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What Should NTB do?
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Basanta Raj Mishra
President NATO
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NTB was set up as a public-private partnership with the idea of combining the strengths of the public and private sectors. But even after five years of its establishment, it has not been able to improve on what the private sector had done earlier. Rather it is now just competing with the private sector. NTB is now just copying what the associations of tourism firms were already doing, such as participating in trade fairs. Moreover, the cost incurred by NTB while participating in these fairs is double compared to what the private sector would incur. What is more serious, it is neglecting the ideas and suggestions put forward by the private sector. It has now forgotten that it should in fact derive its strength from the private sector.
NTB is following a very stereotyped marketing strategy. The system that the private sector had set up 10-15 years ago is still being followed by NTB. It has not been able to introduce any change. Therefore, the marketing efforts of NTB have been quite ineffective.
Large sums of money are being spent on promotion of tourism by NTB but tourist arrival decreased even in September, the month when it normally increases. Though the country’s tourism industry is going through a period of crisis, NTB has not used its crisis management cell that was set up with representation from the private sector too. It did not learn from the experiences of other countries. When the Sri Lankan tourism industry faced a similar crisis, following the bomb explosion at the Colombo airport, the crisis management cell there took the country’s tourism minister to Germany (one of its major markets) where he assured the tour operators and the prospective tourists that the explosion would have no impact on tourists as everything had already been taken care of. But here NTB does not seem to understand the value and the function of this cell.
Firstly we have to find the root cause of the problem. The main reason is the bad perception of the people about Nepal and it is in turn caused by the negative publicity about Nepal in the international media. We have to fight against this perception.
So, our marketing strategy has to be totally changed. For that we have asked NTB to just retain whatever business we have now (not go for market expansion) and focus upon changing the negative perception of people in these markets about Nepal.
At such a time of crisis, the public and the private sector should work together. We have to jointly develop specialised tourism packages best suited for such times and market them very wisely. As our budget is limited, our first priority in marketing should be to focus on trade (the tour operators). Instead of trying to reach all the prospective tourists and all small tour operators, we have to go to those large tour operators that are helping us even now by sending tourists. We should also reward them. The foreign diplomats are visiting every nook and corner of Nepal without fear but they issue negative travel advisories to their people. We should convince them to change their negative travel advisories or to at least soften them. Second, when we participate in trade fairs it would be wise to invite foreigners who have been to Nepal during the recent days and make them talk about their perception on Nepal. Third, We should also invite foreign tour operators and media people to familiarise them to the situation here. Public relationship plays an important role in this.
This again shows the need for a good public-private partnership. What I have seen now is that NTB, instead of working with tourism firms and associations, is competing with them. The recent example is participation in the ITB fair in Berlin this March. Though the Nepal Association of Tour Operators (NATO) was already participating in the fair, NTB went there separately. Worse still, in its press statement after the fair, NTB did not even mention the participation of NATO, though it mentioned the names of firms that participated in the fair under the NATO banner. NTB should rather be focused more on broader areas such as increasing tourist arrival, sustainability of the tourism industry and enhancing the contribution of tourism to the GDP and employment level in the country. We need NTB’s support, but all we get is competition.
If my business doesn’t go well, I have to bear the consequences. I may not be able to pay back the bank loans and I may be put in the blacklist by the banks. But this does not apply in the case of NTB. It is not concerned even when the tourism industry is in decline. This is because there is no system of evaluation and reward and punishment in NTB.
Structurally, NTB has no comparison throughout South and Southeast Asia in terms of the mechanism put in place for public-private partnership. But NTB has not been able to live up to that spirit. The public private partnership should have become stronger over the years but it is getting weaker by the day.
What we individuals can do is bring in some tourists, maybe a few thousands, but we have no capacity to bring in millions. If NTB also cannot do that, why don’t we hire foreign experts as the CEO of NTB? Australia’s national tourism marketing body had a New Zealander as its CEO. Similarly, a French expert used to look after the tourism marketing in the UK. We should look at it from a commercial point of view. There is no dearth of funds to pay a foreign expert. Donors are helping us by providing money. For example, UNDP is helping in developing rural tourism. Various other ways can be explored to collect the necessary funds.
