Report

128 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA
natural assets such as Mount Everest – the top of the
world – and seven other peaks of 8,000 meters and
higher. There is also a rich cultural heritage and a great
diversity of ethnic groups with distinctive traditions:
Lumbini is the birthplace of the Buddha, while
Bhaktapur is a perfectly preserved medieval town full
of Hindu temples. Thus far the focus of investors has
been mainly on the Kathmandu valley, with a few
exceptions. Most of the potential for development lies
outside the valley. Investors will also want to consider
the potential for more specialised tourism, for example
health tourism, adventure tourism, and convention and
sports tourism. Nepal’s neutral status in the region
might offer a real advantage here.
The study further suggests that training schools for
the hospitality industry, amusement parks, golf courses,
cable-car complexes and resorts in non-traditional
destinations such as the mid-western, far-western and
eastern development regions are among the opportunities
for foreign investment. The emergence of the
People’s Republic of China as a source of tourists has opened
up opportunities for specialty restaurants as well. Similarly,
an opportunity exists for setting up the international
airport planned for outside the Kathmandu
valley. The possible site is a place near Lumbini.
In view of the importance of the tourism sector in
Nepal it could be suggested that it should expand the
coverage of its commitments by including tourist guides
services. The opening up of this sub-sector would enable
Nepal accessing standard companies having better
guides and conversant in various foreign languages.
This will augur well for the growth of the tourism sector
in Nepal. In addition, Nepal should rethink over its
commitment to have foreign equity ceiling. In fact
removal of this ceiling is likely to result in the increased
inflows of FDI as foreign companies do not have the
necessity to look for local partners. Finally, it should
make its Mode 4 regime a bit more liberal which is
currently open for limited categories of persons largely
involved in the supply of services via Mode 3.
Summary of Restrictions in the
Tourism Sector of Nepal
• In hotel and restaurant services commitment limited
to star hotels and graded restaurants
• Under Mode 3 maximum foreign equity ceiling of
80% for hotel, lodging and graded restaurant
services
• Under Mode 3 maximum foreign equity ceiling of
51% for travel agencies and tour operators services
• No sectoral Mode 4 commitments in both the
committed sub-sectors
• Mode 4 horizontal commitments almost limited to
ICTs
• As per the horizontal commitments under Mode 1
no national treatment with respect to foreign
exchange provided to foreigners to pay for any
cross-border services
• No commitments in tourist guides services.
The Maldives
The Maldives had neither undertaken any commitments
in the Uruguay Round nor has it offered any commitments
during the ongoing services negotiations in the
tourism and travel related services sector. This is
surprising as it is a country whose economy, to a large
extent, depends on tourism. Though it suffers from
capacity constraints with regard to negotiating in the
WTO and identifying sectors/sub sectors and drafting
the schedule of commitments in services as it does not
have a representative office in Geneva to interact with
the WTO on a regular basis, this is also true that the
Maldives will gain hugely from undertaking
commitments because that is the only way to ensure
that it gets desired market access from its trading
partners for its exports. This will also help the country
in articulating its import interests.
The Maldives has been very successful in developing
its tourism industry and enjoys an enviable image in
the market place. The Maldivians’ entrepreneurial flair
and the liberal investment climate seem to have resulted
in 30 years of continuous growth (The World Bank
2006). In 2004, the country hosted 618,000 tourists, a
record number – double its population. Its hotel
occupancy (more than 80%), average length of stay
(more than 8 days), and daily expenditures (approaching
$200/day) are all high by international standards.
Over the last decade or so the Maldives has replaced
the West Indies as the upper class British destination of
choice and now the rich Japanese have joined them.
Tourism in the Maldives grew at a rate of 11.6% between
1972 and 2005. This is a rate well above regional
or global growth rate. Although the contribution to
GDP is estimated at 33%, the highest in the region, it
is commonly believed that much of the activity in the
islands – as much as 70% – is linked to tourism. The
tourism sector in the Maldives covers six sub-sectors:
guest houses, safari vessels, tour operators, travel agents,
resorts and hotels. The majority of business enterprises
in the Maldives are private limited liability companies
and, in the case of tourism, that figure is about 81%,
and the majority is owned by the Maldivians. In tourism