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N T I S2010Index 2: World Market ConditionsTable 2.45Total World Export Value of Tourism, 2004-2008 (US$1,000)2004 2005 2006 2007 2008n/a 680,000,000 745,000,000 857,000,000 944,000,000Source: UNWTO (2009b).Market Access Conditions: There are no particular foreign barriers in this sector. 99 Numerous barriers exist inNepal, in particular a lack of transport infrastructure.Major Competitors in World Market: Major direct competitors seem to be other South Asian countries thatoffer tourists a somewhat similar natural and cultural heritage, such as India (in particular the Himalayanregions), Bhutan, Tibet or Sri Lanka. However, these destinations can also be complementary. A lot of visitorscombine a visit to Nepal with a visit to India (31 per cent) or Thailand (14 per cent), which are also major transitcountries for flights to Nepal. Few people currently combine it with Tibet, which is probably related to thestringent visa regulations applied by China for visits to the Tibet region. 100 The same applies to Bhutan, whichis pursuing a policy to limit the number of tourists and keeping revenue per visitor high. Policy changes thatmake visits to Tibet or Bhutan easier could offer new opportunities for visitors, but are also a potential threatfor Nepal.World Market Prospect: Tourism is a fast-growing market around the world. Global international visitorarrivals have grown by 4.3 per cent per annum between 1995 and 2008 and this growth is expected tocontinue. The UNWTO forecasts a 4.1 per cent annual growth rate until 2020, and an even faster growth of6.2 per cent in South Asia.Index 3: Domestic Supply ConditionsNepal ranks very low in the World Economic Forum’s ‘Travel & Tourism Competitiveness Index’ (WEF, 2009b),which takes into consideration the regulatory framework, infrastructure, and human and natural resources. Itranks 23 rd out of 24 ranked destination countries in Asia and the Pacific, and with a similarly low rank acrossall indicators. Some of the indicators appear questionable or plainly wrong, but it is clear that overall Nepalsuffers from a lot of infrastructural and institutional constraints that also affect the tourism industry. 101Tourism Infrastructure: A particularly popular attraction for tourists in Nepal is trekking routes; however, someof them have been converted into roads, with obviously positive effects for the local population, but which hasnegatively affected trekking activities (eg Annapurna Trekking, which used to take 20 days before, which hasnow been reduced to 9 days). According to industry sources, more careful planning and development of newtrekking routes is necessary. Hotels often do not have enough capacity.Labour Cost and Overall Production Cost: Industry sources see no significant labour cost advantage comparedto competing countries, mainly because of low labour productivity and labour unrests.99One particular exception that may be seen as a foreign barrier is the Chinese “Approved Destination Status” policy, but Nepal has been an“approved destination” since 2001.100It is relatively expensive and complicated to get a permit for direct travelling from Nepal to Tibet.101One indicator measures visa requirements, where Nepal ranks 131 st out of 133, but it seems to be based on wrong information..NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT91
N T I S2010Transport Infrastructure: Infrastructure, in particular air and road transport infrastructure, has a majorimportance for the industry and is also a particular area where the GoN’s policies can have a significant impact.Seventy-five per cent of international visitors arrive by air (MoCTA, 2008), and domestic flights are also crucialfor the accessibility of some of the main tourism areas.International air transport is currently limited to Kathmandu airport (Tribhuvan International Airport, TIA).TIA has a limited capacity and is currently open only until 12.30 am, mainly due to infrastructural constraints.Similarly, a lot of smaller airports and airfields across the country require upgrading. Some have even falleninto disuse. 102 The capacity of TIA will not be sufficient for the expected increase in air traffic over the nextyears. To address these constraints, a US$80 million project by ADB is underway. 103On a different matter, opening up additional airports, in particular Pokhara airport, for international trafficis also under consideration. This has not been achieved so far and should be a priority for the GoN as itwould both help to increase visitor arrivals to these places (with Pokhara having a great potential for visitorsfrom India in particular) and to reduce transit traffic in Kathmandu airport. It appears that flights betweenPokhara and some cities in India will start soon, also because of a new air services agreement signed betweenNepal and India, which explicitly allows for international flights between regional airports. But problemsremain, both in Nepalese legislation and in high landing fees for small aircraft--which would be used for flightsfrom Pokhara--in Indian airports. The number of seats that Nepalese and Indian airlines are each allowed tooffer per week has been increased from 6,000 to 30,000. 104 Several Indian airlines are now planning to offeradditional flights between Kathmandu and several Indian cities.Similar air services agreements have recently been concluded or renewed with several other countries,including Qatar and Singapore. Currently, Nepal Airlines Corporation, the state-owned flag carrier, is the onlyNepalese airline providing international flights, with only one or two aeroplanes for international flights and amarket share for incoming visitors of only 6 per cent (MoCTA, 2008). There should, therefore, be no reason tonot unilaterally liberalize air access of foreign airlines even further if current regulations prevent airlines fromoffering air services to Nepal.Efficiency of Domestic Supporting Industries: In efficiency of domestic supporting industries, industry sourcessee the efficiency of hotels as high, airlines average and transport companies low. For hotels, the efficiency ofgrocery suppliers is high but the sole energy supplier (NEC) low.Business Environment: Tourism services in Nepal are regulated by various acts and the country opened upforeign investment in travel agency and tour operator service