How can public-private partnerships improve resilience in Nepal?

Andre Steele of our Engineering team and James Walton of our Economics & Finance team highlight the roles that public-private partnerships can play in post-earthquake Nepal.

Thursday 12 November 2015, Andre Steele, Private: James Walton

We recently attended the launching event for the World Economic Forum (WEF) study on Building Resilience in Nepal through Public-Private Partnerships, hosted by Willis in London. The study explores how public-private partnerships could increase resilience to hazards and risks in Nepal, particularly within the key sectors of tourism and construction.

IMC is actively involved in supporting development in this area and has a long history of work in Nepal, so we had a particular interest in the report and the launching event. For instance, we recently provided the UK Department for International Development (DFID) with key research documents on retro-fitting hospitals in Nepal

See our reports on ‘Methods for assessing vulnerability‘, ‘Methods for Retrofitting‘, and ‘Non-structural considerations

Meanwhile, we continue to support the development of seismic codes for the country, and we are helping to build evidence for retro-fitting schools to enhance safety and for the vital role of professional engineering institutions in improving safety in the construction industry. Our flagship Rural Access Programme, which uses rural roads to improve livelihoods and access to markets, has been running there since 1999.

Eight strong points came from the discussion of the study at the event:

  1. Strengthening pre-event partnerships between the public and private sectors can improve responses and reduce negative impacts. In this light, the study focuses on safe schools, tourism and building codes.
  2. Ninety-five percent of buildings that fell during the Nepal earthquake in April this year were privately owned and typically constructed of low-strength cement. Their collapse was the result of poor enforcement and poor dissemination of codes. Private house builders did not see the value in investing in building for earthquake resilience.
  3. There is huge potential for retro-fitting for schools, demonstrated by the fact that retro-fitted schools fared much better in the earthquake.
  4. Retro-fitting has a key role to play, especially in public buildings, but there are no codes or guidance documents on how to retro-fit.
  5. Roughly 10 percent of Nepal’s GDP comes from tourism, which suffered significantly because of the earthquake. The private sector is keen to establish certification systems for safe hotels and attractions, but they are struggling to push this forward.
  6. Capital, science and policy can provide a platform for annualising risk (insurance) as part of budgets at all levels. Regulation has a role to play, though not necessarily regulation in the traditional Government enforced sense, but also through incentivising adoption of codes and with a role for donors and NGOs.
  7. The private sector will begin processes of recovery as soon as possible independent of development actors and Government, and it needs support to rebuild with greater resilience.
  8. Resilience is not just an engineering/construction issue, but a social, political, economic and development issue. Collaborative partnerships across sectors can improve enhancing resilience.

2015-Nov-12_IMC headshots_001-2

Reflecting on the discussion

While there is recognition that PPPs can reduce Nepal’s infrastructure gap, the lack of PPP legislation and Government capacity to lead the project development process mean that Nepal is not yet fully equipped to develop sustainable PPP projects. This scenario is contributing to unfulfilled private sector investment appetite.

Particularly since the April earthquake, there is urgent need for social and economic infrastructure development. But the development of PPPs without requisite laws and institutional capacity can present risks to public and private sector organisations, society, and the environment. These risks could include unsuccessful project implementation, lack of private sector interest, sub-optimal financial returns, and a lack of environmental safeguarding.

A PPP Policy was introduced by the cabinet of the Government of Nepal on 9 October of this year, but it has not yet been enacted into a PPP Law to replace the current Build, Own, Operate and Transfer [BOOT] Act.

The risk/return outcome of PPP projects will need to be attractive to private investors. Progress needs to be made before the Government can take on its own risk and create an investment environment that is attractive to the national and international private sector.

While there is recognition that PPPs can help build resilience following the earthquake, it is imperative that the conditions mentioned above are met before a pipeline of PPP projects is developed. International donors such as DFID, the World Bank, and the ADB have been and will continue to support the Government in creating the necessary conditions to do so.

Overall, the event did a good job in raising many of the important issues around how public-private partnerships could increase resilience to the hazards and risks in Nepal, and it gave us at IMC an opportunity to reflect on how we can further support sustainable infrastructure development through our project work in Nepal. An event like this could be very effectively complemented by another in Kathmandu with Government, donors, private sector organisations and civil society to discuss the specific action that stakeholders can take to improve the PPP environment to help meet the country’s urgent need for resilient infrastructure.

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