#NIS2019: The Conclusion Day

The last day of the summit included a parallel session and three plenary sessions followed by a concluding session at the end.

The first session of ‘Day-2’ NIS 2019, chaired by the Nepal Minister for Physical Infrastructure and Transport Raghubir Mahaseth made emphasis on the investment potential of road, railway and waterways in Nepal.

As part of the session, Joint Secretary at the Ministry Gopal Prasad Sigdel highlighted Nepal Government’s priority to mega physical infrastructure projects and informed that:

• Gautam Buddha International Airport project will be completed by 2019 end and Pokhara International Airport by 2020
• Cable cars were already successfully operated in Manakamana, Chandragiri and Kalinchowk areas

The session also stressed on water transportation potential of Koshi, Karnali and Gandaki rivers, and required investment on the same.

The panelists underscored the need for immediate formulation of plans and timely execution on physical infrastructure development for better economic development and prosperity.

As part of the session, Asian Development Bank (ADB) Vice-Chair Shixin Chen said Nepal needs to focus more on physical infrastructure. “The ADB has its investments in Nepal’s Gautam Buddha International Airport, Melamchi Drinking Water Project and various other projects including the rebuilding of earth-quake damaged schools,” said Chen, expressing their willingness for further investment in Nepal.

Speaking in another panel session on ‘Investment in Nepal: Exchanges of Experience’, investors lauded Nepal’s investment climate. @investinnepal19

“There is huge labor force, problem of load shedding is almost solved, and industrial atmosphere has been created. So, the foreign investors can make Nepal their destination,” said Confederation of Nepali Industries (CNI) Chairperson Bhawani Rana.

Non-Resident Nepali Association (NRNA) Founding Chairman Upendra Mahato also called on foreign community to invest in Nepal’s projects for its reliability and investment potential.

The Summit Outcomes

• Nepal Investment Summit 2019 (@investinnepal19) has reportedly witnessed signing of 15 new deals and MoUs for new projects in Nepal
• Besides, the country has also received proposals, 17 applications for 10 other projects presented as part of the Summit
• Transport, hydropower, hospital, airport, convention center and agriculture infrastructure were among areas that received investment proposals
• India, Vietnam, United States, South Korea, China, Britain were among countries that represented participating investors
• International Finance Corporation, World Bank Group, Asian Development Bank, Multilateral Investment Guarantee Agency, were among the key multilateral donor agencies entered into separate investment and cooperation deals during the summit
• One of the world’s largest solar development company SkyPower announced a new partnership with Nepal’s Chaudhary Group for a 600-MW capacity renewable solar energy projects #cleanenergy
• PM and Finance Minister Khatiwada held 30 side-line bilateral meetings with investors and delegates as part of the Summit
• More than 1300 participants and around 735 foreign delegates from more 300 companies attended the Summit

What Key Delegates Said on Nepal Investment Summit 2019?

Nepal values the FDI to embark on the high economic growth trajectory. – K P Sharma Oli, Right Honorable Prime Minister

Let us all join hands together to unlock Nepal’s Economic Potential.- Maha Prasad Adhikari, CEO, Office of the Investment Board

Affordable tax rates have been fixed and laws have been made targeting investors. There is a possibility for investors to have a big market in Nepal which lies between two big nations – China and India. I want to urge all investors to invest and get high returns on their investment. – Dr. Yuba Raj Khatiwada, Honorable Minister for Finance

Plans have been made to make long-term investments in Nepal. – Shixin Chen, Vice President of the Asian Development Bank

Nepal has been a rising star in South Asia with foreign direct investment flows reaching a record high in 2017, and likely to remain an important investment destination in the region. This confirms Nepal’s efforts to improve its investment climate and become a competitive investment destination for multinational companies that want to have an impact. We stand ready to work with investors and the government to make Nepal a hub for investment in infrastructure that improves lives, leads to sustainable growth and delivers opportunity for its citizens. –  Keiko Honda, CEO of Multilateral Investment Guarantee Agency (MIGA)

