22 August, 2024
Provincial Infrastructure for Inclusive Growth
The constitution of Nepal has envisaged a three-layer system of governance in the country to make the infrastructural development more dynamic at the provincial and local levels through decentralization of structural and institutional setups. Studies also acknowledge the effectiveness of infrastructure development when left to subnational authorities as the direct result of allocative and productive efficiency achieved through delegated approach of decentralization. Subnational governments are more likely to plan and execute infrastructure development projects with efficient project management practices that meet the development requirements of a particular region or locality. Remarkable progress has already been achieved in the areas of infrastructure development, drinking water supply and sanitation improvement, effective internal resource mobilization, and small and medium-scale industry establishment due to the promotion of governance at provincial and local levels. Before the country went into federal structure, there was a problem that the regions such as Far-West and Karnali regions were lagging behind while the regions nearby the central capital of the country were more privileged in terms of economic and infrastructure development. But due to the federal structure, each province has its own government and budget allocated for priority sectors. This provision has certainly helped in inclusivity by increasing the reach of development works towards people in each province.
Opportunities for Provincial Infrastructure
Using the opportunity of the federal structure in terms of expansion of economic activities and the creation of effective demand, infrastructure including cross-border economic zones, industrial zones, industrial corridors, special economic zones, and industrial villages are being developed. The major prospects in Nepal are that each province has its own potential infrastructure for inclusive economic growth. Some potential projects that can significantly contribute to inclusive economic growth in the country are listed below:
Challenges and Possible Solutions for Provincial Infrastructure
Provincial governments largely depend on central transfers for funds as their own revenue sources are limited. This affects their independent and autonomous decision on infrastructure investment. Poor execution of capital expenditure is also a serious concern in Nepal at the sub-national level. Inadequate institutional capacity, ineffective management, administrative leadership, lack of coordination between provincial ministries and agencies, and lack of coordination between federal, provincial, and local governments are some of the issues that need to be addressed. Furthermore, the provinces have not yet formulated all the necessary laws and regulations or established the requisite offices to carry out the functions that have been delegated. Private investors have faced numerous challenges as a result of limited policy provisions and laws. To address these issues, formulation of necessary laws has to be expedited. Federal government needs to provide more autonomy to provincial governments in terms of decision making on important infrastructure projects. There should also be more funding available to each province through central transfers. However, as the federal government might also have limited funding, provinces should look to increase their own source of public revenue by incentivizing more local economic activities and enhancing local tax base.
The constitution of Nepal has envisaged a three-layer system of governance in the country to make the infrastructural development more dynamic at the provincial and local levels through decentralization of structural and institutional setups. Studies also acknowledge the effectiveness of infrastructure development when left to subnational authorities as the direct result of allocative and productive efficiency achieved through delegated approach of decentralization. Subnational governments are more likely to plan and execute infrastructure development projects with efficient project management practice that meet the development requirement of a particular region or locality. Remarkable progress has already been achieved in the areas of infrastructure development, drinking water supply and sanitation improvement, effective internal resource mobilization, and small and medium-scale industry establishment due to the promotion of governance at provincial and local levels. Before the country went into federal structure, there was a problem that the regions such as Far-West and Karnali regions were lagging behind while the regions nearby the central capital of the country were more privileged in terms of economic and infrastructure development. But due to the federal structure, each province has its own government and budget allocated for priority sectors. This provision has certainly helped in inclusivity by increasing the reach of development works towards people in each province
Note: This article is from Nepal Infrastructure Summit 2022 souvenir.