TRAVELLER'S TALES

SMEs kept at bay

DON ROSS

There is no joy for small to medium enterprise investors in the vast tourism arena. If they were hoping for a break at last week's Mekong Tourism meeting, billed as a forum for SMEs to create a dialogue with bankers, they were sadly disappointed.

Held in Ho Chi Minh City, the event attracted 180 enterprises from the six- country Mekong River region, all of them keen to fathom the mysteries of gaining a bank loan for their pet tourism projects.

Unfortunately, that is just how the banks, even the ones that claim to be SME-friendly, consider projects proposed by small family entrepreneurs. They are all pet projects that should not be taken too seriously by savvy investment bankers.

Despite Asian Development Bank support, the meeting attracted just a handful of gloomy bankers and they presented a predictably negative view of investment in SME projects.

The tone of the two-day meeting was not helped by the venue, a rambling Rex Hotel in the heart of Ho Chi Minh City, where delegates struggled to locate their rooms strewn through an assortment of annexes and wings. Opened in 1927, probably by an enterprising SME, it has since been swallowed up by Saigon Tourist Corporation's ever expanding empire, that rules the roost in Ho Chi Minh City. A tourist doesn't sneeze in this city without paying something to the Saigon Tourist coffers.

The rambling environment appeared to rub off and encourage the bankers to follow suit in a series of presentations that rambled on, while failing to offer any serious direction to tourism executives. Delegates were as lost in the meeting as they were trying to locate their rooms.

So while bankers insisted that Mekong Region tourism was on an economic roll, they essentially told delegates searching for a loan for their guesthouse or restaurant they would have to look elsewhere.

After all the speeches and power-point presentations, the bottom line was clear for every small investor or tourism entrepreneur. Banks generally do not trust tourism, particularly if it is in the hands of family businesses.

For an event that was supposed to bolster confidence and encourage small enterprises to expand their role in tourism, it fizzled out like a wet firework. Unfortunately, the architects of the Mekong region's tourism model preach community tourism, pro-poor projects and opportunities for small family enterprises to share in the region's economic harvest.

In contrast, bankers recite statistics on the high-risk factor, claiming that family businesses and village communities are too dodgy for comfort. They claim tourism is littered with bad debts, failed projects, flawed business plans and the SME pie-in-the-sky mentality. Just who is accountable when a project fails? Apparently banks that claim to have a SME-friendly policy are in reality very uncomfortable serving this market.

On paper at least, SME enterprises are the backbone of the Mekong Region. Made up of China's two provinces, Yunnan and Guangxi, Laos, Cambodia, Myanmar, Vietnam and Thailand, the region's tourism appeal relies mainly on family ventures - guest houses, travel agencies and village attractions.

Yet for how long can the village or family business prosper if banks favour mega projects or large city-style hotels that underwrite their loan applications with a management contract from an international hotel chain?

As the meeting lost steam, it became apparent that SME businesses in tourism will have to turn to their governments for financial assistance.

Across the region there are hospitality ventures in the 25 to 50 room category mainly guesthouses and boutique hotels that give destinations their distinctive character and appeal.

Luang Prabang in Laos is an example of how a destination has been developed around SME enterprises. The same applies of Pakse in southern Laos and the resorts along Vietnam's sandy coastline and even its mountain resorts in Sapa.

However, when they need a loan to build additional rooms or upgrade their accommodation, they are usually turned down by commercial banks.

This indicates that the only viable commercial model for tourism in this region is the concrete cube crammed with rooms rising 25 to 50 floors high. Anything less is viewed with extreme suspicion. If that happens to be true then the future looks bleak for the small destinations in the Mekong region.

How much doom and gloom can a tourism executive take in one day? Following the bankers, delegates faced a rousing call from former Pacific Asia Travel Association vice president Peter Semone, who pointed to global warming, over crowding of resorts and old fashioned crime and insecurity as the factors impacting on tourism investment.

How can anyone be sure a tourism project will work in an industry that can turn on its head at the hint of terrorism, he asked delegates.

If security and health concerns were not knocking at the door, he assured the tourism industry of the Mekong region that global warming would haunt them to financial ruin.

"We cannot ignore the environment and the negative impact tourism has on a region like the Mekong Region," he said.

Hiding behind a pillar out of sight of the doomsday messengers, I noticed a delegate tapping away on his laptop. He was completing the final brush strokes to a survey of what has been called "Cambodia's Southern Tourism Corridor."

"Here's the future," he whispered. "You see this line of golden beaches and the cluster of islands off the Cambodia's southern coast. This is where investors should go to capture the next opportunity."

He pointed to a coastline from Trat Province and Ko Chang in Thailand extending through Cambodia beyond Sihanoukville all the way to the delta region of southern Vietnam and the gateway city of Ho Chi Minh City.

Here was the essence of tourism development - a dreamer identifying the spots where the next beach resorts will be built and the tourist routes that will link three countries via sealed highways.

He showed a short section of dirt road in Cambodia, skirting an idyllic beach.

"That's the last unsealed stretch," he said. "Now the task is to identify the attractions on the route east and draw investors to build resorts and guesthouses."

With or without the bankers it will happen but it might take a few new brush strokes from governments to pull in the finance to build Southeast Asia's version of the Gold Coast, 20 years down track.

Don Ross can be reached through this email address: info@ttreport.com

Bangkok Post

Last Updated : Sunday April 08, 2007