Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S201010.3 Export Potential of Nepalese Service SectorsThere are opportunities for Nepal to increase and/or develop exports of selected services. But there areobstacles to realizing such opportunities, many of which are domestic in nature. This chapter examines andanalyses barriers to export of six services, be they domestic or foreign: Tourism and Travel-related Services Web-based Services (IT and BPO Services) Health Services Education Services Labour Exports Engineering ServicesTourism and Travel Related ServicesNepal is endowed with rich and diverse natural resources and cultural attractions. The country has anincomparable cultural heritage as well as a rich environment ranging from the highest mountains to the Teraiplains. In FY 2006/07, 516,000 tourists visited Nepal, with foreign exchange earning of US$205 million, anaverage stay of 13 days, and an average spending of about US$60 a day. The sector provides direct employmentto 237,000 and indirect employment to 548,000 persons (WTTC 2008). Furthermore, according to the WTTC(2008), travel and tourism was expected to generate NRs 16.6 billion, or US$257.3 million, in 2008, increasingto NRs 52.1 billion, or US$552.1 million in 2018. 2 The GoN’s economic survey covers only the contribution ofhotels and restaurants, which was 2.6 per cent of GDP in 2008/09.Regulatory FrameworkTourism and travel-related services in Nepal are regulated by various acts: the Industrial Enterprise Act, theTourism Act 2035 (1978) (amended in 2053 [1997]), the Hotel, Lodges, Restaurants, Bar and Tourist GuideRules 2038 (1981), the Travel and Trekking Agency Rules 2037 (1980), the Trekking and Rafting Rules 2044(1985), and the Mountaineering Rules 2036 (1979).The Foreign Investment and Technology Transfer Act (FITTA) 1992 does not allow foreign investment in travelagencies, trekking agencies, water rafting, pony trekking, horse riding, and tourist lodging. Nepal opened upforeign investment in travel agency and tour operator services following the WTO membership, but limited itto 51 per cent. FDI is permitted in hotel industry with GoN’s approval. As per the WTO commitments, up to 80per cent foreign equity is allowed in hotel, lodging services, and graded restaurants. FITTA, however, allows100 per cent investment, indicating that it is ahead of the WTO commitment.The Tourism Industry Division (TID) of Ministry of Tourism and Civil Aviation (MoTCA) is the tourism regulatorin Nepal and deals with registration, licensing, star ranking of hotels, industry incentives, and monitoring andevaluation.The Civil Aviation Authority of Nepal (CAAN), which came into existence in December 1998, acts as theregulator for aviation. CAAN also performs three functions: regulation, growth, and monitoring. It providesAir Operator Certificates (AOC) and enters into air service agreements with different countries. At present, theGoN has entered into agreements with 35 countries, but only 18 airlines have scheduled flights thus far. Priorto the 1993 liberalization in the sector, the Department of Civil Aviation used to perform these functions.2WTTC (2008) Travel & Tourism Satellite Accounting Research, Travel & Tourism: The Winds of Change.216NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT