Fear of White Elephants

  3 min 11 sec to read
Fear of White Elephants

The Nepal government is notorious for keeping white elephants which incur large ownership costs but do not generate revenue. Unfortunately, the government seems unable to form any idea how and when the country will start getting returns out of them.  Unfortunately, the government doesn’t seem to have any idea how and when these assets will become profitable.

During the Panchayat era, these assets were in the form of public enterprises (PEs). While some were sold off to private parties or shut down after the political change of 1990, some of these PEs still exist today under an undefined socialist ideology. They continue to consume the country's scarce resources and taxpayers' money. In recent years, the Nepal government has added new types of costly assets to its portfolio in the form of large infrastructure projects. Examples include the Gautam Buddha International Airport in Bhairahawa, the Pokhara International Airport, and the Chobhar Dry Port. The construction of all these projects has been completed, and the repayment on foreign loans for these projects has already begun or is set to begin in a couple of months. However, it is uncertain when, if ever, these projects will start generating revenue. There is no clear indication of when these airports will begin to attract international airlines.

There are a significant number of costly infrastructure projects, such as the Melamchi Water Supply Project and the Kathmandu Terai Fast Track Road Project, that have been consuming scarce national resources and adding to the country's debt burden due to delays in their construction. While these projects may generate revenue once completed, the completion dates are indefinite. The Melamchi project, which was started well before 2000, is still ongoing and plagued by corruption. The 73-km Fast Track was started in 2018 with an initial completion date of 2021, but it has now been pushed back to 2024. However, it is likely that this deadline will also be missed, given the current progress of the project. The Chobhar Dry Port is dependent on the completion of the Fast Track.

Another notable project that is facing similar delays is the Sikta Irrigation Project. It was conceived in the early 1980s and work began in early 2000. However, progress on this corruption-plagued project has been minimal. Despite claims that it is over 60% complete, farmers are not receiving water to irrigate their lands. Another white elephant worth mentioning is the railway project. Despite a train service currently operating between Jaynagar (India) and Kurtha (Nepal), and plans to extend it to Bardibas, the project is facing operational challenges and consuming significant resources. Another project, the Bheri Babai Diversion Multipurpose Project, is also facing uncertainty in completion, despite an expected completion date of 2023.

Being added to this list of white elephants are the Nijgadh International Airport and Budhi Gandaki Multipurpose Hydropower Project. A significant amount of money has already been spent on the airport project, but its construction is still uncertain. Additionally, a lot of money has been collected as a tax from the sale of petroleum for the hydropower project, but it remains unused, raising concerns that it may have been used for other purposes, such as financing the government's operating costs.

Big infrastructure projects are essential for the country's development and should be undertaken for two reasons. First, during the construction phase, they create a lot of employment opportunities and stimulate other economic activities. Second, once completed, they generate revenue over a long period of time, which can more than compensate for the financial cost incurred. However, the prolonged delays in the completion of these projects and the inability to generate revenue from them after completion can have serious negative consequences for the country.

Madan Lamsal
[email protected]

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