Infrastructure | Private Sector Development | Construction Industry
We are practicing bad, ill-informed and sub-optimal macroeconomics
In this detailed interview with The FarSight, Dr Surya Raj Acharya, Nepal's prominent infrastructure expert, presents historic insight and interesting examples, unravels the wrong path taken in economic planning and economics mispracticed, elaborates on challenges and opportunities in the construction industry and for Nepal’s young population, and expresses despair over Nepal’s urbanisation debacle – all with respect to Nepal’s infrastructure development.
Dr Surya Raj Acharya is a staunch advocate of infrastructure investments to stimulate Nepal’s economy to the next level. He stresses that some of those investments would be a game changer for Nepal as multiplier effects start realising in the long run and dismisses concerns over short run financial feasibility. He also highlights on the urgent need to develop a vibrant construction industry if Nepal wants to take control of its development processes independently and in a sustained manner. The interview in full:
You’ve been strongly emphasizing the need for some large infrastructures in Nepal. If we are to go big time as soon as possible, how do we manage investment sources from?
First let me clarify that I do not mean that we need only large infrastructure. We need diverse kinds of infrastructure, large and small, urban and rural, conventional and modern and so forth. Yet, the importance of large infrastructures is that they set a basic physical structure of our development within which infrastructure of lower hierarchy operates. And when it comes to the investment necessary for the large infrastructures, let me give you a brief background why investment source has become too big an issue than what it deserves.
If we study the infrastructure development process in pre-WW II Europe and the US, and compare it with post-WW II economic success of East and South Asian countries, or even India, there’s a fundamental difference. The West had to wait for each technology to emerge before building the necessary infrastructure.
Canal transportation dominated shipping for the period of 18th century to early 19th century. Railways dominated the next 100 years from 1825 onwards after railway technology emerged utilizing the steam engine. At the end of 19th century and early 20th century, the technology of internal combustion engine disrupted the monopoly of railways while Ford automobile technology gave birth to the need for road infrastructure by introducing large scale car manufacturing capability.
Technology evolved over time while the west simply adapted to the changing dynamics by building suitable infrastructures. It wasn’t the other way around that they spent massively on infrastructure with long proven technology. There is no concrete data but it is estimated their public investment was less than two percent of the GDP during the 19th century, because there was no need for massive infrastructure investment at that time.
Relatively, post WW II, East and South East Asian countries had no option but to make massive public investment at once to get out of underdevelopment, become competitive and because most technology were already developed by then. Japan, at the peak of its growth trajectory, spent 3-4 percent of its GDP on transport infrastructure alone. When Japan did that, the west was astounded with the scale of their public investment because they viewed it as fiscal burden. On top of that, Japan did it by mobilizing internal capital including fiscal borrowing.
Japan made those investments through its dual budget program, its regular budget and its ‘second’ budget known as Fiscal Investment Loan Programme (FILP) (Jaito in Japanese language) that began in 1953.
**[In the words of the book Japan’s Fiscal Crisis: The Ministry of Finance and the Politics of Public Spending, 1975-2000, FILP is a policy-based public finance system that channelled small investors’ accumulated savings to projects, dedicated to achieve national economic and social objectives, run by governmental and quasi-governmental organizations]**
Investments were made in infrastructures as railways, public housings and expressways and on cost recovery basis. Many other countries like China and Korea followed the path and began emphasizing public investments.
The approach raised the need to rethink the narrative about public investments in macro economy, particularly in developing countries, that it is a means to stimulate economies and not fiscal burden. Countries could benefit with multiplier effects with boost in aggregate demand, supply side effects such as high productivity and cost-efficiency and domestic and international market competitiveness.
In present time, technology has progressed to another level and all of them are available at once. Electricity has become a basic essential. Railway technology has moved on from conventional to high-speed (bullet train). The world is connected more than ever with the advent of internet.
So, basically Nepal is in the state East Asian countries were at during the sixties and the seventies.
It is natural for Nepalis to desire many forms of infrastructures – from mono and metro rail to freeways and telecommunications to rural electrification. Building them all at once is a herculean task, which even the west achieved successively but at a gap of around a century.
