How does real development happen in Nepal? (A surgical analysis from planning to implementation)
In the minds of Nepal’s young generation, development often means “a bulldozer running on the road,” “a view tower standing tall,” or “a bridge being built.” However, based on 20 years of journalism and policy research, development in Nepal is not only “cement and steel rods.” It is a complex process, and when we fail to understand it, we remain trapped in a recurring vicious cycle of “Asare development” and “corruption.”
When development projects in Nepal fail or face delays, it is not only the contractor’s fault. There are serious contradictions within our very “system design.” The authority granted by the Constitution, the restrictions imposed by the Public Procurement Act, and the bureaucracy’s fear that “if you work, you get trapped”—in the conflict between these three forces, Nepal’s development gets stuck. Let us dissect the development cycle in a factual manner.
This article is a deep “white paper” style analysis focused on how development and construction works operate in Nepal, what their internal dimensions are, and why processes get prolonged. This material has been prepared based on an in-depth study of the Public Procurement Act, documents of the National Planning Commission, and reports of the Office of the Auditor General.
Table of Content
- How does real development happen in Nepal? (A surgical analysis from planning to implementation)
- Where Is the ‘Birth’ of a Plan? (The Anatomy of Planning Failures)
- The Mystery of the Budget and the “Red Book” (The Structural Trap of the Red Book)
- Public Procurement Act and the Trap of the “Cheapest Contractor”
- Implementation Phase – Officials, Contractors, and Middlemen
- Local Level – “Bulldozer Development” and Loot Under the Cover of User Committees
- Checks and Balances – The Trap of “Postmortem” Culture and Decision Paralysis
- Solution – The Way Forward
- Conclusion
Where Is the ‘Birth’ of a Plan? (The Anatomy of Planning Failures)
Many people think development begins when a minister or a lawmaker cuts a ribbon or delivers a speech. But legally and technically, it is an entirely different ecosystem. According to Nepal’s “Local Government Operation Act, 2074” and the National Planning Commission’s guidelines, the real planning cycle starts from the “settlement level” (bottom-up approach). How it becomes distorted by the time it reaches the ministry’s “Red Book” is analyzed below:
The Seven-Step Planning Process and “Dummy” Participation
Legally, plan selection must begin at the settlement/ward level and move through the Ward Committee, the Rural/Municipal Executive, and finally be passed by the Assembly through a “seven-step process” (7-Step Planning Process).
In deeper reality, minutes are prepared on paper, but in practice, instead of the genuine needs of local people, plans written on slips of paper pulled from the pockets of “smart operators” and local political party cadres are entered into the minutes. In development administration, this is called “elite capture.” When the foundation of a plan is built on “interest” rather than “need,” it is natural for the plan to be abandoned midway.
The National Project Bank (NPB) and Political “Bypass”
The concept of the “National Project Bank” (National Project Bank - NPB), considered the backbone of development, is highly scientific. Before any project is registered, pre-feasibility, land acquisition status, and cost-benefit analysis must be clearly established.
A fact shown by research is that, in practice, under pressure from leaders to manage power balance, “raw” projects that have not completed the required process are directly bypassed through the Planning Commission. Less than 24 hours before the budget arrives, hundreds of projects are forcefully inserted into the Planning Commission server (PLMBIS) through political access—without a DPR and without confirmed land availability. As a result, the banking system becomes a victim of “garbage in, garbage out.”
MTEF and the Trap of “Resource Assurance”
The Medium-Term Expenditure Framework (MTEF) forces the government to forecast expenditure for the next three years so that multi-year projects do not stop due to budget shortages.
The real problem is the extreme misuse of the term “resource assurance.” By pressuring officials in the Ministry of Finance, even when there is no money in the state treasury, documents are made to state that “resources are assured.” As a result, a road contract of NPR 5 billion is awarded, but the government allocates only NPR 50 million per year. That NPR 50 million is not even enough to cover the contractor’s interest. The project then becomes “chronic.” The Office of the Auditor General’s repeatedly highlighted problem of “carried-forward liabilities” has its main root in this unrealistic resource assurance.
The “Cut-Paste” Farming of DPRs
The Detailed Project Report (DPR) prepared before a project is approved is the blueprint of development. But in Nepal, consultancy firms often submit a “soil test” report from one river and copy-paste it into a bridge report of another district. Because government engineers lack both the technology and manpower to cross-check such data, projects get approved with faulty designs. As a result, within two months of construction starting, work stops in the name of “design review,” and costs are increased.
Therefore, in Nepal, the birth of a plan is not happening from the “womb of need,” but between “political impulse and technical negligence.” Reform must start from this point (Project Screening Phase). Solutions will not emerge by breaking heads only during the implementation stage.
