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Current State of Tourism Services Sector in Nepal and Ways Forward

Presentation byDr. Ramesh C. Chitrakar

Rameshc977@yahoo.comExpert 1

AtAtSecond National Stakeholder Workshop on ServicesSecond National Stakeholder Workshop on Services

(27th – 28th October 2009)(27th – 28th October 2009)

Co-organized by UNCTAD-Ministry of Commerce and SuppliesCo-organized by UNCTAD-Ministry of Commerce and Supplies Kathmandu, NepalKathmandu, Nepal

October 27, 2009October 27, 2009

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Role of Tourism and Travel-Related Services

Sector of comparative advantage – instrumental in spreading benefits & providing alternative economic opportunities

Located between the two fastest growing countries

namely India and China Endowed with rich and diverse natural resources and cultural attractions - Incomparable cultural heritage as well as a rich environmental spectrum from the highest mountains to the Terai plains.

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Effect of the Tourism Service Sector on the National Economy

Contributes to the economy (GDP), employment (including women & youth), foreign exchange earnings.Helps in meeting MDGs & poverty reduction: Sector with high multiplier and positive spill-over effects etc.Three Year Interim Plan (2007-2009): Formulated new plans and policies for tourism infrastructure development (creating awareness about tourism, developing skills, expanding tourism activities); improving standards of tourism services; and undertaking international promotion and marketing.Tourism Vision 2020 (May, 2009): Valued tourism as the major contributor to a sustainable Nepalese economy, having been developed as an attractive, safe, exciting and unique destination through conservation and promotion, leading to equitable distribution of tourism benefits and greater harmony in society. The Tourism Vision 2020 also envisaged two goals: Increase annual international tourist arrivals to Nepal to two million by 2020,

and Augment economic opportunities and increase employment in tourism sector to

one million. Declared Nepal Tourism Year 2011 as a national campaign looking at the encouraging trend in 2008 and 2009

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Market Trends The opening of Nepal for foreigners: 1949 when Arnold Heim made an aerial flight over Dhaulagiri, S. Dillon Ripley searched for mountain quail in Rekcha (Surkhet) and Chainpur (Sankhuawasabha), H. W. Tilman’s party explored and climbed Lamtang and Ganesh Himal, and Sutter-Lohner’s expedition made a 99-day alpine trek around KanchanjunghaNo. of tourists increased since then, but decreased during a decade long Maoist movement. Year 2007: re-started to attract more tourists. In the year 2006/07, tourists visiting Nepal reached 516,000, with foreign exchange earning of $205 million, average stay 13 days and average spending about $60 a day. About 100,000 people directly employed in providing tourism services while 125,000 indirectly involved. Economic survey records only the contribution of hotels and restaurants (2.6% in 2008/09).

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Table: Number of Tourists by Purpose of Visit

Year (December)

Pleasure Trekking & Mountaineering

Business Official Pilgrimage Meeting & Seminar

Others Total

2000 255889 118780 29454 20832 15801 5599 17291 463646 55.2 25.6 6.4 4.5 3.4 1.2 3.7 100

2001 187022 100828 18528 18727 13816 - 22316 161237 51.8 27.9 5.1 5.2 3.8 - 6.2 100

2002 110143 59279 16690 17783.00 12366 - 58907 275468 40 21.5 6.2 6.50 4.5 0 21.3 100

2003 97904 65721 19387 21967 21395 - 111758 338132 29 19.4 5.7 6.50 6.3 0 33.1 100

2004 167262 69442 13948 17088 45664 - 71893 385297 43.4 18 3.6 4.40 11.9 0 18.7 100

2005 160259 61488 21992 16859 47621 - 67179 375398 42.7 16.4 5.90 4.50 12.7 0 17.8 100

2006 145802 66931 21066 18063 59298 - 72766 383926 38.0 17.4 5.5 4.7 15.4 - 19.0 100

2007 217815 101320 24487 21670 52594 8019 100800 526705 41.4 19.2 4.6 4.1 10.0 1.5 19.2 100

2008* 152950 100055 23039 45091 43044 6938 129160 500277 30.6 20.0 4.6 9.0 8.6 1.4 25.8 100

Source: Ministry of Culture, Tourism and Civil Aviation Note: Figures in bold represent percentage share in total * Estimated

