22-28 January 2016 #792

Safe landing

Nepal’s economy is on the verge of collapse, and infrastructure projects are on hold

GOPEN RAI

Last week, the Norwegian company Statkraft pulled out of the 650MW Tama Kosi III project citing fragile political situation and lack of power sector reforms in the country. Had the $1.5 billion project been completed as scheduled this year, it would have bolstered Nepal’s economy by exporting electricity to India. Statkraft’s exit is a huge blow to the country’s goal of becoming an energy exporter, and has also hurt the confidence of foreign investors interested in Nepal.

Statkraft cited political instability and disruptions as reasons behind its decision, but several big foreign investment and development projects have been delayed by last April’s earthquake and the Indian blockade.

The long overdue Melamchi Water Supply Project is expected to be further delayed by a year. After nine months of disruption, work on the Ring Road expansion project supported by China finally resumed this week. Several other national priority projects have also suffered setbacks, including an ADB-funded upgrades of Kathmandu Airport (pic) and a second international gateway serving Lumbini.

“The 1989 blockade didn’t stop work at the Marsyangdi project, that should have been the case this time too,” says Bigyan Shrestha, project chief of the 456MW Upper Tama Kosi which has itself been delayed by at least two years. “The government failed to come up with contingency plans to support ongoing infrastructure projects.”

Since September 90 per cent of the industries in the Tarai have been shut down, causing an estimated loss of Rs 2 billion daily. Several five-star hotel projects in Kathmandu have also been delayed or shelved. In its review of 2015-16, the Central Bank has said Nepal’s economy may be heading to negative growth this fiscal year.

Sahina Shrestha

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