Background
The usual build-and-develop formula for any country has an undeniable relevance to its social and economic advancement. To put it very simply, we have been conditioned to believe that a country’s basis of development revolves around various prerequisites. One of such is infrastructural development. Given the context, when you are surrounded by terms like these, you are bound to start looking for answers to where your specific country lies, what is the level of infrastructural development like and what transformational steps are needed. This question is an omnipresent one. And, the answer to this is what needs unfolding.
Nepal, its Infrastructure and Economic Growth
According to the World Bank Report 2010, ‘infrastructure’ is an umbrella term for many activities and plays a pivotal role in industrial growth, adding up to the overall economic growth. Generally, economists and urban planners distinguish two types of infrastructure, namely, economic infrastructure and social infrastructure. Economic infrastructure is defined as the infrastructure that fosters economic activity such as the construction of roads, highways, railroads, airports, seaports, electricity, telecommunications, water supply, and sanitation. Contrastingly, social infrastructure is distinguished as the infrastructure that promotes health, education and cultural standards of the population through activities that have a direct or indirect impact on the welfare such as schools, libraries, universities, clinics, hospitals, courts, museums, theatres, playgrounds, parks, fountains, and statues.
Having established this baseline, let us now take an example of ‘roads’ as this is one of the first components we think of when we hear the term ‘infrastructure’. As per the Economic Survey report of 2018/19, the local road network stands at 60,162 km. About 40% of roads in Nepal are national highways and out of it, 77% are in poor condition. Likewise, 82% of the feeder roads are in a bad condition too, thus, increasing vehicle operation cost, journey times and fuel consumption. Because of the nation’s geography, the problems related to transport and road infrastructure have often been highlighted. But the poor infrastructure’s high investment needs are recurrently overlooked. According to the Department of Roads (DOR) and the Ministry of Physical Infrastructure and Transport (MOPIT), the road sector requires USD 6.5 billion investments between the years 2016-2020, but the budget gap has instead widened from 67% in 2016 to 81% in 2017. Even with the given budget gap, only 81% of the allocated funds are spent. Further, out of the total 80 bridges in the Postal Highway Project, 78% of the work has been delayed due to design mistakes, political interference, weak contract management, negligence and so on. Moreover, according to the list of projects compiled from the Annual Development Plans of the National Planning Commission, infrastructural projects have been ongoing for more than 11 years. Further disaggregation in terms of roads, irrigation and power projects shows that on average, the projects have been ongoing for more than 12, 16 and 9 years respectively. Thus, it can be understood that Nepal falls behind in the building and maintaining infrastructures.
The deepening infrastructural gaps and problems of our country need not be compared with developed economies from the west. A close-to-home look can easily give us a much-needed perspective. India became the second fastest growing economy of the world during 2003/04-2013/14 through large investments in infrastructure but its economic growth slowed down during 2012-2014 due to stalled infrastructure projects.
However, in the last two budgets, a paradigm shift has been witnessed in terms of our strategies for sustainable development, through prioritization of the infrastructure and development projects across all provinces of the country.
Under infrastructural development, the major priority has been given to the construction of strategically important infrastructure projects of the country and completion of ongoing projects/sectors such as the construction of roads, civil aviation, education, health, rail, waterways, telecommunication, information, and broadcasting including electronic media.
But merely adding infrastructure projects to the pipeline doesn’t do much for the economy unless they are investable and have integrated technological elements. Consistent progress in the infrastructural sector hasn’t been witnessed and without this, the current economy cannot reach to NPR 5 trillion economy within the current tenure as promised by Prime Minister KP Sharma Oli.
Infrastructure Bottlenecks
The Government of Nepal (GoN) has been keen on accelerating economic growth of Nepal and graduating from the status of a Least Developed Country (LDC) by 2022 and attaining the vision of becoming a middle-income country by 2030. The Finance Minister also committed adequate budget for infrastructure projects in the budget of the fiscal year 2019/20. 9.2% of the GDP has been allocated for capital spending but it is lesser than that of the previous year. Economists predict that the government needs to spend at least 8-12% GDP in public infrastructure to bridge the infrastructure gap and as per the Nepal Development Update of 2019 published by the World Bank Group, around 10-15% of GDP is needed annually for infrastructural investment for the next 10 years.
However, for Nepal to achieve the target, per capita income needs to be raised and Human Development Index (HDI) has to witness progress as well. For this, the infrastructure gaps need to be closed. At present, the presence of infrastructure gaps and access to reliable and adequate infrastructure services are limited for Nepalese citizens because of various infrastructure bottlenecks.
Nepal’s potential for development through investment in infrastructure has long been realized. Political instability has often been blamed and put out in the front for serving as an ‘infrastructural bottleneck’ but it is not the case because there seems to be plenty of political will to undertake underhand deals. In actuality, decision making is paralyzed which causes the hindrance. And majorly because, infrastructure is ‘hardware’ and the real bottleneck facing the country is ‘software’ i.e. management, government coordination, transparency, and accountability. Various studies have proven that investment in infrastructure is not enough because investment without addressing the structural problems of governance will only aggravate inequality, leading to unbalanced development, create wastage and ultimately harm the environment. Other such bottlenecks are skewed land acquisition policies, inadequate energy and fuel supply, and lack of private investment.
So, even if infrastructure projects have been taken up, instead of being pushed forward, they become dysfunctional due to blame-game and lie unfinished, due to which the general public fails to see the government making progress.
All of this has been reflected in the Global Competitiveness Index 2019 which includes infrastructure as one of the pillars of enabling an environment of a country. Nepal ranks 112th out of 140 countries in it and scores 51.8 out of a 0 to 100 scale. Thus, Nepal cannot spare to dismiss its infrastructural bottlenecks as it affects the country’s competitiveness and slacks the pace of growth while other countries move forward.
Way Ahead
The most crucial point to understand in the overall context of development is that economic activities and its subsequent inclusive growth cannot take place without an infrastructure base. For a strong infrastructure base, the participation from both the government and private sector, and legal and policy foundation is essential. The role of government and its bureaucracy has to be realized at every stage of infrastructural development i.e. from inception and licensing to construction and operation. Moreover, studies around this sector have also suggested that in order to overcome the infrastructure gap in Nepal, the private sector has to be mobilized in cooperation with the financing and policy changes by the public sector. The Investment and Infrastructural Summits have also indicated that it is high time Nepal gets investment-ready.
Additionally, it is given that infrastructural bottlenecks such as ineffective and delayed decision making, management, skewed land acquisition policies, inadequate energy and fuel supply, lack of private investment and others act as major stumbling blocks. Almost all infrastructure projects are being overrun in terms of either time or amount and thus deteriorated the quality of the projects as well. Thus, although infrastructural development is not an overnight process, integrated infrastructural development has to be convened.
Every country around the globe is progressing, be it at a fast or a snail’s pace, so there is no reason why Nepal cannot learn a thing or two from them. Learning, adapting, and actualizing the lessons is the way forward for its infrastructural development.
Nasala Maharjan is a Bachelor's in Business Administration (BBA Honors) graduate from Kathmandu University with a major in Finance. She is mostly interested in researching and writing about economic development and contemporary issues in Nepal. She joined Nepal Economic Forum (NEF) as a Research Fellow in 2019 and is currently a beed at beed management.
