Tourism policy issues in Nepalese economy

Executive Summary

Nepal’s main source of Foreign Exchange is the tourism industry. Sir Edmund Hillary and

Tensing Sherpa first climbed the Mount Everest in 1953. The modern tourism history of Nepal

was started since then.

After the peace agreement between government and so called rebel group the political parties

have been agreed and given their commitment to tourism as the most important sector of Nepalese

economy. Although, tourism industries are unmotivated and sickness because disturbances and

strikes in tourism industries from the political parties. However, economical emerging and most

populist neighboring countries India and China represent the enormous potential but it has also

threats from global financial crisis.

The community based tourism is well suited for the Nepalese economy. The preservation,

conservation and promotion of cultural heritages are needed through involvement of local bodies

so that capacity building and training is needed until villagers are confident enough with their

tourism activities. Government should decentralize the tourism planning process and develop

tourism marketing information system.

Introduction

Tourism has been an imminent part of Nepalese sociology since time immemorial. A strong

Nepalese belief of ‘Guests are God’ has established tourism as a strong culture and tradition in

Nepalese life. Sparkling mountains, unique natural beauties, lovely waterfalls, thrilling and diverse

wildlife experiences, diverse yet harmonised ethno-cultural setup, historical and religious places

have contributed to the commercial transformation of the industry in the early twentieth century.

Tourism has been an integral part of national development to cope with poverty, increase

employment and to upgrade the national economy. It has been well proved that, the Nepal’s main

source of Foreign Exchange Earnings (FEE) is the tourism industry by which the government

recovers the adverse balance of payments and maintain economic stability. Nepal is one of the

admired tourist-destinations of the world. The tourism industry is the major means to entirely

support the nation towards the national development. However, at around the end of the last

century, Nepal especially the tourism sector, has suffered a lot due to the domestic political

turmoil and insurgency. Revenue collection from the tourism sector has faced a serious setback.

Therefore, a large number of development activities were blocked. Before two years, an agreement

has been signed between the government and the rebel group in an effort to lasting peace and the

peace has been established. Simultaneously, the government has given the topmost priority to the

tourism sector and has prepared a long-term master plan to develop tourism infrastructure in the

nation. The plan is expected to help to provide valuable information in strengthening Nepal’s

tourism industry and for formulation of future plans, strategies and policies. Hence, to boost up the

tourism sector and contribute the national effort in strengthening the national revenue there is a

need to prepared good tourism policy in terms of the economic development of Nepal.

Statement of the Problem

A major source of foreign exchange earnings, tourism in Nepal is an instrument to provide

employment and building infrastructure within the country. By considering the direct and indirect

contributions, tourism accounts 6.4 per cent of Nepalese GDP in 2007 (UP ZRS 2008, p. 23). The

sector also provided the people of Nepal with increasing employment opportunity. Between 1997

and 2007, number of employees in tourism sector rose by two folds. The growth of this sector,

nonetheless, is somewhat dependent on tourists from the European as well as OECD countries. In

2007, roughly 35 per cent tourist came from OECD nations (MTCA 2009). And, in terms of value

European tourists contributed over 45 per cent to the industry (UP ZRS 2008, p.31). However,

with the OECD economies now going through a deep recession, the flow of tourists to Nepal

might be decreased.

The tourism industry is growing very rapidly and Nepal has tremendous potential for tourism

development because of its unique natural and cultural heritage. In this context, good tourism

policy is essential to increase national productivity and income, increase foreign currency

earnings, create employment opportunities, improve regional imbalances and projecting the image

of Nepal more assertively in the international arena, through the development and diversification

of the travel and tourism industries.

Looking at the macroeconomic issues, the government must consider strategies for reducing

poverty, generating employment and raising living standard. In order to achieve the goals of

improving the lives of the people in Nepal, significant investment in tourism infrastructure,

tourism security, agro tourism, urban tourism, and expanding rural infrastructure are needed.

Without reviewing the weaknesses and include appropriate policy in plans, tourism development

goal cannot be achieved. Therefore, this paper aims to analyze Strengths, Weaknesses,

Opportunities and Threats (SWOT) and recommends some policies in the context of Nepal.

Tourism Outlook

Sir Edmund Hillary and Tensing Sherpa first climbed the Mount Everest in 1953. The modern

tourism history of Nepal was started since then. The Himalayas have attracted foreigners to Nepal.

At that time there was a shortage of hotels, airways and other so many infrastructures and there

was a restriction to travel in many parts of Himalayas. The new development was started since

1960s; the government encouraged the building of hotels and other tourist facilities. Now Tourism

is the largest industry in Nepal; the largest source of foreign exchange and revenue. Possessing 8

of the 10 highest mountains in the world, Nepal is an admire destination for mountaineers, rock

climbers and people seeking adventures. The Hindu and Buddhist heritage of Nepal, and its cold

weather are also strong attractions. The government of Nepal has been actively promoting tourism

in Nepal and has always encouraged the private sector for their vigorously involvement and

participation. Different travel and tourism organizations are working in this sector.

