National 6 (Spotlight Weekly)

What A Difference A Year Makes

Along with an export slowdown, decline in tourist arrivals and continuing violence, the aftermath of the September 11 terrorist attacks in New York City and Washington DC has brought Nepal enormous international attention. The Maoists are still active and organized but they are internationally isolated, as Nepal's terrorism and economic woes have become issues of international concern. Had the country been politically stable, it would have faced less damage and secured more benefits. Amid political instability and chaos, the only hopeful sign is the growing global concern over Nepal's problems

By KESHAB POUDEL

If the law-and-order situation fails to improve, many star hotels in Kathmandu would be forced to close their doors. The garment industry, another major foreign currency earner already hit hard, is also in trouble. While continuing their targeted killings and attacks on selected police stations, the Maoists have kicked off a new assault on the eve of the parliamentary elections scheduled for November.

Twin towers : Victim of international terrorism

Nepal's tourism sector, which seemed to be on a gradual process of recovery, has suddenly been hurt by the resurgence of violence in the first week of September. After the September 11 terrorist attacks in New York City and Washington DC, Nepal's tourism industry has seen a drastic reduction along with a sharp decline in garment exports to the United States. Bookings for October and November are slightly better, but renewed violence has raised concerns. Many hotels are receiving cancellation orders.

Following the United States-led war against terrorism, terrorism activities around the world have drastically declined. Violence, however, has flared up in Nepal. Since November, when the state of emergency was first imposed, more than 3,000 people have been killed in the conflict. Despite the watchful western eyes, the Maoist "People's War" is gaining new momentum. At a time when perpetrators of all kinds of insurgencies and acts of terrorism in other parts of the world are searching for peaceful exit, Nepal is caught in a relentless cycle of death and destruction.

"At a time when the entire world is enjoying relief from the long spell of the Cold War, Nepal has become a victim of a new incarnation of the Cold War. The Himalayan cold wave is beyond the comprehension, appreciation and anticipation of the average Nepalese people," says a strategic analyst.

Because of the strong vigilance of the world community over Nepal and the entire South Asian region, damage has been minimal and the legitimate democratic government is safe from all kinds of assaults from within and outside. "The United States and other western countries showed very little interest in Nepal's internal affair before the 9\11 terrorist attacks, but the country has seen growing US concern over spreading violence in Nepal," says Professor Dhruba Kumar, a strategist analyst working with Center for Nepal and Asian Studies.

But growing political instability, Maoist violence and economic slowdown has pushed Nepal, which lies between economically prosperous, developed and politically stable Tibet autonomous region of China and unstable and underdeveloped Bihar and Utter Pradesh of India, into an uncertain phase.

Economic Setback

Nepal has seen a major setback in its economic sector following the September 11, 2001 terrorist attacks. Along with external factors, internal terrorism has further damaged the country' two major sectors, tourism and garments.

Tourists : Making fun

The Nepalese economy is currently in the most sensitive phase and the government has to adeptly steer the economy out of its troubles by employing prudent policies that are in keeping with the needs. The insurance risk has increased by many folds and no new investors are in a position to come to Nepal as long as the law-and-order situation remains fragile.

"We must find a peaceful settlement of the ongoing Maoist problems. Otherwise, there is no hope for sudden recovery of Nepalese economy," said former vice-chairman of the National Planning Commission Badri Prasad Shrestha. "How can we expect to roll back the economy on its front when violence continue to dominate?"

According to the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the fall in exports has forced the closure of more than 60 percent of Nepal's garment industries and resulted in the loss of more than 50,000 jobs. More than 90,000 people were directly employed by the garment industry and around 500,000 people depended on the sector for their livelihood. The same is true for the carpet sector, as exports have come down considerably. Nepal exported garments worth US$ 200 million to the United States in fiscal year 2000\2001. That figure has come down by 50 percent in the last year.

"Our economy is heavily dependent on tourism and garment and carpet exports. After the September 11 attacks, the United States - which is the primary destination for Nepalese garments - has suffered. Because of recession in Germany, exports of woolen carpets have suffered. The Royal Palace incident and Maoist insurgency damaged our economy badly. The September 11 attacks added fuel to the crisis," said Dr. Tilak Rawal, governor of the Nepal Rastra Bank (NRB).

According to the NRB's financial survey for the last eight months of the current fiscal year, total exports have declined by 7.8 percent to reach 34.93 billion over the same period last year. In the tourism sector, the number of arrivals declined by many folds and the receipts from tourism sector also declined by around 4 percent in the year 2000-2001 to the tune of Rs.11.71 billion.

