Tourist in Langtang Trek (Photo credit: Sharad Joshi, ICIMOD)

The UN General Assembly has designated 27 June as the international day for micro, small, and medium enterprises. In celebrating this special day, we have focused our attention on how to future proof tourism related small businesses (SMEs) in the Hindu Kush Himalaya (HKH).

The World Tourism Organization reported a steady growth in international tourist arrivals in 2022, signalling the start of tourism recovery following the pandemic years. The report also pointed to a very promising tourism future. Over the next decade (2022–2032), the industry is expected to grow at the rate of 5.8% annually and create 126 million new jobs. Optimism is even higher in the Asia-Pacific region, where an annual growth rate of 8.5% and 77 million new jobs are expected. Countries are opening up to revive and recover their economies and businesses, and tourists are returning in big numbers, largely because of pandemic fatigue, travel stimuli, and a post-pandemic revenge travel trend.

Considering tourism is one of the worst-hit sectors, this is welcome news. But are countries ready? Are their economies and businesses ready?

Building back better – with tourism SMEs

The readiness applies not only in terms of economic recovery but also on whether such recovery is green, inclusive, and resilient to shocks. Aligning responses to climate change and COVID-19 shocks with tourism recovery will be crucial. With deep uncertainty, vulnerability, and inequity characterising the new normal, tourism SMEs will have to build their resilience in the HKH region – which extends across Afghanistan, Pakistan, India, China, Nepal, Bangladesh, Bhutan, and Myanmar. SMEs are economic lifelines, contributing to real, inclusive growth from the grassroots. Homestays, farm stays, agro-tourism enterprises – such businesses keep the local economy vibrant and breathe life into traditional cultures and rural lifestyles. SMEs are well placed to promote local goods and services and authentic experiences while also providing strong economic incentives to protect nature. Such businesses have also historically been an inclusive space for women and young entrepreneurs.

SMEs clearly offer distributed, equitable, sustainable benefits. So how can we leverage their power to build tourism back better?

This can be ensured by future proofing SMEs for the post-pandemic and net-zero world. Future proofing revolves around building climate resilience of tourism enterprises through mitigation and adaptation measures as part of a green and inclusive recovery strategy. The green and inclusive recovery aspects guide SMEs on two fronts: first, in aligning the economic recovery of businesses with sustainable development goals (SDGs) and net-zero targets for climate change; and second, for an economic reset of SMEs to yield positive environmental and social impacts, in addition to increasing profitability.

Package of innovative solutions

Building the climate resilience of tourism SMEs can be effectively delivered through a package of innovative solutions in the areas of technology transfer, capacity building, and climate finance. There are ample opportunities that can be harnessed from the emerging global and regional policy environment. For instance, the Glasgow Climate Pact, which aims to turn the 2020s into the decade of climate action and support, and the Glasgow Declaration on Climate Action in Tourism, which has committed to making the tourism sector climate neutral by 2050, are important policy arrangements. Similarly, the Ministerial Declaration on the HKH Call to Action and the Mountains of Opportunity investment framework recognise the urgent climate actions needed to sustain the mountain economy and increased investment required from public and private sectors.

Harnessing technology transfer, capacity building, and climate finance

In terms of technology transfer, renewable energy is at the heart of decarbonising tourism SMEs, especially through low-carbon and energy-efficient business practices. Strong pledges made by the HKH countries to reduce greenhouse gas emissions provide an opportunity to decarbonise SMEs. With the exception of Bhutan (which has a fixed-level target of maintaining its carbon neutral status), the rest of the HKH countries have economy-wide targets.

Nepal’s 2^nd Nationally Determined Contribution (NDC) (2020) and National Climate Change Policy (2019) present specific targets and policy arrangements for making tourism a climate-friendly sector. This focus on a green growth strategy and nature-based tourism as a part of the NDCs presents an immense opportunity for a green recovery of Nepal’s tourism economy and businesses. We need a last-mile innovation through renewable energy solutions that not only create a new paradigm of decentralised infrastructure but also boost local economies and spur entrepreneurial spirit. There is a huge potential and scope of such solutions in building resilience of tourism entrepreneurs in Nepal.

Capacity building and climate finances are also important for stimulating entrepreneurial spirit. Capacity building is crucial because entrepreneurs need to integrate renewable energy while also making great strides to decarbonise their businesses. This can happen only if they have the capacity to absorb, adapt, or transform the value proposition of business. To do so, SMEs need go through a fundamental shift in terms of value creation and generating environment and social impacts and profitability. Sustainable business incubation programmes will be crucial in building the capacity of entrepreneurs to explore a range of options, including rethinking and re-engineering business model planning and implementing and delivering impacts at environmental, social, and economic fronts.

Climate finance is very vital to transition tourism SMEs to low-carbon economies. In Nepal, the investment required for green transition of various sectors from 2021 to 2030 varies from USD 4.8 billion (reference scenario), to USD 42.8 billion (with existing measures), and USD 46.4 billion (with additional measures). Access to finance is critical for Nepal to reach the net-zero target. There is a need to mobilise both public and private finances. The Government of Nepal has emphasised the necessity of an inclusive financial system. The central bank’s mandatory provision of requiring financial institutions to lend to certain productive sectors such as tourism, energy, and small-scale industry serves as a watershed moment. The Renewable Energy Subsidy Policy (2016) and Renewable Energy Subsidy Delivery Mechanism (2013) also provide great incentives for poor, socially excluded, and women entrepreneurs. However, having an enabling policy arrangement alone is not enough. While the cost of decarbonising tourism SMEs through renewable energy transition is capital intensive, the investment will have to come from the private sector. There is also the need of customised financial products and services to support the tourism SMEs in their green recovery journey.

Moving beyond the status quo

Over the next decade, the HKH countries will need to deliver climate action at scale and with speed in building the climate resilience of tourism SMEs. Delivering action through package of innovative solutions at the intersection of technology transfer, capacity building and climate finance will be important, not only for future proofing of tourism SMEs in the HKH but also to fully harness the benefits that are there for the taking.

At a critical time when shocks from climate change and COVID-19 are impacting tourism, the HKH countries need bolder steps. The time to take climate action is now – and urgent.

Anu Kumari Lama

Maheshwar Dhakal

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