Abstract
Nepal has been experiencing unprecedented human mobility since late 1990s. According to the World Bank Survey (2009), a total of 2.1 million Nepalese migrant workers, here forth called Nepali diaspora, out of 29 million populations, are abroad. The rate of migration has been continuously increasing and consequently, remittance inflow is staggering. Nepal received remittance of 3.5 billion USD in 2010 which constitutes 20% of its total GDP. However, most of the remittance flow is limited to intra-family financial activities that basically support their family and relatives. Due to the absence of proper mechanism, financial flow from diaspora to productive investment sector, especially infrastructure development, is not channelized effectively. On the other hand, Nepal has one of the lowest transport densities and effective network access levels which are vital to development and socio-economic transformation. Numerous transport infrastructure projects ranging from medium to large scale cannot be materialized due to lack of development fund. Government has limited internal resources and dependence on donor support is ever increasing. Therefore, fund for transport infrastructure has always remained a key issue. Recently government of Nepal has brought forward strategy of public private partnership (PPP) under various schemes namely, Build Operate Transfer (BOT), Service Contract (SC), Management Contract (MC), and Annuity Contract (AC), Special Project Vehicle (SPV) Contract, User Community or User Group or NGO based contract. Under current PPP approach, Nepali diaspora capital from various host countries can be mobilized in infrastructure development project with profitable rate of return. This will benefit all stakeholders—homeland, hostland and diaspora themselves.
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Diaspora Investment: Opportunities and Challenges in Transport Infrastructure in Nepal
1. Diaspora Investment: Opportunities
and Challenges in Transport
Infrastructure in Nepal
March 17, 2012
Desh Raj Sonyok
Department of Civil Engineering
New Mexico State University
Email: drsonyok@nmsu.edu
2. Overview
2.1 million Nepalese migrant workers/students are
abroad (total population 29 million)
US $3.5 billion in remittance (20% of GDP, 2010)
Lowest road density in south Asia (12km/100 km2)
Insufficient fund for transport infrastructure
Huge potential of diaspora investment to nation’s
infrastructure development
Needs reliable investment options and awareness
3. Outline
Motivation and Objectives
Definition
Transport Infrastructure Status
Transport Infrastructure Projects
Why Investment in Infrastructure?
How to Invest in Infrastructure?
Diaspora Investment Potential
Conclusions
Infrastructure
Investment
Diasporas
4. Motivation
Prithivi Highway:
224 km long; 7- 8
hours drive
Proposed Fast
Track:
60 km long; 1- 2
hours drive
GDP: $440 (196th out of 215)
GDP growth rate: 3.5% (lowest in South Asia)
Remittance: 20% of total GDP (2010)
Diaspora investment for infrastructures
Data Source: World Bank (2011)
Only Int’l Airport
5. Objectives
Introduce present-state-of transport
infrastructure in Nepal
Identify future transport infrastructure projects
Evaluate Nepali diasporas capital
Create awareness on investment opportunities
and challenges among diasporas
This talk is intended for a general audience
6. Defining Transport Infrastructure
For the purpose of this study transport infrastructure
means:
Road
Tunnel
Bridge
Airport
Railway Line
Cable Car Line
Trolley Bus Structure
Tramway
Waterway
Source: Private Financing in Build and Operation Act in Infrastructure, 2006
7. Transport Infrastructure Status
Road: major transportation infrastructure
Airport: 1 international airport and 42 domestic
Railway: 53-kilometer narrow-gauge rail line
Waterways: Koshi Canal Waterway
8. Road Networks
National Road Network: total 20264 km
Strategic Road Network (SRN):
40% of the National Road Network
15 National Highways and 51 Feeder roads totaling 10835
km (2009/10)
Local Road Network (LRN) :
