Time for rethink : Investment board of Nepal

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    Nepal Investment BoardIt is a shame that Investment Board Nepal (IBN), established to bring foreign direct investment into the country, is wasting time holding meetings with donors seeking aid.

    Former Prime Minister Dr Baburam Bhattarai had announced that the IBN’s aim was to bring in investment of US $1 billion in the first half of the fiscal 2011/12.

    Two years down the line, it has turned into just another government agency that hobnobs with donors.

    The country needs infrastructural reforms that can accelerate economic growth which has stagnated since 1993/94. People were expecting the IBN to bring FDI, help large scale-projects materialize, and create ripple effects by generating jobs. The long-term goal was to develop an institution that works efficiently to implement projects to fill the infrastructure gap in Nepal.

    The IBN was formed based on the Investment Board Nepal Act 2011, aiming to accelerate implementation of the projects that had been in limbo for decades. The Bhattarai-led government then handed over 14 different large-scale projects, including five hydropower projects, to the IBN in May 2012. The board of the IBN, which is chaired by Prime Minister, in turn gave it the mandate to negotiate with foreign investors directly. This decision had generated a lot of hope regarding FDI and infrastructure development in Nepal.

    The IBN had received a mandate from the Bhattarai-led government just a day before the first Constitution Assembly (CA) was dissolved. The then PM Bhattarai had expressed his zeal to develop infrastructures even in the midst of political chaos, for which he should be appreciated.

    Currently, the IBN is responsible for facilitating the implementation of 14 projects, including West Seti (750 MW), Upper Karnali (900 MW), Kathamdnu-Terai Fast Track, Nijgadh International Airport, upgrade of Tribhuvan International Airport and establishment of star hotels. Unfortunately, none of these projects have any momentum, even after two years of IBN formation.

    So far, the IBN has not been able to make any achievement public. It is led by a CEO whose experience in private sector is limited to working in commercial banks. In an article more than a year ago, IBN CEO Radhesh Pant had said, “Our hydro resources belong to all the people of Nepal. It is the responsibility of any government to ensure that our nation’s resources are managed wisely for the benefit of our people.” He was right.

    The question, now, is whether the IBN is really working to bring in FDI to implement these projects! Pant must be aware that there would be no point of IBN if it does not succeed in sealing deals with investors.

    No doubt, there are problems. Foreign investors are not waiting in line to invest as and when we want them. But this does not justify IBN’s increasing involvement with donors. Honestly, we already have too many institutions that work with donors.

    After two years of its existence, there should be an independent review of the IBN, its progress, achievement and the people involved in it. It is an institution created for efficiency. Mediocrity and inefficiency have no place in this institution.

    We already have a number of inefficient public institutions, including 37 public enterprises. The office of the IBN is receiving assistance from Centre for Inclusive Growth (CIG), an initiation of British government’s aid agency Department for International Development (DFID). But what has it achieved so far? There are questions to be asked and issues to be discussed before jumping into consolidating funds for the IBN.

    We should appreciate that the bilateral and multilateral donors are interested in helping develop Nepal’s infrastructure. But we should also use our judgment in deciding when to ask donors for money and when to make do with what we have.

    Going further, bringing additional FDI in the country is not an easy task. The IBN should let people know what it is doing to take forward the 14 projects that it is responsible for. The IBN should not get involved in just about anything to develop infrastructure. It should focus on what it has been assigned to do—convince investors to come to Nepal. People would like to know what is going on with the five major hydropower projects. How serious are Indian and Chinese investors about coming to Nepal?

    We need both foreign aid and FDI for economic growth. Eugene Bramer Mihaly in his book Foreign Aid and Politics in Nepal makes a vital but provocative point when he asks whether Nepal consumes aid or aid consumes Nepal. Foreign aid is the holy cow that no one wants to question for reasons well understood. With this in mind, we need to be cautious when we use aid money.

    The IBN has become synonymous with infrastructure development, and it should know that more than half a century of aid in Nepal has not resulted in any large scale infrastructure project. These projects can be developed with FDI. Spend time with investors. Time with donors might be fun, but will prove futile in the long run!

    The author is a graduate student at Tsinghua University in Beijing

    bhoju.poudel1@gmail.com