technical assistance consultant’s report · 1.3 structure of the draft final report 9 the final...

Technical Assistance Consultant’s Report

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.

Project Number: 36188 November 2008

NEPAL: Preparing the Secondary Towns Integrated Urban Environmental Improvement Project (Financed by the: Japan Special Fund and the Netherlands Trust Fund for the Water Financing Partnership Facility)

Prepared by:

Padeco Co. Ltd. in association with Metcon Consultants, Nepal

Tokyo, Japan

For Department of Urban Development and Building Construction

TA 7182-NEP PREPARING THE SECONDARY TOWNS INTEGRATED

URBAN ENVIRONMENTAL IMPROVEMENT PROJECT

Volume 1: MAIN REPORT

in association with

KNOWLEDGE SUMMARY

1 The Government and the Asian Development Bank agreed to prepare the Secondary Towns Integrated Urban Environmental Improvement Project (STIUEIP). They agreed that STIUEIP should support the goal of improved quality of life and higher economic growth in secondary towns of Nepal. The outcome of the project preparation work is a report in 19 volumes. 2 This first volume explains the rationale for the project and the selection of three towns for the project. The rationale for STIUEIP is the rapid growth of towns outside the Kathmandu valley, the service deficiencies in these towns, the deteriorating environment in them, especially the larger urban ones, the importance of urban centers to promote development in the regions of Nepal, and the Government’s commitments to devolution and inclusive development. 3 STIUEIP will support the objectives of the National Urban Policy: to develop regional economic centres, to create clean, safe and developed urban environments, and to improve urban management capacity. All three STIUEIP municipalities (Biratnagar, Birgunj and Butwal) are regional economic centres. STIUEIP will also ensure that Biratnagar and Birgunj achieve the relevant Millennium Development Goals; the STIUEIP investment will be smaller in Butwal, and further MDG initiatives will be necessary there. 4 The World Health Organisation estimates that 24 per cent of the burden of disease in Nepal is attributable to environmental conditions. One of the strategies that the National Urban Policy enunciates is to therefore to develop healthy cities. The design of STIUEIP aims to improve environmental conditions to the extent that there are significant, measurable reductions in the burden of disease in the three municipalities. The project components include Drainage and Sanitation (Biratnagar and Birgunj), Solid Waste Management (Birgunj and Butwal), Roads and Lanes (Biratnagar and Birgunj) and a component to improve environmental infrastructure in an industrial area (Butwal). 5 The Drainage and Sanitation component is the largest. There will be waste wastewater collection and treatment systems to serve most of the population, with 60.5 km of separate sewer (Biratnagar) and 44.3 km of combined drainage (Birgunj). Local inundations during the monsoon will quickly drain away. The component includes the improved and additional communal water supply taps to ensure that everyone has access to a safe water supply. The component will achieve the objective of total sanitation through community mobilization, provision of toilets in schools, homes, and other locations. 6 The solid waste management component will enable Butwal and Birgunj to collect all the municipal waste and transport it to a municipal waste management centre. The centre will compost as much of the organic waste as possible and distribute it to farmers. Awareness programs will support the segregation of waste and its disposal in appropriate communal bins. 7 The Roads and Lanes component will improve those roads and lanes that the drainage construction activities affect, consistent with the principle of integrating construction work. The municipalities will ensure that lane improvements focus on poor neighbourhoods.

TA 7182-NEP PREPARING THE SECONDARY TOWNS INTEGRATED URBAN ENVIRONMENTAL IMPROVEMENT PROJECT

FINAL REPORT

Volume 1: PROJECT RATIONALE June 2010

Prepared for the Asian Development Bank and the Government of Nepal

in association with

Tsunashima No. 2 Building 3-20-12 Yushima Bunkyo-ku Tokyo 113-0034 Japan

METCON Consultants P.O. Box 4412 43 / 15 Dandibaba Marg, Tangal, Kathmadu-2, Nepal

Tel: +81-3-5812-1091 Fax: +81-3-5812-1092 Email: [email protected]

Tel: +977-1-441-2902 Fax: +977-1- 441-8478 Email: [email protected]

mailto:[email protected]

TA 7182-NEP - i - Final Report, Vol. 1

Acronyms

ADB Asian Development Bank BOT Build Operate Transfer CBO Community Based Organizations CBS Central Bureau of Statistics DUDBC Department of Urban Development and Building Construction DWSS Department of Water Supply and Sewerage EIA Environmental Impact Assessment FMAQ Financial Management Assessment Questionnaire GDP Gross Domestic Product GESI Gender and social inclusion GIS Geographic Information System GoN Government of Nepal IAP Integrated Action Programme IDPs Internally Displaced Persons IEE Initial Environmental Examination IPT Integrated Property Tax JV Joint Venture KMC Kathmandu Municipal Council KUKL Kathmandu Valley Upatyaka Khanepani Limited LGCDP Local Governance and Community Development Programme LSGA Local Self Governance Act MLD Ministry of Local Development MPPW Ministry of Physical Planning and Works MuAN Municipal Association of Nepal NGO Non-Governmental Organization NLSS Nepal Living Standards Survey NUWSSSP National Urban Water Supply and Sanitation Sector Policy (2009) NWSC Nepal Water Supply Corporation O&M Operation and Maintenance PPP Public-Private Partnership PPPN Public Private Partnership for Urban Development, Nepal PPTA Project Preparatory Technical Assistance (ADB) SEZ Special Economic Zones SWM Solid Waste Management SWOT Strengths Weaknesses Opportunities and Threats TDF Town Development Fund TOR Terms of Reference TYIP Three Years Interim Plan (National Planning Commission) UEIP Urban Environmental Improvement Project

TA 7182-NEP - ii - Final Report, Vol. 1

UNDP United Nations Development Programme US United States VDC Village Development Committee WSUC Water and Sanitation Users’ Committee

TA 7182-NEP - iii - Final Report, Vol. 1

Contents

1 Introduction ................................................................................................................. 1

1.1 Executing agency .............................................................................................................. 1

1.2 Progress of the work ......................................................................................................... 1

1.3 Structure of the Draft Final Report ................................................................................... 2

1.4 Structure of this volume .................................................................................................... 3

2 Economic and social background ................................................................................ 4

2.1 Lagging economic growth ................................................................................................ 4

2.2 Rapid growth of urban centers .......................................................................................... 4

2.3 Need for services .............................................................................................................. 5

2.4 Environmental conditions ................................................................................................. 6

2.5 Need for regional economic centers ................................................................................. 7

2.6 Lack of social inclusion .................................................................................................... 8

3 Government policy and initiatives .............................................................................. 9

3.1 Development of the policy and legal framework.............................................................. 9

3.2 External assistance to the urban sector ........................................................................... 14

3.3 Lessons from other projects ............................................................................................ 17

3.4 Requirements for selection of project components......................................................... 18

4 The proposed project ................................................................................................. 19

4.1 Objectives ....................................................................................................................... 19

4.2 Project municipalities ..................................................................................................... 19

4.3 Investment priorities ....................................................................................................... 21

4.4 Regional cooperation (trans-boundary) issues ................................................................ 23

4.5 Components and outputs ................................................................................................. 24

4.6 Cost Estimates ................................................................................................................ 29

4.7 Financing plan and cost recovery ................................................................................... 31

4.8 Related projects .............................................................................................................. 32

TA 7182-NEP - iv - Final Report, Vol. 1

4.9 Implementation arrangements......................................................................................... 37

5 Project benefits, assumptions and risks .................................................................... 42

5.1 Expected benefits and outcomes ..................................................................................... 42

5.2 Environmental safeguards .............................................................................................. 43

5.3 Social safeguards ............................................................................................................ 43

5.4 Assumptions and risks .................................................................................................... 43

Appendices A. External assistance to Nepal

B. Completed ADB projects in Nepal

C. Review of the Urban Environmental Improvement Project

D. NLSS statistics

E. Summary Poverty Reduction and Social Strategy

F. Selection of towns

G. Urban plans and periodic plans

H. Population Projection

I. Decentralization of water supply

J. Design and Monitoring Framework

K. Security incidents

L. Maps

M. Proposed contract packaging

N. Comparison with UEIP

O. Letters from Biratnagar and Butwal municipalities

TA 7182-NEP - 1 - Final Report, Vol. 1

1 Introduction

1 This is Volume 1 of the Final Report for a Project Preparatory Technical Assistance (PPTA) of the Asian Development Bank (ADB) to the Government of Nepal (GoN) for the Secondary Towns Integrated Urban Environmental Improvement Project (hereafter ―the project‖ or ―STIUEIP‖). It provides an overview of the project and explains the rationale for the project.

1.1 Executing agency

2 The Ministry of Physical Planning and Works (MPPW) is the executing agency for the PPTA, acting through the Department of Urban Development and Building Construction (DUDBC).

3 In August 2009, the MPPW established a Steering Committee for the PPTA. The members of the Steering Committee were initially as follows:1

1. Secretary, MPPW

2. Directory General, DUDBC

3. Deputy Director General, DUDBC

4. Representative, Nepal Water Supply Corporation (NWSC)

5. Representative, Ministry of Finance (MoF)

6. Representative, Ministry of Local Development (MoLD)

7. Representative, National Planning Commission (NPC)

8. Chairman, Municipal Association of Nepal (MuAN)

9. Coordinator, PPTA 4 At later dates, the Joint Secretaries of MPPW, the Chief Executive of the Town Development Fund (TDF) and the Executive Officers of Biratnagar, Birgunj and Butwal joined the Steering Committee.

5 On 20 September 2009, MPPW established a technical committee for the PPTA with officer level members representing the Steering Committee agencies.

1.2 Progress of the work

6 Prior to commencement of the PPTA, The ADB and the GoN agreed that the proposed project should support the goal of improved quality of life and higher economic growth in the Prior to commencement of the PPTA, The ADB and the GoN agreed that the proposed project should support the goal of improved quality of life and higher economic growth in the secondary towns of Nepal. The expected outputs were to include (i) a feasibility study for integrated urban environmental improvement and supplementary urban facilities; and (ii) formulation of appropriate institutional and implementation framework. The PPTA was to select secondary towns with high economic growth potential and urgent needs for investment of urban infrastructure and services. The investment package was to cover provision of infrastructure for urban environmental improvement mainly for household services such as water supply,

1 Minutes of the Steering Committee, 9 August 2009.


sanitation, drainage and solid waste management, and supplementary urban facilities such as urban road, bus terminals, city parks and markets. The PPTA was also to assess the roles and capacities of central ministries/departments and local bodies and recommend appropriate institutional and financial arrangements including capacity-building programs.

7 The PPTA commenced on 1 May 2009. The initial work assessed conditions in the 53 municipalities outside the Kathmandu valley, and ranked the municipalities in terms of suitability for the proposed project. On 17 August 2009, the Steering Committee considered the PPTA Interim Report and approved the selection of the municipalities of Biratnagar, Birgunj, and Butwal for the project. 2 In each of these towns, the PPTA work included municipality-wide surveys, numerous meetings with stakeholders, and extensive analyses of the engineering, institutional, social, financial, economic and environmental aspects of the proposed project. In Kathmandu, there were consultations with all relevant departments and agencies, as well with national NGOs active in the urban sector.

8 Bandhs and strikes in Kathmandu and the project towns adversely affected the progress of the work and the quality of the work.3 From mid-August to late October there was no Executive Officer in Birgunj, and this restricted the consultation work in that municipality. The original schedule provided for the Draft Final Report to be submitted on 16 October, 2009. In early October, the GoN and ADB agreed on a submission date of 30 October. However, the sudden illness of one of the international team members from 17 October meant that this date could not be achieved.

1.3 Structure of the Draft Final Report

9 The Final Report comprises nineteen volumes as follows:

1. Project Rationale

2. Drainage and Sanitation

3. Solid Waste Management

4. Roads and Lanes

5. Public-Private Partnerships

6. Poverty Reduction and Social Strategy

7. Major Environmental Issues

8. Economic Analysis

9. Institutional Analysis

10. Butwal Water Supply

11. Biratnagar Survey Data

2 The Interim Report was submitted on 26 July 2009; a revised Interim Report was submitted on 26 August 2009. 3 Bandh (meaning 'closed') is a frequent form of political protest in South Asia. A political party declares a general strike, usually for a day. It calls on people to stay at home. Shopkeepers are expected to keep their shops closed and buses and cabs are supposed to stay off the road and not carry passengers. All this is supposedly voluntary. However, on 2 June and 15 June 2009, tyre-burning, stick wielding groups of Maoists enforced the shutting of shops and assaulted cyclists; traffic dared not venture out and the city came to a standstill. The United Nations Office of the Resident Coordinator in Nepal strongly condemned the use of force to enforce the bandh. Bandhs are widely criticized because of the disruption of everyday life, the violence and the cost to the economy. In 1998, the Supreme Court of India upheld a 1997 High Court decision against bandhs in 1998, but political parties still organize them; the Supreme Court of Nepal has not similarly acted.


12. Birgunj Survey Data

13. Butwal Survey Data

14. Financial Assessments

15. Biratnagar Social Safeguards

16. Birgunj Social Safeguards

17. Biratnagar Initial Environmental Assessment

18. Birgunj Initial Environmental Assessment

19. Butwal Initial Environmental Assessment

1.4 Structure of this volume

10 Chapter 2 gives the economic and social background to the project. It explains the importance of developing regional economic centers outside the Kathmandu valley. The country’s urban population is growing rapidly from a low base, and the Kathmandu valley cannot absorb much more of the growth. Towns outside the Kathmandu valley lack adequate water supply, drainage, sanitation, solid waste management and urban roads. In the case of each service, the coverage of the urban population is only about half that of Kathmandu valley municipalities. Moreover, even to the extent there is coverage, the quality of service is poor.

11 Chapter 3 reviews GoN policies and initiatives, and summarizes external assistance in the urban sector. The main gaps in the regulatory and policy framework are in relation to health care waste, urban roads, and squatters. The key priorities of the TYIP are employment-oriented, market-led, broad-based economic growth, inclusive social development, targeted programs, sustainable peace building, poverty reduction and regional integration. Based on the Government's priorities, the ADB's Country Partnership Strategy: Nepal 2010–2012 has four pillars: (i) inclusive and broad-based economic growth; (ii) inclusive social development; (iii) governance and capacity building; and (iv) climate change and environment sustainability. In each of these four pillars, the ADB proposes to focus on one or more aspects of urban environmental improvement: urban infrastructure development, promotion of private sector development and participation (including public-private partnershipsPPPs), access to basic services (water, sanitation, etc), strengthening local governance, mainstreaming social and environment safeguards in the government system, and clean urban development. The chapter also reviews lessons from past projects.

12 Chapter 4 describes the proposed components of the project and the intended outputs. It explains the selection of Biratnagar, Birgunj and Butwal for the project, and the selection of four components for the project: Drainage and Sanitation, Solid Waste Management, Roads and Lanes, and Public-Private Partnerships. It gives a summary of the financial aspects of the project: the cost estimates, the financing plan, and cost recovery proposals. Several related projects are underway, and the chapter explains the relationships of these to the proposed project. Finally, the proposed implementation arrangements are explained.

13 Chapter 5 deals with the benefits and risks of the project. There will be significant health and amenity benefits. There will be improvements in local access. There will be greater participation of women and socially vulnerable groups in economic activities. The chapter explains the social and environmental safeguards. The proposed project faces many serious risks, and the GoN and the ADB will have to take steps to mitigate these risks.


2 Economic and social background

14 The rationale for STIUEIP is the rapid population growth of towns outside the Kathmandu valley, the service deficiencies in these towns, the deteriorating environment in them, especially the larger urban ones, the importance of urban centers to promote development in the regions of Nepal, and the Government’s commitments to devolution and inclusive development.

2.1 Lagging economic growth

15 The economic development of towns outside the Kathmandu Valley has been slower than the growth in their populations. Incomes are much lower, wage employment is less, manufacturing activity has grown slowly or not at all and is absent from many towns (see Figure 1, Appendix F). The number of bank branches per 100,000 people is much lower. Although unemployment is lower than in the Kathmandu valley, this is only because a much higher proportion of the labor force works in agriculture, and there is a much higher incidence of under-employment. Under-employment has increased substantially in recent years and there is some urgency about alleviating it.4

2.2 Rapid growth of urban centers

16 The urban population is growing rapidly. However, the annual rate of increase is gradually slowing. The projections of GoN indicate that by 2021 the urban population will be more than twice as large as it is now (Table 1). Table 1 Population projections

Item 2001 2006 2011 2016 2021

Total population (million) 23.15 25.89 28.58 31.32 34.17 Annual rate of increase, % 2.26 2.20 1.85 1.76 Urban population (million) 3.23 4.32 5.60 7.16 9.05 As per cent of total 14.0 16.8 19.9 23.7 28.2 Annual rate of increase, % 5.9 5.3 5.0 4.8 Kathmandu Valley population 1.65 1.91 2.18 2.45 2.72 As per cent of total 7.1 7.4 7.7 8.1 8.5 Annual rate of increase 3.1 2.7 2.3 2.1

Source: Central Bureau of Statistics, 2003, Population Projections for Nepal 2001 – 2021.

17 The urban population (2009) in Nepal is only about 18 per cent of the total population, a very low proportion in comparison with other Asian countries. In fact, the rate of growth of the urban population has exceeded that of the urban economy (as measured by the growth of non-agricultural gross domestic product). The projections of the Central Bureau of Statistics (CBS) have the expansion of the urban population growing fastest outside the Kathmandu Valley, the country’s dominant urban agglomeration.

4 International Labour Organization, 2008, Decent Work Country Programme for Nepal, 2008-2010.


18 Civil unrest has accelerated the growth of urban populations.5 However, hopefully this is a short-term effect and the GoN projections remain reasonable. The terai accounts for two thirds of the urban population and industry outside the Kathmandu Valley.6 The population of the terai is growing faster than that of the rest of the country. The terai has the advantages of flat terrain, easily obtainable water, and proximity to the transport networks and cities of India.

2.3 Need for services

2.3.1 Incomes and standard of housing

19 The standard of housing is very poor in the towns outside the Kathmandu valley. Some 43 per cent of houses have earth floors, compared to only 27 per cent in the Kathmandu valley, and 12.6 per cent have roofs of straw or thatch (for further statistics see Appendix D). Some 35 per cent of the population is in the three lowest per capita income quintiles, compared to only 5 per cent in the Kathmandu valley towns. Poor housing and low incomes translate into low effective demand for services.

2.3.2 Levels of service

20 There is an urgent need to expand the infrastructure systems of the secondary urban centres. The most recent living standards survey (2003/2004) showed that in urban areas outside the Kathmandu Valley only 39.3 per cent of households have access to piped water supply, only 30.4 per cent of households have access to sanitary facilities and only 24.1 per cent have access to garbage collection and disposal services. Other data shows that only 15.0 per cent of roads in towns outside the Kathmandu Valley are sealed compared with 60 per cent of roads in Kathmandu Valley towns. In recent years, the expansion of infrastructure networks, especially the road and drainage networks, has failed to keep pace with the growth of the urban population. As a consequence, most of the expansion is in the form of ribbon development beyond municipal limits.7

2.3.3 Quality of services

21 Even where there is coverage, the quality of services is poor. Analysis of 87 samples of water supply in Biratnagar, Birgunj and Butwal showed that a high percentage were unfit to drink 5 David Irwin, Leonard van Duijn and Alastair Seaman, 2003, Nepal IDP Research Initiative Findings: An initiative of concerned agencies in Nepal. GTZ, INF, SNV, UNDP/RUPP.

6 The terai is the southernmost of the three major ecological zones of Nepal, the other two being the hill and mountain zones. Terai (literally "moist land" or "foothill", originally from Persian), comprising marshy grasslands, savannas, and forests at the base of the Himalayas in India, Nepal, and Bhutan. Above the terai lies the hill zone, a forested belt of rock, gravel, and soil eroded from the Himalayas, where the water table lies from 5 m to 37 m deep. The terai is composed of alternate layers of clay and sand, with a high water table that creates many springs and wetlands. Monsoon rains and swollen rivers descending from the Himalayas inundate large areas every year. Much of the terai is now farmland. 7 Ribbon development means constructing buildings along the roads radiating from a town. From the 1920s, ribbon development caused concern in car-owning countries. With increasing use of motor vehicles, houses along main roads were saleable even when remote from shops and other services. Ribbon development allowed developers to save money and land for constructing roads. It was attractive to industry because the road frontage gave exposure and good access. Town planners normally consider ribbon development to lead to inefficient use of resources and urban sprawl. One aim of the United Kingdom's post-war planning system (which influenced policies in other countries) was to halt ribbon development. Ribbon developments are often difficult to service efficiently. Traffic congestion increases while ever more people join the ribbon further along the road; turning movements from numerous access points impede the free flow of traffic. An added twist in Nepal is that, in contrast to the United Kingdom, roads are a recent phenomenon; their construction has brought windfall wealth to a tiny minority of land owners. Moreover, the lack of roads contributes to high urban land prices because there is so little land with reasonable road access.


from the presence of fecal coliform (Table 2).

Table 2 Samples of water quality, 2009

Sample source Biratnagar Birgunj Butwal

No. of samples

High risk

Medium/ low risk No. of

samples

High risk

Medium/ low risk No. of

samples

High risk

Medium/ low risk

(%) (%) (%) (%) (%) (%)

Private tap 8 25 63 10 30 30 7 - 57

Tubewell 30 10 20 20 15 30 4 - -

Community system 4 75 - - - - 4 25 50

All systems 42 20 26 30 20 30 12 8 50

Note: Risk category as per total coliform counts. There are no risk assessment studies for Nepal to support these categories, and the risk categorisation corresponds to the WHO Guidelines for Drinking Water Quality (1999) which give similar categories as a typical example. Risk parameters other than coliform counts (cleanliness, broken concrete, drainage, number of users etc) may influence action priorities for action with respect to the various water sources. Source: Surveys by Environmental Service (NESS) (P) Ltd for PADECO.

22 These summary results show that apart from water from tube-well supply in Butwal, the health of the municipal populations is at considerable risk from all water sources.

2.4 Environmental conditions

23 With rapid urban and industrial development, environmental conditions are becoming very poor in the larger urban centers.8

2.4.1 Environmental health

24 Poor quality of drinking water, low coverage of sanitary facilities, and heavy use of biomass (primarily wood) in kitchens is increasing the burden of disease on Nepal’s urban population.9 The worst features of urban environments are the air pollution (especially in the larger terai towns), the slums, the squatter settlements, the uncollected solid waste, the waste dumped in drains and watercourses, pollution of water courses from industrial effluent and untreated municipal wastewater, and water-logging from inadequate drainage. These environmental risk factors have resulted in premature death, disease and disability, especially among the poor and vulnerable groups, increased health costs, and other economic burdens. In 2007, environmental health costs have been estimated at $51.2m annually, or 0.7 per cent of GDP.10

2.4.2 Industrial pollution

25 Industrial pollution is of increasing concern in all districts having significant industrial activity. The GoN projects industrial output to grow at an average 8.7 per cent annual rate of growth.11 All of this growth will be outside the Kathmandu valley, where industrial output is in decline. Nepal has nine industrial estates, three of which have vacant plots. However the estates 8 Volume 7 contains additional information. UNIDO’s Industrial Development Perspective Plan: Vision 2020, prepared for the Ministry of Industry, Commerce and Supplies in 2002, advocated a goal of 10 per cent growth annually. The TYIP set a 6.3 per cent growth target. 9 World Bank, 2007, Nepal Country Environmental Analysis 10 World Bank, op. cit. 11 See Appendix F.


are small and only account for a fraction of industrial output. Industry has concentrated in particular districts but not at particular locations. A poor industrial relations climate discourages proximity as it facilitates the spread of industrial disputes. 12 Most industries have either not adopted adequate pollution control measures or are not operating their facilities properly. The level of awareness about industrial pollution issues is low among industries, regulators, local governments, and the general public; there is a lack of clear mandates and of resources for monitoring and enforcement. Since industrial output is in decline in the Kathmandu valley, and is mostly located outside municipal boundaries, the central government seems hardly aware of the scale of the problem.

26 Shallow groundwater, rivers and streams are vulnerable to contamination and can carry this contamination to locations far from its source. Municipal populations are exposed to hazards that they cannot control.

2.4.3 Climate change

27 Climate change is a threat to Nepal’s urban centers, especially the towns in the terai. During summer, the whole country is likely to experience precipitation 15 to 20 per cent above current averages (Volume 7). Changes in the hydrological regimes are also possible, such that peak river flows could increase even more than the increase in precipitation. Together with the increase in temperature, there could be a greater risk of malaria, kalaazar and Japanese encephalitis in the terai. These risks add to the urgency of improving urban environments in the terai towns.

2.5 Need for regional economic centers

28 Urban development is concentrated in the Kathmandu valley. In the rest of the country, large urban centers have not yet developed because of the low level of urbanization overall, the shortcomings in transport infrastructure, and the lack of good links to the major ports and urban centers of India. As a consequence, much of the rural population has poor access to urban services.

29 There are other reasons why there is a need to develop regional economic centers in Nepal. The physical limitations on further development in the Kathmandu valley mean that it is inevitable that new urban centers will emerge. Road networks, accessibility, and suitability for industry are likely to determine their location.

30 Then there is the political imperative. The Interim Constitution of Nepal (2007) provides for a democratic federal system of government:

To bring an end to discrimination based on class, caste, language, gender, culture, religion and region by eliminating the centralized and unitary form of the State, the State shall be made inclusive and restructured into a progressive, Democratic Federal System.

31 A federal system implies a need for regional centers. One of the policies of the National Urban Policy (2007) is:

To develop regional economic centres with large industrial and trade activities, fulfilling the regional need and promoting export in every development region by twenty-year planning period matching with long-term vision of periodic plan of that region.

32 The National Urban Policy identifies Biratnagar (Eastern Region), Birgunj (Central Region), Butwal (Western Region), Nepalgunj (Mid-western region) and Dhangadi (Far Western Region) as possible regional economic centres in addition to the existing centers of Pokhara and Kathmandu Valley. 12 UNIDO, 2002, Industrial Development Perspective Plan: Vision 2020. Prepared for the Ministry of Industry, Commerce and Supplies.


33 Data on manufacturing and trade provide evidence of the practicality of this strategy (Appendix F). Manufacturing activity has been declining in Kathmandu but increasing in Butwal and Dhanghadi. Biratnagar and Nepalgunj are already significant manufacturing centres. 13 Almost all Nepal’s international (ie excluding India) trade is through Birgunj and Biratnagar. GoN plans to establish a Special Economic Zone or an Export Processing Zone near each of the three towns.14

2.6 Lack of social inclusion

34 Although the incidence of poverty in Nepal has declined markedly, inequalities have increased.15 The Gini-coefficient for Nepal is the highest in South Asia, and according to official estimates it has been increasing.16 A major reason for inequalities in Nepal is social exclusion. Institutions and processes uphold or exacerbate income- and capacity-poverty on the basis of gender, ethnicity, and caste. Gender-based exclusion is pervasive and deep-rooted, with discrimination against women limiting their physical survival, health and educational opportunities, ownership of assets, mobility, and overall status. Inequalities are greater in urban areas than in rural areas.17 The Gini-coefficient for urban areas is 43.1, much higher than the rural figure of 35.3. Most urban poverty is found outside the Kathmandu Valley. Most urban squatter settlements are found outside the Kathmandu Valley.18

13 Most of the industry is located outside the municipal boundaries. 14 Site works have commenced but the Special Economic Zone Bill has yet to come before the Parliament. 15 This section relies mainly on ADB, DFID, and ILO, 2009, Nepal: Critical Development Constraints (Draft). 16 A low Gini coefficient indicates a more equal distribution, with 0 corresponding to perfect equality, while higher Gini coefficients indicate more unequal distribution, with 1 corresponding to perfect inequality. When used as a measure of income inequality, the most unequal society will be one in which a single person receives 100 per cent of the total income and the remaining people receive none (G=1); and the most equal society will be one in which every person receives the same percentage of the total income (G=0). Worldwide, Gini coefficients for income range from approximately 0.230 in Sweden to 0.707 in Namibia. 17 Binod Manandhar, 2009, Relationship between Real Internal-Migration and Poverty in CBS Statistical Bulletin, 2009. 18 A common misconception in Nepal is that most squatters live in the Kathmandu Valley. It is not so. A recent study (Masako Tanaka, 2009, From confrontation to collaboration: a decade in the work of the squatters’ movement in Nepal, Environment & Urbanisation Vol 21 (1): 143-159) put the number of squatters in the Kathmandu Valley as low as 13,243 (in 2008). One reason for the low number in the Kathmandu Valley is that government is more active in evicting squatters.


3 Government policy and initiatives

3.1 Development of the policy and legal framework

35 Development of the legal and administrative framework for the urban sector dates only from Nepal’s Seventh Five-Year Plan (1987-1992). That period saw the creation of the Ministry of Housing and Physical Planning (now the Ministry of Physical Planning and Works (MPPW), the Nepal Water Supply Corporation (NWSC), the Urban Development Training Centre, and town development committees. Subsequent developments have been progressively less significant. During the Eighth Five-Year Plan (1992-1997), the Town Development Fund (TDF) was established.19 During the Ninth Five-Year Plan (1997-2002), the Local Self-Governance Act was passed. With the important exception of water supply, the Tenth Five Year Plan (2002-2007) and Three Years Interim Plan (TYIP, 2007-2010) periods have seen no significant legislation in the urban sector.20

3.1.1 National policy framework

36 The key priorities of the TYIP are employment-oriented, market-led, broad-based economic growth, inclusive social development, and targeted programs, and sustainable peace building.