only after WTO membership, which is limitedto 51 per cent. However, Foreign Direct Investment (FDI) in hotel industry has been opened up to 80 per centforeign equity. Nepal’s Foreign Investment and Technology Transfer Act (FITTA), however, allows 100 percent investment in hotels, above the minimum WTO commitments. Nevertheless, unstable government isconsidered to be the main obstacle to attracting FDI.Government Initiatives and Donor Involvement: The GoN has taken tourism as a priority sector. It hasproduced New Tourism Policy 2008, Nepal Tourism Vision 2020, and declared new tourist destinations and2011 as the tourism year. The donors involved in the sector include UNDP, DFID and SNV-Nepal. UNCTAD hasrecently been involved in this sector.102There are 47 domestic airports, of which 32 are in operation. Attempts have been made recently by Nepalese airlines to revive some of thoseairports. See http://nepalitimes.com/issue/2009/11/1/Headline/16427c.103“Air Transport Capacity Enhancement Project”, see http://www.adb.org/Projects/project.asp?id=38349. The project will be funded by aUS$10 million grant and US$70 million loan.104http://www.nepalitimes.com/issue/2009/10/30/Nation/16446.92NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT
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Nepal Trade Integration Strategy 20
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Table of ContentsForewordAbbreviati
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Table 2.17 Acreage and Production o
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List of BoxesBox 2.1 A Nepalese IT
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LoD Limit of DetectionM&E Monitorin
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Chapter 1Trading Environment, Expor
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N T I S20101.3 Capacity Development
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N T I S2010Table 1.1Balance of Paym
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N T I S2010Changes in the Nepalese
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N T I S20101.5 Expanding an ‘Incl
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N T I S2010 Index 4 measures the po
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N T I S2010Table 1.9Impact of 19 Ex
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N T I S2010Table 1.10Geographical D
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N T I S20101.7 Declining Importance
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N T I S2010negotiate for the inclus
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N T I S2010Types of Exported Produc
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N T I S2010Table 2.2Large Cardamom:
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N T I S2010Index 4: Socio-economic
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N T I S2010Index 1: Export Performa
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N T I S2010exporters. Nepal permits
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N T I S2010RankCountryExports Nepal
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N T I S2010like China and Australia
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N T I S2010The opportunities for pr
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Page 60 and 61: N T I S2010Export Prospect: Accordi
Page 62 and 63: N T I S2010Cost and Quality of Infr
Page 64 and 65: N T I S2010Attractive markets for T
Page 66 and 67: N T I S2010Market Access Conditions
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Page 70 and 71: N T I S2010Information from industr
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Page 76 and 77: N T I S2010# Botanical Name 41 Spec
Page 78 and 79: N T I S2010Current Export Destinati
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Page 82 and 83: N T I S20109) Silver JewelryBackgro
Page 84 and 85: N T I S2010Availability and Quality
Page 86 and 87: N T I S2010Attractive Markets for S
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Page 92 and 93: N T I S201012345678910# Name of Ste
Page 94 and 95: N T I S2010Export Prospect: Accordi
Page 96 and 97: N T I S2010Gender Impact: Female wo
Page 98 and 99: N T I S2010The value added of those
Page 100 and 101: N T I S2010sheep population, which
Page 102 and 103: N T I S201013) TourismBackgroundTou
Page 106 and 107: N T I S2010There are also about 24
Page 108 and 109: N T I S2010Index 1: Export Performa
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Page 112 and 113: N T I S2010Contribution to Skill De
Page 114 and 115: N T I S2010Types of Exported Servic
Page 118 and 119: N T I S201016) Health ServicesBackg
Page 120 and 121: N T I S2010medical services are bei
Page 122 and 123: N T I S201017) Education ServicesBa
Page 124 and 125: N T I S2010should be interpreted ca
Page 126 and 127: N T I S2010foreign students. The me
Page 128 and 129: N T I S2010Under mode 4 (presence o
Page 130 and 131: N T I S2010Index 4: Socio-economic
Page 132 and 133: N T I S2010generate revenue of US$3
Page 134 and 135: N T I S2010monopsony power. Several
Page 136 and 137: N T I S2010The possibility of direc
Page 138 and 139: N T I S2010Dairy Products, specific
Page 140 and 141: Chapter 3Access to the Indian Marke
Page 142 and 143: N T I S2010The Nepal-India Trade Tr
Page 144 and 145: N T I S2010Most issues reported abo
Page 146 and 147: N T I S2010Nepalese Domestic Issues
Page 148 and 149: N T I S2010India’s view is that t
Page 150 and 151: Chapter 4Access to the Chinese Mark
Page 152 and 153: N T I S2010products must be wholly
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N T I S2010The findings discussed h
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N T I S20104.5 Other Impediments to
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N T I S20104.7 Recommendations: Cha
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N T I S2010inflow between 2000 and
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N T I S2010Industrial Parks and SEZ
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N T I S2010Lack of up-to-date polic
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N T I S2010Apart from the critical
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N T I S2010capabilities in all five
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N T I S20105.5. Combining Investmen
