Binod Chaudhary
Kathmandu. Over the years, the Nepal Infrastructure Summit has blossomed into a premier platform, convening over 1,000 participants from government bodies, private enterprises, international stakeholders, and thought leaders. This summit is not just an event; it is a crucible for collaboration, innovation, and transformative ideas in the infrastructure sector.
The State of Infrastructure in Nepal
As we gather here today, it is imperative to reflect on the state of infrastructure in Nepal, which touches the very core of our economic and social well-being. Despite our rich cultural heritage and abundant natural resources, Nepal’s infrastructure development remains one of the most underdeveloped in South Asia. This is not just a statistic but a reality that affects the daily lives of our people.
Our infrastructure projects, predominantly managed by the government, face severe delays and inefficiencies. Take, for example, the Melamchi Water Supply Project, initiated in the late 1990s to quench the thirst of Kathmandu. Due to political instability and administrative hurdles, it remains incomplete, affecting millions of residents. Similarly, the Butwal-Narayanghat and Bhaktapur-Dhulikhel road projects, crucial for improving transportation and trade routes, face ongoing delays, leading to traffic congestion, higher transport costs, and loss of productivity.
In contrast, our neighbor India set a world record by constructing a 100 km stretch of road in just 100 hours. This feat highlights what is possible with strong project management, resource allocation, and technological integration. Nepal must take inspiration from these examples to improve its infrastructure delivery mechanisms and stay competitive.
On a positive note, we do have success stories. The Middle Marsyangdi Hydroelectric Project has significantly contributed to the national grid despite initial setbacks. Projects like Arun III are progressing well, and other mega projects like the Pancheshwar Multipurpose Project and the Karnali Basin should be prioritized as they hold the key to closing our energy infrastructure gap.
Lessons from Failures and Successes
The contrasting outcomes of these projects offer valuable lessons. The failure of timely execution, as seen with Melamchi, alongside delays in major road projects, emphasizes the urgent need for reforms in our project development modalities. In contrast, the success of Middle Marsyangdi illustrates the impact of effective planning, stakeholder engagement, and adaptability.
Yet, we must confront challenges related to our airport projects. We built Pokhara International Airport and Gautam Buddha International Airport with the vision of enhancing tourism and aviation. However, they are not fully operational due to limited air routes and low traffic. This raises critical questions: Are we focusing too much on building grand projects without ensuring the necessary ecosystem to support them? Infrastructure is not just about construction; it must be supported by holistic development.
International Models of Success
Looking beyond our borders, we can learn from international examples:
South Korea: After the Korean War, South Korea was one of the poorest countries globally. Through strategic government planning, investment in infrastructure, and fostering private-sector participation, it rapidly industrialized. The development of Incheon International Airport, now a global aviation hub, showcases how visionary projects can drive a nation’s economy.
China’s Special Economic Zones (SEZs): Cities like Shenzhen transformed from small fishing villages into megacities in just a few decades through tax incentives and regulatory reforms. Nepal must consider creating such zones to attract investment and catalyze infrastructure development.
Addressing Nepal’s Challenges
While the challenges we face are multifaceted, they are not insurmountable. We must address key areas:
Execution Delays and Quality Standards: Frequent political changes and bureaucratic inertia contribute to delays and poor-quality projects. Establishing independent project management offices that remain insulated from political fluctuations is essential to ensuring continuity and adherence to quality standards.
Financing and Investment: Nepal’s over-reliance on loans for major projects places a significant burden on the economy. We must explore innovative financing mechanisms, including Public-Private Partnerships (PPPs), which can mobilize private capital and expertise. For instance, the Trishuli 3A Hydropower Project demonstrates the potential of PPPs.
Regulatory Reforms: Simplifying regulatory procedures is critical. Implementing a “one-stop-shop” for project approvals can reduce delays and make Nepal more attractive to both domestic and foreign investors.
