A STUDY ON THE EFFECTIVENESS OF INVESTMENT IN

TOURISM INFRASTRUCTURE DEVELOPMENT PROJECT

FINAL REPORT

SUBWTTEDTO CENTRAL MONlTORING AND EVALUATION DIVISION

NATIONAL PLANNING COMMISSION SECRETARIAT

SINGHA DARBAR, KATHMANDU

CENTRAL DEPARTIvlENT OF ECONO:rvrrCS

TRlBHUV AN UNIVERSITY, KIRTIPUR

KATHMANDU

JULy 2000

ACKNOWLEDGEMENT

Central Department of Economics, Tribhuvan University, is highly privileged to have this opportunity to undertake the study of the "Effectiveness of Investment in Tourism Infrastructure Development Project Phase I". The Department, therefore, wishes to place on record its sincere gratitude to National Planning Commission for entrusting us this important study. We believe that the results and the suggestions made in the report will be very helpful in carrying out similar projects in futme.

The Study Team wishes to express its sincere thanks to Dr. Shanker Shanna, Honorable Member, NPC for his valuable comments on the draft report. Thanks are also due to Mr. Hira Lal Singh Dangol, Mr. Vaidya Nath Mallik, both Joint Secretary, NPC and Dr Chitra Deo Bhatia, Advisor, NPC for their valuable and constructive comments and suggestions. The study team gratefully acknowledges the support and cooperation extended by Mr. Ganesh Rai, Under Secretary, NPC and Mr. Shekhar Babu Karki, Section Officer, C:rvIED at various stages of the study. Mr. Karki's support and cooperation during the fieldwork is also duly acknowledged. We also express our sincere thanks to Mr. Devendra N. Gongat Project Manager, TIDP II for sharing his experience about various aspects of the TIDP I.

Thanks are also due to the President of HAN Pokhara Chapter, president of the Boat Owners Association for sharing their views and concern about tourism development in Pokhara.

We are also very much indebted to all the officials of the implementing agencies for their cooperation in providing required infonnation concerning the project. Special mention should be made about the untiring support extended by local community of Gorkha and Pokhara by sparing their valuable time in responding our questions and participating in the group discussion. Without their cooperation the study would have remained incomplete.

We are thankful to Account Officer of the Department Mr Ram Mani Khanal for his prompt attention and service to the Study Team members. We are equally thankful to Mr Kancha Ram Mahatjan and Mr.Kushu Ghale for their excellent secretarial services.

Central Department of Economics Tribhuvan University

STUDY TEAM

Prof Vishnu P. Shanna Study Coordinator Mr. Ram Dev. Singh Economist Dr. Devendra P. Shrestha Economist Mr. Shekhal' Babu Karki Liaison Officer, CMED, NPC

Assistant

Nft'. Gyanendra Mallik Research Assistant

11

ACAP

.ADB

ATC RME CMED

DCA

DHUD

DOA

DOR

DOT

EIDCTP

FGD

GCAP

GDP

GOs

HAN

HMTTC

IUCN

KlVITNC

MOCTCA

:rvIOF

NATI-llvI

NGOs

NPC NTB

OIM PCAIP

PIvlU

PTDC

RNAC

SWC

TIA

TIDP

US

UNDP VDC

ACRONYMS

Annapurna Conservation Area Project

Asian Development Bank

Air Traffic Control

Benefit Monitoring and Evaluation

Central Monitoring Evaluation Division

Depal1ment of Civil Aviation

Department of Housing and Urban Development

Department of Archaeology

Department ofRoads

Department ofTourism

Eco-tourism Deve10pment and Circuit Trekking Project

FOCU'l Group Discussion Gorkha Conservation Area Project

Gross Domestic Product

Government Organisations

Hotel Association Nepal

Hotel:Management and Tourism Training Center

IUCN- The World Conservation Union

King Ivlahendra Trust for Nature Conservation

Ivlinistry of Culture, Tourism and Civil Aviation

Ministry ofFinance

Nepal Academy of Tourism and Hotel Management

Non-government Organisations

National Planning Commission

Nepal Tourism Board

Operation and Maintenance

Pokhara Conservation Area hnprovement Project

Project Management Unit

Pokhara Tourism Development Committee

Royal Nepal Airlines Corporation

Social Welfare Council

Tribhuvan International Airport

Tourism Infrastructure Development Project

United States

United Nations Development Project

Village Development Committee

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TABLE OF CONTENTS

Acknow1edgement Study Team Acronyms Table of Contents List of Table lVrap of the Study Area Executive Summary

Chapter

1. INTRODUCTION 1.1 The Context 1.2 Rational of the Study 1.3 Objectives 1.4 Area of the Study 1.5 Approach and Methodology 1.6 Research Instruments 1.7 Field Work 1.8 Field Performance 1.9 Data Management 1.10 Method of Analysis 1.11 Limitation of the Study 1.12 Organization of the Study

1

u

iii

iv-v

VI

vii viii-xiv

Page

1 - 10 1 1 1 2 2 4 5 6 10 10 10 10

2. TOURISM INFRASTRUCTIJRE DEVELOPMENT PROJECT

Al'ID OVERVIEW

2.1 Prqject Background 2.2 Project Cost 2.3 project Objectives 2.4 Proj~ct Components

3. TOURISM DEVELOPMENT POLICY: AN OVERVIEW 3.1 Background 3.2 Policy Adopted in the Eighth Plan 3.3 Achievements of the Eighth Plan 3.4 Tourism Policy in the Ninth Plan 3.5 Public Sector Investment in Tourism DeVelopment

4. EFFECTIVENESS OF TOURISM INFRASTRUCTIJRE DEVELOPMENT PROJECT

4.1 Pokhara Airport Upgrading 4.2 Sarangkot Access Road 4.3 Pokhara Conservation Area Improvements 4.4 Lakeside Footpath and Garden 4.5 Eco-tourism Development and Circuit Trekking

iv

11 14

11

11

11

12

15 ~ 20

15

15

16

17

18

21- 52 21 28 31 36 37

Chapter

4.6

4.7 4.8 4.9 4.10 4.11 4.12

5.

6.

Tourism Support Services, htstitutional Development and Implementation Assistance Improvements in GOl'kha Conservation Area project Upgrading of Physical Facilities ofNATIiM Project Schedule Overall Impact of the Project Public Private Linkages in Tourism Sector Potentialities Created by the Project

ENVIRONMENTAL IMPACT ASSESS:MENT

SUGGESTIONS

BIBLIOGRAPHY

RESEARCH INS1RUMENT

ANNEXES

List ofhtstitution, Name ofPersons Interviewed

Page

41 44 46 49 49 51 52

53 - 54

55- 58

59 - 60

v

LIST OF TABLE

Table No. Title Page

1.1 Field Performance 6

2.1 Swrunary of Project Cost and Actual Expenses 11

3.1 Trends in GDP, Development Expenditure and Tourism

Sector Development Expenditure, Nepal 1990/91-1998/1999 19

3.2 Share ofTourism Sector in GDP and Total Development

Expenditure, Nepal, 1990/91-1989/99 20

4.1 Flight Movement, Passenger and Cargo Handled in

Pokhara Airport, 1990-1998 23

4.2 Revenue ofPokhara Airport by Major Sources 24

4.3 Tourist Arrival in Pokhara by Mode of Transport, 1990-1999 25

4.4 Average Annual Growth Rate of Tourist in Pokhara by

Mode ofTransport 25

4.5 Number ofHotels, Their Rooms and Beds in Pokhara,

1990-1999 26

4.6 Number of Trekking and Travel Agents in Pokhara 1990-1999 26

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. 84 0 E .. " . .ri '1NEPAL' ~.

TOURisM'u,i'FRASTRUCTUREbEVj:fop'MENT PROJECT 2?

EXECUTIVE SUMMARY

1.1 The Context

Following the recommendations ofa study commissioned by Asian Development Bank in 1990 to suggest measures for tourism promotion in the country the Tourism Infi'astructure Development Project Phase I was launched in 1992 with the loan assistance of ADB and completed in December 1997. The main objective of the project was to support the government's strategy to develop tourism sector and thereby increase the foreign. exchange earnings.

Three years have passed since the completion of the Phase I of the project It is, therefore, timely that a study be carried out to assess the effectiveness of investment made in the Project in terms of the attainment of the goaJs. The present study is an outcome of the need to document strengths and weakness ofthe project and sUgge.lJt measures for improvements .

1.2 Objectives of the Study

The overall objective of the study is to assess the effectiveness of investment in Tourism Infrastructure Development Project The specific objectives ofthe study are:

to examine issues concerning the effectiveness and impact of the Project; to compare the changes in the length of stay and flow of tourist in the area before and after

the completion ofthe project; to identify the potentialities created for developing the new projects; to assess the strengths and weakness of the project by studying the targeted and actual

facilities developed; to assess the private sector involvement in the project by studying tourism entrepreneur

benefitted, to examine the extent of participation and involvement of tourism entrepreneurs, women,

and the commWlity at large in the project activities and .. to solicit their views about the effectiveness and usefulness of the Project.

The Project covered selected areas on three districts of the country viz; Kathmandu, Gorkha and Kaski.

