Governance of Infrastructure Development

Much of the development narrative in Nepal focuses on the financing aspect of infrastructure investment while public discussion on the quality of such investment is very limited. In fact, the governance of infrastructure investment is largely overlooked. There is a need to explore more on aspects such as infrastructure selection and prioritization criterion, evidence-based project planning, and streamlining project executions and operations. Without these aspects we are missing opportunities to make most out of our limited resources.

We need a holistic infrastructure governance framework. In this regard, the recently published report on ‘Infrastructure Finance Strategies for Sustainable Development in Nepal’, has identified potential sources of public expenditure efficiencies by highlighting robust ways to reduce the cost involved in infrastructure projects and improve overall infrastructure governance.

One way for sound infrastructure governance is to improve project prioritization to optimize the infrastructure portfolio. Even if the country saves 10 percent of capital expenditure, which amounts to NRS 8 billion, it would provide sufficient cushioning to finance large scale infrastructure projects. Achieving these efficient outcomes demands identifying projects with clear purpose, evaluating projects using improved cost-benefit analysis, and prioritizing projects at portfolio level. The government must select projects with clear purpose based on socio-economic priorities and the metrics must consider long-term economic, social and environmental effects.

Another way of improving infrastructure governance is through utilization of existing infrastructure assets. This is important given Nepal’s limited ability to mobilize domestic resources for infrastructure. Adding more roads and constructing more hydropower plants will not resolve problems if the existing infrastructure is not maintained. Nepal should move away from the build, neglect, and rebuild mentality and implement an infrastructure management system together with appropriate financing framework. We should take smart infrastructure utilization management approach. For instance, recent elimination of power cuts in Nepal is the result of better utilization and demand management of existing infrastructure. On contrary, the valley road expansion project has turned out to be poor and traffic congestion has not reduced. Deployment of information technology in establishing intelligent transport system (ITS) for roads would enable the utilization of the existing road capacity.

Moreover, the opportunity by making most of the infrastructure assets like power and water systems lies in reducing non-technical losses such as electricity leakage and distribution losses. An article ‘NEA incurs more losses due to power leakage’, published in Kathmandu Post on August 2016 points out that electricity leakage was 25 percent, the 4th highest leakage rate in the world. However, the situation has significantly improved in recent years due to the better management of existing infrastructure. This avenue is worth taking seriously as reducing the losses can cost significantly less than what it cost to build a utility infrastructure project.

The above discussion suggests an immediate need to have a national level infrastructure governance framework. Such framework would not only help in effective utilization of the already constraint resources, but also create conducive environment for private investment in infrastructure.

Note: This article is from Nepal Infrastructure Summit 2022 Souvenir.