"The tourism industry is suffering from the internal as well as the international security situation," says Prasiddha Bahadur Pandey, managing director of Shngri-La Hotel and Resort. "If the situation continues to worsen, Nepal's hotel industry will close down."

Because of low tourist arrivals, many airlines are facing difficult days. Hoteliers were elated by growing booking for October and November, but the sudden upsurge in Maoist violence has changed the situation. "If the government doesn't come out with a relief package in time, many hotels would be in no position remain open," says Pandey, general secretary of the Hotel Association Nepal.

Effect on Investment

The September 11 attacks and increasing internal disturbances have increased insurance premiums by several folds. Because of the growing risks, many investors have fled the country. New ones haven't come.

Foreign investment has fallen drastically and is at a historical low for the last one decade. If the internal situation is not controlled soon, foreign investment dry up. "Unless internal violence finds a peaceful exit, no foreign investor will come to Nepal," says Rabi Bhakta Shrestha, president of the FNCC. "Our textile exports have been badly hurt not only by the terrorist attacks but also because of certain duties imposed on Nepalese products. The government must request the US government to lift additional customs on Nepalese garments."

This question was raised during US Secretary of State Colin Powell's trip to Nepal in January and Prime Minister Sher Bahadur Deuba's visit to the United States. If the US government were to accord preferential treatment to Nepalese garments, like it does to those from African and Caribbean nations, there is a possibility of increasing exports.

"Nepal needs to formulate a long-term strategy to encourage foreign investors. In accordance with the forthcoming Tenth Plan, the government should give incentives to investors," says Dr. Bishomber Pyakurel, an economics professor at Tribhuvan University and president of Nepal Economic Society, at a recent talk program.

Boon and Bane for Nepal

More than 5,000 people have been killed in the six-year-long Maoist insurgency. Two months after the 9/11 attacks, the Maoists broke off peace talks with the government and resumed their violent campaign by attacking the army for the first time. The government's move to declare a state of emergency and deploy the military against the rebels brought Nepal's anti-insurgency campaign closer to the US-led war against terrorism.

The global community suddenly focused its attention on Nepal. The army has received an opportunity for much-needed modernization. The United States, United Kingdom and India have offered various kinds of weapons as well as training for the army. China also has agreed to support the army, offering communication equipment.

The growing concern of external powers also has increased challenges for Nepalese. "For the first time in the last 50 years, Nepal has secured a place in US and western foreign policy," says Professor Kumar. "Despite all the backing, Nepal has not found a political leader who could turn this opportunity into our favor."

Effect on South Asia

In South Asia, the Liberation Tigers of Tamil Eelam and the Sri Lankan government continue to hold the ceasefire announced in January and are preparing for peace talks in Bangkok. The insurgency in the other South Asian countries continues as states are fighting covert and proxy wars. The increase in US concern has not made a substantial difference.

Insurgency and violence are expanding from Kashmir to the eastern Indian city of Manipur along the trail of the Himalayas. Insurgents rule the mountains from Kashmir to the north-eastern states of India. Even tiny Bhutan is facing similar problems, as the United Liberation Front of Assam has been using its territory for hideout. Isolated and ignored by the western world for long, covert and proxy war continues to affect countries in the region.

It was only after the incident of September 11 and US President George W. Bush's call for the war against terror, that the Maoists and many other fundamentalist organizations have been internationally isolated. But they continue to operate their activities, killing civilian, military and police. Despite assurances from all the countries, including Nepal's two neighbors, the Maoists continue to launch attacks against the legitimate authority and destroy infrastructures.

"The direct fallout of the September 11 attacks in New York is that Nepal's six-year-long communist insurgency come under the eye of the world's superpower and other western countries," says Professor Kumar. "It is clear that no country wants to see a possible alliance of regional insurgents."

The global war against terrorism and the end of the Cold War changed the fate of many war-torn zones in the world, the continual existing Cold War in South Asia between two powers India and China, experts argue, increase the risk of more proxy wars in the region. Although continual involvement of the world's only superpower has reduced tensions between traditional rivals India and Pakistan, the situation is yet to normalize.

After 9/11, along with India, China has also come up very strongly condemning violence in Nepal. As China has already indicated that it will not tolerate any kind of external interference in any form into the domestic affairs of Nepal, more challenges lie ahead. "We are very concerned about the Nepalese situation. We condemn all kinds and forms of terrorism. We hope Nepal can contain it very soon," said Chinese Ambassador Wu Congyong. (See SPOTLIGHT 5-11 July 2002). We understand the difficulty faced by Nepal. That kind of assistance can be used for development and security of Nepal. Such assistance should not have any conditions."

