Despite all the political turmoil our country has gone through in the past and continues to go through as I write, it still managed to achieve positive GDP growth. While this growth has not been in the same league as our adjoining neighbors, it has still been positive and we have to thank our often little-valued Nepalese migrant workers for that.  If it was not for remittances fueled consumption this country would have been in a sorry state.  Given the past and present context, it does not look likely that our country will get political stability for some time to come. So it is time as a nation that we decide how best to move forward to give positive impetus to our struggling economy.

While there has been a lot of talk with respect to agreeing on a common minimum economic agenda between political parties and implementing that, there has been little discussion as to what that should be.  When we talk about the whole economy too many things need to be considered and putting together a common minimum economic agenda that all political parties can agree to can be a difficult task so I propose that we narrow down this common economic agenda to what I call a "Common Minimum Infrastructure Agenda" (CMIA).  This CMIA will focus only on two things: (a) building 2,000 kilometers of toll roads, and (b) building 2,000 MW of electricity the bulk of which would be reservoir based projects.  Both of these task would be accomplished within 10 years from the date of commencement of CMIA. The responsibility of implementing the CMIA would be given to Nepal Infrastructure Board if there is such an entity while the responsibility of coordinating the financing would be done by the Nepal Investment Board.  All of this could be legitimized through a CMIA Act (or CMIA ordinance in the absence of a parliament) which could be in the form of a prospectus for a government backed Nepal Infrastructure Fund which would lay out in detail all the portfolio of toll-road and power projects the CMIA would invest in and all other relevant details that an investment prospectus would contain to satisfy and interest global investors.

CMIA portfolio

The objective of toll roads is to connect large economic centers of the country so goods, service and people can move more quickly and efficiently at lower cost.  This portfolio of interconnected toll roads should include at the minimum the following: (i) East-West Toll Road, (ii) Kathmandu-Bigunj Toll Road, (iii) Kathmandu - Pokhara toll road, (iv) Sunauli Pokhara toll road, and (v) Kathmandu Tatopni Toll Road.  These five toll-roads will account for about 1,500 KM and the rest could be toll roads that connect the East West Toll Road to major population centers not reached by the other toll roads.

The portfolio of hydropower projects would include all currently planned and proposed projects identified by the NEA for which financing has not been determined yet.  Based on NEA's 2011 Annual report, these projects had a capacity of 1,422 MW.  Adding West Seti to the above and we have about 2,100 MW of identified power projects in the pipeline.  We should also ensure that the portfolio of power projects include all planned and proposed transmission line projects including the cross border lines to India to ensure we can send the generated electricity to where the demand exists.

The reason for this narrow focus is primarily because these are the two sectors that will make the most impact in providing the basis for further development of the country.  The narrower focus will also means it will be easier to get political consensus from parties and more importantly it will be an easier sell to investors who like focus and transparency.

Financing

Using USD3 million per kilometer for toll road (approximate based on the cost of Kathmandu-Bhaktapur road expansion)  and USD 3 million per MW for power projects including the cost of transmission, financing the CMIA projects would need at least 12 billion US dollars over ten years, i.e. one 1.2 billion USD per year.  For Nepal, this is not a small sized fund and the big question is whether it can get its hand on that kind of financing. With the right strategy and approach, I think it is possible to secure such financing.  Yearly billions of dollars are poured by large pension funds globally into what is referred to as alternative investments that turn sour and have to be written off.  The recent example are the investments in the collateralized debt obligation (CDO) market where one global bank expected market wide losses to reach up to 260 billion USD.  Compared to CDOs and other such investments which just repackage one paper instrument into another, Nepal's portfolio of infrastructure investments would be backed by income generating hard assets on the ground and in my opinion more appealing to long-term investors if marketed properly.  With a right global investment bank underwriting partner, Nepal might just be able to pull of the creation of a unique emerging market fund for global investors to put their alternative investments in.  If the fund turns out to be successful, this could set an example whereby Nepal could finance its other infrastructure projects in the future.

We cannot rely on the miniscule overseas development assistance that we get every year to build our infrastructure nor can we expect or rely on foreign investors to put their money on the ground and take operational and financial risk in Nepal in the current political context.  We have to do away with the "begging" culture that we have fostered to finance our projects by asking one country or another to build our infrastructure projects.  Instead, we as a nation must be willing to take the risk to invest in our future ourselves.  This means having the audacity to borrow in international markets to build our infrastructure. All countries have borrowed internationally to finance their infrastructure projects.  If there has ever been an opportune time to borrow in international markets it is now. Global interest rates where 30 year Japanese Government Bonds yield 1.8% and 30 year US treasuries 2.57% will not remain this low for ever.  Finally, imagine the direct and indirect benefits of pumping 1.2 billion US dollars into the Nepalese economy every year for the next 10 years. It will be huge not to mention the cumulative benefits the country will get from increased stable power supply and an efficient toll-road network.

(The writer is former Chairman of Rastriya Banijya Bank and can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

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