We, from the private sector, have done most of what we could. We have reached the limits of our capacity to resolve this ongoing crisis. No entrepreneur wants to betray his employees; no one wants to be on a bank’s blacklist. We are all in the same boat. If it capsizes, we will all drown. We all understand that but NTB is least concerned.
What NTB is Doing
The latest political happenings in Nepal have hampered the country’s tourism industry a lot. The Nepal Tourism Board’s (NTB) promotional efforts are hampered by several issues beyond NTB’s control. Therefore, sometimes we have not received satisfactory results from our promotional investments. But given a favourable situation, our efforts have seen good results. During the 2003 ceasefire, we went to India with the Pashupati Darshan Package. The result was that the tourist arrival in 2003 increased by 23 percent and in the case of Indian tourists it increased by 29 percent. In other words, market promotion yields returns when the country’s situation in normal.
Now we are spreading a message that whatever the political situation in Nepal, tourists are always safe here. Such publicity has worked. In the first six months of 2004 there was a growth of 35-50 percent in tourist arrival. But the bomb blast in the Fishtail Lodge, Pokhara on May 14, frequent transport blockades at various places and the closure of several industries in September sent abroad negative messages about Nepal. As a result, tourist arrival started to decline again. The September 1 disturbances following the murder of Nepali workers by militants in Iraq brought about a decline not only in Indian tourist arrival but from third countries as well. And the decline continued till January. This proves that the country’s image built through years of effort can be shattered in a day. To blame NTB that it could not help the growth of the tourism industry is baseless. People should take into consideration the results of such events.
Even during that period of chaos, we held promotional programmes in India in association with the national flag carrier, RNAC. Though we couldn’t stop the declining trend completely, we saw some improvement in October and November. In December 2004, Indian tourist arrival was higher than that in 2003.
After February 1, 2005, there has been negative publicity about Nepal going on in the foreign media even though the situation here is in fact better than earlier. We have sent several press releases to the foreign media explaining the situation but the efficacy of this step depends on how much publicity our releases receive. Negative news travels fast. In February, we saw a 43 percent decline in tourist arrival. In March we did not witness a growth but the decline decelerated. Slowly, the reality about the situation here is spreading. Meanwhile, NTB in association with RNAC, Cosmic Air and some other organisations launched the “Buy three, get one free” scheme for Indian tourists. If the situation were normal, this would have sold like hot cakes. Still, we are hopeful of positive results out of this scheme this summer. Likewise, NTB, in association with Cosmic Air, launched “Buy one, get one free” scheme at the Dhaka Travel Mart. The people who visit Nepal under these schemes are expected to carry positive news about the country and we hope this word-of-mouth will spread more effectively, albeit slowly, and people abroad will realise that Nepal is now a safer place for tourists.
We have been frequently meeting with foreign diplomatic missions here asking them to revise their travel advisories. While some of them have obliged, some others have not. So, we have started developing a better channel via the Foreign Ministry for more effective communication with these missions.
In addition to sending regular updates to the international media regarding the situation here, we also interact with them. The foreign media representatives in Nepal are mostly Nepalis so they are not unfamiliar with the situation here. However, we sometimes also invite them to travel to some select destinations to personally find out about the situation there. But as this has not helped much, we feel that we have to be in more frequent contact with them.
It is true that some renowned foreign tour operators have stopped selling Nepal. They have removed Nepal from their brochures. This is because the consumer laws in European and North American countries are very strict. If the clients do not get the services as per the promises, the tour operator may have to face legal risks. Due to the frequent blockades and other such problems in Nepal, these tour operators are not taking these risks. Now that the peace and security situation has improved, we can hope that these tour operators will start including Nepal in their list of destinations.
In this regard, it is pertinent to note that one of the reasons for the tourists not coming to Nepal is the problem of insurance. If emergency is declared in a country, the insurance companies automatically start asking for higher insurance premium, making it costlier for the tourist. If Nepali travel agencies arrange for the insurance of the tourist from a Nepali insurance company, we can expect more tourists to come to Nepal.
In a situation like we are in today, we need to make extra investment in image building and public relations. We need to interact more with the international media and with the journalists of foreign media. But we are not able to do that as much as is needed. We have not been able to publish coverage about Nepal in various communication channels.
