06 August, 2024
Nepal Infrastructure Summit 2022 Souvenir
Modernizing cross-border physical infrastructure is an important factor for expanding bilateral or multilateral connectivity. Nepal being a landlocked country, transport infrastructure is a necessary cornerstone for economic connectivity that helps in reducing trade costs, lowering price volatility, integrating market and bringing economies of scale.
The strategic positioning of Nepal offers a unique opportunity to participate in numerous regional projects. Before engaging in such projects, it is essential to understand our strengths concerning connectivity, and the reasons holding back our connectivity with South Asian countries. In this regard, improving connectivity through subregional cooperation such as the Bangladesh, Bhutan, India, and Nepal Motor Vehicles Agreement (BBIN MVA) plays a crucial role in pushing forward social and economic development among these South Asian countries. The BBIN MVA seeks to build a road-based economic corridor linking Bangladesh, Bhutan, India and Nepal. The BBIN MVA aims to promote the smooth movement of passengers, personal and vehicular cargo traffic within and between the BBIN countries.
Looking at the composition of transport connectivity in Nepal, 90 percent of goods and passenger transport services take place via road, 8 percent by air and 2 percent by rail, rope and others. Nepal should prioritise high-quality road infrastructure to increase connectivity in the short term. While high quality road infrastructure could be expensive at initial stage, investing in such massive projects is worthwhile in the long term. Nischal Dhungel in his article, ‘Connectivity via sub-regional cooperation’, writes middle- and low-income countries show a positive relationship between transport infrastructure and economic development. Therefore, transport infrastructure becomes extremely important as a primary driver of economic growth. Nepal can tap into two huge markets, China and India, if it can develop advanced road and railway systems.
Nepal also confronts significant economic development obstacles due to constraints in electricity supply. However, there has been some positive developments. Nepal and Bangladesh intend to hold meetings about bilateral power trade and Bangladeshi investment in Nepal's hydropower industry. The positive side of the bilateral power trade is that Nepal can buy power from Bangladesh during the winter and sell its power dominance during the rainy season. This increases the prospect of improving energy trade not only with India but also with Bangladesh. In this regard, The Millennium Challenge Cooperation (MCC) Nepal Compact ushers in a new era in United StatesNepal Partnership, which aims to improve road quality, increase the availability and reliability of electricity, and facilitate cross-border electricity trade between Nepal and India.
Nepal can also benefit from new railway connectivity with another neighboring country China. The feasibility study for the proposed Kerung-Kathmandu railway project would significantly boost the development of a "cross-Himalayan connectivity network" using transportation, ports for trade, roads and telecommunication. While implementing projects like the BBIN MVA, Nepal should be free from political ties and act in the country's best interests. Swift implementation of high priority connectivity projects should be first on the agenda, bringing considerable macro-economic benefits not limited to generating thousands of jobs for the Nepali people.
Note: This article is from Nepal Infrastructure Summit 2022 Souvenir.