So, of course, source of funding is a big challenge for us, because there are so many things to do, but little resources. However, finance is not a binding challenge.
Our view about infrastructure, in Nepal and other developing countries, is shaped by the capital intensity of infrastructures. We need to get out of that loop, and believe that big infrastructures are possible within our own might.
The key is good economics, farsightedness, determination, building technical capacity, planning and execution. If appropriate approach is followed, the investment would not be as binding as commonly perceived to be.
East Asian countries achieved it by applying innovative and strategic approaches to financing challenges. So can us. Our economic and infrastructure planners should rethink and draw some inspiration and adopt possible lessons from them.
Can you provide with some more specifics about these inspirations that you just talked about? It would be interesting for our readers to read them in snippets.
When Japan built its first 29 km railway line from Shimbashi (Tokyo) to Yokohama in 1870-72, it developed the project from British financing borrowed in pound sterling at some 12 percent interest rate. Their capacity for railway technology was zero then. Mind you, it wasn’t a grant and this is 19th century that we are talking about. Why did the Japanese feel the need to take such a drastic step?
Meiji regime viewed these critical infrastructures as strategic ones and their window to rapid modernization, thus, loan burden and associated risk was worth taking. The railway was built under the best British and European advisors and engineers under the condition that they would train the Japanese workforce. The line was built in four years. In the next 10 years, Japanese workforces were sufficiently trained in railway construction. So there is your technology transfer and there is your skilled workforce.
If you relate this example with Janakpur Railway which was reconceptualized some 10 years ago, you’ll feel sorry to know that it lacks similar vision.
The problem is that our political leaders hardly understand economic concepts, but they are really good at consistently repeating rhetoric as national saving or capital (rastriya punji nirmaan as they constantly repeat in their speeches). Were they sensible, we’d have institutions as Japan Post Bank that played a significant role in the making of the modern Japan.
In their phase-I stage (1945-1960) of post-war reconstruction, inadequate saving, (household saving rate was around 10%) was a major macroeconomic challenge for Japan. The postal banking (saving) system had a wide reach and helped Japan accumulate large savings. That’s where FILP came in and channelled investments into infrastructure development and key industries.
Often in its history, the bank made it to the largest financial institution with its huge deposit base. It was these savings that helped Japan recover from the devastation of WW II while Japan did not have any significant financial assistance like Marshall Plan.
Similarly, there are examples of value capture mechanism to finance infrastructure. For instance, a master-planned infrastructure, like a metro rail network, can boost land and real estate value that developers can leverage to finance and sustain the metro rail.
Hong Kong comes to mind that successfully employed the value capture mechanism in financing its vast public transport system. In a nutshell, Hong Kong’s Mass Transit Railway Corporation (MTRC) first formulated a comprehensive master plan incorporating its metro system and the land surrounding the projects, took necessary approvals for the project and government rights for property developments in land surrounding the stations and depots, then allotted those property development rights to several private developers, for commercial and residential undertakings, through bidding and finally, forged partnerships on different risk and profit-sharing modalities (for instance, buyback guarantee of residential units by MTRC) with them on different real estate activities like selling and renting commercial and office outfits and residential units.
As there is premium value generated by the public investment, it is natural for the MTRC to seek handsome returns through different real estate activities while the private developers were happy to bear property development costs and risks. The model was lucrative for both enabling MTRC to operate on its own cash flows without government subsidies, which is quite a rare feat for a public transport system.
So what should be our ways of doing things?
Based on the experience of East Asian countries, it is critical to understand that when infrastructure projects are conceptualized, it would not be appropriate to rationalize them purely on financial basis. At the developing state, physical infrastructure brought about structural changes.
Conventional economic analysis cannot capture all wider benefits of infrastructure. That’s number one.
Second, the fact that we need to manage massive funds to finance our infrastructure projects is a back-of-the-envelope estimate. For that, we need to explore different mechanisms like ‘Value Capture’ to unlock private and public capital .
