The Second NEA-JC Workshop on Current and Future Technologies October 12, 2008 Tokyo, Japan Technology Transfer for Infrastructure Development in Nepal Surya Raj Acharya, PhD Senior Research Fellow Institute for Transport Policy Studies (ITPS) 3-18-19 Toranomon, Minato-ku, Tokyo surya@jterc.or.jp Oct 12, 2008 1
Contents Role of Infrastructure development Capacity gap and resource gap Technology transfer: issues Examples from Japan, Korea Sum-up 2
Expressway development in China Expressway (km) 60000 50000 40000 30000 20000 10000 0 Others countries (2003): Indonesia: 580 km Thailand: 331 km Philippines: 173 km India: ~200 km 1988 1998 2002 2007 Data source: Fwa (2008)..tells a lot about infrastructure and economic growth in China 3
Road Transport: Situation in Nepal When we will have a bridge? Bullock cart pulling a passenger bus crossing RIU RIVER (Chitawan): Photo source: kantipuronline.com 4
Global Competitiveness Ranking 2007 (Countries: 131; full score 7) Overall competitiveness Infrastructure competitive. Country Rank Score Rank Score United States 1 5.7 6 6.1 Germany 5 5.5 1 6.7 Singapore 7 5.5 3 6.4 Japan 8 5.4 9 6.0 Korea, Rep. 11 5.4 16 5.6 Hong Kong 12 5.4 5 6.2 France 18 5.2 2 6.5 Malaysia 21 5.1 23 5.3 Thailand 28 4.7 27 4.9 Spain 29 4.7 19 5.5 China 34 4.6 52 4.0 India 48 4.3 67 3.5 Indonesia 54 4.2 91 2.7 Vietnam 68 4.0 89 2.8 Sri Lanka 70 4.0 73 3.2 Philippines 71 4.0 94 2.7 Pakistan 92 3.8 72 3.2 Bangladesh 107 3.6 120 2.2 Nepal 114 3.4 128 2.0 Data source: World Economic Forum 2008 5
Major constraints for Infra. Development Resource Gaps Viable finance Govt Revenue Special tax, bond User s fee Private finance Foreign exchange $$ to import project inputs Capacity Gaps Institution Law, regulation, strategies and policies Organization formulation and implementation of Plans & projects Domestic saving Resource availability Human Resource Know-how 6
Which constraint is more binding for Nepal? Surplus domestic saving combined with increasing inflow of remittance: relaxes resource gap pressure Capacity (technical) gap impacts in multiple ways Ability to implement project and operate services, facilities and maintain infrastructure Cost effectiveness of infrastructure building Multiplier effects in the economy Why electricity tariff in Nepal comparatively higher? - Higher project cost due to lack of domestic capacity Bangladesh Pakistan India Thailand Nepal Hong Kong Japan Philippines Electricity tariff* in Asia * Rate for household consumption (median group, 21~400 units) 0 5 10 15 20 25 US cent/unit Data source: UN-ESCAP (2007), NEA (2007) 7
Consulting/construction industry: Low-capacity Trap Cost Cost/Revenue Revenue S 1 S 2 S 2 Firm size Needs government support to escape the trap Public sector firm, public-private ownership Creating a viable market prospect (commitment for infrastructure investment) Protection in market (for a fixed term) to minimize the risk 8
Importance of conducive environment to facilitate the capacity building process Law, Regulation Policy support Long-term strategy Incentives Accountability Institutional Capacity Organizational Capacity Human Resources Capital Resource Research and development Professionalism Technology transfer Learning-by-doing Education, training Opportunities for technology transfer: Infrastructure projects with foreign consultants/contractors - Projects under ODA (grants and loan) - Private sector funded projects Stand alone technology transfer activities (Technical cooperation etc) 9
Capacity building process in Nepal Peripheral capacity NGOs Activism Core capacity Policy/plan Financing Technology Management Regulation Privatization Participation Decentralization Emphasis more on peripheral capacity rather than on core capacity 10
Dynamics of ODA and Capacity Building Economic development Infrastructure/services TA /TC Efficiency/sustainability Conditions Capacity Ownership Learning-bydoing Recipient s participation ODA implementation mechanism ODA Domestic resource Debt burden Total Investment 11
Japan s Experience: Railways First Railway line in 1872: Shimbashi-Yokohama Almost 100 % inputs from Britain (including man power) British expert s wage: several times higher than local Financing: London bond market, 12 % interest rate Policy makers realized the value of technology transfer Concrete plan for Technology Transfer (TT) Tech. Transfer: Learning by Doing ( story of Mr. Page ) By 1880, mostly Japanese inputs (except locomotives) By 1990, Locomotive also Japanese; steel industry Rapid expansion of Railway network Japan now world leader in railway technology 12
Japan s Experience: Road development 1950 s The roads of Japan are incredibly bad. No other industrial nation has so completely neglected its highway system. Ralph J. Watkins, Road advisor in 1956 1960 s 13
Comprehensive Road Development System In 1954, Japan established a system Five-Year Road Development Plan Watkin s report 1956: like a road bible The road planning system was supported by road special account Fuel and vehicle ownership taxes Japan Highway Public Corporation in 1956 Tolled expressways First Expressway: Osaka-Kobe only road project by World Bank loan- effective technology transfer! 14
Japan now boasts a network of high-quality highways. 15
Korea: Seoul-Pusan Expressway 4-lane highway planned, Seoul to Pusan (428 km) in 1967 Requested for World Bank loan: WB conditions 4-lane too wide, scale down the design Need to employ foreign consultant and contractor Korean government position 4-lane: for long-term (not for current demand) Local consultant/contractor s lead role: learning-by-doing Result: No World Bank and other donor s aid Korean government decided to do on its own Major bottleneck: Foreign exchange and know-how Made best effort (used $ from Koreans serving Vietnam war) Project completed 1970 before the schedule time! Rapid development Korean construction industry! 16
Sum-up Infrastructure development: key development agenda for New Nepal Strategically, closing capacity gap is more important but not given due importance Need to set mechanisms for technology transfer thorough learning-by-doing Professionalism and research: develop ability to ask right question! Contribute to the process of setting national vision 17
Lee Kuan Yew on Foreign Aid (when Britain was planning to close military base in Singapore directly cutting down Singapore s GDP by 20 %) Britain had promised significant aid..i was determined that our attitude to British aid, indeed any aid, should be opposite of Malta s.i was shaken by their (Malta s) aid dependency, banking on continuing charity from the British, which nurtured a sense of dependency, not a spirit of self-reliance I warned our workers The world does not owe us a living. We can not live by the begging bowl (page 52-53) On my first visit to America in October 1967, I recounted to 50 business people Singapore s philosophy was to provide goods and services cheaper and better than anyone else, or perish. They responded well I was not putting my hand out for aid, which they had come to expect of leaders from newly independent countries. (page 56) Quoted from From Third World to First by Lee Kuan Yew 18
Dr. Mahathir on capacity building...whereas the Chinese child grows up in an environment that is shaped by economic activities, the vast majority of Malays used to grow up as part of the peasantry In the past, even the Malay people who had shops had no real sense of an efficient enterprise. Their Idea of business basically was that anything earned through the sale of goods should be regarded as pure profit..change people s value and educate them in basic business skills.we established a Ministry of Entrepreneur Development and a university entirely devoted to the training of business managers.special training schemes to educate Malays they now own thousands of companies Dr. Mahathir Mohamad (quoted from, A New Deal for Asia, 1999) 19
The significant problems we face cannot be solved by the same level of thinking that created them Albert Einstein.Thank you for your attention! 20