1.3 Approach & Methodology

The study is a desk work-cum-field based study. Both secondary and primary data including observation method were used to gather data. Relevant documents, reports, and records including project appraisal, benefit monitirong evaluation report and project completion reports were tbroughly reviewed and analyzed. Required data pertaining to various aspect of tourism promotion in general and project re1ated infonnation in particular were obtained from various agencies.

viii

The collection of primary data involved mainly the use of qualitative (participatory) approach supplemented by conventional survey method. The participatory research approach used in the study included key infonnant interview, in-depth interview with selected beneficiaries, foous group discussion (FGD), and observation. Foous Group Discussions (FGD) were conducted with with key infonnants, stakeholders, women and community people.Similarly, inoodepth interview with Project Implementing Agencies and other key infonnants were conducted. Selected hotel and lodge operators, tour operators travel and trekking agents, traders, souvenir shops, boat operators and taxi drivers in the study area were also interviewed to seek their reactions about the flow of tourist and the volume of their business. Projects sites in all tIU'ee study areas of Kathmandu, Pokhara and Gorkha were visited to observe the infrastructure completedl developed and assess their operation and maintenance.

To supplement the qualitative infonnaUon a small departure survey was also carried out among the tourist returning from Pokhara which mainly focussed on the length of stay at Pokhara, amount spent during the stay, other places visited in Pokhara, facilities available in the airport and suggestion for the promotion of tomism..

The research instruments developed included guidelines for fooused group discussion (FGD); rapid appraisal questionnaire; in-depth interview questionnaire and checldists and departure survey questionnaire. Since the project has several components to be implemented by separate implementing agencies, in-depth interview questionnaires were suitably developed for each of them.

Field work for the study commenced in May 20 and concluded on June 3. Field work was launched in two phases. Phase I was conducted in Pokhara and Gorkha and in Kathmandu it was launched in the ~econd phase,

The peIfonnance and the effectiveness of the project have been carried out on the basis of a comparative record of proposed activities listed in the project appraisal report and actual performance toward the end of the project A "before" and "after" approach, whereever data ano~ has been adopted to assess the impact of the project. The strengths and weakness of the each components of the project are analyzed and lesson learned for future are discussed on the basis of the reflections from various data gathering approaches adopted and the perceptions and and impression gained in course of discussion with various stakeholders and project, implementation agencies and local leaders.

1.4 The Project

The project has three major elements that include: (I) Improvement of tourism related infrastructure; (ii) Upgrading Hotel Management and Tourism Training Center (HMTTC)~ and (iii) Tourism Service Centers.

Improvement oftourism related infrastructure comprised following activities:

Pokhara conservation area improvement; Phewa lake side footpath garden improvement in Pokhara; Sarangkot access road improvement near P0k!tara from Mohalia Tole to Silingabot village;

IX

Polchara Airport Upgrading Ecotourism development and circuit trekking in the Annapurna Conservation Area; Gorkha conservation area improvement, Gorkha Municipality;

Upgrading ofHMTTC included (a) upgrading of physical facilities and b) institutional support to HM'ITC in Kathmandu.

Tourism Service Centers included establishment of tourism service centers, in Kathmandu and Pokhara and institutional development and implementation assistance.

1.5 Project Cost

The total cost of the project as estimated in the project appraisal was US $ 14,60 million.. The Project was completed inDecember 1997 with a revised total expense ofUS $ 8,94 million. A total amount orus $ 2.34 million was cancelled.

1.6 Activities AccompHshed

Pokhara Airport Upgrading

One of the major components of TIDP I was the creation of additional infrastructure facilities to upgrade the Pokbara Airport. The improvement under the Project comprised, chain-link fence and gates for the perimeter of the airport was completed; Existing runway was regarded, leveled, and paved with asphalt, and turning bay was constructed next to the new tenninal building. New passenger terminal building was constructed. Facilities such as check..in arrival and departure lounge.os, offices, restaurant, access parking, and landscaping were provided; New control tower, four units staff quarter, overhead and underground water tank, engineer's office and storage for battery carts constructed.

Sarangkot Access Road

In the major component ofthe project, Saranglcots road has been constructed which has attracted the tourist and local visitors by making easy access ofvehicles and thereby helping to strengthen the local economy.

Pokhara Conservation Area Improvement

The improvement under the project had comprised piped affiuent removal, septic tanks and soak pits, improved stonn water drainage, new footpaths, street lighting t and litter bins covering a total of 5.5 kilometers (rom) benefiting some 750 household initially.

Lakeside Footpath and Garden

The Lakeside footpath have been constructed from the tourism service center, which is not yet completed, at Ratnapuri Pardi, past the front of the Pokhara Metropolitan City guest house and the Police Training Centre across the mouth ofPhirke Khola through the Town Development

x

http:lounge.os

Committee I Department ofHousiDg and Urban Development land up to the ferry point to Fishtail Lodge.

Eco-tourism Development an Cln::uit Trekking

Under the project components a new trekking circuit, Pokhara-Ghalegawt-Sikles-Pokhara; two small local style model tourist lodges are built and operated by local communities; three :fully serviced campsites, two micro-hydro schemes in addition to one micro-hydro schemes undertaken by KMTNCIACAP previously; and two kerosene depoLts; community development projects, visitors center, and training for local private entrepreneurs with cooperation from HMTTC have been constructed and performed. Sanitation, garbage pits and public toilets have also been constructed along the circuit.

Tourism Support Services, Institutional Development and Implementation Assistance

To supplement the tourism development activities of HrvfG, the project has constructed the tourist information services in thecowtt1y, one in Kathmandu and other in Pokhara.

Gorkha Conservation Improvement

Under this Project following activities have been completed:

One Ian stone paved road from parking area, footpath; Combined sullage and stonn. water drains, two public toilets and septic tanks and street lighting installation. from parking area to Lower Square; gravel paved road from the lower square to below the Main Square., combined sullage and storm water drains. and street lighting improvement, pump installation; public toilets and laundry facilities were deleted keeping in view the pollution aspects, 157 steps repaired, inadequate spaoo prolu'bited pro_on of benches and landscaping; parle, walkways, steps and compound waD, constroction of sman information center completed. Some site development and landscaping works remain to be completed due to contractual dispute and contract termination.

Upgrading of Physical Facilities ofNATHM

Under the Project following activities have been completed.

Rehabilitation of the main building. including damp proofing. roof repair. plastering and construction ofthe western wing. central overhead water tank construction. ground water boring and ground water tank, and provision of water treatment facilities. more than 4000 m'1 of new classrooms. theatre. restaurant, bar. kitchen and bakery were constructed. In addition demonstration. hotel rooms and suits were completed The remaining area had been converted into landscaping garden.

Institutional Support for NATHM

Under the Project following activities have been constructed.

Twelve person months of international consulting services provided from funds allocated wtder the implement:"ltion assistance component. Since the UNDP withdrew from the project,

xi

procurement of some equipment for kitchen, bakery from the fund under the implementation assistance component. And other equipment from tocalfunds, provision of fcltowsltip, study hips and group training could not be prm,ided as lJNDP 'withdrew from the project.

1.7 Findings

Due to the development of various infrastructure the number of airlines served bas increased. This has resulted in the increased movements of flights in Pokhara. The facilities created bas ensured flight safety and flight regularity. Pokhara C:iv.i1 Avaittion Office's capacity bas tremendously increase to handle more passengers. These an have helped in increasing the revenue generation from the airport.

In Pokhara the number of hotels and hotel beds, trekking agents and travel agents have increased in recent years. The flow of tourist is also quite good. The study has shown that the length of stay in Pokhara has increased. However, the amoWlt spent by tourist has not shown a consistent increase along with the increase in the length ofstay.

The visible impact of the completion of the project is the increase in the employment opportunities specially for women and corre8ponding increase in income of the community. The study revealed the increase in the price of land after the completion of ther project.

The potentialities for the development of handicrafts, cottage industries, souvenir shops have greatly increased due to the completion of the project. Likewise, the scope of horticulture, floriculture, fruit processing, aquaculture, poultry farming, daily fanning and meat processing bas also enhanced.

Pokhara airport upgrading project, however, lacked long term vision, During the in-depth interview some of the airlines Station Manager complained about the problem of space in the terminal buildil'..g The Civil Aviation Office, Pokhara has not been able to provide space for check-in counter in the main hall and thus being managed in some comer outside the main hall. lne office space to some of the airlines is provided at the second stair of the terminal building which according to them is less convenient in handling their business,

1.8 Environment Impact

In Pokhara, sewer lines were laid on both sides of the road along the core bazaar area and connected to three commWlity septic tanks and soak pits. The constlllction pemitted households and businesses to oonneot their toilet facilities to these sewer Jines. Before the Project facilities were built, many of the households drained wastewater from toilets into the open drains, creating health hazards. The stonn drains constructed under the Project have helped to improve drainage system and thereby the sanitation situntion of the locality. In Gorkha, the drainage and toilet facilities constructed under Project have shown some improvement in the health and living conditions of low-income households near the Project facilities.

xii

The kerosene depots and the micro-hydro schemes constructed under the eco-tourism component have not only improved the living conditions of people in these remote areas but also significantly e1iminated the cutting of trees for firewood by trekkers and local residents. Moreover, the sanitation and drainage facilities at campsites and in the communities have improved health and environmental conditions for both the trekking tourists and local residents.

The Sarangkot access road project has been claimed as an exemplary project where the road cutting accumulated soil were transported to some other safer places. It is, however, claimed that the construction of the road has pollult:d Pht:wa Lake from !loil erosion and added the problem of silting there. The negative impact of the project is the increase in the school drop out rate in Sarangkot.