Monetary policy

37 Nepal has an independent central bank, the Nepal Rastra Bank, which formulates and implements monetary policy. Under the Nepal Rastra Bank Act (2001) the principal objectives of monetary policy are (a) price stability, and (b) maintaining necessary surplus in the balance of payments. To fulfill these objectives, the open market operations have been made effective as a monetary measure. Using a fixed exchange rate of 1.6 with the Indian Rupee as a monetary anchor, the monetary policy is operating guided by money supply. In the past, economic growth was unsatisfactory, yet the financial sector expanded rapidly. As a result of the remittance inflow and the low flow of credit to the private sector, the liquidity in the financial system remained high and kept the interest rate on deposits low. Non-performing loans, though declining, are still high in the banking sector. This is also the situation with the Government-owned financial agencies and with some of the private sector financial institutions. In such a situation, a financial reform program is in operation with the objective of strengthening and enhancing the capacity of the financial sector.

Fiscal policy

38 Fiscal policy has been prudent in recent years, but risks are rising. Although the Nepal Rastra Bank remains committed to containing domestic borrowing to about two per cent of GDP in line with previous IMF staff recommendations, the 2009/10 budget envisages revenue growth of 24 per cent compared to the 2008/09 outturn, which will be difficult to achieve under current fiscal policies. Moreover, current outlays are budgeted to increase by 32 per cent from the 2008/09 outturn and new expenditure pressures are emerging. The deficit is thus likely to exceed

19 The purpose of the TDF is the alleviation of economic and social poverty in urban sectors through long term financing in social infrastructure and revenue generating projects. The TDF receives funding from donors, principally KfW and ADB, which it then lends to support projects in municipalities and towns. Volume 8 elaborates the role, past performance, and financial capacity of the TDF, and section 4.8.1 of this volume gives details of the status of TDF projects in the proposed project towns. 20 The Nepal Road Board Act was passed in July 2002.


the budget by a considerable amount and, over time, such fiscal slippage could undermine macroeconomic stability. The TYIP does not pay much attention to fiscal policy (in comparison with policies on Government expenditure) but it does mention broadening the tax base. It notes that direct tax is comparatively unimportant in the tax structure, but proposes no action. It proposes fiscal devolution to local bodies but gives no details.

Urban sector policies

39 The TYIP identified the following weaknesses in the GoN’s policies for the urban sector:

1. Lack of policy on urban development, and a lack of development in urban infrastructure to keep pace with the growing population caused by migration.

2. Lack of coordination between physical development plans and infrastructure investment, as municipalities find revenue generating projects more attractive than constructing basic facilities.

3. Lack of high-level authorized agency for the management and coordination of the development of Kathmandu Valley.

4. Ineffective mobilization of TDF in the development of urban infrastructure.

5. Lack of appropriate legal structures to attract private investment in land development and housing construction.

6. Competition between Town Development Committees (operating under the Town Development Act), and municipalities (operating under the Local Self-Governance Act). Town Development Committees do not limit their role to policymaking, but also seek a role in implementation.

40 It will be difficult to quickly overcome these weaknesses. The TYIP highlights the following challenges:

1. To manage uncontrolled and disorganized urban habitat through integrated development of scattered rural settlements.

2. To manage adequate supply of requisite human resources and infrastructures.

3. To maintain coordination between the MPPW and the Ministry of Local Development (MLD), in the context of urban development.

4. To provide freed Kamaiyas, Dalits, Adibasi Janjatis, and low-income families with access to decent housing.

41 The MPPW has strong technical capabilities in housing, urban planning and development (DUDBC), water supply and sanitation (DWSS). The TDF and the Roads Board Nepal are under its supervision. The DUDBC is also responsible for the national building code, was the executing agency for the Kathmandu Urban Development Project and is the executing agency for the Urban and Environmental Improvement Project, both being ADB loan projects.

42 The MLD and agencies under its supervision have technical resources in solid waste management (Solid Waste Management and Resource Mobilization Center, SWMRMC), municipal administration, municipal finance, community development, and environmental management. A new Local Infrastructure Development Policy was approved in late 2004 and published by MLD. The policy aims to increase the participation of local people in infrastructure development and thereby enhance social services, economic opportunities and mobilization of local resources. The policy is based on the following principles:

Devolution of infrastructure development to local government;

Institutional strengthening and capacity building of local government;


People’s participation in local infrastructure planning;

Mobilization of local resources and skills for infrastructure development;

Coordination of government and donor agencies in local infrastructure development.

43 The design of STIUEIP derives from these principles.

Inclusive development

44 The TYIP was the first Government periodic plan to fully reflect the Millennium Development Goals and Nepal’s other international commitments relating to social inclusion and gender equality.

3.1.2 Municipal government

45 The proposed project would be implemented within the structures for which the Local Self Governance Act (LGSA, 1999) and the Interim Constitution of Nepal provide.

Local Self-Governance Act

46 The LGSA provides the legal basis for devolving responsibilities for social, economic, institutional, and physical infrastructure to local government. The LSGA gives a high priority to the uplift of socially marginalized groups, the adoption of rights based, and participatory approaches to project work, maximum use of local resources and protection of the environment. It guarantees women and vulnerable groups a level of representation in municipal government. Regulations under the LSGA specify the procedures for municipalities to prepare a ―periodic plan‖ to guide local development (Appendix G).

47 The LGSA clearly establishes municipalities as autonomous from the central government. However, because of the Government’s international obligations, the Act also allows the Government to give directions to municipalities in certain circumstances. Under the LSGA, the Government may review whether a local body has accorded the necessary priority to backward communities, women and children, and whether such matters as the ecological balance have been encouraged and the Government may give appropriate directions.

Interim Constitution

48 Since 2002, there have been no elected local councils. Clause 139 of The Interim Constitution of Nepal (2007) provides as follows:

Interim local bodies shall be constituted at the District, Municipality and Village levels by consensus among all consenting parties to the agreement reached on the 22nd day of Kartik 2063 BS (November 7, 2006) between Nepali Congress, Communist Party of Nepal (UML), Nepali Congress (Democratic), Jana Morcha Nepal, Nepal Sadhbhavana Party (Anandidevi), Nepal Majdur Kishan Party and United Left Front along with Communist Party of Nepal (Maoist).

49 In July 2008, the Fifth Amendment to the Interim Constitution of Nepal, 2006 replaced this clause with the following:

Preamble: Until local elections are able to be held, the Government of Nepal shall formulate an interim body at the district, municipality and village levels, with the participation and consensus of those political parties active at the local level.”

Explanation: In this Sub-article, “political parties active at the local level” shall refer to those parties represented in the Constituent Assembly, and to those parties that filed for candidacy in the relevant districts under the first-past-the-post system.”

50 The MLD deputes civil service personnel (engineers, planners, accountants) to municipalities, and appoints the Secretary (Executive Officer). The LSGA gives the secretary wide ranging powers to administer the municipality.


51 Civil servants are vertically accountable to the central government for their performance career opportunities and benefits. They follow the instruction and guidelines issued from their respective line commands.

52 In the absence of an elected mayor, MLD appoints an Executive Officer instead of a Secretary. Quite apart from the loss of independence that this state of affairs brings to municipal management, there are adverse consequences for the representation of women and vulnerable groups. Under the LSGA, women and vulnerable groups enjoy a guarantee of representation on the municipal council; in the absence of elections, there is no arrangement to guarantee of representation. However, clause 21 of The Interim Constitution of Nepal states:

53 Women, Dalits, indigenous ethnic groups, Madhesi communities, oppressed group, the poor farmers and labourers, who are economically, socially or educationally backward, shall have the right to participate in state structures on the basis of principles of proportional inclusion.

54 Another adverse consequence of the absence of elected councils concerns municipal finances. Executive Officers are reluctant to increase taxes and charges when they have no demonstrable political support for such action. The TDF adopts a cautious approach to lending to municipalities because there is always the risk that future elected bodies might repudiate loans taken out by unelected bodies.

Mandatory functions of municipalities

55 The LGSA specifies a range of mandatory functions for municipalities, broader and more onerous than in most countries. Unfortunately, municipalities have much more interest in the optional functions listed in the Act (see Appendix O).

Town planning

56 Municipalities are responsible for preparing land-use zoning maps, plans for water supply and drainage. They are to provide parks, recreation areas, community facilities and public toilets. They are responsible for building control (building permits

Water supply and sanitation

57 The National Water Plan (2005) set a target of total population coverage of basic level drinking water supply and sanitation services by 2017.21 The National Urban Water Supply and Sanitation Sector Policy (2009) sets out the principles that should guide the formulation of projects and programs to achieve these targets. The Government emphasizes local responsibility in line with its decentralization policy; relevant legislation to that end includes The Water Supply Management Board Act (2006) and the Water Supply Tariff Fixation Commission Act (2006).22 Other principles include (i) demand driven approach, (ii) importance of institutional development, (iii) user involvement, (iv) integration of water supply and sewerage; (v) cost recovery of 50 per cent of capital investments (as a transitional arrangement toward full cost recovery), and 100 per cent of operations and maintenance, and (vi) establishing an independent regulatory body.

58 The regulatory framework has developed incrementally with separate regulations adopted and enacted for water resources, national sanitation, rural water supply and sanitation, water quality, and urban development. Major regulations include Drinking Water Regulation (1998), Local Self Governance Regulations (1999), and National Drinking Water Quality Standards (2007). There are many inconsistencies and overlaps among the acts and regulations, and translating policies and plans into actions in the context of decentralization and community empowerment is a key challenge.

21 Volume 2 of this report provides details. 22 The Water Supply Management Board Act introduces Water Supply Management Boards to manage services in municipal areas, authorizes them to issue licenses and enter into agreements with service providers to collect tariffs, and constitutes Kathmandu Water Supply Management Board.


59 The GoN does not have regulations, policies and guidelines focused on wastewater management. The GoN intends to develop an umbrella water supply and sanitation act by consolidating existing acts.

Solid waste management

60 The regulatory framework for solid waste management is complex despite a short history.23 Under the Municipality Act (1992), the collection and disposal of solid waste was not a mandatory activity for municipalities, except for Kathmandu. It was only in 1999 that the LSGA made solid waste management a mandatory function for municipalities. Relevant acts and regulations include the Environment Protection Act and Rules, 1997, the LSGA and Rules the Solid Waste Management and Resource Mobilization Act (1987, amended 1992). With the assistance of UN Habitat, MLD, has drafted a Solid Waste Management Bill with the intention of defining solid waste management as an essential service and strengthening powers to take action against offenders and those obstructing solid waste management operations. The MLD has confirmed that the GoN intends to lay this bill before parliament at the first opportunity.

61 In December 2005, the then Minister of Local Development chaired a meeting to agree on a unified approach to solid waste management by all 58 municipalities. Among other things, the meeting agreed on common landfill sites serving more than one municipality. Common sites were proposed for the following municipalities (among many others): Birgunj and Kalaiya (and Parsaumi VDC) Biratnagar, Itahari, Dharan, (and Khaner, Sonapur and Tankisinawari VDCs).

62 There are no regulations governing the disposal of healthcare waste, only guidelines.

Urban roads and transport

63 GoN lacks policies, regulations and standards for urban roads.24 The road authority for an urban road may be either the municipality or the Department of Roads. The Department of Roads, functioning under MPPW, is responsible for the construction and maintenance of Nepal’s Strategic Road Network, which includes the major urban roads. The Department of Local Infrastructure Development and Agricultural Roads (DoLIDAR) functioning under the MLD is responsible for providing support to municipalities. 25 Applications to Road Board Nepal for funding assistance for maintenance pass through DoLIDAR.

64 MPPW’s National Road Policy (2002/2003) makes little reference to urban roads apart from stating that (as does the LSGA) that roads within municipalities are the responsibility of municipalities unless they are part of the national road network. It states that bus terminals are a municipal responsibility (as does the LGSA). Municipalities are also responsible for arranging lighting for roads and lanes.

Education and culture

65 Municipalities are responsible for adult education, pre-primary education, libraries, and sports development. They are to support the operation of schools. They are to maintain, repair and protect religious and culturally important places.

Health and welfare

66 The Municipalities Act (1990) first made municipalities responsible for public health, but there is wide variation in the extent to which municipalities have taken this up. Under the LSGA, municipalities are responsible for operating health centres, and health posts, or arranging for others to do so. 23 Volume 3 gives details. 24 Volume 4 gives more information. 25 See National Transport Policy (2001/2002), and TYIP, Chapter 30. Under the Local Infrastructure Development Policy (2004), DoLIDARs responsibilities include regulations, standards, manuals, policy development, monitoring and evaluation.


67 According to the policy of decentralization and devolution, the Government is handing over management of health posts, sub-health posts and other primary health care facilities to local bodies. Municipalities are responsible for most aspects of public health and primary health care, including programs for family planning, public health education, preventing the spread of infectious diseases, and consumer protection.26

Pollution control

68 In the absence of appropriate human resource and commitment of the Government, the implementation of the Environment Protection Act 1996, Environment Protection Regulation (1997) and Standards has been unsatisfactory everywhere. Instead of executing themselves, the Ministry of Environment has handed over its responsibilities of for industrial effluent standards to the Ministry of Industry, Commerce and Supply. However, the main objective of that Ministry is to promote the industries, not to penalize them for breaching environmental regulations. In this context, this role of civil society like Pro Public, become crucial in achieving compliance with regulations.27

69 Under the Industrial Enterprises Act (1992), industries can obtain a reduction of up to 50 per cent from their taxable income for capital expenditure on any industry on process or equipment that has the objective of controlling pollution or that has minimal impact on the environment.

3.2 External assistance to the urban sector

3.2.1 Past projects

70 Most external assistance to Nepal has been in the rural sector of the economy (Appendix A). For many years, the ADB has contributed the most funds to projects in the urban centers. Most of this investment has been in the Kathmandu valley, notwithstanding that the Kathmandu valley accounts for less than half of Nepal’s urban population.

3.2.2 Current projects

71 The $53.9m Small Towns Water Supply and Sanitation Sector Project and the $37.5m UEIP, both of which the ADB approved in 2002, marked a change of direction. The STIUEIP is most necessary to continue to redress the past imbalance in the geographical spread of investment.

72 The World Bank is preparing an Emerging Towns Project. This is likely to focus on water supply, sanitation and solid waste management.

73 Some bilateral donors are making a significant contribution to the urban sector, in particular India, Finland and Germany. Most of these contributions have been outside the Kathmandu valley. 26 In 1978, the Alma Ata international conference defined primary health care as "essential health care based on practical, scientifically sound and socially acceptable methods and technology made universally accessible to individuals and families in the community through their full participation and at a cost that the community and the country can afford to maintain at every stage of their development in the spirit of self-determination". It was a new approach to health care that came into existence following this international conference organized by the World Health Organisation and the UNICEF. Nepali representatives attended the conference and Nepal subsequently adopted this approach. 27 Pro Public is a non-profit, a NGO dedicated to the cause of public interest. It was founded in 1991 by a group of environmental lawyers, journalists, economists, engineers, consumers and women rights activists. It campaigns against corruption, red tape, and irregularities in government, and seeks to make government agencies aware of their duties and responsibilities. Its focus has been on good governance, protection of natural and cultural heritage, environmental justice, pollution control, gender justice and consumer protection. However, the focus of its activities regarding industrial pollution has near Kathmandu.


3.2.3 The ADB’s Strategy 2020

74 Strategy 2020 sets out the ADB’s strategic direction to the year 2020. It also sets the goals of our institution in order to fulfill a vision of an Asia and Pacific region free of poverty—a vision that can become a reality by 2020. Under Strategy 2020, the ADB will redirect its focus onto three critical strategic agendas: inclusive economic growth, environmentally sustainable growth, and regional integration. The ADB seeks to be an agent for change by promoting private sector development, good governance, gender equity, knowledge solutions, and partnerships. In respect of infrastructure, Strategy 2020 emphasizes the importance of achieving health outcomes:

First ADB should use its existing large “footprint” in infrastructure to improve health outcomes on the margin. There are many opportunities to do this. For example, the potential that water and sanitation has for improving public health is undoubtedly large: readers of the British Medical Journal last year voted sanitation the greatest medical milestone ever, over penicillin and anesthesia. However, having committed in Strategy 2020 that provision of water and sanitation will be one of the main ways ADB will contribute to health we then need to have a better evidence base to show that our investments in this sector are, indeed, reaching the poor and contributing in some way to better public health.

3.2.4 The ADB’s Country partnership strategy

75 In line with ADB's Strategy 2020, ADB’s recent (October 2009) Country Assistance Program Evaluation concluded that ADB’s inclusive growth strategy should continue. 28 The report considered that assistance to infrastructure was fundamental to achieving inclusive economic growth, poverty reduction and regional integration. Based on Nepal's fundamental long-term development needs, and on the GoN's priorities, the ADB's Country Partnership Strategy:Nepal 2010–2012 has four pillars: (i) inclusive and broad-based economic growth; (ii) inclusive social development; (iii) governance and capacity building; and (iv) climate change and environment sustainability. In each of these four pillars, the ADB will focus on one or more aspects of urban environmental improvement: urban infrastructure development, promotion of private sector development and participation (including PPPs), access to basic services (water, sanitation), strengthening local governance, mainstreaming social and environment safeguards in the government system, and clean urban development.

Municipal infrastructure and services

76 The ADB will continue to support the Government in (i) improving urban infrastructure, including water supply and sanitation, and urban transport; (ii) improving access to and the service level of water supply and sanitation; (iii) supporting urban environmental improvement, including municipal waste management and waste water treatment; and (iv) strengthening the operation and management skills of local governments and water user and sanitation committees. The ADB will also assist the Government and municipalities to promote PPPs to improve the efficiency of service delivery, and offset the low revenue base available to local authorities. Finally, ADB will support mainstreaming climate change into planning, design and implementation of projects.

Inclusive development and gender equity

77 The Country Partnership Strategy includes a gender equity road map to ensure that all ADB operations address gender and social inclusion concerns. The road map builds on progress made in gender mainstreaming and the new policy commitments on social inclusion. It recognizes that structural and policy changes will need to be at the forefront until significant attitudinal change is evident. The road map will provide guidance on policy reforms, and on how to improve the Government's capacity to promote more equitable and sustainable economic and social growth. ADB will also support women and other socially excluded groups to (i) participate 28 ADB, 2009, Nepal: Delivering Assistance in a Challenging Environment. Reference Number: CAP: NEP 2009-19 Country Assistance Program Evaluation: 26194 June 2009.


in decision-making; (ii) access basic social services; (iii) find employment; and (iv) get training. ADB will explore the use of the Gender and Development Cooperation Fund and other grant resources.

78 ADB will also help the Government review its numerous socially targeted programs, support the preparation and implementation of a comprehensive social protection strategy, build the capacity of agencies, and pilot approaches to reach women and socially excluded groups.

Governance

79 The ADB will help the Government enhance the transparency and accountability of public systems, including regulatory bodies. It will support increased representation and participation of youth in central and local governance systems. The ADB will support the country's political transformation to a federal state by strengthening public sector management and service delivery at central and local levels. It will support fiscal and administrative decentralization, with particular emphasis on accountability to local communities, strengthening monitoring and evaluation, and building capacity to implement social and environment safeguards. Climate change

80 The ADB will help Nepal adapt to climate change through national and local planning, investments in risk reduction, support for insurance and other risk-sharing instruments, and ―climate-proofing‖ projects. Sustainable management of forests, water, and other natural resources for provision of clean water supplies, protection of biological diversity, and sequestration of carbon from the atmosphere to offset greenhouse gas emissions will be part of ADB’s assistance. ADB will promote alternative energy and energy efficiency. It will assist capacity strengthening in the context of the Government's efforts to put in place an institutional framework for managing climate change and the environment. ADB is supporting the Pilot Program on Climate Resilience (PPCR).29 Regional cooperation and integration

81 Promoting regional cooperation and integration continues to be an integral part of ADB’s country programming. The ADB will concentrate regional cooperation and integration efforts on energy, transport and trade, and infrastructure for tourism development (e.g., civil aviation, national roads). The ADB will continue to support improvements to Nepal's road and border trade connections with neighboring countries, and will promote cooperation in energy, trade and investment facilitation. ADB will help to develop a trade and transport corridor that would connect India and the People's Republic of China through Nepal. It is preparing a transport logistics and trade facilitation project and several other regional cooperation and integration projects on the basis of earlier regional sector studies.

Private sector

82 This Country Partnership Strategy supports a reorientation of the public sector away from production and providing services toward regulatory and supervision functions. To this end, ADB will focus on addressing regulatory and oversight issues. Support for the restructuring of the 29 In May 2008, representatives of forty developing and industrialized countries agreed to create two international investment funds that will provide financing for developing countries to pursue cleaner development paths and protect themselves from the impacts of climate change. The PPCR, approved in November 2008, was the first program under the Strategic Climate Fund. Nepal is one of the PPCR countries. The PPCR aims to demonstrate ways in which to integrate climate risk and resilience into core development planning and implementation. The pilot programs and projects under the PPCR are country-led and build on National Adaptation Programs of Action and other relevant country studies and strategies. The PPCR supports two types of investments: (1) technical assistance to build upon existing national work to integrate climate resilience into national and sector development plans; (2) public and private sector investments indentified in national or sector development plans or strategies addressing climate resilience.


water supply and power sectors will continue, with particular attention to the sequencing of regulatory reforms, and to facilitation of private investments. ADB's focus on enhancing connectivity and infrastructure development will facilitate the entry of private investments in other sectors, such as tourism, agro-industries, and hydropower. ADB will conduct a private sector assessment and prioritize assistance to areas where immediate reform and improvement are required as well as to those where private sector investment can be catalyzed by ADB's private sector operations.

3.3 Lessons from other projects

83 There have been two integrated urban development projects in Nepal, the Kathmandu Urban Development Project (KUDP), completed in 1999, and the Urban and Environmental Project (UEIP), commenced in 2003 and not yet complete (Appendix B). The ADB has supported two other significant urban sector projects: the Second Tourism Development Project and the Small Towns Water Supply and Sanitation Sector Project.

3.3.1 Completed ADB urban projects in Nepal

84 The main lessons from past ADB urban projects in Nepal are as follows:

1. Drains should not be constructed unless there is treatment of the drain discharges.

2. Capability enhancement of implementing agencies should be carried out well in advance of implementing infrastructure components, based on a thorough institutional assessment.

3. Entities intended to manage O&M for infrastructure should be established early in the project cycle, and staff trained throughout the implementation period, rather than at the very end.

4. Assessment of community attitudes to infrastructure, such as waste disposal, should be a part of project preparation.

5. Enforcement of appropriate regulations is an essential part of managing urban infrastructure.

6. Designs of environmentally sensitive infrastructure systems should anticipate the impacts of noncompliant behavior by the public.

7. It is important to complete land acquisition before commencement of construction.

8. Implementation of projects in a socially inclusive manner will not happen unless project designs incorporate specific components that will benefit the poor.

3.3.2 Urban and Environmental Improvement Project

85 Appendix C is a review of UEIP. A review of the UEIP indicates that future IUDPs in Nepal should have:

1. A clear focus on a single goal.

2. A higher level of investment per beneficiary. Projects can achieve this either by a tighter geographical focus or by concentrating on fewer components. Attention to recovering costs from beneficiaries will ensure that such an approach is just as equitable as one where benefits are spread thinly over a larger population.

3. A financial plan in which beneficiaries contribute to the cost of the project in accordance with practice in Nepal.

4. Project components that are physically integrated, so as to achieve economies in implementation and additional benefits through synergies between components.


5. A comprehensive approach to each sub-sector (solid waste management, drainage etc) that the project covers in a town; for example, all aspects of solid waste management should be covered, not just composting.

6. An emphasis on essential infrastructure: water supply, sanitation, drainage, solid waste management, and roads rather than ―revenue generating facilities‖ and land pooling.

3.3.3 Completed urban sector projects in other developing countries

86 There is only a short history of urban infrastructure projects in Nepal. In formulating a new urban project in Nepal there are bound to be necessary elements of which there is little or no experience in Nepal. It is important to draw on international experience, which the ADB and World Bank have documented extensively.

3.4 Requirements for selection of project components

87 Arising from the regulatory and policy framework for municipal services and infrastructure, and various agreements between the ADB and GoN relating to the project are certain requirements that project components must meet to be included in the project. Table 3 is a summary of these requirements.30 Table 3 Essential requirements for project components

Requirement Logic Examples and remarks

Must be municipal infrastructure To ensure that municipalities can act as implementing agencies for all investments.

For example, roads under the Department of Roads

Must be consistent with periodic plan To comply with Local Self-Governance Act.

Some investments not in the periodic plan may be necessary to support those that are.

Must support economic development of town

Economic growth is the objective of the project.

Must be such as to together have visible impact

Investments must be integrated To reduce costs of implementation.

To achieve synergies.

Roads and drains built together reduce construction costs and together facilitate land development, whereas one without the other does not.

Must be environmentally sustainable To achieve health benefits.

To ensure sustainability.

For example, there should be no investment in solid waste collection unless there is a sanitary land fill site.

Must be socially inclusive and be consistent with MDGs

To ensure project is equitable.

For example, road improvements should be balanced by walkway improvements in low income areas.

Must provide for private sector participation to the maximum practicable extent.

To reduce cost to municipality and Government.

To promote economic development.

30 See Terms of Reference.


4 The proposed project

4.1 Objectives

88 The project seeks to promote healthy cities. It will do this by creating healthier urban environments. Appendix J sets out the design and monitoring framework for the project.

4.2 Project municipalities

89 The project municipalities are Biratnagar, Birgunj and Butwal (Figure 1). Figure 1 Location Map

4.2.1 Rationale for town selection

90 GoN and the ADB agreed that the criteria for selection of towns should include economic growth potential, demands for environmental improvement, commitment, capacity and readiness of towns and ―interrelationships between towns for strengthening urban-rural linkages‖. These criteria relate to the three National Urban Policy (2007) objectives as follows:

National Urban Policy objectives Selection criteria Developing regional economic centres Economic growth potential, interrelationships

between towns for strengthening urban-rural linkages

Creating clean, safe and developed urban environment

Demands for environmental improvement

Improving urban management capacity Commitment, capacity and readiness of towns


91 The selection of municipalities rather than towns was unavoidable if contrary to geographical reality. As in many countries, the limits of urban areas in Nepal do not correspond to administrative boundaries. Some urban centres lie wholly within municipal boundaries, but others extend well beyond. However, it is municipalities or village development committees (VDCs) that have the responsibilities and powers relating to managing the urban environment and the delivery of services. If the project selects towns, it would be necessary to have a large number of implementing agencies, some municipalities and others VDCs for adjoining areas.

92 Appendix F gives details of the evaluation of candidate municipalities for the project. The main reasons behind the final selection of Biratnagar, Birgunj and Butwal were as follows:

1. There are insufficient funds relative to needs to select more than three municipalities.

2. Birgunj and Biratnagar areas are by far the largest manufacturing areas.

3. Butwal area is the fastest growing manufacturing area, and already one of the largest.

4. All three towns are designated as possible regional economic centres in the National Urban Policy. Each is in a different region.

5. With the exception of Siddarthanagar, the three municipalities have the strongest financial capacity of the candidate towns.

6. All three towns have digital mapping and periodic plans either complete or nearly complete.

93 However, after the Steering Committee had made its selection, it was discovered that Butwal had in fact not commenced preparation of a periodic plan. DUDBC had appointed consultants, but the consultants had not commenced.

4.2.2 Biratnagar

94 At the time of the 2001 census, Biratnagar (Morang district) was Nepal’s second most populous municipality in Nepal, with a population of 166,674 and area of 5,990 ha. Biratnagar has been an important administrative center since 1914 when the district center of Morang was shifted from Rangeli (to the east of Biratnagar). Apart from the District offices there are also divisional offices of the Government. Biratnagar became a municipality in 1951. The municipality lies between two rivers: the Singhiya on the east and the Keshlaya on the west. However, most of the storm water drains discharge to the Singhiya river.

95 The Biratnagar to Itahari corridor is one of Nepal’s most important manufacturing centers. Nepal’s first large scale industry, the Biratnagar Jute Mills, was established here in 1936. Morang district now accounts for 8.4 per cent of the country’s manufacturing output in terms of value added. The adjoining Sunsari district accounts for a further 5.3 per cent.31

96 The airport within the municipal boundary is one of three regional hubs in Nepal’s air service network. Across the Indian border, and just 5 km south of Biratnagar, is the town of Jogbani (2001 population 29,961). From Jogbani regular bus and express train services operate to Kolkata, Delhi and other cities of West Bengal, Bihar and Uttar Pradesh.

4.2.3 Birgunj

97 Birgunj municipality (Parsa district) has an area of 2516 ha and a 2001 population of 122,448. Like Biratnagar, it lies between two rivers: the Singha river on the east and the Sirsiya River on the west. Also like Biratnagar, the Indian state of Bihar lies to the south of the municipality. Surface runoff is very slow due to flat terrain and the effects of road embankments and other development on the natural drainage. Virtually the whole municipality is subject to inundation during the monsoon, and water-logging also occurs during the dry season. 31 CBS, 2009, Census of Manufacturing Establishments 2006-2007.


