Reviving the economy of Nepal through construction sector during pandemic

Nepal economy

By Mijash Vaidya

The COVID-19 pandemic has affected the entire political, social, economic, religious, and financial structures around the globe, and of course, Nepal is among one of them.

According to the World Bank, Nepal’s economic growth is expected to fall in the neighborhood of 1.5 and 2.8 percent in the fiscal year 2020, reflecting lower remittances, trade and tourism, and broader disruptions. A prolonged outbreak of COVID-19 would impact growth significantly with a further deceleration in services and industrial production. One of the major sectors that is highly affected by COVID-19 is construction, which provides a significant contribution to Nepal’s economy. The construction sector alone is said to contribute about 10-11 % to Nepal’s GDP and uses about 35% of the government budget. It provides employment to more than 1 million people.

The target of Nepal to graduate from the least developed country to middle-income or developed country by increasing its economy has been heavily impacted because of COVID-19. The construction of 5,000 projects worth Rs. 800 billion in the country will be postponed after eight months due to a nationwide lockdown for controlling the pandemic. Construction work has almost stopped in all projects, and around 3 million people working in the construction sector have become jobless. This obviously will shake the entire economy of Nepal.

Nepal has reported over 500 cases so far with three deaths, and with the increasing number of cases, the situation has become even worse. Nevertheless, the government of Nepal has also made several arrangements and adopted effective measures to prevent the pandemic situation. The World Bank and Ministry of Finance have signed an agreement of a fast-track $29 million COVID-19 Emergency Response and Health Systems Preparedness Project to help Nepal prevent, detect, and respond to the COVID-19 pandemic and strengthen its public health preparedness.

In the context of the construction sector, some essential and national pride projects are still under construction. However, to catch-up on the falling economy, the Government of Nepal needs to focus on continuing small and medium scale projects at the local level using local labor and should organize construction rationally in accordance with the requirements of epidemic prevention and control simultaneously. In addition, for projects under construction and resumption projects, the construction unit, and relevant participating units should develop the epidemic prevention and control management system and emergency plan in harmony with the local government and the health department.

Moreover, strict construction site management, environmental disinfection, and cleanliness of the living place of workers, temporary canteens, and other construction sites should be ensured along with the project quality and safety. The closed management system can be implemented on conditional construction sites. Implementation of the real-name system requirements, on-site staff account at the construction site, registration system for personnel entering and leaving the construction site performing temperature detection, reporting, and necessary isolation observations at the site should be done. The construction sites should be equipped with the necessary protection and disinfection supplies like soap, face mask, sanitizer, gloves, etc. and should put up health advisory posters and infographics. The construction industry should conduct a self-awareness program and strengthen publicity as well as should provide training to workers on self-prevention and protection ability. Also, all the construction workers must be tested before they can return to work and should provide a health certificate. In addition, the government should provide an additional amount for project management to cover the increased overhead cost incurred during this period, and should announce a financial package or incentives to help and encourage workers.

To revive the economy of Nepal in the current situation, the Government of Nepal must concentrate on stimulating the construction sector as the other sectors like remittances and tourism depend on the global economy. Global remittances are projected to decline sharply by about 20 percent in 2020 due to the economic crisis as predicted by the World Bank. As far as tourism is concerned, it is not possible until international flights and borders are opened, and unless the vaccine becomes available across the world. On the contrary, the construction sector does not depend on the global economy like other sectors for small and medium scale projects. Nepal has enough size and capacity to produce raw materials such as cement, aggregate, and steel components. Improvement in the construction sector leads to the arousal of the manufacturing sector as well. Consequently, creating employment in the construction and manufacturing sector, which can help to mitigate the hunger crisis and improve the health of the workers as well as their families during this pandemic. Thus, the government should ramp-up the construction sector and should propose a significant fiscal stimulus in this sector as soon as feasible in order to cope with emerging catastrophe and to prevent further shocks to the economy.

(The author is a Master’s scholar in Highway and Railway Engineering at South China University of Technology, Guangzhou, Guangdong province, China.)