There is unanimous agreement about the need to expedite hydropower development to meet the nation’s energy demand and fuel growth. However, there is lack of political will and policymaking to back that vision because both are products of a healthy political process, and with national politics scrambled as it is, it is all doom and gloom for the economy.
To make things worse, seasoned governments in the last two decades have tailored priorities to suit their own political ambition, leaving energy development in disarray. What is often understated is, that when energy development suffers, all sectors of the economy suffer.
Call for commitment
There has been no dearth of encouraging initiatives to revive Nepal’s stunted economy but inevitably, policies and programmes are either poorly funded, suffer from lack of effective implementation or remain suspended once the government that initiated them makes an exit. This has left stakeholders, including national and overseas investors, frustrated and discouraged. Hence, Nepal’s economy, which had begun to recuperate after the end of a decade-long conflict, is sliding back into depression. National productivity is at an all-time low and the exodus of skilled and unskilled manpower has accelerated.
To reverse this trend, major political stakeholders must urgently express their unconditional commitment not to hold business and industry hostage to their political agenda and agree on a long-term development pla
ns and programmes for each of the priority sectors,
including energy, with pre-defined budgetary commitment. If this requires revisiting periodic plans, political parties and the incumbent government must not seek an easy way out.
For hydropower development, this means revisiting the framework where all stakeholders can identify and own their roles at all stages of its development. It also means exercising a bottom-up approach to planning and policymaking and ensuring local support for the programmes by guaranteeing local people’s participation in implementation and the decision-making of the projects.
Lessons to learn
Policy formulation alone will not guarantee results. It has to be followed by effective execution and management of resources. The government should learn from its success-ful ventures in hydroelectric projects in Lamjung, Sindupalchowk, Dolakha and Myagdi.
The political parties had expressed unanimous commitment not to hold economy hostage by resorting to bandhs and strikes during Nepal Tourism Year 2011, but the year saw string of strikes and political violence that put off tourists and hit other sectors of the economy hard.
Hydropower development faced its share of difficulties due to such strikes and obstruction — some with valid underlying reasons, but disputable mode in which protests and demands were expressed. Having said that, it must be acknowledged that unless the projects are able to secure confidence and ownership of the local community, development of infrastructure projects in Nepal will remain a challenge. One way to do it is to allocate certain portion of a project’s royalty to Village Development Committees in form of shares, offer public shares to the locals and adopt a bottom-up approach by taking them into confidence in all aspects of the project. This will not only secure valuable local support and confidence, but also make the project more equitable.
Sense in stability
It is unfortunate that despite repeated expression of concern from stakeholders, government has failed to ensure political or policy stability needed for creating a conducive investment climate. Lack of clear vision in developing export-oriented hydropower projects is a case in point, with political parties standing in favour or against a particular project based on their own political arithmetic rather than their principled position on export-oriented projects.
Similarly, bureaucrats and political actors are divided on the idea of accepting foreign direct investment (FDI) in run-of-river projects and consider them expensive (like Khimti and Bhotekoshi) and an ineffective solution to load shedding problem in the dry season. They also argue that there is no guarantee those companies will reinvest in Nepal or create chain effect in the economy.
On the other hand, foreign investors are reluctant to invest in storage type of projects because of its high cost, difficulty in financing and cumbersome resettlement issues. Furthermore, they are worried about political hazards and risks that such projects have to endure due to elastic commitments of political parties who have a long tradition of signing morally binding documents and not implementing them in practice.
But more importantly, Nepal needs a stable and long-term energy development plan, negotiated, owned and supported by all stakeholders, including investors, developers, locals and more importantly all major political groups. Such plan then has to be implemented and executed with coordination among various line agencies and ministries such as Ministry of Finance, Ministry of Energy, Ministry of Local Development, Ministry of Forest and National Planning Commission, irrespective of change in government.
Way forward
Undoubtedly Nepal’s hydropower sector offers a lucrative investment opportunity and international financial and donor agencies such as the World Bank, Asian Development Bank, EXIM bank of China, as well as national and foreign private sectors have expressed interest and commitment in investing in developing mega projects here. FDI will bring in much needed capital and best practices in terms of technology and management. Besides slashing Nepal’s petroleum imports, mega projects will spur domestic industries with more jobs that can substantially reduce poverty and raise living standards.
When domestic demands for energy is met, Nepal can earn valuable foreign currency by exporting electricity to energy hungry neighbouring economies like India and Bangladesh. Nepal has a historic opportunity not just to propel itself to economic prosperity but also to contribute to energy security in the entire South Asian region.
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