Infrastructure is at the core of the economic development agenda in Nepal. From high-level political leadership to common people, infrastructure development is seen as a top priority of national development. Due to the hilly and difficult terrain of Nepal, the construction of physical infrastructure has become a complicated task. Yet, Nepal has made some achievements in the provision of basic infrastructure, such as basic access roads, piped water supply, and electricity, amid such geographical adversity and limited resources. For example, the total length of the road network was just 15,460 km (blacktop 4,590) in 2002, which reached 98,490 km (blacktop 21,490 km) in 2022.
In a developing country like Nepal, the provision of basic infrastructure, even without a normal level of reliability and quality, can have a significant impact on economic and social life. However, basic infrastructure alone may not be sufficient to propel the economy to a higher level of productivity and competitiveness. Safe, reliable, and high-speed highways, a consistent power supply, access to potable water, and a dependable and efficient international airport are essential conditions for fostering a high-growth economy. Therefore, Nepal needs to leapfrog into a new era of high-quality infrastructure.
Nepal is now facing an unemployment problem, and infrastructure investment can help to address this problem in the short term through the expansion of the market for labor and other local inputs for construction. Infrastructure investment is known to be effective in triggering a multiplier effect. In order for the national economy to benefit from such a multiplier effect, the import of technology, manpower, materials, and other means used in infrastructure construction should be minimized. That is, local resources should be used to the maximum extent.
When foreign firms, technology, and manpower are used in infrastructure construction, the multiplier effect will be smaller. Thus, in the early stages of development, large investment in infrastructure development along with the development of domestic capacity for construction plays an important role in kick-starting the economic growth machine. This has also been confirmed by the experience of successful Asian countries such as Japan, Korea, and China. These countries had invested heavily in ambitious infrastructure projects such as roads, bullet trains, metro rails, and airports, especially in the early stages of development, despite the criticisms and even warnings from mainstream economists in western countries.
There is a fundamental difference between how infrastructure was developed in western countries and how it should be developed in developing countries. In western countries, the pace of economic development, including infrastructure building, had to follow the pace of technological development. For instance, from the early 19th century to the early 20th century, transportation in western countries was based on railways. The automobile and highway era began in the early 20th century, and has now reached its peak. Likewise, after World War II, civil aviation captured the market for long-distance domestic and international travel. Such gradual technological development can be observed in other fields as well. In the long process of technological development, the western world has more time to build the necessary infrastructure.
In contrast, technologies for all kinds of infrastructure are now available for developing countries, and society and the economy are demanding that all kinds of infrastructure be built simultaneously and in the shortest possible time to catch up to the developed countries. Developing countries now need highways, railways, airports, electricity, urban infrastructure, and so forth simultaneously. Due to the nature of most infrastructure, a large share of the investment burden falls on the public sector. The social sectors like education, health, and social security have also increased demands on government revenue. Amidst the increasing pressure of diverse sectors on government revenue, one of the key challenges faced by a developing country like Nepal is how to mobilize investment resources to meet the huge demand for capital investment in the infrastructure sector. Another challenge is how to ensure the sustainability of the infrastructure to be built while spending scarce capital resources.
Being a latecomer in economic and infrastructure development, developing countries also have the prospect of learning lessons from the successful or problematic experiences of the developed world. Unlike the past convention that the infrastructure sector is primarily the responsibility of the public sector, there are innovative approaches now in practice to involve the private sector in developing infrastructure. Public-Private Partnership (PPP) is emerging as an effective instrument to mobilize the private sector’s capital and management creativity, delivering better value for money. In addition, East Asian experience tells a very insightful story on how domestic capacity in the construction industry and the ability to mobilize domestic resources are linked together. After World War II, Japan heavily invested in infrastructure without any foreign aid. Korea also gave priority to infrastructure.
Lately, in China, high economic growth has been driven by infrastructure investment. One of the underlying factors that made higher investment possible in all these countries was the development of domestic capacity for infrastructure or construction engineering. For instance, if China had not developed technical capacity for high-speed rail (HSR), it would not have been possible to mobilize huge investment and build over 40,000 km of HSR network in the span of only 15 years. Nepal and other developing countries can learn this important lesson of developing domestic technical capacity in the construction industry and then mobilizing domestic capital for infrastructure investment. This can create a much-needed virtuous cycle of higher infrastructure investment, higher productivity, and higher economic growth.
