30 September, 2024
Experts Urge for an Enabling Environment to Attract Private Sector Investment in Infrastructure
Stakeholders have pointed out the lack of legal frameworks, government coordination,
and promotion as major barriers to engaging the private sector in Nepal's infrastructure
development. During the third session titled “Private Sector Engagement” at the Nepal
Infrastructure Summit 2024, organized by the Government of Nepal, the Ministry of
Physical Infrastructure and Transport, and the Confederation of Nepalese Industries (CNI),
government, private, and international experts called for creating a conducive
environment for private sector participation in infrastructure projects.
Dr. Roberto de Ocampo, former Finance Minister of the Philippines, stated that the
successful implementation of the Public-Private Partnership (PPP) model in the
Philippines could serve as a valuable lesson for Nepal. He recalled the challenges faced in
the 1990s when investment opportunities were limited and there was a lack of confidence
among investors, leading to many infrastructure projects becoming unviable. He
emphasized that the Philippines developed laws for the PPP model after engaging various
institutions and the private sector, as the government alone could not handle the
investment requirements. He advised that, while the primary responsibility for
infrastructure development lies with the government, it is crucial to manage the influence
of politics and bureaucracy. “The government should not only seek collaboration with the
private sector in times of crisis; rather, a proactive approach is essential,” he stated.
Dr. Ocampo suggested that Nepal should focus on developing legal frameworks and
enhancing the capacity of government mechanisms, with training in management skills
and coordination to effectively implement the PPP model. He emphasized the importance
of identifying sources of investment and understanding who would take ownership of
development projects to engage the private sector effectively.
Pradhumna Prasad Upadhyay, acting CEO of the Investment Board, highlighted the
importance of collaborating with the private sector, as they are more knowledgeable
about the initial stages of production and market demand. However, he also pointed out
that the government plays a significant role in attracting large investments in
infrastructure. “The private sector pays attention to small details and can actively engage
in fair competition, thus playing a crucial yet often invisible role,” he remarked.
Upadhyay noted that the government's improved regulations are increasing production
in the energy sector and attracting more investments in communication. However,
former CEO of the Investment Board, Radhesh Pant, claimed that the board has not been
able to operate independently due to political influence. He also mentioned that foreign
investors lack confidence in the investment environment in Nepal. “The government must
create a welcoming atmosphere for private sector investment; otherwise, investors will
go where conditions are more favorable,” he asserted.
Jinoos Shariati, First Secretary of the UK Department for Business and Trade in India,
highlighted that the gaps in the procurement law and information flow between offices
hinder a favorable investment environment in Nepal. Citing India’s ambitious
infrastructure development goals for 2040, she advised that Nepal should facilitate
procurement and information flow to attract foreign and private investments. “UK
investors emphasize the need for transparency in procurement; if Nepal can facilitate this,
investments from the UK could follow,” she said.
Mohammed Azim Hashimi, Director of the Asian Development Bank, mentioned that they
have been directly discussing necessary matters to attract investments with the
government. He noted that the ADB has invested in 13 countries, including Nepal.
Vishnu Kumar Agarwal, former president of CNI, remarked that once the private sector
establishes trust through successful projects, further collaborations become easier. He
recalled that in India, successful projects led by the private sector prompted the initiation
of other projects. He pointed out that while the private sector has invested in
hydropower, it has not been able to engage significantly in urban infrastructure projects
in Nepal. He emphasized that the government should promote smaller investment
projects to encourage private sector participation.
Damodar Bhandari, Minister of Industry, Commerce, and Supplies, who chaired the
session, informed that the government is amending laws to create a better investment
environment. He mentioned that the Department of Industry has facilitated online
approvals for investments up to 500 million, and revisions to the mining and mineral laws
are underway. The company law draft is in its final stages, and various agreements are
being made with countries to attract foreign investments. “The role of the private sector
is crucial in achieving the goals of the 16th National Plan. The government remains
optimistic about facilitating foreign investments,” he stated.
The session was moderated by infrastructure expert Ram Krishna Khatiwada.