Western Support

After the imposition of the state of emergency in November, US Secretary of State Powell visited Nepal. Washington agreed to provide military assistance worth $20 million. British Foreign Office Minister Ben Bradshaw visited the country and US scholars have raised Nepal's situation in the international arena.

As Nepal has to spend a huge chunk of its regular budget on the army, western donors also agreed to finance the country's development activities. At the Nepal Development Forum meeting 2002, the donors pledged annual assistance worth US$ 50 million for the next five years.

With continual support, the British government held an international meeting to discuss and find ways to help Nepal in its security and development. Representatives from the United States, the United Kingdom, India, China, Russia and other donor countries participated in the meeting.

Political Instability

Nepal has seen deepening political instability in the last three years. Although the Nepali Congress secured a thumping majority in the elections of 1998, internal disputes forced it to change three prime minister before the House of Representatives was dissolved earlier this year.

Krishna Prasad Bhattarai served as prime minister for nine months before being removed by Girija Prasad Koirala. Sher Bahadur Deuba succeeded Koirala amid internal dissension in the Nepali Congress and a parliamentary deadlock created by main opposition CPN-UML. After the fall of the Koirala government and imposition of the state of emergency, the internal differences gradually brewed in the Nepali Congress.

Following Deuba's visit to the United States and meeting with President Bush, Koirala, UML general secretary Madhav Kumar Nepal and Rastriya Prajatantra Party president Surya Bahadur Thapa joined hands to oust the prime minister. Koirala and his supporters in the ruling party rejected Deuba's demand to extend the state of emergency.

In the course of deepening personal clash, Prime Minister Deuba dissolved the lower house and called fresh elections. Instead of compromising with his one-time disciple, Koirala suspended, and subsequently expelled, Deuba from the party's primary membership. The internal crisis in the Nepal Congress exacerbated Nepal's political instability.

After the world's only super power called for a war against terror following the September 11 attacks, the international scenario has changed drastically. But the Nepalese people are yet to see relief or hope of peace on the horizon. At a time when the global community is marking the first anniversary of the deadliest terrorist attack in human history by tightening security, Nepal is gripped by a resurgence of violence.

"Our economy has been affected by sluggish demand in the US economy. Garment is in recession point as the demand in the US market has declined sharply. Similarly, tourism inflow has nosedived," said former finance and foreign minister Dr. Ram Sharan Mahat.

"There is a better appreciation about the problem of terrorism and poverty in the developing world, including Nepal. As a result, the commitment of ODA has increased. There is a commitment for increased assistance to combat the problems of Nepal."

'Our Internal Situation Is More Responsible For Destroying Tourism'

— PRASIDDHA BAHADUR PANDEY

PRASIDDHA BAHADUR PANDEY, managing director of Shangri-La Hotel and Resort, is a leading young tourism entrepreneur. General secretary of Hotel Association of Nepal, Pandey spoke to SPOTLIGHT on various issues relating to the tourism industry. Excerpts:

What has been the effect of 9\11 on Nepal's tourism sector?

There was a global recession in the world following the September 11 attacks. Nepal's problem is related to internal security. The number of tourist arrivals declined by half to about 200,000 last year. Nepal's average tourist-arrival figure was 400,000-500,000.

What is the situation now?

The number of tourists continues to decline. Normally, the months of October and November have a huge flow of tourist, but we are receiving cancellation orders. In June, July, August and September, hotel occupancy was below 20 percent.

Ho do you see the future of the hotels?

If this situation continues, Nepal's hotel industry will close down. A few months back, we received good bookings for October and November. But now the situation has reversed. We need to have at least a minimum number of tourists to maintain basic facilities in hotels. If occupancy is less than 20 percent, we are in no position to pay salaries and electricity bills. Unlike other industries, hotels are very vulnerable. Once a hotel closes down, you need to invest a huge amount of money to reopen it. The 9\11 terrorist attacks had reduced tourists by 50 percent, but our internal situation is more responsible for destroying the tourism industry.

What steps need to be taken?

The government has to announce visa-free provisions for tourists and more flights should be operated after privatizing the national carrier.

Is there not any possibility to attract Indian tourists again?

This is an industry that can recover in a very short period. As soon as normalcy returns, it will recover. But it will take many years to rebuild the infrastructures.