Private sector must contribue three-fifth in infrastructure: NPC

Kathmandu, Feb. 27: The private sector must contribute nearly three-fifths of the investment needs in tourism, industrial and transport infrastructure to achieve the Sustainable Development Goals (SDGs), says the National Planning Commission (NPC).

The apex planning body in the country has said that the private sector was expected to invest more heavily in industry, energy, physical infrastructure, housing, urban infrastructure and tourism, according to the 'SDGs – Status and Roadmap: 2016-2030' recently published by the NPC.

"A preliminary estimate of the annual investment required for the entire SDG period, i.e., 2016 -2030, ranges between 42 to 54 per cent of the Gross Domestic Product (GDP). About Rs. 1,770 billion - approximately 49 per cent of the GDP - per year is needed over the entire duration of the SDGs," reads the report.

The report said that the government investment requirement was expected to be the lowest in tourism followed by energy, industry and urban infrastructure – mainly housing.

"The government should shoulder about 55 per cent of the SDG investment requirement, starting with sectors like poverty reduction, followed by agriculture, health, education, gender, water and sanitation, transport infrastructure, climate action and governance," said the NPC.

The World Bank Group had estimated that Nepal needed to invest 7-11 per cent of its Gross Domestic Product (GDP) in transport, power, water and sanitation services, communication and other key infrastructure sectors between 2011 and 2020.

It said that Nepal had invested 5.3 per cent of the GDP in those four sectors against the need of about 10 per cent.

According to Swarnim Wagle, former vice-chairman of the NPC, the country needs to fill in the gap in key infrastructure sectors.

Addressing the last press meet at his office last week, he had said that there should be better physical connectivity such as roads, railways and aviation, as well as digital connectivity support business and investment.

The report has made special mention on the financing gap. Water and sanitation, energy, transport, industrial and urban infrastructure comprise 58 per cent of the financing gap while social sectors, including poverty, health, education and gender, comprise 31 per cent of the financing gap.

"The financing gap in agriculture will likely be minimal after irrigation, rural roads and electrification investments are made in the early years," mentions the strategic document.

It also said that given the existing pattern of domestic equity financing, the pattern of credit allocation and Foreign Direct Investment (FDI) inflows, the annual average private financing of the SDGs is about Rs. 382 billion.

The financing gap in the private sector will have to be met by reorienting non-SDG investments towards the SDGs, mobilising larger volumes of equity, bank financing and attracting large FDI, especially in industries and physical infrastructure. 

Published in The Rising Nepal on 28 February 2018.