Third and most important is sound economic planning. As far as managing sources internally are concerned, countries as Nepal face saving and investment gaps (based on two-gap model in economics). To manage these economic constraints, there should be strong internal resource (capital) mobilization policy and internal borrowing policy among other things concerning public finance system. A structural reform is warranted in this front, otherwise bad economics lead to bad economic planning.
Why I am saying this is these are tricky waters to sail. For instance, even if you have high national saving, the balance of payment (BoP) - your foreign exchange reserve - may dwindle sharply if you make investment in projects with high import component. So you need to maintain a strong foreign exchange reserve all the time. Here, our remittance income has provided a certain cushion to us for a long time now but we have been unable to leverage it.
On the other hand, Nepal has low debt-GDP ratio, around 40%, which allows us to take up some more debts to meet its infrastructure financing. Japan has one of the highest debt-GDP ratios, more than 200%, yet servicing its debts comfortably. Most of its debts are internal borrowing, which are easier to manage. Greece had similar ratio as Japan but fell into severe crisis in 2009. Most of its debts were external, owed to foreign lenders.
Nepal can manage its infrastructure financing by means of internal borrowing taking cues from Japan. Our remittance income clearly provide the leverage while stock investors flocking at IPOs in recent years is a sign that there are dependable domestic liquidity and ready investors.
Then there is taxation. I have often reiterated in public forum, including the events at National Planning Commission and Ministry of Finance, that Nepal should hike its fuel tax, drawing lessons from Indian and European fuel taxation policy. Economists often suggest that fuel tax is the best tax in the world since it has positive impacts on both distribution and environmental ground. For us, it is environmentally good and as a net fuel importer, it may also help us reduce our import bill.
There are detractors against this approach who raise inflation concerns but economy is about trade-offs. It was this tax that created reserves for Buddhigandaki project’s land acquisition. We can learn from India, which imposes one of the highest fuel taxes in the world. Because of relatively higher fuel tax, fuel price in India is higher than in Nepal though Nepal imports petroleum fuel from India.
Taxing fuel and earmarking the revenue for infrastructure fund is a common approach adopted across the world which our planners have ignored for long.
Another important source is private sector. Based on revenue trait, infrastructure is of two types – revenue generating and non-revenue generating. Non-revenue generating are public goods like parks and general roads. Other infrastructures are revenue generating like hydro powers, solar energy, drinking water supply, waste management and telecommunication where profits can be generated.
Naturally, private sector will be interested in investing in revenue generating infrastructure projects and making profits but one of the key parameters that determine their feasibilities is interest rates. For an infrastructure project with long payback period, even a one or two percent higher interest rate would be enough to render the project financially or economically unfeasible. In Nepal’s case, private investors are accessing bank financing at more than nine percent interest rates to develop these projects. One of the key issues policy makers in Nepal should focus on is to make the cost of capital - interest rate - for infrastructure cheaper.
I am not a trained economist or an experienced banker, but as an observer of our financial system, capital mobilisation policy and domestic borrowing plan, I can tell you that we are practicing bad, ill-informed and sub-optimal macroeconomics, and have an inefficient capital market. So it is not just politicians who have failed us, our policy makers and planners are equal culprit.
How about we focus on public health infrastructures, some robust universities and few critical road infrastructures for the time being, and gradually shift gear towards larger infrastructure investments?
I completely agree on the first argument, but any investment that you make on current inefficient structure of our education or other system is a waste of tax-payers’ money and our scarce resources, unless you revamp them entirely.
The ground reality is that our teacher-student ratio in our public schools is disproportionate; doctors are more inclined to catering at private hospitals despite their appointments at public hospitals while public health facilities are dysfunctional. Where is research at universities? In fact, are there any really high-quality universities in Nepal? Our students lack critical thinking skill and are plagued by photocopy culture, an ill-practice nurtured by the university itself.
We are pouring scarce resources into a dysfunctional public system, while citizens are bound to use private services. What economic sense does it make to fund them?
How do we correct them is by setting our policies and our system right, and to do that we don’t have to look forward to donors’ money that is squandered on consultancy, foreign visits and vehicles in the name of institutional reforms.
