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124 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA In the WTO context tourism is only one of the three services sectors – the other two being financial and telecommunications – wherein Bangladesh has undertaken commitments. The commitments made earlier in tourism have a very positive implication as Bangladesh has gained experience and should thus be willing to take wider and deeper commitments in the sector in the current round. Others also suggest that Bangladesh had initial commitments in this sector during the conclusion of the Uruguay Round negotiations and it is quite obvious from such commitments that the it has developed some understanding of the opportunities and risks involved in this sector (Raihan and Mahmood 2004). This will certainly help Bangladesh in drafting improved commitments. In Bangladesh, the tourism and travel related sector ranks low in GDP share. It has been estimated that tourism contributed about 0.3% to GDP while the hotel and restaurant subsectors accounted for only 0.67% of services sector output in 2002–03 (ESCAP 2005:3). Direct employment in tourism was estimated to be just over 100,000 people and indirect employment could be over 200,000 people. Tourism has been considered important for poverty alleviation and Bangladesh strives for the optimal use of tourism resources to benefit local communities. The Bangladesh Parjatan Corporation, the national tourism organisation, has been responsible for developing tourist facilities nationwide (ESCAP 2005). At the same time, the private sector has developed tourism businesses. The government has encouraged foreign investment in tourism, either as a joint venture or with 100% foreign ownership. A set of 10 incentives was designed to encourage local and foreign investment. In Bangladesh, the National Hotel and Tourism Training Institute has been developing human resources in the tourism industry. A two-year diploma course in hotel management began in 2002, and national certificate courses on hotel and tourism-related subjects have been conducted regularly. Bangladesh has supported the Action Plan on Tourism of 1991 as a member of the SAARC Technical Committee on Tourism, which identified tourism as one of six important sectors with scope for multilateral and bilateral cooperation. In 2004, members of the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation (BIMSTEC) 2 recognised that strategies such as joint marketing and exchange of visits and information could enhance interregional tourism. Members also agreed to facilitate business travel, exchange programmes and tourism by introducing a BIMSTEC business travel card/visa. Bangladesh is a member of South Asia subregional economic cooperation. Bangladesh needs to improve upon its commitments in the sector during the ongoing services negotiations. Bangladesh should expand the coverage of its commitments by including other sub-sectors – travel agencies and tour operators services and tourist guides services. In the sub-sector in which Bangladesh has already undertaken commitments it should also include hotels other than five star and restaurant and catering services. Moreover, as Bangladesh has not made any commitments under Modes 1 and 2 in the committed sub-sector, it should take full commitments in these modes. The opening of the tourism sector will increase the volume of domestic tourism, as well as the level of investment (Raihan and Mahmood 2004). Currently, Bangladesh is a net importer of tourism services through Mode 2 despite having enormous resources for the development of its tourism sector. Bangladesh is an important tourism market for India. It sends a large number of people to India for various purposes including tourism. For instance, in 1998 about 303,000 Bangladeshis visited India and the number rose to 333,000 in 1999 (Rahman 2000). It has been estimated that about 40,000 Bangladeshis visit India annually primarily for the purpose of medical treatment (Ibid). Those who visit India for health reasons are also relevant to tourism in view of health tourism. Similarly, Sri Lanka has started direct flight service between Dhaka and Colombo in order to facilitate the movement of tourists between the two countries. There is trade taking place between Bangladesh and Bhutan via India which is also likely to facilitate tourists’ movement between these two countries. Though it is interesting to note that India has been operating hotels in the Maldives, Sri Lanka and Bhutan, there is no information regarding any reputed Indian hotels operating in Bangladesh. Bangladesh being the third largest market in the region has a lot of potential to attract investments and skilled professionals which will help its tourism industry to grow at a rapid pace. In view of this it ought to undertake wider and deeper commitments in all sub- 2 The BIMSTEC is an international organisation involving a group of countries in South Asia and South East Asia. The member nations of this group are: Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal.
