Men working for infrastructure project in Nepal

Rationale for Open Contracting in Nepal’s Infrastructure Projects

The issues of corruption are integral parts of public policies related to any public megaprojects as they have sufficient components that automatically favor corruption. Lokatelli et al, in their research in 2017, have highlighted that large projects’ features like project size, uniqueness and project complexity favor corruption in such initiatives. As a result, corruption becomes an integral part of megaprojects, starting from planning till the monitoring and evaluation of such projects. Similarly, a 2016 OECD study also recognizes most of the reasons highlighted in the Lokatelli et al paper for higher corruption in government’s activities, including those related to public procurement. In addition, the study had also highlighted that; bribes are mostly used (57%) only to acquire public procurements followed by customs clearance (12%), other preferential treatment (7%), favorable tax treatment (6%), license and authorization (6%), access to confidential information (4%), and to get a travel visa (1%).
Overview of Irregularities in Nepal’s Megaprojects
We have long been hearing that public procurements in developing economies, including those in Nepal, are highly prone to mismanagement and bribery. Now, these available empirical findings further suggest and also provide enough evidence to substantiate the perception. In fact, in January 2018 a Republica Daily news report brought such bribery practices in Nepal’s construction sector to the public’s notice. As per the coverage, there are only handfuls of contractors who dominate country’s construction sector and by using all means that they can. As expected, they illegally tried to siphon NRs 8-14 billion. Few projects which have been seen to portray wrong practices in country’s construction sector are drinking water projects like the much debated Melamchi Water Project, energy sector and post-Earthquake recovery activities which have hit major newspapers’ headlines; thus, one can’t deny the wrongdoings in Nepal’s major megaprojects. Proactive involvement of the government in amending existing laws and also involvement of various development partners, for example the Asian Development Bank, in developing e-government mechanism for enabling stakeholders to bid online for public procurements also indicate that the issues of misconduct in public procurements in Nepal is a serious issue and the government and the development partners alike are concerned to minimize loss from such practices.
As most of the infrastructure projects involve large investments with significant government stakes; it is very likely that these projects have major issues with the large-scale corruption. Available past studies confirm that irregularities in infrastructure-related projects – mainly in the areas of construction of building, roads and hydropower plants – in Nepal are causing economy massive loss each year. To worsen the situation, Nepal’s private sector also practices and promotes corruption in the country.
Issues in Other Countries
Corruption in infrastructure-related megaprojects is not only a problem of Nepal. Almost every nation faces some forms of corruption in this sector. Earlier, Aqsa Shabbir – a doctoral student at the University of Manchester – had analyzed these issues in Pakistan for her PhD thesis. She found that corruption was present in country’s all major infrastructure projects and at all phases of the project. Three key causes of such practices were weakness in implementation system, ineffective and inadequate procurement rules, and finally lack of institutional capacity and honest leadership. Similarly, another study has found such misconducts frequently in South Africa too. The same study argues that corruption in infrastructure-related initiatives is almost universal as those projects, in South African case; appear to have been formulated for either political or only symbolic reasons that have to offer very minor benefits, sometime null, to the beneficiaries.
Drawing from above studies, it is evident that countries around the globe lose large chunk of resources from major infrastructure projects to corruption. Thus, it is necessary to discourage such misconducts so as to ensure invested resources are fully utilized in targeted sectors and for the targeted beneficiaries. As a 2007 World Bank study has highlighted, government authorities in each country have central roles in local infrastructure projects and if devised well a mechanism, they can help save huge resources that otherwise would have wasted in bribery.
Way Forward
Most of us are well aware that Nepal’s economic competitiveness and development so far have been limited by inadequate infrastructures. And after Nepal adopts federalism, it is likely that major parts of the country would need to prioritize major infrastructures if they wish to generate enough jobs for the locals and most importantly to drive economic growth in each of the country’s seven provinces. As highlighted earlier, megaprojects like these are most prone to irregularity. Thus, we need to devise feasible tools to curb potential misconducts in current and future infrastructure projects at local and national levels. For this, open contracting (OC), could be the best available alternative. OC yields major benefits including public interest in accessing contracting data; economic benefits resulted from more efficient allocation of resources, minimized corruption practices, and improved service delivery.
Jaya Jung Mahat is a Senior Research Fellow and Assistant Professor at King’s College Kathmandu. He tweets at @jjmahat820


Kings Logo

Established in 2009, King’s College promotes entrepreneurial spirit through progressive education. Our vision is to transform the society through entrepreneurship.