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Growth Rate of Tourist Arrivals by Major Regions

Asia

Year North

America

Central & South

America Western Europe

Eastern Europe

Africa India other Total+

Australia & Pacific Other Total

2001 -20.2 -23.7 -17.4 -11.3 -21.8 -32.9 -21.7 -26.5 -16.5 0.0 -22.1

2002 -45.6 -39.8 -33.2 -14.9 -29.1 3.8 -18.7 -9.9 -35.4 0.0 -23.7

2003 8.1 -19.0 8.2 22.3 42.4 29.3 38.8 34.6 14.1 0.0 22.7

2004 10.9 93.3 22.4 18.8 -28.0 4.5 12.7 9.2 13.9 0.0 13.9

2005 -10.4 -18.6 -15.8 7.9 12.1 6.9 4.4 5.4 -24.0 266.2 -2.6

2006 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9

2007 29.4 252.1 31.4 197.2 54.0 -4.9 32.9 17.1 86.8 568.1 33.5

2008 2.8 16.3 -2.2 -23.0 0.1 -5.0 -9.6 -8.2 11.6 25.8 -5.0

2001-2008 0.6 9.8 0.7 10.6 -2.2 0.8 7.5 4.6 3.7 47.3 2.8 Source: Calculated based on Data from Ministry of Culture, Tourism and Civil Aviation

Growth rate improved for the year 2007, i.e. (33.5%), but could not sustain in 2008 may partly due to financial recession in the western world and partly because of political conflict within the country.

No time series data for inflows of Chinese tourists. NTB : Chinese visitors (by air) in 2007 increased

by almost 63 percent over 2006 and 7 percent in the first half of 2008 compared to the same period in 2007, indicating the importance of Chinese tourists in the days to come.

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UNWTO: developed tourism satellite account in 2001

According to the World Travel & Tourism Council (WTTC), the TSA is based on a demand-side concept of economic activity Tourism industry does not produce or supply a homogeneous product or service like many traditional industries Diverse collection of products (durables and non-durables) and services (transportation, accommodation, food and beverage, entertainment, government services, etc) that are delivered to visitorsPolicy makers to understand that this diversity has many complex links to different parts of the economy, which makes the economic impact of tourism so significant

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WTTC (2008) gives a comprehensive picture about the economic impact of tourism to NepalAccording to 2008 update, T&T expected to contribute directly 3.0% to GDP in 2008 (NPR20.5 bn or US$318.9 mn), rising in nominal terms to NPR50.8 bn or US$538.1 mn (3.6% of total) by 2018 Of total exports, T & T is expected to generate 14.8% (NPR16.6 bn or US$257.3 mn) in 2008, increasing to NPR52.1 bn or US$552.1 mn (14.8% of total), in 2018. Employment estimated at 548,000 jobs in 2008, 5.3% of total employment, or 1 in every 18.8 jobs. By 2018, this is estimated to total 824,000 jobs, 6.2% of total employment or 1 in every 16.0 jobs. WTTC projection seems to match with 20/20 plan of creating a total of 1 million jobs.

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Contribution to National Development Objectives and Economic Diversification

Contributes to development and poverty reduction in a number of ways.Not only economic benefits, but also social, environmental and cultural benefitsIn terms of poverty reduction: provides employment and diversified livelihood opportunities. Reduces vulnerability by increasing the range of economic

opportunities available to individuals and households living in conditions of poverty.

Generates taxable economic growth since taxes can be used to alleviate poverty through education, health and infrastructure development.

Its contribution at micro level is explained in terms of its contribution to MDG.One direct contribution is in terms of foreign exchange earnings, which however, is fluctuating over the years

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Table: Foreign Exchange Earnings from Tourism

Year

Total Foreign Exchange

Earnings from Tourism

As % of Total Value of

Merchandise Exports

As % of Total Value of

Exports of Goods & Non-factor Services

As % of Total Foreign

Exchange Earnings

As % of GDP

Growth Rate

2000/01+ 11717 21 12 7.4 2.7 -

2001/02 8654.3 14.9 10.6 6.1 1.9 -26.1

2002/03 11747.7 23.1 15.2 8.20 2.4 35.7

2003/04 18147.4 32.9 20.3 11.40 3.4 54.5

2004/05 10464 17.5 12.2 6.10 1.8 -42.3

2005/06 9556 15.5 10.90 4.60 1.5 -8.7

2006/07 10125 16.1 10.70 4.50 1.4 6.0

2007/08* 10891 26.7 16.6 6.6 1.3 7.6

Average Growth Rate 3.8 Source: Economic Survey 2007/08 + Data based on new format since FY 2000/01 First Eight Mont

