To attract Chinese tourists
By Raju Adhikari
Though the travel and tourism industry in China is still in its initial stage, it is one of the fastest growing industries in that country. China is the largest single consumer market in the world and has the sixth largest share of global Gross National Income. Due to its unprecedented economic growth, China has become a source of potential tourists not only for the third world but also for developed Western European and North American countries. Chinese expenditure on travel is currently growing at 27 per cent per year. According to a recent report issued by a US tourism firm, China is the world's fastest growing tourism market in the world, with its total revenue reaching $67.3 billion in 2002. As China 's economy grows and stringent travel restrictions are relaxed, urban middle to upper-class Chinese are increasingly looking beyond their borders for travel. A growing number of mainland Chinese are traveling overseas as their living standards are improving. The number of overseas travelers for tour purpose is growing by around 25 per cent annually and it is expected to grow continuously. In 2003 alone, 21 million mainland China residents travelled outside of the country. This figure is expected to cross 100 million in 2010, making China one of the largest contributors of travellers in the world. The World Tourism Organisation has predicted that China will be the world's largest tourist market by 2020.
After the successful implementation of the Economic Reform Policy since the late 70s, China opened its door to foreigners. Though it still has not opened several social, political and economical sectors to the outside world, the government makes continuous efforts to open more sectors. After its accession into the World Trade Organisation, China is obliged to abide by many trade regulations of the body and the travel industry is one of those highly affected sectors. As more foreign players are entering into the Chinese market, the tourism industry is continuously improving.
Fast developing public service and advertising sector have contributed a lot to the rapid development of tourism in China . Travelling overseas is no more a dream for many Chinese city dwellers unlike five years ago. Residents of cities like Beijing , Shanghai , and Canton are contributing over half of the outbound travellers. The latest statics suggests that Guangdong residents who traveled abroad in 2002 exceeded 1.4 million. For many Chinese, travelling has become a necessity of life. In major Chinese cities, the average annual expenditure for travelling has hit $150 per household. In 2005, over 20,000 travellers from Beijing visited different countries during a one-week holiday in October. This holiday marks the national day of China and is regarded as the golden week. A total of 31 million Chinese travelled abroad in 2005, much higher in number compared to eight million in 1998.
Nepal 's tourism industry accounts for 8 per cent of Nepal 's Gross Domestic Product and is the third-largest revenue generator after agriculture and industry. A total of 375,000 tourists visited Nepal in 2005. Nepal's tourism is dependent mostly on Indian, European and American tourists, who together contributed $160 million to the nation's economy last year. But Nepal has already started attracting Chinese tourists as well and the trend is on the rise. According to Nepal Tourism Board statistics, visitors arriving in Nepal via air, during February 2007, observed a very positive upsurge in numbers, a 62.6 per cent increase compared to the same month last year. There was a gigantic leap in Chinese tourists (281.6 per cent) also. These mainland tourists represent an enormous source of revenue for the countries that can attract them over the coming decade. Even if Nepal can grasp only a portion of the outbound Chinese tourists, it will be very crucial in raising Nepal's economy. After the announcement of the end of decade-old insurgency, Nepal has already experienced a significant increase in the number of tourists from several countries. It has been reported that because of the lack of flights, many tourists were unable to visit Nepal during the peak season of October last year. Nepal is one of Asia's most famous tourist destinations for the Chinese and since it became the first South Asian nation to gain the Approved Destination Status from the Chinese government, it has already drawn significant numbers of Chinese tourists. But owing to a lack of direct flights from major cities and the high ticket cost, the number of Chinese travelers was limited in the past. Now there are directs flights from Shanghai and Guangzhou and the increase in the number of visitors from China has been the result of this facility. But to attract more tourists and to reduce travel cost by free market competition, there is a need to attract more airlines to operate direct flights between the two countries.