1.9 Suggestion

Management Capability

The study ha.'5 shown that some of the implementing agencies such as OOA, KMTNC and IThATTC lacked sufficient experience to manage their respective components. Therefore, government should make sure that the implementing agencies posses management capability to handle the projects.

Lack of Community Participation

Lack of community participation has been one of the major weaknesses of the project On the whole the approach lacked local participation. It is therefore, highly essential that the government shQuld involve the community in designing and implementing the project activities. TIl.e government should seek local community p..vticipation in the implementation of the project activities. 1'111.') will avoid unnecessary dispute with the community and thus help in OatTying out the activjties smoothlv . .'

C;OllgestiOD in Airport

There i'l onJy one taxiway for the craft. This has caused delay in incoming and outgoing flights. In order to maximize the lltility of the imlestment made in upgrading the airport one more ta'riway is required. Apron park is also very much limited. Parkh"lg space should be made more spacious.

Airport is very much congested now. Pokhara need much bigger airport may be international airport to handle the increasing nwnbel' of passengers. So alternative airport is the best option

Development oiSupplementary Facilities

Adequatt: atTangement of water supply in Sarnkot should be made. Hotel located on hilltop are not able to provide hot water, shower facilities due to the inadequate supply of water. So arrangement ofwater supply will increased the stay of tourist and hence increased the usefulness of the access road.

xiii

Discharge of Storm Water

Storm water drainage currently constructed should be extended beyond dam site for i1s effective discharge. This will greatly reduce the existing pollution in the Phewa Lake. It ~ however, believed that this activities is proposed to be completed during the second phase of TIDP.

Tourist Service Centre in Kathmandu and Pokhara

Tourist Service Centre in Kathmandu bas been occupied by three prominent bodies of the HMG i.e. NTB, SWC and Industry Administrative Division ofMOCTCA. There has been lack of accountability in looking after the facilities created. Therefore, only the NTB should be made accountable to make effective use of the infrastructure created.

The sanitation, electrification and furnishing of tourist service centre in Pokhara should be completed as early as possible. The completion of this service centre will greatly increase the effectiveness of foot trail and suspension bridge constructed at the Phirke Khola.

Fund for Operation and Maintenance

To obtain the maximum benefit of the investment made in developing the infrastructure, the government should provide adequate staffs and aDocate required atnOlmt for the operation and maintenance ofthe developed intfastructure.

Selection ofContractors

The performance of the contractors selected from the list of pre-quaJified contractors maintained by the Government appeared to be relatively weak than that of other contractors used in the Project Contractors with the former took much longer time to implement the activities. The Government and the Bank should carefully review the process of preparing the list ofpre-quaJitied contractors and their selection criterion.

Matc:bJng Fund

The government should provide the matching fund as early as posst'ble not to wait for the new fiscalyear to begin. This will facilitate the early start and timely completion of the project

Appointment ofProject manager

The Government should appoint the Project Manager at its earliest One of the reasons for the delay in the project was the late appointment ofthe Project Manager by nine months.

xiv

CHAPTER I

INTRODIJCTION

1.1 The Context

Asian Development Bank (ADB) commissioned a study in 1990 to suggest measures for the development of tourism sector in the country. The study emphasized the need of infrastructure development including strengthening of the Hotel Management and Tourism Training Center and other support services. Following the recommendations the Tourism Infrastructure Development Project was launched in 1992. The Phase I of the project was completed in 1997. The main objective of the project was to support the government strategy to develop tourism sector and thereby increase the foreign exchange earnings.

1.2 Rationale of the Study

Considerable amounts of resources have been spent in developing infrastructure over the span of five years. In Phase I. the Project mainly focussed its activities in the development of tourism related infrastructure in Pokhara and Gorkha. The Project placed emphasis on three important elements: (i) Improvement of Tourism related Infrastructure; (ii) Upgrading of Hotel Management and Tourism Training Center (IDvITTC); and (iii) Tourism support services, institutional development and implementation assistance.

Three years have passed since the completion of the Phase I of the project. It is, therefore, timely that a study be carried out to assess the effectiveness of investment made in the Project in terms of the attainment of the goals. Such study will document strengths and weakness of the project and suggest measures for further improvement in the subsequent Phases ofthe project.

1.3 Objectives of the Study

The overall objective of the study is to assess the effectiveness of investment in Tourism Infrastructure Development Project.

The specific objectives of the study are as follows:

to examine issues concerning the efficiency, effectiveness and impact of the Project; to compare the changes in the length of stay and flow of tourist in the area before and after

the project; to assess the impact of the project and identify the potentialities created for developing the

new projects~

to assess the strengths and weakness of the project by studying the targeted and actual facilities developed;

to assess the private sector involvement in the project by studying tourism entrepreneur benefited,

to examine the extent of participation and involvement of tourism entrepreneurs. women, poor families, underprivileged castes, and the community at large in the project activities and

1

1.4 Area of the Study

Tourism Infrastructure Development Project has mainly covered three districts viz. Kathmandu, Kaski and Gorkha. In Kaski and Gorkha districts the study site includes many clusters where the infrastructure work has been completed mainly in and around Pokhara Municipality and Gorkha Municipality. The main study sites in Pokhara specific to project components are as follows:

Project Area in Pokhara

Wards 2, 4, 7, 8, and 17 of Pokhara sub-Metropolitan which includes K1 Singh bridge, Ganesh Tole, Moharia Tole, Ram Krishana Tole, Srijana Chowk, Pardi dam, and area near Phirke Kola

Phewa Lakeside

Moharia Tole to Silingbot village ofSarangkot VDC

Pokhara airport

Tourist service center at Pokhara

Ghalegoan, Sikles and Kharpani in ACAP area where micro hydro electricity generated, campsites, community lodges constructed and kerosene depot established

Project Site in Gorkha

Selected wards where traditional monuments are located specially Rani Pokhari and Top Ghar where construction works have been completed.

Project Sites in Kathmandu

I-Il'v1TTC at Rabhi Bhavan, Kalimati Tourism Information Center at Bhrikuti Mandap

1.5 Approach and Methodology

The present study is a desk work-cum-field based study. The nature of the study demanded extensive review of documents and use of both secondary and primary data including observation method.

A. Review ofDocuments

Relevant documents, reports, and records including project appraisal, benefit monitoring evaluation report and project completion reports were thoroughly reviewed and analyzed. In the review process periodic plan documents and economic survey reports were also reviewed to review the government tourism policy and analyze the public sector investment in tourism promotion.

2

B. Secondary Data

Required data pertaining to various aspects of tourism promotion in general and project-related information in particular were obtained. Data were gathered from Tourism Promotion Board, Nepal Rastra Bank, Hotel Association of Nepal (HAN) and Hotel Management Tourism and Training Center (I!MTTC), Annapurna Conservation Area Project (ACAP), Pokhara Tourism Information Center, Tourism Infrastructure Development Project Management Office and other several relevant institutions.

c. Primary Data

The present study is mainly based on qualitative (participatory) approach for data collection. Quantitative (conventional) survey method was also adopted to gather data from limited and very restricted population.

Qualitative Study

Participatory approach has been applied to obtain "soft" or qualitative information from all stakeholders including community people. This approach in fact enabled the local community members, key informants, line agencies as well as project personnel to share their views and aspirations about the project The participatory research instruments used in the present study included: key informant interview, in-depth interview with selected beneficiaries, focus group discussion (FGD), and observation. Guidelines for FGD were developed to initiate the discussion. The guidelines are presented under the title ''Research Instruments" at the end of the report.

i) Focus Group Discussion (FGD) with key informants and stakeholders: Series of FGD session were conducted with the key informants and existing stakeholders in the community. They include Mayors, VDC Chairman, Ward Chairman(s), ex-Chairman, women representatives of the wards, teachers, local NGOs etc. FGDs were very helpful in eliciting their opinion about the projects activities and their strengths and weakness.

ii) FGD with Community including women: Series of FGDs with target beneficiaries of the project, viz. general communities including women, were held in the project site. The FGDs helped in assessing the perceptions and attitude of the community people about project activities and its positive and negative impact on the daily life ofthe local people. The name of the participants in FGD is presented in Annex VI, VII, VIII and IX .

iii) In-depth Interview with ProJect Implementing Agencies: TIDP is a multi-dimensional project involving several agencies for project implementation. Following agencies were responsible for implementing the project activities specific to them: Department of Housing and Urban development (DHUD) for Pokhara Conservation Area; Project Management Unit (PMU) and Department of Tourism for Phewa Lakeside footpath and graden and Tourism Centers in Kathmandu and Pokhara; Department ofRoads (DOR) for Sarangkot Access Road; Department of Civil Aviation for Pokhara Airport Upgrading; King Mahendra's Trust for Nature Conservation (KMTNC) for eco-tourism development and circuit trekking; Hotel Management and Tourism Training Center (HMTTC) for upgrading its facilities on Kathmandu; and Department of Archeology (DO A) for

3

improvement of Gorkha conservation area. The name of the key stakeholders and Officials of the TIDP Phase II is presented in Annex I and II respectively.

