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Technology Transfer for Infrastructure Development in Nepal

Surya Raj Acharya, PhDSenior Research Fellow

Institute for Transport Policy Studies (ITPS)3-18-19 Toranomon, Minato-ku, Tokyo

surya@jterc.or.jpOct 12, 2008

The Second NEA-JC Workshop on Current and Future TechnologiesOctober 12, 2008

Tokyo, Japan

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Contents

Role of Infrastructure development

Capacity gap and resource gap

Technology transfer: issues

Examples from Japan, Korea

Sum-up

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Expressway development in China

0

10000

20000

30000

40000

50000

60000

1988 1998 2002 2007

Expr

essw

ay (

km)

Data source: Fwa (2008)

Others countries (2003):

Indonesia: 580 km

Thailand: 331 km

Philippines: 173 km

India: ~200 km

..tells a lot about infrastructure and economic growth in China

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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

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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

Global Competitiveness Ranking 2007 (Countries: 131; full score 7)

Data source: World Economic Forum 2008

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Major constraints for Infra. Development

Resource Gaps

Domestic savingResource availability

Foreign exchange$$ to import project inputs

Viable finance• Govt Revenue• Special tax, bond• User’s fee• Private finance

Capacity Gaps

Human ResourceKnow-how

Organizationformulation and implementation of Plans & projects

InstitutionLaw, regulation, strategies and policies

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Which constraint is more binding for Nepal?

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Surplus domestic saving combined with increasing in- flow of remittance: relaxes resource gap pressure

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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

0 5 10 15 20 25

Philippines

Japan

Hong Kong

Nepal

Thailand

India

Pakistan

Bangladesh

US cent/unit

Electricity tariff* in Asia* Rate for household consumption (median group, 21~400 units)

Data source: UN-ESCAP (2007), NEA (2007)

Why electricity tariff in Nepal comparatively higher?

- Higher project cost due to lack of domestic capacity

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Consulting/construction industry: “Low-capacity Trap”

Firm size

Cos

t/Rev

enue

S1 S2S2

Revenue

Cost

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

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Importance of conducive environment to facilitate the capacity building process

Institutional Capacity

Organizational Capacity

Human ResourcesCapital Resource

• Law, Regulation

• Policy support

• Long-term strategy

• Incentives

• Accountability

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)

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Emphasis more on peripheral capacity rather than on core capacity

Core capacity• Policy/plan• Financing• Technology• Management• Regulation

Peripheral capacity

• Participation• Decentralization

• Privatization• NGOs• Activism

Capacity building process in Nepal

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Efficiency/sustainability

Domestic resource Total Investment

Infrastructure/servicesEconomic development

Capacity

ODA

Ownership

ConditionsTA /TC

ODA implementationmechanism

Recipient’s participation

Learning-by- doing

Debt burden

ODA implementationmechanism

ODA

ConditionsTA /TC

Debt burden

Dynamics of ODA and Capacity Building

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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

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1950’s

1960’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

Japan’s Experience: Road development

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• 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 !

Comprehensive Road Development System

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Japan now boasts a network of high-quality highways….

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Korea: Seoul-Pusan Expressway•

4-lane highway planned, Seoul to Pusan

(428 km) in 1967

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Requested for World Bank loan: WB conditions−

4-lane too wide, scale down the design

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Need to employ foreign consultant and contractor•

Korean government position−

4-lane: for long-term (not for current demand)

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Local consultant/contractor’s lead role: learning-by-doing•

Result: No World Bank and other donor’s aid

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Korean government decided to do on its own•

Major bottleneck: Foreign exchange and know-how

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Made best effort (used $ from Koreans serving Vietnam war)

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Project completed 1970 before the schedule time !•

Rapid development Korean construction industry !

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Sum-up•

Infrastructure development: key development agenda for “New Nepal”

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Strategically, closing capacity gap is more important but not given due importance

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Need to set mechanisms for technology transfer thorough learning-by-doing

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Professionalism and research: develop ability to ask right question !

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Contribute to the process of setting “national vision”

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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

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“….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)

Dr. Mahathir on capacity building..

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“The significant problems we face cannot be solved by the same level of thinking that created them”

….Thank you for your attention!

Albert Einstein