Can tourism encourage better export performance

Giving an example of pashmina, authors Jose Guilherme Reis and Gonzalo Varlea discuss on ‘can tourism encourage better export performance in diversification in Nepal’. The paper has highlighted the importance of brining “fair” in the country without much expenses. The paper, which has given a detailed description of the Nepal’s pashmina and firms’ behavior in the past, has following part: 

Entering and successfully surviving in export markets is a costly process for firms. Key steps for success include learning about the existence of foreign demand, determining the production costs of exportable goods, building a high-quality reputation, succeeding in product branding to reduce competitive pressures, constant upgrading of quality standards to better serve demanding international clients, and remaining competitive with other players in the global marketplace. Drawing on the findings of recent research (Reis and Varela 2013), this note argues that tourism can help alleviate some of these costs by providing a relatively inexpensive platform for cost discovery and acting as a low-cost in-house trade fair, accessible to all domestic producers. Combining product-level data on the world’s and Nepal’s exports (for goods that are both related and unrelated to tourism) with Nepalese data on tourist inflows and expenditures and macro indicators on relative prices results in a positive association between tourist inflows from given destinations and their expenditures with future merchandise exports of tourist-related products to those destinations. For goods previously unrelated to tourism, data reveal no connection between tourism flows and their future exports. The spillovers from tourism into merchandise export performance and diversification imply that there are gains to be had from cooperation between tourism and export promotion activities.

IMF’s global policy agenda

Though Nepal has very limited effect from the global economy it is always interesting to see how international institutions look into economy and what they prescribe for countries. The International Monetary Fund (IMF) has come out with a policy paper on what should be the agendas for the period of time ahead. The agendas varies from country to country. Here, we can see some highlights of those policies and priorities.

From the policy paper:

Advanced economies - Macroeconomic policies should remain supportive, with gradual 

fiscal adjustment anchored by credible medium-term plans. The United States needs to raise 

the debt ceiling and agree on a medium-term fiscal adjustment roadmap, carefully manage 

the normalization of financial conditions, and strengthen appropriate oversight of shadow 

banks. The euro area requires more actions to reduce financial fragmentation and address 

architectural issues of the union, as well as structural reforms to revive growth. In Japan, 

reform success hinges on ambitious fiscal medium-term adjustment and measures to 

invigorate growth.

Emerging market economies - Policy responses to recent financial turbulence should be
anchored by sound and credible monetary policy frameworks. Exchange rates should be
allowed to respond to changes in fundamentals, with buffers used to avoid excessive and
disorderly adjustment. Gradual fiscal consolidation should continue in countries with high
deficits and debt. Removing structural obstacles—including infrastructure deficits and entry
barriers in markets—will be critical to support high growth going forward.

Note: Nepal is taken as one of the low income countries

Low-income countries - While growth has remained resilient in most countries, global
downside risks point to the need for proactive macroeconomic policies. Bolstering foreign
reserves and maintaining domestic fiscal space are priorities. Action on many fronts is
needed to promote inclusive growth.

Globally - Addressing remaining external imbalances requires further progress in closing
policy gaps in major economies. Pending regulatory reforms must be completed to ensure
that the global financial system will transition to a safer state. 

Potential domestic demand boost the growth rate in China, India

The Economic Outlook for Asia, China and India 2014 shows the region’s situation beyond the middle-income trap.

The report has highlighted that the domestic demand will be in rise in the coming years. The report reads:

 Real GDP growth in Emerging Asian economies is projected to be moderating gradually but remains robust over the 2014-18 period, according to the results of the OECD Development Centre’s Medium-Term Projection Framework for this 2014 edition of the Economic Outlook for Southeast Asia, China and India. As a whole, the Emerging Asian Economies are expected o grow by 6.9 per annum in 2014-18.