The vastly improved situation in Nepal and the rising confidence of international travel trade, consumers have paved the way for more travelers to visit Nepal. The Nepali Embassy in China has begun to exempt visa fees for Chinese tourists. The Nepal tourism authorities are training more Chinese guides, and improving accommodation to suit Chinese tourists which are positive moves to attract more Chinese tourists.
Special attributes of Chinese tourists
There are some things to be considered in serving Chinese tourist better. Chinese tourists are quite different compared to conventional American and European tourists. The Chinese concept for the outside world is still vague; they expect similar environment and food in the countries they visit. Most Chinese tourists like to travel in groups. A good televised programme can work wonders while introducing the destination and in preparing them for the visit. Though Nepal borders China, many Chinese do not even have an idea about where Nepal is. Chinese are most responsive to televised advertising, especially in national broadcasting and television channels. Inviting Chinese television channels to Nepal for shooting footages to make a promotional advertisement would work well. If Nepal can utilise this through diplomatic ties, the number of tourists will soar immediately. As Nepal is a cheap and close destination, the possibilities of visiting Nepal for a couple of days are very high.
The Chinese are more attracted by beautiful sceneries and exotic life styles. Nepal possesses both these and this can be very helpful in attracting the Chinese if good advertising and marketing campaign is launched at the government level. Beside this, the Chinese love to shop for different commodities including food. A research suggests that the Chinese spend as much as 20 per cent of their total travel expense on shopping. This can also create good business opportunity for retailers in the visited country.
The Chinese expect hotels to be equipped with entertainment centres, hair salons, bowling alleys, Karaoke bars etc. A Chinese restaurant is an indispensable place inside the hotel and Chinese language TV channels are also necessary. Recognising and accommodating such differences will contribute a lot for the future development of the Chinese tourism market. Language is one of the major barriers for almost all countries. Guides who speak Chinese must be provided to win their trust. Guides at major scenic spots like the national parks, multi-destination package tours which could include India and Tibet , and Chinese-friendly maps and guidebooks would facilitate the tourists in Nepal .
As a growing powerhouse for economical and political arena, China and Chinese tourists are reshaping the global travelling market. If Nepal can utilise this opportunity to attract more Chinese travellers, it can certainly contribute a lot to the economic prosperity of the nation.
(Adhikari is a Ph.D candidate of International Economics in Donghua University , Shanghai , China and can be reached by email at sharmatr@gmail.com)
MEDICINES & TENDER BUSINESS
By Diwakar Chhetri
Maila Tamang came a long way to Trisuli from a remote village for medical treatment of his daughter, who had severe chest pain and vomited blood. Whatever disease she may have, what would be the consequence if she is treated with compromised medicine? There are thousands of Maila Tamang in our country.
Quality, cost and easy availability are crucial factors to be taken into consideration while discussing medicines. In our country, patients who come in for treatment are always near death; hence, compromising in quality during manufacturing of any medicine is a heinous act and should be made punishable. Though the cost of medicine is also an important factor, it is not as important as its quality. Rather easy availability is more important than the cost.
No one should invest huge amounts of money and enter the pharmaceutical business if the objective is to earn ample profit within a short time. The nature of this business is such that, a man may sow the seed and his grandson may get some opportunity to taste the fruit. But in practice what is seen in the Nepali market is that the medicine entrepreneur starts looking for profit from the second year of establishing his factory. These investors are impatient and don't want to go through the process of establishing the product by winning the confidence of doctors. They look for short-cuts and the medicine is made available in sales through government tenders rather than through prescriptions. Very few institutions (government or non-government) have taken quality control seriously while buying medicines through tenders. These few institutions maintain a roaster of standard pharmaceutical companies and request them to bid for the tenders. To some extent, this procedure can assure the quality of medicines.
