30 September, 2024
The Foundation of Prosperous Nepal is Sustainable Physical Infrastructure: Deputy Prime Minister and Finance Minister Paudel
Deputy Prime Minister and Finance Minister Vishnu Prasad Paudel stated that the
foundation of a prosperous Nepal is sustainable and quality physical infrastructure.
Speaking on the topic of “Financial, Monetary, and Regulatory Policies” during the fourth
session of the fifth Nepal Infrastructure Summit, jointly organized by the Ministry of
Physical Infrastructure and Transport and the Confederation of Nepalese Industries (CNI),
he emphasized that sufficient, quality, sustainable, and transformative physical
infrastructure is essential for prosperity.
Deputy Prime Minister Paudel noted that the infrastructure conference successfully
brought together individuals from interrelated sectors, policymakers, experts, and
stakeholders to discuss various dimensions of infrastructure development linked to the
country’s economic growth and prosperity. He expressed confidence that "this
conference will contribute significantly to outlining a roadmap for modern, safe, and
green infrastructure development that meets the needs of the 21st century."
He expressed hope that the conference would inspire investment in infrastructure
development in sectors with competitive advantages and contribute to sustainable
economic growth, job creation, and poverty reduction, ultimately fulfilling the national
aspiration of a prosperous Nepal and happy Nepalis.
He highlighted the necessity of policy and procedural reforms to attract sufficient
investment for infrastructure development and mobilize capital from the private sector.
Deputy Prime Minister Paudel stated that the government is ready to facilitate all types
of investment by utilizing innovative tools. "We want to integrate our policies, plans, and
programs into the infrastructure development campaign to face current challenges and
unveil future possibilities," he said, adding that effective cooperation, coordination,
collaboration, and partnership from the private sector are essential.
He emphasized that infrastructure development cannot be accomplished solely through
government efforts and that the private sector, external investors, the international
community, and development partners also have significant roles to play. He expressed
the government’s commitment to maintaining economic and financial discipline while
operating and utilizing public finances. He also highlighted the government's ongoing
adjustments and timely changes to financial, monetary, and regulatory policies for
infrastructure development, expressing a commitment to making these even more
favorable in the future.
He emphasized the importance of quality and sustainable physical infrastructure and the
interconnectivity of its various aspects, noting that the government has prioritized budget
allocation and implementation focusing on key infrastructure sectors such as
transportation, energy, water resources, and information technology.
Paudel highlighted the significant role of the infrastructure sector in building the
foundation for economic development and determining the path to prosperity. He stated,
"Infrastructure must be sustainable, quality, environmentally and climate-sensitive,
green, transformative, and inclusive. Only through this can we lay a solid foundation for
economic development, increase production and productivity, and create jobs."
He mentioned that mutual coordination, cooperation, and collaboration among different
levels of government are equally important for integrated and coordinated infrastructure
development. The current government is committed to establishing appropriate
synergies between development policies, plans, and programs.
Stating that maintaining a balance between limited resources and infrastructure
development aspirations is not possible through internal sources alone, Deputy Prime
Minister and Finance Minister Paudel noted that the current pressure on internal revenue
mobilization and the increasing burden of public debt have made it challenging for the
government to secure resources for infrastructure development. He indicated that the
government prioritizes necessary arrangements for attracting private sector investment
through mixed financing, public-private partnerships, and other potential methods.
He clarified that the current government has adopted a policy of increasing capital
expenditure for infrastructure development, promoting various legal and procedural
reforms to enhance capital expenditure, and focusing foreign aid resources on physical
infrastructure development. He stressed that both financial and monetary policies play a
significant role in promoting infrastructure development and encouraging private
investment, mentioning that the Nepal Rastra Bank has been adopting favorable policies
to ensure monetary stability and expand investment flows into the infrastructure sector.
