Radhesh Pant has experience of working nearly a decade in United States in the financial sector. After acquiring good experience of banking sector from the world’s number one economy, he returned to Nepal in 1999 and engaged in banking sector. He was also the president of the Nepal Bankers' Association (NBA). He was appointed to head of Nepal Investment Board in 2011. The Investment Board is envisioned to give a one-window solution to potential investors in big projects of over Rs 25 billion with the chairmanship of the Prime Minister of Nepal. Siromani Dhungana and Sujan Dhungnaa of New Business Age spoke to him about prospects of alternative development paradigm in Nepal and his view regarding development versus growth. He says development and growth should go together for the effective development initiative in the country. Excerpt:
The ongoing controversy in Nepal regarding growth versus development (more specifically inclusive development) is said to be affecting the functioning of the Nepali economy. How do you view this controversy?
Inclusive development induces economic growth that is sustainable and will result in better livelihood for all the people. Inclusive development will also minimize the gap between the rich and the poor that will culminate in fair distribution of wealth and ample opportunities for all. However, economic growth alone could actually increase the gap between the haves and have nots thereby ensuing inequality, ill-governance, agitation and corruption amongst others which is not sustainable and will result in restlessness, chaos and ultimately civil unrest. This is the risk we are facing in the country right now. We need to focus on inclusive growth and we need to do that fast.
For Nepal, with the abundant resources of all kinds, we ought to focus on inclusive development. We need to get our act together. First off, our politicians need to place consistent and consensual priority on inclusive development. Projects that have enormous impact on inclusive growth need to be defined and prioritized. Then we need stable policies such that government changes do not impact these projects and there is continuity. Finally, we need to build our capacity within and outside government to ensure transparency, good governance, accountability and technical ability to monitor and regulate large scale projects. Moreover, we need to be competitive compared to other countries in the region in terms of providing good and timely services, incentives and project formulations.
I believe the Investment Board has been established about a year and a half ago for the single purpose of executing large scale projects that assures fair share to Nepal. We are currently focused on large projects that have enormous impact on the economy and would definitely foster inclusive development of Nepal.
The Investment board is entrusted to promote economic development of the country and to create employment opportunities. How compatible is this stated mandate with the actual functioning of the Board?
I think it is absolutely compatible. We have great resources in hydropower, agriculture, tourism amongst others, but we have not been able to capitalize on them. Development of these resources, coupled with the infrastructure development needs in the country to physically connect every nook and corner of the country is the priority. It provides trade of goods, people and services within the country and also abroad. This would create lots of jobs, domestic sustenance, increased exports and will ultimately lead to economic transformation.
Investment Board is mandated to do exactly that. Its objective is to provide a fast track approval process and a single window mechanism for prospective investors, both domestic and international. So, essentially by implementing the large scale projects, the Investment Board is the transformation agent that will create ample employment opportunities and inclusive development of Nepal.
But having said that, there need to be competitive and coherent policies in place in order to achieve this. Moreover, the Investment Board needs to be at an arm’s length from the government and needs to be run professionally, transparently, competitively and with accountability. This is what we have been focused for a year or so. The Investment Board needs to capture the interest of Nepal in all the projects that it executes rather than on vested interests of certain factions. And that is exactly why the Project Development Agreement based on the nine principles that protects Nepal’s interest has been formulated.
So, what are the nine principles? Could you illustrate on that?
Well, currently, we have a Project Development Agreement that is focused on the Hydropower Development. However, this agreement will be emulated for other large projects in other sectors as well. The basic nine principles are that the Project:
1. Meet Nepal’s electricity needs first.
2. Captures for Nepal her fair share of economic benefits.
3. Ensures best use of river basin.
4. Returns hydro asset to Nepal in good operating condition.
5. Transfers project risk to party best able to manage risk.
6. It is balanced. The developer is able to receive a fair market based return as compensation for investment, project development and management skills and risk.
7. Ensures high environmental sustainability and high safety standards.
8. Industrial and Employment Benefits. A good deal is structured so that the demand for goods and services from the tens of billions of dollars of expenditure stimulate many new prosperous business and thousands of skilled and semiskilled jobs for Nepalis.
9. Model community benefits includes a package that brings about long term benefits such as training, skill development, employment, business development, community infrastructure - clean water, health services, electrification, housing, etc. It will ensure that local people will become proponents rather than opponents of new hydro projects.
With these principles in place, I am confident that Nepal’s interest will be protected and that Nepal will be able to maximize its fair share from the project.
The government has set an economic growth target of 7 per cent by 2015. Do you think that the government is biting more than it can chew?
In my mind, reaching a 7 percent economic growth is not that much of a deal. We need to get our act together. First of all, economic agenda has to be a top priority for all the parties. Consensus amongst the political parties on priority projects is a pre-requisite. Then, elections need to happen in November. We need to send out signals to the investors, both domestic and international that Nepal is ready for business. Stable investment policies that are attractive to investors need to be in place. In the current fiscal year, we are expected to grow at 4.5 percent growth and last year we grew at around 5 percent. If the above preconditions are achieved, adding two more percent is not that difficult. The ball is on our (Nepal’s) court.
In your opinion, what type of policies should the government adopt to promote inclusive development?
Policies need to be clear, simple, sustainable and stable. With every government change, its priorities and policies cannot change. Secondly, inclusive development will not happen overnight. We need to have a long term strategy that is supported by all the stakeholders of development. This includes the political parties, government, private sector and Nepali people in general. The policies and laws need to complement the project execution rather than hindering it. If we are able to execute projects that harness our resources (which are spread across the country), inclusive development will become a reality.