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Tourism policy issues in Nepalese economy


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Executive Summary

Nepal's main source of Foreign Exchange is the tourism industry. Sir Edmund Hillary and Tensing Sherpa first climbed the Mount Everest in 1953. The modern tourism history of Nepal was started since then.

After the peace agreement between government and so called rebel group the political parties have been agreed and given their commitment to tourism as the most important sector of Nepalese economy. Although, tourism industries are unmotivated and sickness because disturbances and strikes in tourism industries from the political parties. However, economical emerging and most populist neighboring countries India and China represent the enormous potential but it has also threats from global financial crisis.

The community based tourism is well suited for the Nepalese economy. The preservation, conservation and promotion of cultural heritages are needed through involvement of local bodies so that capacity building and training is needed until villagers are confident enough with their tourism activities. Government should decentralize the tourism planning process and develop tourism marketing information system.


Tourism has been an imminent part of Nepalese sociology since time immemorial. A strong Nepalese belief of 'Guests are God' has established tourism as a strong culture and tradition in Nepalese life. Sparkling mountains, unique natural beauties, lovely waterfalls, thrilling and diverse wildlife experiences, diverse yet harmonised ethno-cultural setup, historical and religious places have contributed to the commercial transformation of the industry in the early twentieth century. Tourism has been an integral part of national development to cope with poverty, increase employment and to upgrade the national economy. It has been well proved that, the Nepal's main source of Foreign Exchange Earnings (FEE) is the tourism industry by which the government recovers the adverse balance of payments and maintain economic stability. Nepal is one of the admired tourist-destinations of the world. The tourism industry is the major means to entirely support the nation towards the national development. However, at around the end of the last century, Nepal especially the tourism sector, has suffered a lot due to the domestic political turmoil and insurgency. Revenue collection from the tourism sector has faced a serious setback. Therefore, a large number of development activities were blocked. Before two years, an agreement has been signed between the government and the rebel group in an effort to lasting peace and the peace has been established. Simultaneously, the government has given the topmost priority to the tourism sector and has prepared a long-term master plan to develop tourism infrastructure in the nation. The plan is expected to help to provide valuable information in strengthening Nepal's tourism industry and for formulation of future plans, strategies and policies. Hence, to boost up the tourism sector and contribute the national effort in strengthening the national revenue there is a need to prepared good tourism policy in terms of the economic development of Nepal.

Statement of the Problem

A major source of foreign exchange earnings, tourism in Nepal is an instrument to provide employment and building infrastructure within the country. By considering the direct and indirect contributions, tourism accounts 6.4 per cent of Nepalese GDP in 2007 (UP ZRS 2008, p. 23). The sector also provided the people of Nepal with increasing employment opportunity. Between 1997 and 2007, number of employees in tourism sector rose by two folds. The growth of this sector, nonetheless, is somewhat dependent on tourists from the European as well as OECD countries. In 2007, roughly 35 per cent tourist came from OECD nations (MTCA 2009). And, in terms of value European tourists contributed over 45 per cent to the industry (UP ZRS 2008, p.31). However, with the OECD economies now going through a deep recession, the flow of tourists to Nepal might be decreased.

The tourism industry is growing very rapidly and Nepal has tremendous potential for tourism development because of its unique natural and cultural heritage. In this context, good tourism policy is essential to increase national productivity and income, increase foreign currency earnings, create employment opportunities, improve regional imbalances and projecting the image of Nepal more assertively in the international arena, through the development and diversification of the travel and tourism industries.

Looking at the macroeconomic issues, the government must consider strategies for reducing poverty, generating employment and raising living standard. In order to achieve the goals of improving the lives of the people in Nepal, significant investment in tourism infrastructure, tourism security, agro tourism, urban tourism, and expanding rural infrastructure are needed. Without reviewing the weaknesses and include appropriate policy in plans, tourism development goal cannot be achieved. Therefore, this paper aims to analyze Strengths, Weaknesses, Opportunities and Threats (SWOT) and recommends some policies in the context of Nepal.

Tourism Outlook

Sir Edmund Hillary and Tensing Sherpa first climbed the Mount Everest in 1953. The modern tourism history of Nepal was started since then. The Himalayas have attracted foreigners to Nepal. At that time there was a shortage of hotels, airways and other so many infrastructures and there was a restriction to travel in many parts of Himalayas. The new development was started since 1960s; the government encouraged the building of hotels and other tourist facilities. Now Tourism is the largest industry in Nepal; the largest source of foreign exchange and revenue. Possessing 8 of the 10 highest mountains in the world, Nepal is an admire destination for mountaineers, rock climbers and people seeking adventures. The Hindu and Buddhist heritage of Nepal, and its cold weather are also strong attractions. The government of Nepal has been actively promoting tourism in Nepal and has always encouraged the private sector for their vigorously involvement and participation. Different travel and tourism organizations are working in this sector.

