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MOT 1450

Pratap Thapa
Word Count: 3002

4181441
8/13/2012

Delay in Melamchi Water Supply Project in Nepal

MOT1450

Introduction
The Melamchi Water Supply Project is the largest drinking water supply project of Nepal and also the longest as the project is still struggling to proceed smoothly, 14 years after the government of Nepal decided to carry out the project was taken in 1998 (MWSP, 2006). The $474 million water supply project targeted to meet the increasing demand of drinking water in the capital city of Kathmandu valley was proposed to solve the long standing drinking water shortage in the city (MWSP, 2006). The execution of the much-hyped project has mired with controversies from political and local level delaying the project significantly from originally planned schedule to complete in 2006 (eKantipur, 2010). The project is co-funded by loan from donor agencies, development grants and government of Nepal (MWSP, 2006). The decision government of Nepal faced, whether or not to build the Melamchi water supply project, had an underlying problem of wicked nature as characterized by Rittel and Webber ( 1973). Firstly, there is no true or false solution to the water supply problem, several alternative possible solutions can be good or bad when measured from different criteria. Secondly, the problem of decision about Melamchi project is a symptom of other problems. The actual problem can be argued as inefficient operation of Nepal Waters Supply Corporation (NWSP), unplanned urbanization, growing population, political instability or poor economy of the country forcing it to take loan from donor organizations. Finally, the problem is essentially unique as the set of stakeholders involved, the political circumstances and the scale of the project are different from other similar infrastructure projects. This paper will focus on the decision making process of Melamchi Project that has occurred after announcing the initiation in 1998. Even though drinking water supply has remained one of the top priorities of the government and there should in principle be no opposition about it, the Melamchi project has not been able to progress in a planned way and is severely delayed. Thus, this paper addresses the following research question: What factors caused the delay in the decision making process of Melamchi Water Supply Project? This paper will answer the research question by analyzing the decision making process by applying the Rounds Model developed by Teisman (Teisman, 2000). The paper is organized in the following manner. In the following section, the Rounds Model is introduced. The third section of the paper is the analysis section. In this section the decision making process of the case is described by illustrating its main events. The stakeholders involved in the decision making process are identified and their goals, interests and power are also analyzed in this section. The case is then analyzed using rounds model and the insights are explained. The fourth section of the paper concludes the earlier sections and provides answer to the research 2

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question. The paper is closed with some recommendations on the decision making process.

Theoretical Section
The rounds model explains the decision making process as an interaction between different actors in several rounds (Teisman, 2000). In this model, the decision making process is characterized by impasses and breakthroughs. The rounds model assumes that solutions/policy and problems are relevant to a policy process, insofar as they are presented by an actor during this process (Teisman, 2000). The Rounds model focuses on different actors, objectives and solutions, their dynamics and interaction to understand the decision making process. Several actors are involved in the decision making process each with its own individual and institutional self-interest and its own normative preferences, and each with its own capabilities or action resources that may be employed to affect the outcome (Scharpf, 1997). Hence, to gain insight the focus should be on interaction between purposeful actors in the decision making process. In the given case of Melamchi Water supply project, different actors are involved in the decision making process with their own interests and normative preferences. The decision making process went through a series of interactions sometimes halting the progress and sometimes leading to the next level of decision making process. Thus, rounds model is deemed most suitable to explain the decision making process and provide insight into the reasons for severe delay in the implementation of Melamchi Water Supply Project.

Analysis
Description of the Decision Making Process
To mitigate the increasing water crisis in Kathmandu Valley, Nepal government announced the initiation of Melamchi Water Supply Project (MWSP) in 1998. The project envisaged the tunnel infrastructure will be able to meet the water demand in Kathmandu for next 25 years (Maskey, 2011). Asian Development Bank (ADB) approved loan and became the main donor for the project in 2000. The key condition attached to the funding of this project was that the water distribution services were to be contracted to a private water company for a certain time period on a performance based management contract (ADB, 2006). The estimated project cost of $464 million was funded 45% by loan from Asian Development Bank and World Bank, 30% by multilateral donor agencies (Japan Bank for International Cooperation (JBIC), NORAD, Sida, Organization of Petroleum Exporting Countries Fund for International Development (OFID/OPEC) and NDF) and 25% by government of Nepal (MWSP, 2006). The water supply project brought in a huge hope amongst the citizens but controversies soon started to appear between donor organizations. Additionally, this time period was marked by political instability, interparty conflicts and an 3

