Monday, August 6, 2012

Country needs to triple investment on infrastructure


The country needs three to four times of the current level of investment in infrastructure to achieve growth targets.
"Currently the country has been spending around three per cent of the total gross domestic product on infrastructure but it’s not enough," said country manager of World Bank Tahseen Sayed at a workshop on 'Private Investment in Infrastructure: Mapping a Way Forward in Nepal' organised by the Investment Board and World Bank here in the Valley today.
"ADB estimated that some eight per cent investment of GDP on infrastructure is required to meet the economic growth," senior transport specialist at the World Bank Farhad Ahmed said, adding that an addition of $1.3 billion to $2 billion per annum up to 2020 is required, whereas 25 development financing institutions contributed $226 million to infrastructure and other economic sectors in 2011. "Similarly private sector invested $35 million in infrastructure between 2005 and 2010."
The World Bank Study has, however, revealed that weak regulatory and institutional environment, apart from inadequate institutional capacity, fiscal risk, viability gap funding and lack of bankable projects made the Public Private Partnership (PPP) — that is key in developing infrastructure — difficult.
The involvement of private sector in the PPP projects has to be clarified, according to senior PPP specialist at the World Bank Sri Kumar Tadimalla. "Private sector is necessary to bring efficiency, not for capital," he said, adding that PPP is a tool not an end to achieve development.
Development of infrastructure will create base for higher economic development, said caretaker finance minister Barshaman Pun inaugurating the workshop. "But the growth has to be sustainable," he said, adding that there is a huge investment deficit. "The country needs to join hands in the sectors of hydropower, transportation and irrigation with private sector, apart from using pension fund and capital market as source of investment for infrastructure that could propel growth."
However, the single most important macro constraint for Nepal's economic growth is the weak investment in infrastructure which has had a cascading and crippling impact on other vital aspects of our economy like tourism, industrial development, and hydropower, said chief executive of Investment Board Radhesh Pant.
Nepal ranks 119 out of 125 countries in the world in infrastructure quality, according to the World Bank database. "The first step to fostering economic growth in Nepal should be to focus on infrastructure development with respect to a viable strategy and political and public consensus," he said, adding that the government alone cannot undertake the financial burden and risks involved.
Like the governments around the world that have learned that private sector engagement is key to successfully finance, build and operate infrastructure assets, the country should follow the suit, Pant added.
The government in its attempt to promote PPP modality has also published a white paper on PPP, brought BOOT Act and lately formed Investment board that intends to remedy the deficiencies and mobilise and manage PPP, cooperative, domestic and foreign investments.

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