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Table: Mountaineering Expedition Teams

Year

Number of Teams

Number of Mountaineers

Number of Employment

Royalty (Rs'000)

Expenditure of the team (Rs’000)

2000 132 773 11587 119893 498513

2001 112 836 6203 127394 552033 2002 134 913 9928 128185 600000

2003 152 1080 14838 181360 630000

2004 140 1042 9362 127072 494494 2005 128 940 636 156240 400137

2006 133 986 4344 145612 423985

2007 162 1128 4843 169829 966637 2008 202 - 8080 239426 -

Source: Source: Ministry of Culture, Tourism and Civil Aviation.

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Contribution to National MDGs

MDGs- agreed set of goals to be achieved by 2015 based on all actors working together at global, regional and national levels

World's main development challenges: poverty reduction, opportunities for education, better maternal health, gender equality, and reducing child mortality, AIDS and other diseases.

International tourism contributes to MGDs by generating benefits to poor people and poor communities in the context of sustainable tourism development, usually without specifically targeting the poor

Targeted interventions to address the issues raised in MDGs also require that the linkages between tourism and poverty be identified. Figure 3 illustrates many of these linkages.

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Figure 1: Linkage between tourism and poverty

Tourism and Poverty

Pro-poor growth Non-farm livelihood

opportunities

Education and Training

Enterprise, development and micro, small and medium-

sized enterprises

Health care, infrastructure and services

Source of L ivelihood

Growth and diversification in marginal or remote areas

Access to markets for the poor

J obs: employment and empowerment

Sustainable environment management

Revitalization of local culture & preservation of

traditional skills

Reduction in isolation

Corporate social responsibility

Global partnership for development

` Source: Modification of Sheet No 3: Tourism and Poverty Reduction Making the Links, Pro-poor

Tourism Partnership 2004, adapted from UN (2007), Study on the Role of Tourism in Socio-Economic Development.

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Contribution of tourism to achieving MDGs

Goal Contribution of tourism

1. Eradicate extreme poverty and hunger

(a) Tourism stimulates economic growth both at the national and local levels and promotes the growth of the agricultural, industrial and service sectors;(b) Tourism provides a wide range of employment opportunities easily accessible by the poor. Tourism businesses and tourists purchase goods and services directly from the poor or enterprises employing the poor. This creates opportunities for micro, small and medium-sized enterprises in which the poor can participate;(c) International and domestic tourism spreads development to poor regions and remote rural areas of a country that may not have benefited from other types of economic development;(d) The development of tourism infrastructure can benefit the livelihood of the poor through improvement in tourism-linked service sectors, including transport and communications, water supply, energy and health services.

2. Achieve universal primary education

(a) The construction of roads and tracks to remote areas for tourists also improves access for school-age children and for teachers;(b) Tourism can help local resource mobilization, part of which can be spent on improvement of educational facilities.

3. Promote gender equality and empower women

a) The tourism industry employs a high proportion of women and creates micro enterprise opportunities for them. It promotes women’s mobility and provides opportunities for social networking.

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4. Reduce child mortality (a) The construction of roads and tracks to remote areas for tourists also improves access to health services; (b) Revenues accruing to national and local governments through taxes on the tourism industry can be used to improve health services and nutrition for young children and their mothers;(c) Tourism raises awareness about HIV/AIDS issues and supports HIV/AIDS-prevention campaigns;(d) Tourism aggravates the spread of HIV/AIDS (negative effect).

5. Improve maternal health

6. Combat HIV/AIDS, malaria and other diseases

7. Ensure environmental Sustainability

(a) Tourism can generate financial resources for conservation of the natural environment;(b) Tourism raises awareness about environmental conservation and promotes waste management, recycling and biodiversity conservation;(c) Uncontrolled tourism may generate negative externalities as a result of pollution, congestion and depletion of natural resources (negative effect).

