PROSPERITY THROUGH CONNECTIVITY
PROSPERITY THROUGH CONNECTIVITY
Since the onset of the contemporary globalization that started from the early 1970s, the world has seen greater flows of people, goods, investment and knowledge which have been the source of increasing welfare, or in other words, prosperity. However, these opportunities for greater prosperity are not distributed equally in all places. Greater connectivity helps people tap the opportunities. As aspirations of people have become global, more and more people believe that increasing connectivity through the development of transport infrastructure can not only change their own lives, but also the future of their countries. This is equally true for Nepal and Nepalis. Transport infrastructure not only connects people but also touristic destinations thereby boosting tourism, an industry that is a key contributor to national prosperity. This article describes the use of transport infrastructure as a development strategy, discusses the status of transport infrastructure in Nepal and highlights some steps that are needed for improvement.
Building transport infrastructure as a development strategy is a popular choice of not just politicians and policy makers but also an equally widespread policy prescription of economists, academics and policy analysts. This focus stems from the theoretical belief in the role of transport infrastructure in achieving economic growth and convergence between leading and lagging regions. Reduction in transport costs not only makes it easier to trade but can also result in significant welfare gains for both producers and consumers. Both neoclassical and endogenous growth theories lend evidence to the transport infrastructure agenda. While neoclassical economists regard physical capital as a key for growth, the endogenous growth theorists focus on the role of public capital like transport infrastructure in augmenting the impact of education and innovation. The New Economic Geography theory also argues that transport infrastructure helps to spread economic activities to lagging regions and enable them to catch up with the leading ones. Although development choices have been influenced by the faith of policymakers on the promises postulated by above theories, political and managerial incentives are usually the final determinants. Investment in transport infrastructure provides incumbent governments the opportunity to make visible public spending, enhance their legacy, and impact a significant number of beneficiaries. These investments also fulfil the aspirations of constituencies to be more globally connected.
Transport infrastructure has formed the backbone of Nepal’s development strategy. The National Planning Commission has identified 21 “national pride projects” of which 10 are directly related to transport infrastructure, three aviation-related, one railway-related, one fast-track related and the remaining ones are about building highways. Nepal’s transport infrastructure had mainly focused on roads and aviation until very recently. At the regional level, the Asian Highway routes link Nepal with China and India via two highways: 1027 kilometers long AH2 (Kakarvitta – Mahendranagar) and 297 kilometers long AH42 (Raxaul – Narayanghat – Kathmandu – Kodari).
Nepal’s road network comprises of Strategic Road Network (SRN) that is made up of national highway and feeder roads with total length of 12,989 kilometers as of FY 2015/16. In addition, total length of other local road network was 60,163 kilometers as of FY 2018/19. All the district headquarters are connected by road network except Humla. Construction of roads along the North-South corridors, a mid-hill highway, a postal highway, the Madan Bhandari highway, and the Kathmandu-Terai fast track are some exciting plans of the Government. In aviation, Nepal has an international airport in Kathmandu, four regional domestic airports, and 28 other domestic airports in operation. Two regional international airports, Gautam Buddha in Lumbini and one in Pokhara are now nearing completion, while preparatory works are underway to develop the Nijgadh International Airport in Bara District.
In addition, there are opportunities in other sectors of transportation such as railways and waterways, which the Government has begun exploring. Nepal has embarked on a plan to construct a 945-kilometers long East-West Electrified Railway with rail links with India. There has also been talk about the development of Kathmandu–Kerung, Birgunj–Kathmandu, and Kathmandu-Pokhara-Lumbini railway routes for interstate transportation, and metro and monorails in Kathmandu Valley for intra city transport.
Further, Nepal also has plans to develop water transport on the Koshi, Gandaki and Karnali rivers. Nepal has already concluded an agreement with India to develop inland waterways for cost-effective and efficient cargo movement, within the framework of trade and transit arrangements, providing additional access to sea for Nepal. With the success of ropeways such as Manakamana, Chandragiri and Kalinchowk Cable Cars, feasibility studies of ropeways in other areas such as Muktinath and Swargadwari are also being undertaken.