98 Birgunj originated as a planned town. In 1897 a village was expanded and re-named after Prime Minister Bir Shamsher on his appointment as Knight Grand Commander of the Star of India.32 The town is unusual in Nepal in having its commercial heart on a rectangular grid of streets.

99 Birgunj has Nepal’s only Inland Clearance Depot served by rail (outside the municipal boundaries, to the west). Under the Subregional Transport Facilitation Project, the ADB is financing the upgrading/construction of a 12.4 km access road with 7 m wide carriageway with up to 50 m right of way from the Inland Clearance Depot to the Tribhuvan Highway, to enable trucks and buses to avoid the congested Birgunj and Jitpur market area on the Tribhuvan highway connecting Birgunj to Kathmandu. 33 The access road is nearing completion. The Tribhuwan highway is part of the Asian Highway Network.34

100 The Birgunj area is one of Nepal’s most important manufacturing areas. Parsa district accounts for 7.4 per cent of the country’s manufacturing output in terms of value added. However, much of the industry (and associated urban development) lies on the north of the town along the road to Simara.

101 As a major centre for commerce and trade, Birgunj receives large numbers of visitors. Indians cross the border to shop in the commercial area and buy goods that are cheaper than in India because of differences in import tariffs. Immediately across the border on the Indian side is the town of Raxaul (2001 population 41,347).

4.2.4 Butwal

102 Butwal municipality has an area of 7,953 ha and a 2001 population of 75,384. It is located at the crossing point of two national highways: the East-West Highway and the Siddartha Highway, which leads from Siddarthanagar on the Indian border north to Pokhara and beyond. The East-West Highway is part of the Asian Highway Network (AH2, which runs from Delhi to Dhaka). The topography and geology of Butwal are such that inundation is less of a problem than in Biratnagar and Birgunj. Established in 1959, Butwal is one of the older municipalities.

4.3 Investment priorities

103 To determine candidate investments in each town, PADECO consulted municipal executive officers and senior staff, representatives of political parties, and other stakeholders and reviewed the municipal periodic plans (Appendix G), undertaken surveys and reviewed GoN policies and Nepal’s international obligations.35 Additional information on local perceptions of priorities came from focus groups and community questionnaire surveys in each town (see Volumes 11-13).

32 John Whelpton, 2005, A History of Nepal. 33 In Nepal, The Heavy Vehicle Act limits truck axle loads to 10.2 t, although enforcement is not strict. Indian registered trucks carrying containers or having loads more than 16 t generally do not proceed beyond Birgunj. Instead, the cargo is transferred onto 10–12 t capacity vehicles registered in Nepal. Unloading and re- loading trucks can involve days of waiting. 34 Established in 2005 under the Intergovernmental Agreement on the Asian Highway Network, the Asian Highway Network consists of highways of international importance within Asia, including highway routes substantially crossing more than one sub-region, highways within sub-regions including those connecting to neighboring sub-regions, and highways that provide access to: (a) capitals, (b) main industrial and agricultural centers, (c) major air, sea and river ports, (d) major container terminals and depots, and (e) major tourist attractions. The Agreement established standards for roads that are part of the network, but these standards do not apply to urban sections of the roads such as those within Birgunj and Butwal municipalities. 35 There is no periodic plan for Butwal. A consultant has just commenced preparation of this plan.


4.3.1 Drainage and sanitation

104 The three municipalities have identified drainage as a high-priority. Table 4 Priority issue among residents

Issues Biratnagar (%)

Birgunj (%)

Butwal (%)

Water supply 7.9 6.3 42.5

Solid waste management 13.2 34.7 11.0

Toilets/sanitation 21.1 16.8 1.4

Sewage/drainage 36.8 25.3 17.8

Roads 19.3 11.6 20.5

Others 1.8 5.3 6.8

Total 100.0 100.0 100.0 Source : STIUEIP community surveys 2009

105 The experience of past drainage works in Nepal that ADB has supported is that drainage improvements without treatment of the outflows often have adverse environmental impacts (Appendix B).

106 All three towns lack well-managed public toilets.

4.3.2 Solid waste management

107 In the three municipalities, dumping of solid waste on roads and in open drains compromises the effective operation of drains, pollutes the environment encourages flies and rodents.

108 None of the municipalities operates a sanitary landfill for municipal waste. Collected waste is dumped on river banks. None of the municipalities have incinerators or other treatment facilities for health care waste. It is impracticable for each health care facility to safely dispose its own waste. The only sensible strategy is for the municipality to provide an incinerator and recover the cost from the health care facilities.

109 In all three municipalities, rag pickers sort through dumped waste. In each case, children are among the rag pickers. Since much of the health care waste and other hazardous waste enters the municipal waste stream, rag pickers are exposed to hazards and contribute to the spread of disease. Some of the health care waste is burnt at individual health care facilities, but not in appropriate facilities and hazardous emissions in an urban environment result.

4.3.3 Roads

110 Biratnagar and Birgunj municipalities identified urban roads as a high priority. In all three towns, a high proportion of the total road length is unsealed. The sealed sections are not well maintained.36 Traffic congestion in the central areas is becoming serious. There is a need to 36 In Kathmandu, resuspended dust from traffic accounts for 25 per cent of total suspended particulates in the atmosphere. There is no equivalent data for regional centres.


develop new road links or improved road links to alleviate the congestion in the inner areas. However, any such roads would form part of the Strategic Roads Network and be the responsibility of the Department of Roads, not municipalities.

4.3.4 Markets

111 All three municipalities have projects to construct or improve markets with TDF funding. These projects are at varying stages of implementation. None of the municipalities has indicated markets as being their highest priority, although Butwal and Biratnagar have shopping complex projects that they are looking to fund.

4.3.5 Water supply

112 In discussions during the development of the project components, none of the municipalities attached a high priority to including water supply as a component of the project. There are several reasons for this. First, it makes sense to fix drainage and sanitation problems, including ensuring everyone has access to a safe communal water supply tap, before increasing the piped water supply to properties. Secondly, because in terai towns water can readily be obtained from shallow or deep tube wells the community can to a large extent arrange water supply itself. Thirdly, drainage and sanitation have suffered neglect in comparison with water supply. Fourthly, any ADB assistance to water supply in the project towns runs the risk of being fungible; that is to say, it could merely serve to encourage NWSC to cut its investment in the towns in favour of investment in non-project towns. However, the proposed project included improvements in communal water supply as an essential investment to achieve the MDGs and the Government’s goals for access to safe water supply and achieving total sanitation.

113 At a late stage in the PPTA, Butwal municipality changed its views and decided that it preferred a water supply component to Drainage and Sanitation and Roads and Lanes components. It was not practicable at this stage to prepare a Water Supply component, but PADECO has prepared an overview of the water supply situation in Butwal (Volume 10).

4.4 Regional cooperation (trans-boundary) issues

114 Biratnagar and Birgunj adjoin the Indian border. Immediately across the border are Indian towns; Biratnagar and Birgunj are each in reality parts of a single urban area that the international border divides into two parts. There are three main trans-boundary issues relating to infrastructure planning and investment: transport, trade and wastewater management. Resolution of these issues has to take account of relevant policies of the GoN and the ADB.37 Day-to-day coordination

37 The ADB considers a project to be ―regional‖ when it requires collective action by two or more countries (not necessarily adjacent) to jointly respond to cross-border issues, such as the impact of environmental degradation, international crime, communicable diseases, natural disasters, or regional economic crises (Operations Manual: Bank Policies, OM Section B1/BP, issued on 6 August 2008). ADB’s regional cooperation strategy and program for South Asia (RCSP, ADB, 2006, Regional Cooperation Strategy and Program (2006-2008): South Asia, Manila) aims to help the region realize its full potential in economic and social development, and to participate effectively in wider Asian integration. To achieve this goal, the RCSP has five key operational objectives: (i) improve connectivity, (ii) facilitate trade and investment, (iii) develop regional tourism, (iv) facilitate cooperation in energy, and (v) promote private sector cooperation. In the case of water and environment, the RCSP proposes supporting knowledge-based cooperation and capacity development activities.

At their last meeting, the prime ministers of Nepal and India agreed that enhancing trade between Nepal and India was a priority (Joint Press Statement on Official visit of Rt. Hon. Madhav Kumar Nepal, Prime Minister of Nepal to India, 18-22 August 2009). Both sides agreed that the Inter Governmental Committee at the level of Commerce Secretaries should look into the relevant issues with a view to promoting trade, investments and industrialization in Nepal, expanding complementarities of bilateral trade on a sustainable basis and further removing barriers to trade and investment. The two sides initialled the revised Treaty of Trade and Agreement of Cooperation to Control Unauthorized Trade, which would contribute to further enhancing bilateral trade.


between the Nepal towns and their Indian counterparts is the responsibility of the District Development Committee (Nepal) and the District Collector (India); there is no municipality to municipality coordination.

4.4.1 Trade

115 The economic base of Biratnagar and Birgunj is trade as much as industry. The future growth of the towns and their Indian counterparts depends on the continuing development of trade. Trade is expanding faster than GDP, and both urban centers have the potential for rapid growth.

4.4.2 Wastewater management

116 The drainage is towards the Indian border; immediately across the border are towns. Nepal is party (15th August 1996) to the Basel Convention on the Control of Trans-boundary Movement of Hazardous Waste. Compliance of the industrial effluents with recognized standards is therefore most necessary and monitoring essential. However, more important than the pollution is that Biratnagar and Birgunj are in reality cross-border towns.

4.4.3 Road and rail infrastructure

117 Almost all Nepal’s overseas trade gives through Biratnagar/Jogbani or Birgunj/Roxaul.38 The location of the railway, main roads, and other physical facilities to handle this growing trade will shape the direction of urban growth on both sides of the border. However, there are no plans showing how the main municipal roads relate to the future strategic transport infrastructure.

4.5 Components and outputs

4.5.1 Rationale

118 The likely funds available from the Government, the municipalities and other sources are insufficient to meet all the needs for municipal services and infrastructure. Each of the three sub-projects (Biratnagar, Birgunj and Butwal) will focus on improving environmental health. The project components will be Drainage and Sanitation, Solid Waste Management, Roads and Lanes, and Water Supply.

4.5.2 Biratnagar

Drainage and Sanitation

119 To achieve the GoN’s target that everyone should have access to improved sanitation by 2017, the project will include interventions to improve drainage and sanitation throughout the municipality.39

120 Community mobilization will promote cooperative and individual actions to achieve total sanitation and related environmental health improvements. It will cover all slums and squatter settlements; the project will promote and provide financial support to the construction of private 38 That is, trade other than trade with India. 39 According to the World Health Organisation/UNICEF Joint Monitoring Program for water supply and sanitation by the World Health Organization and UNICEF the following are considered as "improved" sanitation: connection to a public sewer, connection to a septic system, a pour-flush latrine, a simple pit latrine, and a ventilated improved pit latrine. Sanitation solutions that are not considered as "improved" are: public or shared latrines, open pit latrines, and bucket latrines. Excreta disposal systems are considered adequate if they are private and if they separate human excreta from human contact. This definition of "improved" sanitation is used to measure the achievement of the Millennium Development Goal related to sanitation in developing countries. In practice, it is often hard to ascertain during a survey or a census which type of sanitation solution is considered improved or not.


toilets, school toilets and public toilets.

121 Cost considerations mean that at this stage it is not feasible to provide sewers and drains to the whole of the municipality; the project includes only the priority sewage and drainage works. These works mainly serve the more developed areas. The sub-project will include property connections to the sewers.

122 There will be two wastewater treatment works (the main one using stabilization ponds, and the small one using reed beds). The sub-project will provide a separate sewerage system draining to the main treatment plant, and a small combined system draining to the reed bed plant.

123 Where necessary for the purposes of achieving the total sanitation objective, the sub-project will provide new or improved communal taps that local user groups operate and maintain.

124 Capacity building for managing the drainage systems and sewage treatment plants will be part of the design contracts. Arrangements for technical support longer term in respect of drainage, sewerage, sewage treatment and sanitation will be as the SSTWSSSP determines.

Solid Waste Management

125 A separate project funded by the Government of Finland and GoN will implement a regional solid waste processing facility. That project is a regional facility that serves a wider area than just Biratnagar municipality. This achieves economies of scale and also ensures that there are disposal facilities for industry and a much larger residential population, outside the municipal boundary. The project will not include any interventions in solid waste management. However, during the design stage consideration will be given to including in the Drainage and Sanitation component some public awareness or community mobilization action in relation to solid waste if others are not undertaking this work.

Roads and Lanes component

126 The cost of the drainage, sanitation, and solid waste management works leaves insufficient funds for constructing new roads. Road improvements have fewer benefits to environmental health than the other components of the project. In the main, road works will comprise upgrades to roads in conjunction with drainage and sewerage works. Integrating road and drainage works will reduce construction costs by providing opportunities for larger contracts. Floods and water-logging can damage roads, so it is desirable to select road and drainage works at the same time. Improving road access and drainage together will facilitate development of adjoining open land. To ensure social inclusion and facilitate solid waste management and drainage, lane improvements will be undertaken in slums and squatter settlements.

127 Some of the roads are part of Nepal’s Strategic Road Network. The carriageways of these roads are not the responsibility of the municipality, but the remainder of the right-of-way is. As implementing agencies for STIUEIP, municipalities will need to coordinate the detailed design of project works adjoining national roads with the Department of Roads.

128 The municipality has expressed concern that the proposed road works are not consistent with their road priorities and not extensive enough. These concerns are misplaced. The commencement of STIUEIP road works is probably three or four years off. During this three-year period municipalities should avoid undertaking road maintenance or improvements in sections that STIUEIP will upgrade and instead focus on maintenance and improvements to sections that STIUEIP will not be touching. In this way, municipalities should be able to substantially achieve their aspirations for the overall road network.

129 The road improvements included in the cost estimates and shown on the drawings are not necessarily those that the subproject will implement. It is for the municipality to determine after further consultation with stakeholders exactly what improvements the subproject carries out, as long as they are on roads affected by the sewerage and drainage works.


4.5.3 Birgunj subproject

Drainage and Sanitation component

130 As in Biratnagar, the project will include interventions throughout the municipality so as to achieve the GoN’s target that everyone should have access to improved sanitation by 2017.

131 Community mobilization will promote cooperative and individual actions to achieve total sanitation and related environmental health improvements. It will cover all slums and squatter settlements; the sub-project will promote and provide financial support to the construction of private toilets, school toilets and public toilets.

132 Cost considerations mean that at this stage it is not feasible to provide sewers and drains to the whole of the municipality; the sub-project includes only the priority drainage works. These works mainly serve the more developed areas. The works will include:

1. Improvements to the main drain

2. A new diversion channel near the head of the main drain

3. A new catch drain at Adarshanagar

4. A treatment works at the southern end of the main drain

5. Replacement of open drains by covered sewer lines

6. Stormwater diversion channels

7. Capacity building for managing the drainage systems and sewage treatment plants will be part of the design contract.

Solid Waste Management component

133 The project will expand solid waste collection to the entire municipal population. To ensure social inclusion, special attention will be given to solid waste management in slums and squatter settlements where it almost entirely absent. The sub-project includes the development of a waste processing facility that will include a sanitary landfill, a composting plant, and a special pit for health care waste.


134 As with the Biratnagar sub-project, road works will comprise upgrades to roads in conjunction with drainage and sewerage works. Integrating road and drainage works will reduce construction costs by providing opportunities for larger contracts. Floods and water-logging can damage roads, so it is desirable to select road and drainage works at the same time. Improving road access and drainage together will facilitate development of adjoining open land. To ensure social inclusion and facilitate solid waste management and drainage, lane improvements will be undertaken in slums and squatter settlements. The replacement of open drains by covered sewers provides extensive opportunities to provide new lanes for pedestrian use, and the cost estimates allow for this treatment.

135 Some of the roads are part of Nepal’s Strategic Road Network. These roads are not the responsibility of the municipality, but now need upgrading or replacement by new links. As implementing agencies for STIUEIP, municipalities will need to coordinate the detailed design of project works adjoining national roads with the Department of Roads.

136 The municipality has expressed concern that the proposed road works are not consistent with its road priorities and not extensive enough. These concerns are misplaced. The commencement of STIUEIP road works is probably three years off. During this period the municipality should avoid undertaking road maintenance or improvements in sections that STIUEIP will upgrade and instead focus on maintenance and improvements to sections that


STIUEIP will not be touching. The sub-project will lead to a reduction in the cost of road maintenance because there will be less damage during the monsoon. Thus, the municipality should be able to substantially achieve their aspirations for the overall road network.

137 The road improvements included in the cost estimates and shown on the drawings are not necessarily those that the subproject will implement. It is for the municipality to determine after further consultation with stakeholders exactly what improvements the subproject carries out, as long as they are on roads affected by the sewerage and drainage works.

4.5.4 Butwal subproject

138 At a late stage of project preparation, the Butwal municipal board changed its views on priorities and decided that it preferred a Water Supply component to the Drainage and Sanitation and a Roads and Lanes components.

Water Supply component

139 In Butwal, the NWSC is implementing projects to improve the water supply system.40 The municipality has asked NWSC to prepare a water supply master plan with the assistance of the municipality. The municipality further proposes that the Butwal sub-project implement part of this masterplan. At this stage, the scope of a water supply component in the project is therefore uncertain (see Volume 10 for details of work under this PPTA).


140 As in Birgunj, the project will expand solid waste collection to the entire municipal population. To ensure social inclusion, special attention will be given to solid waste management in slums and squatter settlements where it is almost largely absent (though the coverage is better than in Birgunj). The sub-project includes the development of a waste processing facility that will include facilities for sanitary landfill, composting, health care waste disposal, recycling and leachate treatment.

Mainabagar Auto Village component

141 The Mainabagar Auto-Village in Butwal is an innovative and environmentally beneficial intervention by the municipality. The Butwal sub-project includes further investment in Auto-Village infrastructure, which can be justified on its own merits as continuing the environmental improvement of Phase I of the development. But the funding allocation in the Project is conditional upon the municipality coming to an agreement with the tenants whose 10-year leases are beginning to expire. The work includes preparation of a masterplan for the area with the participation of stakeholders. The exact works to be constructed under the subproject will depend on the outcome of the masterplan work, but the cost estimates allow for access road upgrades, paths, drains, landscaping, water supply, electricity supply, street lights, wastewater management and parking areas.

4.5.5 Policy reforms

142 Arising from the size of the project are opportunities for policy reforms.

Drainage and Sanitation component

143 The SSTWSSSP incorporates a substantial institutional reform component in the water and sanitation sector. The project may provide opportunities to support reform initiatives under that project. In particular, the sewage treatment plants could set standards for future treatment 40 Volume 16 includes details and cost estimates of a possible water supply project for Butwal. One of the major problems with including a water supply project in Butwal is the fungibility of the loan. See Devarajan, Shantayanan and Swaroop, Vinaya, 1998, The Implications of Foreign Aid Fungibility for Development Assistance. World Bank Development Research Group and Poverty Reduction and Economic Management Network.


facilities.


144 The only GoN agency with technical expertise in solid waste management is the SWMRMC. However, the GoN should extend its remit to the whole of Nepal. This it can do by executive order. SWMRMC also has the power to delegate such of its functions and powers under the Solid Waste Management and Resource Mobilization Act to municipalities as it sees fit. This is highly desirable because municipality’s powers under the Local Self-governance Act are not as extensive.

145 There are no regulations for the management of health care waste. The MoEST should formulate regulations for health care waste recycling and disposal, as for other hazardous wastes; it could usefully follow the Indian regulations. The objective of municipalities should be to stop health care wastes entering the municipal waste stream. In the absence of national regulations, municipalities can formulate and enforce appropriate bye-laws. In terms of expenditure, municipalities need only provide a supervised burial pit. Health care facilities should bear the cost of transporting wastes to the disposal site. Incineration is not an acceptable option in Nepal because of the air pollution consequences and the lack of regulations governing incinerators.


146 There is a need for technical standards and policies for urban roads. In the past, the lack of such standards was immaterial because there were so few urban roads. However, urban road networks and traffic are increasing rapidly. It is not appropriate that STIUEIP set such standards, if only because the three towns are all terai towns, but the design work could provide inputs to the formulation of standards if that work is happening in parallel. If the GoN is able to establish a unit with technical responsibility for urban roads, the GoN could consider asking the ADB for technical assistance in formulating appropriate national standards for urban roads. Such standards would cover matters such as cross-drainage, side drainage, lane widths, location of utilities, pavement design, traffic surveys (eg passenger car units for calculations), road hierarchy, economic analysis (eg road-user and vehicle operating costs) and criteria for pedestrian bridges.

PPP

147 In respect of PPP projects in municipalities, the most competent organization to set financial policies is the TDF. Among GoN agencies, only the TDF has the necessary financial skills, powers, responsibilities and resources to promote PPP in municipalities. The GoN and Nepal’s development partners should recognize this. It is unfortunate that the PPP-UE project is not more closely associated with TDF. TDF has already set some rules governing loans for ―revenue-generating projects‖. For TDF to promote larger scale PPP projects, however, there is a need for appropriate technical assistance (Volume 5).

Financial arrangements

148 If the Government and ADB agree to channel all loans to municipalities through TDF, there will be opportunities to rationalize some aspects of municipal finance.

149 First, DUDBC should transfer management of its revolving funds to TDF, which has greater financial expertise in obtaining repayments. As a general principle, any transaction with a municipality that involves repayment should be a TDF responsibility. There is no history of municipalities repaying loans other than those through TDF.

150 Secondly, as recommended by the Local Authorities Fiscal Commission Report, 2000, the GoN should dissolve town development committees. The Local Self-governance Act did not abolish town development committees, but it made them redundant. If a town development committee carries out projects independently of the municipality, there is an indirect impact on the municipal finances.

151 Thirdly, there is a need to rationalize responsibilities in relation to rivers and water


courses. The Local Self-Governance Act assigns the same responsibility to VDCs, DDCs and municipalities. Only the DDC has the power to collect fees for removing boulders and gravel from river beds. Rivers can be major responsibilities for municipalities if (as at Butwal) there are threats to infrastructure and property from river erosion and threats to public health and the environment from pollution. However, if the necessary expenditure is high, then the duplication of institutional responsibility will lead to none of the three categories of local government accepting responsibility. The DDC is the most logical place to assign responsibility, particularly as the municipalities and VDCs are represented on the DDC.

4.6 Cost Estimates

152 Table 5 on the following page summarizes the cost estimates (further details are given in Volume 14).


Table 5 Project components and outputs


4.7 Financing plan and cost recovery

153 The municipalities have confirmed that they can substantially increase property tax revenues if residents know that there is a major project benefiting the entire municipality to be paid for. It should be possible for municipalities to increase property taxes at faster than the GDP growth because the taxes are low and because coverage is still not one hundred per cent.

154 Municipalities in Nepal and elsewhere do levy charges for solid waste collection and for sewerage, and they use a variety of methods to do so.41 The methods of collection (for residential properties) include:

Sewerage: Surcharge on water fee

Surcharge on property tax

Transfers from telephone or power accounts

Solid waste: Surcharge on property tax

Flat monthly charge

Conservancy tax

Transfers from telephone or power accounts

155 For this project, the property tax (that is, the Integrated Property Tax, IPT) is preferable to user charges as a means of increasing revenue from residential properties:

In Nepal, user charges for municipal services are regressive.42

Property taxes are very low. For IPT, the Government-prescribed rates vary from about 0.03 per cent of land and building value to about 0.13 per cent depending on the value of the property. Most households would be paying each year less than 0.06 per cent of the property value.43

Property taxes are administratively simpler than user charges in that there is already a system in place.

The project is primarily producing public goods (that is, improved environmental conditions).

The use of user charges would reduce the public health benefits because the poor (who live in the more unhealthy conditions) would not take up services.

Surcharges on water fees (to pay for sewerage) are not practicable because in the three project municipalities NWSC only serves a portion of the municipal population. Many properties get water supply from WSUC systems or from private tube-wells.

156 In the case of non-residential properties, charges for solid waste collection from individual properties are appropriate as are the present collection systems. In the future, it should 41 Roy W. Bahl and Johannes F Linn,1992. Urban Public Finance in Developing Countries. A World Bank Book. Published for the World Bank by Oxford University Press, New York. 42 In Nepal, the rates for property tax are progressive; that is the higher the value of the property the higher the tax as a percentage of the property value. 43 Local Self-Governance Regulations (1999). In Indonesia the equivalent rate is 0.5 per cent, and in the Philippines 1.5 per cent. Another way of making comparisons is to look at property tax revenues as a percent of GDP per capita. In the European Union property taxes are 0.92 per cent of GDP, in Nepal municipalities about 0.15 per cent.


be possible for the private sector to undertake all collection from commercial and institutional properties. However, it is first necessary to establish the norm of proper collection and disposal of solid waste, 157 Volume 14 contains financial assessments of the Town Development Fund, DUDBC, and the municipalities.

4.8 Related projects

The project towns will benefit from other projects in the towns and also from projects outside the towns that will boost their economies.

4.8.1 Town Development Fund

158 All three municipalities have projects under preparation or implementation with funding from the Town Development Fund (Table 6). Table 6 TDF projects in Biratnagar, Birgunj and Butwal

Town Project Cost (NRs m)

Status Included in STIUEIP?

Biratnagar Storm water drainage Phase 1(1) 118.3 Under implementation No

Bus park─Master plan and Phase 1 60.0 Under preparation No

Drainage plan Completed Yes

Birgunj Improvement of Meena Bazaar(1) 34.6 Under implementation No

Storm water drainage─Eastern 100.0 Under preparation Yes

Bus terminal 60.0 Under preparation No

Commercial centre at bus terminal 40.0 Under preparation No

Drainage─Main drain (study) Under study Yes

Drainage master plan Under study Yes

Butwal Bus terminal with shopping stalls(1) 69.9 Under implementation No (1) KfW programme. Source: TDF. 159 Some of these funds derive from the KfW German Development Bank. Under its Town Development Fund Project, Phase III, the Bank is providing €7.5m (equivalent to NRs789.9m) for urban economic and social infrastructure projects and renovation of municipal buildings damaged during the conflict period. TDF has to disburse the total amount by 2012, with 80 per cent of the funds available for loan financing and 20 per cent for grant finance.

160 GTZ’s Urban Development through Local Efforts (UDLE) project has provided institutional support to the Town Development Fund since its inception.44 TDF and UDLE staff regularly visit municipalities to appraise applications for loans and grants and advise on them on 44 GTZ, Deutsche Gesellschaft für Technische Zusammenarbeit, is owned by the Federal Republic of Germany. Its mandate is to support the German Government in achieving its development objectives. Germany is one of Nepal’s most important bilateral partners, and GTZ has maintained an office in Kathmandu since 1975. Current priority areas include local self-governance and civil society, renewable energy, health and family planning.


issues related to technical design, construction supervision, and maintenance of completed projects. UDLE has assisted TDF with the introduction of a project monitoring system, financial issues, and technical training.

161 The TDF projects complement the STIUEIP. STIUEIP does not include bus terminals, but the TDF is funding these in each of the project towns.

4.8.2 Projects supported by the Government of Indiance its inception

162 In terms of level of assistance, continuity of assistance, and record of success, India is by far Nepal’s most important bilateral development partner. India is also the bilateral development partner most relevant to STIUEIP.

163 Nepal has a 1,800 km border with India, and trade with India is vital to the economies of all three project towns. One of the main emphases of India─Nepal economic cooperation is on improving cross-border connectivity. A revised India-Nepal Treaty of Trade and Agreement of Cooperation to Control Unauthorised Trade was signed on 27 October 2009. The treaty aims at providing a more stable framework for trade, enhancing access for Nepalese primary and manufactured products to India, promoting investments, facilitating trade through simplification of procedures, mutual recognition of certificates and development of border infrastructure, and assisting Nepal in developing its capacity to trade. The earlier 1996 Treaty was a turning point in the trade relations between the two countries, resulting in a seven-fold growth in bilateral trade, and the new treaty will further boost trade.

164 Construction of two Integrated Check Posts at Birgunj-Raxaul and Biratnagar-Jogbani at an estimated cost of $4.5m is likely to commence soon and will greatly enhance people-to-people contact and trade. In addition, development of over 1,500 km of roads in the terai will provide improved urban-rural linkages. The concentration of India’s assistance in the terai, the fastest developing ecological region of Nepal, makes this assistance especially relevant to STIUEIP.

