ADB-Nepal Partnership

One of the least developed nations in the world, Nepal ranks 157th among 187 countries in the Human Development Index. After peaking at 5.8 percent in 2008, gross domestic product has been averaging only 4 percent since. The unstable political climate has made it difficult for Nepal to sustain inclusive development. Although civil strife ended in 2006, sporadic tensions continue to break out in the country. Several bomb blasts and other acts of violence rocked the nation in the run-up to and on the day of the national elections in November 2013. As such, although the country is well on its way to meeting some of its Millennium Development Goals, progress in other areas such as infrastructure is sorely lacking. For instance, the country has enough resources to produce nearly 1,600 megawatts of hydropower, but its existing infrastructure can only yield 705 megawatts. And while the country is on track to halving poverty by 2015, socioeconomic inequality remains widely present among different ethnic, geographic and social groups. Through its latest five-year plan for Nepal, the Asian Development Bank aims to help bolster the country’s urban infrastructure — including energy generation and transmission, and water supply and sanitation — and bridge the inequality gap. Funding levels From 2006 to 2012, ADB disbursed nearly $1 billion in grants and loans from its Asian Development Fund and other special funds. In its 2013-2017 country partnership strategy with Nepal, ADB aims to provide nearly $1.5 billion from its ADF resource envelope. An annual allocation of between $219 million and $245 million has been earmarked for 2015 and 2016; the allocation for 2013-2014 is $638 million. Funding priorities Following the priorities set out in the government of Nepal’s three-year plan, ADB will be focusing on these five areas: - Infrastructure: This will address the gaps in basic services provision and lack of economic opportunities by developing energy, transport and urban services infrastructure. - Agriculture: This will support the development of agricultural methods and infrastructure to boost production. - Tourism: This will improve the tourism sector through infrastructure and private sector investments and provide appropriate skills needed for employment. - Social Services and Social Protection: This will focus on improving indicators set in the MDGs through investments in health, education and human development. - Governance and Public Financial Management: This will support greater public fiscal management and increase private-public investments and private sector investments. The bank will devote 85 percent of its assistance on three core sectors: energy, transport and urban services. The remaining 15 percent will be allocated for education and agriculture. Below are the sectors selected by ADB for support for the 2013-2016 funding period: Some of ADB’s recently launched initiatives in Nepal include: - Skills Development Project. This aims to bridge the large skills gap by providing sufficient training for people who want to be employed in the construction, manufacturing and services sectors. - Building Climate Resilience Of Watersheds In The Mountain Eco-Regions. This seeks to assess the climate change vulnerability of river sub-basins and support capacity building for watershed management. - Kathmandu Valley Wastewater Management Project. This supports the rehabilitation and construction of wastewater networks and plants, as well as the strengthening of the institutions working for wastewater management in Kathmandu. - South Asia Sub-Regional Economic Cooperation (SASEC) Power System Expansion Project. This is designed to address weaknesses in the electricity network in the country by expanding the energy transmission network and developing hydropower generation. Devex analysis As Nepal continues its political and economic transformation, efficiently managing development aid is crucial in ensuring the country’s steady progress. But one of the criticisms leveled at ADB-financed projects in 2010-2012 was low performance. In 2013, 20 percent of the projects were considered to be “at risk.” Among the contributing factors were poor project management, slow procurement process and low readiness filters of projects in the approval stage. This underperformance could result in lower than expected ADF allocations for 2015-2016. According to the ADB Nepal Portfolio Performance Review 2013, even if the performance rating of other ADF countries remains unchanged, Nepal could only expect to receive about 80 percent of the maximum allocation for 2015-2016. To address this problem, ADB and the government of Nepal have agreed to improve project management. Project readiness filters were put in place for new projects and there is a commitment for a thorough monitoring process. ADB and other development partners also plan to jointly work on Nepal’s portfolio performance review, which will bring together lessons learned and harmonize project management approaches. Contact: Nepal Resident Mission Metro Park Building, Lazimpat, Ward No. 2 P.O. Box 5017, Kathmandu, Nepal Tel: (977-1) 400-5120 Fax: (977-1) 400-5137 Email: adbnrm@adb.org Join the Devex community and access more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.