Behind on infrastructure

No doubt, much needs to be invested in areas of development and poverty reduction. Not only Nepal but all of South Asia lags behind. The South Asian region’s infrastructure statistics are depressing. According to a recent report published by the World Bank, entitled ‘Reducing Poverty by Closing South Asia’s Infrastructure Gap’, the region needs to invest $1.4-2.1 trillion in order to meet its targets of economic development and poverty reduction by 2020. Nepal, on the other hand, needs to spend about $13-18 billion, which is approximately Rs 1.3-1.8 trillion, on infrastructure. This means that Nepal needs to invest, on average, about Rs 220 billion every year for the next six years.

This is interesting because these numbers are about 45 percent of the total budget for the fiscal year 2013-14, and almost three times greater than the planned capital expenditure. Between 2007 and 2012, Nepal has only spent, on average, about 5 percent of its GDP on physical infrastructure per year, as per the World Bank report. Similarly, Nepal should invest as much as 10 percent

of its GDP on physical infrastructure in the next six years.

The government, on the other hand, does not have a limitless supply of funds. It has to operate within a limited budget. Even if it were to ramp up the amount of money allocated to infrastructure development, it would have to do so by taking away funds for other sectors, including health and education. The government cannot afford to do this. Health and education, undoubtedly, are the two most important services that a government should offer its citizens. However, the Government of Nepal has also been failing severely in this area.

Health and education

National statistics on health and education validate this argument. According to the Ministry of Finance Economic Survey, in 2012, Nepal had 7,501 hospital beds in total, which is approximately 0.258 beds per 1,000 people. Our southern neighbour has about three times more hospital beds per 1000 people than we do. In fact, even Bangladesh’s figures were more than double of ours. The Ministry of Health has been allotted a meagre Rs 30.43 billion for the current fiscal year, and this number is not even 10 percent of the country’s total budget. With most of Nepal living on less than a dollar a day, it is very difficult to imagine our healthcare indicators becoming tolerable, let alone acceptable, any time soon.

For the education sector, the numbers are even worse. As per the 2012-13 Economic Survey, there were 19,584 teachers for 548,045 students in 3,604 public higher secondary schools, whereas there were 14,083 teachers for 155,902 in 2,611 private higher secondary schools. Clearly, there is a huge disparity in the student-to-teacher ratio of public schools and private schools. The ratio for public schools is more than two and a half times worse than that of private schools. This disparity is evident in the pass percentage differentials between public and private institutions of the so-called iron-gate exams. In 2012 and 2013, more than half of the students that took the SLC did not make it through the iron-gate. But the pass percentage of community schools stood at 27.97 while 86.68 percent of students from private schools passed the SLC.

Public-private

Therefore, we have a situation where the government’s resources are neither adequate for infrastructure development nor health and education. The answer to this problem lies in the state’s partnership with the private sector. Private sector participation in Nepal, however, in terms of infrastructure development is one of the worst in the South Asian region. According to the World Bank Report, Nepal’s private sector investments in infrastructure was about 0.66 percent of its GDP whereas this figure for our neighbours was at least double that of Nepal’s. This clearly underscores the need for and opportunities associated with bringing in the private sector to help the government.

Collaboration with the private sector, however, to tackle issues of poverty and development is not an easy task. Health and education, especially at the rural level, are areas where the economic returns are very high but financial returns almost negligible. Hence, it is difficult to entice the private sector to invest in these areas. It would be more appropriate for the government to focus on rural education and health and let the private sector bring its expertise and resources to infrastructure building. Energy and transportation sectors, for example, favour private sector participation.   

It is high time for the government to start investing in infrastructure, particularly in transport, education, health, and energy sectors; however, the government does not have the required funds to do so. Therefore, it should work closely with the private sector to tackle this issue.

Pandey holds a degree in Mathematics and Economics from Trinity College, the US