165 To improve rail connectivity between India and Nepal, India is constructing two more cross-border rail links. One of these is the 18 km Jogbani-Biratnagar link.45 The 108 km section Katihar to Jogbani was completed in 2008. The broad gauge line provides regular rail services to Kolkata and New Delhi.46

4.8.3 Strengthening Environmental Administration and Management at Local Level─Nepal

166 Strengthening Environmental Administration and Management at Local Level─Nepal (SEAM-N) is a project of the Government of Finland and the Ministry of Local Development (see Appendix A for details). The first phase of the project established local and regional environmental administration in Sunsari and Morang districts (Biratnagar lies in Morang district, but is also close to Sunsari district). The second phase of the project is extending activities to a wider area of the Eastern Region and promoting replication across Nepal within five to six years. Besides environmental administration by local bodies, of particular relevance to STIUEIP is the development by SEAM-N of a regional waste processing facility serving the Biratnagar-Itahari

45 Joint Press Statement on Official visit of Rt. Hon. Madhav Kumar Nepal, Prime Minister of Nepal to India (18-22 August 2009). 46 Prior to 2008, the railway to Jogbani was standard gauge. The broad gauge in India is 5 ft 6 in (1,676 mm) gauge. It is the most prevalent gauge in South Asia, stretching from Iran to Burma and from Kashmir to Sri Lanka. On broad gauge track, trains can carry double-stacked shipping containers on standard flatcars. Double-stacking containers is highly economic, and offers Nepal the prospect of a substantial reduction in freight costs. Most of China’s rail network is standard gauge, and for this and other reasons it is highly unlikely that transport corridors from Nepal’s northern border will ever be economically significant. By contrast, Nepal’s location on the broad gauge network of South Asia is central. It would benefit greatly from closer integration of the economies of South Asia.


corridor, a PPP regional laboratory, and a self-monitoring system for industry, and support for solid waste management in Biratnagar. The SEAM-N project in the Eastern Region is implementing an admirable approach to managing industrial pollution in the Biratnagar─Itahari corridor.

4.8.4 The Second Small Towns Water Supply and Sanitation Sector Policy Project

167 With the assistance of ADB, MPPW has commenced the $71.7m Second Small Towns Water Supply and Sanitation Sector Project (SSTWSSSP). Four aspects of SSTWSSSP have a direct bearing on STIUIEP: the scope and nature of the project, the Sector Efficiency Improvement Unit, the strengthening of DWSS regional offices, and the financing arrangements.

Sector Efficiency Improvement Unit

168 As part of SSTWSSSP, the MPPW is establishing a Sector Efficiency Improvement Unit in DWSS. A consultant will undertake the following work relevant to STIUEIP:

Policy Support for Water Supply and Sanitation

1. Review and development of proposals for amending relevant acts, policies, regulations, guidelines or their implementation arrangements.

2. Support implementation of the National Water Supply and Sanitation Sector Policy and establish monitoring and evaluation mechanism.

3. Support for the development of an umbrella Water Supply and Sanitation Act.

4. Support for the development of national standards, policies and guidelines for sewerage and wastewater management.

Benchmarking and efficiency improvement of service providers

1. Development of criteria for benchmarking and performance evaluation.

2. Collect relevant data, apply the approved criteria and produce periodic performance evaluation.

3. Institutionalize systems for dissemination of performance evaluations of service providers so that there is greater demand by citizens for better services.

4. Develop systems to encourage efficiency and better citizens’ service delivery by the service providers.

5. Institutionalize the systems for sustainable performance evaluation and rating.

6. Develop policy interventions for encouraging private sector participation supply to improve managerial efficiencies and

Water supply and sanitation sector coordination 1. Review programs/projects in terms of policies, priorities, institutional structures,

subsidies, implementation arrangements etc and suggest how to improve coordination and use of resources, and develop a uniform and Sector Wide Approach.

2. Suggest institutional arrangements to achieve better sector coordination and harmonization in financing and implementation modalities.

169 Since SSTWSSSP has already started, GoN is likely to have established a new policy framework for water supply, sanitation and wastewater management by the time STIUEIP commences.

Water Supply and Sanitation Divisional Offices


170 Under SSTWSSSP, the role of DWSS Water Supply and Sanitation Divisional Offices (or sub-divisional offices) is to provide technical support to water and sanitation users’ committees (WSUCs). It follows that the source of technical support to WSUCs and municipalities under STIUEIP will necessarily be the same. SSTWSSSP is providing capacity building support to the Water Supply and Sanitation Divisional Offices. SSTWSSSP includes sewerage, stabilization ponds, public awareness programs, public toilets, sludge drying beds and other facilities like those proposed for STIUEIP.

Financing arrangements

171 As an ADB-assisted project with similar components, SSTWSSSP has implications for the financial arrangements for STIUEIP. The investment cost of SSTWSSSP is estimated at $71.7m, including taxes and duties of $7.5m. The ADB is providing a grant of $45.1m to finance 62.9 per cent of the total cost. The GoN will lend a portion of the grant, estimated to be about $17m, to the TDF at a proposed interest rate of 2%–3% per annum with no less than 20 years maturity, including a grace period of 5 years. The TDF will on-lend the funds to WSUCs at an interest rate not exceeding 5 per cent per annum with a maturity of 20 years including a grace period of 5 years. The balance of the grant amount (about $28m) will be channeled through the GoN as a grant portion, to be used for subproject investment costs, consulting services, and other costs. All payments received from the TDF under the subsidiary loan agreement will be used for country poverty reduction programs. The TDF will be responsible for:

Assessing the financial sustainability of subprojects;

Examining the subproject costs in connection with the repayment capabilities of the WSUCs;

Recommending and monitoring tariffs to cover O&M expenditures, debt service payment, and replacement and future expansion;

Providing training in tariff setting, bookkeeping, accounting, and financial management to members and/or employees of WSUCs;

Disbursing and collecting loans.

172 Despite the considerable responsibilities that SSTWSSSP lays upon TDF, it provides no technical assistance to TDF to improve the execution of these responsibilities. It relies on the knowledge that TDF has been strengthened by gaining experiences from KfW grants and the STWSSSP, and the presumption that the UDLE project will continue to provide technical support.

4.8.5 TA 7355-NEP Institutional Strengthening of Municipalities

173 The purpose of the proposed ADB Institutional Strengthening of Municipalities TA is to improve financial management, revenue collection, and capacity to deliver urban services in four municipalities: Kathmandu and the three STIUEIP municipalities. The TA will last eighteen months and is intended to precede STIUEIP. It will have three components.

Financial management system

174 The financial management system component will include review of the financial management, revenue administration, types of tax and non-tax revenues, introduction of the integrated property tax, collection levels and efficiency of taxes and non-tax charges, valuation methods, staff capacity, potential for revenue enhancement etc, accounting and audit practices, and level of computerization.

175 Based on the review, the TA will identify opportunities for increasing revenues. A comprehensive financial management improvement plan, including revenue enhancement measures will be recommended in consultation with each municipality. After obtaining endorsement from the municipality, the consultant will help implement the plan and staff capacity


development programs.

Strengthening technical capacities

176 It is essential that urban services are provided in a sufficient and cost-effective manner. This component aims at developing technical capacity of relevant officials and central government departments in respective sectors in the fields of overall infrastructure planning, sector planning, project management and effective and efficient operation and maintenance for urban service delivery. Capacity development programs will include classroom sessions, on-the-job training, and exposure visits, and may be implemented directly by the consultant or out-sourced to an appropriate and capable third party.

Geographic Information System (GIS)-based urban mapping

177 A complete GIS-based municipal information system will be developed at scales of 1:2,500 for urban areas and 1:5,000 for the remaining areas. The map layers will show administrative boundaries, contours, land use, transportation infrastructure, utilities infrastructure, various buildings and cadastral data.47 Consultants will undertake socio-economic survey (100% coverage), develop cadastral information and establish effective house and street address system. Software customization will link the GIS-based maps with the taxation system. Capacity development programs will institutionalize and optimize the use of GIS-based urban maps for tax mapping and recording, land use planning, and public works engineering.

4.8.6 North South Fast Track Project

178 The TYIP includes initiating construction of an alternative highway to connect the Terai with the Kathmandu valley, the so-called Kathmandu─Terai Fast Track project. Consultants completed a feasibility study and preliminary designs for this highway in May 2008. 48 They estimated the cost of a four lane road at $922m, and a two-lane road at $595m (in both cases including land, consulting services, physical and price contingencies). The estimate for the two lane road included works essential for facilitating future upgrading to four lanes.

179 Despite the high cost, the distance saving of 150 km and time saving of over four hours for through traffic and the poor state of the Tribuvan highway gave a very high economic internal rate of return (EIRR) for all alignments studied. When built, the road will be a significant boost for Birgunj. The ADB has stated that as part of the Country Partnership Strategy it will endeavor to support the conclusion of a PPP for the construction of the road.49 The project is also part of the ADB’s Regional Cooperation Operations Business Plan for South Asia.50

4.8.7 Local Governance and Community Development Programme

180 The Local Governance and Community Development Programme (LGCDP) is the first phase of a longer term program of support to local government and community development (Appendix A). Among other things, the LGCDP will transform the financial relationships between the central government and local bodies (see Volume 14).

47 Unfortunately, the cadastral data may be difficult to capture at these scales or at any scale. The available cadastral maps are more than twenty years old. The effective use of cadastral maps will need to wait for reforms in land administration. The ADB TA Consultant’s Report, Nepal: Strengthening Land Administration Services, 2007, recommended reconsideration of the principle of multiple parcel information, and recommended that agencies other than the Ministry of Land. Reform and Management should use base maps developed by the Ministry that showed only boundary lines and parcel numbers. 48 ADB TA 4842-NEP, 2008, North South Fast Track Project. Final Report. Oriental Consultants Co. Ltd in association with ITECO, Kathmandu and NDRI, Kathmandu. 49 ADB, 2001, Nepal: Country Partnership Strategy 2010: 2012. 50 ADB, 2008, Regional Cooperation Operations Business Plan: South Asia 2009-2010.


4.9 Implementation arrangements

4.9.1 Project management

181 The MPPW will be the executing agency for the project, acting through DUDBC. The three municipalities will be the implementing agencies. Subject to confirmation by the ADB and the GoN, the loans to municipalities will be channeled through the TDF.

MPPW

182 The MPPW will constitute a project steering committee (PSC) and a technical committee for the project.

183 The members of the PSC will be as follows:

MPPW: Secretary (chair) and Joint Secretary

DUDBC: Director General; Deputy Director-General, Urban planning; Deputy Director-General, Housing; Project Manager, STIUEIP (secretary)

DWSS: representative

MoF: representative

MLD: representative

MoH: representative

TDF: Chairman

MuAN: Chairman

184 The PSC will be responsible for:

Overseeing project implementation.

Ensuring coordination between all stakeholders.

Reviewing project audits and ADB mission reports.

185 To ensure that cooperation between agencies is effective, the GoN and ADB will required that agencies represented in the PSC provide written assent to the tender document for any contract with an expected value of over $1m prior to its issue.

186 Until the award of all of the key implementation contracts, the PSC will meet at least once every two months, and then as often as necessary. The key implementation contracts will be not less than the design and supervision contracts for each component.

187 The membership of the technical committee will comprise officer-level representatives of the same organizations that comprise the steering committee.

DUDBC

188 DUDBC will establish a Project Coordination Office (PCO). It will have the following responsibilities:

(i) Acting as secretariat to the PSC and advising the PSC on priorities,

(ii) Advising PSC on selection criteria for bidders for consulting and construction contracts

(iii) Managing the bidding process for project components

(iv) Developing and implementing financial control systems and procedures, and reporting financial performance to PSC in accordance with ADB standards and procedures.


(v) Assisting with quality controls and inspections of work being undertaken

(vi) Initiating action in the event of unsatisfactory performance

(vii) Monitoring and reporting project outputs and outcomes to the PSC,

(viii) Disbursing project funds

(ix) Monitoring compliance with any conditionalities

(x) Monitoring procurement by

(xi) Monitoring local contributions to project costs

(xii) Arranging external audits as required

(xiii) Organizing training and capacity development for municipality staff on a range of relevant issues.

TDF

189 The role of TDF in project implementation will be similar to that on SSTWSSSP. The TDF will be responsible for the financial sustainability of subprojects. It will (i) examine the subproject costs in connection with the repayment capabilities of the municipalities; (ii) monitor the property tax collections; (iii) disburse and collect loans. The TDF may, in consultation with the DUDBC, send the records of payment and/or repayment from WSUCs and the performance of local governments as a facilitator to the Ministry of Local Development (MLD) to seek necessary support from the ministry. Volume 14 contains an assessment of TDF.

Municipalities

190 The arrangements for project implementation at the municipal level will be in accordance with The Local Self-Governance Act. Each municipality will delegate implementation responsibilities to a Project Management Committee (PMC). Section 264 of the Act permits this delegation. The membership of the Committee will as a minimum include:

Executive Officer (Chair)

Section chiefs

Chief of the DDC Environmental Section

Representatives of divisional offices of DUDBC, DoR, DWSS

Representative of the District Education Office

191 The Executive Officer will designate certain staff of the municipality to constitute a Project Implementation Unit (PIU). PIUs will be responsible for municipal performance as follows:

(i) Developing bidding documents, and submitting these for approval of the PMC and the PSC

(ii) Ranking proposed bidders, and recommending selection to the PMC and, where appropriate because of the values involved, the Project Steering Committee

(iii) Oversight of project design

(iv) Supervising consultant contracts and construction contracts.

(v) Projecting future operations and maintenance requirements, including costs and staff requirements

(vi) Initiating remedial action in the event of unsatisfactory performance by contractors

(vii) Maintaining adequate financial accounts and records, and


(viii) Making due payments in a timely manner.

(ix) Reporting progress against targets, including percentage of work completed and funds expended.

(x) Assisting with monitoring and evaluation.

192 The PCO will encourage PMCs to request GoN to depute additional staff when a PMC considers it needs special assistance. In accordance with section 127 of the Local Self Governance Act the Executive Officer will sign all contracts. Volume 9 gives more detail on the implementing arrangements for municipalities.

User committees and tole lane organisations 193 To the extent possible, PMCs will implement the project through users’ committees. In particular, where possible users’ committees will participate in the implementation of parts of the sanitation programs, solid waste collection and lane improvements. However, user committees and tole lane organizations (TLOs) will not be eligible for assistance under the project unless the participation of women is on committees is at least 25 per cent (under the Local Self-Governance Act, at least one of four ward members must be a woman). Two representatives (one male, one female) of each users’ committee and TLO will together constitute a Community Task Force. Volume 2 gives more detail on the roles of user committees and TLOs in implementing the project.

4.9.2 Implementation period

194 The project will be implemented over five years (2011-2016)

4.9.3 Advance actions

195 To expedite project start-up, the GoN and municipalities will need to initiate several significant tasks.

Water quality warning to residents

196 The PPTA water quality survey revealed that sources of drinking water in each municipality are not safe to drink. The municipalities must warn residents.

Formation of joint committees of local bodies

197 For the Butwal and Birgunj sub-projects, joint committees of local bodies are essential to confirm the selection of sites for regional solid waste processing facilities and to improve control of industrial pollution. The GoN should finance a program of monitoring of water quality in the main water courses passing through the local bodies. The experience of UEIP is that such committees should be formed as early as possible (Appendix C).

Land acquisition

198 Municipalities should confirm the sites for wastewater treatment plants and commence land acquisition procedures. They should commence land acquisition procedures for the regional waste processing facilities as soon as the joint committees have confirmed the site selection.

Preparation of Environmental Impact Assessments

199 Once land acquisition procedures have commenced, the municipalities should commission environmental impact assessments (Volume 7).

Urban planning

200 In each municipality, it is essential that urban planning precede detailed design of the Drainage and Sanitation component and the Roads and Lanes component.


Regulations on health care waste

201 There is a need for MoE to introduce regulations for health care waste. These could be modeled on the Indian ones, and GoN should consider asking the Government of India to assist with drafting appropriate regulations.

202 Alternatively, each municipality can make bye-laws regarding health care waste. Under section 96 of the Local Self-Governance Act, municipalities have extensive responsibilities in relation to health care facilities.

Reconsideration of allocation of departmental responsibilities for urban roads

203 The GoN should consider re-allocation of responsibilities for urban roads from DoLIDAR to the DUDBC. The DUDBC has greater technical resources to support policy formulation for urban roads. As municipal road networks expand there will be an increasing need for national standards on the design of urban roads and the classification of urban roads.

Policy framework for squatters

204 For effective implementation of the project, it is desirable that there be national policies in place for the management of squatter settlements and the delivery of services and infrastructure to them. DUDBC is the responsible GoN department. The Interim Constitution provides that:

205 The State shall pursue a policy of making special provision on the basis of positive discrimination for the minorities, landless, squatters, bonded labourers, persons with disability, backward communities and sections, and the victims of conflict, including women, Dalits, indigenous tribes, Madhesis and Muslims.

206 In December 2009 the cabinet decided to form a 13-member Commission on Resolving Problems of Landless Squatters.51

4.9.4 Procurement

207 Procurement will be carried out in accordance with ADB’s Procurement Guidelines. The civil works contracts, which will include the technical operation of systems for one year after completion of the construction, will be made for each municipality, combining drainage and sanitation facilities. Civil works contracts valued at more than $1m equivalent and equipment contracts valued at more than $500,000 will be undertaken through international competitive bidding procedures, while civil works contracts valued at $1 million equivalent or less and equipment contracts valued at $500,000 or less will be procured following national competitive bidding procedures generally in accordance with the Government’s Public Procurement Regulations (2007) and Public Procurement Act (2006) and acceptable to ADB. Packages valued at $100,000 or less will be procured under shopping procedures.

4.9.5 Consulting services

208 The Executing Agency and Implementing Agencies will recruit consultants in line with ADB’s Guidelines on the Use of Consultant Services. The consultants will (i) support project management, monitoring, and evaluation by the PCO; (ii) carry out community mobilization work in low income communities, (iii) carry out design and construction supervision for individual project components, including monitoring for safeguards compliance; and (iv) provide training and capacity development programs for municipalities and other local institutions on environmental. social, financial, technical, and managerial aspects. The design and construction supervision program will include awareness programs services.

209 To the extent possible, the municipalities will engage appropriate contractors for the community mobilization work for the Drainage and Sanitation Component, including conducting

51 The Himalayan Times, 9 December 2009.


socioeconomic surveys, providing health and hygiene education, and implementing the Gender and Social Inclusion (GESI) action plan (Volume 6), supporting the implementation of communal water supply facilities and private sanitation facilities with output-based aid (OBA, Volume 2), and assisting with the implementation of resettlement and rehabilitation plans. The municipalities will engage appropriate contractors by using selection criteria including (i) experience of community mobilization relevant to the project objectives, (ii) ties with the project town, (iii) financial integrity, and (iv) a record of proven competence in group formation.

4.9.6 Accounting, auditing and reporting

210 The DUDBC will provide ADB with quarterly progress reports on project implementation. It will prepare information on the Project's physical progress and status of project management, and consolidate them with other issues and submit a combined report to ADB within 1 month of the end of the applicable period. Within six months of physical completion of the Project, the DUDBC will submit to ADB a project completion report.

211 Financial management assessments of the DUDBC and TDF show that they have satisfactory financial management arrangements and project accounting systems in place, gained through experience of working on ADB and GTZ projects. The DUDBC will maintain separate project accounts and records to facilitate identification of all goods and services financed by the grant proceeds and counterpart funds. The PCO will have suitably qualified accountants. The auditor general will each year audit the consolidated project accounts and related financial statements. Within nine months of the end of each fiscal year, the GoN will submit audited reports, related financial statements and a separate audit opinion on the use of the imprest account and the Statement of Expenditure procedure. The TDF will be subject to annual audit by auditors acceptable to ADB, and will submit to ADB a copy of the audited statements of project accounts and financial statements within 9 months after the end of each fiscal year. Furthermore, ADB reserves the right to verify the financial accounts of the DUDBC and TDF to confirm that the share of ADB’s financing is used in accordance with ADB’s policies and procedures.

4.9.7 Performance, monitoring and evaluation

212 The PCO will establish a PPMS in line with ADB guidelines. The system will ensure that the implementing agencies implement and manage project components efficiently and in a manner that maximizes the environmental health benefits. Under the guidance of the SEIU, the PCO will conduct a benchmark survey for the towns and submit for ADB's review and concurrence an implementation plan for monitoring performance and preparing benchmark information within 9 months of loan effectiveness. Consultants will conduct these baseline surveys in accordance with the Project design and monitoring framework (Appendix J). After the initial surveys, the PCO will commission consultants to conduct annual monitoring and evaluation reports and make these available to ADB and the Project Steering Committee as well as posting them on the DUDBC website.

213 The SEIU will establish performance indicators for water and sanitation service providers (under SSTWSSSP, see section 4.8.4). There are no standard performance indicators for road authorities or for providers of waste management services.


5 Project benefits, assumptions and risks

5.1 Expected benefits and outcomes

214 By the end of the project in 2016, the population of the three municipalities is likely to be about 600,000 (Appendix H). The entire populations of the municipalities will be beneficiaries. Visitors to each of the three municipalities will also be beneficiaries.

5.1.1 Benefits of the Drainage and Sanitation component

215 Sanitation services, such as on-site sanitation (private latrines), public toilets, wastewater collection and treatment facilities, and storm water drainage, will also be provided in Biratnagar and Birgunj through an integrated approach. About 25,000 additional households will have improved sanitation facilities by the end of the Project. Supplemented by community mobilization and health and hygiene awareness programs, the Project will bring significant health benefits, to be measured by the reduction in the occurrence of waterborne, water-washed and vector-borne diseases.

216 The economic analysis of the Drainage and Sanitation component found it to be economically viable (Volume 8). These subprojects have also been found to be financially sustainable. The financial analysis found that the sewerage charge to cover operation and maintenance costs and loan repayments throughout the project period would be within 3 per cent of the monthly income, even for poor households.

5.1.2 Benefits of the Solid Waste Management component

217 The entire population of Birgunj and Butwal will derive health and amenity benefits from the Solid Waste Management component. There will be a reduction in vector-borne disease. The improvement in solid waste collection will enable the drainage system to perform better. The rehabilitation of rag-pickers, children among them, will give these people better quality jobs or education. The collection and safe disposal of health care waste will remove a hazardous waste from the municipal waste stream where it contributes to the spread of disease.

5.1.3 Benefits of the Roads and Lanes component

218 The Roads and Lanes component will directly benefit the entire municipal populations. The benefits will comprise better access to their homes or property, and better drainage. The works will improve safety for pedestrians and reduce vehicle operating costs.

5.1.4 Benefits of the PPP component

219 The major benefit of the PPP component will be private sector investment in urban facilities, and the relief that this provides to municipal budgets.

5.1.5 Gender equality and social inclusion

220 The project will implement a GESI Action Plan (Volume 6) to address different impacts on, and needs of, women, the poor, and vulnerable groups. Gender mainstreaming in overall project planning, implementation, and monitoring and evaluation processes will be effectively applied for gender-responsive service delivery. Women will directly benefit from the Project in terms of their participation in user committees and in decision-making processes.


5.2 Environmental safeguards

221 The initial environmental examinations have shown the likely adverse environmental impacts to be negligible. However, because of the scale of the project components in each town is such that under Nepal’s relevant regulations there will be a need to prepare environmental impact assessments for the Drainage and Sanitation component in all three municipalities and for the Solid Waste Management component in Birgunj and Butwal. Preparation of these assessments cannot commence until the municipalities confirm the site selection and land acquisition arrangements.

222 In the case of Butwal, the municipality insists that the site for the regional solid waste management facility to be at Tamnagar in the west of the municipality (Volume 3). This site is forest land. Regulations state that use of forest land for a project is only permissible if there are no other alternatives. Since there plainly are alternatives, it is not possible to proceed with environmental and social safeguard assessments of the Tamnagar site. If the Government approves the Tamnagar site, Government regulations require the planting of 25 trees for every tree removed. Thus, it will be necessary to plant 125,000 trees. Fortunately, the Chapala Forest Users Group is one of the largest, with 1624.5 ha. It ought to be possible to find locations within this area to plant the trees and thereby ensure that the project does not adversely affect the livelihoods of members of the group.

5.3 Social safeguards

223 Alternative sites have been considered for all land acquisition requirements. The proposed land acquisitions will involve very little involuntary resettlement. There will be no adverse impacts on indigenous people except possibly at the regional waste processing site near Birgunj. This could displace a few indigenous families (Dhanuk); the impacts could be minimized detail project design may permit minimization of the impacts by moving a little further from the present relevant (squatter) settlements.

5.4 Assumptions and risks

224 The project faces many potential risks. To consider how best to mitigate these risks, it is helpful to divide them into three groups:

1. Risks that can be brought under the control of the project.

2. Risks that depend on GoN decisions or action.

3. Risks associated with uncontrollable events.

225 All the possible mitigation measures that this section discusses would increase the cost of the project or increase the necessary grant proportion if the GoN and the ADB decide to adopt them.

5.4.1 Risks that can be brought under the control of the project

Possible difficulty in distributing compost to farmers

226 The Solid Waste Management component will produce large quantities of compost. The only potential market large enough to absorb the compost in these quantities is the farming market. However, there is no significant use of municipal compost by farmers and the Government subsidizes chemical fertilizer. To establish a market for compost among farmers will require initiatives by the Government, district development committees, the municipalities and the Municipal Association of Nepal. Even if the compost is given to farmers for free, it is still beneficial in terms of avoiding the cost of disposing of organic waste on the landfills.


Local community opposition to treatment plants and waste processing facilities

227 Local community opposition to sewage treatment plants significantly delayed implementation of UEIP, and led to additional work in finding new sites for plants. In one instance the Office of the Special Project Facilitator at the ADB received a complaint from a CBO. The opposition came not from affected persons but people living in the vicinity of the proposed plant locations. Participants at a subsequent ADB workshop emphasized that the project design had not adequately assessed the capabilities of the project coordination office and the project implementation units to implement social and environmental safeguards.52 It is likely that similar problems will emerge with STIUEIP. Biratnagar and Birgunj are much larger than the UEIP towns, and there is less choice regarding feasible locations for facilities.Technical considerations more or less dictate treatment plant sites.

228 To mitigate these risks as far as practicable, the design of the project generally provides benefits to host communities in terms of improved road access and other project interventions. The exception to this is the proposed Tamnagar landfill site. PADECO does not recommend, and advises against the Tamnagar site. In the event that the project proceeds with Tamnagar, it may be possible for the proposed water supply component of the project to provided water supply benefits to the Tamnagar area.

Inability to afford the cost of acquiring sites for treatment plants

229 The cost of acquiring sites for treatment plants and waste processing sites is very high.

230 Topography largely dictates the location of treatment plants. To avoid pumping costs and the cost of constructing long transmission mains, the sites have to be close to the area served and these means land costs are high. The proposed sites at Biratnagar and Birgunj represent the least cost solutions.

231 In the case of the Birgunj solid waste processing site, it would be possible to reduce the cost of acquisition and associated road works substantially by adopting the site that PADECO recommends at Kalaiya. However, the municipality is concerned about the risks of access to Kalaiya being blocked by local protestors and is willing to accept the higher cost of a site adjoining the municipality boundary.

Communal management of public toilets

232 There are insufficient public toilets. Both Biratnagar and Birgunj receive large numbers of visitors, and public toilets are also required in the main markets. There is a risk that communal management of public toilets may not work. However, there are examples of successful management of toilets by users committees or community groups. To mitigate these risks, sufficient funds have been allocated for community mobilization work.

No source of technical support in respect of urban roads

233 DoLIDAR is responsible for providing technical support to municipalities in relation to urban roads. However, in practice it does not provide this support. The Department of Roads has more technical resources and ones more relevant to urban roads than does DoLIDAR but does not have the responsibility. Municipalities rely on consultants. Applications by municipalities for grants from Roads Board Nepal for road maintenance pass through DoLIDAR, but DoLIDAR merely acts as a post box. The absence of technical support threatens the satisfactory maintenance of roads that the project upgrades. The absence of an active agency for urban roads hinders the development of national standards for urban roads. As urban road networks expand, the need for national standards and for technical support to municipalities will increase.

234 Since the project towns are all in the terai, it is not appropriate that the project be a

52 ADB, 2008, The Urban and Environmental Improvement Project: Learning from an Ineligible Complaint in Nepal.


vehicle for developing national standards. The absence of national standards has contributed directly to some of the environmental problems in the project municipalities. In Birgunj, the Department of Roads built a new bypass road to rural standards; there are inadequate culverts and drains for the urban situation and the road acts as a dam causing regular local flooding to large parts of the commercial area.

235 To mitigate the risks, GoN could review the allocation of responsibility for technical support. The most sensible arrangement would be for the GoN to allocate responsibility to DUDBC.

5.4.2 Risks that are dependent on GoN decisions

Lack of participation by women and vulnerable groups

236 The Local Self-Governance Act guaranteed women and vulnerable groups a minimum level of representation in municipal councils. In the absence of the elected councils, there is no guaranteed representation of women and vulnerable groups in the taking of decisions by the implementing agencies. No women participated in any meetings in the municipal offices during the PPTA. The proposed GESI plan for the project (Volume 6) can at best mitigate to some extent the lack of participation by women and disadvantaged groups. It cannot replace the lack of political representation in the absence of elected councils.

237 The project implementation arrangements include special measures to ensure participation of women. The design of each of the project components is such as to ensure that vulnerable groups benefit from the project component.

Inadequate legal powers

238 Municipalities may not have adequate legal powers under the Local Self-governance Act to implement the Drainage and Sanitation Component. While the Act mandates municipalities to provide (or arrange through others) the provision of drainage and sanitation services, its provisions are very general and there is a lack of specific powers in relation to works on private or GoN property. By contrast, the NWSC has more specific powers in relation to the construction and management of sewerage under the Nepal Water Supply Corporation Act (1989). Whether or not inadequate legal powers will be a problem will not be clear until the detailed design stage of the project. If at that stage it is evident that there is a problem, then the municipality can negotiate with the NWSC.