Ground Reality
Here, “access” dominates over “facts.” Although policy states that the Planning Commission’s “project bank” is mandatory, on the final night before the budget (the night of Jestha 14), plans are inserted into the “Red Book” from the pockets of leaders. When budgets are allocated to projects without study, without soil tests, and without land acquisition, those projects “pass” on paper but “fail” on the ground.
Studies say that more than 60% of projects in Nepal enter the budget without full preparation (Detailed Project Report - DPR). The result is that only after a contract is awarded does it become clear that the landowners will not allow the road alignment. Then begins the “variation order” game, where a NPR 5 billion project reaches NPR 15 billion.
The Mystery of the Budget and the “Red Book” (The Structural Trap of the Red Book)
To understand development in Nepal, it is essential to dissect the “Line Ministry Budget Information System” (LMBIS) and the much-discussed “Red Book” (Red Book). This is not merely a document of numbers; it is a document of policy intention and technical inconsistencies.
Budget allocation is broadly divided into three pillars by ministries and economists:
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Recurrent Expenditure: Salaries, pensions, social security, and administrative costs.
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Capital Expenditure: Roads, infrastructure, machinery—what we commonly call “development.”
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Financial Provision: The most frightening and least understood heading—budget to pay principal and interest on debt.
Deep Analysis and Alarming Figures
The irony is that after federalism, administrative burden should have reduced, but it has become more severe. Looking at recent years’ figures (such as the fiscal year 2080/81 scenario), around 65–70% of the state treasury is spent on recurrent expenditure, about 18–20% goes to financial provision (debt repayment), and only 15–18% remains for real capital (development) expenditure.
That is, we are spending more on paying interest than on development itself. This indicates the economy is moving toward a “debt trap” (Debt Trap).
Why Capital Budgets Freeze? (Internal Dimensions)
1. LMBIS and Budget “Locking”
Plans are entered into the LMBIS software, but the “quarterly breakdown” is unscientific. More than 60% of the amount is kept for the third quadrimester (Chaitra–Asar). The system is designed so that in winter (the construction season), the budget released is low, and during the monsoon, it is released more.
2. Lump-sum Allocation
In the Red Book, billions are kept under headings like “contingency” or “miscellaneous.” This is money hidden to later shift (virement) into districts of influential leaders by bypassing Parliament. Due to such “non-project budgets,” real projects stop due to lack of funds, while billions remain frozen waiting for virement.
3. The Trap of Conditional Grants
A large portion of the budget sent by the center to local levels is “conditional grants.” That is, it is fixed for a specific activity only. But often, the fixed plan does not match local needs or faces land disputes. The result is that money is visible in the local account but cannot be spent (non-fungible), and ultimately it returns.
4. The Complexity of Reimbursement
In foreign aid-based projects (such as ADB or World Bank projects), the government must spend first from its own sources and later claim reimbursement from donors by submitting bills. But due to cash flow problems in the Ministry of Finance, many foreign-funded projects remain “on hold” for years because the government cannot make the initial investment.
Therefore, merely having a budget in the “Red Book” is not a guarantee of development. Our budget formulation is distribution-oriented, not result-oriented. Unless we ruthlessly reduce recurrent expenditure and enforce fiscal discipline to raise the share of the development budget to 50%, “Asare development” will remain our fate.
The Wrong Timing of the Fiscal Year
Nepal’s fiscal year begins from Shrawan 1. Shrawan–Bhadau–Asoj passes in monsoon and festivals. Only in Kartik do tender documents begin to form. In winter (Poush–Magh), the process moves. In Jestha–Asar, agreements happen and work is rushed. To stop this, the Constitution mandated “bringing the budget on Jestha 15,” but behavior did not change. In bureaucracy, the practice of starting work from Shrawan could not take root because the process of receiving the “authorization” letter still takes months.
Public Procurement Act and the Trap of the “Cheapest Contractor”
You have likely heard repeatedly: “The lowest bidder got the contract, and did not do the work.” The root lies in the Public Procurement Act 2063 (PPA) and its regulations.
Legal Loophole
With the good intention of safeguarding state money, a rule was made to award contracts to the “lowest bidder.” But this has proven to be one of the biggest burdens on Nepal’s development.
Example: A government engineer estimates NPR 100 million to build a bridge. The tender opens. Contractors compete. One contractor bids “I will do it for NPR 60 million,” submitting a 40% lower bid.
By rule, the government must award the contract to that bidder. But practically, quality work worth NPR 100 million cannot be delivered for NPR 60 million.
Result
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The contractor first takes a “mobilization advance” (Mobilization Advance—up to 20% advance payment of the contract amount).
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That money is used to buy land or invest in the stock market.
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Two tractors are placed at the construction site to show the work has started.