I don’t agree on the second part of your question. I’ve already explained about it. Our budgetary system of financing infrastructure including the Official Development Assistance (ODA) is myopic, extremely incremental and conservative. Our mindset is plagued by inferior complex - Nepal cannot accomplish big projects without donor assistance and it shouldn’t bite off more than it can chew, both of which are utterly wrong narratives.
You just spelled out donors’ money, so I’ll quickly deviate to the topic of development cooperation. How do you view rebuilding our heritages (reconstruction) using donors’ money?
There’s a large display board at one of the Hanuman Dhoka monuments that proudly brands a donor’s reconstruction effort. Many other heritages are also being built using donors’ money. It is a national shame that we are relying on donors’ money to reconstruct heritages that our ancestors built some centuries ago on their own capabilities despite being relatively poorer than what we are today. Clearly, it is not an issue of resources when we are lacking the ability to fully utilise (spend) our national budget.
It is gross irresponsibility and insensitivity to allow donors to involve them in. Their names will be engraved on our heritages for decades to come.
There should be policy correction in our overall development cooperation strategy. We should be courageous enough to say that our heritages are off-limits, but fungible enough to divert proposed funds to other hardware like school buildings, roads and bridges.
How do you analyse the role of private sector in infrastructure development?
Private sector should be at the core of infrastructure development and nation building. Priorities, policies, project identification and protocols are government’s territory of work; private sector does the real work by bringing in investments and doing construction, operation and management works.
This means, within the domain of any infrastructure, private sector plays a crucial role in fulfilling different functions – investment (investors), consulting (technical consultants), construction (contractors) and management and operation (technical and management expertise).
In feasible areas, private sector takes the investment initiative on its own. I’ve already mentioned how one of the key parameters - interest rate - is influential in restricting private sector capacity.
In other areas, the sector compliments government’s investment by forging partnerships (Public Private Partnership). In others, it fills the gap where government doesn’t have the budget but the ability to afford incentives for private sector.
However, private sector role should not be taken as a substitution to the government's role. In absence of effective government institutions, private sector motivation could be ‘rent-seeking’ instead of innovation and productivity. As the Nobel Prize winning economist Amartya Sen has wisely said: “The invisible hand of the market has often relied heavily on the visible hand of government.”
How do these different infrastructure activities come together in the making of a vibrant construction industry?
For an infrastructure-crunched country, construction industry is a key sector where there are several opportunities for the private sector. So the government must promote it at any cost. As Nepal doesn’t have one that is dynamic, we can begin by formulating a concrete, forward-looking and private sector friendly policy - which is an extremely important need of the hour.
Had there been Nepali contractors in Melamchi project, it wouldn’t have to go through all the ordeals that it is now accustomed to. With foreign contractors, once there is dispute, it attracts international tribunal for dispute resolution. Just look at the transaction costs that arise afterwards.
In the absence of a vibrant construction industry, we will be compelled to rely on foreign partners forever, not just in core construction but for consulting, operation and management purposes too.
In infrastructures like public transportation, hydro powers and transmission lines, there are good opportunities for private sector in their operation and management functions. It is high time, we start building our own expertise.
On the other hand, construction industry is also a strategic industry encompassing the component of national security. In developed countries, contractors are national security partners like military contractors. Thus, government must be open-minded and proactive in developing the private sector capacity vis-à-vis construction industry to boost their participation in the nation-building process.
What about investments? How do you evaluate investment feasibility?
I have a critical view there. In Nepal’s context, several revenue-generating projects may have strong economic benefits but not financially feasible because Nepal’s economy is not matured enough to provide scale. Some investments can thus have huge financial implications for the government if it fails to apply the right investment model.
One instance is Kathmandu-Terai Fast Track Project (KTFTP) which could have been a blunder if it were undertaken in the proposed financial arrangement. As Nepal’s motorization is still not developed, traffic demand and toll fee revenues from the project didn’t look exciting. The developer had sought an annual Minimum Revenue Guarantee (MRG) in the range of USD 150 million for next 25 years from the government’s side. It was natural for the developer to seek returns on its investment but the PPP-BOT modelled project could have turned into a massive financial burden for the government. Plus, usually there are chances of renegotiation on PPPs due to their long horizon.