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insurgency launched by the Communist Party of Nepal (CPN/Maoist) (Pant & Samad, 2006). In 2001, eight members of the royal family of Nepal were killed in a massacre including the King and Queen. This event had a slowdown effect on all the activities of the nation. In 2002, World Bank withdrew from MWSP citing the following reasons (ADB, 2006): (1) Important options have not been explored to utilize the water resources within the valley; (2) MWSP would only benefit the richest five percent of the population. This withdrawal delayed the project until new scheme of financing was re-designed and sourced (MWSP, 2006). In 2004, the ADBs Special Project Facilitator (SPF) received a complaint from the Water and Energy Users Federation-Nepal (WAFED) and group of NGOs about the MWSPs non-compliance in the areas of access to information and regarding privatization of water resources (Pant & Samad, 2006). In May 2004, the then minister for Public Works, Prakash Man Singh, cancelled the contract with Korean company, Hanil Koneko, after it had only constructed 1.6 kilometres of access road in two years, and re-awarded it to a consortium headed by a Chinese company, China Railway 15 Builder Group (Kathmandu Post, 2005). This raised question of corruption in the system and the reigning prime minister and minister for public works were arrested and taken into custody for seven days by commission for corruption and control. They were later released as ADB confirmed that the contract was given to lowest bidder and was according to procedure (Kathmandu Post, 2005). In 2005, Sida and NORAD quit the project, citing their dissatisfaction with the progress of the project as well as concerns about Nepals unstable political situation. The withdrawal of three major donors, World Bank, Sida and NORAD created a shortfall of $137 million from the planned budget. In 2005, the new King suspended the parliament enforcing the martial law. This action raised a civil movement and monarchy was ousted from the country in 2006. In the same year, the locals started opposing the Melamchi Water Supply project and put forward several demands. In July 2006, Melamchi works in Sindhupalchowk district were suspended for several days after locals padlocked half a dozen offices of the project (ADB, 2006) . The Communist Party of Nepal (CPN/Maoist), the former insurgents, emerged as the largest party in the new republic Nepal after downfall of monarchy. The new communist rule brought in sweeping change in political values of Nepal (Maskey, 2011). Hisila Yami, then minister for Ministry of Physical Planning and Works (MPPW), canceled the agreement with the Severn Trent British transnational water 4

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company, which was granted the contract to manage the water supply distribution in Kathmandu on the grounds of anti-aid development philosophy of Maoists (Khadka 2007). All work for tunnel construction was halted and the Melamchi Project was in uncertainty. ADB threatened to come out of the project after the incident (Maskey, 2011). After six years of project implementation, the new government of Nepal felt a need to change the scope and scale of Melamchi project and the project was revised in 2007.ADB approved the proposed project restructuring in February 2008 (MWSP, 2006). After the restructuring, the Project was revised to a total of $317.3 million and a completion date of June 2013 (MWSP, 2006). The project was disrupted again as locals launched a violent struggle, in which project workers were manhandled, office was vandalised, vehicles were stolen and roads were blocked (Poudel, 2011). Such was the level of local interference that, when a local she-goat had a miscarriage, people sought compensations, claiming that it has happened due to explosion in the tunnel works. (eKantipur, 2010) From 2010 onwards the project has faced little obstruction according to officials. However, the project officials are not positive about meeting the 2013 deadline and have requested ADB to extend the loan contract till 2015 (eKantipur, 2012).

Table 1Summary of the Decision Making Process

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Stakeholder Analysis
From the case description provided above different stakeholder groups can be identified in the decision making process. The following matrix classifies the actors involved in the decision making process on the type of power position they possess and the stance they take on privatization of water supply:

Table 2 Classification of Actors Involved

Government of Nepal (Ministry of Physical Planning and Works) Government of Nepal, Ministry of Physical Planning and Works (MPPW) is the executing agency for the Project (MWSP, 2006).The goal of the ministry is to provide adequate water supply in Kathmandu valley and identifies Melamchi Water Supply project as a major means to accomplish the goal. Government of Nepal provides partial funding to the project and is responsible for selection and organization of the autonomous Melamchi Water Supply Development Board (MWSDB), which is the executing agency for the project (MWSP, 2006). Local Elected Institutions The District Development Committee (DDC) and Village Development Committees (VDC) have limited constitutional role in planning and regulating water resource. However, VDC and DDC are the focal point for all other developmental activities (Pant & Samad, 2006). The local elected representatives of DDC and VDC were apprehensive that they were not consulted during the planning and design of the Melamchi Project, although water is being diverted from their area. They in fact could have played an important role in establishing linkages between the local people and the project authority. Local Concern Groups and NGOs The local peoples interests were regarding employment, amount of water diversion and distributing a share of the profit raised by selling Melamchi water to them.