But most institutions float the tenders for all in order to buy the cheapest. Unfortunately, quality is not the top priority in such a process. These medicines go to different health posts in remote areas for the treatment of poor patients. Have these institutions or government buyers ever tried to follow up on those patients to find out whether they were cured with the medicines provided? Has there been any pathological check up to find out whether Albandazole that cost the institution just 70 paise cleared worms in children? Just availability of medicines cannot reduce the mortality rate of poor citizens. It is always better to provide quality medicines to a few, rather than providing inefficacious medicines to many.
There are very rare pharmaceutical companies which supply medicines to dispensaries that distribute medicines strictly against doctors' prescriptions. Rather, they manufacture the medicine just to meet the tenders' demand. It is also found that the medicine from such manufacturers get marketing permission from the Drug Department on the same day when the tender has to be submitted. It is very important to note that no medicine can reach its optimum-qualitative-stage unless and until two or three batches are not manufactured. But we are deliberately ignoring such technical aspects.
Here are some of the controlling measures suggested for acquiring quality medicines through tenders:
1. Make a list of standard/reputed pharmaceutical companies and ask them to submit their bids.
2. Do not allow any company to participate in the tender for medicines which have not been earlier marketed by them even if the manufacturer is a company of high repute. At least three batches of medicine have to be manufactured as a pre-requisite qualification.
3. If possible, try to incorporate the leading brands of the prescription market. This method indirectly puts pressure on all the companies to go to the doctors' chamber for making their brand more popular and they have to take care of quality (otherwise doctors will not prescribe the medicine).
4. Random and surprise quality analysis should be done for the supplied medicines. That should be supported by post-medication pathological tests. If it is not feasible to test each and every patient, at least a few patients, as a sample, can be taken for a surprise pathological test.
5. Give priority to the domestic manufacturer as this will make it more convenient for the buyer to reprimand the manufacturer, if any discrepancy arises in quality. Overseas companies will be beyond the buyers' reach for such action. Last year, duplicate medicines of highly reputed Indian brands, worth millions, were confiscated in Delhi . Chances of entry of such fake brands are much higher in our country due to the open border. Obviously, national brands are the ideal choice for safety.
6. Make the entire system more organised, lucid and transparent to avoid corruption.
A year back, the embassy of one of our neighbouring countries floated a tender for medicines with a clear condition that only the manufacturers of that particular country were allowed to participate. Nepali pharmaceutical manufacturers were not allowed to participate at all. No matter what lay behind the condition, such attitude/policies have made that country one of the leading economic giants. But we never learn anything from them. We are ignoring one universal fact that Nepal will never prosper unless we love and care about our country.
For the officers of an institution or the government, floating a tender for medicines is one of their duties, but we should not forget that conditions provided in the tender could be the deciding factor of life and death for poor patients. Hence, concerned authorities should put serious thought on the subject and make rectifications in procedures for the availability of quality medicines.
(Chetri is associated with pharmaceutical industry)
Consequences of weak industrial relations
By Chandan Sapkota
The World Bank has been arguing for the liberalisation of the labour market, with more market friendly hiring and firing mechanism and broader liberalisation. In tune with this policy, the PRSP (the Tenth Plan) had taken the Bank's old rhetoric of liberalisation of the labor market, giving insufficient attention to first smoothing out thorny issues plaguing the labour market and industrial relations.
The ILO, in its report ‘Poverty and Reform in the Magical Kingdom: Nepal's PRSP’, claims that several of its recommendations on addressing these issues were not accommodated in the final PRSP document, and despite being over touted as a participatory plan, the PRSP was prepared without extensive consultations with labour unions and other stakeholders. It argues that this was one reason for the emerging labour disputes plaguing the industrial sector today. The ILO has warned that "failure to involve the social partners in a transparent and fair process of labour reform would be politically naïve and could lead to strikes or other forms of protest". This is precisely what is happening now. The current approach neither helps reduce poverty nor entices the much needed FDI in the export-oriented industries.