A closely related infrastructure is trade infrastructure and logistics. Nepal Intermodal Transport Development Board (NITDB) has developed Inland Clearance Depot (ICD) / Container Freight Station (CFS) at Birgunj, Bhairahawa, Biratnagar and Kakarvitta for facilitating trade and logistics. The three main trade routes i.e. Birgunj, Bhairahawa and Biratnagar cumulatively account for around 80 to 85 percent of the national trade business. Thus, there are possibilities of multimodal logistic parks or private freight terminals at those locations that can help to reduce logistics costs and have significant impacts on the national economy. If properly planned, Nepal can become a transit route connecting India and China and developing a proper transportation network will be important to make this possible. These developments in transport infrastructure are positive signs that could help accelerate Nepal’s journey towards prosperity.
Despite these developments, there is also ample evidence showing the problems and challenges that could be faced while developing transport infrastructure, and Nepal, begin a late starter, can learn from the experiences from other countries around the world. Although a number of plans for developing transport infrastructure are under execution, the different modes of transport infrastructure in the plans are being developed in isolation with little coordination between different institutions and stakeholders. The ability of these plans to contribute to national prosperity can be possible only if a national level Master Plan/ vision document comprising of all transportation networks, their linkages and synergies is developed. This should also include the Urban Transport Master Plan and other initiatives in major cities, including Kathmandu, Pokhara, Butwal, Bhairahawa, etc. to ensure development of sustainable mass transit system. Doing this would not only enhance connectivity but also facilitate the creation of thriving agglomeration economies.
With Nepal’s transition into a federal structure, the provincial and local governments are also actively involved in expanding the road infrastructure. It is important that the capabilities of these governments are increased as capacity is fundamental for advancing technology and its use. Another challenge that has been observed in the development of transport infrastructure is its impact on the environment. This is challenging given the significant gains Nepal has made in forest preservation. Transport infrastructure needs to be understood in a holistic way and its potential to bring about positive socio-economic transformation needs to be assessed accordingly. This would also mean some regulatory relaxation for projects with significant strategic and socio-economic importance. Moreover, some good transport projects may not be feasible financially but maybe beneficial socio-economically. Hence, such economic assessments should be carried out with priority alongside transportation planning.
The quality of institutions, especially local institutional quality, also play a crucial role in the success of infrastructure development. Institutions can be formal and informal constraints shape human interactions and incentives. Evidence from some regions in Europe have shown that places with low institutional quality were associated with flashier projects with low returns. Regions in Spain and Portugal are classic examples. In Spain, although initial investment in transport in the 1990s helped the regions to catch up, the investment didn’t stop even when there was no road deficit in the 2000s, especially due to the influence of Spanish private (entrepreneurial) sector. This has resulted in ‘white elephants’ like the motorway connecting Madrid and Toledo (AP-41). Similarly, rather than solely looking at potential economic returns, a collective interest of 17 municipal governments was influential in building the longest bridge in Europe, the Vasco da Gama’ bridge in Lisbon that had very low returns.
Nepal has opportunity to be a success story in transport infrastructure development. To achieve this, Nepal needs to first attain a minimum threshold of basic transport infrastructure. A key challenge in Nepal is that identification of transport projects are not always based on objective analysis and evidence. Activities by three different governments, federal, provincial and local, adds to the challenge by making it difficult to coordinate efforts. However, it need not be so. Transport infrastructure can be built in a coordinated manner by objectively identifying projects, and distributing responsibilities according to resources, management and political capabilities. Also, the traditional methods of procurement have resulted in transport infrastructure of low quality and increased costs of maintenance. This needs to change, and a greater focus needs to be given to transport infrastructure in strategic and economic corridors. Finally, it is equally important to realize the limitation of transport infrastructure in achieving prosperity once the minimum threshold for basic transport infrastructure has been met. Policymakers also need to focus on other drivers of growth such as human capital.
The views expressed by the author in this article are strictly personal.
Hemant Tiwari,Transportation Specialist, Office of Investment Board Nepal, firstname.lastname@example.org
Manoj Paudel, Economist, Office of Investment Board Nepal, email@example.com
(The article was published in Souvenir of Nepal Infrastructure Summit 2019 “Resilient Infrastructure for Sustainable Development”)