Excellences, Ladies and Gentlemen
At the outset, let me congratulate CNI-The Confederation of Nepalese Industries for organizing this important event, Nepal Infrastructure Summit 2017. Thank you for providing me this opportunity.
In a developing country like Nepal, infrastructure development is indeed a core element of the development and prosperity agenda, which I am passionately pursuing as a politician, and also as a trained Architect/Engineer and Planner. In this context, please allow me to go beyond the usual ceremonial role of the Chair in order to make few relevant points.
I have beenemphasizing at various forum that,after a prolonged period of political changes and transformation, we have to now lunch accelerated campaign of development and prosperity. Fortunately, all political parties, government and private sectors are in a broad consensus on the urgent need of ‘leap-frogging’ in infrastructure development in order to address the people’s aspiration toward prosperity.
Physical infrastructure and services not only contribute to improved quality of life, but also to higher productivity of our economic engine. Without modern infrastructure system, our economy cannot compete effectively in the current era of globalization. Despite the fact that the policies needs to be tailored to suit country specific condition, there are however some common denominators, such as mobilization of both domestic and foreign capital, improvement of both technical and managerial capacity, technology transfer, and maximizing the private sector involvement.
The successful of experience of growth and development in East Asian countries, such as Japan and Korea shows the pivotal role of infrastructure. Infrastructure development is also a corner stone of development strategy in our rapidly growing neighbors, China and India. Unprecedented level of high investment in infrastructure has made it possible to drive rapid economic growth and socio-economic transformation in all these countries. It appears that higher infrastructure investment contributed to the growth and development through various channels, such as stimulating growth through multiplier effects and employment generation, productivity growth, global competitiveness and improved quality of life.
We have seen the infrastructure driven rapid growth in our close neighbor India. Some year in previous decade GDP growth was as high as 15 % in Bihar state of India, which was basically driven by higher investment in infrastructure. Economists celebrated the double-digit growth while people were happy more with pothole free wide highways in Bihar. This is something we can learn from.
Policy makers should not be surprised with the imperatives of high infrastructure investment in developing countries. It is not a subject of choice, and there is indeed a compelling reason for scaling up the infrastructure investment at the early stage of development. Infrastructure stocks in the western industrialized countries were accumulated as a result of investment over the centuries. These countries could adopt a rather slow pace of infrastructure development just to match the pace of technological development. And this was just fine since they did not have to face stiff global competition.
But developing countries are facing entirely different situation. People’s aspiration and demand are shaped by the modern technology and high quality of life. Economy is facing stiff global competition. For example, it took almost 100 years for London to have its population increased from 2 to 8 millions. Similar increase in population of Asian cities has been taking place just in 2 or 3 decades. Higher pace of urbanization requires higher speed of building urban infrastructure. As a result, the kind of infrastructure stock that accumulated over the period of centuries in the western countries has to be achieved over a period of few decades in developing countries. That is the reason why we need much higher investment in the infrastructure.
I therefore think that the debate is not so much about if we need higher investment in infrastructure; we all have a broad agreement on the imperative of higher investment in infrastructure to cater the need of society and economy. Out debate should rather focus on how to mobilize the necessary investment and utilize it in a best possible ways in order to provide efficient infrastructure services.
In Nepal, we have to upgrade our road system. Some of the link of our national highway system needs to be upgraded to high-speed expressways. Construction of Kathmandu-Terai Expressway needs to be started without delay. The construction of East-West electric Railways and other North-South railways routes should be expedited. Construction of Second International Airport has to be started at the earliest possible. Few big hydropower projects must be completed sooner to overcome the problem of load shading and give impetus to industrialization. We should not further delay the construction of Metrorail in Kathmandu valley. We must utilize tunneling and advanced technology for a better design of these infrastructures.
In Nepal, such a list of infrastructure projects might appear a bit ambitious in the context limited capital resources and inadequate technical capacity that we are facing now. However,being a latecomer, we have good opportunity of learning from successful countries’ experiences, including our great neighboring countries. Unfortunately, in recent years, we have been facing some paradoxes;on one hand we face limited capital resources, and on the other hand we are not able even to implement infrastructure projects funded by our regular budget. Our young and energetic engineers are unemployed or under-employed. Our construction firms are not utilized to full capacity. Our youth workforce are migrating abroad seeking jobs.
We have to reverse all these trends. For this, we must gear up our efforts by formulating comprehensive strategies of infrastructure development, and effectively implementing them.
We have also few opportunities to take the challenges of rapidly developing infrastructure. The sizable inflow of remittance amounting over annual 6 billion dollar, almost one-third of our GDP, provides us much needed capital resources. As we can see, the hard earned remittance income is currently being spent for consumption or unproductive investment. Our relatively lower debt/GDP ratio, which is less than 30%, provides some fiscal space to mobilize domestic and foreign borrowing for productive investment in infrastructure.
Unlike the past approach of infrastructure investment and management by public sector, private sector globally is involved in all aspects of infrastructure development. Nepal has also successful experience in sectors like hydropower and cable cars. I hope, in coming days ahead private sector will make a significant contribution for infrastructure development with a leading role in mobilizing investment, implementing projects and operating services in a more efficient ways. In this context it is equally important to attract foreign direct investment in the infrastructure sector, for which Nepalese private sector could be effective instruments through building partnership and joint-venture with foreign companies.
Given our diverse and difficult geographical terrains and vulnerable geological conditions, our planners, engineers and managers do not have a luxury of just following university text books or standard manual to resolve technical issues we confront in the process of building infrastructure. We have to be creative to generate knowledge and innovate solutions suited to our context. This would not only include the infrastructural needs of present day Nepal. We must plan for the future generation. We must learn from international experiences of establishing fusion of infrastructures, and Information and Communication Technology, essentially developing smart cities and modern infrastructure. This would allow us to reap benefits of global technological growth to expand and manage or infrastructure smartly. In order to address this issue, government, private sectors, experts, academics and other stakeholders should make joint efforts.
Finally, I would like to make note that our development should also be inclusive, green and sustainable. The pattern of infrastructure and choice of technology may have significant bearing on such aspects of development. Here also we have real opportunity to follow a sustainable path of development. With hydropower development, we can make our energy system carbon free. By electrifying our transport system including introduction of electric railways, we can boast for a uniquely Zero Emission transport system perhaps first in the World.
Let me emphasize again that to face all these challenges, and reap the available opportunities, the innovative and creative potential of private sector need to be fully utilized. Given the weak capacity of public sector, Nepalese private sector should emerge as a trusted partner not only for investment and implementation but also contributing to policy innovation. I take this initiative of CNI to have beenexactly in this spirit. This forum has brought all-important stakeholders together. I look forward to stimulating sessions and discussions, which would certainly contribute towards generating new ideas and insights. I once again thank and congratulate CNI for taking a lead in this endeavor.
Dr. Baburam Bhattarai
19 February 2017
Nepal Infrastructure Summit – 2017