Nepal is one non-coastal country which is endowed with immense natural resources. From highest mountain ranges to green forests, perennial rivers, hospitable and culture rich society, Nepal has it all. It is the only country on planet where the landform changes so rapidly that starting from lowest point of 60 Meter above Mean Sea Level (MSL) in South one can reach highest point on earth in North at 8,850 Meter above MSL i.e., Mt Everest, all within a distance of just 160 Km. Due to such steep gradients, there is humongous hydropower potential which remains under exploited.

Post COVID Nepal is the first country to adopt and adhere to GRID approach i.e., Green, Resilient and Inclusive Development approach . The country has a roadmap to graduate to middle income country by 2030 and move to high income level by 2043 and achieve net Zero in another two years i.e., by 2045. These are ambitious goals and need a focused approach and structured implementation of development activities. Infrastructure remains the key sector so essential to achieve the stated milestones. It is generally agreed that Nepal would need to invest a budget equivalent to approximately 10% of its GDP in infrastructure to achieve its middle income and SDG goals by 2030. But the actual investment is around 4% which is grossly inadequate .

The Public Private Partnership route has become inevitable to mobilizing resources to achieve goals of development. But there are constraints in deploying PPP on a significant scale. Major challenges are: -

a. Limited understanding of PPP.

b. Frequent political changes.

c. Insufficient political will.

d. Limited financial resources.

e. Right awareness of laws and rules of PPP.

f. Delays in approval process.

g. Risks related to foreign exchange.

h. Inadequate coordination between line agencies.

There has been improvement to some extent after enacting the PPP Act 2019. There is better legal clarity, visible administrative objectivity and often transparency in the ways PPPs are being processed now. It is further strengthened with capacity building initiatives rolled out by donors and other multilateral agencies. Today we see a project bank and a sustained capacity building program being run by Office of Investment Board of Nepal (OIBN) for their key staff. Overall, there is improved capacity of public officials dealing with PPPs and better project enabling environment.

In Nepal, the PPPs in energy sector form majority of projects completed, in-process or being planned i.e., PPPs in Nepal are skewed in favor of power sector. The project pipeline presented by OIBN has now endeavored to bring balance by planning projects in other sectors as well. With the legal and statutory framework already in place the funds for rolling out these projects are to be identified and procurement of project implementation agencies or concessionaires may begin. The good sign is that the fiscal deficit fell to 0.4% of GDP in H1FY24 from 1.4 percent in H1FY23 primarily due to reduced government spending, seldom seen in similar economies.

Phase wise recommendations on how to leverage PPPs for infrastructure development are: -

a. Phase 1 to be more demonstrative of success of PPPs with available and quickly ramped up funds and putting in place the govt revenue maximizing framework.

b. Phase 2 to be able to sustain the momentum of infrastructure delivery through PPPs.

c. Phase 3 will be able to address the entire wish list and create a capital market based sustainable cycle of PPP based project and services delivery ecosystem.

PPPs in first phase may be deployed in ready-to-go projects from the existing project pipeline. The funding needs may be met by allocated capital expenditure budget by re-assigning priorities and disinvestment in state owned enterprises (SOEs) may begin. Launching of digital public infrastructure in taxation and capital markets ecosystem may prove to be a game changer in broadening tax base and enhancing tax revenue, a key requirement for public expenditures. PPPs may be deployed in optimizing logistics linkages at remote, rural, and urban areas. The use of load carrier drones in PPP mode can be highly effective. PPPs in religious tourism may be considered in view of similar success visible across the border in India.

In second phase or after three years or so the tax base expansion and capital market reforms may add to government coffers leaving more money with government to spend on health and education in addition to continue building infrastructure to drive domestic consumption and growth. The optimization of SOEs to continue. With enhanced PPP awareness at all levels, PPPs emerge as a preferred route for infrastructure development. Focus should be on making Nepal not only a preferred tourist destination but a credible investment hub and manufacturer. Fortunately, all that is possible through the PPP route.

In final phase or long term, the PPP should continue to retain its primary position in development of infrastructure in Nepal. Following GRID approach in development of infrastructure Nepal may be able to achieve the set milestones including climate commitments and sustainable development goals. Further, the PPP route of infrastructure development may create enough capacity for Nepal to emerge as the leader with immense potential/surplus in green energy to be of use to global energy demand, global computing demand and demand of data centers of future.

To undertake suggested activities and fully exploit the potential of PPPs, a concerted effort from the government, private sector, and civil society is needed. By creating an enabling environment for PPPs and addressing key obstacles, Nepal can harness the potential of private investment to bridge its infrastructure deficit and stimulate economic growth with far reaching benefits. Need of the hour is to identify PPP Pioneers in each sector who can implement PPPs in their respective sectors and show the way to others. It is possible and doable.

Dr. Naresh Bana, psc, F.I.E., M.I.M.A., M.I.P.W.E., Ph.D. is a peer recognized international PPP consultant and 'Subject Matter Expert' (SME) with Government of India owned entity NHLML.