Nepal has been left relatively unscathed from Covid-19 – the disease. But can our consumption driven economy sustained by remittance and tourism dollar remain insulated from turmoil in the rest of the world?
Corona virus has relentlessly mutated complicating efforts to develop vaccine. And the threat of it infecting whole of the world till herd immunity develops remains unchallenged. Social distancing, which stifles economic activities, would only slow the spread leaving medical facilities less overwhelmed. Fitch Ratings projects world economy to contract by 3.9% in 2020 which is twice as severe as the 2009 financial crisis. That equates to output declining by $2.8 trillion relative to 2019 and $4.5 trillion relative to pre-virus forecast for year 2020.
International tourism begins with flight. But people are scared to fly lest they contract coronavirus. Though modern aircrafts have some of the finest air filtration system the virus can still transmit through touch. Such is the congestion in economy segment that passengers are bound to bump into one another despite their best precautions.
And regulators have made life hell for aviation industry already grappling with two-third airplanes grounded. Airlines are asked to comply with social distancing. Easily said is single passenger in a row with three seats. But airlines need to raise airfare just to break even if they fly with reduced load factor. With corona viruses proliferating, it would make air travel expensive for a long time.
Aviointeriors – airplane seat supplier – has come up with outlandish concept where middle seats face backward and are separated by shield. Another design imagines plastic hood above all economy class seats. There is scant chance these prototypes would see the light of day. But, if need be, retrofitting is going to be expensive. That cost would be passed on to passengers.
United Nations World Tourism Organization (UNWTO) estimates there were 1.4 billion international tourist arrivals in 2018. It generated international tourism exports of $1.7 trillion. World Travel and Tourism Council (WTTC) goes further. It values all economic activities generated by tourism in 2018 at $8.8 trillion and counts jobs created at 319 million. Besides, it predicted one in five new jobs created worldwide would be travel and tourism related.
Airfare makes up bulk of travelling expenses. And hotels are also not cheap when booked as an individual. Travel agencies buy those services in bulk and come up with attractively priced tour packages. While easy availability of visa has opened the door to foreign countries it is affordable tour package that has made 1.4 billion cross-border journeys feasible.
Though Hilton and Marriot are popular hotel chains, it is budget hotel operating with tighter margin that provide bulk of available room nights. Cheap and not bad, they are primarily where guests of tour packages stay. Those hotels might as well fold without adequate occupancy. And so will all the travel agencies that fail to sell their packages: tour guides who have no group to lead and concierges who have no guests to serve. In an economy one’s expenditure is another’s income. And that would set off domino effect of job loss.
Coming back to Nepal, WTTC 2018 report states tourism generated $2.18 billion in revenue and directly and indirectly employed 1.05 million people in Nepal. The figure includes revenues generated and jobs supported primarily by hotels, airlines and travel agencies. Tourism related economic activities made up 7.9% of the GDP. In the same year Nepal earned $643 million in foreign exchange. Such a significant contributor to nation’s economy and it is at stake because flying has become a bane.
A crisis is also a moment to foist change. Consumption makes up around 70% of Nepal’s GDP. But it is spent on imported goods and services. Not all imports can be substituted with domestic production, even in the long run. But with the help from government fraction of it can be diverted toward domestic tourism. All it needs to do is label worthwhile places as destination, construct roads leading to them, standardize hotel rooms and declare holidays. It will stimulate local service industry, spur jobs and keep money within economy.
Switzerland, a country one fourth our size, has hundreds of tourist destinations. Why do we need to stick with Mt Everest, Kathmandu valley, Nagarkot, Pokhara, Annapurna Circuit and Lumbini forever? Develop additional destinations for rafting, kayaking, bungee jumping, zip flying, mountain viewing and skiing. ‘Invest in experiences, not things’ is the new cool. Within home and within budget, definitely Nepali youths will lap up the opportunities.
Nepal is a blessed country. But how many of us have been to all of Lumbini, Pokhara and Kalinchowk? Forget far off places like Khaptad and Rara Lake. We do not travel much. But that can be attributed to mostly narrow, winding and graveled roads. Because of misplaced priorities and criminal lethargy each year government struggles to meet its capital expenditure target. Allocate sufficient capital to construct metalled road to tourist destinations. It will give fillip to travel, tourism and commerce.
Sudden brake in tourism has Oyo struggling. It might even go bust. But the idea it pioneered will live on. Poorer countries had no well known hotel-chains making it impossible for customers to compare two different hotels. That had always dissuaded tourism. With standardized beds and amenities, Oyo provided consistency. Now, one can book an Oyo partnered hotel and be certain what he will be getting. Average Nepali hotels need more of such partnership. If not Oyo, if not a Nepali startup, then, Hotel Association of Nepal (HAN) can take some initiatives to standardize its offerings.
Even with all the infrastructure in place people will not travel if they do not have holidays to begin with. Introduce two golden weeks for Nepalis to savor Nepal: one in autumn during Dashain and another in spring during school break. One can look to China for inspiration. It will celebrate National day golden week from 1st to 7th of October, 2020. Manufacturing plants will stay shut and so will schools. In fact, Chinese enjoy up to three such golden weeks with two others being lunar New Year and Labor Day. These extended leaves are designed to boost tourism and facilitate long-distance family visits.
Though domestic travel does not generate foreign exchange, it will help alleviate pain to the industry mourning loss of international visitors. The collective efforts will save fraction of jobs while introducing Nepalis to facets of Nepal. But the outlay is supposed to be largely financed by remittance and the bigger question is: what if remittance takes a hit? Until next time.