To address the issues related to unemployment, poverty reduction, export revenue, trade deficit, and the rising social tension, it is essential to resolve the contentious labour issues and smoothen out industrial relations. Along with the amendment of the Labour Act, a more proactive role of the FNCCI and other organisations representing the industrial sector is required. Go-slows and work-to-the-rule systems, which are affecting labour productivity, are the result of a lack of motivation and incentives. Enhancing industrial relations and reforming the defective labour policies should be carried out before embracing liberalisation policies. This applies not only to the private sector but to the public one as well. The sooner the issues are settled, the better it will be for the industrial sector and as well as the economy.
The labour market has been quite tumultuous during recent months with some unions going on strikes and this has forced factories to close down operations. Not just joint ventures and MNCs, but domestic companies are facing increasing demands from the unions and the workers, who are protesting against hiring and firing policies and job insecurity. This has already taken its toll on the industrial sector. For instance, a decline in exports has already been noticed, and joint ventures and MNCs are raising serious concern over the deteriorating investment and business environment.
The series of factory closures is quite unprecedented. All the companies that closed down operations cited labour disputes as the prime reason. From MNCs to the noodle factories to the already sinking garment industry -- all have been plagued by labour disputes.
On December 21, Dabur Nepal Pvt. Ltd., a multinational company with an annual turnover of over Rs 3 billion, closed down operations citing a dispute with unions over designating permanent status to workers who had worked for over 240 days, a highly controversial provision in the Labour Act, and some other issues like reemploying laid-off workers and job insecurity. Moreover, the company's CSR initiative, Banepa Greenhouse, was also closed down briefly following intimidation from the Maoist-affiliated union members.
Then came the closure of another MNC, Bottlers Terai Limited, which produces the Coca-Cola brand of products with a daily production equivalent to Rs 3.5 million. The company stated that it was forced to shut down operation after the Maoist-affiliated trade union demanded revoking the decision to lay off 55 workers. The company had laid off workers due to a low demand during the off-season.
Though both companies resumed operation, the damage done to the investors' confidence is not going to ease soon. These kinds of forced closures will definitely hurt the much needed FDI flow. This bears more weight at a time when there is a dire need to attract workers from the informal sector to a more organised formal sector, and to reduce the unemployment rate and poverty.
It is not that only foreign firms and joint ventures are affected. Domestic firms have also been forced to halt operations. Himalayan Snacks and Noodles Pvt. Ltd., which produces successful brands like Mayos, shut down operations on December 20 citing labour disputes.
Another successful noodle company also met with the same fate. Pokhara Noodles shut down operation due to a dispute with its labour union over the lay off of 82 workers on December 22. That lay off was necessary because of a huge inventory build up, slowing market demand during off-season, and cut-throat competition. From the company's and a management point of view, it was a prudent decision to lay off workers when there was high inventory build up and slow demand during the off-season.
The poor industrial relation between the workers and the employers also struck the already beleaguered garment industry, which is struggling to survive in the post MFA era. Cotton Comfort, the largest apparel exporter, closed down production citing labour problems and obstruction in manufacturing units. It is reported that with Cotton Comfort's closure, the number of operating garment companies has plummeted to nine from 18 last year. At a time when the Nepali apparel is losing its market to the Chinese and Indian companies, this has come as another powerful blow to the industry.
The closure of the heavyweight Cotton Comfort along with hundreds of other small and medium garment firms is taking a toll on export revenue. During the first four months of 2006/07, total exports declined by 0.1 per cent reducing the total earning to a meager Rs. 20.84 billion while imports grew by 10 per cent to Rs. 92.09 billion thus Nepal 's trade deficit widened by 16 per cent, reaching Rs 41.25 billion, according to NRB data.
It should be noted that all the domestic companies that have halted operations serve both the domestic and the foreign markets. But the emerging labour disputes are going to have a more severe impact on export revenue. Global companies like WalMart Inc. and Gap Inc. had already voiced concern over the ability of the Nepali companies to deliver on time. With the current labour dispute across the industrial sector, it is sure to heighten concerns, putting a question mark on the efficiency in delivery and production capabilities. This also has a bearing on the monetary policy because of the possible decline in foreign currency earnings of export-based industries, burgeoning trade deficit, and persistent impact on the balance of trade.