We have to be able to bring foreign tour operators and foreign journalists on familiarisation trips. A high level Nepali delegation should be sent abroad to give a better picture of Nepal to the foreign media and tour operators. In addition to that, we have to make new and attractive travel packages and advertise them. But we lack enough funds to finance these activities. NTB’s budget is very low. It’s very difficult to create an impact with such a low budget. Everyone should understand this.
If our national flag carrier is strong it will be a lot easier for us to work towards our objectives but that is not the case. RNAC has only two aircrafts operating on the international route. If one of them is grounded because of technical failures, we cannot be sure of being able to serve according to our packages. Though we can also tie up with foreign airlines, and we have in fact carried out some programmes with them, their help depends on the type of programme. Air China helped us when we went to China for tourism promotion. Gulf Air helped us at the ITB fair. Jet Air and Qatar Airways have similarly helped us. But it takes a lot of time to get their help as they need to contact their head office first before making commitments. But in tourism we need to react immediately in times of crisis and for that the national flag carrier would be handy. Therefore the stronger the national carrier, the easier it is to promote tourism.
The private sector is also going through a difficult time but if they come up with the money to organise programmes jointly with the NTB, we may be able to create more of an impact in the markets. As individual firms they are doing their best but at such times of crisis, it is better to make joint programmes and packages.
NTB tied up with some airlines to offer packages in India and Bangladesh. This kind of packages should actually come from the private sector. NTB’s work is not about offering packages. When we ask the private sector firms to make investments in such programmes, they complain of the lack of money and they say that their business will be even more hampered if they invest now.
NTB’s budget varies a lot. Sometimes we have to operate with Rs. 9 crores, sometimes with Rs. 5 crores. For effective work there should be stability in marketing. To achieve that consistency we requested the government and it recently brought out a new system of collecting Tourism Service Fee which makes it easier for us to predict the volume of resources that may be available to us.
NTB is never a silent spectator. It has a small team of 41 persons including the peon and the driver. Our team is smaller than that of medium sized travel agency. Hardly any other country’s tourism board can perform to this extent with such limited manpower and budget.
Power Sector Reforms Flaws in Proposed Law
Two draft Ordinances aimed at reforming the power sector and presented for discussion among the stakeholders in mid-April have been guardedly welcomed by the private sector for its principle of encouraging private investment as per the Hydropower Development Policy (HDP) 2001. But they have had reservations on a number of serious flaws in the proposed laws.
The draft laws have provided for, among others, unbundling of the Nepal Electricity Authority (NEA) and further opening power generation and distribution for private investment while setting up a regulatory authority (National Electricity Regulatory Commission or NERC) for tariff fixation and a National Electricity Transmission Company (NETCo) for operating and managing the national electricity transmission grid. The private sector power developers and distributors are promised open, unrestricted and non-discriminatory access to the national power grid on payment of a wheeling charge prescribed by the NERC.
Commenting on the Electricity Ordinance (EO), the private sector people say that it should have been based on the Electricity Act 1992 and the HDP 2001, but it seems that various provisions of the HDP 2001 are changed, repealed or the EO has become silent regarding them. There does not seem to be a consistency between the Policy and the Ordinance on various issues.
They say that the Electricity Regulations (ER) should have been developed and reviewed simultaneously with the preparation of the draft Ordinances. In the absence of the ER, a lot of ambiguity has been introduced in the draft Ordinances, a lot of room has been left for discretion, individual interpretation and changes at later stages, which introduces a lot of financial risks to the developer.
The status of the EO is still unclear, they point out and ask: “Is it the Umbrella Act for power project development?” This is an important point to be clarified, they say, since the Finance and other Acts still do not recognise the provisions of the EA 1992. The EO should be structured in such a way that it becomes a “Single Umbrella” for all power project development adhering to the principles of “single-window” adopted by the government.
Commenting on an important gap in the Ordinances, they say that electrical power should be de-linked from water. According to them, electrical power should be treated as a commodity, and should not be mired with other water-related issues. The private sector would like to treat electricity as a purely commercial commodity, and would not like to be involved in other water issues, which is best left to the government to sort out.
