Submit your Article

 Minister for Culture, Tourism and Civil Aviation Rabindra Adhikari has been repeatedly saying that the environmental fears over the Nijgadh International Airport are overblown. It is true that the airport, as envisioned, will cover over 8,000 hectares, which will make it the biggest in South Asia in area. It is also true that an estimated 2.4 million trees will have to be felled. But as Adhikari points out, the media and the broader public is missing a crucial catch.

In the first phase, only 2,500 hectares will be used, and as such just around 760,000 trees will have to go. As envisioned, after the first phase the airport will be able to handle 15 million passengers a year; after the second phase, in another five years, it will accommo­date 30 million; and 60 million after the third phase, in five more years. If the airport does not get expected traffic after the first or the second phase, then it may not be expanded.

But the larger goal is to establish Nijgadh as a tran­sit hub with easy access to 27 major Asian cities. If things go as planned, say the project’s backers, the airport could be a game-changer for Nepal, lay­ing a firm foundation for national prosperity and development. But is the environmental cost of bring­ing down 760,000 trees in the first phase worth it, not to think of the two latter phases? Has the government done enough homework on the likely damage to the rich flora and fauna, as well as to human settlements nearby, after destroying the last remaining patch of dense forest in the Tarai belt? And was there really no option to Nijgadh?

The country without a doubt needs a second inter­national airport to relieve the pressure on the over­burdened TIA, and the government says expanding Bhairahawa or Pokhara airport was not an option. So perhaps Nijgadh is really irreplaceable. If so, the devel­opers will have to be extremely careful about inflict­ing minimal ecological damage, in a country already beset by climate change-induced natural disasters. Perhaps it is also worth reevaluating Nijgadh’s role as a ‘transit hub’ after the development of passenger aircraft capable of flying 20 hours non-stop. While the ecological damages certainly have to be minimized, it would also be a tragedy to build anoth­er Hambantota, often dubbed “the world’s emptiest international airport.”

The provision of mandatory shares for affected locals in hydro projects introduced the concept of equity investment in rural communities. As a result there is a frenzy of sorts—and often one gets a sense that buying shares is akin to winning a lottery. Until recently long queues were often seen outside banks facilitat­ing the purchase of shares. While the introduction of automated process of late has eased the pro­cess somewhat, the questions about risks and returns—wheth­er or not applicants understand market risks—remains. Do these shares actually offer value for money in the long run? How do poorer and marginal­ized households manage funds required to buy these shares? What can government and developers do to ensure that locals—who have very little finan­cial literacy—are not exposed to market risks that can wipe out their entire savings?

A new comprehensive study conducted by the International Financial Cooperation (IFC), a pri­vate sector arm of the World Bank Group, seeks to answer some of these questions.

Nepal has taken an innovative approach in tackling complex issues in project development, particularly benefits sharing and ensuring cooperation of affect­ed-locals. This idea of offering local shares gives locals a sense of ownership and thus prevents any potential disruption to the projects. As Nepal government seeks to develop over 10,000 MW of hydropower in the next decade, IFC estimates that the value of local equity alone could be around half a billion dollar.

That is a significant amount of capital to be raised from poorer, rural and marginalized house­holds. This could in turn have serious implications on house­holds’ debts levels in rural com­munities. As the IFC study and other anecdotal reporting sug­gest, households have disposed of assets or borrowed money at high interest rates to invest in these seemingly ‘lucrative projects’. But the internal rate of return for these projects remains uncertain as delays and costs overruns hit the initial estimate.

Take for example the Upper Tamakoshi, hailed as a model project built with domestic cap­ital. The initial project cost was estimated to be around Rs. 35 billion ($ 330 million approxi­mately). But according to revised estimates, the final price tag could nearly double—costing over Rs. 60 billion. Then there is the issue of falling price of the shares. Since 2014, the value of hydro shares has fallen by almost one-third. Even so the share-buying frenzy for hydropower companies con­tinues unabated. This is clearly irrational and shows the failure of communicating market risks to prospective investors.

While allocating local shares offer a unique way to share the benefits of development with communities, particularly the vulnerable ones, protecting them from market risks—as well as creating a sustainable financ­ing mechanism—is critical if this innovative policy is to have the desired result.

