CHALLENGES AND PROSPECTS FOR NEPALESE CONSULTING BUSINESS: NEED OF CAPACITY BUILDING FOR SUSTAINABLE DEVELOPMENT

Transcription

1 CHALLENGES AND PROSPECTS FOR NEPALESE CONSULTING BUSINESS: NEED OF CAPACITY BUILDING FOR SUSTAINABLE DEVELOPMENT Mr. Hare Ram Shrestha Society of Consulting Architectural and Engineering Firms, Nepal Background Consulting service in Nepal was started since mid sixties in individual basis. Government started to procure consulting service from the consulting firm acknowledging as company entity started from the seventies only. Thus the establishment of consulting firm started from seventies only. Slowly trend of hiring consulting service grew, which encouraged the establishment of new consulting firms. With the established trend and sizeable firms in existence, need of association of firms felt necessary and Society of Consulting Architectural and Engineering Firms (SCAEF) Nepal was established in Society of Consulting Architectural and Engineering Firms (SCAEF) SCAEF Nepal, apex body of consulting firms in Nepal established in 1990, was formally recognized by Government of Nepal in August SCAEF became national member association of FIDIC and member of Technical Consultancy Development Programmes for the Asia and Pacific (TCDPAP). Ministry of Physical Planning and Works was designated and line ministry of SCAEF in February Public Works Directives (PWD) 2002 made mandatory provision that consulting firms are to be registered with the professional societies for getting short listed to participate in submission of proposal. Since its establishment SCAEF is continuously working to improve the consulting business friendly environment in Nepal. SCAEF is represented in Construction Business Development Boar (CBDB) headed by Minister of Physical Planning and Works, Construction Business Development Implementation Committee (CBDIC) in Ministry of Physical Planning and Works, Kathmandu Municipal Corporation and many other bodies. SCAEF has organised various training, workshops and seminars at both national and international level. Asian Development Bank is more supportive to the SCAEF Mr. Hare Ram Shrestha, SCAEF, Nepal Page 1/7

2 initiatives. With the initiative of SCAEF, Government of Nepal is preparing the Consulting Service Act with the TA support of Asian Development Bank. It is expected that Act will help in institutional development, procurement, management aspects and ultimately toward sustainable development of consulting business. At Present there are 90 member firms in SCAEF. It is estimated that about 300 consulting firms are not registered in SCAEF, are not fully operational and not all have its own permanent offices. SCAEF's rule states that at least one shareholder of the firm should be engineer. Many of the non-scaef member firms are owners other than engineer. SCAEF member holds about 90% of the consulting works in Nepal. Now SCAEF member firms are involved in all types of sectors ranging from hydropower, transportation/roads, irrigation, water supply, urban development, environment, rural development, agriculture, alternate energy, social and economic development. SCAEF member firms are involved in approximately 6000 projects ranging from small to large projects. Member firms have employed about 2000 engineers and more than 4000 other mid level technical technicians. Challenges for construction business With about 30 years of experience working in development projects in Nepal it has many challenges. Institutional development is still not matured. It has lack of supportive policy and legislation. It lacks accreditation system. Unhealthy and cut-throat competition is taking place in the consulting sector, especially for smaller projects. This has resulted in lack of timely and quality delivery of service to the client. Nepal is facing rapid brain drain of engineering human resource resulting in shortage of quality man power. Out of about engineers in Nepal more than engineers are working outside the country. Fresh graduates are available, but consulting industry requires specific experienced human resources. To attract the trained, skilled and experienced human resources, consulting firms should be able to offer comparatively attractive remuneration and fringe benefits, which domestic firm can not afford due to unhealthy and cut throat competition in the market. It has no business networking and marketing. Government is indifferent in supporting national consulting industry. Corruption is another culprit hindering the consulting sector. Bureaucracy of Nepal is still not supportive for the service providing sector. With the donors' continuous concern, Mr. Hare Ram Shrestha, SCAEF, Nepal Page 2/7

3 policy speaks of promoting the private sector. But the attitude of government officials are still very narrow, cooperation to smooth implementation of the project is still lacking. Delay in decision making by the client (especially the government) is very normal, but the blame goes to the consulting firms. Consultants' selection also takes long time. Inadequate provisioning of consultants input in project to save negligible amount has adversely affected quality and smooth implementation of projects. Corruption and rent seeking attitude impose high costs and delays in decision making. Sufficient overhead is not recognised by the clients as expenses required for operation of business and profits for future development. Standard billing rate proposed by SCAEF is not adopted by the clients. Required level of consultations are not made with the concerned stakeholders and SCAEF during project preparation Nepal is politically unstable. Maoist insurgency of 12 years was almost a standstill situation of development activities. Even after peace process started since last three years, political environment is not favourable for development activities, which directly mars the consulting business. At present 109 armed groups are still active in Nepal. Activities of Maoist affiliated trade unions have resulted closures of many domestic industries. Governance is weakened due to rising crime and insecurity, political and criminal extortion from private business, strikes and road blocks, trade union militancy. Many businesses including the construction business find it difficult to operate because of frequent strikes, interruptions in supplies, difficulties in transport and mobility, occasional violence and the need to pay protection money to political and criminal networks. Both public and private sector investments in infrastructure are still very low. During 90ies there was slow increase in foreign direct investment (FDI). But the FDI was drastically decreased since last 12 years with the start of Maoist insurgency in Nepal and reversed in more recent years. Development of Physical Infrastructure: Prospects for Construction Business Major constraints of Nepal are inadequate infrastructures of all sectors road and transport, extremely low generation of electricity, irrigation, water supply etc. This means that there is urgent need to accelerate the infrastructure development. This obviously led to the huge potential of construction business. Thus potential for opportunities in consulting business in Nepal is also very high, if political situation Mr. Hare Ram Shrestha, SCAEF, Nepal Page 3/7