Compare it with Bangkok’s Si Rat Expressway (second stage expressway). It was one of the first large-scale construction projects in Thailand built in PPP-BOT model with investment from Kumagai Gumi, a giant Japanese construction firm. As Bangkok’s motorization was already matured and road toll revenues looked good, the project was undertaken under different revenue sharing modality at different intervals of the concession period of 27 years. In fact, the actual traffic was more than estimated, and the investor made handsome profit (which paradoxically brewed trouble as this triggered public criticism, and the project was finally bought back by the government-owned corporation).
About KTFTP, I had strongly objected to it to the then government led by PM Sushil Koirala. The PPP-BOT model was inappropriate for the project because it wasn’t a commercial project (financially unprofitable) as Si Rat was, and rather needed public investment because the project is crucial from economic development perspective. In this sense, the government should be able to take financial risks, and finance it through its own means or think about alternative mechanism like Viability Gap Funding (VGF) to reduce its obligations.
India innovated Viability Gap Funding (VGF) to meet similar feasibility gaps - an investment vehicle that provides capital subsidy to private sector in PPP projects that are financially unviable owing to project’s long development period and small revenue stream.
If that’s the case, why do authorities take such gross decisions?
In Nepal, based on my observations, there is a tendency to rationalise infrastructure projects from the lenses of hydropower investments. Hydropower investments are usually commercially viable - there are ready investors (equity), easy credit flow (debt) while the Nepal Electricity Authority (NEA) endorses the business prospect (revenue stream) by signing Power Purchasing Agreement (PPA). Of course, there are risks but you can see the project horizon clearly.
Unlike hydropower projects, infrastructures such as airports, highways and railways are much trickier, but economically necessary. However, in many big projects, PPP just doesn’t work, so public investment is necessary.
One reason why such negligent (KTFTP) decision happens is because there is little understanding about infrastructures and financial and economic complexities surrounding big projects among planners. For them, it is easy to utter rhetoric and fancy acronyms as PPP and BOOT or BOT whenever they are posed with questions about metros and airports, but they don’t heed to possible ramifications from long-term perspectives.
And it doesn’t have to be about financial angle only. It can be about technology. What we plan today must either incorporate the best technology around or be easy-to-integrate with future technology/needs.
For instance, some of our railway lines are being planned ignoring the standard gauge track system, although it is most widely used in the world. Instead, the railway department is considering broad gauge track system that Indian Railways is primarily dependent on. But, India itself is upgrading to standard gauge system, creating a separate railway track for its Mumbai-Ahmedabad high-speed rail line.
[For more on railways, read Dr Acharya’s take published on https://www.onlinekhabar.com/2020/08/889704]
In view of what you’ve explained so far, what should be Nepal’s immediate plan of action/focus area with respect to private sector based on long-term goals?
I’d say undivided focus on developing our construction industry and building private sector capacity in the infrastructural domain.
What is our present industry state?
If any private sector player wants to undertake a cable car project, it takes more than a year to obtain approvals due to policy gap and red tape. Dependence on foreign firms,consultants and workforce pervades across our infrastructure works. For instance, over the years, our capacity in Detailed Project Report (DPR) engineering consultancy has gone down and reliance on foreign consultants has increased. Our present state is such that even drivers will have to be hired from abroad once railways are developed.
The next thing is government lacks clarity on directing public and private investments. Its investment management is misplaced - seeking private investments in infeasible areas, like KTFTP, while ignoring the other areas of the construction industry where private sector can prove effective.
One remedy is that government clearly demarcates its role and investment areas, do only some construction works where necessary while leave other functions to the private sector. Private sector can engage in so many ways – BOOT, management contract and outsourcing while it is much efficient.
Take few instances. Security guard profession has changed over time after outsourcing firms like G4 Security Service disrupted the market. There is professionalism and quality service delivery now while service seekers are relieved from the challenges in securing professional and reliable security service. These experiences will come handy later in managing different infrastructure functions.
In developed countries, they have solid infrastructure management and quality works not because their government road engineering agencies hire top students, but because these top talents actually work for private consulting or construction firms.
