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.

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

9. Road Networks

10. Road Networks in the Region
Road length (km) per 1,000 sq km
land area
Road length (km) per 10,000
people

11. Transport Infrastructure Projects
Road Length km
Analysis
Period years
Constructin
Cost, US $ mil
FIRR
%
Kanti Rajpath 60 25 16.0 29
Birgunj-Jitpur 19 25 3.8 26
Kathmandu, Outer RR 72 25 80.1 25.8
Janakpur-Jayanagar 25 25 4.7 20.3
Sitapaila-Dharke 25 25 8.5 26.7
$1.00 = NRs70.00
Road/Railway Length km
Analysis
Period years
Constructin
Cost, US $ mil
FIRR
%
Kathmandu-Hetauda Fast
Track
50 900 14.6
Tarai East-West Railway
1,317 9,344
Kathmandu – Pokhara
Railway
160 331
Mid-Hill East West
Highway
Nijhgad Int’ Airport
600
Mega Projects:

12. Future Transport Infrastructure
Tarai East-West
Railway
Mid-Hill East-West
Railway & Road
Proposed Railroad
Kath- Hetauda Fast
Track Road
Kath-Birganj Railway

13. Future Transport Infrastructure
Source: RITES Feasibility Study Report - 2010

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%

19. Diasporas Investments Potential
Web source http://www.nrn.org.np/pdf/nrna_intro.pdf

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

22. Diasporas Investments Potential
$$$ Remittance$$$
$3.5 Billion
Diaspora Bond
Direct Investment
Transport
Infra.

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

26. Thank You

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

28. Backup

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)

30. Transport Infrastructure Status

31. Asian Highway

32. Proposed Alignment of Railways
Source: RITES Feasibility Study Report - 2010

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