8. Develop a global partnership for development

(a) Tourism contributes to the socio-economic development of least developed countries, landlocked countries and island developing countries through foreign exchange earnings and the creation of job opportunities;(b) Tourism stimulates the development of the transport infrastructure, which facilitates access to and from the least developed countries, landlocked countries and island developing countries;(c) Tourism stimulates internal and external trade and strengthens supply chains;(d) Tourism promotes the integration of isolated economies with regional and global flows of trade and investment;(e) Tourism reduces the burden on government budgets through implementation of public-private initiatives;(f) Tourism creates decent and productive work for youth;(g) Tourism provides opportunities for bilateral, multilateral and sub-regional cooperation among countries;(h) Information technologies play an important role in integrating tourism enterprises into global tourism markets.

Source: United Nations ESCAP, Transport and Tourism Division, Transport Policy and Tourism Section, adapted from UN (2007), Study on the Role of Tourism in Socio-Economic Development

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Tourism services regulated by various acts: Industrial Ent. Act, Tourism Act, 2035 (1978) amended in 2053 (1997), the Hotel, Lodges, Restaurants, Bar and Tourist Guide Rules, 2038 (1981), the Travel and Trekking Agency Rules, 2037 (1980), the Trekking and Rafting Rules, 2044 (1985), and the Mountaineering Rules, 2036 (1979).

FITTA 1992: no foreign investment in Travel Agencies, Trekking Agencies, Water Rafting, Pony Trekking, Horse Riding, and Tourist Lodging.

Opened up foreign investment in travel agency and tour operator service after WTO membership, but limited to 51%

FDI permitted in hotel industry with government's permission. As per WTO commitments, up to 80% foreign equity allowed in hotel, lodging services and graded restaurants.

MOTCA/ Tourism Industry Division: tourism regulator dealing with registration, licensing, categorization of star hotels, providing facilities and incentives and monitoring and evaluation.

Tourism Regulation

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Civil Aviation Authority of Nepal (CAAN): Regulator in aviation since its existence in December 1998. Three activities: regulation, growth and monitoring. Provides Air Operator Certificate (AOC) and enters into air service agreements with other airlines. Out of 35 air service agreements, only 17 have schedule flights at present.

Prior to liberalization in 1993, civil aviation department used to perform such activities.

Lack of domestic regulation to abide by the WTO commitments is a regulatory problem. WTO commitments: opened up the travel agency and tour operator service for foreign investment up to 51 percent of foreign equity capital. Not happened so far for lack of domestic regulation.

China provided Nepal with the approved tourist destination status since 2001. However, only three agencies in China known to provide approval for Chinese to travel to Nepal hindering the free flow of Chinese tourists.

People with international linkages required for tourism promotion abroad. Requires huge capital investment. Not possible at present as Nepal has not allowed capital account convertibility so far.

Service Enquiry Point established under the WTO division of the Ministry of Commerce (See annex ….for detail). At present, there is a coordinating body, which is represented by 17 Ministries/agencies. However, it is not functioning effectively for lack of necessary manpower, equipments and activities

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Potential for Medical Tourism

Broadly defined as provision of ‘cost effective’ private medical care in collaboration with the tourism industry for patients needing surgical and other forms of specialized treatmentPotential in Nepal. Will have to consider how to position itself as a medical tourism provider in the global market.The New Tourism Policy (NTP) 2008-identified health tourism as one of the potential tourism products of NepalFamous for natural method of treatment: NTP emphasizes to develop Nepal as a place of traditional Aurveda and naturopathy method for treating diseases with greater participation of the private sectorAs Nepal is equipped with valuable natural, historical and cultural heritage, NTP also highlights to publicize the importance of post-treatment rest around natural heritage sites in Nepal - requires infrastructure development with the participation of private sector.High altitude sports like cricket may also be included in Nepal’s health tourism.Qualified doctors, having their master and doctorate degrees from developed countries with several years working experiences are also available in Nepal. Medical check up, diagnosis, lab facilities, indoor service, surgery and follow ups are possible at a very low cost compared to developed countries.

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Effect of Trade Liberalisation on Tourism GATS and WTO Reforms to achieve higher demands for services began in

1992: Efforts to remove licensing and quota requirements in imports, reduce tariffs, liberalize investment laws, restructure the tax system and privatize a number of state owned enterprises (SOEs)

Moved towards integration with the global economy: country’s active participation in numerous international organizations and trade agreements.