All the head ofthese iUl>tilutions were intervtewed in-depth to assess their views about the design of the project, their efficiency, and effectiveness in attaining the project goals including its sustainability.

iv) Interview with other key informants: Other key infonnants who were involved in tourism sector and familiar with the project activities were also interviewed in-depth. They include Pressident of HAN Pokhara Chapter, President of local users group, President of Boat Operators Association, Member Secretary of Taxi Association, Pokhara. Besides these, major airlines officials operating from Pokhara, selected star rated hotels were also interviewed in-depth. They were interviewed to assess the impact of the project on the promotion of tourism related businesses. The name of the key infonnants interviewed is provided in Annex III

Selected hotel and lodge operators, tour operators travel and trekking agents, traders, souvenir shops, boat operators and taxi drivers in the study area were also interviewed to seek their reactions about the flow of tourist and the volume of their business.

The name ofthe major airlines, hotels are presented in Annex IV and V.

v) Observation: Projects sites in all three-study areas of Kathmandu, Pokhara and Gorkha were visited to observe the infrastructure completed/developed and assess their operation and maintenance.

Departure Survey

In the present study departure survey was also carried out. Two days of observation period was allotted for the survey. During the observation 16 non-Nepalese tourist returning from Pokhara by air and surface were interviewed. The survey mainly focussed on the length of stay at Pokhara, amount spent during the stay, other places visited in Pokhara, facilities available in the airport and suggestion for the promotion of tourism were solicited from the participating tourist. Departure survey questionnaire is presented under the title"Research Instruments" at the end of the report.

1.6 Research Instruments

In the present study reliance has been placed more on qualitative approach for data collection. For qualitative study, the research instruments developed include: gUidelines for focused group discussion (FGD); rapid appraisal questionnaire; in-depth interview questionnaire and checklists. Since the project has several components with separate implementing agencies in.. depth interview questionnaires were suitably developed for each of them. Similarly, the project has varieties of stakeholders including from local residents to private entrepreneurs, local bodies and visitors. Private entrepreneurs include shopkeepers of various kinds, hotel and lodge owners, airlines, travel agencies, and tour and trek operators, restaurant owners and taxi drivers. Rapid appraisal questionnaires (unstructured) were developed for them.

For the departure survey a separate departu.re survey questionnaire was developed and administered.

All the research instruments used in the study are presented under the title "Research Instruments /I at the end of the report.

4

http:departu.re

1.7 Fieldwork

Fieldwork for the study commenced in May 20 and concluded on June 3. Fieldwork was launched in two phases. Phase I was conducted in Pokhara and Gorkha. Two teams were involved. The field team for Gorkha comprised one core team member and one research assistant while field team for Kaski district comprised three members, which included two core team members and one officer from CMED. The first phase of fieldwork lasted for 10 days. The field team for Gorkha, however, completed the fieldwork in Gorkha in 5 days and returned to Kathmandu to continue another round of fieldwork at Kathmandu. The entire fieldwork was completed in two weeks time.

The core team members conducted focussed group discussion. The FGD were recorded in the tape for transcription. The data quality in the present study is very good, as core team members were involved in fieldwork and its management. Since the nature of the study required interview with high-ranking officials the involvement of core professionals in the fieldwork was essential. The involvement was also essential to get first hand information about the projects through direct observation of the completed infrastructure.

5

1.8 Field Performance

The field perfonnance is presented in Table 1.1.

Table 1.1: Field perfonnance

S. Project Component In-depth Interview Focus Group Discussion Observation

No.

Proposed PerformedProposed PerformedPerformed I 1. I Pokhara Conservation Area Ward Chainnan Site visited for

Improvement

3*

Male 4 work assessment

Female 1 2

Total 3 9

2. I Lakeside Footpath & Garden Lodge Owners 2 Site visited for

Improvement Boat Operator 1 2 work assessment

Resident ofPhirke Khola Area 1 I 1

Total 3 5

Male Resident of Portion ofaccess

Community People

3. I Sarangkot Access Road IVDC Chainnan 1 1 Male 3 Silingbot village 1 1 I road observed

Female 3 Female Resident of

1Silingbot village 1 Total FGD 2 2Total 21 Total 7

Contd. '"

6

S. Project Component In-depth Interview Focus Group Discussion Observation No.

Proposed Performed Performed IOfficials ofMajor Airlines 71 7 Terminal and

tower building

4. I Pokhara Airport Upgrading

5. I Eco-Tourism Development and Head of KlvITNC

1Circuit Trekking HeadofACAP 1 I

Total 2 1

2** \ Male FGD 1

2 FemaleFGD 1 Iwork assessment

6. I Gorkha Conservation Area 'Ward Chairman 1

Improvement IMale 1 I

Female 1 1

Total 3 5

Upgrading ofPhysical Facilities Head of I-J.1.1TTC 1 1

atHMfTC

8. I Tourism Service Center (Nepal IHead ofNTB, Kathmandu 1 I 1

Tourism Board), Kathmandu

Pokhara

Tourism Service Center, I Head ofTourism Service Center 1 I 1

7

, .

S. Project Component In-depth Interview Focus Group Discussion Observation No.

ProDosed Performed ProDO.sed Performed Performed 9. Other Beneficiaries Major Hotels 3 I Pokhara 5

Gorkha 3

Total 31 Total 8

- Tour Operator 1 1

- Trekker 1 2

- Souvenir Shops 3 4

- Hotel and Lodge operator 3 3

- Travel Agents 2 2

- Trading Establishment 2 2

10. I Stakeholders -DHUD 1 1

- DOR, Western Division 1 1

-ACAP 1 1

-DCA 11

-Tourism Infonnarion Centers. Pokhara 1 1

- Pokhaia Sub-Metropolitan 1 1

- GACP/DOA, Gorkha 1 1

Prithwi Narayan Municipality, Gotkba 1 1

I - HMTTC, Kathmandu 1 1

\

1- Nepal Tourism Board 1 1 1

Contd. , ..

8

S. Project Component In-depth Interview No.

ProDosed 11. I Other Related Institution's Oftlcials I - Pokhara lnunigration Office

- Phewa Conservation Trust

- TIDP> Phase II (PMU),

Kathmandu

- TIDP II Environment

Conservation Project, Pokhara

- NPC, Regional Office, Pokhara

1

1

1

Performed 1

1

1

1

1

12 IDeparture Survey - I 16

Focus Group Discussion Observation

.. Chairman(s) ofWard No. 2, 4 and 8 ofPokhara Sub-Metropolitan were interviewed

>It* Chairman(s) ofWard No. 1 and 3 ofPrithiwiNarayan.ll1unicipality, Gorkha were interviewed.

9

1.9 Data Management

Data generated through FGDs were transcribed for analysis. In-depth interview questionnaire and key infonn ants , interview were manually compiled and analyzed. Data collected through departure survey were manually tabulated and analyzed in view of few respondents.

1.10 lVlethod of Analysis

Government policies for tourism promotion are critically reviewed and weakness identified. Relevant secondary data are analyzed using simple calculations of percentage changes and growth rate. The petformance and the effectiveness of the project have been carried out on the basis of a comparative record of proposed activities listed in the project appraisal report and actual petfonnance toward the end ofthe project. A "before" and "after" approach, wherever data allows, has been adopted to assess the impact of the project. The strengths and weakness of the each components of the project are analyzed and lesson learned for future are discussed on the basis of the reflections from various data gathering approaches adopted and the perceptions and impression gained in course of discussion with various stakeholders and project implementation agencies and local leaders.

1.11 Limitation of the Study

The lack of benchmark data has complicated the assessment of before situation on the one hand while the time and resource constraint of this study does not allow to pennit a comprehensive community survey to examine the after situation on the other. Some assessment, however, may be made on the basis of observation made to the project site during the fieldwork for interviewing the beneficiaries and the series of discussion held with local bodies and other key infonnants.

1.12 Organization of the Study

Chapter Two presents an overview of the Tourism Infrastructure development Project Pha..o;;e 1. This is followed by the description of the governments plan for tourism promotion and the investment made for the development of the tourism sector. Chapter Four presents the analyses of the effectiveness of each component of the TIDP projects followed by the environmental impact assessment of the project in Chapter Five. The last chapter i.e., Chapter Six presents the suggestions for future improvement.

to

CHAPTER II

TOURISM INFRASTRUCTURE DEVELOPMENT PROJECT AN OVERVIEW

2.1 Project Background

Tourism has been an important foreign exchange earner for Nepal for a long time. At the beginning ofthe 19905 it become the dominant exchange earner, Due to lackof advance planning and coordination between the public and private sectors the tourism sector's potential for earning foreign exchange was not fully realized, The ADE financed study Tourism Development Program 1989 which was completed in 1990 outlined a tourism strategy for N~pal and highlighted the need to develop the scenic city of Pokhara as a second center for tourism activities. The study recommended that most of the capital investment and the services in the sector be provided by the private sector. It further recommended that the public sector facilitate the private sector activities by providing an appropriate policy framework, building tourism related infrastructure, developing human resources for the tourism industry. and increasing the capacity of the public sector institutions to interact better with the private sector. The government accepted these recommended and Tourism Infrastructure Development Project Phase 1, was started in 1992 and completed in December 1997.

