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Investor Presentaiton

FINANCING SUSTAINABLE TOURISM IN KHYBER PAKHTUNKHWA 1.1 Growth of Tourism in Khyber Pakhtunkhwa Khyber Pakhtunkhwa (KP) is richly endowed with natural beauty, has an ancient history and a diverse cultural heritage making it an attractive destination for both international and domestic tourism. The province is also the gateway to the northern areas of Pakistan, which have historically attracted adventure tourists and professional mountaineers from world over. KP itself boasts some of the most spectacular natural resorts in the country such as Swat, Chitral, Kaghan, Naran and the Galliyat region. Improved security environment in the province and better road connectivity, has resulted in a surge of domestic tourism to KP and the northern areas in the last five years. Despite international travel restrictions because of Covid-19, the easing of lockdowns in the country since last year has led to an unprecedented rise in domestic tourists particularly in the summer season. Estimates range from 2 to 3 million tourists visiting KP and the northern areas during the Eid holidays in 2021, generating an estimated Rs 4 billion in revenue for the province¹. Rs. 3mn tourists in KP generated 4br L Revenue in 2021 This phenomenal growth in domestic tourism has resulted in the creation of much needed economic opportunities in the region and provided a welcome boost to the hospitality sector and tourism related services in these areas. However, the surge in tourist numbers has put forward a new set of challenges for the provincial government. Despite improved roads and highways, tourist hotspots of KP lack basic infrastructure facilities such as solid waste disposal systems, adequate hotel and toilet facilities, clean drinking water, internet connectivity, hospitals, and emergency response services etc. These areas, therefore, are often unable to cope with large influx of tourists especially during peak seasons. Moreover, there are no effective mechanisms in place to monitor and control the degradation of the fragile environment and ecosystem of the natural resorts caused by unregulated commercial activity and large tourist inflows. To effectively address such challenges there is a need to promote sustainable tourism and development systems in KP, as in the rest of the country. One way that has been successfully employed by other countries is to create a system that entails self-sustaining revenue mobilization and expenditure mechanisms through which resources generated in tourist destinations are used specifically for the development and ¹Buneri, (2021). KP earns an estimated Rs4bn tourism revenue during Eid holidays maintenance of tourism infrastructure and service delivery at the source of revenue. Local taxes on tourism and hospitality services, tolls and user charges that can be applied flexibly and adjusted readily, can be potential instruments for revenue collection. These taxes can be hypothecated i.e., structured in a way that the revenue raised is ring fenced for specific types of use within that geographical location instead of going into the provincial revenue pool. Studies have shown that local tax collection which is earmarked for specific public good or service provision within that area, creates incentives to pay which otherwise might be weak or absent in a centralized tax collection and expenditure system. Lack of tourism infrastructure in KP leading to No proper solid waste disposal management missed opportunities Absence of good quality hotels & toilets Lack of proper hospitals & emergency responses Scarcity of clean water 11
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