06 August, 2024
|Investment Board of Nepal (IBN)
Infrastructure serves as the backbone for any country’s development. However, because of the threat posed by climate change, infrastructure must not only meet the need for economic growth, but of sustainable economic growth. That is, the infrastructure must be resilient to the effects of climate change and must minimally emit greenhouse gases (GHGs). For a developing country like Nepal, which is not a net transmitter of GHGs, the first requirement is critical.
Because of climate change, Nepal has been increasingly affected by adverse weather conditions every year, of which, flooding and landslide are the most serious and frequent. Nepal is a water-rich country and has a dense network of rivers, streams, and lakes (in the mountain areas). In the Terai region, flooding displaces people and destroys crops, whereas in the hills, peoples’ lives, settlements, and businesses are destroyed. Nepal is also at risk for seismic activities, and it is necessary that the infrastructure should be resilient to the effects of earthquakes.
The risk of combined effect of climate change and seismic activity is very real, and this is a risk for many districts. As a pertinent example, the combined effect of the 2014 Jure landslide and the earthquake that happened the following year, has severely affected economic activity in Sindhupalchok District, many years after these events. It also increases the risks of Glacial Lake Outburst Flooding (GLOF) in other mountainous districts of Nepal. Thus, there is a substantial need to make infrastructure resilient to these kinds of shocks.
However, the negative effects of climate change are not limited to the mountains. The floods in the Terai region has already led to enormous losses, and this would be worsened over time. Thus, economic losses in both the mountains and Terai are likely to be huge because of the effects of climate change; and The Asian Development Bank estimates that by 2050, Nepal could lose 2.2 percent of its annual GDP because of it.
As a result of these prevailing risks, and with a clear view of mitigating and adapting to them, Nepal ratified the Paris Climate Agreement and its second National Determined Contribution (NDC) in 2020. The NDC is a climate action plan that helps reduce emissions and adapt the country to climate change. The NDC incorporates a financial strategy for achieving outcomes which needs to be updated every five years. In the second NDC, the government has estimated that the total cost of meeting the mitigation targets till 2030 is USD 28.4 billion and this only includes activity-based targets and not the cost of policies, measures, and actions. The cost of adaptation, as laid out in the National Adaptation Plan (NAP), is USD 47.4 billion till the year 2050.
These are very large figures and will be difficult to be mobilised from government sources or from traditional financing. The Government of Nepal (GoN) has committed to achieve the target of graduating to a middle-income country status by 2030 and achieve the net-zero greenhouse gas emission by 2045. The GoN has also set specific targets to be achieved by 2030. This includes, but not limited to, generating 15000 MW of clean energy, construction of 200 km of electric rail network, 2000 km of rail network and black topped roads, building five international airports, and attracting 5 million tourists.
The GoN has been implementing the 15th Periodic Plan that envisions investment of over 79 billion USD in five years, starting from 2019. The Government expects about 56% of investment to be realised from the private sector. This shows the importance of private investment including FDI for infrastructure development in Nepal. The Investment Board of Nepal (IBN), the country’s nodal agency for implementing large projects, will play a key role in attracting and facilitating these investments.
IBN’s role in Green Infrastructure Development
IBN, established in 2011, is a high-level government agency under the chairmanship of the Rt. Hon’ble Prime Minister to develop, implement, and facilitate projects in Public-Private Partnership (PPP) and private investment by mobilising domestic and foreign investment in Nepal. During the ten-year period of its establishment, the Board has played a significant role in the development of large and transformative infrastructure projects that will make a significant contribution to the socio-economic transformation of Nepal. The Board has approved an investment of about USD 8.74 billion for 33 projects out of which 20 projects are in the energy sector and the remaining projects in other sectors. Further, under the Public Private Partnership Investment Act (PIPPA) 2019, all investments more than NPR 6 billion fall under the purview of IBN.
IBN has contributed to wider clean energy in Nepal through hydropower projects and has been exploring opportunity in solar projects, electric transport, and smart urban cities. The flagship project, Arun-3 with 900 MW installed capacity is in the advanced stage of construction with 56 INFRASTRUCTURE FOR GROWTH almost 62 percent progress being made so far in generation component. Similarly, the 900 MW Upper Karnali HEP is at the financial closure stage. IBN’s Cement Projects such as Hongshi and Huaxin have adopted waste heat recovery systems (WHRS) for power generation. Similarly, the Board has allowed to conduct a Feasibility Study for 350 Solar Project (Doti & Dadeldhura).