The next challenge is how to make infrastructure more sustainable. Since broadly defined sustainability is a new concept, developing countries can benefit from the experience of developed countries here too. As discussed above, the physical infrastructure systems of western countries evolved in response to emerging technologies without much consideration for the sustainability indicators currently in priority. As a result, some of the infrastructure system, along with the form of cities in the West, is structurally incompatible with sustainability concepts. In contrast, developing countries can have a more appropriate physical form of development, including infrastructure types and technologies that are better aligned with the concept of sustainable development. Despite a real opportunity for sustainable infrastructure development in developing countries, a word of caution is warranted here. Sustainability, including climate change, is now a global agenda, and both developed and developing worlds are making efforts to address this agenda. The context of developed and developing countries is much different, and approaches should accordingly be designed. However, there is a risk of applying a universal approach, thereby missing some opportunities available to developing countries.
As shown in Figure 1, economic efficiency, social acceptability, and environmental protection are often considered the “three pillars” of sustainable infrastructure development. These key elements of a sustainable infrastructure system are in fact influenced by the interplay of the underlying system structure (physical and institutional) and various operational policies. In the case of a developing country like Nepal, where the physical form of settlement and infrastructure system are still in the evolving process, we can see one more important element of sustainability, that is, an appropriate physical form of overall development (physical structure), which can serve as the “foundation block”. The “three pillars” usually relate to the institutional structures and operational policies. Without providing a strong “foundation block,” the above-mentioned “three pillars” cannot be well supported.
In other words, unless an appropriate physical form, including an infrastructure system, is ensured, other institutional and operational policy measures may not be fully effective toward achieving a sustainable infrastructure system. In fact, the policy measures addressing issues related to “upper pillars” are often in conflict and demand judicious trade-offs. Infrastructure policies aimed at improving the environment may have a negative impact on the objective of economic efficiency. Such a potential conflict and need for a trade-off can be significantly minimized if the “foundation block” is well built. That is, if an appropriate physical form of settlement and infrastructure system are achieved, it is much easier to identify policies that have minimum conflict or even synergy with each other. Hence, a developing country like Nepal should endeavor to achieve appropriate forms of physical development along with infrastructure technologies serving a range of sustainability goals, such as low-carbon, efficient, safe, reliable, equitable, inclusive, and resilient.
We can find many practical examples verifying the importance of the ‘foundation block’ as shown in Figure 1. For instance, the transportation system in the United States was built mainly for automobile-based travel for short and medium distances and air travel for long-distance trips. Passenger railway was phased out by a deliberate decision. That is why the mode share of public transport in the United States is very low as compared with Europe and East Asia. Both automobiles and planes emit a higher amount of carbon per passenger-km. Likewise, road transport is relatively more prone to accidents and not inclusive, as low-income groups, children, and the elderly may not have access to automobiles. These facts show that the US transport system is structurally not compatible with the sustainability concept. The US has wrongly built the ‘foundation block’, and however good efforts are made at the ‘superstructure level’, that is, the institutional and policy level, the improvement is very marginal.
Figure 2 shows scattered plots of per capita GDP versus per capita transport emissions for developed and developing countries. As expected, as the GDP per capita increases, per capita transport emissions also increase. However, the slope of the trend line is different for different groups of countries. For countries like Japan, Singapore, Switzerland, and the Netherlands, for the given level of GDP per capita, the per capita transport emission is relatively lower, while for countries like the US, Canada, and Qatar, for the corresponding level of GDP per capita, the emission is much higher. The difference can be explained by the different kinds of transport systems. In the first group of countries, railways and public transport, which have lower carbon emissions per passenger-km, are dominant modes, whereas in the second group of countries, private cars with a higher degree of emission are dominant. As can be seen in the chart, Nepal is in a very early stage and can potentially follow any of the two trend lines. The wise thing from the point of view of sustainability is to adopt a transport system similar to that in Japan or Singapore, which is a public transport-dominated transport system.
Empirical evidence discussed above demonstrates that there is a real possibility of developing a sustainable infrastructure system in a developing country like Nepal. Unfortunately, current policy focus and priority are not adequately geared towards that direction. Worse, the donor agencies, which have a significant role in and influence on infrastructure development strategy, are looking at the very narrow issue of emission mitigation and other institutional and social issues. Having a ‘foundation block’ more conducive to the development of sustainable infrastructure systems does not seem to be an explicit priority for both the government of Nepal and international donors. This is one of the key issues for which Nepal needs attention and a necessary policy departure.
{Dr Acharya is an expert on infrastructure policy, planning and management, and currently a member of University of Nepal Development Board. This article was initially published in a souvenir of Federation of Contractors’ Associations of Nepal.}
Comment