With declining capital investment, Nepal's public investment, which is crucial for Nepal’s recovery from the devastation caused by April-May 2015 earthquakes, is still low, with no immediate signs for progress or improvement.
Although almost 10 months have passed since the major earthquakes, Nepal is yet to come up with a concrete program for early recovery.
Following the establishment of National Reconstruction Authority, the reconstruction campaign seems to be taking off, with the announcement of several packages and programs for earthquake recovery. Asian Development Bank (ADB) President Takehiko Nakao has visited Nepal at about the same time.
He met with Prime Minister Khadga Prasad Oli and Finance Minister Bishnu Prasad Paudel to discuss Nepal’s economic recovery and social development after the devastating earthquakes of 2015.
Nakao also exchanged views with the Prime Minister and the Finance Minister on the need for a long-term socio-economic development strategy and medium-term development plan that the government has started working on recently.
During his meetings, Nakao praised Nepal’s enactment of its new constitution as a major milestone in its political transition process.“The new constitution marks a new era for Nepal and lays the foundation for lasting peace, stability, and more rapid socio-economic progress. I hope the remaining political differences over the new constitution will be amicably resolved soon, paving the way for its timely implementation," said president Nakao.
“ADB is ready to provide assistance for Nepal’s transition to the new governance structure and public management systems as envisaged in the constitution,” said ADB President Nakao.
ADB forecasts Nepal’s economy to grow 1.5% in the current FY2016, ending on 15 July 2016, after 3% growth in the previous year, affected by the tragic earthquake in April 2015 and subsequent supply disruptions. ADB is expecting the growth to pick up to 4.8% in FY 2017.
During the visit, Nakao said ADB is willing to expand annual lending to Nepal by 70% to $500 million per year from the current $300 million to support critical investments and reforms. Under ADB’s country partnership strategy with Nepal for 2013–2017, ADB is prioritizing major investments in hydropower generation and transmission, enhancing the capacity of international airports, building new economic corridors to promote regional trade, and reforming higher education systems.
“ADB will continue its support for inclusive growth through investments in agricultural diversification and productivity, urban and rural water supply and sanitation, and rural roads. ADB will work to attract private sector investment and public-private partnerships for large-scale hydropower and transmission projects and high-value agricultural value chains."
Nakao said it is essential to accelerate the pace of investment for reconstruction and other development programs in order to achieve its economic growth potential of 7–8% per annum in the medium term. Nepal’s public capital spending has been low at an average of 3.5% of gross domestic product (GDP) over the last 5 years compared to the 8-12% required to fill the critical infrastructure gap within a decade.
A large portion of ADB’s currently committed assistance of $1.75 billion—equivalent to 6% of GDP—remains unspent. The government and ADB should work together to speed up project implementation, including by promoting timely and proactive decision making by project implementing agencies.
Implementation of projects slowed further in 2015 due to the earthquake, aftershocks, and supply disruptions in southern border districts.“Now that the situation has normalized, the government needs to step up efforts to make up for the delayed reconstruction, as well as build fundamental capacity for project planning, implementation, and monitoring,” said Nakao. In this regard, Nakao welcomed the recent establishment of the National Reconstruction Authority.
According a press release issued by ADB Resident Mission, the Capacity Development Resource Center at the Nepal Administrative Staff College, established in late 2015 supported by ADB’s technical assistance, will be instrumental in providing regular and long-term training to staff at agencies implementing projects and related government officials, he said.
“Enactment of the new constitution and launch of the United Nations’ Sustainable Development Goals have provided an excellent opportunity to prepare a long-term vision and development strategy for Nepal. They will help the government deepen reforms, prioritize public investment, and spur private investment in all sectors,” said Nakao.
Nepal was a founding developing member country of ADB and ADB started lending operations there in 1969. ADB has approved 135 sovereign loans totaling $3.7 billion to date. It has also approved five non-sovereign loans, equity investments, and guarantees totaling $49.5 million.
As Nepal is launching reconstruction and recovery programs, the visit of ADB president and his commitment to provide further technical and other support is significant.