Extension of SWMRMC mandate

239 The role of SWMRMC is dependent on a GoN decision to extend its mandate outside Kathmandu Valley.

Lack of control of industrial effluents

240 The poor water quality of water courses that pass through or adjoin the municipalities is due to industrial effluents and other upstream discharges as well as the municipal discharges. Investment in municipal wastewater treatment plants will not reap all the potential benefits if industries continue to discharge untreated effluents. Only political will at all levels of government can change this, along with interventions along the lines of the SEAM-N project.

241 Under the Local Self-Governance Act, the DDC is responsible for environmental protection. The proposed implementation arrangements for the project include that the chief of the DDC environmental section will be a member of the PMC.

Lack of ownership of the project by the municipality

242 The priorities that municipalities have expressed through the Executive Officers and the All Party Committees do not mention slums, squatter settlements, waste water treatment, industrial pollution and some other critical environmental issues. The all-party committees exclude women and express views at variance with the views of the community as revealed by


the focus group discussions. Butwal and Biratnagar municipalities have submitted letters with similar texts stating that they will find it difficult to accept ownership of the project (Appendix O).

243 The municipalities have no interest in wastewater treatment or improving the water quality of water courses. The dumping of solid waste in water courses is but one example of this attitude. The problem is countrywide. The GoN has to take steps to change attitudes. It should consider asking the ADB to finance wastewater treatment plants at Pokhara to reverse the adverse consequences of earlier ADB-funded projects that have led directly to the deterioration of Phewa Lake.

Risk that municipalities will default on loans

244 There is a high risk that the municipalities will default on loans. There is no record of municipalities re-paying sub-loans on ADB projects, only a record of default (Kathmandu municipality and Pokhara municipality). TDF has expressed concern about this risk of default in the event that GoN and ADB decide to channel sub-loans through it.53 Channeling loans through TDF should reduce the risks of default in that TDF is at arms’ length from the Government and therefore less susceptible to political direction. However, if the sub-loans are channeled through TDF, there is the risk that loan defaults by municipalities could lead to the collapse of TDF. The sub-loans would amount to a large proportion of TDF’s loan portfolio, perhaps as much as 40 per cent. This implies a substantial increase in TDF workload and responsibilities. The GoN should consider asking the ADB for a TA to increase the capacity of the TDF (see Volume 9).

245 It is too early to know whether UEIP municipalities will commence repayments once their grace periods expire. It seems doubtful. Pokhara municipality, a rich municipality, did not repay the loans under the ADB Tourism Development Project and Second Tourism Development Project. Kathmandu municipality did not repay the loan for the Kathmandu Urban Development Project. These defaults occurred in times when municipalities had greater financial strength than they have now. In constant price terms, the revenues of Biratnagar, Birgunj and Butwal are declining year by year. Meanwhile the obligations of the municipalities are steadily increasing as the population grows.

246 The design of the project has attempted to minimize the risk of default by concentrating on investments for which grant finance is appropriate. However, the municipalities, DUDBC, the municipalities and ADB have pressed the consultant to include ―revenue generating facilities‖ in the project. This would greatly increase the risks of loan default because the sub-loans would necessarily be much larger.

247 The Town Development Fund Act (1997) authorizes TDF to incorporate, when concluding a loan agreement with a municipality, such terms and conditions in the agreement as TDF deems necessary for the protection of its interests. Accordingly, TDF may at its discretion take collateral from a municipality against a loan.54 If any municipality breaches the terms and conditions of the agreement by e.g. deferring repayment of principle or payment of interest or amounts due in advance, then TDF is empowered under Article 11 of the Act to realize its dues either through seizure and use of the collateral property in rent or in lease or by selling the property through auction or tender or direct negotiation. Where any property of a municipality is seized and sold off under this procedure, the amount municipality. If, despite repeated efforts, a property cannot be sold off or only be sold off at an offered amount not in the interest of TDF, then TDF may acquire the property itself at a price fixed as per the prevailing GoN rules.

248 Section 147 of the Local Self-Government Act permits municipalities to pledge property

53 Sushil Gyewali, comments at Steering Committee, 11 October 2009. 54 In the case of UEIP, the GoN gave an assurance that the municipalities would provide ―appropriate and adequate collateral‖ to secure their obligations under the subsidiary loan agreements. This has not been done.


as security for loans.

Restoration of elected municipalities

249 In some countries, the ADB supports local governments that are not elected. Moreover, non-elected governments can be more pro-poor than elected ones (compare the performance of Vietnam and Pakistan in poverty reduction over the last twenty years). Many projects under non-elected governments have been successful. The risk to the project lies not in the fact that there are no elected municipal bodies in Nepal, but in the possible consequences of a transition from non-elected to elected municipal boards. There is a high risk that elected bodies will repudiate the decisions taken by non-elected bodies including the taking out of loans. By the time the grace period on loan payments expires, the municipalities would have received all the grants. However, this is a worst case scenario. Once a new constitution is promulgated, local elections are likely to follow quickly; the balance of probability is that there will be elected local bodies before the start of the project.

Lack of continuity in Executive Officer positions

250 Executive Officers of municipalities change positions frequently. The Civil Service Act (1993) provides for a two year posting. However, the Act also specifies several circumstances in which an officer can move to a new posting before two years are up. Executive officers rarely complete two years. New appointments do not follow immediately on transfers. The GoN has no means of enforcing longer postings without amending the Civil Service Act.

251 DUDBC’s record of Project Manager continuity is good in comparison; this should mitigate to some extent the adverse impacts of frequent changes at the municipal level. However, the best approach to mitigating the risk of frequent changes in Executive Officer is to make the implementation arrangements as little dependent on the Executive Officer as possible. If the GoN adopts the arrangements that section 4.8.1 proposes, the impact of changes in Executive Officer should be small. The GoN should undertake that it will immediately replace any departing Executive Officer.

Corruption

252 In Nepal, corruption in infrastructure provision and service delivery at the municipal level is on the rise.55 Corrupt practices at the various stages of municipal service provision have a detrimental effect on poor communities. The poor cannot afford the payoffs necessary to obtain services. Solid waste management rarely extends to poor neighborhoods. Leakage in revenue collection affects the financial position of NWSC and reduces the prospect of services in poor neighborhoods.

253 The experience of the ADB in promoting good governance in Nepal by combating corruption, improving public service delivery, and strengthening capacity has been mixed.56 ADB tried to help reform governance and strengthen anticorruption measures with a TA supporting anticorruption legislation, the establishment of vigilance centers and a personal information system for civil servants, procurement laws, and public financial management. However, there are still issues regarding the capacity of the National Vigilance Center, the Office of the Prime Minister and local bodies to implement the anticorruption strategy. Political instability has created further difficulty in addressing weak governance and corruption.

254 The designs of the Drainage and Sanitation component and the Solid Waste Management component will ensure that poor neighborhoods get services under the project. The small number 55 Purusottam Man Shrestha, 2007, Corruption in Infrastructure Provision and Service Delivery at the Municipal Level in Nepal. A case study. Water, Engineering and Development Centre, Loughborough University, Leicestershire. 56 ADB, 2009, Nepal: Delivering Assistance in a Challenging Environment


of contracts will reduce opportunities for corrupt practices but will not eliminate them.

255 The GoN has taken measures to combat corruption, but they have not been effective. Additional measures that GoN could consider are: (a) making municipal officers more accountable to the public (rather than just to their supervisors), (b) more disclosure of information, (c) improving pay, (d) stopping the practice of transferring officers to ―close‖ cases of corruption, and (e) improving systems of reward and punishment in local government.

5.4.3 Risks associated with uncontrollable events

Security situation in the project towns

256 Security incidents are comparatively frequent in Birgunj and Biratnagar as compared with other towns (Appendix K). However, this state of affairs has persisted for several years and it has not prevented the ADB from completing a project in Birgunj. Security incidents, road blockages, and transport strikes can delay project implementation, but so can changes in project officials, budget constraints, lack of institutional capacity and land acquisition.

257 Under section 247 of the Local Self-Governance Act, the police must respond to any request by a municipality for assistance in implementing a decision.

Political instability

258 Political instability is one of the main causes of Nepal’s poor development performance.57 The Maoists won a landslide victory in the 2008 Constituent Assembly elections. However, the resignation of the Prime Minister on 4 May 2009 over differences with other major political parties created a vacuum in political leadership that lasted until the election of a new Prime Minister on 23 May. Since July, the government has comprised an unwieldy coalition of 23 parties headed jointly by the Unified Marxist Leninist party and Nepali Congress has been in power. The government is the eighteenth since 1990. The main challenges for the Government in the short term are sustaining the peace process, drafting and introducing a new constitution, and integrating peace into the development process. Since the election of the new Prime Minister, growing political differences between the Maoists and other key political parties have brought normal parliamentary business almost to a complete halt. The budget has not been passed, leading to wide spread distribution of normal government business, and to adverse equipment imports. It is not realistic to expect any legislation relating to the urban sector until after promulgation of a new constitution.

259 For some time, Nepal’s development partners have been expressing their concern over the political instability and the threat it poses to the peace process. Nepal is highly dependent on foreign aid, especially for its development programs; the political deadlock could shake the confidence of donors. Quite apart from the impact on confidence, the political deadlock impedes project implementation and thereby foreign aid utilization. Numerous changes in key officials and personnel also make it difficult to maintain the momentum of projects. Foreign aid makes up nearly 28 per cent of the GoN budget,58 so the impact of continued political instability on the economy would be severe. However, as of mid-July 2009, foreign aid commitments for the current fiscal year 2008/2009 totaled NRs47,000m as compared with NRs34,608m in 2007/2008.59

Collapse of market for carbon credits

260 In the event that GoN decides to seek funds for the project through the Clean Development Mechanism, there would be a risk associated with the collapse of the market for 57 ADB), Department for International Development, and International Labour Organization, 2009, Nepal: Critical Development Constraints. 58 TYIP total expenditures, recurrent, capital, and principal repayment. 59 Minister of Finance budget speech, July 2009.


carbon credits. There are strong indications that the market will stay extremely weak for some time to come.

Global financial crisis

261 The global financial crisis could affect Nepal by substantially reducing overseas remittances. Nepal is very dependent on remittances. It is too early to tell whether remittances will fall or by how much. However, by the time of appraisal there should be clear evidence one way or the other as to the probabilities of these risks eventuating.

Earthquakes

262 Nepal is very much at risk from earthquakes. Birgunj and Biratnagar lie outside the most seismically active zone while Butwal is on the edge. Depending on its severity, an earthquake could disrupt the operation of sewage and drainage systems, including treatment plants. Pumping stations would be susceptible to damage to the electrical systems and to the equipment as a whole. Disruption of road traffic could make it difficult to undertake emergency repairs.

263 Nepal has no codes for the earthquake-resistant design of utilities, and few countries do.60 In respect of earthquake risks, utilities differ from buildings in that they are networks. Damage to a single element of the network can render the entire network inoperable. It is therefore important to consider at the design stage how best to mitigate earthquake risks during the detailed design stage of the project having regard to (1) codes in other countries for design of underground utilities and (2) .

Flooding

264 All three towns have a degree of flood risk, although the risk to project infrastructure is greatest in Biratnagar. Pumping stations and the treatment plant could suffer damage to electrical equipment and to structures through settling. Designs can incorporate some mitigation measures.

5.4.4 Conclusions: possible changes to the project design

265 The need for the project is urgent. However, taking all the risks into account, the project is barely feasible and requires significant risk management (Table 7 and Figure 2). It is not possible to reduce the risks by shrinking the size of the project. Building half a sewage treatment plant makes no sense.

60 For details, see the website of the International Association for Earthquake Engineering, http://www.iaee.or.jp.


Table 7 Summary of risks

Potential for management

Stage of implementation

Before loan effectiveness

Design Construction Operation and maintenance

Risks that can be brought under the control of the project

Local community opposition to land acquisition Inability of municipalities to afford land acquisition

Community management of project facilities will not work

Lack of local ownership Lack of local ownership

Lack of local ownership


Risks that require decisions by GoN to control

Lack of local ownership Lack of local ownership



Difficulty of disposing of compost to farmers.

Lack of progress with decentralization reforms








No source of technical support in relation to urban roads




Inadequate legal powers

Insufficient skilled local staff in municipalities




No elections for municipalities








Corruption. Corruption. Corruption. Corruption.

Risk of municipalities defaulting on municipal loans

Lack of effort to control industrial effluents

Lack of effort to enforce health care waste policies

Risks beyond the control of GoN

Security situation Security situation Security situation Security situation

Political instability Political instability Political instability Political instability





Earthquakes

Flooding


Figure 2 Project risks in the absence of risk management initiatives

PR

OB

AB

ILIT

Y Medium

High

Low

Low Medium High

Local community opposition to sites Lack of participation by women and vulnerable groups

PROBABLE IMPAC T

Lack of technical support, roads

Lack of technical support, sewerage and drainage

Lack of control over industrial effluent

No restoration of elected local bodies

Corruption

Risk of loan default

Local community opposition to sites

Political instability Earthquake

Floods

Difficulty disposing of compost to farmers

TA 7182-NEP A - 1 Final Report, Vol. 1

Appendix A External assistance to Nepal

A1 Level and nature of assistance 1 Table 1 and Table 2 summarize external assistance to the GoN.1 In 2008/09, the external assistance that GoN expects to receive comprises NRs44,153m in grants and NRs18,701m in loans If allowance is made for their contributions to donor pools, bilateral development partners contribute about half of total assistance that Nepal receives. No bilateral projects target the urban sector, although a few relevant projects cover both urban and rural areas. With respect to multi-lateral agencies, the ADB and World Bank are Nepal‟s major development partners. The World Bank projects focus on rural areas and institutional reforms unrelated to the urban sector. The ADB is the only development partner with a substantial program in urban areas. Assistance from the UN family of agencies is of much greater importance in influencing GoN policy than might be apparent from the value of the grants. Finally, some international NGOs are important in the urban sector.

A1.1 Bilateral donor activities in the urban sector

A1.1.1 Government of India

2 The Government of India is by far Nepal‟s biggest bilateral development partner. It was Nepal‟s only bilateral development partner for the first two five year plans. The great major of the projects that India supports are in terai.

3 The city of Dharan owes its transformation to the establishment of the B.P. Koirala Institute of Health Sciences, the country‟s largest health care institution and a center of medical research and training. It is also the flagship of India-Nepal economic Coorperation Programme. Apart from constructing the entire modern facility, India has been providing extensive faculty support. The Institute imparts international standard hands-on medical education and training, besides taking to the community medical services, some of which are cost-free. It attracts patients from all over Nepal, even from India, and conducts research useful to both countries.

4 Together with schools that followed in its wake, the Institute has brought about a sea change in education level and development in Dharan.

5 Other urban projects included cold storage (various towns) and large polytechnics (Biratnagar and Hetauda).

6 For implementing an effective and integrated border management system, development of border infrastructure along the India-Nepal border is progressing with assistance from the Government of India. Construction of two Integrated Check Posts at Birgunj-Raxaul and Biratnagar-Jogbani at an estimated cost of $4.5m is expected to commence soon. The early completion of these modern facilities would contribute considerably to facilitate people-to-people contact and trade. In addition, development of over 1,500 km of roads in the terai will provide improved urban-rural linkages.

7 To improve rail connectivity between India and Nepal, India is constructing two more cross-border rail links. One of these is the 18 km Jogbani-Biratnagar link.2

1 Table 1 and Table 2 do not include the work of international NGOs. 2 Joint Press Statement on Official visit of Rt. Hon. Madhav Kumar Nepal, Prime Minister of Nepal to India (18-22 August 2009).


A1.1.2 Urban Development through Local Efforts

8 Commencing as long ago as 1987, and with support from German Development Services, Urban Development through Local Efforts (UDLE) has addressed a series of challenging objectives. The program objective have evolved from that for 1987 – 1990 of supporting efficient urban development and strengthening towns to develop their capacity and make better use of their potential to that for 2001 – mid 2005 under which public service needs of different target groups within the urban population are sufficiently addressed and self help initiatives are supported by effectively and efficiently managed municipalities.

9 A series of “service packages” have been provided, covering subjects such as Municipal Organizational Development; local economic development; periodic plans; and a variety of other specific sector based support.

A1.2 UN family programs

10 The importance of programs of the family of UN organizations lies not in the size of the financial assistance but in the on-going support they provide to Nepal‟s attainment of the MDGs and the fulfillment of its other commitments under international conventions.

A1.2.1 UNICEF programs

11 UNICEF‟s water, sanitation and hygiene program aims to increase access to sustainable and safe drinking water, sanitation facilities and improved hygiene practices in schools and communities, contributing to a reduction in disease. By the end of 2009, UNICEF aims to have tested all drinking water sources for arsenic in 20 terai districts. All households with contaminated sources will be made aware of how to remove or avoid arsenic. UNICEF is mobilizing teachers, child clubs, students and community organizations to promote installation of sanitary toilets in homes, hand washing with soap and point-of-use water treatment. In support of the education program, safe drinking water and sanitary, UNICEF is installing child-friendly toilets in 450 schools in marginalized communities. The child clubs and students will manage the upkeep of the toilets and learn how to purify their drinking water and when to wash their hands with soap. In five districts, UNICEF is working with partners to strengthen water user federations to raise issues of public interest, advise on allocation of district resources for marginalized communities and support their members. UNICEF is supporting the development of a sector-wide approach to enhance government capacity to plan the sector.

A1.2.2 ILO programs

12 The ILO Office in Nepal operates a wide range of projects focusing on jobs for peace through local economic development, child labour, indigenous peoples, migration, HIV/AIDS, and other development challenges. Some of these are of particular relevance to STIUEIP:

Implementation guide for Nepal on community infrastructure development in urban areas. This guide, based on pilot projects in Janakpur municipality, provides a framework for implementing community infrastructure development in urban areas in Nepal, aimed at creating jobs whilst improving low-income settlements.

Decent Civil Works in Nepal: From Research to Action Planning: This study in addressed decent work issues in the following areas: policies for productive employment, labour policies and practices, recruitment practice, job security, remuneration and wage payment, gender issues, child labour, working time and rest, occupational safety and health, the right to organize, social dialogue and consultation and finally the freedom to leave work. It recommended improvements in order to grasp the potential for systematically creating productive jobs in the civil works sector, including methods of contracting and contract documentation.

Local economic development: The ILO is supporting initiatives with District


Development Committees to promote local economic development.

A1.2.3 World Health Organisation programs

13 The WHO Protection of the Human Environment (PHE) program focuses on the provision of safe water (water quality focus) and sanitation (support for total sanitation). In collaboration with the DWSS, WHO has supported policy development in the sector, capacity building and quality control, for both rural and urban settings.

14 The WHO program is giving more attention to indoor air pollution caused by bio-mass combustion, in collaboration with MoHP and Practical Action. Health-promoting urban and other human settlement development has been supported through the DUDBC. Together with the Nepal Health Research Council, WHO supports a diverse set of activities in research and good practice in arsenic mitigation, health care waste management, climate change and human health. Capacity building, orientation and awareness rising for a variety of environmental health concerns have been an important component of the PHE program. Often it has also been possible to initiate follow-on activities with those that participated in WHO sponsored programs. Emergency preparedness in water supply and sanitation has been promoted strongly in collaboration with other WHO units.

15 WHO PHE maintains offices in the MPPW and at the DWSS. From these two offices it supports its partners in the MPPW, the DWSS, the DUDBC, the Ministry of Health and Population, the Nepal Health Research Council and the Department of Food Technology and Quality Control of the Ministry of Agriculture and Co-operatives. Partners associated with the PHE program include the Ministry of Environment, the Rural Water Supply and Sanitation Fund Board, and the infrastructure section of the Ministry of Local Government. Among development partners and civil society PHE collaborates closely with UNICEF, UN-Habitat, Water Aid, NEWAH, Practical Action and ENPHO.

16 Nearly all activities of the PHE program fall within the component of creating a „healthier environment‟, with the aim of enhancing „control and prevention of disease and disability‟. Emergency preparedness for water and sanitation is also clearly linked.

17 WHO has supported policy development in water supply and sanitation. The National Sanitation Action Committee and the National Arsenic Steering Committee have been supported in various ways by WHO. WHO supported the preparation of DUDBC‟s Urban Development Policy, which includes environmental considerations and advocates a healthy settings approach in urban development.


Table 1 Grants and loans from development partners, NRs million

Development partners 2007/2008 2008/2009 Current urban projects

(and those with urban component)

Completion Date Grant Loan Grant Loan

Bilateral agencies Australia 0 0 40 0 China 100 0 635 2,000 Denmark 844 0 635 0 LGCDP 2013 B2B 2012 PPP 2013 European Union 106 0 88 0 Finland 176 0 239 0 LGCDP 2013 SEAM-N Germany 2,892 0 3,585 0 LGCDP 2013 UDLE TDF India 1,383 1,397 4,766 2,107 Terai projects Various Japan 3,591 0 3,290 0 LGCDP 2013 Kathmandu-Bhaktapur

Road 2010

Melamchi 2013 Korea 7 0 230 450 Netherlands 152 0 229 0 Nordic Development Fund

0 60 0 140

Norway 366 0 579 0 LGCDP 2013 Melamchi 2013 Saudi Arabia 0 220 0 248 Switzerland 142 0 258 0 United Kingdom 2,397 0 2,055 0 LGCDP 2013 USA 905 0 538 0

Sub-total 13,061 1,677 17,167 4,945

Multi-lateral agencies ADB 641 9,160 4,250 7,450 LGCDP 2013 SSTWSSSP 2015 UEIP 2010 GAVI 308 0 0 0 2013 Global Fund for AIDS Tuberculosis Management 367 0 1,326 0 World Bank 5,491 4,795 11,343 3,231 LGCDP 2013 Emerging Town 2013 Melamchi 2013 International Labour Organisation 10 0 20 0 Education for All Donor Pool 2,652 1,247 5,301 2,035 Health Donor Pool 2,691 0 2,470 410 International Fund for Agricultural Development

28 263 107 333

OPEC Fund for International Development

0 226 0 297

Universal Postal Union 5 0 0 0 UNDP 529 0 172 0 PPUE 2012 Various(1) UN Environment Programme 7 0 1 0 UN Habitat 28 0 41 0 SSTWSSSP 2015 UNICEF 618 0 605 0 UN Population Fund 100 0 289 0 WHO 219 0 280 0 World Food Programme 705 0 780 0

Sub-total 14,400 15,690 26,986 13,756

Total 27,461 17,367 44,153 18,701

Note(1 ) See Table 2 for detail Source: MoF, 2008, Source Book for Projects Financed with Foreign Assistance for Fiscal Year 2008-09 and similar document for 2007-08.


Table 2 Major development partners’ activities in the urban sector

Sectors and Themes

Development Partner

Project Name Duration Amount

Economic growth

DANIDA B2B 2002-12 NRs1479m (2007-09)3

Economic growth

DANIDA PPP / IPD4 2005-08 / 2009-2013

Social development

Gov. of Nepal with various

donors5

Local Governance and Community Development Programme

2008-2013 $106m (ADB); $53.75m (UNJP); $261m (GoN):

and additional from other donors

Social development

UNICEF Various UNICEF projects under 2008-10 programme

Various $68m6

Environmental sustainability

Gov. of Finland Strengthening of Environmental Administration and Management at

the Local Level in Nepal

2001-11 EUR1,823m7

Multiple World Bank Emerging Towns of Nepal 2009-10 $160,000

Multiple MLD and GTZ8 Urban Development through Local Efforts Programme

1987-2010 NRs6477m (2007-09)

Multiple ADB Second Small Towns Water Supply and Sanitation Sector Project

2010-15 $59.3m

Multiple Gov. of India Various Various NRs9653m (2007-09)

Multiple ADB

Kathmandu Valley Water Distribution Sewerage and Urban

Development

2006-2013 $1.23m

Multiple ADB Urban Environmental Improvement Project

2003-10 $37.5m

Multiple ADB Melamchi Water Supply Project 2001-13 $137m

Multiple JICA Improvement of the Kathmandu-Bhaktapur Road

2008-11 $26m

Multiple ADB South Asia Tourism Infrastructure Development Project (Bangladesh,

India and Nepal) - Nepal

2010-15 $12m9

B2B: Business-to-Business; DANIDA: Danish International Development Agency; GoN: Government of Nepal; GTZ: German Technical Cooperation; IPD: Innovative Partnerships for Development; JICA: Japan International Cooperation Agency; MLD: Ministry of Local Development; PPP Public Private Partnership; UNICEF: United Nations Children's Fund; UNJP: United Nations Joint Programme. Sources: Consultants‟ meetings, Nepal Ministry of Finance, various internet sources.

3 Includes contribution to Local Governance and Community Development Programme. 4 IPD replaced the PPP Programme as of August 2009. 5 Including ADB, DANIDA, CIDA, DFID, UN System (UNDP, UNICEF, UNCDF, UNFPA, UNV, etc.), Government of Norway, SDC, GTZ, JICA, World Bank. 6 $20 mil. has been allocated internally. $48 mil. is required to be raised from donors 7 Budget for the completion phase. 8 German Development Bank (KfW) provides financial assistance through the Town Development Fund (TDF). 9 Total budget.


A1.2.4 UNDP program

18 The UNDP and GoN launched a Public Private Partnerships for the Urban Environment (PPPUE) program in 2002. PPPUE has prepared a training “toolkit” to develop capacity for pro poor PPP at the municipal level. PPPUE is the global facility that developing countries can use to obtain support in their efforts to define, promote and implement PPPs to reduce poverty by increasing the access of the urban poor to basic services. The program offers a flexible portfolio of demand driven services built on the basis of a strong partner network and results at the country level.

19 The rationale underlining PPPUE‟s services is the development of an environment conducive for partnerships and to build adequate capacity for local partners to bring all stakeholders into the development process and improve the access by disadvantaged communities to basic services. The goal is to facilitate the creation of a constructive environment with respect to reform; one that allows community organisations and other civil society groups to advocate for their needs and preferences and contribute their skills and capacity through sustainable partnerships with governments and the private sector.

20 The purpose of the tool kit is capacity building for members of local level government, business and community organisations interested in an innovative approach to the problems of service delivery, especially to the poor. The tools have been developed through a participatory process involving PPPUE‟s programs and projects in 14 countries ensuring that they are applicable and useful globally but able to be localised rapidly. To date, PPPUE has facilitated PPP projects in 10 municipalities, including 7 in Biratnagar, 1 in Butwal, 2 in Pokhara, and 2 in Siddarthanagar. However, most are small in scale.

A1.2.5 UN Habitat

21 UN-Habitat‟s objective in Nepal is to work with the ADB, UNDP and GTZ (a) to raise the profile of the urban development sector among government agencies, bilateral agencies, multilateral agencies and UN agencies, and (b) to cope with the challenges of rapid urbanisation to make a difference in the lives of people living in urban areas in general and that of the poor living in slums and squatters in particular (Table 3).


Table 3 UN Habitat: recent and current activities

Project title Timing Budget ($) Partners Main activities/outputs

Assistance to IDPs and Returnees

2008 200.000 Norwegian Refugee Council

Provision of basic non-food items and emergency or shelter materials to 605 vulnerable families of IDPs (returnees)

Slum and squatter upgrading

2007-2008

75,000 MPPW DUDBC Mu

Preparing a grant proposal for assistance from Cities Alliance to develop a nationwide upgrading programme in Nepal of slum and squatter settlements and investment .10

Community based Housing for the Marginalise

2008-2010

1,700,000

Rural Housing Company MPPW DUDBC

Assist marginalized communities and families with a package of assistance to address some of the fundamental causes of their poverty and living conditions.

Pro Poor Urban SAN Governance

2005-2010

414,720 Municipalities MPPW DUDBC DWS

To prepare poverty map, gender assessment and need identification for the poor on environmental sanitation sector of municipalities.

Urban Water Demand Management

2005-2010

141,050

Municipalities MPPW DUDBC NGO Forum

To facilitate with the Government of Nepal in addressing in the national policy and promote Rain Water Harvesting at wider scale by capacity building.

Integrated Urban Environment Management

1,039,839 Municipalities Practical Action Nepal Centre for Integrated Urban Development11 Water Aid NGOs

To enhance institutional and human resources capacities at local levels for the sustainability of improved water and sanitation services and enhance local private sector capabilities for participation in service delivery.

Source: UN-Habitat Country Programme Document 2008-2009 - Nepal

22 In 2006, UN Habitat signed a Memorandum of Understanding with GoN in for implementation of the Water in Asian Cities (WAC) Programme in Nepal.12 Its activities have been supplementing and supporting the ADB assisted water and sanitation projects to demonstrate innovative technologies, gender mainstreaming, community participation and project implementation approaches, for example on UEIP.

10 The proposal, to be prepared, will respond to GoN‟s request for technical assistance on the issues of slum upgrading and tenure security for the urban poor, provision of assistance to a few (up to three) motivated local governments in developing and testing institutional frameworks aimed at upgrading of slums and squatter settlements; developing a national level policy framework on slum upgrading, and development of monitoring and evaluation systems to measure the impact of national and local slum upgrading and shelter programmes. The participating GoN agencies would be MPPW and MuAN.

11 Established in 2002, Centre for Integrated Urban Development (CIUD) is an NGO mobilizing resources and conducting study and research on various urban issues. It has been working for sustainable urban solutions to support and compliment government efforts as well as its own initiative to tackle urban challenges. CIUD has been working closely with the municipalities and partner organizations. At the heart of its policy is community participation. The main areas of intervention have been water resource management, sustainable development for the poor, heritage conservation, traffic management and solid waste management. 12 The Water for Asian Cities (WAC) Programme is a collaborative initiative between UN-Habitat, the ADB and the governments of Asia. The WAC Programme was officially launched at the Third World Water Forum in 2003. The WAC Programme in Nepal was initiated in 2004. (UN Habitat, 2009, UN Habitat Water for Asian Cities Programme – Nepal: Annual Report, 2008.

