The Nepal Infrastructure Summit (NIS) 2022 was hosted by the Confederation of Nepalese Industries (CNI) on 8-9 September and gathered over 1000 participants, including representatives from the Government of Nepal, private sectors, foreign dignitaries, think tanks, and investors. NIS 2022 aimed to
i) build on the legacy of the past three editions of the Summit to continue identifying key constraints to infrastructural development in the current context;
ii) catalyze reforms promised by the government for infrastructure development;
iii) forge stronger networks and alliances in the region for seamless connectivity and shared growth;
iv) attract large-scale private investment in Nepal’s core needs and strengths; v) prioritize the delivery of green, climate-resilient infrastructure projects that helped achieve the Sustainable Development Goals (SDGs).
The first edition of the Nepal Infrastructure Summit, titled ‘Accelerating Investment in Infrastructure,’ was held in 2014. The second Summit in 2017 was themed “Private Sector as an Indispensable Partner,” while the third Nepal Infrastructure Summit in 2019 was themed “Resilient Infrastructure for Sustainable Development.” The fourth Infrastructure Summit was themed “Infrastructure for Growth.”
Why “Infrastructure for Growth”? Since the last NIS in 2019, Nepal’s economic growth has contracted by 2.37 percent in 2019/20 due to COVID-19. Economic activities had come to a standstill globally, and the world had experienced unprecedented supply chain disruptions, both of which had adversely impacted growth. Nepal had set an ambitious economic growth target of 8 percent for FY 2022/23, while the growth rate for the current fiscal was estimated to be around 5.84 percent. There was a compelling argument for infrastructural investment as a stimulus post-Covid-19. Furthermore, an uncertain world economic environment, escalating climate vulnerability, increasing economic costs of climate change, and the need for all countries to reduce their carbon emissions compelled Nepal to use this window of opportunity not just to internalize environmental externalities but also to proactively pursue long-run multipliers. Thus, NIS 2022 sought to reinforce the idea that in the path to economic recovery, the best bet was investments in infrastructure with a focus on green infrastructure and financing. Dialogue on urban development and the concept of “livable cities” with a focus on green infrastructure was also included.
Public funding of capital projects had increased in recent years, but gaps remained, ranging between US$77B and $136B until 2030, according to a recent CNI-IIDS study, in just four priority sectors: energy, transport, urban development, and water and sanitation. The pandemic has forced countries to redistribute the budget earmarked for infrastructure to other urgent priorities. Post-pandemic global events were causing global supply chain disruptions, energy/fuel crises, trade wars, economic sanctions, protectionism, and fragmentation, leading to soaring commodity prices. The IMF had expected global prices to rise by 8.7 percent in developing economies. Inflation (CPI) in Nepal in June 2022 had been at 8.56 percent, the highest in the last five years.
The record current account deficit combined with brewing inflation and currency devaluation had made it particularly difficult for Nepal as the nation relied heavily on imports. The record balance of payments deficit had made a significant dent in the external position. Major infrastructure initiatives, therefore, had to consider the prospects of generating a trade surplus given the extremely challenging situation the country faced on its external front. To add to this, Nepal had been undergoing a major liquidity crunch, pushing the money market rate very high. The increased interest rate on government treasuries had further posed challenges in mobilizing resources for infrastructure investment. NIS 2022 sought to fill this gap through dialogue on innovative financial instruments and modalities, taking both local and international investors into confidence. A stronger network and connectivity in the region in the form of new air routes, better roads, transmission lines, and an electricity grid, as well as policies regarding trade, would not only address some of these challenges but also protect from external shocks, provide a foundation for greater regional integration, and lead the country towards sustainable long-term growth.
Broadening the scope of infrastructure: The Summit had a special focus on ICT. Although Nepal was well endowed with natural beauty, it faced difficult terrain and topography for connectivity. Being landlocked, both internal and external movement of goods and people was costly and inefficient. ICT was one area where goods (services) were independent of distance and weight. Furthermore, the pandemic had increased the dependence on digital infrastructure for connectivity. NIS 2022 believed that investment in digital infrastructure and technology integration would help Nepal ride the digital wave, develop a competitive edge, and be part of the global value chain.
NIS 2022 revived the zeal for policy reforms: Innovative financing modalities, foreign direct investments, further engagement of the private sector, technology adoption, and digital transformation required a solid foundation of policies, strategies, and governance—married with a zeal for sweeping legal and economic reforms spearheaded by the central government in coordination with its subnational counterparts. To this end, NIS 2022 was designed to ensure the participation of provincial representatives, which would bring a bottom-up approach to growth and enable reforms for inclusive growth.