With Nepal tourism brand ‘Naturally Nepal, once is not enough !’, the government of Nepal

in consultation with Nepalese travel trade sector and concerned organizations decided on October

25, 2008 to launch a national tourism campaign “Nepal Tourism Year 2011”. The main

objective of this announcement reflects the government’s expectation to bring tourists Nepal at

least one million by the year 2011. The campaign will also focus on mobilizing the networks of

the Non-Resident Nepalese (NRN) communities, Nepalese diplomatic missions abroad, INGOs

and NGOs, airlines and national and international media. Similarly, friends and well-wishers of

Nepal, tourism academicians and celebrities will be approached in order to highlight the campaign

internally as well as internationally (Nepal Tourism Year 2011).

In order to make a significant contribution towards the national goal of poverty alleviation, and

to achieve a sustainable development in tourism, the Tourism for Rural Poverty Alleviation

Program (TRPAP) has been successfully completed as a pilot project in 6 districts. This program

targets the poor and backward castes and women. Construction of an Integrated Tourism Master

Plan with the aim of providing directives to the tourism sector, and the task of making timely

improvement and modification in the tourism policy, is nearing completion (NPC 2008, p. 206).

In order to fulfill the objective of making transport affordable, safe, qualitative and reliable,

strategies for the construction and operation of airports, and private sector involvement even in the

long route flights, have been adopted. As a birth place of Buddha, the Second World Buddhist

Conference was concluded in November, 2004, with a 10-point declaration that includes the

development of Lumbini (Birth place of Budda) as an international peace city. With the objective

of producing human resources of international standard in tourism sector, courses in Bachelors in

Hotel Management and Bachelors in Travel and Tourism Management, are being offered by the

Nepal Academy of Tourism and Hotel Management.

Tourists’ Inflow in Nepal

In March 1989, tourism had grown by more than 10 percent per year for most of the 1980s.

Between 1985 and 1988, the number of tourists increased from approximately 181,000 to about

266,000. More than 80 percent of the tourists arrived in the country by air. In FY 1985, more than

US$40 million worth of foreign exchange was earned through tourism. By FY 1988, this amount

had increased to more than US$64 million. In FY 1989, tourism accounted for more than 3.5

percent of GDP and about 25 percent of total foreign exchange earnings (Nepal Tourism, 2009).

According to Immigration Office, Kathmandu, visitors’ arrivals to Nepal in April 2008 reached

32,665, which is a marginal decrease of 1% as compared to same month last year. However

European sector remains unchanged with almost the same figure as compared to the April 2007.

France grew up by 21%, Austria with 20%, Netherlands & Israel with 28%, Switzerland with

66%, Spain with 25%, but UK, Sweden & Germany decreased by 20%, 31%, & 20% respectively.

There are some significant growths recorded; Australia & New Zealand arrivals show a growth of

51%. Closely following the trend are Canada & USA with the growth of 25%. The arrival figure

shows a decrease of 18% for the Asian countries. SAARC countries arrival is decreased by 14%

where India has the share of 19% decrement. Bangladesh on the other hand shows an

extraordinary growth of 60% which may be the positive impact of the recent Bangladesh Sales

Mission program held vigorously.

Problems and Prospects in Tourism

Global turndown may hits in Nepalese tourism sector. The symptom in this sector has revealed

and to hit hard of global financial crisis. The figures released by the Immigration Office,

Tribhuvan International Airport (TIA), reveal that arrival figures by air in the month of March

2009 compared to the same month last year decreased by 17.6 percent jump down to 33,005. The

United Nations World Tourism Organization (UNWTO) expects international tourism to stagnate

or even decline slightly by -1 percent to -2 percent throughout 2009 (UNWTO 2009).

Tourism sector has facing so many difficulties due to lack of infrastructure. The government’s

national flag carrier Nepal Airlines Corporation has remained a big challenge. Political instability

is other major problems in Nepal. Participation of the private sector in the infrastructure

development could not be increased because of the suspicion between government and private

sector. Due to the lack of data on cultural heritage preservation of cultural heritage is so

challenges.

Sparkling mountains, unique natural beauties, lovely waterfalls, thrilling and diverse wildlife

experiences, harmonised ethno-cultural setup, historical and religious places have contributed to

the commercial transformation of the industry. So, rural tourism can play the essential role in

Nepalese economy in terms of alleviate poverty and employment generation.

