Hydropower development – Importance of FDI

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    FDIIt has long been realized that development of Nepal hinges on proper management of its immense water resources. It can be the basis for the country’s prosperity. Rational utilization of water resources will open up numerous opportunities for both skilled and unskilled labor forces, and domestic and foreign capital. Hydropower development is the best option for utilizing water, human and financial resources. This would provide opportunities to the nation’s unemployed and disenchanted population. But, if our policy continues to send the productive labor to the richest countries, development of any kind in our country in the future is beyond imagination.

    Qatar has the highest GDP per capita ($98,900) in 2011, which has been a major hub for Nepali labor. The per capita income of Qatar implies that a migrant worker from Nepal can earn as much as he/she would earn in USA, Japan, Australia and Europe. The growth of Qatar’s economy has been a major contributor to Nepal’s GDP as remittance covers 22 per cent of Nepal’s GDP. A study conducted by the World Bank reveals that along with the pull factors stemming from the growth of Qatar’s economy, notable push factors driving migration from Nepal include: continued poverty, high levels of unemployment, political instability, and sluggish economic growth. The combination of push and pull factors has resulted in Nepalis becoming the second largest migrant group in Qatar (with approximately 299,000 Nepali migrant workers at the end of 2008). Many of these workers are employed in the construction and manufacturing industries as unskilled laborers. Their salaries vary according to their skills and the industry where they work, but on average they seem to receive lower salaries than those of other migrants for the same work.

    Most of Nepal’s resources are still not diverted to the productive sectors; 79 per cent of the total remittance received is used for daily consumption. All successful economies devote part of their current income to investment rather than consumption, so as to expand their future ability to consume. The real estate sector, which is less productive, absorbs a large portion of the investments. The resources/capital would be diverted to the development of hydropower if development policy motivated the achievement of this end. Consumerism if not improving would stop generating savings needed for further investment in the economy. This context obviously indicates the need of foreign direct investment (FDI) to make Nepal relatively competitive and prosperous.

    FDI has become the major means to enhance development activities in developing and emerging markets since the past three or more decades. The relevance of the role of FDI is growing with the onset of the twenty-first century. Now, it has become apparent that FDI is a critical and crucial source of capital and technology for the rational utilization of global untapped resources. In this context, it is obvious that harnessing Nepal’s hydropower potential depends basically on the inflow of FDI. There are a few hydro-projects like Upper Karnali 900 MW, Arun III 900 MW, Upper Marsyangdi-two 600 MW, Upper Trisuli-one 216 MW, West Seti 750 MW etc are waiting for immediate go-ahead.

    Our neighbors not only show keen interest but also are committed to invest in these projects. Disputes and conflict of interests put a number of bottlenecks against the implementation of the proposed projects. Successful implantation of these projects would be the gateway to FDI and means to generate employment for youths who are turning migrant workers abroad. But, on the way to their implementation, they are facing difficulties mainly because of the lack of consensus within and among the political parties. We know that in the recent past, the Arun III was in the pipeline under the World Bank investment. But this project was killed resulting from the advocacy against its implementation. Nepalis today are struggling with the load shedding hours even during the peak rainy season as a consequence of its killing. This has not only proven counterproductive, but also has eroded all the requirements of a forward looking economy. If this project had been constructed, it could have a viable medium not only to mitigate load-shedding in the country, but also would boost economic growth. Unfortunately, this is not so. We, undoubtedly, are the losers, not the winners. Nepal should be in a position to seize the opportunity. Construction of the proposed projects as mentioned above would make Nepal not only a load shedding free country, but also a country exporting electricity. A barrier to hydro-power development means to expand load-shedding hours for years to come.

    Today, FDI plays an important role in boosting the economies of the Third World, particularly the emerging economies such as India and China. The construction of the above mentioned projects works as the gateway to FDI. Unemployment in Nepal is rampant and is pegged at over 46%. This is mainly because of the lack of employment opportunities in the domestic sector. People will be able to get numerous employment opportunities if Nepal allows the flow of FDI particularly for hydropower projects in the country.

    Source : The Himalayan Times /PROF DR KAMAL RAJ DHUNGEL