Boost Infrastructure

Sanjiv Poudel

Infrastructures like transportation, communication, energy, irrigation, water supply, airports, sanitation, healthcare and education services play a crucial role for a country’s economic and social development. Though Nepal accords top priority for infrastructure development in its five-year plan and annual budget, the progress is not so satisfactory. So, the government needs to carry out countrywide infrastructure survey to recognise the magnitude of infrastructure gap and the urgency of addressing it. The government may involve early career researchers and fresh college graduates for this survey to hunt their innovative ideas to solve the existing infrastructure deficit.

The majority of development projects in Nepal are being funded by multinational development banks, foreign consortium loans, donor countries, development partners, and the Nepal government itself. Now, the government should encourage mobilisation of available domestic resources for investment into infrastructure development projects. Participation of domestic banks in funding development projects is very limited. Though some banks in Nepal have established infrastructure financing department, much of funding goes medium-sized hydropower projects to meet the statutory requirement of lending into energy sector. Assets liability mismatch, liquidity shortage and capital constraints are key barriers for domestic banks for funding into development projects. So, the Nepal Rastra Bank (NRB) can play a crucial role in promoting domestic Banks and Financial Institutions (BFIs) in infrastructure financing by way of providing various policy incentives. Similarly, banks should also be allowed to exclude their lending exposure extended into national priority projects while calculating mandatory ceiling of credit-deposit (CD) ratio. This will also address the issue of ongoing shortage of loanable funds in the banking industry, to some extent.

Public Private Partnership (PPP) along with Build, Own, Operate and Transfer (BOOT) model is already proven to be successful in effective utilisation of private sector’s funds, innovation, technology and expertise in hydropower development.  So, the government should explore the possibility of adopting PPP model in other sectors like transportation, information and communication, urban development, agriculture, airport, water supply, sanitation, healthcare and education services as well based on priority. Engaging the private sector in infrastructure development through PPP not only helps the government manage required funding for construction of projects but also allows it to pass operational roles to efficient private sector operators. 

The government also needs to develop various policy instruments and promotional tools to channelise remittances into development activities. Similarly, use of various capital market instruments like project bonds, initial public offerings, debentures etc. can help mobilise local institutional investors in infrastructure financing.

Implementation aspects of development projects in Nepal have always been challenging due to political instability. There has been a tendency of shifting priorities with formation of each new government. There are also cumbersome processes for getting licenses and environmental clearances, and various social issues primarily of land acquisition/compensation and re-settlement. So, the government needs to adopt a one-door policy for issuing licenses, legal and environmental clearances to national priority development projects by forming a separate fully empowered entity. This entity should also act as the role of coordinator with all the stakeholders like the employer or the government, the developer, funding partner, local authority, etc. for execution of the projects within the allocated budget and timeline.

Nepal Infrastructure Summit 2022 is round the corner, which is expected to gather over 1000 participants including the Nepal government, private sectors, foreign dignitaries, donor partners, investors and various development agencies. So, let’s grab this opportunity to declare next few years to celebrate as infrastructure development years for fulfilling infrastructure gap that help to achieve the country’s Sustainable Development Goals (SDGs).