Another argument put forward by the private sector is that power trading – both internal and external – should be recognised as a legitimate activity in the objectives of the EO and the NERC Ordinance. Power trading will introduce competition in the market leading to overall improvement of the quality of electricity and service delivery.
Though the royalty structure was clearly defined in the HDP 2001, the draft EO is silent in this respect, and leaves it to the ER to “prescribe” it. Again, this introduces a lot of uncertainty for project development and leaves too much scope for discretion, adhocism and eliminates a level-playing field, complain the private sector people.
In the EO, the project license period has been reduced from 50 years to 35 years. As this requires the developer to recover his investment within this period, it will result in tariff loading to the consumer, it is pointed out. And since this is against the spirit of the HDP 2001, the private sector has demanded to reinstate the license period at 50 years.
Section 20 of EO – Restructuring of the Corporate Body – is totally impractical for the private sector, they say. If the intent of the draft law is to restrict monopoly in the sector, the private sector’s suggestion is to grant NERC the authority to define the scale of a Corporate Body that needs to be “unbundled”.
Another weakness of the draft EO is that the restructuring of NEA is not defined. Rather the HDP 2001 had more specific points spelled out on this issue. The unbundling of NEA was warranted more from the perspective of NEA’s lenders, and this cannot be imposed on private sector as they have their own covenants in loan agreements, it is argued.
Regarding the draft NERC Ordinance, the private sector has welcomed the idea of forming a National Electricity Regulatory Commission (NERC) as it is expected to provide a more transparent and level playing field for Independent Power Producers (IPPs) and public sector utilities. But objection has been raised due to the absence of a clear definition of “reasonable return” promised to IPP while fixing the royalty and electricity tariff by NERC. The EA, 1992 had provided for a 25 percent return on equity, while NERC-O 2005 is silent on this issue.
In another objection, the private sector says that the draft provisions have imposed a lot of limitations on NERC’s autonomy. For example, the sources of funding for NERC are the government and donor agencies and international organisations, the tenure of the NERC members are limited for the interim period and the procedure for removing the NERC members from their positions do not let them function autonomously.
These issues will adversely affect the working of the NERC as the government and the donors may impose conditions and covenants which will render NERC’s activities far from being that of an “independent” regulator. Opportunities for such interferences must be removed from the Ordinance, they say.
NERC has been mandated to approve tariffs on certain basis, as per the Ordinance. The EO refers to cost plus tariffs. In this regard, the private sector people say, NERC must be able to define the “true cost” of power project development in a fully commercial manner. This is essential, say the private sector representatives, because there is a lot of confusion in the country regarding Independent Power Producer’s (IPP) costs for project development. Any cost structure should comply with internationally accepted norms and standards of costs for commercial project development.
The private sector also demands that the Ordinance should clearly state that there will be no re-appointment of the NERC members. Similarly, there should be a statement which says that they will not be removed from their position till their term expires or if a formal impeachment process carries through. This is essential to insure a really independent and autonomous regulator, they say.
In a separate comment on the draft Ordinances, the International Resource Group (IRG) that has been working as a consultant for USAID-funded private sector Hydropower Development Project, has suggested to avoid the frequent use of the term “prescribed authority” in the draft by properly defining such an authority. It has also pointed out the lack of clarity about which organ of the government is responsible for implementing these drafts when they become laws.
Similarly, it has suggested that even those power projects that will be developed by the government should be required to obtain a license in a similar manner as obtained by projects to be developed by the private sector. This is essential to ensure compliance with the environmental law and safety regulations, it has pointed out.
One suggestion provided by IRG is to remove the provision that allows the government to expropriate power projects as it increases risks to the investment and causes higher tariff to the consumers.
IRG too has objected to the requirement of unbundling existing private power companies. It has also asked for a clear provision prohibiting government officials from becoming members of the board of directors of any power company so as to avoid the possibility of a conflict of interests.
Similarly, it has also suggested setting up a promotional office in India to promote Nepal’s hydropower in India, the major potential market for such exports at present. Such an office should be funded by the government and run under a special contract with the Department of Electricity Development of the government, it says.
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