With Nepal tourism brand 'Naturally Nepal, once is not enough !', the government of Nepal in consultation with Nepalese travel trade sector and concerned organizations decided on October 25, 2008 to launch a national tourism campaign "Nepal Tourism Year 2011". The main objective of this announcement reflects the government's expectation to bring tourists Nepal at least one million by the year 2011. The campaign will also focus on mobilizing the networks of the Non-Resident Nepalese (NRN) communities, Nepalese diplomatic missions abroad, INGOs and NGOs, airlines and national and international media. Similarly, friends and well-wishers of Nepal, tourism academicians and celebrities will be approached in order to highlight the campaign internally as well as internationally (Nepal Tourism Year 2011).

In order to make a significant contribution towards the national goal of poverty alleviation, and to achieve a sustainable development in tourism, the Tourism for Rural Poverty Alleviation Program (TRPAP) has been successfully completed as a pilot project in 6 districts. This program targets the poor and backward castes and women. Construction of an Integrated Tourism Master Plan with the aim of providing directives to the tourism sector, and the task of making timely improvement and modification in the tourism policy, is nearing completion (NPC 2008, p. 206). In order to fulfill the objective of making transport affordable, safe, qualitative and reliable, strategies for the construction and operation of airports, and private sector involvement even in the long route flights, have been adopted. As a birth place of Buddha, the Second World Buddhist Conference was concluded in November, 2004, with a 10-point declaration that includes the development of Lumbini (Birth place of Budda) as an international peace city. With the objective of producing human resources of international standard in tourism sector, courses in Bachelors in Hotel Management and Bachelors in Travel and Tourism Management, are being offered by the Nepal Academy of Tourism and Hotel Management.

Tourists' Inflow in Nepal

In March 1989, tourism had grown by more than 10 percent per year for most of the 1980s. Between 1985 and 1988, the number of tourists increased from approximately 181,000 to about 266,000. More than 80 percent of the tourists arrived in the country by air. In FY 1985, more than US$40 million worth of foreign exchange was earned through tourism. By FY 1988, this amount had increased to more than US$64 million. In FY 1989, tourism accounted for more than 3.5 percent of GDP and about 25 percent of total foreign exchange earnings (Nepal Tourism, 2009). According to Immigration Office, Kathmandu, visitors' arrivals to Nepal in April 2008 reached 32,665, which is a marginal decrease of 1% as compared to same month last year. However European sector remains unchanged with almost the same figure as compared to the April 2007. France grew up by 21%, Austria with 20%, Netherlands & Israel with 28%, Switzerland with 66%, Spain with 25%, but UK, Sweden & Germany decreased by 20%, 31%, & 20% respectively. There are some significant growths recorded; Australia & New Zealand arrivals show a growth of 51%. Closely following the trend are Canada & USA with the growth of 25%. The arrival figure shows a decrease of 18% for the Asian countries. SAARC countries arrival is decreased by 14% where India has the share of 19% decrement. Bangladesh on the other hand shows an extraordinary growth of 60% which may be the positive impact of the recent Bangladesh Sales Mission program held vigorously.

Problems and Prospects in Tourism

Global turndown may hits in Nepalese tourism sector. The symptom in this sector has revealed and to hit hard of global financial crisis. The figures released by the Immigration Office, Tribhuvan International Airport (TIA), reveal that arrival figures by air in the month of March 2009 compared to the same month last year decreased by 17.6 percent jump down to 33,005. The United Nations World Tourism Organization (UNWTO) expects international tourism to stagnate or even decline slightly by -1 percent to -2 percent throughout 2009 (UNWTO 2009).

Tourism sector has facing so many difficulties due to lack of infrastructure. The government's national flag carrier Nepal Airlines Corporation has remained a big challenge. Political instability is other major problems in Nepal. Participation of the private sector in the infrastructure development could not be increased because of the suspicion between government and private sector. Due to the lack of data on cultural heritage preservation of cultural heritage is so challenges.

Sparkling mountains, unique natural beauties, lovely waterfalls, thrilling and diverse wildlife experiences, harmonised ethno-cultural setup, historical and religious places have contributed to the commercial transformation of the industry. So, rural tourism can play the essential role in Nepalese economy in terms of alleviate poverty and employment generation.

