Our efforts at resettlement and reconstruction need to go hand in hand with development of mega projects
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The government has announced the budget of Rs 819.46 billion for the coming fiscal with focus on rebuilding the country devastated by the recent earthquake. Given the billions of rupees-worth infrastructure damage, the budget is crucial.
The earthquake has strained government efforts and is going to drain out resources. The outrageously slow economy has hit the skids with an initial projection of three percent growth for next couple of years. We get more dismayed when the figure is compared with our neighbors. Our close neighbors India and China both registered 7.4 percent economic growth in 2014, far higher than our growth of 5.1 percent recorded the same year.
At such a critical juncture, our efforts at resettlement and reconstruction need to go hand in hand with development of mega projects. A long-term plan with transparent mechanism can navigate through a host of challenges created by the disaster.
The Post Disaster Need Assessment (PDNA), a comprehensive document, prepared by the National Planning Commission (NPC), can be a guiding principle for economic prosperity. The government seems to have secured two-thirds amount envisaged by the PDNA for reconstruction of damaged infrastructure. We need to repair a number of crucial agencies; particularly the government delivery system.
Existing state structures are not sufficient to undertake reconstruction and to bring economic vibrancy. To complete much-needed reconstruction, the government should give sweeping powers to National Reconstruction Authority to be headed by the Prime Minister. However, merely constituting a body won't be enough. We need to make our bureaucracy competent and committed and able to rise above petty interest and shun conventional ways of working.
Nepal needs massive reconstruction and new construction. Private sector can help implement national development plans. Yet, a small economy like Nepal does not have a vibrant private sector to satisfy the needs of technology and capital. Hence, the government has to involve domestic as well as international investors in developing infrastructures.
The share of private sector stands at two-thirds of overall economy which means it can play a vital role in economic transformation of the country. However, this sector's investment in infrastructure is less than one percent. Nepal is 132nd out of 147 countries studied by the World Bank in terms of quality infrastructure.
Huge infrastructure gap poses challenges for Nepal to graduate to Developing Country status by 2022. Nepal needs to invest as much as US $13-US $18 billion and achieve at least eight percent annual growth during 2012-2020 to hit the target. Chronic investment deficit in infrastructure could hinder Nepal's journey to graduation.
We have to boost private investment in reconstruction and infrastructure development. Foreign assistance would not be enough to sustain the economy. Our initiatives need to focus on promoting private investment to unleash employment opportunities and pave the way for other economic activities. For a country like ours, foreign investment is not only a source of capital but also a key channel for entry of technology required for infrastructural growth.
Indian state of Gujarat is an example of how foreign investment can result in massive economic transformation after an earthquake (in 2001). Gujarat Chief Minister (now Prime Minister of India) Narendra Modi took the lead to boost foreign investment by plugging the gap between development needs and required resources. Gujarat has already hosted more than half a dozen international investor-conferences to sensitize local as well as global investors about investment opportunities there.
Responding to the call for investment from Gujarat, more than 8,400 Memorandum of Understandings were signed with the commitment of investment worth 20 trillion Indian Rupees in 2011 alone. Mainly, Gujarat saw unprecedented revolution in energy, agriculture, infrastructure, service and industries over the last decade, mainly due to massive inflow of foreign capital.
However, only resources can't bring desired results if we don't have plans to spend available resources effectively. For years, we have had weak budget spending that worsened our capacity to implement development programs. We have been able to spend only 70 percent of allocated annual capital budget. Unless the government lures them, the private sector will not be attracted. Public-private partnership can be a viable option to encourage private investment in infrastructure.
Donor community representatives have also strongly raised the issue of weak spending capacity of the government and sought the guarantee of proper utilization of their funds. We may get far less donations than committed by donors if we fail to properly address their concerns. The government needs to have plans for convincing them and setting up a system that ensures better spending and transparency. As the recipient country, it is our duty to ensure that donors' fund is optimally utilized. Since the fund pledged by some donors can be mobilized through their pet non-governmental organizations, we should be equally vigilant to prevent another Haiti.
The earthquake set off a debate on investment and rebuilding Nepal. As Nepal is close to the end of decade-long political transition, with recent breakthrough in new constitution, the climate for investment is getting favorable. Though we are in 108th position in global index in term of climate for doing business, we are still second after Sri Lanka in South Asia.
Though Nepal has initiated reforms in laws, policies and tax regimes and announced some incentives for investors, it needs to do more. We need reforms in bureaucracy, strengthen capacity for spending, ensure transparency and end red-tape so that we can encourage private investment.
Foreign investment in coming days depends on how we project Nepal in the global arena. We have to circulate the messages that despite the huge earthquake, Nepal is still an attractive destination for investment given the new opportunities opened up by the recent earthquake.
prabhakarji@gmail.com
