The last few weeks have been very unsettling for those engaged in the tourism business, caused in large part by the rumors that were doing the rounds that the government is contemplating policy changes at a structural level. Upon tabling the Tourism Levy Bill of Bhutan 2022 in the Parliament, on June 20, to the dismay of many, the rumors were proven to be true.
While much has already been written and spoken in various media channels surrounding the proposed changes, me and my colleagues at the Bhutan Sustainable Tourism Society (BSTS), a society consisting of voluntary members would also like to contribute to the discourse. It is hoped that doing so would contribute to a well-rounded and properly thought out transformation initiative that has been undertaken by the government in this most vitally important industry.
First and foremost before any change or systemic overhaul is contemplated, it is critical to understand if a change is really necessary; the pertinent question to ask is: is something going wrong? Particularly when one is dealing with an industry that accounts for the highest foreign exchange inflow, and accrual of multifarious benefits that encompass the entire strata of the Bhutanese society, the government needs to exercise extreme caution – before it embarks on an exercise that could very well imperil a system that is perceived to be working.
We need some serious thinking on the matter – what exactly is it that we are trying to fix? Are we in a tourism crisis or are we creating one?
Going by what is being discussed on the floor of the Parliament, it is obvious that the major change that the government hopes to implement borders around what is euphemistically termed: Sustainable Development Fee (SDF). The SDF is basically the daily tax that will be levied on the dollar-paying tourists. The government is proposing to increase this levy from the current level of US$65 to the proposed rate of US$200 per person per night halt. The government justifies that there needs to be an investment in the tourism sector and, it is their hope that the increased revenue generated from the increased SDF will help them achieve this end, by ploughing back the revenue thus earned, into the tourism sector.
At most, this is idealistic – in fact even improbable. And, by the way, this is not a new idea. Some years back the Tourism Council of Bhutan (TCB) deducted from the tour operators’ earnings a levy called the Tourism Development Fund (TDF). For the creation of this Fund, the TCB deducted US$10.00 per tourist per visit, including 20% of the FIT Surcharge. Over the years the amount of TDF collected was very, very substantial. Sadly, this Fund was never ploughed back into the industry. To this day we are clueless as to what happened to the Fund.
As a developing country, we have many other priority sectors such as agriculture, health, education etc., for which the government needs funds. As the past has proven, we do not believe that the government will deliver on their promise that they would plough back the SDF money into tourism – it is unlikely to happen.
To be fair it is not only the government of Bhutan that is in default – it happens in the most developed economies as well. To quote an example, when I was working with the US National Parks they had this constant battle with their government – over millions of dollars generated by the Parks that never got ploughed back into the upkeep of the Parks. In a similar vein, it is unbelievable that the Royal Government of Bhutan would invest the SDF fund into tourism – they have no past record of having done so. Thus offering the justification that they are increasing the SDF to such a high level so that they can plough it back into the industry will find no acceptance among the industry and the people of Bhutan.
To achieve this objective the government needs to rethink their policies. They also need to realize that this is a role in which the private sector can offer able support. However, the private sector can only help when the government promulgates policies and regulations that are conducive and enables vibrant business activity. We should draw inspiration from what Thailand did. A few years ago, when they were trying to revive their economy, the Thai government took the courageous step of waiving the Visa Fee. This amounted to a loss of millions of Baht in revenue to the government. But as far as the Thai government was concerned, it was not about revenue gain or loss – it was about creating enabling regulations to support the people. The waiver of the Visa Fee encouraged transit passengers to go out to the city and spend. The street vendors, transporters and businesses benefitted from this regulation. As far as the Thai government was concerned, they believed that they benefitted much more by foregoing the visa fee. The government’s endeavor at increasing the SDF achieves just the opposite – it strangulates business opportunities and throttles a vital industry.
The government further claims that the existing Minimum Daily Package Rate (MDPR) has outlived its usefulness and that it is now redundant – conveniently forgetting that the MDPR has been in place from the day the tourism policy of ‘High Value Low Volume’ was conceived and set into motion. There is no other country in the world that has done this. Basically it is a tool to support our private sector to improve our services and products. When we all know that we have not achieved these improvements to add high value to our products and services, how could we be so adamant to discard this tool, at this stage in our growth? No system is perfect and likewise the pricing system does have its flaws but the fact is that the pros far outweigh the cons. We need to work on addressing the loopholes in the system but not at the cost of dismantling it. We will all become losers as a consequence of this drastic and unimaginative move that is contemplated by the government. This tool makes us the masters of our own tourism growth. Do we want to now hand over the reins to the tourist – empowering them to dictate the price for our services? The MDPR is not written in stone and should be removed only when our products and services have achieved a certain level of quality. I am afraid that the time is not now.
Our visionary and benevolent monarchs have steered the country through thick and thin – the development and progress that we have seen is unprecedented. Their Majesties, the pride and treasure of our country, continue to strive tirelessly for the welfare of the Bhutanese people. Unfortunately, it is becoming a habit for every new government to test and experiment their ill-thought-out ideas and ill-conceived plans. For the size of our economy and population, we cannot afford to make mistakes, especially in areas where the consequences will be extremely damaging. Tourism is a dynamic industry and change is inevitable but we should not change for the sake of changing, and for the better.
How far are the proposed changes likely to address our current woes? Will they? Issues such as offsetting seasonality, taking tourism to the east and the south, promoting longer durations for trekking and bird watching, promoting our niche in ecotourism, and generating more revenue for our hotels and other service providers – these are at the core of our endeavors.
No one can contest that the government’s proposed policy changes are happening too fast, too early. Clearly, there is no depth and proper understanding of the dynamics of tourism – it is evident from the timing of the proposed change. We urge and plead with the Royal Government of Bhutan to please take the time to rethink and give due consideration to the concerns of the people.
Karma Tshering (PhD)
Sustainable Tourism Specialist
Founder – Bhutan Sustainable Tourism Society