Challenges and Prospects of Nepalese Construction Industry


Nepal is a land-locked, rugged topography country situated between China and India. Till 1950, the country was isolated from the rest of the world. Means of transportation and communication did not exist. After the commencement of First Five Year Development Plan (1956), Nepal’s planned economic development started. This is the period of Tenth Five Years Development Plan but the success in hand is very negligible in agricultural and industrial development. It has a population of about 23.21 million with annual population growth rate of 2.24 percent, and literacy rate of 48 percent. Almost 90 percent of the population lives in the rural areas and most of them depend upon agricultural sector. This sector provides around 40 percent contribution to GDP. On the other hand, due to lack of appropriate policy, plans, stable political environment, infrastructures, technology and adequate investment, the industrial sector remains still at infant stage. It provides very negligible contribution to GDP and employment opportunity.
In the last two decade there has been considerable progress in the construction industry. During the period the Nepalese contractors have been able to develop their management skill, improve working capacity, financial and technical capabilities, and acquire suitable construction equipments. As a result local contractors have been able to compete and participate in mega construction project. Basically this article tries to explore the development of construction industry in Nepal; identify challenges faced by the contractors as well as the prospect of construction industry building new Nepal.
Physical infrastructure development is the major tools that led to prosperous and developed nations. National infrastructure system must be connected through global and regional links if countries are to benefit from the expansion of markets and trade through globalization. Infrastructure development offers the foundation on which a country can seize and capitalize on the opportunities ushered in by globalization and regional integration.
Investments on large scale infrastructures are critical to enable a country to achieve long term growth and sustainable poverty reduction. It played an important role in enabling the poor to participate in the growth process. Access to education and health which are also the indicators of economic development, can be vastly improved through better road, electricity, communications, water supply, and sanitation services.

Nepalese Construction Industry contributed around 10 to 11 percentages to GDP and it uses around 35 percent of government budget. It is estimated that this sector is creating employment opportunities to about one million people so it generate employment next to agricultural sector in the country. Similarly about 60 percentages of the nation’s development budget is spent through the use of contractors. (Federation of Contractors Association of Nepal).

Nepal Constructions Industry is fast growing service industry in Nepal. Sound Political system and policies helps to create good environment to grow. Constructions equipment and materials market have grown by double after the great earthquake of 2015

In the last two decade, there has been considerable progress in the construction industry. During the period, the Nepalese contractors have been able to develop their management skill, improve working capacity, financial and technical capabilities, and acquire suitable construction equipments.

The leading brand constructions equipments are easily aviable to purchase and to rent  like: JCB, Komatsu, Case, Caterpillar and Tata construction deal with equipment like excavators, loaders, rollers, backhoe loaders, wheel loaders, etc. Likewise, Doosan, Hyundai, Kawasaki, Mahindra and Ashoka also have introduced various construction equipments. The major chunk client for equipment are contractors, while real estate developers, hydropower and mining projects, government departments like the department for road, department of irrigation, brick industrialist etc .


Used Komatsu Dump Truck Dump

Used Komatsu Dump Truck Dump

, challenges face by Nepalese Construction industry are : lack of standard pre-qualification criteria under the new Procurement Act, absence of a balanced and standard bidding document, unclear government Rules and Regulations, lack of construction equipment and workshop, Approval of the Lowest Bid, Taxation System, Delay in Payment, Price Change, Brain Drain, Unavailability of Construction Materials etc. There is relationship between development of construction industry and economic development of a country. Being a developing country, Nepal offers promising employment opportunities for the contractors in Roads and Airports, Irrigation and Hydropower, Real State and Housing and Public Private Partnership in infrastructure development. More importantly, if there is a stable government and it introduces development plans and policies, not only this sector but the whole nation will stand to benefit. Government should also focus on attracting foreign direct investment in the sector. On the other hand, the Nepalese construction industry, which is still regarded as in infant stage,

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