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Chapter 6Trade FacilitationN T I S2
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N T I S2010In the 2005 Trade Facili
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N T I S2010The latest phase of impl
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N T I S2010improve efficiency. Few
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N T I S2010Figure 7.1Future Organog
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N T I S2010EU countries, special pr
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N T I S2010Act 1980. So far, 130 fi
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N T I S2010The current projects inc
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N T I S2010The NBSM as a secretaria
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N T I S2010Many more organizations
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N T I S2010Table 7.8Existing Nepal
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Table 7.9Standards Issues for Ten E
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N T I S20107.14 Priority Actions an
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N T I S2010It is not clear what amo
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N T I S2010GeneralNepal’s general
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N T I S2010a crucial part of the PR
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N T I S2010residue limits (MRLs) ar
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N T I S2010The viral diseases chirk
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N T I S2010SPS issues Affecting Tra
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N T I S2010Indian phytosanitary sta
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N T I S20108.5 Conclusions and Reco
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N T I S2010Simpler requirements suc
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Table 8.4Summary of Export Environm
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N T I S2010To register a patent, a
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N T I S2010breaches of law. The Nep
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N T I S2010Intellectual Property is
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Chapter 10Barriers to Service Trade
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N T I S2010Constraints in the touri
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N T I S2010Table 10.2Nepal GATS Com
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N T I S2010locations favourable for
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N T I S2010Barriers to Exports of H
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N T I S2010Institutional IssueThe s
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N T I S2010 Strengthening sub-natio
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N T I S2010Observations from enterp
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N T I S2010Nepal Ginger Producers a
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N T I S2010 Helping paper manufactu
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N T I S2010Computer Association of
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N T I S20105. Also related to the a
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N T I S2010The key principles inclu
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N T I S2010That being said, Nepal h
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N T I S2010Nepal Business ForumOn M
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N T I S2010Third, capacity developm
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N T I S2010expected to emerge from
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N T I S201012.7 Possible Options fo
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N T I S201012.8 RecommendationsThe
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N T I S2010GoN / MoF (2009), Econom
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N T I S2010Thapa, Ajit N.S. (2006).
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N T I S2010NEPAL TRADE INTEGRATION
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N T I S2010MainOutcomes Recommended
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N T I S2010NEPAL TRADE INTEGRATION
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N T I S20102. GINGERStrengths Tradi
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N T I S20104. LENTILSStrengths High
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N T I S20105. TEAStrengths Very fav
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N T I S20106. INSTANT NOODLESStreng
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N T I S2010 Review, simplify, and i
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N T I S20109. SILVER JEWELRYStrengt
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N T I S201011. CHYANGRA PASHMINA PR
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N T I S201013. TOURISMStrengthsNatu
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N T I S201015. IT AND BPO SERVICESS
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N T I S201017. EDUCATION SERVICESSt
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N T I S201019. HYDRO-ELECTRICITYStr
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Appendix 1Methodology for Export Po
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N T I S2010B. Data SourcesThe analy
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Appendix 2Market Attractiveness Ind
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N T I S2010Rank13) Tourism1 Germany
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Appendix 3Updated Legislative Actio
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N T I S2010specified management sys
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N T I S2010than pesticide residues
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Appendix 5Malaysia GAP (Skim Amalam
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N T I S2010E. Document ControlQMS d
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Appendix 7Good Agricultural Practic
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