Despite being a low-income country grappling with low investment in human capital, lack of adequate infrastructure and resources, Nepal has set ambitious economic and development targets for the next few years. As the government is still in the initial phase of implementing federalism, it is facing challenges in terms of bringing effectiveness in service delivery, smoothening transition towards federalism, and improving doing business climate and governance, raising budget execution and spending capacity and accelerating project implementation. Against this backdrop, Sujan Dhungana of The Himalayan Times caught up with Puspa Raj Kadel, vice-chairman of National Planning Commission, to know the details of the country’s economic and development goals, potential to achieve them and challenges. Excerpts:
Nepal’s development process — from policy formation, project development and its execution — is often said to lack proper planning and study. As you lead the apex advisory body of the government for planning and setting the country’s development vision, what is your take on this?
The issue you raised is the chief problem facing Nepal’s development. Though the country is accumulating resources for development from domestic as well as foreign sources, allocation of these resources has not been proper and planned. We allocate resources haphazardly and even fail to properly execute projects that have been allocated necessary budget. The tendency to announce unprepared projects and allocate budget for such projects has to be stopped. Projects should be properly studied and its feasibility tested before allocating resources to them. Not all but some projects, which are not even feasible, are incorporated in the budget at the last hour and resources are allocated accordingly.
As a huge amount of resources is allocated for such small and infeasible projects, it not only affects budget spending but also the entire development process. Similarly, even projects that are properly studied face problems in development owing to different procurement hassles, inability of stakeholders to take risks, transfer of government and project officials, disputes on land acquisition and environmental issues. These issues directly affect project execution. The crux to all these problems has been unstable government and bureaucrats in the past. As the country is just moving away from its transition phase, the country has failed to set a proper system for development.
As a liaison agency of Nepal’s development and planning, what is NPC doing to address these development hurdles?
Among other measures, we had planned to introduce ‘Project Bank’ and implement it so that only properly studied projects are announced through the budget and that resources are allocated to only feasible and deserving projects. The Fiscal Responsibility and Budget Management Act, which was recently endorsed from the Parliament, has envisioned to prepare the Project Bank and granted NPC the responsibility to prepare and implement it. NPC is currently preparing necessary groundwork so that the plan can be materialised. The planned Project Bank will be a roster of properly studied and feasible projects. Introducing the Project Bank system intends to end the tendency of incorporating infeasible projects in the annual budget in the last hour. Under pressure from different quarters and elected representatives, the Ministry of Finance has been giving space to infeasible projects in the budget since many years. However, once the Project Bank is formed, the budget will incorporate only those projects that have been identified as feasible by the Project Bank and NPC.
What is causing the delay in establishment of Project Bank?
The first thing is that necessary policies have to be formulated on time to execute any plan. The Fiscal Responsibility and Budget Management Act was enacted quite late. The general understanding of the public is that elected representatives are the agents for development. This is not true, as lawmakers are agents to draft necessary laws and policies. It is the government — especially the local units — that is the real agent of development. This has to be understood by the public as well as bureaucrats and leaders. Similarly, we first need to finalise operation modality or the governance part of the Project Bank. After studying all the related aspects of Project Bank, we have finally prepared a draft on how to operate the Project Bank. All stakeholders should stand against the tendency of incorporating pork barrel projects in the budget. Similarly, the NPC will also fix minimum standard of projects which local and provincial governments plan to develop. However, we expect resistance to the Project Bank concept from lawmakers. Effective coordination among government agencies is crucial to implement the concept of Project Bank.
Through the 15th periodic plan, NPC has set a roadmap of the country’s development for next five years. But stakeholders are questioning the ambitious economic and development goals set in these periodic plans. How realistic are they given the current economic and development growth scenario?
I believe that the country has set a base to achieve notable economic growth in coming years. Nepal has already achieved seven per cent economic growth in the last three consecutive years. The government has set a target to achieve 8.5 per cent economic growth this year which I see is achievable if we are able to raise our efficiency and budget spending capacity. Efficiency at work will boost government expenditure, which will then have multiplier effect on the economy. Stability of the government today itself has been a boon for the economy, while a few initiatives have been made for accelerating development and economic growth. Stable government and policy reformation, among others, have been sending positive signals of doing business in Nepal. Against this backdrop, I believe Nepal has the potential to achieve high growth rate in coming years. If other countries are achieving high growth, why can’t Nepal? But efficiency in doing work, making decisions and executing projects in Nepal is slow compared to other countries. Isn’t this a setback to achieving desired economic growth? It is somehow true. But we should not be too pessimistic and should rather support development. Having said that, we need to enhance the efficiency of doing works and making decisions to foster growth.
The 15th periodic plan has given less priority to new projects while it has prioritised completing existing projects. The total liability of the existing national pride projects alone is almost Rs 1.8 trillion. Much of the country’s budget today is being allocated for the post-earthquake reconstruction works. As the reconstruction drive will be wound up soon, we expect national pride projects and other important projects to be allocated sufficient budget, which will aid in their timely completion. Completion of the projects will directly support economic and development goals. Though the budget spending remained tepid in the first quadrimester of this fiscal, we need to ensure that much of development budget is spent in the second quadrimester.
The government is claiming that a few national pride projects will be completed this fiscal. Which projects are likely to be completed this year and how optimistic are you?
Developers of pride projects, including Upper Tamakoshi and Gautam Buddha International Airport, have vowed to complete the construction works within this fiscal. Similarly, even Melamchi Water Supply Project is likely to be completed soon. We expect these projects to be completed within this year or early next year. However, the 15th five-year periodic plan has set a target to complete almost 15 such mega projects by the end of 2023-24.
A version of this article appears in print on November 19, 2019 of The Himalayan Times.