Ecosystem Development: Infrastructure projects should be developed holistically. For instance, while we have increased hydropower production, the lack of adequate transmission lines hinders efficient electricity distribution. Similarly, our airports cannot reach full capacity without proper air route agreements and supporting facilities.
Hybrid Annuity Model (HAM): A Path Forward
A successful model from India’s PPP framework is the Hybrid Annuity Model (HAM), introduced to address challenges in traditional Build-Operate-Transfer (BOT) models, especially in road construction. In HAM, the government contributes 40% upfront during construction, while the private developer finances the remaining 60% through equity and debt. This reduces financial risk and ensures a steady cash flow through biannual annuity payments, eliminating reliance on uncertain toll revenues.
Nepal can benefit from adopting HAM, particularly for road infrastructure along key trade routes with India and China. By reducing developers’ financial exposure and guaranteeing returns through annuity payments, we can attract more private-sector participation and accelerate road infrastructure development.
Sustainability and Electric Vehicle Adoption
Nepal has also made significant strides in sustainability, particularly in the electric vehicle (EV) sector. Between 2020 and 2023, Nepal saw a 245% increase in EV imports, with 80% of private vehicle imports now electric. This transformation has helped reduce fossil fuel dependency and carbon emissions by an estimated 1.5 million metric tons annually. The EV penetration rate in Nepal is among the highest in South Asia.
This shift should inspire further investments in renewable energy and climate-resilient infrastructure. Sustainability must be at the heart of every infrastructure project, ensuring long-term environmental protection alongside economic growth.
Nepal: The Bridge Between India and China
Nepal’s geostrategic location positions it at the heart of the South Asia-East Asia corridor, uniquely placed to serve as a bridge between India and China, the world’s two largest and fastest-growing economies. While intraregional trade in South Asia remains below 5%, Nepal can capitalize on its position by improving infrastructure to serve as a transit hub, unlocking new trade and investment opportunities.
Investing in projects like the East-West Railway, strategic highways, and airport connectivity will not only strengthen domestic infrastructure but also boost Nepal’s role in regional economic integration.
Airport Infrastructure and Global Connectivity
Our focus must extend to airport infrastructure, which is critical for facilitating tourism and international business. Examples from Delhi, Singapore, Dubai, and Istanbul show how airports can serve as engines of growth, handling millions of passengers annually. Dubai International Airport, for instance, handles over 88 million passengers a year, while Istanbul Airport reached 64 million passengers in just a few years.
Nepal’s ongoing airport modernization projects, including Tribhuvan International Airport, Gautam Buddha International Airport, and the planned Second International Airport in Nijgadh, will boost our global connectivity, driving tourism, trade, and foreign direct investment (FDI).
Conclusion: Seizing the Moment
At this pivotal moment, Nepal’s infrastructure development requires bold decisions, robust investment strategies, and a commitment to public-private collaboration. The private sector has a crucial role to play in driving innovation and efficiency. With first-mover advantages, companies investing in Nepal today will find a lucrative market with high returns compared to more saturated economies.
By adopting models like HAM, which balance public-private risk-sharing, we can spur infrastructure growth, especially in road development. Visionary policies and government commitment are essential to fostering an environment that supports investment, streamlines project execution, and promotes sustainability.
Infrastructure is not just about roads and bridges; it is about building the foundation for a prosperous and resilient Nepal. I urge all of you—government officials, private sector leaders, and international partners—to seize this moment. Together, we can make Nepal a shining example of sustainable development, a regional hub for trade, and a global destination for investment and innovation.
Let us envision a Nepal where infrastructure is not a bottleneck but a catalyst for growth; where our airports operate at full capacity, connecting us to the world; where our hydropower not only lights up our homes but also powers our neighbors; where our tourism industry attracts millions, creating jobs and promoting cultural exchange; where our agricultural sector thrives, feeding our people and exporting value-added products; and where every citizen, regardless of where they live, has access to the opportunities that infrastructure brings.
(Special Address by Hon. Binod Chaudhary at Nepal Infrastructure Summit 2024).
प्रतिक्रिया दिनुहोस्