IBN as the fast-track agency and facilitator of private investments and PPP in Nepal has been able to increase investors’ confidence by bringing in more investment in Nepal for the development of green energy projects in various sectors. Some of the recent milestones achieved in the last two fiscal years include- signing of an MoU with SJVN Limited to develop Lower Arun with an indicative capacity of 679 MW; with Risen Energy Singapore JV Pvt Ltd for 250 MWp solar project; and with Power Construction Corporation of China for Tamor Storage HEP of 756 MW. Recently, IBN has signed an MoU with NHPC Limited for detailed project study of 1200 MW West Seti & SR 6 hydroelectric projects. These are some examples which demonstrate that the investors are finding their comfort zone to invest in Nepal. This is also an indication of the increasing credibility of IBN.
IBN’s Strategy for Green Infrastructure Investment
IBN’s project portfolio and achievements so far clearly demonstrate that we are geared towards significantly contributing to the target of achieving the net zero emission. We have developed a project bank with probable list of bankable projects and have advanced systems such as Project Bank Management Information System, Roster Management System, and the web based One Stop Service that will expedite the growth of green infrastructure.
IBN is equipped to achieve the national goals with its first ever Strategic Plan and Business Plan. The key goals of IBN are to approve investments of at least USD 10 billion by 2026, manage PPP projects of about USD 6 billion by 2026, develop IBN as a PPP Centre of Excellence, and contribute to improving investment environment through effective investment promotion. IBN has adopted four Strategic Pillars (focus area) to achieve the strategic goals. These are project development and NEPAL INFRASTRUCTURE SUMMIT 2022 57 management, investment promotion, institutional development, and coordination and collaboration with other agencies mainly domestic and international.
The nature of these pillars indicate that IBN is an institute with a broad scope. The PIPPA 2019 mandates IBN as the fast-track agency for implementing large projects. It provides IBN the authority to conduct many activities such as originating ideas, carrying out feasibility studies, developing project procurement plans, making important documents1 , screening, evaluating, and selecting the winner-bidders. Once all the processes are complete, signing the PDA and causing the project to be implemented, are the final steps.
The PPP model is one of the most widely used methods that countries use to finance big infrastructure projects. This model allows leveraging of private sector strengths towards public-oriented goals. This is the model that is primarily used within IBN, and the institute has been successful in the implementation of large hydropower projects like ‘Arun III’ hydroelectric project.
Hydropower is necessary for Nepal as it provides energy security and reduces dependence on imported fossil fuels. Moreover, it is a renewable and clean source of energy. Hence, for these reasons, hydropower will continue to be a central focus. However, IBN clearly sees the need to go beyond hydropower. IBN has also enabled the implementation of two large cement factories – Hongshi and Huaxin which incorporates WHRS that eventually helps to reduce carbon dioxide.
Cement is a critical input in any physical project, and the presence of cheap and reliable domestically produced cement would enable projects to securely access this valuable resource. In addition to this, IBN has signed MoU for the detailed feasibility study of large-scale grid connected solar project with battery energy storage system (BESS).
The IBN has identified several projects with a green component. Two of the significant ones are the Electric Bus Rapid Transit (EBRT) in Kathmandu and the Sudurpaschim Transport Project. Both are urban projects. As cities and urban centres are particularly large emitters of GHGs, mass transit can be one of the most effective ways of reducing emissions, particularly if the transit system is electric. Mass transit has other benefits such as reducing traffic jams (commuter time), thereby, providing reliable and timely point-topoint transportation services, and allowing all sections of society the access to high standards of transportation. In terms of promoting economic growth, mass transit is critical as it can aid with the development of a professional workforce.
N’s commitment to energy includes nonhydropower projects such as the Venture Waste to Energy Project in Dharan Sub-Metropolitan, Sunsari. The project, already being implemented, meets multiple objectives of both waste management and energy security. Moreover, it also meets ecological goals such as allowing waste to degrade biologically and without emitting significant GHGs.
Nepal is on the path of generating economic prosperity by creating a robust legal and policy framework which aims at providing a conducive business environment for the private sector whilst acting as one of the main pillars of the economic development. In recent years, the GoN has undertaken various reforms as part of its sustained efforts to garner private sector investment. IBN, as the ‘first reference point for investment in Nepal’, is committed to avail excellent and quality services to investors for timely execution of projects.
IBN has a vision of developing Nepal as an attractive investment destination. To achieve this vision, it is devoted to accelerating investment in transformative green infrastructure projects across a variety of sectors by promoting and managing public private partnerships and facilitating private investments.
Note: This article is from Nepal Infrastructure Summit 2022 by Investment Board of Nepal (IBN).