4 improve. Nepali engineers working abroad could be very good asset if favourable environment is created to work in the country. Being a developing country, Nepal offers a promising market with lot of infrastructure projects in need, especially hydro power, transport/roads, housing, tourism infrastructure, rural development sector etc. Increasing opportunities exist from international aid agencies. Most of government ministries and departments are in the trend of procuring the consulting services. Private sector is also procuring the consulting services for developing housing development and hydropower projects. At present Nepal generates only 700 MW of power, which is less than 1% of its total hydro power potential. To meet domestic demand with annual growth rate of 10% energy demand, Nepal should generate 2000 MW of power within five years. Since it has tremendous potential of hydro power, obviously it will be hydro power. To generate additional 2000 MW hydropower $ 7000 million investment is required only to meet the domestic demand. Government of Nepal is planning to generate MW hydro powers in next 10 years to export to the neighbouring countries, especially India. In that case, $ 40,000 million is to be invested. This sector has huge potential for construction industry including the consulting business. Road transport infrastructure is extremely low in Nepal. It has now only 8000 kilometres of strategic road network (SRNs) and about kilometres of rural road networks (RRNs). RRNs are mostly unpaved roads, operational during fair weather of 8 months only. Nepal needs another 4000 kilometres of SRNs and additional 50,000 kilometres of RRNs. Existing RRNs are to be paved to make it all weather operational. To construct 4000 kilometres of SRNs $ 10,000 million is to be invested. Similarly to construct 50,000 kilometres of RRNs about $ 100,000 million is to be invested. Thus road sector alone needs roughly $ 110,000 million. If we add only these two types of infrastructures hydropower and road transport, total investment of $ 150,000 million is required. For the development of other sectors of physical infrastructures like housing, irrigation, water supply, telecommunication, industry, mining, tourism infrastructure etc accounts for another $ 350,000 million. Thus Nepal needs to invest $ 500,000 million in coming next ten years. Implementation of these projects opens the significant potential to the constructing business including the consulting business. Way Ahead: Capacity Building of Consulting Business for Sustainable Development Mr. Hare Ram Shrestha, SCAEF, Nepal Page 4/7

5 To implement all the planned physical infrastructures as discussed above, Government of Nepal has to improve various aspects supportive environment, besides the provisioning of fund required for investment. Good governance is the paramount importance which includes political stability, improvement in law and order, improvement in attitude of government officials, favourable political environment etc. Similarly, development partners - contractors and consultants need to enhance their capacity to be able to undertake the planned physical infrastructures. Domestic consultants are hired for small and medium sized projects and as piggy back with the international consultants for large projects in Nepal. Capacity building for consulting business for sustainable development should be the high priority. Member firms are to be strengthened by providing training to young professional and development of entrepreneurship and expertise. Works toward sustainability of member firms by assuring jobs and assisting for marketing support and conducting R& D. Institutional strengthening is required through development of membership and development of realistic internal policy with vision, mission, quality of service delivery, surveillance of performance and professional liability. Another aspect is to enhance public image by identifying development focus for Nepal, contributing poverty alleviation, strengthening anti-corruption campaign and integrity management and bringing innovative idea. Project preparation mission is to be formed in concerned ministries in collaboration with SCAEF. In the way ahead, following actions are to be adopted by various levels of actors and stakeholder of the consulting business for its sustainable development: At Government level: Recognise that a strong and growing national consulting industry is vitally important to the country's sustainable economic development. Support the growth of the industry by creating a healthy environment through good governance. Form project preparation mission in collaboration with SCAEF. Implement consistent, transparent policies and regulations on the industry. Take serious actions to prevent corruptions, campaign to improve for the supportive attitude of government. Mr. Hare Ram Shrestha, SCAEF, Nepal Page 5/7

6 Adopt an incentive schemes to retain the national experts and attract the national experts working abroad and minimise the brain drain. At the Industry Level: Maintain an effective channel of SCAEF for dialogue with government to reflect the concerns from and seek supports to the industry. Help the government in its efforts for good governance and anti-corruption. Provide training programme in cooperation with government, multilateral and bilateral aid agencies for the capacity building of the national consulting profession. Promote domestic consultants to the international market through various opportunities provided by regional or international associations of consultants. Develop as accreditation mechanism in consulting business. At the Firm level: Develop a long term strategy plan to identify its business development target areas and sectors. Based on the company's strategic plan, develop and implement a capacity building programme (training of in-house staff and develop a network of retainers). For small and new firms, focus on the domestic markets and work with international consultants as local partners, accumulate experience for the future consortiums. For big firms with sufficient experiences, form joint ventures with international firms to work in international markets. Sharpen the skills and update knowledge of the firms professional to meet the demand of the market. Most importantly, once winning a contract make sure to deliver the good service. Mr. Hare Ram Shrestha, SCAEF, Nepal Page 6/7

7 References: 1 SCAEF, Workshop proceeding of "Capacity Building of SCAEF" June 2006, Kathmandu. 2 ADB, DFID, ILO " Country Diagnostic Studies, Nepal: Critical Development Constraints, SCAEF, Action Plan for Institutional Development of Nepalese Consulting Industry, B. L. Nyachhyon, Capacity Building of Consulting Industry of Nepal; some Facts and Future Actions, April S. S. Bhat, Nepal Hydropower Sector: Opportunities for developers and Consultants, 2009 Mr. Hare Ram Shrestha, SCAEF, Nepal Page 7/7