OFF-THE-RECORD TEA-TALK: Project Delays And Corruption

It seems the highest level government entity which does investigation of delays, irregular activities and corruption in all kinds of physical infrastructure projects is Public Accounts Committee (PAC).

Jan. 7, 2022, 8:20 a.m.

For the past few weeks, almost all media are, rightly, making noise about slow pace of development activities resulting in very low capital expenditure. This in turn created liquidity crunch with severe cash shortage in the market. Low level of capital expenditure has always been a chronic problem, and main reason is delays in entire process of development activities in government sector. Regarding government’s development projects, focus of man-on-the-street and media, in general, is invariably on corruption, and strangely enough attention is not given to very slow pace of development. General tendency is to make corruption responsible also for slow pace of development activities. But, it can be easily proven that linking corruption with delayed projects is bizarre, and it makes no sense.

It seems the highest level goverment entity which does investigation of delays, irregular activities and corruption in all kinds of physical infrastructure projects is Public Accounts Committee (PAC). Apart from PAC, the most effective and powerful anti-corruption agency is Commission of Investigation of Abuse of Authority (CIAA). It is being said that CIAA is the most powerful and effective anti-corruption agency among all South Asian countries and Nepal has best anti-corruption law in South Asia. In spite of this tough law against corruption, unfortunately Nepal is still among most corrupted countries of the world. Obviously, the general perception is that corruption is the main reason for delays in physical infrastructure projects of Nepal. But this perception defies logic.
Why would a corrupt official intentionally delay a project instead completing the project on time thereby facilitating to pocket the kickback sooner? There cannot be even a single physical infrastructure project in the whole world without involvement of one or more private companies representing as contractor, supplier or consultant. It is obvious that companies will make profit, and there is strong possibility that they may put aside a certain portion of profit to bribe concerned politicians and bureaucrats for smooth functioning of the project as well as for possibility of getting favor in future projects. General tendency all over the world, especially in developing countries like Nepal, is that all private companies are ready to manage certain political fund to get big contracts in infrastructure projects. It is up to those concerned politicians and officials whether to succumb to those ‘attractive offers’ from those companies or reject bribes of any kind. In either case, we can conclude that project delay has nothing to do with corruption. On the contrary, the project may likely to move faster if there is nexus between project staff and contractors.

The most prominent international NGO committed to combat corruption in the world is Transparency International (TI). According to TI, almost 79 percent of world’s population live in countries with “corrupt” governments and two-third of the countries score lower than 50 in the range between zero, the very corrupt and hundred, the very clean. Irony is that there are many countries much more prosperous than Nepal among those two-third countries with corrupt governments. Hence, it is crystal clear that corruption is not the main reason for slow pace in development of physical infrastructure in Nepal. Obviously, the only other possible reason is bad governance.
Governance, in any country, will always be in the hands of two sets of citizens- politicians and bureaucrats. Many may have this notion that of contractors are to be blamed for slow pace of projects. But, again the question arises- why the decision-makers could not give contracts to more qualified and more efficient contractors, as final selection of contractors is always in the domain of the government. Top bureaucrats have readymade answer for this also- laws, rules, regulations and processes do not always allow to select better contractors. But, this answer does not make sense as amendment of laws, rules, regulations and processes is in the hand of top bureaucrats and law-makers in the parliament. Question arises who has stopped them in making necessary amendments in laws, rules and regulation so as to facilitate in selecting better performing more efficient contractors. One other question may arise- who should be blamed more- political leaders or top bureaucrats. Safest answer to this question is 50/50. Of course, top bureaucrats have always good excuses of blaming the bosses, the politicians. On this point also, it may not be an exaggeration to conclude that there cannot be any Prime Minister or minister, who wants delayed projects in his tenure, although he may be hoping for some under-the-table political funds. The needle definitely points to bureaucrats and technocrats in the government machinery related with infrastructure project delays.