With 25 projects approaching USD 3 billion in financing, we are here for the long haul and will continue to support infrastructure development, policy reforms, skills development, and anything required. There is a clear acceptance by Nepal authorities that the country’s prosperity will rely on crowding in the investment from around the world. Not only financial resources, but also technical and managerial know-how, will be critical to realize Nepal’s vast potential. – Hartwig Schafer, Vice President of World Bank South Asia

IFC has played a role in creating markets and supporting investments for 60 years. In Nepal, we are looking to scale up significantly our investments in strategic sectors such as hydropower, agribusiness, tourism, and financial inclusion. We are encouraged by the government’s efforts to improve the enabling environment and IFC plans to increase its cumulative investment portfolio to around USD 1 billion over the next four years. – Hans Peter Lankes, Vice President, Economics and Private Sector Development, IFC

Province 2, Sudurpaschim Stand Special Attraction

Province 2 and Sudurpaschim emerged as the top investment destinations at the Summit.

While the Summit highlighted potentiality of different projects belonging to different provinces, Province 2 and Sudurpaschim have reportedly stood unique in attracting investors.

Despite number of projects, the province 2 attracted investors by showcasing its geographical importance, tax-related incentives and other special initiatives by provincial government.

It is noteworthy that majority districts of province 2 share borders with India, giving scope for trade and business opportunities.

Sudurpaschim also wooed investors in its way by showcasing its 7 seven projects identified by the Investment Board Nepal and 9 other projects of the region.

“There must be some positive competition among the provinces when it comes to wooing investors and develop provinces. Only if we try to develop on our own can federalism be stronger,” said Bijaya Kumar Yadav, Minister For Economic Affairs And Planning, Province 2 Government.

“It is difficult for provinces to organize such large-scale events. So, we sought to use the Investment Summit platform at best we can,” says Jhapat Bohora, Minister For Economic Affairs And Planning, Government of Sudurpaschim Province.

Responding on the Province 2 potential, CG Chairman Chaudhary said, “During our survey, we saw a very good investment opportunity in solar plant in Province 2. When we went to hold talks with Chief Minister Raut and his team, we were impressed by their professionalism and their commitment to support us. That boosted our confidence; our talks resulted in the signing of the memorandum of understanding during the summit.”

In this regard, Chaudhary explained that CG Infrastructure is planning to set up various solar plants in all 8 districts of the Province 2.

“Competition among provinces to attract investment can be described as the benefit of adopting federalism. It is good that provinces engaged in a healthy competition to attract investment,” says former Chief Secretary Som Lal Subedi.

The Conclusion

The Nepal Investment Summit 2019 worked out as a big platform for the Himalayan nation in showcasing to the world, its investment and development potential across sectors. Hope the Summit outcomes will add to the country’s portfolio in the days to come.

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The country’s only infrastructure bank has resumed its operations on March 06, 2019 with an aim to generate finances for the local infrastructure projects.

The Minister for Finance Yuba Raj Khatiwada inaugurated the bank that has been developed under the public-private partnership model.

The bank has resumed its operations with the largest paid-up capital of NPR 20 billion and the authorized capital of NPR 40 billion.

With headquarters in Kathmandu, the bank will expand to all local regions with branch offices in every province.

The infrastructure bank will play a key role in addressing financial needs and fund crunch being faced by Nepali infrastructure sector.

It is noteworthy that many local banks and financial institutions have expressed their reluctance to offer fund funds for long-term infrastructure projects. Now, the infrastructure bank is expected to fill that gap!

Addressing the inauguration event, Khatiwada, who served as the governor of the central bank in the past, called on need for utilization of banking services.

NIB came into operational much before the expected date. Earlier in February 2019, the tentative date for resuming NIB operations was set as June 2019.

NRB issued an operating license to NIB in a decision on February 11, 2019.

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In its new decision on February 11, 2019, Nepal Rastra Bank (NRB) has issued an operating license to the country’s only infrastructure bank i.e., Nepal Infrastructure Bank (NIB).

As the country’s first bank under the public-private partnership initiative, NIB will focus on filling funding gaps of the country’s infrastructure projects.

As per the new decision, the financial institution will resume its operations from June 2019.