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After two years, an application is filed for time extension claiming “inflation increased” or “site was not cleared.”
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This cycle continues for up to 10 years (examples: Kamalvinayak–Nagarkot road, Tinkune bridge).
Implementation Phase – Officials, Contractors, and Middlemen
At this stage, it is important to understand how development gets “hijacked”:
1. Land Acquisition and Forest Disputes
About 90% of large projects (such as fast track and transmission lines) get stuck in land acquisition and tree-cutting. The lack of coordination between the Ministry of Physical Infrastructure and the Ministry of Forests is so severe that it can take up to two years to get approval to cut a single tree. Preparing an EIA report alone takes months, and the report remains shelved in the ministry for years.
2. Syndicates of Construction Entrepreneurs
In Nepal, the number of “Class A” large contractors is limited. In big contracts, there is collusion among them. Small contractors must become sub-contractors of big contractors to get work. Big contractors keep a 20% commission and pass the work down. To extract profit, small contractors compromise on quality. Asphalt thickness is reduced, sand content is increased.
3. Technical Supervision (Monitoring)
Engineers are supposed to stay at the site and inspect. But government engineers face lack of resources and security challenges. On the other hand, in many cases, there is an “undeclared agreement” (commission system) between engineers and contractors to pass “running bills.” This is an open reality that the Office of the Auditor General indirectly points to repeatedly.
Local Level – “Bulldozer Development” and Loot Under the Cover of User Committees
With federalism, “Singha Durbar in every village” arrived, but along with it, “the corruption of a small Singha Durbar in every village” also became decentralized. How the sacred objective of “public participation” envisioned by procurement regulations has been hijacked by “bulldozer mafia” is both technically and practically alarming.
We have called this “Dozernomics,” and its cycle runs like this:
1. Policy Misinterpretation and Project Fragmentation
Public Procurement Regulations (Rule 97) provide provision (amount may vary based on recent amendments) that projects up to NPR 10 million can be implemented through user committees. The intent is that locals contribute labor, gain employment, and work is labor-intensive rather than machine-based.
Ground reality: If a NPR 50 million road project is tendered, open competition occurs and it becomes difficult to ensure “one’s own people” get it. So, a NPR 50 million project is broken into five parts of NPR 10 million each, and five dummy user committees are formed to assign the work to party cadres. Technically, this is called a “fragmented project,” and it is a serious violation of fiscal discipline.
2. User Committee as a “Proxy Contractor”
On paper, the chairperson, secretary, and treasurer are ordinary villagers. But except for signing the bank chequebook, they have no role. The real work (de facto contractor) is carried out by a person close to an influential leader or an elected representative.
Alarming fact (conflict of interest): Across local levels, a large number of ward chairs, mayors, or their close relatives own bulldozers and excavators. The same actors allocate budgets, form user committees, and rent out their own bulldozers hourly. This is a clear case of conflict of interest, but there is no effective mechanism to stop it.
3. The Fraud Game of “Muster Roll”
This is repeatedly highlighted in the Office of the Auditor General’s reports—“paper workers.” Work completed by a bulldozer in four days is documented by the user committee as “100 villagers dug it in 15 days,” preparing a muster roll with 100 fake names, thumbprints, and signatures. Money is withdrawn from the government account in the name of wages for 100 workers, but the actual payment goes into the pocket of the bulldozer owner. This is organized extraction of state funds.
4. Engineering Disaster
The “bulldozer driver” becomes the informal village engineer. Where the technical estimate requires a 20-degree slope, the bulldozer cuts the hill at 90 degrees for convenience.
Result: Geologists call such roads “environmental time-bombs.” Roads cut without drainage wash away older settlements below during monsoon and dry up water sources. IEE/EIA reports become ritualistic and copy-paste documents.
5. The Drama of Public Audit
Rules require a public hearing after completion, stating “this much was spent.” But in practice, minutes are written inside a room, signatures are collected from two or four passersby, and the file is closed. Photos shown during payment collection display a constructed road, but that road does not last even one monsoon.
In conclusion, the current local-level development model is producing not “sustainable development,” but “sustainable destruction” and a new class of “middlemen contractors.” Unless the use of heavy equipment is fully prohibited in user committee projects and competitive bidding is introduced even for small works, this loot system will not stop.
Checks and Balances – The Trap of “Postmortem” Culture and Decision Paralysis
Nepal’s watchdog institutions that monitor public bodies are considered among the most powerful in South Asia in terms of authority and structure. But the irony is that, like the saying “too many cooks spoil the broth,” there are so many mechanisms to “find holes in work” that the final result becomes a zero-sum game.
This section expands in depth on how Nepal’s oversight mechanisms, bureaucratic psychology, and “oversight syndrome” have paralyzed development.
