Nepal needs to invest double in infrastructure to bridge gap
Nepal should to increase investment in infrastructure to some 8.24 per cent to 11.75 per cent of the Gross Domestic Product (GDP) to bridge the current infrastructure gap, according to a report.
Nepal needs $13-18 billion from 2011-2020 in order to bridge the investment gap in infrastructure, according to the World Bank study that has .
The country will require as high as $5.3billion to $7 billion for electricity, while the transport sector will require $3.7 billion to $5.5 billion. as the country has been facing longer power outages for last few years, and the quality of roads has been very poor.
There is need to increase investment from both the public and private sector in transport, electricity, water supply and sanitation, solid waste management, telecom, and irrigation, apart from introducing reforms, said the report on 'Reducing Poverty by Closing South Asia's Infrastructure Gap' that is released here today by the World Bank.
Nepal had earmarked some 2.9 per cent – in the fiscal year 2011-12 and 2.7 per cent in the fiscal year 2012-13 – of the GDP for infrastructure development. But the government's spending capacity has eroded making it unable to spend the budget earmarked. Currently, Nepal’s investment in the infrastructure stands at less than five per cent of the GDP.
Likewise, the report recommended South Asian countries to spend as much as $2.5 trillion on infrastructure by 2020 to bring its power grids, roads and water supplies up to the standard needed to serve its growing population.
Of the total amount, up to $7 billion should go to the energy sector, especially development of hydropower projects, followed by up to $5.5 billion in the transport sector, primarily building of roads, it suggested, adding that up to $2.6 billion needs to be invested in water supply and sanitation by 2020, while up to $2.3 billion has to be allocated for irrigation sector. "Investment of up to $600 million and $500 million will need to go to telecom and solid waste management sectors, respectively," the report added.
The country’s private sector investment commitment stood at $997 million in the energy sector and $135 million in the telecom sector between 1990 and 2012. But no private investment pledges were made for transport, and water supply and sanitation sectors during that period. The trend is the same across South Asia.
The first analysis of the South Asia's infrastructure needs by the World Bank, the report further said that eight South Asian countries could address their enormous infrastructure needs by tapping private and public sector funds as well as by introducing reforms.
Private sector’s participation in infrastructure in Nepal is 0.66 per cent of the GDP, which is the second lowest in South Asia after Afghanistan. Maldives tops the chart, followed by India, in private sector investment against the GDP in infrastructure.
"Many people in South Asia are unconnected to a reliable electricity grid, safe water supply, sanitary sewerage disposal, and sound roads and transport networks," World Bank vice president for South Asia Philippe Le Houérou said during the launcing programme here today.
"For the past twenty years, the South Asia and East Asia regions have enjoyed similar growth rates," the co-author of the report Dan Biller said, adding that the South Asia's access to infrastructure services still lags significantly behind both East Asia and Latin America with some access rates comparable only to Sub-Saharan Africa.
Only 71 per cent population of the South Asia countries has access to electricity, ahead of sub-Saharan Africa at 35 per cent, but well behind the rest of the developing world at above 90 per cent, the report revealed, adding that lack of electricity is the biggest barrier to their growth in South Asia.
Likewise, the transport infrastructure suffers from a lack of intraregional links among the national road networks, unrealised potential for rail and inland water freight transport, and inadequate road and rail connectivity of ports with other areas, it said, "These limitations turn transport infrastructure into a barrier for regional and international trade."
It also revealed Nepal as one of the poorest infrastructure services along with Afghanistan and Bangladesh – in South Asia – which resemble the infrastructure situation in the Sub-Saharan region of Africa.
Despite recent rapid growth and poverty reduction, South Asia region continues to suffer from a combination of insufficient economic growth, slow urbanisation, and huge infrastructure gaps that together could jeopardize future progress, another co-author of the report Luis Andres said.
The report stressed closing the huge infrastructure gap should be a priority for the South Asia in order to meet its development goals, poverty alleviation and shared prosperity.
South Asian policy makers should invest in rehabilitating and maintaining infrastructure assets to deliver services efficiently and in a sustainable manner, moving away from the 'build, neglect, and rebuild' mindset, added the report of the World Bank that has a portfolio of 96 active infrastructure projects in the region, with total commitments of $19.8 billion.
The report has suggested a gamut of policy options like rehabilitate and maintain existing infrastructure, reform service providers and ensure their financial sustainability, establish solid legal, policy and regulatory framework and decentralise the centre’s authority to local bodies as a means to improve service delivery.