Strength, Weakness, Opportunity and Threat (SWOT) Analysis

Strengths

After the peace agreement between government of Nepal and so called rebel group the political

parties of Nepal have been agreed and given their commitment to tourism as the most important

sector of Nepalese economy. Consequently the “New Nepal” was awarded also a new tourist

brand name. The natural beauty, diversity and unique features at the same time are representing a

permanent strong point of tourist sector in the country. Natural beauty is the one of the most

important strength of tourism sector. |Silver Snow cap

Weaknesses

The country could not earn foreign currencies as expected from this sector. Poor infrastructures,

poverty, illiteracy, are always a serious problem in tourism sector, especially airlines and

transportation services are bottlenecked. Drinking water and hygienic food also represent a big

problem for rural tourism since they are not easily accessible in rural areas. The major weakness is

always disturbances and strikes in the main highways from the political parties. So tourism

industries are unmotivated and are in sickness condition. Less use of computer technologies and

software programs are the drawback of his sector. Lack of inventory of tourism sites and lack of

good master plan, the possibility of integrated and coordinated development of the tourism sector

has not yet been transformed to an opportunity. Apart from conventional tourism, development

and growth of other innovative tourism, such as adventure tourism and eco-tourism, has not been

encouraging. During the political conflict in Nepal many airports were damaged and need to

physical infrastructure development, expansion and modernization of various airports, and

construction of new airports could not be carried out at the same time due to the lack of adequate

resources.

Opportunities

Economical emerging and most populist neighboring countries India and China represent the

enormous potential for tourism sector in near future. The promotions of regional tourism through

South Asian Association for Regional Cooperation (SAARC) could be the useful instrument to

develop this sector. Community based rural tourism is the high potential of the country. People

become more conscious in updating an inventory of cultural heritage of the country. The natural

scenery, high mountains, incomparable cultural heritage and various specialties have made Nepal

a well-known place in the world tourism map. There is a possibility of further growth in the

number of tourists with the opening up of new mountains and restricted areas. Recently political

developments in Nepal and peace agreement with so called rebel group are improving the

country’s image at global level and have help to bring more tourists to Nepal. There is also an

immense possibility of developing adventure tourism in the mountains and rivers of Nepal.

Threats

Political condition still not quite good, strike in the tourism industries is the major problem, not

good air connectivity with rest of the world, security problems and so on is the major domestic

threats. There are some declining figures in tourism inflow in Nepal due to the very recent global

financial crisis. More importantly, threats from the competition on the global market, especially

from close competitors like Malaysia, Thailand, Singapore, Sri Lanka, Maldives where the

resource constraints like low budget comparing to competitors, slow development of infrastructure

also have an important negative role.

Conclusions and Policy Recommendations

Conclusions

Rural community development such as health, water, roads, power supplies etc. and sustainable

small tourism business such as home-stays, guesthouses, tea shops, guide services, handicrafts etc

should be established. The community based tourism is well suited for the underdeveloped

Nepalese economy. The ongoing capacity building and training is needed until villagers are

confident enough with their tourism activities. In order to achieve the sustainable development

further activities in this sector is needed.

For establishing the ongoing and sustainable linkages between the central government and local

bodies the institutional design has to be legally assured within government regulations. Tourist

impacts on natural resources and cultural heritage are to be controlled, especially in fragile areas.

Develop new tourism products and new tourism places are most. In order to access rural tourism

products it is necessary to upgrade and maintain roads, trails, bridges and other essential

infrastructure. Capacity building and skills training is a core activity to promote rural tourism. The

exchange and study programs in tourism sector will be useful in proving confidence and

motivation to start new tourism initiatives in the remote areas. Tourism marketing information

system should be established for long term tourism development.

Policy Recommendations

• Local communities and private agencies should be involved in the preservation,

  conservation and promotion of tangible and intangible cultural heritages.

• The tourism sector should be developed as the foundation of the economy.
• Private airline companies should be encouraged to contribute to tourism and economic

  development through the expansion of domestic and international air services.

• Special Tourism Promotion Program (STPP) should be launched, targeting neighboring

  countries, India and China.

• Diversifying the tourism sector and should be expanded by developing educational

  tourism, health tourism, wildlife tourism, agro tourism, eco-tourism, mountaineering

  and trekking tourism, adventure and entertainment tourism, cultural tourism, and

  religious tourism in addition to mountain tourism.

• Better Tourism Marketing Information System (TMIS) should be established by

  empowering the local bodies.

References:

1. MTCA (Ministry of Tourism and Civil Aviation). 2009: Government of Nepal. (Online)

   Available at: http://www.tourism.gov.np/tourismstatistics.php (accessed on 16 July 2009)

2. UP ZRS (Univerza na Primorska Znanstveno-raziskovalno sredisce Koper). 2008: Nepal:

   Tourism Sector Analysis. (Online). Available at:

   http://asiantour.progetti.informest.it/market_analysis/nepal.pdf (accessed on 28 July 2009)

3. UNWTO (United Nations World Tourism Organization). 2009: (Online). Available at:

   http://www.unwto.org/index.php (accessed on 29 July 2009)

4. Nepal Tourism Year 2011. 2009: (Online). Available at:

   http://nepaltourismyear2011.com/ (accessed on 20 July 2009)

5. NPC (National Planning Commission. 2009: (Online). Available at:

   http://www.npc.gov.np/uploads/plans/20081228114653.pdf (accessed on 15 July 2009)

6. CBS (Central Bureau of Statistics). 2009: Statistical Year Book of Nepal, (Online).

   Available at: http://www.cbs.gov.np (accessed on 10 July 2009)