The IFC study is timely and its recommendations, particular­ly for creating a dedicated fund to enable access to finance in favorable terms, makes real sense; locals, who meet certain eligibility criteria, can be giv­en concessional loans with the provision of shares as collateral. The study further recommends a mix modality of grant and loans in the case of mega proj­ects—where the dividends can be used for servicing the loans. The government also seems to be taking some steps to put in place additional safeguards.

The Ministry of Energy is in the process of formulating a new guideline whereby the public can buy shares during IPO by making just a 10 percent down payment, and linking the rest of payment to the progress in project implementation.

In promoting local shares, one also needs to be mindful of the license period for hydropower plants—at the end of which the entire ownership is transferred to the government. Some projects may not pay off enough dividends to cover the interest plus inflation within that period. For house­holds with cash to spare, this may be a fair gamble. But for poorer households, won’t the money be better spent elsewhere? 

 The National Reconstruction Authority officials say their hands are tied. As the SRBC Pappu JV, better known as Pappu Construction, has bid the lowest amount for the reconstruction of the damaged central bank building at Baluwatar, and since the bid meets all the technical requirements, the infamous company is sure to bag the contract. Of late the construction company has come under withering criticism for inordinate delays in vital infrastructure projects and for shoddy work.

Of 41 bridges that Pappu has committed to build, it has missed the deadlines on 25. Yet it continues to get lucrative government contracts. One reason is that it has friends in high places. The company is owned by Hari Narayan Rauniyar, a federal lawmaker from the Federal Socialist Forum Nepal that is a part of the KP Oli government. Curiously, Rauniyar is in the federal parliament’s development committee that is man­dated to monitor progress of national development works. Parliamentary regulations prohibit MPs with such conflict of interest from serving in its committees. (Two Nepali Congress members of the development committee have similar conflict of interest, and they have predictably come to Rauniyar’s defense.)

The government may make all the noise it likes about its big ambitions for national development, about its crack-down on cartels, about zero tolerance for cor­ruption. But people will have hard time trusting it when even the most egregious violators of the law are being rewarded instead of being harshly punished; when contractors and medical college owners can sit on vital parliamentary bodies and brazenly tweak the rules for personal benefit.

The Oli government is powerful enough to change this. For instance it can alter the public procurement rule that favors the lowest bidder, irrespective of the bidder’s quality of work. In what will be a powerful deterrent, it can also cancel long-delayed works and punish the contractors. No country has prospered on the back of corruption and shoddy work. The longer the government takes to act against these fraudulent contractors and self-serving MPs, the greater will be public disenchantment. They gave the left coalition two-thirds majority with the confidence that the coali­tion would use the ensuing stability to realize its elec­toral agenda of common prosperity—and surely not to further cement corruption and cronyism.

It may have been made with the best of intent. Many of its provisions may be laudable too. But three years after the promulgation of the new constitution, its success or failure largely hing­es on one, whether it can be implemented and two, on whether the new charter, through amendments if needed, can embrace all sections of the society. The promulgation of the new constitution was a monu­mental feat no doubt: For the first time in Nepal’s dem­ocratic history people’s chosen representatives had written a constitution on their own.

It set in motion the process of institutionalization of the federal democratic republic, particularly with the completion of three tiers of elections under the fed­eral setup. The rationale for federalization was simple enough. The unitary state centered on Kathmandu had miserably failed to meet the aspirations of the down­trodden and the marginalized communities, even as it enriched a handful of elites. The goal was thus to decentralize governance, to take democracy to the grassroots through empowerment of provincial and local bodies. Things have not gone as planned.

The three elections have been completed but there has been no meaningful devolution of power and resources. The federal government has in fact been loath to empower provinces and local bodies. But the local representatives are not blameless either; instead of bringing democracy to the grassroots they are busy buying expensive vehicles and giving themselves all kinds of unearned perks with the help of new tax­es they have levied. These were the kind of excesses under the old unitary state that the federal setup want­ed to do away with.

The other big challenge is accommodating the mar­ginalized communities that still feel left out of the polit­ical mainstream. With so many competing demands, that won’t be easy either. The risk is that as voices of disgruntlements intensify, and federal and lower tiers of governments quarrel over power and resources, people’s faith in federalism, and by extension the new constitution, will erode. This in turn could once again boost undemocratic forces.

It is now upon the drafters of the constitution to ensure its longevity by timely amending it, quickly drafting requisite laws, better training the old bureau­cracy on federal ways and by instituting a culture of good governance and accountability.