Report

T OURISM AND TRAVEL RELATED SERVICES 127
national treatment will not be accorded with respect
to foreign exchange provided to foreigners to pay for
any cross-border services. Thus for the tourism services
provided by foreigners via Mode 1 while paying foreign
exchange national treatment is not guaranteed. This
implies that there could be discrimination between
national and foreigners while payment is made in
foreign exchange for services rendered through Mode
1. However, those categories of persons have been
excluded who are covered by Nepal’s commitments.
Incidentally, there are only a few categories of persons
who are covered by the schedule of commitments.
Under Mode 3 in the National Treatment column
a foreign investor reinvesting earnings is required to
obtain the permission of the department of industry.
Further, all foreign investments except for financial
services require approval by the department of industry.
Besides, incentives and subsidies are available only to
enterprises wholly owned by Nepalese nationals.
The tourism sector is largely dependent on various
other sectors. In this regard, the most important sector
is air transport without which the existence of today’s
tourism would be extremely difficult. However, the air
transport is only partially covered by GATS. According
to Paragraph 3 of the Annex on Air Transport Services,
only three services related to air transport – aircraft
repair and maintenance services; the selling and
marketing of air transport services; and computer
reservation system (CRS) services are covered by GATS
and services related to traffic rights which are the main
activities in air transport remain outside GATS. The
partial coverage of the sector does not really favour
developing countries as the sector is dominated by
innumerable bilateral agreements dictated generally by
advanced countries. Generally speaking, for developing
countries a multilateral agreement is preferable to a
bilateral one since their concerns could be better
addressed when there are a large number of parties
involved rather than the bilaterals where a strong party
can always thrust its will over the weak counterpart.
In this regard, the review of air transport services
is an important exercise in the WTO. Nevertheless, a
few peripheral services covered by the GATS – which
are actually support services to air transport – have
not been liberally committed by member countries.
Thus it is not surprising that barring Nepal no other
South Asian WTO member country has made any
commitments in services related to air transport. Nepal’s
commitments relate to maintenance and repair of
aircraft (CPC 8868) and there are no restrictions in
Modes 1 and 2. Under Mode 3 the commercial presence
is allowed through incorporation in Nepal and with a
maximum foreign equity capital of 51%. However,
foreign equity cap will be increased to 80% after five
years from the date of accession. In the National
Treatment column, Modes 1, 2, and 3 are without any
restrictions. Mode 4 is unbound under both Market
Access and National Treatment columns and refers to
the horizontal section where there is nothing specific
for this sector.
Tourism accounts for about one-third of Nepal’s
services receipts. SAARC countries offer a very healthy
market to Nepal tourism – India being the biggest
market for Nepal in the region. However, Nepal tourism
has witnessed little growth during 1995–2005. Thus,
number of tourist arrivals has been almost stagnant
during the past eleven years.
Tourism plays a very important role in the economy
of Nepal. Employing some 600,000 people, it is the
second largest sector of employment after agriculture
(UNCTAD-ICC 2004). It is also a prominent foreignexchange
earner, contributing 21% of the total value
of merchandise exports, 10% of total foreign exchange
earnings and 3% of the country’s GDP. The economic
importance of tourism in Nepal has been due to
economic linkages, foreign exchange earnings,
employment and improved socio-economic conditions
in remote rural areas (ESCAP 2005). As tourism in
Nepal has hitherto been concentrated in the Kathmandu
valley, Pokhara and Chitwan, it has been suggested that
new areas can be developed in other parts of the country
by setting up resorts that can be destinations on their
own, such as the national parks and wild-life reserves
(UNCTAD-ICC 2004). The Nepal Tourism Board has
been providing small-scale skill development training
covering most areas of the tourism industry for local
stakeholders to strengthen their capacity (ESCAP
2005). The government has established the Nepal
Academy of Tourism and Hotel Management and there
are four private sector training institutes in Kathmandu
and two in Pokhara.
The major tourist-originating market for Nepal has
traditionally been India, which account for nearly 20%
of the total arrivals. This is a foundation that can be
built on, for Indian tourists are among the highest
spenders in Nepal and they are especially likely to visit
in the summer months when non-Indian arrivals
decline. The latest development in this area is the status
granted to Nepal by the People’s Republic of China as
one of the outbound destinations for Chinese tourists.
According to the UNCTAD-ICC study, Tourism is
an area with enormous potential. There are spectacular