The Central Bank issued the operating license and has also created a separate directive for NIB functioning.

As per the rule, the institution will need to start operating within six months of issuing the license. Meanwhile, NIB CEO Anil Gyawali says they have already planned to start operating before the set date.

NRB has also relaxed norms for NIB, allowing the latter to issue loans up to 90 percent of its credit to core capital and domestic deposits ratio. Whereas, the limit for the commercial banks stands at 80 percent.

Under the new rules, NIB is also eligible to accept fixed deposits about NPR 10 million with a five-year maturity period.

“Other than collateral based financing, we will be offering credit to large projects via a public-private partnership model under which government agencies and the private sector will stand guarantee for the loans,” says Gyawali.

NIB will have an authorized capital of NPR 40 billion, paid-up capital of NPR 12 billion and the issued capital of NPR 20 billion.

The institution can cater to investment needs of national infrastructure projects, especially in the areas of agriculture, construction, transportation, tourism, Information Technology, Special Economic Zone (SEZ) and urban development.

“We also aim to invest in social and economic overheads such as opening new tracks, bridges, irrigation systems, water supplies and markets in rural areas,” Gyawali adds, as he informed about focus on high value-adding projects.

The infrastructure bank will have its important role in fund management for large infrastructure projects from both domestic and foreign sources.

Nepal is in dire need of capital for infrastructure to reach the targets set out by the Sustainable Development Goals by 2030.

As per the National Planning Commission estimates, Nepal is need of NPR 1,770 billion annual investment to meet the targets by UN Sustainable Development Goals (SDGs).

Towards this end, the government is also hosting the Nepal Investment Summit during March 29-30, 2019 to attract more foreign capital.

Hope, NIB will add to the government’s efforts to achieving a fast-paced infrastructure development in the country, in line with the global goals.

Related News:

• World Bank Funds Nepal Mini-Grid Energy Access Project with USD 7.6 million
• Foreign Aid to Nepal: World Bank Tops, Govt Eyes Capacity Development

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The government’s capex saw a five-year high at Rs 267.25 billion in the ended fiscal against the actual allocation of Rs 335 billion, with Rs 108 billion spending in the last month considered as a major factor behind the rise.

Infrastructure development & construction accounted to a major share i.e., 79.7 percent of the total capital budget allocated for FY’18, the highest after 82.56 percent in FY 2012-13.

Factors Behind Rise
Provision of early budget system, releasing of full budgets to local units in three tiers, approving the programs and projects in line with the Line Ministry Budget Information System are among key factors that contributed to the rise in capex, say the officials.

“This might have played a part, if not a big part, in the increase in capital expenditure of the government. The government’s move to take action against non-performing and under-performing contractors was another reason for the rise in capital expenditure in the last fiscal year,” says Jagannath Devkota, Information Officer at Financial Comptroller General Office (FCGO).

Meanwhile, economists feel that allocation of funds to new projects outside budgetary allocation is also one of the key contributing factors to the increase.

“Funds totaling Rs 4-5 billion have been allocated for some new projects which are linked with political parties,” says Rameshore Khanal, former Finance Secretary.

In its mention about high spending in the last month, FCGO pointed that there hasn’t been any change in government’s act of late disbursement of the capital budget.

According to the regulatory, disbursing of more than 40 percent of the total capital budget has become a common trend for the country in the last five years.

Developmental Projects Hit!
Meanwhile, government officials argue that the high spending in the last month is not just for new developments and also include payments for tasks completed over the year.

On the other side, government agencies complain that the developmental projects are getting delayed due to untimely release of budgets forcing contractors to move away due to lack of needed resources.

According to the Roads Department, construction of nearly 800 bridges has been pending due to lack of required budgets.

“Thus, a large portion of payments is made in the closing months of the fiscal year. This practice hinders timely implementation of projects by contractors,” says Khanal.

Spending rush at the end of the fiscal is a clear sign of elevated fiduciary risk and improper execution of the allotted budget, says FCGO.

It’s time for the government to rethink on budget planning & execution!

