the so-called accelerator.

Since investment is one of the elements impacting the national product, which in turn promotes demand for manufacturing items, and because investment changes have an impact on income and employment, it has garnered a lot of attention in the literature on economic development.

The area of investment, also known as the entity or space in which the investor plans to put his money, refers to the sort or nature of the activity in which the investor wishes to invest his money in order to receive a return. While we identify the tool employed when we say real estate or securities, we do not define investment when we say domestic and overseas investments.

In other words, when we refer to the field of investment, we are referring to a particular economic sector, and when we refer to the source of financial assets or real estate, we are referring to the investment instrument.

It appears that investments naturally gravitate toward nations whose currencies are robust, stable, or at the very least do not fall in the near future, and away from nations that experience rapid inflation and currency collapse, although this rule is not always true everywhere. To discover that the value of his money has increased, with the exception of the profit that occurred during those cities if he was a citizen of those countries that melt their currency and increase in inflation rates, the investor only needs to place his money in that country's currency (i.e., the country with a strong currency) and recover it after a period.

The majority of the time, investments in the tourism and travel industries are based on the same commercial principles as those in other economic sectors. However, there are times when investments are made in the tourism industry for non-profit motives, like in the following situations:

1. Rather than for solely financial motives, many nations invest in the tourism sector for social and environmental considerations.

2. Institutions like banks frequently participate in the tourism industry for non-commercial reasons, but more crucially, the property's capital value has grown significantly in comparison to other assets, whose value depreciates with time.

Some investments are meant to support a certain lifestyle. For personal or social purposes, some people purchase boats, a recreational farm, a horseback riding facility, and other amenities that fit their lifestyle.

The worldwide exchange of goods has historically resulted in internationalization of the economy. In other words, the capitalist economy came before the free market. This objective trend toward the globalization of open markets within closed domestic markets is known as the internationalization of economic life. The demise of the feudal order and the expanding significance of global trade, The issues have been crystallized between the two traders, necessarily, in the sixteenth century to the creation of the elements of business theory whose ideas were crystallized by a collection of disparate writers subsequently known as the commercialists (Thomas Mann, Jean Colcier). With the expansion of the state's economic strength through increasing its population, the state intervenes in economic life to establish a suitable trade balance that contains surplus and to achieve an accumulation of psychological minerals money, which is the foundation of wealth.