Altogether 65 NGOs and user groups have already been formed in the Melamchi basin areas that are concerned about the Melamchi Water Supply Project activities (Pant & Samad, 2006). They have been establishing contact with
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government and donor agencies to voice the concern of local people regarding socio-economic and environmental impacts of the project, which were otherwise disorganized.
Donor Organizations Donor organizations provide the financial support required for implementation for the project and play a vital role as their financial support is crucial for such a large scale project. The donor organizations want timely completion of the project and efficient operations to get their investment back. The donor organizations were particularly interested in privatization of water supply arguing it will be more efficient. Nepal Water Supply Corporation Nepal Water Supply Corporation did not have much say in the construction stage of Melamchi project; however, since they are the organization responsible for distribution of water supply they were concerned of the governments decision to accept the condition set by donor organizations of privatizing water supply. WAFED WAFED formed coalition with other NGOs and raised voice against governments decision to privatize water supply and also demanded information about the Environmental Impact Assessment report. Consumers The end users of Melamchi project, residents of Kathmandu valley who would get drinking water and pay for it were the least consulted during the whole project. The opinions of people on whether they would be interested to pay and how much was not considered in the decision making process and remains unclear.

Application of Rounds Model


In this section, the Rounds model introduced in the theoretical section will be used to analyse the decision making process of Melamchi Water Supply Project. According to the rounds model, in a shared power situation, decision making typically takes place in rounds of impasses and breakthroughs, which is visible in case of Melamchi Water Supply Project. Although the government of Nepal is the central actor involved in executing the project, the decision making power is shared with several other actors as evident in the way project has evolved. On the one hand, since the project is heavily dependent on donor organizations for gathering required investment, the governing body must comply with the conditions set by such donor organizations. On the other hand, the conditions set by such donor organizations are opposed by several pressure groups which cannot be ignored. At the same time the influence from local people, environmental NGOs and contractors must also be taken into account in the decision making process. The decision making process from 1998 can be mainly divided into three major rounds of decision. The first round begins from the breakthrough decision to initiate long awaiting Melamchi project and extends until World Bank withdrew from the project. Withdrawal of World Bank brought the process to a halt and with 7

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this began the second round of decision making where the project faced a lots of other problems and withdrawal of other sponsors. The series of problems as described in the previous section delayed the progress of the project. Breakthrough was achieved when the scope and scale of the project was revised in 2007 incorporating changes in political views, new contracts from donors and solving some of the withstanding controversies. The implementation has progressed at a greater speed in this round of decision making however some issues with contractors and local people arose in this round. The implementation of the Melamchi Project is strongly associated with the wider political and economic interest of the Nepali political parties. Thus the highly uncertain and changing political situation played a key role in delaying the project. The several rounds of decision making are associated with major changes in the political arena and the agendas changed with change in ruling political parties. Apart from the political influence, the project was also influenced by the differing values of various stakeholders involved. Although there is no conflict in the fact that drinking water should be accessible to all, the way in which it could be accomplished was largely debated. As the discussion was based on the intrinsic value possessed by each actors and no one actor was necessarily right or wrong, it lead to an elongated decision making process where the decision could not be taken only on the basis of scientific analyses and required several rounds of negotiation.

Conclusion
The aim of the paper was to analyze and identify the factors that delayed the decision making process of Melamchi Water Supply project. From the analysis it is seen that the delay can be attributed to the differing values, stances and interests of various actors involved in the decision making process. The major controversy in the project has been regarding privatization of water supply. Privatization was the prime criterion established by World Bank and Asian Development Bank to provide the loan, to which the government of Nepal had agreed. However several civil and human rights group opposed such privatization of water as they argued water is one of the basic rights of people and a basic duty of government to fulfill. Privatization would more likely lead to more efficient and reliable operations ensuring high return on investment for investors, however, it would also lead to high cost for water which especially poor people would struggle to pay. Additionally, there have been oppositions from the local people and NGOs about effects of the project to the local people living in the Melamchi basin area. These controversies combined with highly unstable and insurgent political environment of the country during this period has delayed the project and has caused cost overrun. The decision making process evolved through three distinct rounds. During each round, there was constant dynamic interplay among the actors involved and various decisions made through such interactions shaped the direction of the decision making process. 8

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Recommendations
In this section some recommendations are provided which could be adopted to prevent further delay of the Melamchi project. Firstly, it is observed that the decision making process did not involve all the relevant stakeholders from the beginning. It is highly recommended to know the interests of different actors and include all actors who represent different interests in the decision making process from the beginning, including the actors with blocking power (Bruijn & Heuvelhof, 2008). The local level politicians should be taken into confidence that will help bridge between community and project officials and also help in providing information about actual interest behind several local protestors. Secondly, the major issue in the decision making is seen as privatization of water supply. The issue of privatization of water supply should be framed differently and efficient supply and operations of water supply should rather be discussed where privatization can be presented as one of the prime options. Finally, the problem should be formulated in a broader way like Infrastructure development of the nation including infrastructure development of Kathmandu Valley as well as Melamchi basin region. Such broader issue would help in forming a package deal where several actors including the donor organizations and local people can be compensated well such that they perceive overall gain from the decision (Bruijn & Heuvelhof, 2008).

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References
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