The establishment of an infrastructure development bank has been initiated to focus on
large infrastructure projects, resulting in the implementation of institutional
arrangements for mobilizing long-term capital for infrastructure projects. "The
government is firm in its belief that the private sector must play a crucial role in
infrastructure development," he said, adding, "We have created a conducive environment
for public-private partnerships. To attract domestic and foreign investors to projects like
infrastructure, the country's sovereign credit rating is being developed to reflect the real
state of the country. Once this work is completed, it will create a more certain
environment for investors to invest in the country, and it is expected that investment
flows will expand, contributing further to increasing infrastructure investment."
Prime Minister's Economic Advisor and Former Finance Minister Dr. Yuvaraj Khatiwada
stated that the country's economy is now moving in a positive direction.** He remarked,
"We survived and maintained a stable economy. We may have been slow in some areas,
but we didn't flip upside down. We don't have a policy of heavy taxation like other
countries. During crises, we must do something, but other kinds of restrictions are not
always present."
Dr. Khatiwada described Nepal's tax system as transparent and clarified that a singlewindow system has been adopted to avoid double taxation. "Just because there are some
unclear areas doesn't mean investment is obstructed. There are many opportunities for
profit. There is a transparent and business-friendly environment for the private sector.
Feel free to invest," he encouraged.
He mentioned that the private sector is effectively transitioning investments from the
public sector, emphasizing the need to focus on selecting certain public investment plans.
"Work on the Public-Private Partnership (PPP) Act and others is also in process," he noted.
He stressed that various regulatory provisions are necessary to facilitate investment,
particularly by advocating for legal reforms to promote investment in infrastructure.
Dr. Rajiv Kumar, former Vice Chairman of India's NITI Aayog, expressed his happiness at
witnessing infrastructure development during his recent visit to Nepal. "Health,
education, energy, tourism, and digital public infrastructure are crucial. India has
developed significantly in this regard. Urban infrastructure must also receive special
attention. We discuss urbanization a lot, but we haven't focused on urban infrastructure.
If we neglect urban infrastructure, we will fall behind," he warned. He emphasized the
need to reduce carbon emissions to maintain environmental balance and urged attention
to climate change risks in infrastructure development, especially in the Himalayan region.
He shared that India has also established a separate bank for infrastructure development,
and suggested that regional cooperation among landlocked countries like Nepal and
Bhutan can advance this effort. "Given the limitations of resources, we need to invest in
inter-country infrastructure. We can create a South Asian framework for investment," he
said.
Deputy Governor of Nepal Rastra Bank, Bam Bahadur Mishra, informed that they are
facilitating existing arrangements to maintain financial stability while supporting
development. "We have brought interest rates down to single digits. Since substantial
funds are needed for infrastructure, we have removed procedural hassles for foreign
investments," he mentioned. He expressed confidence that since the increase in nonperforming assets (NPA) is minimal, there will be no issues in loan disbursement. "The
threshold for foreign direct investment (FDI) has been removed. The central bank is
committed to promoting investment and creating an infrastructure-friendly
environment," he added.
Former President of the Confederation of Nepalese Industries, Hari Bhakta Sharma,
stressed the need for the government to make quick decisions on private sector
infrastructure development plans. "Facilitation of large projects is essential. Acquiring
land is a significant challenge. There are many issues in bringing technology. Taxes are
high, and investments in projects are substantial. There is a lack of organized investment
in projects," he stated. He emphasized that policy reforms are necessary to create a better
business environment. "The private sector faces significant challenges in land acquisition
for any project. Once land is obtained, there are still other issues. Despite all challenges,
the industries we operate are functioning and making profits. A better picture will emerge
in the future," he concluded.
Policy researcher Dr. Kalpana Khanal indicated that investing in infrastructure can yield
various economic indicators. "Project governance is extremely important. We can learn
from the past experiences of developed countries. Practices from Eastern Asian countries
like China and American development can also be followed. They have good practices for
enhancing internal capacity in infrastructure development. It is essential to ensure the
integration of domestic capital, skilled human resources like engineers, and the
availability of tools and equipment," she stated. The session was facilitated by banker
Bhuvan Dahal