Strength, Weakness, Opportunity and Threat (SWOT) Analysis


After the peace agreement between government of Nepal and so called rebel group the political parties of Nepal have been agreed and given their commitment to tourism as the most important sector of Nepalese economy. Consequently the "New Nepal" was awarded also a new tourist brand name. The natural beauty, diversity and unique features at the same time are representing a permanent strong point of tourist sector in the country. Natural beauty is the one of the most important strength of tourism sector. |Silver Snow cap


The country could not earn foreign currencies as expected from this sector. Poor infrastructures, poverty, illiteracy, are always a serious problem in tourism sector, especially airlines and transportation services are bottlenecked. Drinking water and hygienic food also represent a big problem for rural tourism since they are not easily accessible in rural areas. The major weakness is always disturbances and strikes in the main highways from the political parties. So tourism industries are unmotivated and are in sickness condition. Less use of computer technologies and software programs are the drawback of his sector. Lack of inventory of tourism sites and lack of good master plan, the possibility of integrated and coordinated development of the tourism sector has not yet been transformed to an opportunity. Apart from conventional tourism, development and growth of other innovative tourism, such as adventure tourism and eco-tourism, has not been encouraging. During the political conflict in Nepal many airports were damaged and need to physical infrastructure development, expansion and modernization of various airports, and construction of new airports could not be carried out at the same time due to the lack of adequate resources.


Economical emerging and most populist neighboring countries India and China represent the enormous potential for tourism sector in near future. The promotions of regional tourism through South Asian Association for Regional Cooperation (SAARC) could be the useful instrument to develop this sector. Community based rural tourism is the high potential of the country. People become more conscious in updating an inventory of cultural heritage of the country. The natural scenery, high mountains, incomparable cultural heritage and various specialties have made Nepal a well-known place in the world tourism map. There is a possibility of further growth in the number of tourists with the opening up of new mountains and restricted areas. Recently political developments in Nepal and peace agreement with so called rebel group are improving the country's image at global level and have help to bring more tourists to Nepal. There is also an immense possibility of developing adventure tourism in the mountains and rivers of Nepal.


Political condition still not quite good, strike in the tourism industries is the major problem, not good air connectivity with rest of the world, security problems and so on is the major domestic threats. There are some declining figures in tourism inflow in Nepal due to the very recent global financial crisis. More importantly, threats from the competition on the global market, especially from close competitors like Malaysia, Thailand, Singapore, Sri Lanka, Maldives where the resource constraints like low budget comparing to competitors, slow development of infrastructure also have an important negative role.

Conclusions and Policy Recommendations


Rural community development such as health, water, roads, power supplies etc. and sustainable small tourism business such as home-stays, guesthouses, tea shops, guide services, handicrafts etc should be established. The community based tourism is well suited for the underdeveloped Nepalese economy. The ongoing capacity building and training is needed until villagers are confident enough with their tourism activities. In order to achieve the sustainable development further activities in this sector is needed.

For establishing the ongoing and sustainable linkages between the central government and local bodies the institutional design has to be legally assured within government regulations. Tourist impacts on natural resources and cultural heritage are to be controlled, especially in fragile areas. Develop new tourism products and new tourism places are most. In order to access rural tourism products it is necessary to upgrade and maintain roads, trails, bridges and other essential infrastructure. Capacity building and skills training is a core activity to promote rural tourism. The exchange and study programs in tourism sector will be useful in proving confidence and motivation to start new tourism initiatives in the remote areas. Tourism marketing information system should be established for long term tourism development.

Policy Recommendations

  • Local communities and private agencies should be involved in the preservation, conservation and promotion of tangible and intangible cultural heritages.
  • The tourism sector should be developed as the foundation of the economy.
  • Private airline companies should be encouraged to contribute to tourism and economic development through the expansion of domestic and international air services.
  • Special Tourism Promotion Program (STPP) should be launched, targeting neighboring countries, India and China.
  • Diversifying the tourism sector and should be expanded by developing educational tourism, health tourism, wildlife tourism, agro tourism, eco-tourism, mountaineering and trekking tourism, adventure and entertainment tourism, cultural tourism, and religious tourism in addition to mountain tourism.
  • Better Tourism Marketing Information System (TMIS) should be established by empowering the local bodies.


  1. MTCA (Ministry of Tourism and Civil Aviation). 2009: Government of Nepal. (Online) Available at: http://www.tourism.gov.np/tourismstatistics.php (accessed on 16 July 2009)
  2. UP ZRS (Univerza na Primorska Znanstveno-raziskovalno sredisce Koper). 2008: Nepal: Tourism Sector Analysis. (Online). Available at: http://asiantour.progetti.informest.it/market_analysis/nepal.pdf (accessed on 28 July 2009)
  3. UNWTO (United Nations World Tourism Organization). 2009: (Online). Available at: http://www.unwto.org/index.php (accessed on 29 July 2009)
  4. Nepal Tourism Year 2011. 2009: (Online). Available at: http://nepaltourismyear2011.com/ (accessed on 20 July 2009)
  5. NPC (National Planning Commission. 2009: (Online). Available at: http://www.npc.gov.np/uploads/plans/20081228114653.pdf (accessed on 15 July 2009)
  6. CBS (Central Bureau of Statistics). 2009: Statistical Year Book of Nepal, (Online). Available at: http://www.cbs.gov.np (accessed on 10 July 2009)

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