District roads, village or agricultural roads and
nonstrategic urban road
14. Why Investment in Infrastructure?
Backbone of sustainable economic growth
Directly impacts on competitiveness,
productivity and overall quality of life
Government budgets is insufficient
60% of development expenditure for roads
comes from donors’ contributions
Long term assets, high operating margin and
low volatility
15. Life of infrastructure assets before
major maintenance
0 10 20 30 40 50 60 70
Source: Macquarie Research, May 2007
60
60
45
30
30
20
10
Tunnels
Electricity Gridlines
Bridges, Trestles & Overpass
Sewage Treatment & Dispoal
Highways, Road & Streets
Wate Disposal Facilities
Telecmmunication Cables
Number of Years
16. Transport Infrastructure for
Development of Nepal
Poor condition of the road network
Lack of connectivity and high transport costs
Improvements in rural connectivity help raise
non-agricultural employment and incomes
17. How to Invest in Infrastructure?
Public Private Partnership (PPP):
Build Operate Transfer (BOT)
Service Contract (SC)
Management Contract (MC)
Annuity Contract (AC)
Special Project Vehicle (SPV) Contract
User Community or User Group or NGO based
contract
Private, public, people and partnership (4P)
18. Example: Kathmandu – Hetauda
Fast Track
Total Cost: US $900 Million
Private, public, people and partnership (4P)
Build-own-operate-transfer (BOOT) package
Who can invest:
General people: $150 Businessmen: $1500
Nepali diaspora, local government bodies, and
banks
Financial Rate of Return (FIRR): 12.9 - 14.6%
20. Diasporas Investments Potential
Nepalese Community Population (approx.) Gov. Census
Australia 10,000
Bhutan 110,000
Canada 6,000 3,505*
China 21,000
Continental Europe 20,000
Hong Kong 35,000 12,564**
India 4,100,000
Japan 100,000
Myanmar 400,000
Malaysia 300,000
Nepal 30,000,000 23,151,423***
Qatar 100,000
Saudi Arabia 350,000
UAE 50,000
UK 50,000
USA 110,616 11,715****
Total (approx.) 35,762,000
Web Source: http://nepalicount.com
21. Diasporas Investments Potential
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
1990 1995 2000 2005 2010 2015
GDP (US$ million)
20% of
total
GDP
9th largest remittance receiving
country in the world
23. Diasporas Investments Potential
Only 10% of the total remittance is sufficient
to construct Kathmandu - Pokhara Railway
Nepali Diaspora in America:
Financial Strength: 75,000 x $2,000 = $ 150 mil.
Sufficient to finance 25% of the construction cost of
Nijhgad International Airport
24. Diasporas Investments Potential
Diaspora as a Investors: How?
Deposit Accounts
Securitization of remittance flows
Transnational Loan
Diaspora Bonds
Diaspora Mutual Fund
* Direct Investment???
Source: USAID (2010)
25. Conclusions
Government budgets infrastructure develpment is
insufficient
Nepal received remittance of 3.5 billion USD in 2010
which constitute 20% of its total GDP
Nepali diaspora have huge potential for contributing to
the infrastructure development of Nepal through
diaspora bond and direct investment
Investment in transport infrastructure will benefit all
stakeholders—homeland, hostland and diaspora
themselves
27. Bibliography
Deoja B.B., Adhikari R.P., and Pande B.R. (2005). Prospect and Approaches to
Public Partnership in Transport Infrastructure, Policy Paper 7, Economic Network
Policy
Government of Nepal (2010). Kathamandu-Terai Fast-Track Road Project-
Project Overview
Building a stable road ahead for investors by Renaissance Global Infrastructure
Fund, accessed on 3rd March 2012..
Sitaula, T.P. (200?). Infrastructure Development in Nepal: Opportunities and
Challenges for Engineers
Terrazas, A. (2010). Diaspora Investment In Develoing and Emerging Country
Capital Markets. USAID and Migration Policy Institute,
World Bank (2011). Migration and Remittances Factbook 2011-Ebook
World Bank Database: http://databank.worldbank.org/data/home.aspx
29. Defining Diasporas
A diaspora can be defined as people who have migrated and their
descendents who maintain a connection to their homeland.
The U.S. State Department defines diasporas as those migrant groups who
share the following features:
Dispersion, whether voluntary or involuntary, across sociocultural boundaries
and at least one political bor
A collective memory and myth about the homeland
A commitment to keeping the homeland alive through symbolic and direct
action
The presence of the issue of return, though not necessarily a commitment to do
so
A diasporic consciousness and associated identity expressed in diaspora
community media, creation of diaspora associations or organizations, and
online participation (Department telegraph 86401, U.S. State Department)
33. Life of infrastructure assets before
major maintenance
Source: Macquarie Research, May 2007
34. Bituminous Graveled Earthen Total Under Construction Planned
4952 2065 3817 10835 769 2509
46% 19% 35% 100%
Table1: Length of Designated Strategic Road Network according
to pavement type, 2010 (km)
35. Roads and Development
Priority Investment Plan (2007-2016) by DoR
Bring the entire hill population within a four
hour walk to an all season road and the Terai
population within two hours
60 percent of development expenditure for
roads comes from donors’ contributions
36. Why Investment in Infrastructure
Patriotism and emotional attachment
Do something good to the motherland
Risk management: diaspora are more knowledgeable about country