KATHMANDU: Nepal is a typical example of a country endowed with rich natural resources, but living in poverty due to the failure to create a conducive investment climate for hydropower development. The hydropower potential of Nepal is sufficient not only to provide for electricity to households, industries and businesses but also to allow substantial quantities of surplus electricity for exports. Hydropower when developed will be an important revenue generator and an essential element of poverty alleviation and economic growth. STRENGTHS According to a conservative estimate, domestic power demand in Nepal is estimated to grow by 10 per cent. We have neighbours, India and China, with huge economies and a large appetite for energy. Growing worldwide climate change concerns make hydropower more acceptable electricity option. OPPORTUNITIES Nepal is poor, only because it is poorly governed. Bhutan’s per capita income has increased substantially in the last few decades, thanks to the export and sale of hydropower to India. If Nepal’s grid system is integrated with the Indian grid system and power traded in India, there will be multiple benefits for Nepal like revenue generation, rapid industrialisation, energy security, employment generation import substitution of fossil fuels et cetera. Recent projects show growing interest from China as builder and financier in Nepal’s hydropower development. There should be no problem for financing and power market if we can make the potential investor happy by offering competitive investment climate. WEAKNESS Generally, Nepal’s rules, regulations related to investment seem to be investor friendly. However, although the investment laws protect property rights and ensure recourse to legal system implementation, enforcement of these provisions is another matter. Investors feel frustrated due to delays in the processing of documents like permits, approvals, clear-ances et cetera. There is no clarity on the government’s plans and programmes for hydropower development. For example, Nepal has no energy strategy plan to streamline hydro-power development and there is no regulatory commission to regulate the power sector. Due to the absence of a power trading company, independent power producers are compelled to sell electricity to Nepal Electricity Authority. The hassles related to land acquisition and clearance for Environment Impact Assessment is enough to kill the enthusiasm of a potential foreign investor. The transmission lines inside Nepal are yet to be expanded and upgraded to evacuate power   from new power plants. To sum up the constraints, Nepal still has miles to go in terms of doing business. THREATS The country needs to develop its hydropower potential with a sense of urgency. The hydropower sector could not develop due to the long period of insurgency and relatively long period of transition, following the comprehensive peace accord. Still many rules and regulations related to foreign direct investment (FDI) in hydropower are missing. For example, the absence of laws related to project financing make large scale financing in Nepal’s hydropower development very difficult. Many potential investors argue that Nepal is not yet ready for FDIs in hydropower. It is to be noted that there are more than 100 countries for investors to invest in. They are always in search of ‘green pastures’ for investment. They will not invest in Nepal only for the love of our country if the investment climate is not good enough.To sum it ip , Nepal does not offer investor friendly platform to support large scale Hydropower development. CONCLUSION As a result, what could be a vibrant, thriving economy, Nepal has become a stagnant economy, struggling industrial base and unacceptably poor living standards particularly in rural areas. We must seize the opportunity to invite investors by offering them competitive incentives and investor friendly environment.
The author is a freelance engineer, with interests in energy, environment and economic development. He can be contacted through