Another example is that many countries contract private firms with road maintenance task under performance-based maintenance contracts; it is why roads are potholes free with immediate repair service at disposal.
The mechanism works because unlike public sector, private players aren’t constrained by bureaucratic and time consuming processes like reporting, approvals and tenders and so forth and so on. If we allow our current system to take care of it, it is highly probable that even small cracks will open wide incurring higher loss of tax payers’ money.
To fight inefficiencies and reduce dependence, you’ll have to make room for private sector’s creativity, promptness and resourcefulness to come into play. That requires government reinforcement.
The government should formulate encouraging construction industry policy that is able to unlock market potential and private capital, enhance private capacity, prepare skilled workforce, treat construction industry as both infant and strategic and regulate where necessary and most importantly provide strong support and incentives.
Bear in mind, once any infrastructure is built – our own construction industry should be capable enough to take control of their overall affairs. Relying on foreign firms and consultants for operation and maintenance is neither economically, nor strategically wise.
How about private sector’s complacency?
I agree they aren’t proactive enough and rather complacent and risk averse. Top private firms run as family firms. There are no permanent engineers. They hesitate to hire best talents from home and abroad, provide sufficient training and attractive benefits to their workforce and turn big by drawing capital from public. I don’t understand why they don’t see the larger picture and risk putting extra efforts to undertake capital-intensive projects and become more competitive.
One possible reason could be the failure of government policy to provide right incentives to private sector firms.
On the other hand, their own associations don’t care enough in forming independent research wings that can guide them into the future.
As someone who is into infrastructure so deeply, you must be aware about Nepal’s overall urbanisation process as well. How do you evaluate Kathmandu’s urbanisation?
Urbanisation is a key element of modernisation. Europe introduced planned development, urbanisation being its crucial component, together with colonisation.
Our Victorian-era styled durbars, for instance Singha Durbar, or parks as Ratna Park, were influenced by European modernisation. So Rana regime did take some initiative in introducing urban concept. There were brilliantly managed spaces, squares and housing, much earlier to the Rana regime, built during the Lichhchhavi and Malla era as well.
Unfortunately, there was no learning from those historic bodies of works. We failed to advance those legacies post-1950. There is hardly an urban structure, style or system that gives a sense of modernity. Is there?
Although the late King Birendra was educated in Harvard and Tokyo University, he failed to introduce urban planning during his reign despite all those exposure. For pre and post-Panchayat political elites and leaders who arrived in the city from remote villages, Kathmandu was already a dream-come-true destination, so they never cared for upscaling or reforms.
Basically, Panchayat and post-Panchayat regime failed to set-up any foundation for physical development and urban planning. Presently, Ministry of Urban Development is the least technically capable public agency. If you look at India, the urban authorities are one of the most autonomous and technically stronger bodies.
Just an example - other than a six-lane road built by the Chinese, there is no other six-lane road in the capital region dwelled by more than four million people.
I am not speculating this - it’ll take more than an hour to pass a juncture in Kathmandu in next few years if metro lines aren’t built sooner.
Anyways, the point is we have completely messed up Kathmandu; as a result, we are choking now.
It’s paradoxical but large part of Kathmandu, otherwise a naturally gifted place, is nothing but a slum dwelled by the rich today.
What’s your observation on urbanisation outside Kathmandu?
I know a thing or two about urban planning from infrastructural perspective.
Recently, I was strolling at the bank of Narayani River from Bharatpur to Meghauli. It’s a fantastic place with the potential of a waterfront, and one of the beautiful Asian cities. Any city blessed with a large river is an asset for urban planner architect. There is Rapti at one end, Narayani at the other, national park is close by, while hills and mountains are clearly visible.
But urban development anywhere in the country, including Chitwan, is changing rapidly beset by the greed and myopic activities of unprofessional real estate developers. Their activities is leaving behind unplanned small fragmented plots of land that are devoid of open spaces and where building amenities will prove costly.
In absence of robust, visionary and sustainable urban planning, we create projects without a broader framework. Concepts as land pooling or value capture mechanism are sidelined. Sites for sports stadium to assembly hall projects are picked up based on single criteria as land availability.
