Tourism sector performs poorly

Statistics from the Ghana Investment Promotion Centre (GIPC) for the first half of 2017 show that the tourism sector recorded its worst Foreign Direct Investment (FDI) projects performance in 10 years.

The sector recorded no new project for the first half of the year although GIPC recorded 95 new FDI projects in the period.

These new projects targeted other sectors of the economy including services, manufacturing, general trading and liaison, building/construction, export trade and agriculture leaving the tourism sector with no new investment.

The poor performance of the tourism sector, according to GN Research, the reach wing of Groupe Nduom, was due to the lack of incentives for enterprises in the sector.

A statement issued and signed by Mr. Kofi Ampah of the GN Research also attributed the poor performance to the repeal of Promotion of Tourism Instrument, 2005 (LI 1817), which empowered the GIPC to grant incentives in the form of tax exemptions to businesses in the industry in 2011.

According to the statement, the presence of the LI led to increase in the private sector investment through construction, refurbishment and upgrading of tourism infrastructures.

However, it stressed that the repeal has left the sector less incentivised.

“Our analysis of the available tax incentives for the tourism sector shows that there are only two major incentives; corporate tax of 22% instead of the standard 25% and the importation of items listed in chapter 98 part B and C of the Harmonised System and Custom Tariff Schedule,” the statement revealed.

The statement noted that comparing the sector with other countries (like Romania, Poland, Belgium, Kenya, Morocco and Senegal) with similar levels of development of tourism (using contributions of travel and tourism to GDP), showed that Ghana charges the highest VAT (17.5%) on businesses operating in the sector.

Another reason for the inability of the sector to attract FDI was institutional and regulatory lapses due to their bureaucratic nature.

The 2017 World Bank Doing Business report showed that Ghana’s performance on almost all the institutional and regulatory components was declining.

Against this background, the statement urged government to institute financial incentives including tax incentives, depreciation subsidies, subsidised tariffs and concessions under specific projects or geographic locations to ensure a satisfactory return on investments.

“This should target long-term opportunities identified by the GIPC. This includes multi-hotel resorts; one each at the Volta Estuary; Brenu Beach in the Central Region; Cape Three Points area in the Western Region; Lake Bosumtwi in Ashanti, the Volta Lake Basin, Dodi Island, Dwarf Island, Digya National Park, Melinli Peninsular, Amedzofe and Wli-falls in the Volta and the Accra marine drive project,” the statement recommended.