Nepal’s membership in WTO in 2004. Upon accession, Nepal assumed a large number of general and specific commitments.

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Nepal's CommitmentsBroadly, the commitments made by Nepal in the services sector are divided into:

(A) General Commitments: Extended market access to both imports and exports in a specified manner except a restriction of providing only US dollar 2000 for Nepalese citizens while going abroad.

Supply of services by an existing foreign supplier will not be made more restrictive than they exist at the time of Nepal’s accession to WTO.

However, movement of natural person has been made unbound or restrictive except in the categories of services sales persons, persons responsible for setting up a commercial presence, and intra-corporate transferees.

In commercial presence, no limitation on national treatment placed on foreign investments and reinvestments except two conditions, i.e. approval of DOI and incentives and subsidies provided available to wholly owned Nepalese enterprises only.

The schedule restricts foreigners to buy and sell real estate in Nepal. The present civil code prohibits selling, mortgaging, gifting or endowing or disposing real estate to foreigners.

Provide decisions within 30 days of the date of application for investments except where of environmental impact assessment (EIA) is needed.

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4 supply of services modes: (1) Cross border supply (2) Consumption Abroad (3) Commercial Presence (4) Presence of Natural Person, the commitments made in tourism under each mode are as follows:

Table : Tourism Specific Commitments by Nepal in WTO Sector or sub-sector Limitation on Market Access Limitation on National

Treatment TOURISM AND TRAVEL

RELATED SERVICES

A. Tourism and restaurants Hotel, lodging services (CPC

6411) (star hotels only); Graded restaurants (CPC 6421-6423)**

B. Travel agency and tour

operator (CPC 7471)

(1) None (2) None (3) None, except only through

incorporation in Nepal and with maximum foreign equity capital of 51 per cent for travel agency and tour operator (CPC 7471) and 80 per cent for hotel, lodging services (CPC 6411) (star hotels only), and graded restaurants (CPC 6421-6423) **.

(4) Unbound, except as indicated in the horizontal section.

(1) None (2) None (3) None (4) Unbound, except as indicated in

horizontal section.

Source: WTO, WT/ACC/NPL/16/Add.2, 28 August 2003 Among many commitments under GATS, liberalization of tourism trade is an important one. After WTO

membership, Nepal opened up the travel agency and tour operation services for foreign investment up to 51% of foreign equity capital.

Up to 80% of foreign equity capital allowed for hotels, lodging and graded restaurants.

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SAFTA

15th SAARC summit: Head of State underscored the vital contribution that tourism could afford to the economic development of the SAARC region.

Agreements made to facilitate the movement of people through improved travel infrastructure, collaboration in human resource development, and the promotion of SAARC as a common destination through public/private partnership and joint campaigns.

Key elements for tourism growth & environment : Harmonization of customs procedures, improvement in transit facilities and improvement in communication systems.

Recognizing this, Nepal also proposed a SAARC tourism board, a SAARC Visa that allows easy movement of nationals of the SAARC countries within the Contracting States, and discount on travel fares for SAARC nations. (Frontline Magazine)

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Table: Trade in Travel Services AAGR* Export Export Import Import Export Import 1995 2005 1995 2005 1995-2005 Countries / Region

(US$ million) (%) Bangladesh 25.06 69.70 233.50 131.65 17.81 -4.36 India 2581.54 7853.00 996.18 6464.00 20.42 54.89 Maldives 210.73 286.49 31.40 69.94 3.60 12.27 Nepal 177.40 131.31 136.34 163.20 -2.60 1.97 Pakistan 109.64 181.00 446.26 1275.00 6.51 18.57 Sri Lanka 225.85 429.06 186.38 314.46 9.00 6.87 South Asia 3330.22 8950.56 2030.06 8418.25 16.88 31.47 Asia 53308.50 101111.00 47699.00 93520.00 8.97 9.61 World 392530.00 679860.00 379434.00 633784.00 7.32 6.70 South Asia’s Share in Asia 6.25 8.85 4.26 9.00

South Asia’s Share in World 0.85 1.32 0.54 1.33 *Average annual growth rate (%) Source: RIS based on IMF BOP CD-ROM 2008

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Table: Tourists Arrivals from SAARC Countries, 2008

