A model to follow

Published On: May 13, 2018 12:10 AM NPT By: Bibek Acharya

Bibek Acharya

Bibek Acharya

The contributor for Republica.

We need to convert private-owned companies into public limited companies before allowing them in serious task of infrastructure development

Whenever you have trouble while walking on footpath or driving along the roadways, you either express your anger against concerned authorities or suggest some measures for reforms with whoever you may be at that moment. But have you ever thought about the role of the modality adopted by the government to build such infrastructures? And have you ever seriously thought about government policy with regard to contractors’ role and whether that has eased our life or caused trouble? Probably not.

May be due to political instability, past governments couldn’t play effective role in infrastructure development. Had they done so, situation would have been much better by now. 

Situation is favorable now for private investors, which have emerged as powerful players but their businesses are serving the investors instead of general public. People have been paying tax for sustainable infrastructure. But such infrastructures are not there for us. 

Private organizations should be allowed to run their businesses in every potential sector but the government should have a clear vision about the role of a private organization and the concerned authorities in infrastructure development sector. Government should strictly monitor their business activities effectively. Private companies prefer to run business confidentially. They don’t ensure transparency and fulfill minimum responsibilities toward the society. Their goal is to earn maximum profits with minimum investment. In Nepal investors with such mindset have been running key institutions such as health and education and infrastructure development.

Make them public
The government can make it mandatory for such companies to be publicly-owned institution. Once construction companies working in infrastructure sector are made public limited companies, they will be accountable to the public. They will also make their transactions public. They will be obliged to work as per the business ethics and government regulations.

Infrastructure development can contribute to uplifting economy. It can create ripple effects in production activities and generate jobs. If construction works are done by publicly-owned companies, it also increases the capital stock, a useful instrument in reducing income disparities. 

Nepal has been suffering infrastructure deficit on an epic scale. International organizations including World Bank and Asian Development Bank (ADB) have estimated that the country needs an investment of eight to 12 percent of national income to reduce “infrastructure gap” and achieve Nepal’s goal of graduating to a middle-income nation by 2030. We need to allocate huge budget for this. 

In the fiscal year 2017/18, of total Rs 1,279 billion annual budget, government allocated Rs 200.6 billion for infrastructure development, which is 15.68 percent.  Is this enough to meet its target set by World Bank and Asian Development Bank? Is the budget being spent properly? Records are not transparent. 

One big problem is overwhelmingly big portion of the budget for development work is spent at the end of Nepali fiscal year. They patch up the field just to meet the criteria to get the money released from government agencies. 

Graduating from a Least Developed Country (LDC) status can be possible only with high growth rates sustained by productive and quality infrastructure development and capital growth. This demands rapid development of infrastructure driven largely by a private sector (local and foreign) that has the technical, managerial and financial expertise to deliver efficient, high-quality and cost-effective results on the ground. But it can be achieved only if the government oversees things with clear policy. Stable government is instrumental to overall development. But overall development can be achieved only after stable growth rate and sustainable infrastructure development—in which public participation must be mandatory.

Public Private Partnership
The government should promote Public-Private Partnership (PPP) modality, which is one of the best ideas adopted internationally in infrastructure development, instead of entrusting infrastructure works to non-transparent private companies. 

The US tested PPP model in the 1960s for urban development projects. Many other countries have followed suit. The PPP model can be effective in carrying out development works in major cities like Kathmandu, Lalitpur, Bhaktapur, Pokhara, Birtanagar, Nepalgunj and Hetauda. 

It is globally accepted that private owned companies become ready to bribe officials to get their work done quickly so that they can earn money quick. They prefer fast track approach instead of following regulations and procedures. The government authorities can effectively oversee public-owned companies and make them liable to certain laws, regulations and procedures. Laws have made it mandatory for public owned companies to make public their financial statement periodically. Also, quality work can be done through public owned companies because they have to do their job in time following certain rules and regulation. 

Public-owned companies, if managed properly, can have highly qualified experts and they can be financially strong to carry out big projects. Private companies may not ensure big investments.

Thus we need to promote PPP model for infrastructure development in areas such as healthcare and education. This makes people feel ownership of the infrastructure. 

For this we need to convert private-owned companies into to public limited companies before allowing them in serious task of infrastructure development for which the government invests huge money from state coffers. Every single rupee collected from the taxpayers should be spent exclusively for their benefits.

The author is a finance researcher

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