2.2 Project Cost

The total cost of the project as estimated in the project appraisal was US $ 14.60 million. Out of this total amount ADE's contribution in terms ofloan amount was US $ 10.4 million accounting more than 70 percent of the share. UNDP was committed to provide US $ 3.02 million. UNDP later withdrew its support because of some problems. Rest of the balance of US $ 1.18 million was to be borne by HMG, The Project was completed in December 1997 with a revised total expense of US $ 8.94 million. A total amount of US $ 2.34 million was cancelled. Project's cost and actual expenses are provided in Table 2.1.

Table 2.1: Summary ofProject cost and actual expenses (US$ in million)

fi Description HMG Bank UNDP 1. Estimated cost 1.18 10.40 3.02

1.2. Cancellation ofLoan amount-(Minus) 2.34 3. Withdrawal ofUNDP SunDort CMmUs 3.02 4. Difference of estimated and actual from HMG 0.30

I 5. Actual expenses 0.88 8.06 Nil Source: TIDPI, Project Completion Report, Apri~ 1999 ADB.

11

".i

,. ~

1 t L

2.3 Project Objectives

The objectives of the project were to support the Government's strategy to develop its tourism sector and to increase the country's foreign exchange earnings from tourism. In recognition of the major role of the private sector in Tourism development in Nepal, the project was to serve a catalytic role to increase private sector activity. A package of strategic components were included in the project to facilitate private sector activity and concurrently strengthen public private sector linkages, to support, institutional development and integrate environmental improvements, poverty alleviation and community participation in the project. The project was designed to increase average length ofstay and spending by upper income group of tourists, principally in Pokhara by preserving its scenic qu81ity by improving environmental other facilities to develop it as a tourist destination ..

2.4 Project Components

The project consisted ofthree parts: '.

Part A - Improvement oftourism related infrastructure comprising

- Pokhara conservation area improvement.

- Phewa lake side footpath garden improvement in Pokhara

- Sarangkot access road improvement near Pokhara from Moharia Tole to Silingabot village

- Pokhara Airport Upgrading,

- Ecotourism development and circuit trekking in the Annapuma Conservation Area.

- Gorkha conservation area improvement, Gorkha Municipality.

Part- B

Upgrading Hotel Management and Tourism Training Center (HMTTC) comprising (a)

upgrading ofphysical facilities and b) institutional support to HMTTC.in Kathmandu.

Part-C

Tourism Service Centers

Establishment of tourism service centers, in Kathmandu and Pokhara and institutional

development and implementation assistance.

"The detail descriptionS ofthe activities of each component of the project are as follows:

1. Polmara Conservation Arealmprovement Project

(i) Ganesh Tole and Ram Krishna Tole for reinforced curbs and flagstone footpaths construction~ ii) core bazar area for construction of sewer lines and Phirke Khola for the construction of septic tanks and soak pits; iii) K L Singh Bridge and Pardi Dam site for construction of stonn drains~ iv) entire road stretch from Mahendra Pul to Pardi for street lighting improvement work and solid waste bins installation~ v) selected location within Pokhara sub-metrpolitian city for turfing and trees plantation work.

12

http:HMTTC.in

2. Lakeside Footpath and Garden Improvement

(i) (ii)

Development of small Asian garden between the service center and the Phewa Lake~ Provide foot trail from service center, past the government guest house and police training center across Phirke Khola up to the boat landing of Fishtail Lodge; cute, seats, and toilets at exit point.

3. Sarangkot Access Road Construction

(i)

(ii)

Mohoria tole to Silingabot village for repairing 5 km road repair works providing four mt. asphalt carriageway, alignment and grade improvement at certain location and 300 m.

. extrusion work; Sarangkot and Moharia tole for repair work of short length of footpath from road to existing steps with stone construction.

4. Pokhara Airport Upgrading Project

(i) Pokhara Airport site and periphery for perimeter fencing with new perimeter wall and gets;

(1i) Airport for runway and apron improvement works and repair work drainage;

of storm water

(iii) Airport terminal building for check-in, arrival and departure lounges, restaurant together with access, parking and landscaping construction; and

offices and

(iv) Airport for construction ofnew control tower,cargo handling, security buildings and staff quarters.

5. Eco-tourism Development and Circuit Trekking

(i)

Oi)

(iii)

For the construction of campsites at Ghalegaon, Bhaise Kharka and Perche/Sikles with provisions for toilets, garbage pitS, kitchen facilities and electricity;

Construction oftwo 20-30 bed tourist lodges at Ghalegaon and Slkles;

Construction of two micro hydro schemes at Sikles;

(iv) Establishment of kerosene depots and solar heater at appropriate circuit trekking points;

(v) Establishment of an information museum at Sikles; and

center at Ghalegaon and construction of a cultural

(vi) Training to be provided to prospective lodge owners

6. Gorkha Conservation A.'ea Improvements PI'oject

(i) Construction of parking area to main square, footpaths and asphalt carriage way, piped drain for sullage removed separate storm water drains, three public toilets and septic tanks, street lighting and litter bins and renovation of Rani Pokhari;

13

(ii) Construction ofpaved road footpath from main square to lower square and repair of 100 steps; and

(iii) Completion of site developm~nt. landscaping, establishment of small information center; and

gardens, walkways and steps and

(iv) Construction ofMuseum.

7. HMTTC in Kathmandu for upgrading of Hotel Management Tourism Training Center

(0

(ii)

(iii)

For upgrading of Physical Facilities at HMTTC and Institutional Support for HMTTC, and Tourism Support Services;

Institution DeVelopment and Implementation Assistance; and

Construction oftourist service center in Pokhara and Kathmandu

14

CHAPTER III

TOURISM DEVELOPMENT POLICY: AN OVERVIEW

3.1 Background

In this chapter an attempt has been made to review HMG's policy adopted for the promotion of tourism in Nepal.

Tourism industry. being a comparative advantage industry of Nepal, holds great potential to establish itself as a means of significant economic activity because of the country's inherent characteristics such as geographical diversity, unparalleled natural beauty, enormous biological resources, distinct cultural heritage, live culture, religious tolerance, and splendid hospitality etc. Development of tourism. sector has contributed to increase employment, and income generation as well as to improvetlie balance ofpaytnent ofthe country.

Keeping in view the comparative and competitive advantage in the tourism sector the Government has the long-run objectives of the tourism development. They are: to develop towism sector as an integral part of the overall economic development; to establish Nepal as tourist destination spot in the world tourism market and to utilize the gains achieved from tourism sector in the rural areas.

3.2 Policy adopted in the Eighth Plan

After restoration of democracy in 1990 the Government had formulated the Eighth Plan in 1992. The Eighth Plan had adopted the strong policy to develop this sector by fully democratic government, which are as follows:

(i) A more liberal tourism. policy had been announced to encourage domestic and foreign investors to increase the capacity of tourism services including hotels.

(ii) The Government had the policy to increase investment in physlcal infrastructure such as roads and the communications network Social attention had been given to opening up new areas oftouristattraction.

(iii) Emphasis hacl'been.given to attract more tourists and to encow:aging them to spend more in the country by lengthening the average length of their stay~ A strategy had been developed to attract more Indian and pacific area tourists as well as tourists from other countries.

(iv) Attempts had also been made to encourage high budget and cultural or a religious tourism.

(v) Attempts had also been made to utilize Nepalese diplomatic missions abroad for towism promotion.

15

(vi) Visa rules would be simplified and a system would be developed to provide visas at the arrival tongue in the international airport.

(vii) An open sky policy would be adopted to encourage foreign airlines to bring more tourist to the country. At the same time, RNAC would be strengthened to serve both domestic and internatiortal network more efficiently.

(viii) Licensing and registration requirements for travel and trekking business would be made simple and transparent. .

(ix) Special programs would be made designed to promote trekking tourism in some areas so as to create employment opportunities to the rural population .

. (x) Measures would be taken to encourage the tourism sector to establish backward linkages in the economy. thereby generating more employment and income opportunities while reducing the import content ofthe sector.

3.3 Achievements of the Eighth Plan

In pursuance of the above mentioned objectives Nepal took part in various tourism fairs and promotional events in East Asia. South East Asia. Australia. Western Europe and North America for promotion and pUblicity of the kingdom in these markets and increasing the number of visitors to Nepal. Destination promotion was done through various media line broadcasting tourism program on Radio Nepal, information on internet, publication and distribution of vaIjousbrochures. Advertisements were given in papers, on radio, television, particularly in the STAR TV. Lumbini and Pokhara festivals were held to expand tourism activitiC$. Preparatory works for Visit Nepal '98, which aims at qualitative development of the tourism industry. were ongoing.

Under the policy of development tourism products, a study of the Indian tourist market was carried out. Improvement of tourist sites in Sunsari and Myagdi were carried' out. Nepal's adventure tourism added two new products in the form of hot air ballooning in Kathmandu anda power glider in I>okhara. Tourism Infrastructure Development Project phase-I (TIDP-I) launched in the :E!ighthPlan with the Asian Development Bank funding carried out Pokhara~ Sarangkot road improvement. Pokhara conservations area improvement, Ghalegaon-Sikles eeo-tourism development, Pokhara airport runway improvement and terminal building and so on. One tourism service centre each in Kathmandu and Pokhara have been built and improvements made in lGorkha palace conservation area:

With a view to specifying the respective roles of the government and the private sector, Tourism Policy 1995 was brought out by the government.

