The government plans to significantly raise public spending against private sector investment in the upcoming 14th periodic plan that begins from 2016-17.

As per the approach paper of new three-year plan, public sector investment will be 40.6 percent, a rise from 31 percent in the ongoing plan. 

Total investment planned in the new plan stands at Rs2.39 trillion, to which the private sector contribute 53.5 percent and the cooperative sector will put in 5.9 percent, according to the approach paper.

Nepal has adopted a three-pillar economic model with involvement of the state, private sector and cooperatives, but the private sector considers cooperative as its part and resents any attempt to categorise them as a separate sector. 

“The share of public investment has been hiked to increase funding in the infrastructure sector,” said a senior official of the National Planning Commission (NPC), which plans to formally make public the approach paper in a few days.

In the 13th plan, public sector investment was planned at Rs464 billion of the total investment of Rs1.47 trillion. The private sector investment has remained over 70 percent in recent years. 

Experts say an increment in public investment is welcome as long as it is limited to mega infrastructure projects instead of areas that cannot yield results.

Economist Keshav Acharya said public investment grows as a result of investment in areas such as electricity and roads and it also encourages private sector investment. “If the government’s investment is used in much-criticised programmes like Constituency Development Fund, it will be a wastage.”

Millennium Challenge Corporation, a US aid agency, has identified electricity, roads, labour rigidity and political and policy instability as key constraints to Nepal’s economic growth. “Public investment should be increased to tackle these constraints,” said Acharya.

As per the approach paper, the government plans to boost investment particularly in electricity, gas and water sectors, followed by transport and communication.

The investment in the first three sectors will be boosted by 201.9 percent, while the fourth and fifth sectors will see 116.5 percent rise in boost in investment. The investment in agriculture and education will be hiked by 72.6 percent and 31.8 percent, respectively.

Although the government’s investment priority has remained infrastructure projects in recent years, the state’s low spending capacity has emerged as a big concern. 

With less than two months remaining for the current fiscal year 2015-16 to end, capital spending has remained at just 22 percent. The situation has been the same for the last several years, with political instability, bureaucratic dillydallying, frequent transfer of project officials and corruption taking a toll on project implementation.