More than 91,000 i.e. 58% has been from India, followed by Sri Lanka and Bangladesh, with tourists visiting from other SAARC countries limited to 2 %, implying the possibility of increasing tourists from other countries as well

S.N. Countries Number % 1. Afghanistan 1,371 0.9 2. Bangladesh 20,067 12.8 3. Bhutan 2,662 1.7 4. India 91,177 58.1 5. Maldives 491 0.3 6. Pakistan 3,248 2.1 7. Sri Lanka 37,817 24.1

Total 156,833 100.0

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Constraints to Inter-SAARC tourism

Internal factors: inadequate infrastructure, insufficient funding of tourism promotion, shortcomings in quality and efficiency in other sectors like educations, and health. (CEDA: 2007+ World Bank: 2004)

External factors include among others; immigration laws, documentation requirements, restriction on currency movements, lack of transparency, and policies that work as a disincentive for specific destinations (CEDA: 2007)

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SWOT Diagram 1: Prepared by MOTCA, Nepal

Strengths Unmatched natural products: Mt. Everest, Himalayan range and

eight of the worlds fourteen 8,000m peaks, diverse landscape, sublime natural scenery, protected areas with diverse flora and fauna, fast flowing rivers, year-round pleasant weather.

Ultimate adventure destination: Number one destination for mountaineers and trekkers, white rafting, largest assortment of aerial, terrestrial and aquatic sports.

Rich Culture: Multi-cultural, multi-ethnic; multi lingual yet harmonious society; unique Newari architecture of Kathmandu valley, Limbini and other UNESCO world heritage sites; Kumari-the Living Goddess; more festival than days in a year; tourist friendly and hospitable people, diverse cultures in Terai region etc.

Others: A model of successful peace process, able private sector, awareness of community level, public-private-people partnership approach, gateway to the Himalaya region.

Weaknesses Insufficient infrastructures Inadequate investment in

tourism sector Limited air connectivity

and weak national carrier Poor coordination among

different agencies Weak public-private

partnerships Scarcity of resources for

massive publicity and consumer promotion

Tourism patterns limited to only in a few geographic areas

Opportunities Government has placed high priority on tourism Growing tourism outbound of immediate neighbors Competitive ground handling costs Spill over effects from adjoining destinations of India and

China Growing demand for adventure travel Sustainability of nature and cultural heritage through tourism

economic development

Threats Transitional phase of

political environment Global terrorism Cross-border disease Strong competing

advisories unfavorable travel

advisories Global economic downturn Climate change

Source: GON/MOTCA (2009), Tourism Vision 2020: Tourism for Peace, People and prosperity.

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SWOT Diagram 2: Prepared by UNCTAD-DITC Nepal’s Tourism Sector

StrengthsNatural assetsCultural diversityReligious sites 4 World Heritage SitesAcquired image as an adventure and cultural theme tourism destinationGood service, hospitable nature of the Nepalese peopleExpanded air access to major marketsGovernment promotion of sustainable tourism Wide array of ecotourism offerings

WeaknessesLagging capacity expansion relative to targeted volume of touristsInfrastructure limitations in rural regions: utilities, telecom, water treatment.Road network limitations / traffic congestion Limited capacity of Kathmandu airport to accommodate growing trafficModerate levels of ‘leakage’Foreign–based local businesses do not repatriate profits towards Nepal Lower quality service provided by small restaurants, guesthouses, taxiesLimited access to new investments and financingInadequate safety regulations

OpportunitiesStrengthen inter-sectoral linkagesStrengthen community-based tourismRestored in-country stability, safety and securityRestored political stabilityImproving tourism and transportation infrastructure and serviceNew tourism themes: healthcare and educational tourism, business and conference tourism

ThreatsEnvironmental degradation in high-traffic areasIncreasing incidence of theft and violence targeting touristsGlobal economic crisisOver-development may damage the image of the destinationCompetition for land between tourists and local needs

Required spill-ins from other sectors: requires improved supply of services from the transport, financial, ICT, recreation, healthcare, utilities and security services sectorsAnticipated spill-overs into other sectors: provides improved market for services from the transport, recreations and healthcare sectors; conservation and improved land management related environmental benefits; expanded offering of infrastructure in tourism zones; propagation of quality standards to other sectors.Key stakeholders: relevant government ministries and parastatals; tourism sector firms – hotels, restaurants; transport firms – airlines, taxies, car-rental; local communities; labour unions; recreation and sports firms and interest groups; advertising agents and e-tourism suppliers.