Also Read : Ministries to Expedite Budget Expenditure in FY’18

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In a recent decision, both the countries decided to develop inland waterways navigation from India’s River Ganges to Nepali border covering the latter’s Kosi and Gandaki (Narayani) rivers.

Towards this end, officials from both the ends discussed key aspects of the project in a two-day meeting held during July 15-16, 2018.

First Such Meeting!
As part of discussions, the two sides discussed to form a team that will undertake a field study for development of the proposed project.

According to the Indian Embassy, the meeting focused on techno-economic feasibility of various routes and modalities.

The 1^st Indo-Nepal consultation meeting on Inland Waterways Connectivity concluded with signing of Minutes. Two sides agreed to immediately send technical scoping missions to each other’s country for techno economic feasibility studies of riverine routes, Indian Embassy in Kathmandu said in a tweet.

The Indian side also offered to initiate capacity development of inland waterways professionals of Nepal, the Embassy added.

Under the study process, Indian officials will visit Kosi and Narayani rivers and Nepali technical team will take a travel to Calcutta, Haldia-Varanali section to observe India’s inland waterways development already under process.

Vice-President of Inland Waterways Authority of India Pravir Pandey and Joint Secretary of Nepal’s Water and Energy Commission Secretariat (WECS) Madhav Belbase signed and exchanged the deal amid the presence of their respective teams, on behalf of the two countries.

Dreams Come True!
Following the two-day meeting, officials of both the sides were excited at the forward movement with regard to the long-awaited dream of both the countries.

It is possible to develop inland waterways in Nepali rivers, especially in Narayani, probably after two years, says Pradeep Gyawali, Nepal Foreign Minister .

The latest announcement comes as a result of the first such consultation meeting between the two countries on ‘Inland Waterways Connectivity’ following an agreement made during PM Oli’s India visit in April 2018.

 “There is a scope of inland waterway navigation in Kosi and Narayani rivers, which can be linked with third counties, including Bangladesh via Haldia, India. It will contribute to Nepal’s economic development,” reads an official release by WECS.

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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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Now that Nepal has the support of its neighboring countries, it is gearing up for its upcoming railway projects. The department is currently assessing its needs and addressing any issues that need immediate attention to meet one of its major goals of building a strong rail network internally and externally.

“We are assessing the needs and preparing a plan accordingly,” says Nepal Railway Department, Senior Engineer, Prakash Upadhyaya.

According to Upadhyaya, the department will shortly approach the Ministry of Physical Infrastructure and Transport, a crucial agency that is responsible for the progress of major infrastructure projects.

However, there are some issues that present obstacles in the department’s course of action.

Obstacles to the project:

• Currently, the budget and infrastructure allocated to the department is not enough to push the project forward. The government has given a sum of Rs 4.5 million for the department’s overall development including the study of multiple railway projects, which include the prospects of monorail
• The department lacks skilled labor and currently does not have any rail engineers.
• The existing workforce is not sufficient as there are only 40 persons presently working for the agency.

The department officials opined that budget allocation will not impact their work provided that a pre-feasibility study of cross-border railway lines is financially supported by the supporting neighboring countries.

Despite the challenges, Nepal’s railway department is undeterred and is keen on garnering support from its neighboring countries to commence the projects.

Talking about the situation, Upadhyaya says, “We may lack the resources, but we do have Nepali people who have been trained in railway engineering in countries like China and South Korea. We should be working towards attracting such individuals to work for us.”

With the aim of equipping its existing workforce with the required skills for the projects, Nepal has sent two if its engineers to China to study a Master’s degree in Railway Engineering.

Infrastructure expert Suraj Raj Acharya is of the opinion that the country needs to be clear on the railways’ significance in the country’s transport infrastructure before zeroing on aspects construction or technical feasibility.

Making his point clear, he says, “There are several railway technologies and the country should cautiously pick an appropriate technology that can help achieve the development goal the country aims to achieve. A rail having a speed of 200 hours per kilometer can adversely impact number of airports in the country.”

Have we made consideration of such situation before creating railway euphoria?” he questions.