In the Eighth Plan period under the institutional improvement scheme, statutes pertaining to Tourism Development Board. 1996 and Civil Aviation Authority of Nepal, 1996 were brought out. CiVil Aviation Act. 1996 took effect during the Eighth Plan period. Necessary amendmentS in National Civil Aviation Policy 2050 have been made, giving due consideration to issues like competitive development and the safety of domestic airlines.

16

i

The Eighth Plan sought to encourage the private sector in tourism industry. Accordingly the private sector was encouraged to operate air service in domestic routes. An open and liberal sky policy was adopted in the international civil aviation. Under the new policy initiative. 14 air operators including sports and ballooning were permitted to fly in the domestic sector. Many of them have already started their operations, Helicopter services have been offering their services in remote areas of the kingdom.

The Royal Nepal Airlines has heen operating to 11 places of 9 countries under its servi ce expansion policy. Among the int;ernational airlines, those of Singapore, Thailand, Qatar, Pakistan, India. Bangladesh, China, Bhutan, Russian Federation etc. are operating in Nepal ..

The Tribhuvan International Airport (TIA) has been upgraded as a focal point of national aviation in accordance with the plan objective. A green channel has been established at the TIA to facilitate the smooth check-in and checkout of tourists. Preparatory work for opening the airport round the clock is being implemented.

In pursuance ofthe objective of increasing the number of the tourist arrival to 1901145, the munber tourist arrival. was 1164739, which was 92% of the target. Likewise, it was expected to earn US $ 375.4 million during the firSt four years of the plan. During the period, US $ 374%.6 million was earned, making nearly 100 percent program of the target. On average length ofstay was 11.23 during this plan period.

In consonance with encourage foreign airlines to bring more tourist, now air services in 31 countries under various bilateral agreements have become operable (Economic Survey, 2000).

However, despite the various programs implemented to develop tourism sector, its share in the country's GDP is confined to 4.4 percent only (Ninth Plan).

3.4 Tourism Policy in the Ninth Plan

Keeping in view of tourism's immense economic potential and market prospects for industry and trade sectors, the Ninth Plan has been formulated with the followmgpolicies.

Long-tenn vision for tourism development should be fonned and pushed forward.

Since tourism is a multi-faceted sector, it can never be developed in isolation and it rather needs to be integrated with other related sectors. So, the programs in this sector will be implemented in an integrated manner.

As tourism is an important ingredient of economic development, its programs will be moved forward with the objective of expending the tourism-related incomes and employment benefits to rural areas by developing forward and backward linkages.

As the limited number of tourist arrivals will not prove economically viable for making tourism industry sustainable, a vision of expanding the range of tourist. destinations by attracting domestic tourists as well as those from neighboring countries.

17

.. With the objective of expanding Kathmandu-based tourism outside the valley so that tourism activities, to some extent, originate there not relying directly on the resources and opportunities available in the oapital city, some domestic airports will be upgraded to those of the regional level.

As it is not feasible to make road transportation available to all places in the country, a nation-wide network of air transportation will be established by making provision for central as well as small airports and then helipads.

In order to increase the extent of t6urist arrivals, special initiative will be taken to maintain understanding as regards the regular transportation in the surface route oonne(.'ied with the neighboring country.

For achieving sustainable and result-oriented development of tourism, efforts will be made to mobilize the private sector in the expansion of tourist services and facilities. For this purpose, the role of central organizations will be emphasized In creating basic infrastructure and

the role of local institutions and communities will be m:tln,agefu~ll~,qf::l9Cal tourist attractions.

In ~~(1c.w'elqprut$1'~()qnsmas811 expanded activity ofUrban tourism so. as to make both complementary to eacl:t other. investment will be made on creating tourism infrastructure on the conceptual basis ofhub and satellite distinctions.

In order to develop rural tpuris~as an expanded activity of urban tourism so as to make qoth complementary to each other, investment will be made or creating tourism infrastructure on the conceptual basis ofhub and satellite distinctions.

While it becomes necessary to stress almost all types of tourism activities in urban tourism, rural tourism requires selective approach. Hence, adventure tourism, eco-tourism, indigenous activities and the interesting aspects representing local values and customs will be emphasized while promoting rural tourism through local people's participation in order that these activities will benefit the local people themselves.

To monitor the effects of tourism-related activities in environment, an environmental code of conduct will be adopted, and in this process, government agencies, local communities and private tourism entrepreneurs will be involved, thereby bringing about co-ordination in the task of environmental protection.

3.5 Public Sector Investment in Tourisln Development

This chapter analyses the public sector investment pattern in tourism development. For this purpose the secondary data has been borrowed from Economic Survey of fiscal year 1999-2000 and Eighth and Ninth Plan document ofNational Planning commission.

3.5.1 Trends in Tourism Sector Development Expenditul'e

The Table 3.1 shows the trends in tourism sector development expenditure during the period of 1990191 ~1998/99. Tourism sector development expenditure has been Rs. 12.4 million in 1990191. It has marginally increased by 0.81 percent and reached to Rs. 12.8 million in 1991/92. In 1992193,itb@s~ge83ivellrisen by .394.40 percent and stood at Rs. 61.8 million. Thereafter. it

,,ci;'":" .;:;.';:.;'( ... ;'.;.;;.>.;:;:;.'. , ... ;. :18 .

grew by 10.19 percent amounting to Rs. 68.1 million in 1993/94. Again, in 1994/95. it has highly increased by 116.45 percent and reached to Rs. 147.4 million. In 1995/96 and 1996/97, tourism sector development expenditure has increased to Rs. 189.2 million and Rs. 203.7 million with growth rate of28.36 percent and 7.66 percent respectively.

The growth rate of tourism sector development expenditure during the period of 1991192 to 1996/91 is high because in this period the Tourism Infrastructure Development Project phase I financed by HDB. had launched in 1992 with the amount of SDR 5.581 million ($ 8.056 million) and ended in 1997. Thereafter, the tourism sector development expenditure has shows decreasing trends. It has negatively decreased by- 21.70 percent in 1997/98 and came down to Rs. 159.5 million. Further. in 1998/97 it has again fallen by- 3.39 percent and fell down to Rs. 154.1 million. It is because of completion ofTIDP-I in 1991. Therefore, after this project tourism sector development expenditure has started falling though the TIDP-II is running but it ha..I< Revised Estimate

Source: Economic Survey FY 1999-2000. Ministry ofFinance. His Majesty's Government.

3.5.2 Tourism Sector and Development Expenditure

Table 3.2 shows the share of tourism sector development expenditure inGDP and total development expenditure during period of 1990/91- 1998/99. Its percentage share in total development expenditure is quite meager and constant i.e. 0.08 percent up to the fiscal year 1991/92. Thereafter. its share in development expenditure has show increasing trends. which is 0.32 percent. 0.32 percent. 0.74 percent. 0.76 percent and 0.11 percent in 1992/93. 1993/94, 1994/94. 1995/96 and 1996/91 respectively. The increasing share of tourism sector development expenditure in total development expenditure from 1992/93 to 1996/91 is due to implementation of TIDP-I. Thereafter, its share has shown decreasing trends. i.e. 0.55 percent in 1997/98 and 0.54 percent in 1998199, because of completion ofTIDP-I though TIDP-II has started its work but it has not spend huge amount like TIDP-I.

Likewise its share in GDP was quite negligible before the program of TIDP-I I.e. 0.01 percent only. After the implementation of TIDP-I its share in GDP has show-increasing trend which has

19

http:by-21.70

---

gone to 0.08 percent in 1996/97. Thereafter, shows decreasing trends, its share in GDP has came down to 0.05 percent in 1998i99., The reason behind this is same as abDve.

Non availability .of data regarding private sectDr investment in tDurism has constrained us to make a cDmparisDn between public and private sectDr investment in tDurism sector.

Table 3.2: Share Dftourism sector in GDP and tDtal develDpment expenditure, Nepal, 19901011998/99 (Rs. in milliDn)

..--------. Year TDurism as % ofTotal Dev. Exp. TDurism Sector TDurism as % of

(IDE) GDPT.D.E. 1990191 0.08 0.0115979.5 12.4

--~--

1991192 0.08 0.0116512.8 12.5 1992193 61.8 0.32 0.04.19413.6

0.321993/94 21188.2 0.0468.1 0.071994/95 19794.9 147.4 0.74 0.081995/96 0.7624980.5 189.2

,203.7 0.77 0.081996/97 26542.6 -0.55 0.06159.51997/98 28943.9 0.54 , 0.051998/99 28531.3 154.1

Source: ECDnDmic Survey FY 1999-2000, Ministry .ofFinance, :H:1IfG, Kathmandu.

20

CHAPTER IV

EFFECTIVENESS OF TOURSIM INFRASTRUCTURE DEVELOPMENT PROJECT

In this chapter an attempt has been made to analyze of the effectiveness ofall the components of the TIDP-I. .

4.1Po;khara Airport Upgrading One of the major components ofTIDP I was the creation of additional infrastructure facilities to upgrade the Pokhara Airport. A total of US $ 1.606 million was earmarked for this component which accounts to 11 percent of the total proposed cost ofthe project. Initially, this component of the project was expected to complete on the first quarter of 1994 but the implementation was delayed and the project was completed only in October 1996. It was thus delayed by two and half years. -Department of Tourism was the executive agency with the overall responsibility of supervision and execution. Department of Civil Aviation was the implementing agency.

The main objective of this component of the project was to improve runway and apron and tenninal building thereby provide safe flight operations with better semces and facilities to the passengers.