T OURISM AND TRAVEL RELATED SERVICES 125 sectors of the tourism sector. Due to historical, cultural and religious connections, Bangladesh will gain immensely from the regional integration. Summary of Restrictions in the Bangladesh Tourism Sector • No commitments under Modes 1 and 2 in both the Market Access and National Treatment columns in the committed sub sector- five star hotels and lodging services • No commitments in hotels other than five star • No commitments in restaurant and catering services • No commitments in travel agencies and tour operators • No commitments in tourist guides services • Mode 4 commitments almost limited to ICTs Sri Lanka Sri Lanka undertook commitments in two of the four sub-sectors of tourism and travel related services, namely hotel and lodging services and travel agencies and tour operators services. For hotel and lodging services Modes 1 and 2 are unbound in the Market Access column. However, under Mode 3 there are no limitations other than those inscribed in the horizontal section which does not seem to cover this sub-sector for allowing foreign investment. Likewise, though there are no explicit limitations under Mode 4, this is subject to all relevant provisions of labour, immigration and customs laws. In the National Treatment column while Modes 1 and 2 are unbound for hotels and lodging services, there are no restrictions at all under Modes 3 and 4. However, as market access under modes 3 and 4 is highly restrictive, a liberal national treatment may not make any substantial difference. In travel agencies and tour operators services while Mode 1 has no limitations in the Market Access column, Mode 2 is unbound and the nature of commitments under Modes 3 and 4 are exactly the same as in the case of hotel and lodging services. But there is one major difference – FDI for travel agencies is allowed as per the commitments made in the horizontal section. Thus foreign investment of up to 40% of equity in a company proposing to carry on a business activity in travel agencies services will be automatically approved, whereas foreign investment in excess of 40% (and up to 100%) will be approved on a case-by-case basis. There are some other provisions in the horizontal section which may also apply to those foreign companies that invest in travel agencies services like they will be treated equally as any company owned by Sri Lankan nationals if they happen to incorporate their companies in Sri Lanka. In the case of joint venture when a partner is a public sector enterprise then while granting access preference will be given to foreign service suppliers which offer the best terms for transfer of technology. Similarly, national treatment accorded to travel agencies and tour operators services is better than that accorded to hotels and lodging services because Modes 1, 3, and 4 have no limitations and only Mode 2 remains unbound. Although Sri Lanka has submitted its initial offer during the current Doha Round of negotiations, it has not yet made its offer public. However, it is learnt that Sri Lanka has further liberalised the sector and removed all Mode 3 restrictions (Taneja et al. 2004). It has also opened Mode 4 to the extent indicated in its horizontal schedule. However, it is not certain whether changes have been made in the horizontal section. In tourism and travel-related services, though the commitments allow for foreign commercial presence in hotels and tour operators services, they are subject to scheduled horizontal measures on approvals, taxes, and foreign equity caps. Overall, they are not very meaningful as the coverage of sub-sectors is limited and there are numerous horizontal measures affecting investment (Chanda 2005). Apart from making liberal commitments in the committed sub-sectors, Sri Lanka should also undertake commitments in tourist guides services as this sub-sector would be of some interest to other South Asian countries in view of geographical proximity and cultural affinity. Moreover, it should also make sectoral commitments under Mode 4. This will also be beneficial for other South Asian countries. Although Sri Lanka has made request on India seeking full commitments in both Market Access and National Treatment columns under Modes 1, 2, and 3 in hotel, restaurant and catering services, it has made similar commitments in the sub-sector. Tourism is one of Sri Lanka’s five highest foreign exchange earners after remittances, textiles, tea and gemstones. 3 Sri Lanka has made a concerted effort to draw tourists into the country by shifting its focus from Western Europe to countries in Asia (Taneja et al. 2004). In line with its objectives, the Sri Lankan airlines has upgraded its infrastructure and management and expended its network to get an increasing pie of the 3 www.tamilnet.com/art.html?catid=13&artid=23355, last visited on 16 November 2007.
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QUANTIFICATION OF BENEFITS FROM ECO
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QUANTIFICATION OF BENEFITS FROM ECO
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Preface Our consultations with seni
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viii CONTENTS 7. Revenue and Welfar
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Executive Summary OBJECTIVE This st
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EXECUTIVE SUMMARY xiii Table 1 EAMA
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EXECUTIVE SUMMARY xv India A full S
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EXECUTIVE SUMMARY xvii indicates th
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EXECUTIVE SUMMARY xix ments on basi
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Part I BENEFITS FROM TRADE, INVESTM
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4 QUANTIFICATION OF BENEFITS FROM E
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10 QUANTIFICATION OF BENEFITS FROM
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2 Literature Review and Rationale f
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4 Effective Additional Market Acces
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6 Impact of SAFTA on Member Countri
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7 Revenue and Welfare Implications
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8 Impact of SAFTA on Inward and Out
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9 Quantification of Benefits from T
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APPENDICES
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Appendix 8 Intra SAARC FDI Collabor
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Appendix 11 Table A11.1 On an Emplo
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Appendix 12 Original Commitments/In
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Appendix 14 Table A14.1 Telecommuni
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Appendix 15 REFERENCE PAPER Scope T
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Bibliography Abelson, P. (1996),
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BIBLIOGRAPHY 241 Cuba (2002), Negot
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BIBLIOGRAPHY 243 (2004), Impacts of
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BIBLIOGRAPHY 245 Silva, Patricia an
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BIBLIOGRAPHY 247 (1998), Tourism Se
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