The WAC Programme is supporting implementation of the water and sanitation related Millennium Development Goals and targets in Asian cities. It is specifically promoting pro-poor governance, water demand management, increased attention to environmental sanitation, and income generation for the poor linked to water supply and sanitation. The programme seeks to achieve this by mobilizing political will, raising awareness through advocacy, information and education; training and capacity building; by promoting new investments in the urban water and sanitation sector; and by systematic monitoring of progress towards Millennium Development Goals.


23 The projects are developed in close consultation with the GoN agencies and the local communities to identify the local needs and requirements. It provides technical and financial support for implementation of its projects in partnership with GoN, NGOs, INGOs and the local community. It also supports in building capacity of the partners for efficient and successful implementation of its projects.

24 The WAC Nepal works closely with UN agencies like UNDP, UNICEF, WHO and PPPUE/UNDP, as well as ADB supported projects in urban sector, particularly on urban governance, innovative technology, human resources towards improving the living of pro-poor.

25 Projects so far completed by WAC – Nepal to 2008 are as follows:

1. Poverty mapping and gender assessment of 8 UEIP municipalities and plus two other towns. All will be completed by 2010. The mapping of four municipal towns – so far has been completed.

2. Capacity building of Water Users‟ Committees of 14 small towns water supply projects.

3. Supported 14 out of 29 WUC (Water User Committees) under ADB‟s small town water supply programme in software activities including institutional strengthening, training, and accountancy and so on under pro-poor financing mechanism.

4. Community based rural water supply and sanitation in poor urban areas (slums) – first initiated at Siddhipur (Lalitpur) and replicated in 4 clusters (tols/lanes - TLOs) of Hetauda and 30 TLOs of Kalaiya with the help of ENPHO and then 21 clusters of Hetauda by its municipal office – to meet the MDG goals; provided micro credit for tap connection and toilet in poor localities.

5. Promotion of household water treatment options in four municipalities (including Butwal) – water delivery to urban poor and preparation of policy paper on rainwater harvesting for the municipalities and installation of RWH in the government new buildings.

6. Integrated urban WATSAN (water and sanitation) projects in 13 municipalities (including Butwal); initiated a community managed reed-bed wastewater treatment plant with biogas digester in Dhulikhel municipality and similar project in other seven UEIP towns (see Appendix B). Piloting on waste water treatment plant in Panauti, which is replicated in Hetauda and later in UEIP other towns.

7. A study on the possibility of partnership between private and development agencies in water and sanitation as a part of Corporate Social Responsibility (CSR) activities has been completed

8. The 2009 work plan includes (selected and applicable to PPTA project):13

Intervention for capacity building and WATSAN improvement as per poverty mapping and need assessment in the municipalities

Develop integrated urban catchment management plan

Scaling up rainwater harvesting programme

Decentralized wastewater management in small and emerging towns

Technical support to SWM in selected municipalities

Institutional capacity building of water and sanitation users‟ committees in small and emerging towns

13 Ms Sudha Shrestha, Acting Chief Technical Advisor, Water for Asian Cities Programme Nepal, UN – HABITAT, Pulchok, Thursday July 30, 2009, pers. com.


Water quality improvement

A1.3 Multi-lateral programs in the urban sector

A1.3.1 ADB projects

26 Appendix B reviews completed ADB projects and Appendix C reviews the UEIP.

A1.3.2 Local Governance and Community Development Programme

27 The Local Governance and Community Development Programme (LGCDP) is a major program that most of Nepal‟s development partners are supporting in some way. The ADB is the development partner making the largest financial contribution; it has agreed to provide a grant assistance of $106.3m to GoN for the implementation of Governance Support Program Cluster (Subprogram I or GSP I under LGCDP). Other participating development partners are as follows:

1. Danish International Development Agency (DANIDA) 2. Canadian International Development Agency 3. Department for International Development (DfID) 4. United Nations system (UNDP, UNICEF, UNCDF, UNFPA, UNV etc.,

contributing $30.5m) 5. Government of Norway 6. Swiss Agency for Development and Cooperation 7. The German Technical Cooperation (GTZ) 8. Japan International Cooperation Agency (JICA) 9. World Bank

10. Government of Finland 28 GoN is envisaging a program costing about twice the amount of what development partners have so far committed. However, because LGCDP covers the entire country, the investment in STIUEIP towns is unlikely to exceed $10 per capita over the next five years.

29 LGCDP will cover all DDCs, VDCs, and municipalities. Its main interventions will be as follows:

1. Empowerment of citizens and communities for active engagement with local governments and strengthening downward accountability.

2. Top-up block grants to local bodies for community-led local development.

3. Capacity development of local governments for effective service delivery.

4. Policy support for decentralization and local governance (devolution, fiscal decentralization, human resources development for policy making, action research etc.).

A1.4 International NGOs

A1.4.1 WaterAid

30 WaterAid is an international charity. Its mission is to overcome poverty by enabling the world's poorest people to gain access to safe water, sanitation and hygiene education. WaterAid began its water, sanitation and hygiene work in Nepal in 1986. WaterAid's aim is to improve the lives of poor people through its work with NGO partners, which in Nepal are Nepal Water for Health (NEWAH), Lumanti, Environment and Public Health Organisation, Urban Environment Management Society, Centre for Integrated Urban Development, and NGO Forum.

31 WaterAid also supports (and was instrumental in forming) the Federation of Water and Sanitation Users Group (FEDWASUN) - a network with more than with 700 water and sanitation


users groups representing 50,000 households - to make the voices of poor people heard by the local governments and service providers at the national level.

32 WaterAid is allocating 30 per cent of its expenditure to urban work. At present, this work reaches those living in slum and squatter settlements in the Kathmandu valley and towns in the Terai (Birgunj and Biratnagar). WaterAid has developed a form of poverty mapping to implement its projects.14

A1.4.2 Practical Action

33 Practical Action is a United Kingdom based NGO committed to reduce poverty. It supports the efforts of poor women and men to improve their livelihoods by providing appropriate technology options, the associated information, knowledge, and skills, and the capacity to organize and use all these to get more control over their lives and livelihoods.

34 In Nepal, Practical Action‟s Sustainable Urban Environment programme aims to improve urban environment and the livelihoods of the urban poor through promotion of sustainable waste management and, water and sanitation. The interventions focus on demonstrating innovative models of waste management, technologies and approaches, by building effective partnerships with local governments, CBOs, NGOs and the private sector.

35 Activities under this area link with programs promoting livelihood options for the urban poor, through building their capacities in developing business opportunities from waste. The approach taken provides opportunities for additional income-generation and socio-economic development to take place, through the adoption of a community-managed, decentralized approach.

36 Practical Action‟s SWASHTHA project (Strengthening Water, Air, Sanitation and Hygiene Treasuring Health) commenced in January 2009 and runs for four years. It covers urban and peri-urban areas of Bharatpur, Butwal, Gularia and Tikapur municipalities. The aim of the project is to develop and promote integrated approaches by addressing major environmental health risks, such as indoor air quality, water quality, sanitation facilities, and hygiene behaviours to create healthy homes and benefit 30,000 women and children and family members in these households.

37 The target beneficiaries of the project are mainly women and children from the socially excluded communities in all four municipalities and marginalised ethnic and other caste groups. The project is implemented through its local partners – Environment and Public Health Organisation (ENPHO) and Municipal Association of Nepal (MuAN).

A2 Proposed interventions

A2.1 World Bank

38 The World Bank has received a request from the GoN to support an Emerging Towns of Nepal project through appropriate analytical and investment support. The World Bank is exploring ways of responding to the GoN request.

39 A scoping study will comprise two parts: (1) a study of the urban sector in Nepal, with emphasis on secondary and tertiary towns; and, (2) preparation of a Water Supply and Sanitation Strategy for Nepal.

40 The principal objective of the Urban Sector Study is to provide inputs to the Bank‟s urban and local government operational agenda, and to help prepare a potential World Bank-assisted

14 WaterAid, 2006. Water and Sanitation Mapping in Nepal, Katherina Welle. See also Water for Asian Cities Programme, undated, Methodology for Mapping Urban Poor.


urban operation to support Nepali secondary and emerging towns in a programmatic and inclusive manner. The objective of the WSS Study is to assess the technical, financial and institutional situation of water and sanitation services, and to propose options that will lead to improved performance and sustainability of the sector.

41 The overall work program will primarily consist of analysis of Nepal‟s urban and water and sanitation sectors and develop recommendations for supporting the Bank‟s emerging work in these areas. For the Urban Sector Study, this includes an analysis of the potential ramifications of federalism and state restructuring on the governance, management and financing of urban centers; analysis of small and medium towns with regard to their demographic, legal and socio-economic status, governance structures, fiscal and financing systems, land markets, infrastructure and service delivery systems, and social and environmental conditions; presentation of options for Bank engagement in the urban and local government sectors; and, preparation of workshops, presentations, and briefing notes as needed for the World Bank, the GoN and other important stakeholders. The Study will also look at the solid waste management sector in emerging towns, including through an assessment of carbon finance and climate change related opportunities for Nepali cities.

A2.2 Danish International Development Assistance (DANIDA)

42 The Government of Denmark has agreed to support GoN with the implementation of the two programs: “Business-to-Business (B2B)" and "Public-Private Partnership (PPP)". Both programmes will be implemented under the Danish International Development Assistance (DANIDA). The objective of the B2B program is to promote long-term, sustainable partnerships between Nepalese entrepreneurs and their Danish counterparts, with a view to enhancing local business development. Danish advisory and financial support will enable the transfer of know-how and technology from Danish companies to Nepalese companies. Similarly, the objective of the PPP program is to promote PPP for better working and living conditions by advancing corporate social responsibility and increasing opportunities for investment and enhanced competitiveness through innovation.

A2.3 KfW Town Development Fund Project

43 The Government of the Federal Republic of Germany has agreed to provide a grant assistance of €7.50m (equivalent to NRs790m) to the GoN for the Town Development Fund Project, Phase III. The grant assistance will be used in urban economic and social infrastructure projects, and renovation of municipal buildings damaged during the conflict period. As in the two preceding phases, TDF will administer the grant amount according to its Loan and Grant Policy, 2009. By the end of 2012, TDF will disburse the total fund with 80 per cent for loan financing and 20 percent for grant financing to the municipalities, small towns, users' committees and the private sector. The grant will be made available through KfW, the German Development Bank.

A2.4 SEAM-N project

44 The project “Strengthening of Environmental Administration and Management at Local Level” (SEAM-N) began in 2002. The Government of Finland is funding the project, and MLD is the executing agency.

A2.4.1 First phase

45 The project‟s first phase ended in May 2008. The project has been working closely with various stakeholders in Biratnagar, Itahari, Inaruwa and Dharan municipalities and seven VDCs in Morang and Sunsari districts.

46 The project purpose was to protect, enhance and sustain the quality of the environment and provide healthier and ecologically more diverse living environments for the population of the


Project area through decentralizing the environmental administration in the context of the on-going overall decentralization process.

47 Despite delays in project activities caused by the political situation and the absence of environmental units, the project has been able to establish local environmental administration and management structures in VDCs and municipalities. Environmental units have been established in Sunsari and Morang districts and some VDCs regarded as core elements of the regional environmental administration.

48 With SEAM-N support, environmental units have been established in the municipalities of Biratnagar, Dharan and Itahari as well as environmental sub-committees (ESCs). DDC level environmental units and ESCs were also established through the SEAM-N support. At VDC level, ESCs have been operational for over two years. One of the biggest bottlenecks in environmental management in Nepal is the non-existence of state-of-the-environment monitoring and reporting. SEAM-N has developed a sophisticated Environmental Management Information System for that purpose; it includes an industrial database, a SWM database and a water quality database. This environmental information is assisting ESCs in their decisions relating to PCCs and compliance monitoring. The environmental database includes information from 250 of the most polluting industries, 260 tubewells in Biratnagar-Dharan corridor and 12 surface water monitoring stations in the river system of Budhi, Judi, Lohadra, Keshlaya and Tangra khola. Samples from river will be taken twice a month and they will be analyzed by the SEAM-N MMA laboratory. The existence of environmental data is also a precondition of formulating sustainable environmental policy. SEAM-N has been strengthening environmental administration at the local level.

A2.4.2 Second phase

49 The second phase of the SEAM-N aims to secure effective use of previous project results and to continue the establishment of local and regional environmental administration by extending the activities to more areas in the Eastern Development Region. The Project will promote a replication of its activities in all other development regions, with a goal of forming the core of real and functional regional Environmental Administration and Environmental Monitoring in Nepal within five to six years.

Environmental Administration and Management component

50 The goal of the Environmental Administration and Management component is to establish the environmental administration structures in the Project area. The proposed environmental administration structure at the DDC and municipality levels has three pillars:

Environment, Agriculture and Forestry Committee (EAFC),

Environmental Unit (EU), and

Environmental sub-committee (ESC).

51 According to the Local Self-governance Act, there must be an Environment, Agriculture and Forestry Committee at the DDC, municipality and even VDC level where the members are 'elected persons'. The intention is that the committee establish an Environmental Sub-committee (ESC) representing different stakeholders and interest groups. The overall objective of this ESC is to play a lead advisory role in planning, management, as well as monitoring and evaluation of all environment related activities. The Environmental Unit is an executing body. It will be an integral part for day to day environmental administration in the project municipalities and VDCs. EUs will be responsible for the documentation of environmental issues, environmental planning and implementation of environmental activities. One of the basic ideas of environmental unit is to collect all environment related information and proposals for planning and preparing for decision making in one place. Thus, establishment of Environmental Units and ESCs will be a priority activity. Strengthening the capacity of the local bodies is a vital activity to enable them to undertake sustainable environmental planning, administration and regular monitoring of the state


of the environment. In selection of the projects, priority will be given to results-oriented model programs, such as school environmental promotion programs, environment friendly model village program (Eco-village), networking of environment groups and solid waste management. The project will emphasize the role of school children as change agents to spread and make other children and families aware of basic hygiene, sanitation, and environmentally sound behavior. Instead of spreading more and more community projects, the emphasis will be on model/demonstration projects. The project will encourage innovative ideas and approaches. Special attention will be given to awareness creation from the grass roots level to the planning and decision making level. “Awareness creation” will be a basic strategy and also an entry point before moving towards actions. The development of effective mechanisms for sustainable solid waste management will be a high priority. The program will mainly focus on development of SWM action plans with PPP approach and waste minimization at source. A regional level solution of SWM in the corridor is also among the goals of SEAM-N. Gender and social inclusion is an integral part of the work. Emphasis will be given to the involvement of women and disadvantaged groups.

52 Key activities include:

Facilitation in establishing environmental units and formation of ESC in all new municipalities and selected VDCs

Supporting the active involvement/mobilization of ESCs in planning, management and monitoring of environmental activities

Organizing training/workshop/seminar for capacity building on environmental planning, administration and management for local bodies ( especially EU and ESC of municipalities and VDC)

Assisting municipalities and VDCs to prepare/update environment profile and environment action plans.

Supporting municipalities, VDCs and local groups, institutions to implement model environment promotion programs like, sustainable school environmental promotion program, eco-village program, environmental awareness raising activities and model environmental conservation projects at the community level through local efforts

Organizing capacity building and training programs on SWM for EUs and ESCs members in new municipalities and VDCs.

Promoting of ICS and Bio-gas plants for control of indoor air pollution

Supporting ESCs and ESC networks for regular meeting, sharing and organizing activities.

Supporting the sustainability of the model environmental projects and approach implemented during phase I.

Supporting municipalities and selected VDCs to implement "Integrated SWM programs", which will include; SWM situation assessment in new project areas, capacity building training, implementation of SWM programs focusing on waste minimization at source.

Awareness raising and capacity building on household hazardous waste and health care waste management.

Awareness raising training on gender and social inclusion to the Project stakeholders

Initiation of women and DAG empowerment and poverty mitigation pilot project


Industrial Environmental Management

53 The main purpose of the Industrial Environmental Management component is to promote and encourage the polluting industries as well as small and cottage industries to implement the best environmental management tools like Cleaner Production (CP),15 Occupational Health and Safety (OHS) and Environment Management System (EMS) in order to increase the production efficiency through better resource management and thereby reduce the negative environmental and OHS impacts. These tools enhance competitiveness and increase the marketing potential of products and services. The industries that participated in the first phase of SEAM-N have already experienced economic and environmental benefits by reducing wastes, emissions, and minimizing consumption of resources. Their environmental loading has diminished and working conditions of workers have been improved, thus reducing environmental compliance liabilities and risks to human beings. Therefore, the main strategy of this component during the second phase is to ensure the continuation of the CP and OHS activities carried out in the industrial corridor, and expansion of CP, OHS, EMS activities in the new districts.

54 The strategies followed by this component are human resource development in CP and OHS areas; Marketing the CP and OHS approach to all the sectors through information dissemination materials, (publications, video documentary, sect oral guideline etc.) and media; Focusing on small and cottage industries as well as selected middle and big pollution prone industries for the CP/OHS and simplified EMS; Introducing novel technologies to control and prevent atmospheric pollution by middle and big scale industries. Building of strong cooperation and coordination with local chambers of commerce and industries, local administrative and central bodies as well as international organizations, such as WHO, ILO etc.; Replicating the best practices activities adopted by the project during the completion phase; Strengthening the capacity of the OHS Unit of BPKIHS to provide occupational health services for the local industries; Developing sustainable mechanisms for the CP/OHS activities in new areas of the project; Mobilizing local experts and consultants; Emphasis given for gender sensitization and poverty issues in all relevant activities.

55 Industries having the view of high potential for replication; High potential for saving of resources (raw material, water, energy); High management commitment and ready to invest on the CP/OHS measures; Owned by women entrepreneur, small and cottage industries; Environmental and economical profiles of the villages and municipalities; National Specific Effluent Standard prescribed industries and also complained by the local community are given priority by the project.

56 Key activities include:

Awareness raising and promotion of CP and OHS programs and simplified EMS to all the local industries,

NGO‟s, local administrative organizations, banks etc.( new project area);

Awareness and Feasibility study on Clean Development Mechanism;

OHS intervention and training program on Pesticide use and its impact to health;

Promotion of Occupational Health Program Support partial grants to the selected industries to implement CP/OHS measures as per the modus- operandi guideline;

15 Cleaner production is a preventive, company-specific environmental protection initiative (Yacooub, Ali, Johannes Fresner, 2006, Half is Enough - An Introduction to Cleaner Production. Beirut, Lebanon: LCPC Press). It is intended to minimize waste and emissions and maximize product output. By analyzing the flow of materials and energy in a company, one tries to identify options to minimize waste and emissions out of industrial processes through source reduction strategies. Improvements of organization and technology help to reduce or suggest better choices in use of materials and energy, and to avoid waste, waste water generation, and gaseous emissions, and also waste heat and noise.


Institutionalization of the CP and OHS activities and gender sensitization;

Reward scheme for the best industries implementing CP/OHS measures.

Prepare Inventory of the industries;

Assisting the industries in applying for Pollution Control Certificate;

Need based environmental management tools can be developed and implemented;

Develop the benchmarking of wastes on selected industrial sector;

Cooperation and coordination with the key line ministries and local stakeholders for the better exchange of the information.

Environmental Monitoring component

57 The objective of the Environmental Monitoring component is to establish and implement an effective environmental monitoring and evaluation system as a part of the environmental management system at local and regional levels. It will establish a monitoring system producing timely and reliable information so as to support environmental decision making.

58 The environmental monitoring system will accumulate, systematize and analyze information on the state of the environment, on the causes of observed and probable changes in the state of the environment (i.e. about the sources and factors of influence), and on the allowable extent of changes and loads on the environment as a whole.

59 The accredited environmental laboratory in Biratnagar founded by SEAM-N in 2003 is the strong foundation upon which SEAM-N Phase II will build and develop an environmental service center (ENSC) in order to extend the product range and to ensure long term sustainability of the laboratory. The ENSC will be established under the public private partnership (PPP) model. Apart from laboratory services it will provide also CP, OHS, GIS, environmental information and PCC-related services to the industries, local bodies and other stakeholders. Partial financial support will be provided by the SEAM-N in order to achieve a full-fledged partnership for sustainable management and operation of the laboratory and ENSC.

60 Water quality monitoring networks at regional level will be established. A preliminary national water quality monitoring plan will be drafted in close collaboration with MOEST and relevant organization. The concept of water quality monitoring groups, Waterwatcher Committee, will be extended to as many of the prioritized VDCs as possible. Monitoring and assessment of the use of pesticide in agriculture will be taken into consideration. Similarly, assessment of ambient air quality at selected sites will be undertaken.

61 A GIS based environmental database - Environmental Management Information System (EMIS) – will be created covering the whole project area. The EMIS will be handled by the information unit of ENSC which will offer GIS services for various project offices, DDC\'s, municipalities, VDC\'s and other customers.

62 SMS (self monitoring system) in 50 new industries will be promoted through technical assistance and by providing partial financial support in terms of equipment. Industries will be extensively supported for the compliance to the rule 16 of environmental protection rule (EPR) – pollution control certificate (PCC) - provisions and other related government environmental regulation and standards.

63 The local authorities – district development committee offices - will be strengthened to carry out environmental administration tasks efficiently. For this purpose the agreed environmental structures will be designed and strengthened with mutual cooperation of DDC offices. More importantly, the DDC offices will be supported for the implementation of environmental powers under the environmental protection rules 16 to 20 delegated by the MoEnv. Similarly, the support to DDC offices for creating complaint handling mechanisms,


issuing PCCs, initiating inspections and compliance monitoring will be prioritised. The coordination with ministries - MoEnv, MoI, MLD - and other relevant organisation in this connection will be maintained.

64 Key activities will include:

Establishment of the environmental service center (ENSC) in the eastern development region of Nepal;

Extension of environmental laboratory services in the eastern development region

Planning and designing of environmental administration structures for DDC offices – for implementation of environmental rules and regulations at local level;

Assisting DDC offices to create and implement environmental complaint handling system;

Preparation of environmental inspection procedures for local and regional level authorities;

Supporting in the development and implementation of self monitoring system (SMS) in the industries;

Assisting industries to comply with environmental regulations and obtain Pollution Control Certificates;

Planning and implementation of water quality monitoring plans and programs in cooperation with concerned district and regional authorities;

Monitoring and assessment of pesticide use in agriculture products in project area;

Assessment of ambient air quality monitoring in the project are;

Development of GIS based Environmental Management Information System;

A2.5 ADB indicative lending pipeline

65 The ADB Country Operations Business Plan: Nepal 2008-2010 lists three loan projects in the urban sector (Table 4). Table 4 Upcoming ADB loan projects in the urban sector

Project Loan ($m)

Grant ($m)

GoN ($m)

Other ($m)

Total ($)

Remarks

Service Delivery of Emerging Supply, Sanitation, and Urban Improving the Quality of Water Towns

20 5 25 Renamed SSTWSSSP, 2009-2015, total cost $71.7m

Kathmandu Valley Water Distribution, Sewerage, and Urban Development

20 10 30

Secondary Towns Integrated Urban Environmental Improvement

25 5 30 $40m specified in PID.

Totals 65

20

85

A2.5.1 Kathmandu Valley Water Distribution, Sewerage, and Urban Development

66 The primary objective of the proposed PPTA for preparing the Kathmandu Valley Water Distribution, Sewerage, and Urban Development project is to prepare a loan project to improve


the basic urban services in the Kathmandu Valley including water supply, wastewater management, solid waste management, drainage and urban transport, backed by a long-term urban strategy and a capital investment and asset management plan for the water utility operator.

A2.5.2 Second Small Towns Water Supply and Sanitation Sector Project

67 Consultants completed a project preparation TA for the Second Small Towns Water Supply and Sanitation Sector Project in January 2009. The ADB Country Operations Business Plan for 2008-2010 schedules the $25m project as “firm” for 2009. At that time (2007), the ADB envisaged a loan amount of $25m, the GoN contributing $5m. However, the PPTA completed in January 2009 estimated the project cost at $47m or $61m depending on the project option selected.

68 The PPTA developed a sector program to provide support at two levels: the sector level, concerning institutional challenges; and town level, concerned with developing infrastructure and services. At sector level, the program would support reform by establishing a Sector Reform Unit within MPPW. A high level Steering Committee would oversee the Unit. To change the focus from constructing facilities to operating services, DWSS would establish a Service Providers Support Division to support WUSCs as they change from volunteer user groups to service providers, managing and operating water and sanitation facilities as a business with full cost recovery. At town level, the program would provide funding and implementation arrangements to improve water supply, sanitation and wastewater services for up to 330,000 people. The program would cover 20 towns with populations under 40,000. The PPTA prepared feasibility studies for three towns.

69 Towns in the program would receive water supply, sanitation, storm water drainage and solid waste management services. The total beneficiary population would be 330,000, which means an investment of $157 per capita, excluding investment in institutional capacity building. Applied to the proposed STIUEIP towns, this per capita investment implies a project (three towns) of at least $70m (Table 5). Table 5 Levels of investment per capita

Project Population covered

Investment per capita

Total investment Remarks

($) ($m)

UEIP 302,500 120 36 2001 population. Excludes Dhadingbesi (not a municipality)

IWQSSDET 330,000 157 52 Excludes costs of roads, institutional capacity building, municipal facilities

STIUEIP—3 towns

STIUEIP—5 towns

444,000

622,000

157

157

70

98

2006 population. Includes solid waste management and water supply but not roads, supplementary municipal facilities or institutional capacity building

70 The $70m figure excludes investments in institutional reforms and capacity building, roads, and supplementary urban facilities. Furthermore, there is a substantial shortfall in the funds likely to be available (compare Table 4 and Table 5)

71 The following financing plan is proposed for each project town to implement the project:

(1) The water supply systems will be financed by:

(a) Water consumers will form WUSCs and contribute, in cash and in kind, 20 percent of the subproject construction cost.

(b) TDF will on-lend 30 per cent of the cost to WUSCs as sub-loans and

(c) the Government will provide 50 per cent of the cost as grant.


(2) All other systems (storm water, wastewater, solid waste management) will be financed by the Government, which will contribute 100 per cent of the total construction cost.

72 This is consistent with STWSSSP, but a much larger community contribution than under UEIP.

TA 7182-NEP B - 1 Final Report, Vol. 1

Appendix B Completed ADB Urban Projects in Nepal

1 Nepal’s development partners have long focused on the rural areas, where the great majority of the country’s population still resides. Only the ADB has supported substantial infrastructure projects in urban areas. GoN has completed three urban projects with support from ADB. A small fourth project supported by ADB was undertaken by an NGO.

B1 Kathmandu Urban Development Project

2 The Kathmandu Urban Development Project (KUDP), completed in 1999, was the first urban development project that the ADB assisted in Nepal. 1 Although completed ten years ago, it is the project that most closely resembles the one now proposed and therefore warrants careful review.

B1.1 Cost

3 The total cost of KUDP at appraisal was estimated at $16m. KUDP was first identified in Kathmandu Valley Urban Development Plans and Programs TA (TA 1172-NEP). This recommended strategies for the development of the Kathmandu Valley followed by a 10-year investment plan for improving its urban environment.

B1.2 Rationale

4 At the time of the 2001 census, the five towns in the Kathmandu Valley were home to 31 percent of Nepal’s urban population, and Kathmandu was the logical starting point for urban development projects. However, with a total planned investment of $16m of which $6m was accounted for by a link road, it was not an integrated project.

B1.3 Scope

5 KUDP included the following components:

Kathmandu core upgrading component. Road and access improvement, traffic management and streetlights, storm water drainage, and land pooling—was a pilot initiative in land management. The PPTA identified 14 catchments, or 16 km, that required storm drainage at the time of appraisal. However, only 11.7 km, or 10 catchments, were completed because of local opposition and a substantial increase in the cost of construction. This part of the project also sought to upgrade about 10.9 km of existing roads but only 8.3 km of priority roads were improved. The roads were originally planned for upgrade once water distribution improved under a World Bank-funded scheme. Road upgrades were significantly delayed and reduced in length, however, when the World Bank project was cancelled. In one case, road improvement suffered because a contractor, selected under the Government system of accepting the lowest bid, used substandard materials.

Bishnumati River Corridor component. Guided land development (which was changed later to land pooling), storm water drainage, environmental improvements, solid waste management, a public education campaign, and construction of Bishnumati Link Road (a 2.8 km road with 20 m right-of-way). The link road had been identified in Kathmandu Valley Urban Development Plans and Programs TA as part of a proposed

1 The consultant derived comments on the Kathmandu Urban Development Project from Asian Development Bank, 2003, Project Performance Audit Report on the Kathmandu Urban Development Project (Loan 1240-NEP[SF] in Nepal.


internal ring road to better manage traffic. The appraisal included plans for a 2.8 km road, with a 20 m right-of-way, and a bridge connecting the banks of the Bishnumati River. The component was cancelled in 1995 because of slow implementation and the Government’s failure to find funds for land acquisition. Before the component was cancelled, consultants had completed the detailed design of the road and its demarcation. The road is now being completed under UEIP.

Implementation Assistance and Institutional Strengthening for executing agencies and municipalities within Kathmandu Valley in local planning, improving maps for Kathmandu and Lalitpur municipalities, and training.