Source: UNCTAD-DITC-TNCD, Strategies for advancing development of the services sector of Nepal, Draft Version, February 2009.

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Points to be re-emphasized Strengths: Rich in natural resources, cultural diversity and religious sites Number one destination for mountaineers and trekkers, and other

adventure tourism (rafting, aerial, terrestrial and aquatic sports) Tourism is Nepal’s dominant service export

Weaknesses: Poor services provided by small restaurants, guest houses and

taxis No direct air connection to Europe and very few international

flights having connections to Kathmandu Weak national flyer Unable to reap benefits from intra-regional tourism Failure to provide attractive and incentive packages to travelers

from India and China compared to competing destinations

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Opportunities: Adding new tourism products like health and wellness tourism, educational tourism,

community tourism, sporting vacations, ethnic tourism etc. Attracting middle income tourists during off season and from non-traditional markets Decrease costs through e-tourism High prospect of attracting surface travelers in future, both from India and China, with the

opening and development of new tourism destinations on both sides of border Prospect of opening new border points like Rasuwa for the Chinese tourists Reducing negative environmental impacts for ensuring long term stability of biodiversity WTO membership helped integrate Nepal’s tourism services into the global economy,

stimulating development through employment creation, and foreign exchange earnings. The positive spill over effect of this aided rural development: reducing dependency on agriculture, distributing the benefits to the population, and boosting GDP growth to reduce poverty.

Threats: Lack of political stability and the status quo bureaucratic structure Political interference and mismanagement in Nepalese airlines Threat of international terrorism and insurgency within the country in the past Regular bandas, road blockades, highway obstruction and landslides

Points to be re-emphasized (Contd…)

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Policy Recommendations – Ways Forward

Tourism be made free from politics and conflict: Any renewed worsening in the political situation could again send tourist arrivals into declineThe linkages between tourism and poverty be identified and established as depicted in figure 1. Focus tourism on the local or community level and aim at increasing tourism's contribution to poverty reduction - pay attention to the village tourism like TRPAP Trekking and mountaineering tourism – provides royalty income Emphasis on religious and cultural tourismMake necessary provision of infrastructure facilities and services (roads, communications, and health and sanitation services) - designed to benefit local communities & contribute to the achievement of Millennium Goals 4, 5, 6 and 7 Specific programmes to increase inflows of tourists coming from North America and India Travel industry to produce trade surplus - surplus provided up to 2004 tuned into deficit since 2005.Introduce TSA developed by WTTC. Also make service sector classification compatible with SNA 1993 and WTO classification

Socio-economic and political aspects

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Regulatory and institutional aspects

MoTCA to improve its Monitoring and Evaluation system Airport be opened round the clock. Also need of inter-

agency coordination for working effectiveness of different agencies operating at the airport

Formulate domestic regulations to make the country able to abide by the WTO commitments. Need of strengthening WTO Reference Centre established under MOCS

The Service Enquiry Point established under the WTO division of MoCS be strengthened with necessary manpower, equipments and activities for its proper functioning

Need of further work in implementing and introducing medical tourism

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Related to Liberalization: GATS etc.

Nepal’s commitments under GATS in twelve sectors, tourism being one. Need of a comprehensive service plan in the tourism sector to:

Access Nepal’s capabilities and resources to compete in the global tourism industry. Find the optimum balance between local and foreign participation in this industry Access the ability and resource to fight barriers to market access created by other

counties through technical standards, subsidies, discriminatory access to information and distribution channels etc.

Identify supply constraints created by the lack of human resource, technology, and quality standards

Develop plans and policies to overcome supply constraints and barriers to market access

Tourism: industry to have the largest monetary turnover in the world by the year 2020 (Frontline Magazine.), so, trade liberalization constraints in tourism must be acknowledged and differences between the SAARC nations must be rectified in order to reap the highest benefit of this growing industry.

Re-examination of the trade policies for enhancing FDI in tourism sector. Consideration be given to increase the coverage of GATS commitments in tourism services by scheduling new commitments for food and beverage services, tourist management services, education and health accommodation services, and other non-conventional services.

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Action Plan Matrix