The latest update comes as a development to the discussions the prime ministers of Nepal and India had with regard to the prospects of developing railway lines within Nepal and beyond in their recent meetings.

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Towards this end, Nepal Rastra Bank issued a Letter of Intent (LoI) to the country’s renowned public-private equity platform Emerging Nepal directing the latter to set up the Infrastructure Development Bank (IDB).

IDB, Nepal’s first such bank, with nearly 40 promoters is set to focus on financing mega infrastructure projects of the country and will begin its operations officially in the next six months.

According to NRB spokesperson Narayan Prasad Paudel, the process followed IDB’s deposit of 50 percent of its paid-up capital (45 percent in six commercial banks and 5 percent in the application phase) for setting up the needed infrastructure.

Why IDB?

With the prime objective of offering financial assistance, IDB will support the infrastructure projects by making the required equity investment and opening letters of credit to facilitate the import of equipment required for the projects.

Besides, IDB mobilizes long-term deposits and also issues currency bonds (domestic & foreign) and debentures to facilitate the required financial resources.

Process Ahead

According to NRB spokesperson Narayan Prasad Paudel, the process followed IDB’s deposit of 50 percent of its paid-up capital (45 percent in six commercial banks and 5 percent in the application phase) for setting up the needed infrastructure.

Post LoI from NRB, IDB will be registered as the public limited company within the next six months.

“In addition, the bank needs to manage the logistics besides developing the necessary software and appointing senior officials. NRB will then carry out an inspection of the financial institution before issuing the operating license,” says Paudel.

Background

IDB is part of the Government of Nepal’s plan to set up a mega bank to support and was envisaged to set up as an entity under public-private partnership.

“The establishment of IDB, which was initiated in the current fiscal year with the participation of national and international banks in order to increase private and foreign investment in the infrastructure sector, will be completed in the coming fiscal year,” reads the budget statement for FY 2017-18.

Following the government’s decision, NRB issued the relevant Licensing Policy for IDB in 2017 calling on the interested parties for their participation and Emerging Nepal was finalized for the deal.

Emerging Nepal has a joint investment of 40 Nepali promoters including insurance firms, five commercial banks and corporate bodies.

When it comes to public-private partnership, government and promoters hold 10 percent and 50 percent shares, respectively, and the remaining 40 percent capital will be raised through Initial Public Offering (IPO).

IDB will be operating according to the Banks and Financial Institutions Act (BAFIA) under the chairmanship of the former Chief Secretary Bimal Koirala.

According to Paudel, NRB is open to welcome more such IDBs provided the necessary requirements are met, and these banks also allow foreign investment.

Let’s hope the new initiative will drive Nepal’s infrastructure development to the next level!

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The new system, powered by 20-kW capacitive wind turbines and 15-kW capacitive solar PV panels, generates 110 units of energy per day, surpassing the village’s daily power demand of 87 kWh and is currently catering to 83 rural households.

“Access to clean, reliable and affordable energy will help the village to connect to the world through internet and mobile phones, and will create opportunities to boost local income. The electricity from the mini-grid will also open the door for commercial activities,” says Mukhtor Khamudkhanov, Director, ADB Nepal.

The project worth USD 16.2 million, partly financed by the Government of Nepal, was part of ADB’s South Asia Sub-regional Economic Cooperation Power System Expansion Project and was also supported by the Scaling up Of Renewable Energy Program under the Climate Investment Fund and the local community.

Whereas, the Alternative Energy Promotion Centre (AEPC) installed and operated the project that aims at boosting power access to rural Nepal.

Prior to this, Nepali Government had launched its first mini grid wind-solar system in Dhaubadi in western Nepal, six years ago.

“The success of Dhaubadi and Hariharpurgadi projects has demonstrated that clean energy is indeed a viable option to provide reliable energy access to rural Nepal through wind-solar hybrid systems,” says Ram Prasad Dhital, Executive Director, AEPC.

“Implementation of innovative renewable energy solutions will help the country to achieve the UN Sustainable Development Goals (UNSDGs),” opines Prakash Mathema, Secretary at the Ministry of Population and Environment, Nepal.

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