4.1.1 Activities propOf~ed and completed

The major activities proposed and completed under the project are given below.

Proposed Completed ModificationsINot completed (i) Proposed activities(i) Chain-link fence and gates for the(i) Construction of perimeter

accomplishedperimeter of the airport: wasfencing together with new perimeter wall and gates comp1eted~

(ii) Runway and epron (ii) Existing nmway was regarded, (ti) Proposed activities improvements. ioo1udmg leveled, and paved with asphalt, accomplished regarding and leveling of the and turning bay was constructed existing runway and improved next to 1he new terminal bitumen-based surtioing building. Stonn water drains was treatment; repair of storm .water repaired and extended; drninage

(iii) Construction ofnew passenger (iii) New passenger terminal building (iii) Much larger tenninal terminal including check-in, was constructed. Facilities such . building than previously arrival. and departure loungeS, as check-in arrival and departure envisaged was constructed. offices. and restaurant together lounges, offices., restaurant, with access, parking. and access parking, and landscaping landscaping were provided;

(iv) Refurbishing of existing (iv) New control tower, four units (iv) Instead of refurbishing the buildings inoluding contro1s staff quarter, ovemead and existing control tower as tower, cargo handling, security underground water tank, stated in the project buildings. and staffquartets. engineer's office and storage for appraisal. a new control

battery carts constructed. tower was constructed. ~~aII"'lJChedu/e 22 months 39 months Delayed

21

Major activities proposed in the project appraisal are successfully completed with few modifications that include: (i) A much larger terminal building than previously envisaged was constructed. The justification for this was the significant increase in the number of tourist between the time of appraisal and the time when the facility was being developed. (ii) Likewise instead ofrefurbishing the existing control tower as stated in the project appraisal. a new control tower was constructed. Both of these modifications have tullied out to have major positive impacts.

4.1.1 Effectiveness Analysis

In order to evaluate the effectiveness ofthe project;, civil aviation authority and the major airlines operating itt Pokhare were interviewed to solicit their impression about the new facilities developed in Pokhara Airport by the project. Departure swveywas.a1so conducted to understand the views of the passengers regarding the facilities available in the airport. Official records maintained by Pokhara Civil Aviation Office on the flight movements, number of passenger and cargo handled are also analyzed. Effectiveness analysis has been carried out with the help of following parameters. .

(a) Number ofairlines served

Originally the airport was planned to provide office space and check-in counters for only one airlines (ADB. 1999). Currently, the airport has been serving to twelve airlines. All the major airlines ofNepal have their flights in Pokhara. Now it looks more congested

(b) Flights movement

After the upgrading of facilities the airport capacity has tremendously enhanced to handle more number of flights. Data available from the Pokhara Civil Aviation Office show that the flight movement in Pokhara airport has more than doubled during 1992 to 1998. Before the implementation of the project the airport has handled 6384 flight movement in 1992 which has more than doubled after the completion of the project in 1998 raising the number of flight movements to 14671 (Table 2). Some airlines like Buddha and Necon Air have as much as five daily flights :from Pokhara to Kathmandu. Previously it use to be limited to two to three flights only. Few other airlines have recently added new air routes from-Pokhara to Bhairhawa. The increase in the frequency offlights could be attributed to more flow of air passengers, which may again be attributed to upgrading the facilities in the airport.

(c) Flight safety and regularity

lnterview with the ATC and Station Managers of the 8 major airlines operating from Pokhera has clearly revealed that the flight safety has been ensured after the developed facilities. Due to the poor condition of the runway minor weather problem tend to obstruct the flight with frequent cancellations. Now this problem has been completely resolyed And flight safety has been fully ensured .. The study has docwnented that aircrew members now feel highly. secured and safe during landing and take-off. However. even after the new" chain-link fence, some of the crewmembers seemed to have experienced undesired intrusions by people and animals during landing and take-off(DOT. 1997). The ATC also observed that the physical facilities and utilities including the communication equipment such as VHF. HF recorder of the control tower is quite satisfactory .

22

(d) Handling orpassengers

One ofthe visible impacts ofthe project after its completion is the handling ofthe air passengers. Information obtained from the Pokhara Civil Aviation Office reveal that the airport has been able to handle 207,874 passengers in 1998 more than doubled that it handled in 1992 i.e., 90550. The departure lounge ,of the airport hoo a seating capacity of 137. This was found dwing tilt:: observation ofthe airport.

(e) Cargo handling

Although the data on cargo handling show erratic treil.d, the cargo handling capacity has gradually increased overtime. In 1992 the airport handled merely a total of 88666 K.G of goods which increased to 298717 K.G. of goods in 1998. Table 4.1 presents the data on flight movements, number ofpassengers and cargo handled during 1990 to 1998.

Table 4.1: Flight movement, passenger andcargo.handled in Pokhara Airport, 1990-1998

Year Flight Passenger Handled Cargo Handled (K.G.) Movement

In Out Total In Out Total

1990 4682 36405 38847 75252 11208 16721 81929.

1991 4846 39361 42695 82062. 4886 61004 65890

1992 6384 44293 46251 90550 11398 77268 88666

1993 8838 55906 61525 123431 19196 226856 246652 .. -

1994 11191 68541 11614 146215 55186 431139 486325

1995 10101 10365 14000 144365 14518 211138 345656

1996 12401 12152 .81156 154508 94904 1818&3 282181

1991 13161 89226 96162 185388 54490 144341 198837 -~------ -

1998 14611 96968 110906 201874 66490 232221 298117 _ ........ _-_._--- - ---.-.. ~~

Source: Pokhara Civial Aviation Office

(g) Revenue generation from the airport

Revenue generated from Pokhara airport by major sources is presented in Table 4.2. As may be seen in the table the revenue generated by the airport reached to the tune ofRs. 11.6 million in the FY 1998/99. This amount is more than Rs. 13.1 million projected for the year 1999. During the year 1991/98 and 1998/99 the total revenue has increased by staggering 116 percent. The increase in the revenue afterthe completion ofthe Phase I project was more apparent. About three-fourths (73%) ofthis revenue is accounted by airport tax from the passenger. This has also supported the

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earlier findings of the significant increase in the number of passengers, which could to a large extent be attributed to the increase in the number of tourist 'arrival in Po~ara. Thus the revenue coIlectionofHlv{G fi'omtheail'port has markedly increased in recentyears.

(b) Passenger's pereeptJons on the available fadUties In the airport

A departure survey was conducted to solicit the views of the tourist on the facilities available in the airport. During two days ofobservation in the departure lounge of the airport 10 tourist (non Nepalese) passengers flying from Pokhara were randomly selected and interviewed.

Almost all the respondents stated that the' facilities available in the 'airport are quite satisfactory. They expressed satisfaction with the quality ofservices available in arrival and departure lounge, tourist information desk, exchange counter, telephone service. Some of the respondents were, however. v~.criti(:al~\ltthe rude behaviors of the taxi drivers. Few expressed their dissatisfactiOn about theunclcanCd lavattuy.

Table 4.2: Revenue ofPokhara .Airj:)ort by Major Sources (Rs in '000)

I S.No. Source 1995/96 1996/97 1997/98 1998/99 '-" -~---.----

1 Airport tax from 2819 3216 3769 13010 \ passengers

2 Rent from cafeteria shop 5 5 332 499

3 Landing fees from airlines 680 2010 2610 2806

4 Fees from ground services 119 56 78 81

5 Rent, from different 120 720 921 865 .......... :air~

6 Rent 'from advertisement 54 88 88 86 boards

7 . Sources other than above 5 301 347 2461 like: TV entry fee, taxi parking etc

Total 3806 6399 8148 17594 Percentage cbange - 68.1% 27.3%

____, ____" ____, __,'_''''' , '''__ '' __,_'''_''''_, "_,,,_,___~__ ,__ , __ ""___,_,,,L,,,

116%'1

Source: Pokhara Civil Aviation Office

(i) .Flow of tourist

The flow oftourist in Pokhara is presented in Table 4.3. As the Table indicates the total flow of tourist in Pokhara reached to 105546 in 1999. This figure does not include the number if Indian tourist that visited Pokhara. The average annual growth rate of tourist travelling to Pokhara during 1990-1998 is estimated to be 9.3 percent which is slightly lower than the national average of 10.2 percent during the same period. This growth rate is quite high.

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'.

The above figure of tourist anival in Pokhara does not include the number of Indian tourist traveled to Pokhara as no exact figure available. However available national estimates shows that Indian tourist account 31 percent .of the total tourist arrival in the country (MOF, 1999) The adjustment of this proportion gives the estimate of the total flow of Indian tourist in Pokhara to 138265 in 1999. Data clearly indicates the increasing trend in the flow of tourist in Pokhara. Tourist travelling to Pokhara by air accounts more than one-third (37010) of the tourist arrival. This proportion has also increased. In 1998 the share oftourist travelling by air was 29 percent.

Table 4.3: Tourist arrival in Pokhara bymode oftransport,. 1990-1999

Year Air % Change Land % Change Total % Change 1990 9344 - 50144 - 59488 -1991 15065 61.23 47073 -6.12 62138 4.45-1992 16876 12.02 52173 10.83 69049 11.12 1993 15966 -5.39 40533 -22.31 56499 -18.18 1994 20548 28.70 38653 -4.64 59201 4.78 1995 20262 -1.39 42524 10.00 63782 7.74

---'-'~-'-' - ..~~. 1996 26044 28.54 60460 42.19 86504 35.62 1997 29471 13.16 60246 -0.35 92717 7.18 1998 30320 2.88 67575 12.17 103895 12.06 1999 38996 28.61 66550 -1.52 105546 1.59

Source: Tourist Information Center, Pokhara.

