Infrastructure Development in Nepal Hampered by Proliferation of Small, Ineffective Projects

Kathmandu. With the commencement of federalism in Nepal, the pace of infrastructure development appears to have accelerated, but certain serious challenges in its implementation are affecting the overall development process. The fact that a total of 123,779 various projects were put up for tender over the eight-year period from the fiscal year 2074/75 to 2081/82 is a significant statistic in itself. This signals growing interest in development construction and state investment.

Analyzing the number of project tenders, a continuous annual increase is observed. The number rose from 3,095 projects in FY 2074/75 to 26,085 projects in FY 2081/82. This growth rate shows that development activities have spread nationwide. However, a closer look at the nature and monetary division of these projects raises some important questions.

When classifying the 26,085 projects for which bids were invited in FY 2081/82 based on amount, a clear trend emerges. In this period, 18,413 projects (73%) worth between NPR 1 million and NPR 10 million accounted for the tenders called. Similarly, 3,101 projects (12%) were between NPR 10 million and NPR 20 million, 2,297 projects (9%) were between NPR 20 million and NPR 50 million, 785 projects (3%) were between NPR 50 million and NPR 100 million, 575 projects (2%) were between NPR 100 million and NPR 500 million, and only 106 projects (1%) were above NPR 500 million. This data indicates that nearly 70% of the total tenders are occupied by 'fragmented' or 'small' projects.

These statistics highlight some fundamental problems in Nepal's infrastructure development. While the excessive number of small projects consumes a large portion of the budget, large, nationally important, and long-term impact projects are overshadowed. The main reason for calling these 'unnecessary fragmented projects' is that they hinder the effective allocation of the budget. Such projects are often alleged to be introduced by local leaders to appease voters, which directly impacts the long-term development of the entire country.

Consequently, the state is unable to invest in major projects. Ambitious plans put forward by the government, including over 500 bridges, strategic road projects, and health post buildings, are stalled due to a lack of budget. On one hand, the uncontrollably spread fragmented projects, and on the other, ambitious plans introduced haphazardly, are failing to be implemented due to budget shortages, policy issues, and numerous complications. This gives the impression that the state's investment is like 'pouring water on sand,' where investment occurs but returns remain minimal.

This situation has also devastated the construction industry. As projects are not completed on time or are stalled due to budget constraints, construction companies are facing financial crises. Thousands of projects have become 'chronic' and stalled, while operators of hundreds of construction companies have defaulted on bank loans and ended up on the blacklist of banks and financial institutions. This puts the loans of financial institutions at risk and increases the potential negative impact on the overall financial system. Furthermore, while a resource assurance of NPR 700 billion was provided for multi-year projects, the estimate that tenders were called without securing resource assurance for around NPR 150 billion signals further financial anarchy. Overall, the amount the state has contracted for the completion of these projects is about NPR 992 crore, but the expected return has not been realized.

In the current context, the country is in the process of forming a new government. This government, which received a nearly two-thirds mandate under the slogan of 'Good Governance and Development,' must take concrete steps to resolve these problems. This requires identifying the root cause of the problem based on facts and data and adopting a strategy accordingly.

As the first and most important step, a 'Stalled Project Resolution Commission' should be formed to solve the problem of abandoned and ailing contracts. This commission should conduct a detailed study to ascertain the actual status of problematic projects, identify solutions, and prepare a roadmap for implementation. Secondly, the Public Procurement Act, Construction Business Act, and Public Procurement Regulations must be amended to be contemporary, creating 'construction-friendly' laws. This will make the procurement process transparent, effective, and smooth, while also creating an environment that encourages construction entrepreneurs to work. Finally, the new government must establish a strong mechanism for rapid physical infrastructure construction in the country and move development work forward. This requires long-term planning, clear policy, adequate budget allocation, and an effective monitoring system.

In conclusion, the challenges currently visible in Nepal's infrastructure development landscape are serious. The prevalence of fragmented projects, misuse of budget, abandonment of major projects, and the crisis in the construction industry have obstructed the overall development process. To resolve these issues, the new government must move forward with strong willpower and a clear action plan so that Nepal can achieve its goals of sustainable and inclusive development.

Lamichhane is a committee member of the Federation of Contractors' Associations of Nepal.