Revenue Mobilization. An attached TA (TA 1905-NEP) comprising a study to enhance tax administration in Kathmandu by improving the revenue mobilization from property, vehicle, and commercial taxes.2

B1.4 Implementing arrangements

6 The Project was implemented by three agencies: the municipality, DoR, and DUDBC. DUDBC was responsible for overall coordination. The mayor chaired the project management unit under DUDBC, which coordinated effectively with KMC and DoR. Project performance significantly improved after 1997, when city leadership and project management officers changed. The Nepal Resident Mission also effectively supervised and monitored the project on a monthly basis. It seems that unclear institutional responsibility caused delays to the Bishnumati Link Road and to its ultimate cancellation.

B1.5 Lessons learnt

7 Relevant lessons learnt from KUDP were as follows:3

Solid Waste Management. Kathmandu municipality successfully achieved private-sector involvement in solid waste collection, but did experience a strike against privatization from the sweepers’ labor union. KUDP pioneered the concept of a conservancy charge for solid waste management. Nearly 30 percent of solid waste collection, including street sweeping in Kathmandu, was contracted out to private operators at the time of evaluation in 2003. Now several small private contractors are involved. Solid waste collection improved where private entrepreneurs were collecting.

Environmental Improvement in the Bishnumati River Corridor was only partly successful. Maintenance of parks and greenery was poor. A pilot reed bed treatment plant did not succeed because the municipality lacked interest and expertise in operating it. Along the river bank, the municipality allowed compost making, spoiling the environment. Without proper arrangements to dispose of construction or slaughterhouse waste, the environment has gradually deteriorated. The project also did not improve water quality because storm drains were illegally used to dispose of sewage. Three ramps built for collecting solid waste were poorly maintained. Six of the seven public toilets functioned satisfactorily and served the poor. These toilets were privately managed under a contract with the municipality. Riverside defecation was practically eliminated. A survey showed 70 per cent of respondents were satisfied with activities to improve the environment.

Revenue mobilization. Although the revenue mobilization technical assistance was rated successful, it did not reap all the potential benefits. It provided useful input for

2 TA 1905-NEP, Improved Resource Mobilization for Kathmandu Municipality 3 This section relies on ADB, 2003a, Project Performance Audit Report on the Kathmandu Urban Development Project (Loan 1240-NEP[SF]) in Nepal and ADB, 2003b, Annual Review of Evaluation Activities in 2003, Operations Evaluation Department.


reforms to revenue collection, although the muncipality did not follow the timelines, and did not efficiently use the training, capacity building, and technical support from GoN, or recommendations for organizational restructuring. It transferred experienced staff to other sections.

Land pooling. The cost of land pooling was $7.7m, compared to the appraisal estimate of $1.7m. However, the subcomponent was rated highly successful, as it generated 700 per cent more in-kind contribution from the community, apart from their input in design and management. Land was four to seven times its original value and rental incomes were also high (an increase of about 200 per cent). The success was confirmed by the demand for land pooling by landowners from the other side of the river. Subsequently, Kathmandu Metropolitan City and DUDBC have undertaken similar widening in another part of the Tundikhel Corridor.

Storm Water Drainage. The drains have reduced flooding in many areas, including JP school (tourist center), Dallu/Chagal, Maharajgunj, and Naya Bazar, where water-logging was an acute problem. About 400 houses were saved from annual flooding, eliminating the annual burdens of whitewashing walls and removing belongings from ground floors. Rents also rose by NRs1,000 per year in case of a room and NRs2,000 to NRs5,000 per year for a shop, depending on their location. Two kilometers of roads have been relieved from annual repair and maintenance, and the municipality estimated it saved them NRs150,000 per km per year. However, as against these benefits, illegal connections to the drains meant that there were no environmental benefits from the project.

B1.6 Pokhara projects

8 The Tourism Infrastructure Development Project and the Second Tourism Infrastructure Development Project included significant urban infrastructure works and capacity building at Pokhara. These various interventions included some of the recommendations of the earlier Environmental Protection Study of Phewa Lake, Pokhara Project.4

B1.6.1 Environmental Protection Study of Phewa Lake

9 The Environmental Protection Study of Phewa Lake found that urban drains were the main source of nutrients polluting the Lake. From measurements, the study estimated that the urban drains were delivering about 7.5 times as much nitrogen and 9 times as much phosphorus as agricultural run-off. The study concluded that the greatest improvements in the nutrient status of the lake could be obtained by controlling urban drainage discharges. Among the recommended projects were the following:

1. A sanitation education project

2. A septic tank and pit privy assistance project

3. A sanitation facility retrofit project

4. A septic tank pump-out and disposal area project

5. Hotel/restaurant sanitation improvement project

6. A solid waste management project

7. A landfill development project

8. A tourism infrastructure development project

9. A land use zoning project

4 TA 1663-NEP, completed in 1993.


B1.7 Scope

10 The Tourism Infrastructure Development Project included:

improved sanitation, footpaths, and street lighting to enhance the attractiveness of the historic main street of Pokhara

At Phewa Lake, one of the scenic attractions of Pokhara, a new footpath and garden

11 The Project aimed to upgrade the attractiveness to tourists of the historic streets of Ganesh Tole and Ram Krishna Tole. Many of the buildings along the street are old traditional two-story brick and tile shop-houses. An important temple is located at the end of Ganesh Tole. The Project established most of the physical works planned for the street, including drainage along the sides of the streets, a sewerage system utilizing communal septic tanks, footpath paving in stone that matches the character of the buildings, litter bins, and street lighting. Although not part of the Project, the local government sealed the roadway, which was previously only partially sealed and unsightly. The uncompleted work comprised the outfall of the drainage system, which was left to drain into Phewa Lake without any mechanism to settle out solid material.

12 The street appearance was improved under the Project. The facilities also benefit local residents in the form of drainage for 6,000 persons, sewerage for about 1,200 persons in 250 households and safer pedestrian movement from the improved footpaths and street lighting. Nevertheless, several operational aspects were either not achieved or required improvement. The litter bins by themselves were inadequate to encourage improved solid waste collection and cleanliness along the street. That program was succeeding at OEM, as evidenced by the common presence of private litter bins and the cleanliness of the street. The design of the drainage and sewerage systems failed to adequately recognize the need to collect and treat kitchen and bathroom sullage separately of the septic tanks so sullage has been excluded from the sewerage system. Most households drain their sullage into the Project storm water drainage system. The result is that this sullage drains untreated into Phewa Lake, contributing to the high levels of pollution.

13 The component aimed to develop an attractive landscaped garden and footpath in an existing park adjacent to Phewa Lake and the site of the tourist service center, also to be established under the Project. Most of the footpath was completed with the exception of the sections joining either end to existing roads and pathways. Essentially, the footpath exists but at one end entry to it is blocked by a wall, while at the other end the entry is not obvious, being separated from the roadway footpath by a grassy strip. A slum exists near the middle section of the footpath and a large section in the same area has collapsed; these conditions impose limitations on the attractiveness and usefulness of the feature. The garden was not established. Few people, let alone tourists, use the footpath. The park through which the footpath passes is itself not attractive, lacking shade trees and areas of interest other than the adjacent lake. Tourists can access the lake at many other sites making a visit to the park for this purpose unnecessary. The park is located near the site of the dam forming the lake, but the main tourist area has developed several kilometers further down the lake. The footpath will likely only be used if the park is made attractive to tourists.

14 ADB’s administration of the Project would have been better if it had monitored and encouraged greater private sector involvement in planning, and if more attention had been given to how the private sector was to be linked in an ongoing manner to the Project.

15 Second Tourism Infrastructure Development Project

16 The environmental improvements in Pokhara under the Second Tourism Infrastructure Development Project included:

A public environmental education program to promote awareness among the residents of Pokhara about public hygiene and sanitation.

Improvements in public and private sanitation facilities. At the time of appraisal, it was estimated that 5,000 households would construct improved sanitary facilities. However, only 165 households constructed new septic tanks with loans from the


municipality.

A septage management program, including the establishment of a regular cleanout service and the sanitary disposal of septage at the waste management facility. The septage treatment facility has been completed and equipment procured for pumping septic tanks and transporting the septage to the disposal site. However, at the time of the Project Completion Report, collection and disposal of septage had not begun.

A solid waste management system to provide regular household collection, recycling of waste where possible, and disposal at the waste management facility. The landfill area has been completed and equipment has been procured for collection and transport of solid waste to the disposal area. Regular collection has begun and a fee schedule has been enacted. However, no fees have been collected (as of October 2005).

Improvements to drainage through the construction of roadside drains along main roads in the town’s core area.

B1.8 Lessons learnt

17 At appraisal, 33 km of storm drains were to be constructed in Pokhara. More than 50 km were actually constructed. However, the design of the drains was changed at the demand of the local population from reinforced concrete pipe to a masonry section with reinforced concrete covers. This allows for easier breaking into the drain for the discharge of sanitary waste into the storm drain. As the project did not provide any wastewater treatment, the result was impacts on the water quality of the lakes into which the drains discharged.

18 Capability enhancement of implementing agencies should be carried out well in advance of implementing infrastructure components, based on a thorough institutional assessment. Virtually all the problems in Pokhara were rooted in the poor capacity of the municipality. The municipality did not assign the necessary staff for training, and the project management unit did not focus on this issue. More emphasis should have been placed on strengthening its capacity prior to the commencement of physical works. 19 Entities intended to manage O&M for infrastructure should be established early in the project cycle, and staff trained throughout the implementation period, rather than at the very end. ADB should ensure that the appropriate institutions are in place before approving contracts for construction, and that there are measures to strengthen capacity in O & M. 20 Assessment of community attitude to infrastructure, such as waste disposal, should be better assessed at appraisal. For example, a participatory process to identify a feasible waste disposal site would have prevented significant delays in the construction of the solid waste disposal site.

21 ADB should insist on enforcement of bylaws and regulations, such as penalties on illegal septage disposal and solid waste disposal. The drainage system, which was designed purely for storm water, is channeling raw sewerage into Phewa Lake, because of illegal dumping of septage.

22 Designs of environmentally sensitive infrastructure systems should anticipate the impacts of noncompliant behavior by the public. The drainage system in Pokhara discharges all water into Phewa lake. Although designed for storm water, many residents have directed their sewerage lines into the drains, which will, over time, cause significant contamination of the lake.

23 It is important to complete land acquisition before commencement of construction. In Pokhara, the drainage system is generally complete. However, three sedimentation traps were not constructed because the proposed land could not be acquired. Over time, this will cause increased sedimentation in Phewa Lake.


B2 Butwal Water Supply Project

24 The Community Empowerment through Improved Water Supply Project was completed in 2005 with ADB’s assistance.5 Volume 2 gives details.

B3 The Small Towns Water Supply and Sanitation Sector Project

25 The recently completed Small Towns Water Supply and Sanitation Sector Project (STWSSSP), approved in 2000 with an investment value of $53.9m, covered 29 small towns. For the purposes of the STWSSSP, small towns were towns with populations under 40,000.

B3.1 Scope

26 The STWSSSP had the following components:

Public awareness campaigns. NGOs carried out public awareness campaigns. The focus of the campaigns was on community awareness of the project concept including (i) the roles and responsibilities of the Water and Sanitation User Committees (WSUCs), local governments, TDF, and DWSS; (ii) the need to share the capital cost of the water supply systems; (iii) the linkage between the desired level of services, the cost contribution and O&M expenditure, and water tariffs; (iv) the availability of TDF loans and the need to pay back the borrowed funds; (v) women's representation in the decision-making process; and (vi) land acquisition and resettlement issues.

Health and hygiene education (HHE) programs. NGOs coordinated with other institutions and civil groups – the district health office, district education office, UNICEF, WSUCs, local sanitation clubs, and women's groups – in developing an appropriate training program. HHE programs covered (i) school hygiene education; (ii) community education; and (iii) focused training including latrine construction, solid waste management, animal waste management, and training of community health workers. The Project provided support (up to 50 percent of construction cost) to low-income households interested in building private latrines for purchasing materials unavailable locally. The private in-premise facilities are of two basic types: pour-flush latrines and ventilated improved pit latrines, depending on the willingness to pay and preference of the households.

Water supply and sanitation facilities. The water supply systems were essentially piped water supply with private yard connections. Community taps serve poorer areas adjacent to the distribution systems. Other poorer areas had access to rainwater harvesting materials. The basis of the design of the piped water supply was: (i) increased per capita water supply; (ii) 24-hour supply with adequate residual pressure heads for private connections; (iii) full coverage of the designated service area; (iv) treated water to meet national standards; and (v) predominantly private yard connections, with some community taps and indoor connections. The subprojects typically had the following components: intake structure, transmission mains, treatment facilities, surface reservoirs, tubewells (pumped systems), submersible pumps, electrical facilities, overhead tank (tubewell systems), distribution mains, house connections, community standposts, pumphouses, and guard quarters. The systems have a 15-year design period.

Technical Support to WSUCs. To ensure that WSUCs obtained the necessary capacity to manage the water supply systems, WSUC representatives received technical and financial training. Technical training covered system operations, preventive maintenance, and water source protection. Financial training covering tariff planning, billing, collection, and basic accounting was provided by the TDF. In addition, technical

5 The project was a part of RETA 6109: NGO Partnership for Poverty Reduction


support centers were established in each of the five regional offices of DWSS, to provide post-construction, fee-based services to WSUCs including (i) engineering and other technical support; (ii) water quality monitoring and testing; (iii) water meter calibration; (iv) training in water quality testing and meter calibration (trainees may include private business persons); and (v) issuing water quality and meter calibration certificates.

B3.2 Lessons

B3.2.1 Benefit

27 The findings of the 2004 benefit monitoring and evaluation survey noted that the STWSSSP had been "effective" in terms of:6

1. reducing the prevalence of diseases such as diarrhea, jaundice, and typhoid fever, as well as skin allergies;

2. improving personal hygiene;

3. improving the environment;

4. increasing the availability of safe drinking water.

28 The project has apparently done well in terms of beneficiary participation and adopting good governance practices in all stages of subproject implementation. This has helped strengthened the technical, financial, and management capacity of the WSUCs to evolve as effective institutions to manage urban development.

29 The district level and regional offices of DWSS were not directly involved in implementation. This has implications for the long-term technical support for towns.

30 Although the project achieved a high level of financial contribution by the community, in some places this resulted in inability for the poorest to participate, leading to hardship and exclusion of these people from the project.7 The project used a top-down approach to awareness programs. Health and hygiene education commenced in the project towns after preparation of the detailed design and its acceptance by the WSUC. The NGO undertaking the health and hygiene education coordinated with other institutions and civil groups – the district health office, district education office, UNICEF, WSUCs, local sanitation clubs, and women's groups – in developing an appropriate training program. The training program covered (i) school hygiene education; (ii) community education; (iii) latrine construction, (iv) household management of solid waste and animal waste, and (v) training of community health workers. However, most NGOs implemented the program using traditional types of mass and public campaigning, mainly through one way communication. There was no reporting of follow-up or monitoring to see if any change had been achieved. People in towns agreed that the approach has had little or no impact on their behaviour and decision-making.8

B3.2.2 Financial sustainability

31 Delay in construction as well as the low number of tap connections is putting a number of WSUCs in the STWSSSP towns in a difficult situation in repaying the loan to the TDF on time. In the terai, easy availability of groundwater to the households at their premises, though often unsafe due to contamination, seems to be the main reason for the low number of tap connections and low water use. Another significant reason is the high tap connection fee.

6 This paragraph relies on ADB Independent Evaluation Department, 2009, Nepal: Delivering Assistance in a Challenging Environment. 7 FCG International Ltd, 2009, Preparing the Improved Water Quality, Sanitation and Delivery Sector Development Program, Final Report, Volume 2. 8 Finnish Consulting Group (FCG) International Ltd, Finland, 2009, NEP: Preparing the Improved Water Quality, Sanitation, and Service Delivery in Emerging Towns Sector Development Program , ADB TA 4792-NEP.


B3.2.3 Training and capacity building

32 Some STWSSSP water supply systems faced problems such as poor construction quality, lack of technical expertise of WSUCs and inadequate technical support. These problems are adversely affecting the effective operation of systems.9

9 ADB, 2009, Review and Recommendation of the President to the Board of Directors: Proposed Asian Development Fund Grant, Nepal. Second Small Towns Water Supply and Sanitation Sector Project.

TA 7182-NEP C - 1 Final Report, Vol.1

Appendix C Review of UEIP

1 At the time of review by the PPTA (May/June, 2009), UEIP was well over half complete, but it was still early to reach firm conclusions on the project.1 However, the similarities between UEIP and the proposals by GoN and the ADB for STIUEIP demand some attempt to see what lessons can be learnt at this stage.

C1 Project rationale 2 The ADB Board approved UEIP in December 2002. Any review of the rationale for UEIP should in the first instance consider the situation at that time. However, for reasons given below, a rationale that was valid in 2002 might not be appropriate in 2009.

C1.1 Situation analysis

3 UEIP is a response to the inability of municipalities to keep pace with the rapid growth of urban populations and their demands for services. The failure to develop urban infrastructure is leading to deteriorating environmental conditions:

Urban land is polluted due to the absence of urban services, haphazard disposal of human waste, uncontrolled growth, haphazard physical development, and institutional failure to respond to these challenges. The lack of adequate sanitation facilities often leads to pollution of surface water and groundwater. Major polluting industries, such as tanneries, sugar, paper, canning, cement, brewery, and pharmaceutical industries, are invariably located in or near urban areas and often dispose of their industrial waste, including toxic waste, to roadside drains and open spaces. Also, disposal of hospital waste, which can be hazardous, does not appear to be properly controlled.2

4 While this statement is no doubt correct, control of industrial effluents and waste water discharge is not a municipal responsibility in Nepal. Most of the polluting industries are located outside municipal boundaries. 3 Moreover, it is the disposal of industrial waste in rivers and watercourses that is the major problem. As for health care waste, UEIP does not include any measures to properly dispose of it. Industries in the Kathmandu valley have been in decline.

C1.2 Project goals

5 UEIP had multiple goals:4

1. Reduction of urban poverty

2. Improvement of public health

1 The ADB requested that the PPTA undertake an in-depth review of UEIP. The PPTA team visited Panauti, Dulikhel, Banepa, Bharatpur, and Hetauda in early June. In general, the comments in this Appendix relate to the situation in June 2009. 2 ADB, 2002, Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Kingdom of Nepal for the Urban and Environmental Improvement Project. 3 At the time of preparation of UEIP, there was a lot more industry within the boundaries of Kathmandu municipalities than there is now. Over the last eight years or so, a growth in industrial activities in certain districts outside Kathmandu has offset the decline. However, the new locations are mostly outside municipal boundaries so as to avoid municipal controls and taxes, and to take advantage of lower land acquisition costs and greater choice of site. 4 Since the preparation of UEIP, ADB has adopted new guidelines that do not permit multiple goals for its projects. See Guidelines for Preparing a Design and Monitoring Framework, Second Edition.


3. Stopping environmental degradation

4. Reducing migration to Kathmandu Valley

5. Decentralization of urban management

6 While GoN and ADB agreed to these goals, and they are worthy goals, none of them seem realistic in the context of the proposed outputs:

1. Reduction of urban poverty is not a sensible project goal in the context of the project components, the nature of which does not have a strong poverty reduction focus.

2. Improvement of public health and stopping environmental degradation are not appropriate because the project is only tackling a few of the factors that affect public health and environmental degradation. For example, the project is doing nothing to ameliorate air pollution or improve solid waste collection, which are major factors in both environmental degradation and public health.

3. The project can only reduce migration to Kathmandu Valley by (a) attracting migrants to the project towns who would otherwise go to Kathmandu and (b) attracting industry (given that industry is in decline in the Kathmandu valley). The project will not create significant new employment opportunities, and some of the towns are quite inaccessible. It is hard to see why people would move to the project towns instead of to the Kathmandu Valley; only Hetauda has real potential as a large urban center.

4. Decentralization of urban management requires institutional reforms and political commitment at the centre. The project’s institutional outputs only covered municipal institutional strengthening and project implementation assistance. A project cannot achieve decentralization, it can only support it once the decentralization is in place.5

7 The project goals seem more like a wish-list than a conscious decision by GoN and ADB as to what they intended the project to achieve.

C1.3 Taking account of other external assistance

8 The UEIP Municipal Institutional Strengthening component builds on past work by the UDLE project. However, UDLE is an on-going project. There should be a relationship between the UDLE and UEIP initiatives. DUDBC’s experience in municipal institutional strengthening is limited to urban development matters, so it is unfortunate that the project design did not spell out the integration with UDLE initiatives. For example, although some of the loan is disbursed through TDF and the project design requires TDF to perform a range of tasks, the ADB provided no implementation assistance or capacity building to TDF. In effect it was relying on the UDLE inputs without explicitly recognizing this in the project design.6 During implementation, UDLE has made a significant contribution to TDF to assist with implementation. 7

C1.4 Taking account of lessons from past projects

9 When the ADB Board approved UEIP in 2002, the lessons learnt from similar ADB projects in were as follows:8

Complex and multi component projects should be avoided where the executing agencies lack experience.

5 On the limitations of capacity building without political commitment, see Adrian Leftwich, 2000, States of Development: On the Primacy of Politics in Development. Blackwell Publishers Inc, USA. 6 ADB, 2002, op. cit. 7 Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH, 2006, Responding to Urban Development Needs in Nepal. Urban Development through Local Efforts Programme 8 ADB, 2002, op. cit. These lessons learnt were derived from these previous projects: Kathmandu Urban Development Project; Institutional Strengthening of Kathmandu Metropolitan City; Second Water Supply and Sanitation Project; and Third Water Supply and Sanitation Project.


All stakeholders should be fully involved in project identification and design from an early stage.

Institutional strengthening should be given the greatest possible emphasis. Key staff should be in place before board consideration.9

Physical works should be tendered in relatively large packages to attract bigger and more experienced contractors.

Likewise, consulting services should be tendered in relatively large packages to attract bigger and more experienced consultant companies. This is also to reduce the workload of coordination for the executing agency and the implementing agency,

Advance procurement action, especially for consulting services, should be seriously considered to reduce delays at project start-up,

Project implementation scheduling should be realistic and take into account the time needed for implementing agencies to constitute themselves,

Consulting services should be guided following interactive processes, working closely with the target groups, producing user-friendly outputs, and emphasizing hand-on advice and on-the-job training instead of mere production of reports,

The executing agency should have an appropriate management information system in place, and agreed, realistic, and relevant performance indicators,

To maximize project impact on poverty reduction, project designs should incorporate specific components that will benefit the poor,

Project design should incorporate better environmental monitoring mechanisms, including the collection of baseline data,

ADB review missions need to supervise more closely the quality of project implementation. They also need to focus more on institutional and social concerns, and encourage interaction between the executing agency, the implementing agency and the beneficiaries.

10 UEIP disregards the experience of ADB that complex multi-component projects should be avoided where the executing agency has limited experience. While DUDBC has plenty of experience as an agency, it lacked experience as executing agency for a project comparable to UEIP, that is a project requiring the application of technical knowledge for which other GoN agencies are responsible. UEIP also disregards the experience of ADB in town selection, that is, that the financial and managerial capacity of towns is of paramount importance in selecting towns.

C1.5 Selection of towns

11 The selection of some of the towns for UEIP is not consistent with the project goal of reducing migration to Kathmandu Valley (Figure 1). Bharatpur, Ratnanagar, Hetauda, Banepa, Dhulikhel, and Panauti have some credibility as satellites to the Kathmandu Valley urban area in terms of access. However, Dhadingbesi, Bidur, and Kamalamai are simply too remote from Kathmandu Valley and the major transport networks to have any credibility as possible counter-magnets to Kathmandu. More importantly, flat terrain and readily available water supply are crucial considerations. As it turned out, in three of the towns there was a dispute over the allocation of water between farmers and urban consumers (see section 3.2.3). An assessment of the feasibility of developing these towns as counter magnets is lacking.

9 The ADB and the Ministry of Finance agreed in 1998 that a precondition to loan negotiations is the appointment of a project manager and the establishment of a project office, including the appointment of core staff.

TA 7182-NEP C - 4

Final Report, Vol.1

Figure 1 Strategic economic linkages of UEIP towns Source: ADB, 2002, op. cit.

POKHARA

DHADINGBESI

KODARI

122 km

122 km

38 km

KAMALAMAI MARKET CENTRE TRADE/COMMERCE

DHALKEBAR

19 km 109 km

EAST-WEST HIGHWAY

HETAUDA INDUSTRY

MARKET CENTRE VOCCATION EDUCATION

KATHMANDU VALLEY

PANAUTI MARKET CENTRE

TOURISM CULTURE

TRADE INFOTECH

EDUCATION

TRANSPORT

BANEPA

26 km

BIDUR MARKET CENTRE/TRADE COMMERCE/TOURISM

70 km

NOUBISE

24 km 20 km

TRADE INFOTECH EDUCATION TRANSPORT

MARKET CENTRE

AGRO-TRADE

77 km

GALCHI

MUGLING

EAST-WEST HWY

157 km

BUTWAL

22 km

BHAIRAWA

SUNAULI (INDIA) LINKAGE POINT TO INDIA

RAKSAUL (INDIA) LINKAGE POINT OF INDIA

SITAMAD (INDIA)

LINKAGE POINT OF INDIA

29 km

SIMARA

KERUNG (TIBET) LINKAGE POINT TO CHINA

LHASA (TIBET) LINKAGE POINT TO CHINA

DHULIKHEL TOURISM

EDUCATION HEALTH

BHARATPUR INDUSTRY

TRADE COMMERCE

HEALTH TOURISM

(RELIGIOUS TRANSPORT

JANAKPUR

BARDIBAS

26 km

BIRGUNJ

26 km 4 km

RATNANAGAR MARKET CENTER AGRO-INDUSTRY

TOURISM 77 km

MALEKHU

Highway Road in poor condition Secondary route Planned route Node town UEIP town Future Agglomeration

BHIMESHWOR


C1.6 Selection of project components

12 The UEIP includes the following components (and major sub-components):

1. Municipal Institutional Strengthening and Revenue Mobilization.

2. Sanitation and Wastewater Management.

3. Water Supply.

4. Neighbourhood Road, Drainage and Water Supply Development.

5. River Training.

6. Road Upgrading.

7. Small Urban Community Facilities.

8. Revenue Generating Urban Facilities.

9. Community Development.

10. Project Implementation Assistance

C1.7 Consistency with the IUDP model

13 At the feasibility study stage, the UEIP concept conformed broadly to the classic integrated-urban-development-project (IUDP) model with multiple components at each project location. In addition to investments in a range of urban infrastructure and services, IUDPs have emphasized policy development and institution building. The policy development and institution building components arose from concerns about the access of the poor to basic services and the mobilization of resources. IUDPs now typically also include capacity building in local governments, particularly in terms of urban management, development of public-private partnerships, and community participation.

14 However, over 25 per cent of the proposed infrastructure investments were outside the core components of water supply, sanitation, drainage, solid waste management and urban roads. Prior to implementation, the core components were further cut back when the solid waste management component was dropped (see section C3.4).

15 It seems that the multiple goals contributed to a situation where any kind of urban investment was acceptable. There are no documents that provide a rationale for the selection of project components in each town in terms of urgent needs. The PPTA documents provide plenty of background information on each town, including reference to the integrated action plans, but then merely state the project components that have been selected for each town. They do not tie the selection to specific proposals in the integrated action plans. That municipalities re-confirmed the selection of project components prior to implementation does not constitute a rationale for the investments. There is no rationale.

16 GoN and ADB deleted all the road components at the Final Review Mission for the PPTA in October 2001.10 In the end the ADB did approve a road upgrading subcomponent limited to surface improvements (excluding realignment, straightening, and widening) so as to avoid land acquisition, resettlement issues, and any possibility of negative environmental impacts. As a consequence of this sequence of events, there is no explanation of the basis for the selection of roads for improvement.

17 For example, sub-projects lack orientation to the needs of disadvantaged groups, despite one of the goals being poverty reduction and another goal the improvement of public health.

18 The project components in any one town often seem to be unrelated to each other, without physical or functional linkage, raising the question as to whether the project is truly an integrated one. For example, there is no relationship between investments in road improvements and those in

10 Nippon Jogesuido Sekkei, 2002, Urban and Environmental Improvement Project Nepal: Final Report.


bus terminals and markets or drainage. The relationship between Revenue Generating Urban Facilities and the project goals is also tenuous, the only goal that they possibly relate to is ―slowing migration to Kathmandu Valley‖.

19 The project components in each town appear to have chosen from an ―a la carte‖ menu. That is to say, the wide range of components seems to reflect choices by the municipality or DUDBC rather than a rational analysis of priorities having regard to the goals of the project or an assessment of needs and the municipality’s integrated action plan.11 If municipalities had to choose from a set menu, the calorie intake would be the same (assuming the items on the menu have utility). However, the cost would be less (because of economies in design and project administration overheads and economies of scale in construction). The economic and financial rates of return would therefore be better.

20 The justification advanced for an ―a la carte‖ menu is that it is consistent with devolution and decentralization to municipalities. However, if GoN is offering grants and concessional loans, it is reasonable that GoN should decide what the money is spent on, and that it attach appropriate conditions. In defense of UEIP, there were no MDGs in 2002; lacking such international commitments, the GoN could consider a broader range of investments than is the case today.

