Mobilizing internal resources for mega infra projects
KATHMANDU, April 3:
Infrastructure constraints are impediments to Nepal's development as well as economic growth. As infrastructure development needs huge investment, experts have differing views on the ways to finance infrastructure projects.
Some say the government should develop key infrastructure projects by mobilizing internal resources, like pension fund, others say the government should look for foreign investments citing investment gap.
Talking to Republica, former finance minister Surendra Pandey said the government should take initiative to develop key projects like Kathmandu-Tarai Fast Track and Budhigandaki Hydropower Projects by mobilizing internal resources. "These projects have lot of economic benefits. The expressway reduces transportation cost as well as import of petroleum products, while the 1200-MW Budhigandaki will be crucial to end load-shedding," Pandey said adding, "Such projects can draw investments from both the private sector and foreign investors."
Stating that donor-funded projects have not been successful in Nepal due to delay in decision-making as well as time and cost overruns, Pandey said projects of national importance should be developed by mobilizing internal resources learning from the example of Upper Tamakoshi Hydropower Project.
Participants at the meeting of Development Committee of legislature-parliament held two weeks ago aired differing views on foreign investment in infrastructure projects, particularly the Kathmandu-Tarai Fast Track Project. Former finance secretary Rameshwore Khanal and some others argued that the government should invest in Second International Airport of Nijgadh and Fast Track in an integrated manner by mobilizing its resources. "The government should accord high priority to these projects as they make significant contribution in socio-economic development," he added.
Ministry of Physical Infrastructure and Transport, however, decided to award the contract to prepare Detailed Project Report (DPR) of the project to an Indian company saying that the undergoing contract process cannot be ended midway.
Officials of the Ministry of Finance (MoF) also say the government can finance key infrastructure projects on its own. "The government can also increase internal borrowing, which stands at only 2.5 percent of GDP at present, if it faces funding shortfall," an official of the finance ministry said, adding that increment in internal borrowing can be justified as rise in capital expenditure gives a boost to economic growth.
Finance ministry officials also said investments is key infrastructure projects, like better roads and hydropower projects, can also help to bring more foreign investments.
"We need around Rs 100 billion for the fast track road project. The government can develop the project by allocate Rs 20 billion each year for five years," the official, who has worked with the budget division of finance ministry, said.
Economists say development of project of such scale can also trigger demand and growth of manufacturing sectors making significant contribution to Gross Domestic Products (GDP).
Upper Tamakoshi Hydropower Project, Sikta Irrigation Project and Rani Jamara Kularia Irrigation Project and Mid-Hills Highway Project are some of the mega infrastructure projects being developed by mobilizing internal resources. Another mega project, Bheri Babai Diversion Multipurpose Project, is also starting in the near future.
Different institutions like Employees Provident Fund, Citizens Investment Trust, Nepal Telecom and Nepal Army Welfare Fund are sitting on cash pile of Rs 120 million. The money is deposited in fixed accounts of different banks and financial institutions.
Economist Bishwambher Pyakuryal suggests public money parked in these institutions should be used in productive sector. "Infrastructure should be a priority sector for them," he added.
Pyakuryal say Public Private Partnership (PPP) can be the best model to develop infrastructure projects. Saying that infrastructure projects being developed by donor agencies are facing different problems, he said they might not be interested in infrastructure projects anymore" "Therefore, the government should come up with risk-sharing schemes in exchange rates to encourage foreign direct investors and develop the projects in PPP model. This is the best available model," said Pyakuryal.
Source: Republica