The nature of labour disputes and industrial relations differ across industries. Some of them are related to the unreasonable demands and threats of Maoist-affiliated trade unions, while others are related to layoffs, health and safety standards, employee welfare, and job security. It is ironic that being the main umbrella organisation of all the industries in Nepal , FNCCI has not initiated any activity to address the root causes of these problems. It has been silent on the issues that need its proactive role. Ironically, its leadership had been active on issues where it should not have acted. For instance, the leadership was proactive in supporting the infamous Royal coup when its regional and district chapters were against it. FNCCI could take up and try to resolve these disputes swiftly as this would at least expunge some of its tarnished image and add credibility.
The Ministry of Labour and Transport Management is also not showing the required interest in resolving this issue. They fail to realise that it now demands a national response.
No doubt, layoffs also affect the workers as well. Widespread unemployment in the formal sector and scarce low paying jobs in the informal sector reduces their chances of getting jobs elsewhere. In such a situation, with backing from unions, they resort to strikes in order to force the board to cede to their demands.
So, without a successful resolution of labour disputes, FDI, unemployment, growth and poverty reduction initiatives will be affected. In its latest report titled Economic Cost of Conflict, Nepal Economic Association urged for a "consensus-based labour laws". This adds weight to the argument that these issues are not individual industry-based problems, but a problem that requires participation from all stakeholders to find the solutions. Several defective and business unfriendly provisions in the current Labour Act should be amended to create a conducive business environment.
The inflexible labour market in Nepal is one of the reasons why Nepal has been sliding in the WB's Ease of Doing Business ranking. It slid down by 10 positions, from 90 in 2005 to 100 in 2006. This implies that it is becoming increasingly difficult to launch a business here. The labour market is so rigid that in the difficulty of hiring index, Nepal had 67 points and in the difficulty of firing index, it had 70, compared to the OECD average of 27 and 27.4 respectively.
(Sapkota is studying in Dickinson College , USA )
Geographical Indication For Khukuris, Apples & Many More
There is a lot of talk about decentralization in Nepal . Although there are different models for moving power away from the center, we do not see many that integrate businesses with decentralization. But the provision for Geographic Indication (GI) enshrined in one of the WTO agreements seems to provide one such model, if Nepal goes ahead in the right direction.
GI is a part of Intellectual Property (IP) and of the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement which 147 countries have signed. The agreement officially defines GIs as indications (words, phrases, symbols, images), which identify a product as originating in the territory of a member country if the given quality, reputation, or other characteristics of the product is essentially attributable to its geographical origin. But unlike other patents, GIs are not newly created but only recognized at a point in time and they are publicly owned by the state with a special communal right granted to a qualifying geographic region.
A prominent international example of gaining business advantage through GI is 'Ceylon Tea'. This GI identifies tea originating in Sri Lanka (which was known as Ceylon till 1972), which possesses a distinctive quality and reputation essentially attributable to its geographical origin. Sri Lanka earns nearly US $ 700 million per annum by exporting Ceylon Tea. The tea industry also employs over 1 million people in a country with a working population of fewer than 12 million.
Similar Nepali candidates for GI could be Khukuris from Bhojpur, Tea from Illam, Dhaka from Palpa or Apple Brandy from Marpha, to name a few. For example Bhojpuri Khukuris have been famous for a long time so the Nepali state could decide to obtain the GI patent for "Bhojpuri Khukuris". The rights to produce "Bhojpuri Khukuris" would then lie only with the people (mostly Kamis who are so-called ‘untouchables’ and therefore mostly deprived of the fruits of ongoing development) of Bhojpur who have been producing it traditionally. Other Khukuri producers would be barred from using "Bhojpur" to promote their knives. This would give Kamis in Bhojpur a distinct brand advantage because the reputation of Bhojpuri Khukuris is so pronounced. So, by working for patenting Bhojpuri Khukuris the state would be helping people who have been disadvantaged socially.
