The Finance Ministry officials and AIIB representatives signed an agreement in this regard on June 26, 2018, on the sidelines of the third AIIB annual meeting currently being held in Mumbai. 

The state-owned Nepal Electricity Authority (NEA) will take up this project that will be carried out under the Power Distribution System Upgrade and Expansion Project.

According to AIIB, the project envisages to enhance power access and address gaps in power distribution in the western and far western regions of Nepal besides enhancing the quality of key infrastructure services across the municipalities (involved in the project) in the Tarai region.

“The project preparation grant will also help prioritize investment areas, prepare context-sensitive engineering design appropriate for geographical and demographic characteristics of each district, and ensure readiness of the project for implementation,” AIIB said in a statement.

The government is seeking a USD 76 million loan from AIIB for the project complete execution.

Shree Krishna Nepal, Chief of the International Economic Cooperation Coordination Division of the Finance Ministry, and an AIIB representative were present at the signing ceremony.

Other Projects in the Offing

The latest approval is the second such grant Nepal is receiving from AIIB after the USD 1 million aid for the Urban Infrastructure Investment Project received in November 2017.

Nepal Government is also awaiting AIIB approval for its three other project proposals submitted recently, which include: Sharada-Babai Hydropower Project planned on the Babai and Sharada rivers, Pokhara-Beni Jomsom Road Upgrading project and Samakhusi-Tokha-Chhahare Road Upgrading and Extension Project.

The aid is part of AIIB’s project preparation special fund created to support its member countries in their project endeavors.

“The purpose of this grant is to enhance the quality of project preparation through financing preparatory activities, such as feasibility study, environment and social assessment and procurement support,” says AIIB.

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Let’s have a glance at some of the key sectors that received major infrastructure push in the new budget:

Energy

With energy sector on top priority, the government allocated Rs 83.39 billion for enhancing the country’s energy infrastructure alone in the coming fiscal.

With a target of equipping all the households with modern energy within three years and further with sufficient energy supply within five years, the government plans to call 2019-2029 as the ‘Energy Decade’.

The budget also envisages construction of multipurpose hydropower projects across all provinces and begin construction of the same within two years period. The government is also planning to construct a 3,000-MW capacitive hydropower project with the combined investment of government, public and remittance funds.

There are also plans to develop a good number of micro-hydro projects and biogas plants to electrify the rural areas of the country.

Transport

Transport is another area that received a major boost in the present budget with an allocation of Rs 109.38 billion.

Some of the high-profile projects include cable car and monorail projects in Kathmandu, construction of the East-west railway line, Kathmandu-Nijgadh Expressway, Postal Highway, Pushpalal Mid-hill Highway and link roads connecting all the districts touching the southern border to the Pushpalal Mid-hill Highway, among others.

The new budget also envisages construction of new airports across the country.

The government has allocated a budget of Rs 1.43 billion for the transportation management system and is also developing relevant government agencies in all the provinces.

Tourism

Tourism is one sector that is of high significance for Nepal. The new budget has Rs 5.20 billion allocated for the overall development of Nepali tourism sector.

While the country reached 1 million target at the end of 2017, the new budget envisages a 2 million annual tourist arrival target by the end of 2020. Strengthening the domestic tourism to drive in more tourist inflow, the government is planning to develop 100 new tourist destinations and diversify tourist services across the country.

The government also has plans to develop the Meetings, Incentives, Conferences and Exhibitions (MICE) tourism by mobilizing the country’s foreign missions. To facilitate ways for tourist arrivals, more number of airports are also being planned at various tourist destinations of the country.

Towards getting academic support, the government is also aiming at the conversion of the Nepal Academy of Tourism and Hotel Management (NATHM) into a deemed university.

Other key areas that received due attention for overall infrastructure development include:

• Economic Affairs- Rs 483.14 billion
• General Public Service – Rs 396.74 billion
• Housing & Community Amenities – Rs 66.57 billion
• Public Order & Security – Rs 47.50 billion
• Social Protection – Rs 46.91 billion
• Defense – Rs 44.93 billion
• Environment Protection – Rs 22.72 billion
• Recreation, Culture & Religion – Rs 7.10 billion

Overall, the new budget paid due attention to the infrastructure development across the country as a key to achieve the economic growth.

Next: Budget Gets Mixed Response

Related Article:

• Nepal’s Maiden Federal Budget 2018-19
• Nepal Federal Budget FY 2019-20: Highlights & Announcements

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The International Finance Corporation’s (IFC) report titled ‘Climate Investment Opportunities in South Asia’, released last week, said Nepal holds USD 46.1 billion worth investment potential and would also fulfil its national climate targets promised under the Paris Agreement by 2030.

According to the report, Nepal offers such opportunities in key sectors such as transport infrastructure, renewable energy and municipal solid waste for the 2008-13 period as part of its moves towards achieving climate change targets.

IFC’s assessment was based on Nepal’s commitment under Nationally Determined Contributions (NDC) to the United Nations Framework Convention on Climate Change in October 2016.

Hydropower and Solar Energy, Among Others

In its NDC, Nepal promised generation and distribution of 12,000 MW hydroelectricity and 2,100 MW solar energy, better waste management and control of methane emission, while also equipping every rural household with smokeless cooking stoves by 2030.

Meeting all these requirements would mean almost USD 46.1 billion investment with 12,000 MW hydropower generation alone requiring USD 22.5 billion investment, says the report.

Besides, the Nepali Government’s policy to integrate technological solutions in the country’s agricultural sector would need another USD 4.8 billion.

Private Sector Participation

While highlighting the role of private sector, IFC called on the Government of Nepal to facilitate private-public partnerships and also conduct awareness programs on climate smart-projects to understand the financial benefits of investing in green projects.

The report also recommended revision of foreign ownership limits, restrictions on non-equity investments and sector caps for attracting foreign investment.

Overall, the South Asian countries, which contribute to seven percent of global CO₂ emissions, hold USD 3.4 trillion climate-smart investment opportunities to fulfil their national targets, highlights the report.

“The only way that the South Asian countries can take advantage of these climate investment opportunities is with a strong and engaged private sector,” says Philippe Le Houérou, CEO, IFC.

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