Table 4.4: Average annual growth rate oftourist flow in Pokhara by mode of transport

I Average Annual Growth Rate

Mode of Transport "Before" (1990-1996) "After" (1997-1999) Land 3.73 4.97 Air 18.87 13.91 Total 7.40 - - --------~- 6.47

In order to assess the effect ofthe proj~ct on the flow of tourist in Pokhara annual average growth rate of tourist by mode of transport has been calculated by splitting the period into two segments i.e., "before" the project (1990-96) and "after" the project (1997-99). The results in the table show that the average groWth rate, except in land touris~ is relatively higher "before" the compJction of the project as compared to "after" the completion of the project. The result has to interpreted with caution as the number ofyears in each segment is not same. The selection of the base year used for calculation also affects the results.

(j) Growth ofhotels and beds

With the increase in the flow oftourist in Pokhara there has been a corresponding growth in other facilities and infrastructure. Table 4.4 presents the figures ofhotels and hotel beds respectively.

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One of the significant growths in the facilities is the growth in hotels and the available beds. Table 4.5 shows that number of registered hotels have increased from 44 in 1990 to 254 in 1999. Correspondingly the number of available beds have also gone up from 2143 in 1990 to 6776 in 1999. It is believed that so many hotels in Pokhara also operate without having registered. The IUCN study reports that in 1995 there were more number of wlIegistered hotels and lodges (150) than the registered one which was 96 (IUCN, 1995).

Table 4.5: Number ofhotels, their rooms and beds in Pokhara. 1990-1999

Year No. of Hotels

% Change No. of Rooms

% Change No. of Beds

% Change

1990 44 - 1072 - 2143 -1991 54 22.73 1236 15.30 2413 12.60 1992 61 12.96 1332 7.77 2604 7.92 1993 70 14.75 1445 8.48 2827 8.56 1994 103 32.04 1810 25.26 3564 26.07 1995 140 35.92 2248 24.20 4432 24.35 1996 173 23.56 2581 14.81 5100 15.07 1997 194 12.14 2796 8.33 5529 8.41 1998 211 8.76 2991 6.97 5895 6.62 1999 254 20.38 3432 14.74 6776 14.94 1

Source: Tourist Information Centre, Pokhara.

(k) Growth of trekking and travel agents

Table 4.6 shows the growth of trekking and travel agents in Pokhara during 1990-1999. As may be seen from the table the number of travel agents in Pokhara has reached to 40 in 1999 from its mere number of 2 in 1990. Similarly the number of trekking agents has also reached to 30 as compared to its number of3 in 1990.

4.6: Number oftrekk' .d I . Polch_._._- 1990-1999-g - -_. ~~ - -- _rc:l" --No. ofTrekking . % Change % ChangeNo. ofTravelYear

AgentsAgents -1990 23 --

100.0066.67 451991 50.0020.00 61992 6 50.001993 8 33.33 9

90.001994 8 n.1L 50.001995 14 75.00 15 13.337.14 171996 15 35.2926.67 231997 19

26.32 281998 24 21.7~ 42.8625.00 401999 30

Source: Tourist Infonnation Center, Pokhara. (k) Length ofstay

One of the major objectives of the TIDP is to increase the length of stay ofthe tourist in Pokhara. According to the estimate of Tourist Information Center, Pokhara the average length of stay of tourist in Pokhara is 2 days in 1999 while another estimate shows the length of stay as three

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I

nights on an average (Shanna, 2000). Based on the interview of 279 tourist traveled by air and 131 traveled by road the Benefit Monitoring Evaluation Survey completed in 1997 came up with the estimate of 4.75 and 5.1 days of average length of stay respectively (DOT. 1997). Compared to the estimates from previous survey that recorded the average length of stay at 3.3 and 4.97 days the latest BME survey results show the extent ofincrease by 1.45 days, Our own estimate based on the departure survey of 16 tourist revealed the average length of stay at 3.33 days indicating some variations with the BME estimate. The variation could be attributed to the relatively fewer number of cases in our survey. In any case it seems that the average length of stay of the tourist in Pokhara has increased to 1 to 2 days.

(I) Daily expenditure

It was expected that upon the completion of the TIDP the length of stay of the tourist would increase resulting to more daily expenditure from the tourist. The BME survey has provided estimates of the daily expenditure of the tourist travelling by air and land. The first BME survey recorded the daily expenditure ofUS $ 33 and 17 for air and land tourist respectively. The second BME survey showed a marked decline in daily expenditure of air tourist to US $ 21 while marginal increase to US $ 19 for land tourist (DOT, 1997). While the length of stay has increased from 1 to 2 days the daily expenses incurred by the tourist specially air tourist declined. This unexpected tesult can be explained in relation to unhealthy competition among the hotels resulting to steep decline in the hotel tariff rate. The undercutting of the hotel tariff rate could have resulted in the decline in the daily expenditure ofthe air tourist. Study has documented that tourist in Pokhara generally prefer non-star hotels since most ofthe non-Indian tourists are budget tourists and backpackers (cited in Shanna, 2000)~

(m) Employment and income

I t is very difficult to quantifY the impact of TIDP on the employment and income of the people. Available statistics clearly shows the development in tourism related activities. Hotels have increased so as the travel agents and trekking agents. Similarly. all the domestic airlines have its flight in Pokhara with its station office; Records available from Boat Owners Association indicate that 265 people are employed as boat operators in Phewa Lake. The number of taxi operating in Pokhara currently is estimated at 1400 (as shown by the official records of Taxi association). More and more number of restaurant, lodges, souvenir shops and trading establishments have opened up in Lakeside and Baidam area. All these development clearly indicates that additional employment opportunities have been created thereby raising the income level ofthe people.

(n) Operation and maintenance

Following operation and maintenance problems were noticed:

There is lack of water in the parking area which has caused some difficulties in cleaning the aircraft that is generally made dirty by birds

The announcement system in the airport is out of order. It has not been corrected yet which has created some problems to the airlines officials.

One lavatory at the check-in hall was fond locked. It does not seem to have been brought under proper use.

The passengers voiced lack of drinking water in the departure lounge.

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Frequent cleaning of the anivaland departure lounge including toilets lacking. Airport office has been planning to contraCt out for the regular clean-up activities.

4.1.2 Weakness orthe Project

The project lacked'long tenn vision. During the in-depth interview some of the airlines Station Manager complained about the problem of space in the terminal building The Civil Aviation Office. Pokhara has not been able to provide space for check-in counter in the main hall and thus being managed in some corner outside the !pain hall. The office space to some of the airlines is provided at the second stair ofthe tenninal building which according to them is less convenient in handling their business.'

Tenninal building already started leaking from several places including check-in counter hall. The study team during the fieldwork in Pokhara observed some treatment work being carried out in the terminal building. This obviously raises the question ,of the quality of construction work. Contractor's poor perfonnance in the construction of the terminal building was duly pointed out by the review mission in 1995.

There seems to have been some design problem. The ATCcommented on the location of the tower building. which is now more toward the south close to parking area which has pose some difficulties to them. They are of the view that the tower building should have been constructed toward the north side ofthe airport.

There was a lack of coordination in the implementation. ATe officials' complained that they were not infonned about the schedule ofthe project. This has caused some amount of stress to them in discharging their jobs.

4.2 Sarangkot Access Road

Trekking and' sightseeing are the other, two major tourist activities in Nepat One such interesting spot in Pokhara which has attracted many tou9sts is Sarangkot. The scenic, beauty that one could enjoy from the top of the hill is breathtaking. One of the components of the TIDP is the construction ofSarangkot Access Road.

The major objective ofthis component of the project is to develop Sarangkot as an attractive spot for the tourist and local visitors by making easy access of vehicles through the construction of access road and thereby help strengthen the local economy. The project also aimed at increasing the length of stay ofthe tourist in Pokhara by half to one day.

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4.2.1 Activities Proposed and Completed

The activities proposed vis- a-vis completed under this co.mpo.nent are as fo.llo.ws:

Activities Proposed Activities Completed ModificationlNot completed

(i) Repair and surfacing of the existing 5 kIn access road. to Sarangkot from Moharia Tole to Silingbot village

(i) 4.8 kIn road from Moharia tole to Gothadi village repaired. including alignment and grade improvement at certain lOcations and eldended by about 300m.

(i) 4.8 KIn. length ofroad constructed

(ii) Provide 4 meters asphalt carriageway with meeting bays and parking areas close to more impressive viewing points

(ii) 4 m. asphalt carriageway provided throughout the road with parking and turning at the terminus.

(ii) Proposed activities accomplished

(iii) Provide seats and plants at these points

(iv) Repair short length of footpath from road to existing steps with stone steps as necessary

(ill) Existing pedestals aroWld trees serve as seats

(iv) Footpath repaired and paved with stone

(Ui) Proposed activities accomplished

(iv) Proposed activities accomplished

Implementation Schedule 8 months 24mon1hs Delayed

This is the only component o.f the TIDP. which was co