Analyzing the caliber of the budget in reviving the tourism industry

It is no doubt that the Nepalese tourism industry has remained very vulnerable to the global contagion of COVID-19 and the shutdown of the economy. In fact, the tourism and hospitality industry of Nepal has remained one of the first in the country to close its doors as the government acknowledged the threat of emerging health crisis due to the ongoing pandemic leading to enforcement of nation-wide lockdown. Moreover, experts also expect the tourism and hospitality industry to be the last to reopen its door as the health crisis subsides gradually. And, in the meantime, while the crisis is still active, there has been left no alternative provision for the enterprises of the industry, as opposed to multiple industries that were allowed to operate in a controlled manner during reduced hours by taking safety precautions. 

Regardless, amid this severity for the tourism and hospitality industry, the industry is nevertheless expected to revive quickly following the aftermath of COVID-19. But of course, certain measures and provisions are expected from the government to help generate much-needed momentum and support during the early phase of the reopening. Speaking of which, the budget allocation and other fiscal declaration announced for the Fiscal Year 2020/21 on 28th May was a great opportunity for the government to play its part in supporting the tourism industry of Nepal. 

On such grounds, the budget declaration for the FY2020/21 has provided commendable provisions for the tourism sectors that began with establishment of fund containing 50 billion which aims at providing lending facilities for payment of salaries of workers and working capital to the tourism sector and small and medium enterprise at five percent interest rate and another fund worth 100 billion for refinancing facilities at the same interest rate and 20% tax rebate for the airlines, hotel, travel, restaurant, trekking, mountaineering, and other value-adding enterprises falling with the category of tourism industry in order to support their revival.  Likewise, the decision to formulate and/or expedite tourism masterplans was also noteworthy. More so, the government’s pledge to expedite the unbundling of Civil Aviation Authority of Nepal (CAAN) into a separate regulatory and service providing body was a major assurance for the aviation sector to witness regulatory effectiveness and efficiency in future. Additionally, the relief to be provided to the airlines companies in the form of exemptions in parking fees, license fees and renewal fees, infrastructure tax in aviation fuel is also noteworthy. 

Similarly, the pledge of the government to develop Tourism Information Management System to ensure better management and safety regarding tourist arrival, hiking, mountaineering, and rescue while facilitating health desks in all important immigration points in the budget announcement undoubtedly meets the requirement to prioritize health and safety in the tourism industry for its sustainable growth during the post-pandemic period. And, the decision to incentivize civil servants to engage in domestic tourism in the budget announcement is also commendable amid the belief that the tourism industry will again have to rely on domestic tourists to revive itself while disruptions is expected in arrival of international tourists until days to come. 

However, more could have been done to incentivize domestic tourism by also allowing domestic tourists to ply green-plated tourist vehicles by pledging to amend necessary provisions in Motor Vehicles and Transport Management Act 1993 and harmonize relevant laws with the tourism policy within the first quarter of the next fiscal year. Afterall, it was desperately expected from the government to deregulate and ease regulations as much as possible in order to aid the industries that struggle to achieve normalcy in this dire situation. 

Likewise, the government could have instead engaged in incentivizing the private sector to develop grander tour packages and programs connecting the Buddhist Tourism Circuit with multiple destinations of Buddhist significance in Asia rather than pledging to itself engage in large infrastructures as building a meditation and convention center in Lumbini in order to promote the tourism circuit. On such note, the government could have pledged to create hassle-free visa and immigration processing, and establish a Ministerial-Level Committee platform between countries specifically for the purpose of enabling discussion of issues and resolutions regarding the regionally extended pilgrimage Circuit that could have automatically incentivized the private sector for development of such pilgrimage infrastructure across the circuits. 

Similarly, the government could have also directed its effort in creating industry and investment friendly regulatory provisions than pledging to undertake several tourism infrastructure development programs to create tourism destinations, promote multiple forms of tourism activities, offer tourism study courses, and build hill stations in hilly regions. After all, the former nature of efforts could have automatically drawn domestic and foreign investment in building such tourism infrastructures and destinations as such tourism infrastructures are commercially viable and can be accompanied by several kinds of revenue modalities.

On a similar note, it can be asserted that the budget has certainly missed on important regulatory amendments relating to elimination of Value Added Tax (VAT) on ground handling charges at international airports, visa and other immigration service fees during this special circumstances. Such effort to tame expected rise in travel cost for international tourists would have not only signaled the effort of the government to make Nepal a competitive destination for travel and leisure, but also invited more foreign and domestic investment in developing top-notch tourism infrastructure and destinations across the country.

Although many of the aspects of the budget are praiseworthy due to its focus on relied measures, it cannot be said that the measures are adequate. It is evident that the suggestions provided by the National Tourism Board were not given proper attention, while some suggestions such as refinancing facilities were given heed to, other recommendations pertaining to policy prescription, electricity tariff reductions, deferment of loan repayments are missing. Moreover, careful analysis of the budget will show that the part containing the tourism sector has remained the same over a period of two years. Very little changes in terms of concrete plans for revival of tourism sector have been made, what provisions are made concern themselves with survival which granted is the correct move, but the trend of neglecting the tourism sector altogether and lack of concrete long term plans altogether makes one wonder about the tourism sector post the phase of survival.

This article was written by Prience Shrestha, Ashesh Shrestha, Yatindra KC, and Anushruti Adhikari.