ADB increases funding for ailing infra sector

ADB-GatesKATHMANDU, JAN 31 – The Asian Development Bank ( ADB ) has increased investment in Nepal’s infrastructure as its inadequacy has emerged as a major obstacle to realizing the country’s economic potential.

According to the ADB ’s Nepal Portfolio Performance Review 2014 report, 78 percent of the total funding it has pledged as of last December has been earmarked for energy, transport and water, municipal infrastructure and services.

Of the total financing amounting to $1.75 billion, 30 percent has gone to water, other urban infrastructure and services, 26.3 percent to energy and 21.4 percent to transport. There are 24 projects related to these three sectors among the 39 ADB -funded currently being implemented.

The latest financing pattern represents a marked shift to infrastructure from rural and social sectors such as agriculture and natural resources, education and multi-sectors, the report said.

ADB Country Director for Nepal Kenichi Yokoyama said that increased funding from the ADBto the infrastructure sector has been made in line with the ADB ’s Country Partnership Strategy 2013-17.

“The allocation of funding reflects ADB ’s strategy to be selective and focused on critical development constraints,” said Yokoyama.

The new partnership strategy has given the number one priority to energy followed by transport, water and urban infrastructure, education and agriculture, natural resources and rural development. “However, we have also given priority to social sectors like education as human capital is also equally important for Nepal,” said Yokoyama.

The report has said that infrastructure projects, particularly those related to energy, are facing bigger problems. To illustrate the point, the report has mentioned the loan issued to the 140 MW Tanahun Project which took more than 18 months to become fully effective and encountered delays in hiring a consultant to supervise the project.

Differences between the ADB and the Energy Ministry on the selection of the consultant for the project delayed the project’s implementation by 10 months. The ADB had selected a consultant in March 2014 but it was finally approved in January after much controversy. Likewise, the duration from the publication of the tender notice to the awarding of the contract for energy related projects increased to 304 days from 213 days, according to the report.

“The deterioration is largely a result of the weak capacity of project staff with regard to ADBprocurement guidelines. This has led to several instances of clarification and investigation, the absence of a confirmed managing director at the Nepal Electricity Authority for several months which forced the board to make decisions for all critical processes and multiple layers and centralization of the tender approval authority,” the report said.

Likewise, delays in land acquisition, problems related to the right of way and forest clearance, poor performance of contractors and poor contract management were the other problems encountered by ADB -funded energy projects. Yokoyama said that energy sector is problematic because the institutions dealing with the energy sector are marred by capacity constraints. “The institutional capacity of them in the areas of planning, design and procurement must be enhanced,” he added.

According to the latest World Bank study, Nepal needs $13-18 billion from 2011-20 to bridge the investment gap in infrastructure. The study report states that Nepal has one of the poorest infrastructure services along with Afghanistan and Bangladesh, which resemble the infrastructure situation in Sub-Saharan Africa.

The country will require as much as $5.3-7 billion for electricity while the transport sector will require $3.7-5.5 billion. Nepal has been facing long power outages for the last few years, and the quality of the roads is very poor. Considering the poor condition of the infrastructure sector, the World Bank has also announced that it will increase funding for energy and road transport in its new country partnership strategy.

The World Bank is already a lead donor in these sectors. At the same time, it will play a supplementary role in local development, agriculture and drinking water where the ADB is the lead financier.

Source : eKantipur