Since GIs are not created, but only recognized, the investments to be made will be only to build a reputation of a product already created. So the people of Bhojpur would not even have to create new businesses but only get together to strengthen their marketing using Bhojpur's solid reputation to promote their brand. The rights of use are granted to the community, not to individual monopolists. Therefore, given Nepal 's success in community forestry, it would not be far fetched to expect success also in GI efforts .
There are also indirect benefits associated with promotion of GIs: examples from Europe and South Asia show that GIs are linked with regions that are popular with tourists, which widens economic opportunities for local people through micro-enterprises and services. Legal protection of GI could also attract additional investment (foreign as well as domestic) into the region to develop the product and place, such as in Vietnam 's Phu Quoc sauce.
With GI protection, producers are able to command premiums for their "exotic" products, especially if perceived and/or actual quality differences exist, including product differences attributable to their unique geographical as opposed to varietal origins. GI based branding strategies as a form of market protection and promotion have long been available to wines and spirits in the European Union with examples including Scotch, Champagne , and Cognac . And the European Union is not alone in its efforts: India is keen to protect its Darjeeling tea, Guatemala its Antigua coffee, Sri Lanka its Ceylon Tea (as mentioned earlier) and Switzerland its Etivaz cheese.
Further, the importance of GIs in Nepal goes beyond trade and commerce. It has to be understood in the wider context of protecting IP pertaining to traditional cultures, assets and production methods in some of the world's oldest human settlements. GIs are the only form of modern IP that grassroots communities are likely to own. Moreover since Nepal is blessed with rare natural flora and fauna many communities have been producing various unique products. So, investing in GI would create a virtuous cycle of other incentives to nurture and sustain traditional methods and know-how that can contribute to inter-generational equity.
GI and the Government
Despite all the benefits that can arise from GI, the irony is that Nepal still hasn't put into practice its globally compatible intellectual property rights (IP) law, which also contains laws governing GI. The comprehensive Industrial Property (IP) Act should have been implemented in the WTO member countries by 31st December 2006 . In Nepal , preparations had already been made to implement the law but it has been postponed after the WTO Ministerial Meeting in Hong Kong stretched the time limit for LDCs upto 2016. Because of this, the government seems in no hurry to implement the IP law which was already in the final stages of its preparation. However, this may prove counterproductive.
The government has to realise that it takes time to make communities aware about GI, and only after people apply for GI, can they start building their brands, which is a slow process in itself. Beyond the formal systems of protection, usefulness of GIs is conditional on the ability of local producers to organize themselves into associations to draw on legal and marketing resources. WTO rules also stipulate that GI can be applied for products of a country only if that country has its own GI law. So any possible benefit from GI can only come about after the GI laws are implemented.
Studies have found that implementing the IP provisions including GI would be highly costly. For example, Finger (2000) has noted that implementing (revising laws, training officials, purchasing equipments and building) three of the six Uruguay round agreements on customs valuation, IP, and sanitary measures would require on an average a minimum of US $ 150 million in a typical poor country. The delay in implementing IP laws in Nepal may be due to this cost factor. But Nepal will have to implement these laws by 2016 anyway. However, Nepal can use the technical assistance clause to which its major developed country trading partners have agreed to while granting WTO membership to Nepal. Steps have to be started to use this assistance for developing the IP and GI regime in the country right away.
If the government is proactive about this issue, it might turn out to be a competitive advantage for the nation. Most of the other LDCs might take a longer time to come up with their own globally compatible IP laws. By that time, Nepal 's private sector would have already created brands for their products and some of these would be based on GI. Hence Nepali businesses would be able to grab global opportunities faster than businesses in other countries.
(Manish Bikram Shah)