If land acquisition to build cities is too expensive, planners can advance their ideas with land pooling. By pooling lands from voluntary land owners, government agencies can build planned amenities such as hospitals and administrative offices, parks, roads and sewages and other suitable amenities there. As for land owners, they will receive back a certain portion of their land contribution, but with a raised value in a picturesque city.
In case of old cities like Pokhara, Biratnagar and Birgunj, there’re still room to implement reforms. Third-ranked cities like Bharatpur and Butwal-Tilottama corridor are growing yet largely open, there’s a good window of opportunity to transform them into a planned urban hotspot.
But when I look at their present state, I have no doubts that it's not just political parties who have failed us in an unimaginable scale - it’s the policymakers and planners too.
About urbanisation, I, too, should be self-critical on behalf of our professional fraternity including urban development planners. It is our failure that we couldn’t own and take this conversation at public and political level in layman’s language.
But one thing is certain, urban development needs a serious dialogue at government, media and civil society level, and some urgent interventions.
Finally, what are the opportunities and challenges associated with infrastructure concerning Nepal’s young population?
As construction industry requires wide range of expertise and manpower, it offers plethora of opportunities for youth, but comes along with a set of challenges.
The work of construction workers is looked down upon. It is viewed as humiliating work, despite being a skilful and rewarding profession. The perception should change.
While a portion of our own workforces are migrating to Gulf countries for menial jobs, construction firms here have to rely on Indian workers to get their projects done. There is a clear supply gap. Quality skill training centres are, thus, highly essential.
For academically trained workforce, they can enter white-collar job market by joining existing firms, as construction managers or start their own firms in the line of consulting, construction, management contracting, operation and maintenance, outsourcing, designing and many other areas where tech and engineering intersect. What is so amazing about the evolution of technology is that it has opened unimaginable opportunities for people anywhere in the world who want to integrate with the global market.
Similarly, Nepali engineering talents have often proved their mettle in the international arena. If we can create exposure, growth and retention plans, our young talents can emerge as world competitive engineers by working in the domestic projects itself.
So, government and private players should play a proactive role in attracting the youth, removing bottlenecks for them, polishing and harnessing their skills, ensuring attractive career prospects and linking them with opportunities. They should understand that if young minds grow, they’ll grow too.
For instance, government can create targeted risk capital funds (fully interest subsidised) that cohorts of graduating engineering talents can easily access.
Additional support should include creating opportunities to gain first-hand experiences from ongoing international firm-led projects, like the ongoing Nagdungha tunnel work, for skill and knowledge transfer. Remember Japan during the sixties and seventies of the 19th century.
In fact, we have a good opportunity to benefit from our northern neighbour China, who is now the global leader in infrastructure technology and management. We can forge collaborations with Chinese counterparts (government bodies, universities, and construction firms) and unlock avenues that allow our students and engineers to gain knowledge and experiences from Chinese expertise in infrastructure development.
Last but not the least, we need to fill some infrastructure gap at the earliest to unleash rest of the youth potential. Nepal is poised to reap demographic dividend which can take a backseat if infrastructure gaps persist and pervade. Political will and consensus to take some financial risks would be a perfect starter.
Anything you’d like to add at the end?
We talked about different aspects of infrastructure development – technical capacity, budgetary concerns (financial management and economic planning), political will and bureaucratic abilities and the role of private sector, which are basically endogenous factors.
Another important aspect is to seek a judicious balance between physical development and environmental conservation. Nepal is rich in nature but also vulnerable environmentally. This unique situation call for an innovative approach to plan and design our infrastructure to make them environmentally sustainable and compatible with our nature and landscape and enhance the natural beauty.
There’s also an extremely important exogenous factor - geopolitics. Nepal’s geopolitical positioning leaves it confounded and struggling amid the interests of its neighbours and of course, the west. Large infrastructures including cross-border ones may attract attention of big neighbours from geopolitical view point. That’s something Nepalis politicians will have to manage tactfully and in the best interest of the country.
Interview and text by Sabin Jung Pande
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