1. Office of the Auditor General (OAG): A Doctor Who Only Performs Postmortems
Constitutionally, the OAG conducts the final audit of government income and expenditure. But from a development administration angle, there are serious technical issues:
Timing mismatch: The audit team reaches the project site or the ministry only after the fiscal year has ended. This “post-facto audit” conducted after the bridge has collapsed or the road has washed away does not save the patient—it only identifies the cause of death (paperwork errors).
Financial vs. physical: Auditors mainly come from an accounts background, not civil engineering. They verify whether a VAT bill for NPR 5 million cement is genuine, but they do not check how much sand was mixed into that cement. Therefore, projects that are “procedurally correct” but “technically poor” also receive a clean chit.
The confusion about “beruju” (arrears): The general reader must understand that arrears are not all corruption. A large share of arrears in OAG reports are “procedural lapses” that require regularization (for example, missing documentation for virement). When media labels it as “billions in corruption,” the real reality gets hidden.
2. CIAA: A Cause of Policy Paralysis?
The Commission for the Investigation of Abuse of Authority is essential for corruption control, but its working style has created a “defensive mechanism” within the bureaucracy.
Fear psychosis: Even a small procedural mistake in procurement can later trap officials in CIAA investigations, with fear of pension being blocked. Decision makers become afraid to sign.
Reward for inaction: In Nepal’s civil service—“if you decide with bad intent, you may go to jail; but if you do not decide at all and shelve the file, there is no action.” Therefore, officials prefer “seeking advice from higher authority” or “forming a committee” rather than approving major project files. This risk-avoidance behavior is a key reason projects remain stuck for 10 years.
Terror of anonymous complaints: More than 50% of complaints are filed by competing contractors or those seeking revenge to derail development projects. Before a project even starts, one complaint leads to seizure of the full file (original documents), and work remains halted for years in the name of investigation.
3. National Vigilance Center (NVC): A Toothless Tiger
Under the Prime Minister’s Office, this body has authority and labs to conduct technical audits, checking road thickness and reinforcement bars in bridges.
The irony is that the Vigilance Center can submit a report saying “this road is low quality,” but it has no authority to prosecute. It can only recommend action, which powerful ministries often throw into the dustbin. This is a clear example of structural imbalance.
4. Court Interim Orders
In big tenders, losing parties file writ petitions in court, and courts issue stay orders to keep work “as is.” Court processes take years, and by then, project costs (cost escalation) have already doubled.
Therefore, we are trapped not in “checks and balances,” but in a cycle of “checks and blocks.” Unless oversight bodies play the role of facilitators who also provide solutions—not only police who find faults—the culture of hiding files and avoiding work will not end.
Solution – The Way Forward
It is not enough to only stack problems. As a subject expert, these are practical solutions suited to Nepal’s ground reality:
1. Stop Premature Budgeting
The “National Project Bank” must be strictly enforced. Not a single rupee should be allocated unless land acquisition, forest approvals, and DPR are completed. Political leadership must abandon the obsession of “my constituency.”
2. Hybrid Annuity Model (HAM)
This model, successful in India, has begun to be discussed in Nepal. Under this, 60% payment is made in installments only after construction is completed. This forces contractors to complete work faster and makes them responsible for maintenance as well. Nepal must move from “mobilization advance” to payment upon delivery.
3. Procurement Reform (Quality-and-Cost Based Selection - QCBS)
Instead of “lowest bidder,” Nepal must seek a balance of “good and affordable.” The law already allows awarding contracts to those scoring higher in technical proposals even if their cost is slightly higher, but it is not used. It must be made mandatory.
4. Penalty and Reward
Strong legal implementation is needed to provide bonuses for early completion and to not only blacklist those who delay, but also recover compensation from personal assets. The current blacklisting process is weak and is easily neutralized by court stay orders.
5. Technical Empowerment at Local Level
Increase the number of engineers at the ward level and separate user committees from major civil works, limiting them to supervision only. Construction work should be carried out by professional contractors, with strong community monitoring.
6. High-Level Coordination Body
Under the Prime Minister’s Office, there should be an empowered task force capable of resolving disputes among the roads, sewerage, electricity, drinking water, and forest ministries within 24 hours. This is the way to stop the practice of Melamchi digging roads a day after they are paved in Kathmandu.
Conclusion
Development has not been absent in Nepal, but it is clear that it has not happened at the speed and quality it should have. The main reason cannot be dismissed as “corruption” alone; this is a systemic failure. Our legal structure values process more than results.
Young readers must understand that unless we view development not as a political agenda but as a technical and managerial subject, we will continue debating “Asare development” for another decade. The solution is not in magic, but in method, discipline, and accountability. Citizen vigilance must not be limited to demanding bridges—it must question bridge design, contract terms, and compliance with timelines.
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