An ex-Prime Minister recently set in motion a big public controversy by accusing past governments of embezzling Rs. 9 billion in one of the biggest hydropower project, Buddhi Gandaki. Irony is that even a bag of cement has not reached the project site yet. This project is lying in drawing table for more than ten years. It is clear that corruption is not the reason for delay of one of the most cost-effective hydropower project of the country. Moreover, if the ex-Prime Minister’s accusation of Rs. 9 billion corruption is true, it is obvious that those involved in the project could have enjoyed more graft if the project construction is started by contractors without delay.

One other ‘game-changer’ project is Pancheswar Multipurpose Project, which is still in limbo for more than two decades. Definitely, corruption has nothing to do with this unacceptable delay of this ground-breaking big project. It can be easily proven beyond doubt that weakness in governance is the main problem. Another prestigious project Lumbini Master Plan was initiated about 50 years back. The project is yet to be completed. Stories of corruption in the project crop up in media quite often. But the delay in the project cannot be attributed to corruption, but on the contrary faster construction would have generated more corruption money. Detailed scrutiny will easily prove that mismanagement of the project is the main reason for delay.

Few years back, another state-owned company Nepal Telecom (NT) was in news, when a global tender was floated for purchase of 4G Mobile system. Perliamentary committees and CIAA started investigation. The result is that NT management could not decide on the tender on time, which resulted in delay in giving 4G service to its subscribers. In the mean time, the competitor Ncell deployed 4G service much earlier than NT.

In the name of combating corruption, Public Accounts Committee (PAC) made headlines by initiating investigation in purchase of two Wide-Body A330 aircrafts worth Rs. 24 billion by another state enterprise Nepal Airlines Corporation. In fact PAC simultaneously started detailed investigation on 4G system and Wide-Body purchase. 4G system worth Rs. 19 billion is being supplied by a Chinese company, whereas Wide-Body worth Rs.24 billion is being supplied by an American company. Grapevine in business circle is that the Chinese company is being represented by a local agent in Nepal, but the American company refused to appoint any local agent. After preliminary examination of papers, PAC did not pursue investigation in 4G project, whereas in case of Wide-Body procurement from the American company, PAC started examining in minute detail even highly technical aspects of the aircraft manufactured by a internationally reputed European company Airbus. Then, to the utter surprise of the entire management team of NAC, PAC came to an unexpectedly harsh conclusion that there are calculation mistakes and technical lapses amounting to almost Rs. 4 billion, and PAC directed CIAA to do further investigation. On 4G investigation, PAC neither bring out any conclusion nor instructed CIAA to carry out any further investigation. Fortunately, in case of Wide-Body case, PAC started investigation only after purchase agreement were already signed. Wide-Body project was not, therefore, delayed and both aircrafts landed in Kathmandu as per schedule.

Most surprising aspect in 4G and Wide-Body deals is that both company got tender award winning in global tender or International Competitive Bidding (ICB). Hence, one more question arises- if PAC or CIAA does not have trust in ICB procurement process, how can big infrastructure projects move ahead? If internationally accepted ICB process is likely to face rough weather, it is certain that bureaucrats and technocrats involved in any project will have this dangerous notion that ‘doing nothing’ or delaying project is better option. There are many stories all over government machinery that some top official does not make a decision on some files saying that he is in that chair or position for just few months, so he does not want to take risk. This phobia about possible investigation by parliamentary committees and CIAA is the main hurdle in all physical infrastructure projects in the country. One way to mitigate this phobia is fast conclusions of investigations by agencies like PAC and CIAA. It is strange that PAC has not yet made public their conclusion on 4G investigation. Similarly, CIAA has not made public their conclusion on Wide-Body investigation.

If detailed analysis is done by comparing Nepal with other developing countries of the world in corruption level published every year by TI and economic growth rate & per capita income published by World Bank/IMF, it can be proven beyond doubt that corruption has nothing to do with project delays, low capital expenditure and slow economic growth. There must be some other reasons for sluggish economy. Unless government identifies those reasons and rectify problems, nation building at faster pace is just not possible.

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