C1.8 Gender strategy

21 The gender strategy rested on the assumption that municipal councils were elected and therefore contained the statutory quota of women under the Local Self-Governance Act. However, elected municipal councils disappeared six months before the Report and Recommendation of the President to the Board of Director of ADB on the proposed loan. During the project, the representation of women on the non-elected municipal boards has been far less than it could have been had elected councils been in place. Worse still, municipal boards seen to have to meet less frequently than elected councils. Thus, women have largely been excluded overnight of the project implementation.

C1.9 Key dates

22 Key dates in the history of the project are as follows:

PPTA approval December 23, 1999

Appraisal mission completed September 6, 2002

Board circulation November 19, 2002

Board approval December 10, 2002

Loan of agreement signing June 20, 2003

Loan effectiveness October 2, 2003

Loan closing date March 31, 2010

C1.10 Tendering of physical works

23 Nine towns and nine components or discrete sub-components inevitably lead to a large number of contracts for design and for construction. A further consequence of this was the need for substantial implementation assistance. There were separate contracts for reed bed treatment plants and for drainage, which seems unnecessary.

11 The integrated action plan was the predecessor of the periodic plan. At the time of UEIP project preparation, all the project municipalities had integrated action plans, but none had periodic plans. The Local Self-Governance Act of 1999 introduced periodic plans.


C2 Municipal institutional strengthening 24 The Municipal Institutional Strengthening component of UEIP comprises general municipal institutional strengthening, support for revenue mobilization, and specific training and support for project implementation.

C2.1 Support for revenue mobilization

25 On revenue mobilization, the aim of UEIP training was to improve municipalities’ capacity to collect revenues through preparation of detailed urban mapping, house numbering programs, house tax and customer databases of various urban services, and implementing improved computerized tax and service fee collection systems.

26 The outcomes have been disappointing:

1. For revenue mobilization in UEIP towns, workshops were conducted for all municipal staff plus political leaders and accordingly a municipal action plan was prepared.

2. For implementing Integrated Property Tax (IPT) the required software was prepared and training programs were also organized. Some municipalities have shown a good deal of interest while other municipalities did not show interest and procured the software on IPT and hired consultants on their own.

3. Similarly, urban maps based on GIS were prepared and house numbers were provided. Cadastral Information System was developed, but no decisions were taken to base revenue collection on urban maps and the cadastral information system.

27 The municipalities failed to take the necessary decisions to implement new systems, and the Project Coordination Office took no steps to ensure implementation of new systems.

C2.2 Other municipality capacity building

28 UEIP training also aimed at providing training in urban management orientation, organization and management, investment planning, budget preparation, local area planning, operations and maintenance, customer client relations, public relations, public-private partnerships, monitoring and evaluation, community mobilization, and community awareness. This is a very broad range of subjects for the training inputs provided.

C2.3 Public private partnerships

29 Prior to implementation, the design of UEIP provided for the establishment of ―revenue-generating urban facilities‖ with “private sector participation”. However, the PPTA reports give no evidence of any interest by the private sector in the proposed investments, and they do not specify the modality of private sector participation. The ―revenue generating facilities‖ would include bus terminals, bus/truck parks, marketplaces, small slaughterhouses, cold storage facilities, recreational facilities, and vocational training centers. The feasibility study proposed the following modality:

The TDF would make loans to the private sector.

The municipality would guarantee the loans.

The private sector would make an initial 20 per cent capital contribution and be responsible for loan debt servicing payments.

For sub-projects undertaken jointly with municipalities, it was assumed that the municipality would provide the land and the initial 20 per cent capital contribution.

30 The final project design included training modules in ―public-private partnership‖ but did not specify the modalities for private sector participation in the project. The UEIP revenue-generating facilities have been wholly funded by the municipalities. There has been no private sector investment. The private sector participation has been merely the renting of the completed facility. Moreover, the revenue-generating projects seem to have been designed with little participation of


beneficiaries. At the completion of the bus park in Bharatpur, built with funding from KfW and ADB (through TDF in both cases), the municipality wanted to call for management tenders but a private syndicate of transport operators refused to accept competitive bidding, forcing the municipality to negotiate with the syndicate. To promote PPP, there must be involvement of the private sector and agreement on modalities right from the beginning.

31 That the facilities would be revenue-generating is an assumption. Actually, taking the 58 municipalities as a whole, revenues from shops, markets, buildings, and bus parks have been declining in real terms. This is despite the continuing construction of such facilities by municipalities.

C3 Infrastructure

C3.1 Sanitation and waste water management

32 The sanitation and wastewater management component of UEIP provides expanded sewerage networks and simple wastewater treatment plants.

C3.1.1 Sewerage networks

33 The PPTA Final Report proposed combined drainage systems for sewage and storm water. However, in some towns the detailed designs were for separate systems. The project included cleaning the drains and sewers in each town and extensions to the networks. The weakness in this approach is that UEIP did not include solid waste management. The PPTA Final Report states that ―the open drains are freely used for the disposal of solid waste‖. Also, when allocating funds for drainage or sewers, full road re-pavement should be included consistent with the principle of integrated development. The PPTA did not consider integration of drainage, sewerage and road works.

34 At Hetauda, combined sewerage is under construction for transmission of both rainwater and sewage. The new sewer line is 13.2 km long and the first in Hetauda; it covers the densely built up area. However, there is no institutional arrangement for maintaining this infrastructure. The Feasibility Study proposed establishing a separate sanitation department. In June 2009, the introduction of a service fee was still under discussion and was not connected to the water supply system.12

35 There was lack of social mobilisation to prepare the community for the implementation. The site for the treatment plant was only made possible following agreement to meet the demands of the neighbouring community to include them in the provision of water, road surface improvement, etc. The community generally still thinks that it is an unnecessary investment.

36 Procurement of construction was in accordance with the Financial Act (1998) and Regulations (1999). There are weaknesses in construction methods. To facilitate smooth construction, contractors need to be fully aware of contractual obligations. Contractors often do not properly read or understand contract documents and yet submit tenders. Pre-qualified contractors should be called to pre-bid meetings for detailed briefing on contract documents and requirements. Following award, there should be a three to four days of contract administration training for both municipal engineers and consultants. Payment modalities need to bind contractor, consultant and the client. Payment of invoices should be made within 60 days unless there are deficiencies in the invoice. Finally, there are examples of dangerous construction methods (Figure 2).

12 It is understood that Hetauda municipality has since decided to operate the sewerage network and has requested the Water Supply Management Board to collect the service fee by attachment to the water supply charges. The point to note here is that construction proceeded before determination of the institutional arrangements.


Figure 2 Deep dangerous excavation for combined sewage drain with leveling staff, Hetauda

C3.1.2 Wastewater treatment 37 The UEIP wastewater treatment plants are reed bed treatment plants, in line with the project’s ―least-cost and appropriate-technology philosophy‖. The systems have been designed to be operated and maintained by the respective municipalities. The expected benefits are public hygiene and public health improvements, and reduced pollution of groundwater and surface water in the vicinity. Figure 3 Reed bed treatment plan under construction with roof of settling tank in foreground

38 A reed bed treatment plant has been in operation at Dhulikhel for five years. However, it is only a small one. A larger reed bed treatment plant at Shreekhandpur was intended to be the prototype for UEIP treatment plants. Inaugurated in September 2008, it had not commenced operation (due to a pipe blockage) when PADECO visited in June 2009 (Figure 4).


Figure 4 Reed bed treatment under construction, Dhulikhel

Figure 5 Shreekhandapur reed bed treatment plant

39 The plant consists of a flow diversion manhole, a coarse screen and grit chamber, two diversion chambers, two 75 m3 biogas reactors, six horizontal reed-bed plants, two sludge drying beds and 11 collection manholes. The treated water will be then discharged into the river. A sewerline from around 200 households of Shreekhandpur will now discharge to the reed bed plant. The land (2,036 m2, four ropanis) was worth $26,000 and UN-HABITAT provided $90,000 for the construction. Thus the total cost per household is $630. It cannot therefore be a suitable model for UEIP.

40 As none of the UEIP reed bed treatment plants are yet in operation, there is some doubt as to how successful they will be. The potential weaknesses of reed bed treatment plants in Nepal are as follows:13

1. Reed bed treatment plants are efficient in initial period, block effluent flow as roots grow; N, P, and K absorption becomes low as reeds mature. Other chemicals as S and

13 Badan Lal Nyachhyon, 2006, Service Enhancement and Development of Sanitary Sewerage System in Urban and Semi-Urban Setting in Nepal, Economic Policy Network Policy Paper 23. Prepared for Asian Development Bank and Ministry of Finance.


heavy metals remain in the effluent and are carried downstream. The reed leaves and roots are a nuisance and require special treatment since they are not used commercially.

2. Due to the lack of primary and secondary ponds for appropriate and adequate de-silting, settling, anaerobic and aerobic process of sewage digestion, the filter media and the pipe systems are choked and soon require replacement.

3. The detention period of effluent is inadequate for settling of suspended solid.

4. During the monsoon period, the filter media and the reed beds are full with rainwater and the wastewater overflows to nature without treatment.

5. Wetland requires a large pool of water for further oxidation and solar radiation (photosynthesis), place for birds and fish to play, and growth of weeds which RBTPs do not provide.

6. Worldwide experience in application of reed bed treatment plants is limited to tertiary level compared to the practice in Nepal of using them for primary/secondary level in Nepal.

C3.1.3 Operations and maintenance 41 The future management of the water and sewage systems remains unclear and presently there is no modality of training of technical artisans as the future operators under the management board for the respective systems. It is likely that NWSC staff may be reassigned to be employed by the management board.

C3.2 Water supply

C3.2.1 Proposed water supply component 42 The water supply component was designed to cover five municipalities only. The work involves development of new water sources, construction of transmission lines, water treatment plants, reservoirs and distribution networks. Consistent with the goal of decentralization of urban management, UEIP was expected to help establish financially and institutionally self-sustainable water supply utilities under local boards. Furthermore, regional integration of the water supply services is envisaged for three municipalities that adjoin each other. Through various interventions in the urban infrastructure/services, in particular in the water supply subsector, the Project is also expected to contribute to the improvement of the framework for public-private partnership.

43 The project design provided for each of the five municipalities, MPPW, and NWSC (as the owner of the existing urban water supply system) to agree on the arrangements for capital investment project management as well as subsequent operational arrangements for the resulting water supply system before awarding the relevant civil works contracts.

C3.2.2 Water supply at Hetauda and Bharatpur

44 In June 2009, NWSC indicated that it had no role in the development of UEIP water projects at Bharatpur and Hetauda (the two municipalities who will have their own management boards). NWSC pointed out that the new schemes are not integrated with the existing works. The municipalities are overseeing construction. The operation of the new schemes and that of the existing system will be handed over to a locally constituted Management Board, but the NWSC expressed doubt regarding the effective sustainable function of such a board, which they consider to be highly politicised; however, the hardware may function well for the first few years when the scheme is still ―new‖. DUDBC in consultation with MPPW has prepared an action plan to set up the water supply management boards in Bharatpur and Hetauda. A report on the valuation of the relevant assets and liabilities of NWSC is under review by MPPW.

45 At June 2009, there was an absence of phase out (transfer) plans from NWSC to the new management board. There was confusion on management of the system. There had been no serious dialogue between NWSC, the municipality or the community. There is a need of cabinet decision on handing over of the assets of NWSC.


46 Ownership will come to the new board, but there remains confusion as to who will actually operate the system.

47 Reasons for delay in construction of the new scheme include the following:

1. A management board was a pre-requisite but stakeholders were not clear about its formation.

2. According to the municipal engineers, overhead tanks were designed without soil tests for bearing capacity. Later, the soil bearing capacity was found to be poor, requiring re-design and increasing the cost by 20 to 22 per cent and delaying implementation.

3. Obtaining community contribution within the coverage area of an existing system is difficult. Therefore, the municipality provided the contribution which is planned to be incurred while connecting new taps. Confusion is there for those households which are already connected.

48 The PPTA suggested introducing a mechanism to monitor and regulate groundwater extraction by households and industries. This recommendation has not been implemented. For Hetauda, the PPTA proposed using groundwater. However, during implementation this was changed to include river intake as well. Figure 6 Overhead tank at Hupra Chaur, Hetauda with public toilet serving recreation ground

49 Part of the NWSC system at Hetauda (Lamsure, in ward 9) was originally constructed by users with municipality support. Management was handed over to NWSC, when the old users' committee could not manage it properly. 14 Designed for 1000 households, it now serves 1300 households. After enhancement, an additional 2000 households is expected to be served. The source is perennial and has adequate quantity for the expansion. Intake is a sump/infiltration well with a ground tank of 200 m3 capacity. Occasional chlorination is done as treatment. An overhead tank is under construction, distribution lines are constructed. The level of UEIP investment in the system is unknown to users. The community of Lamsure has not invested directly in the cost of the water supply enhancement under UEIP, nor is it willing to do so in future. An indirect mechanism needs to be worked out in order to obtain users' contribution to the system.

50 The Users’ Committee Chairman maintains that the proposed management board can manage the system but the tariff rate for the four separate systems need to be different as some sources are less costly to operate than the others. Sharing water from one system to another would not be easy.

51 During the design phase users were not consulted as at the time users committee was not functioning. However, during construction there is good supervision from the community side as

14 Mr Ramchandra Aryal, Chairman, Users’ Committee. Pers. comm. 6 June 2009.


well as the project. Pipe pressure checks were done in the presence of users at the factory, and concrete quality was overseen by the community. Some dissatisfaction was expressed by users; the size of the distribution pipes seems to be small.

52 The speed of construction work is very slow. Apart from the 18 months of planned construction time a further seven months was added. It seems an additional seven months will be required to construct the system.

C3.2.3 Banepa, Panauti and Dhulikhel The PPTA study recommended seperate water supply systems for Banepa and Panauti, with both utilizing nearby water sources. Dhulikhel municipality was not included, as it had applied to the STWSSSP for assistance. For Banepa, the PPTA proposed rehabilitation works, construction of sedimentation tanks, replacement of transmission mains, rehabilitation of distribution mains) and the construction of a new scheme using a river source including an intake, an overhead reservoir, a water treatment plant, transmission mains and distribution lines. For Panauti, the PPTA recommended rehabilitation of the distribution mains, an infiltration gallery, new transmission mains, new distribution mains and a RCC reservoir with chlorination facilities.

Revision to PPTA proposals

53 The ADB fielded experts to suggest revisions to the water supply schemes and undertake a least cost sewerage analysis, with the objective of assisting the DUDBC and other stakeholders to prepare revised water supply schemes for the UEIP, as the PPTA water supply proposals in five towns (Bharatpur, Hetauda, Banepa, Panauti and Dhulikhel) appeared to have neither taken full advantage of the potential economies of scale nor sufficiently considered institutional issues.

54 The consultants proposed a combined system for the three municipalities using Khar Khola and Muldole Khola sources, which are tributaries of Rosi Khola, as a better option than individual town systems. They also made various recommendations concerning project implementation, management, municipal capacity building, financial planning and NWSC participation.

Consulting services in development of municipal and regional water supply system

55 DUDBC/UEIP fielded an institutional expert and a water supply expert to assess the capacity of municipalities and the regional entity to implement and subsequently operate and manage the projects. The consultants were also to develop and recommend suitable institutional arrangements for implementation as well as subsequent operation and management of the water supply projects. In their conclusions the team recommended that further follow up action and clarification and recommended retention of a consultant with a legal background and knowledge of sector institutions and business management to help implement and support the new institutional arrangements.

Studies by PCO/PISC, initiated by the DUDBC and political party representatives

56 The assignment report suggested a combined system for all three municipalities using the sources at Khar Khola and Muldole Khola. The mayors agreed to the proposal, with the mayor of Panauti raising the issue of irrigation users. However, with the term of the elected representatives ending, a committee of political party representatives was formed to run the municipalities and the Irrigation User Committee and VDCs commenced new agitation. The absence of a breakthrough made it impossible to proceed with the sub-project.

57 The DUDBC had to intervene to find a consensus. ADB suggested scrapping the sub-project and reallocating the funds. The DUDBC convinced the ADB to consider continuation of the subproject. In December 2006, DUDBC initiated a rapid appraisal of the two options for water resources in an effort to meet the ADB deadline for resolving the issue on sources.

Rapid technical appraisal report

58 The eighth UEIP steering committee meeting decided to carry out a rapid appraisal, with the help of the consultants, to assess the proposed alternate water sources, ie Ladkhu Khola and its tributaries, as the earlier proposal to use the water from Rosi Khola and its tributaries had run into controversies with the downstream irrigation users who felt that diverting water from Rosi Khola


would gravely affect their irrigation schemes. The findings covered discharge adequacy, technical issues, environmental sanitation, financial implications and operation and maintenance. A presentation on the findings was made to the political representatives, and other concerned stakeholders at Banepa municipality, where they all agreed to the Rosi Khola option.

Feasibility study report

59 In July 2007, consultants to the three municipalities of Banepa, Dhulikhel and Panauti jointly prepared the feasibility study report for the Regional Water Supply Project of Kavre Valley. The purpose of the study was mainly to ensure the participation of beneficiaries and their ownership of their sub-projects from the very beginning of the project cycle. The study focused on elaboration of various scenarios, preparation and comparison of the alternatives in terms of technical, economic, financial, social and institutional considerations.

60 The consultants concluded that the viability of the integrated water supply system depends upon technical, environmental, social, and financial factors. Earlier cost estimates were found to have too low. The increase in the capital investment costs reflected increases in rates, pipe lengths, service area coverage, and other factors. The consultants recommended certain revisions in the systems for each town. They suggested implementing only the most important parts of the distribution network in the first phase. The network could later be gradually increased to meet the demands of the population residing in the fringe areas of the three towns.

Intervention by concerned agencies

61 The seven political parties, PCO, DUDBC and MPPW made a concerted effort to arrive at a consensus on an integrated water supply scheme for the Kavre Valley. The stakeholders finally reached agreement, but on condition that the 12 point demand made by the irrigation user committee and specific demands made by the Kusa Devi and Bhumidanda VDCs were met.

62 The tenth steering committee was held on December 28, 2007. The major decisions taken at the meeting are were follows;

As decided by the combined meeting, demands of Rosi Khola User’s Group, Kusha Devi and Bhumi Danda VDCs to be fulfilled at the local level with active effort of Integrated Water Supply Steering Committee and respective three municipalities and send letter of approval with commitment to be made to MPPW through DUDBC within 7 days.

Due to deficit of budget provision (NRs200m) the project to be implemented in stages, with the initial stage covering only the most essential distribution areas.

Integrated Water Supply Steering Committee by policy guidance, coordination and advice manage commitment for phase wise implementation.

MPPW to request i) NPC and MoF to approve additional budget (ie NRs200m), ii) ADB through MoF for continuation of the project.

Municipalities and Integrated Water Supply Steering Committee, with a clear consensus of concerned groups, to prepare Plan of Action on how to fulfil demands of locals and also register the water sources with the District Water Resources Committee by March 28, 2008 and inform MPPW.

The consultants to commence preparation of a detailed engineering design and EIA.

63 In January 2008, the Director General of DUDBC wrote to the Secretary, MPPW, requesting that the NPC and the MoF manage the requirement for an additional NRs200m and also to request the ADB to continue the sub-project.

64 The meetings of the respective municipal and other stakeholders confirmed their continued commitment to the continuation of the project by agreeing with the decision of the tenth steering committee meeting, where a letter of commitment was to be made available by the respective municipalities to the MPPW through the DUDBC within seven days that the demands put forward by the Rosi Khola user group, Kusa Devi and Bhumi Danda VDCs will be fulfilled at the local level


with active effort of the Integrated water supply steering committee and respective three municipalities.

65 The DUDBC arranged a meeting in February 2008 with all stakeholders. It was decided that the detail design and the EIA should commence. All present expressed their commitment and support. A request was made to the District Water Resources Committee for Kavre by the Project Manager for Banepa, who is also the member secretary for the KVIWSS Project, to register and operate the relevant water sources. Accordingly, a notice was published by the office of the district water resource committee calling for public comments within 35 days notice.

The concerns of the ADB

66 In January 2008, ADB informed the MoF that it proposed to cancel the $3.36m allocated to the Kavre Valley component and recommended utilizing the loan savings in the better performing municipalities. The ADB letter noted that the issue of constructing the integrated Kavre Valley water supply system under UEIP, by drawing water from Roshi stream, had been outstanding since September 2005, while the cost estimate had increased from $4.3m at appraisal to $8.6m, without provision made for the price increase or the cost of the new irrigation scheme, based on the feasibility report prepared in August 2007. It also mentioned that most of the extended areas will have to be dropped at detail design stage, as they serve a cluster of households in areas of Panauti, and this would give rise to protest by the local inhabitants.

67 The letter also mentioned that during the mid-term review mission, it had been agreed that the Kavre Valley water supply component would be cancelled if the twelve conditions and arrangements for additional funding of $4.4m from Government could not be finalized by December 31, 2009. In the meantime a three-point demand had been made by two VDCs where the water source of Roshi originates, even though agreement had not been reached on the previous conditions. The letter also stated that the Project Steering Committee held on December 27 in MPPW, had decided that the Government’s decision on this matter would be provided to the ADB by January 15, 2008 through the MoF, and that the participating municipalities should amicably resolve all conditions/ demands and register the water source in the name of the project by March 31, 2008.

68 The ADB stated that it had not received the Government’s formal position on the various issues, and based on past experience it was not optimistic that the conditions/demands could be satisfactorily resolved within three months, quite apart from the issue of the Government’s preparedness to provide additional funding.

69 The letter also stated that if the contract could be awarded in January 2008, as per the project assessment the loan closing would have to be extended by about two years, putting the project ―at risk‖ of realizing a reasonable level of project outcomes and adversely affecting ADB’s overall portfolio performance in Nepal with negative implications for Asian Development Fund resource allocation to Nepal.

70 The loan review mission in March 2008 discussed the issues on Kavre Valley water supply project with the DUDBC and MPPW. The MPPW advised the mission that in view of the strong demand from stakeholders for the integrated water supply scheme, the Government was exploring various options. In this connection, it was also analyzing the time required to complete the detail designs, environmental impact assessment and institutional mechanism given the involvement of the three municipalities.

Conflict in sharing water source and water rights issues

71 The conflict is now more or less resolved with the intervention of the DUDBC, and the dialog between the municipalities, user groups and VDCs. The respective Boards of the municipalities have expressed their commitment for the continuation of the project, while the water sources are to be registered with the office of the District Water Resources Committee and the request has been made to that effect. Once the public comments are reviewed the sources will be registered with the water supply users committee of the three municipalities.


Incomplete project detailing

72 It was expected that the Detailed Designs, Bid Documents and EIA for the Kavre Valley municipalities would be completed by the consultants by September 2009, as conducting the EIA would require around one year.

73 Further, no provision has been made in the consultants’ assignment to conduct of a Social Assessment and Resettlement Plan for the sub-project. The social assessment study will address the conflicts amongst the three municipalities and the demands made by the user groups and VDCs over the sharing of water. Although the municipalities agreed to manage the demands made by the various groups, they do not the necessary funds or resources to address them. Funds will have to be provided by either the Government or the Project.

Requirement of new institutional arrangements (Regional Authority/RWSMB)

74 From the foregoing the concept of standalone schemes for the municipalities have been ruled out and integrated approach has now been accepted by all stakeholders, therefore the best possible institutional arrangements for the integrated system has to be developed taking into consideration the recommendations made in the previous studies and in particular, consultation with all stakeholders with a view to complete the proposal, prior to September 2009.

Transfer of NWSC assets

75 The NWSC assets and liabilities of Banepa and Panauti have to be valued and the process of transfer to the appropriate authority that will be proposed to manage the integrated system should be initiated. The permission of the Government should be sought and the three municipalities should initiate the necessary action to set up the regional authority/RWSMB. The drafting of the necessary legal agreement will be also required.

C3.2.4 Requirement of additional fund (due to increase in scope and cost)

76 The initial cost estimates for the sub-project from PPTA have now increased due to an increase in scope as the initial service area for water supply distribution has increase due to the various demands made by the political party representatives and local stakeholders and accommodating the various demands put forward by the user committee and VDCs of the affected areas such as introducing the pumping option to assure the downstream irrigation water users of a continuous supply during the dry periods and over the period there were increases in the cost of construction materials which also contributed to the increase in the overall cost of the sub-project.

77 The current trend in the increase of essential construction materials will have a direct bearing on the estimates for the implementation of the civil works, and therefore may need to be revised appropriately.

C3.3 Neighbourhood Road, Drainage and Water Supply Development

78 The Neighbourhood Road, Drainage and Water Supply Development component aims to promote orderly urban growth through land pooling schemes executed under the Town Development Act. The UEIP PPTA consultant’s report contains a discussion of the advantages and disadvantages of land pooling and guided land development. 15 However, this discussion does not sufficiently acknowledge the disadvantages of land pooling.

C3.3.1 Not consistent with municipal priorities

79 The Local Self-Governance Act specifies mandatory and optional functions of municipalities. Land pooling is an optional function, not a mandatory one.16 Municipalities should not be allocating funds to optional functions until they are performing their mandatory functions adequately.

15 Nippon Jogesuido Sekkei, 2002, Urban and Environmental Improvement Project Nepal, Final Report, Volume 2. 16 In Section 96 land pooling is an optional function. Section 111could perhaps be read as mandating land pooling, but then again it uses the phrase ―of necessity‖ rather than requiring all municipalities to engage in it. Section 96 is the section that distinguishes between mandatory and optional functions.


C3.3.2 Not consistent with promoting private sector investment

80 Since completion of the UEIP preparation PPTA in 2002, GoN has strengthened its commitment to creating a better environment for private sector investment. In most countries, the private sector assembles land holdings and subdivides the land for development. There is no necessity for the state to acquire land, and given the financial and institutional constraints that GoN faces, there is no need for the state to undertake land pooling projects, or even guided land development. Land pooling requires municipalities to recruit additional staff. 17 International experience of land pooling is that it requires ―enormous commitments of local planning resources‖ and that it is not the panacea to solve all urban land development problems.18

C3.3.3 Ineffective and inefficient in promoting orderly urban expansion

81 According to the project design, the objective of land pooling was ―promote orderly urban expansion.‖19 A more cost-effective way of achieving the objectives of orderly urban expansion is to improve and expand road networks to match (and provide direction to) the physical expansion of the urban area.20

C3.3.4 Not socially inclusive

82 Those who don’t own land cannot benefit. In the Kamalamai scheme, there are no indigenous castes, share croppers or tenants. In urban areas, 28 per cent of heads of household do not own their home. Small landowners are vulnerable because the surrender of part of their landholding may render their holding uneconomic. In the Kamalamai scheme, a different problem is evident: the landowners are large. The average area of land owned was 1,150 m2, whereas as the national average urban landholding is only 135 m2. Moreover, the land owned within the scheme represented just 3.8 per cent of the total land owned by the beneficiaries.

83 Another indicator of the comparative wealth of the beneficiaries is the above average literacy. Of a total of 70 households, 54 were Brahmins, Chhetri, or Newar.

C3.3.5 Inequitable 84 In UEIP, the ADB loan is financing 100 per cent of the cost of the land pooling. However, it is the municipalities (and therefore local taxpayers as a whole) not the small number of beneficiary landholders who are making the interest payments and loan repayments. In Kathmandu Valley land pooling schemes, it is normal for land owners to surrender part of their land holding for the project to create new lots which the project can sell to pay for the cost of the infrastructure. Not only was this not done in the Kamalamai scheme, but the municipality actually contributed municipal land for the benefit of the scheme landholders. In effect the ADB is providing a concessionary loan so that the municipality can make a handout to comparatively wealthy landowners. The cost of the civil works for the project comes to $2,484 per beneficiary household (excluding the design costs).

C3.3.6 Lack of gender equity in benefits

85 Most landowners are male. According to the 2001 census, only 10.8 per cent of women in Nepal have rights over land. In the case of the Kamalamai scheme 29 out of 78 landowners were female.21

17 The feasibility study for UEIP stated this but did not include the cost of the additional staff in its economic analysis of land-pooling sub-projects. 18 Andre Sorensen, 1999, Conflict, consensus or consent: implications of Japanese land readjustment practice for developing countries, Habitat International, 2000, 51-73. Ballabh Prasad Acharya, 1988, The Transferability of the Land-Pooling/Readjustment Techniques, Habitat International, 1988, 103-117. 19 ADB, 2002, op. cit., p. 7. 20 The expansion of the urban road networks has failed to keep pace with population growth, see Vol. 4.

21 GoN policy is to increase the proportion of land registered in women’s names. A 20 per cent discount in fees applies to land registered in the name of a woman. The TYIP proposes to increase this discount to 50 per cent.


C3.3.7 Lack of transparency

86 Implementation of land pooling is under the Town Development Act and is a function of Town Development Committees rather than municipalities. The projects are implemented by sub-committees of the Town Development Committees, the membership of which mainly comprises officials of central government agencies. The only reference to land pooling in The Local Self-Governance Act is in section 111, which may be read as giving municipalities the power to undertake land pooling. However, section 116 requires the Town Development Committee to formulate its plans in consultation with the municipality, and therefore acknowledges the continued role of Town Development Committees. Even though The Local Self-Governance Act gives judicial powers to the municipality, any grievances in relation to land pooling have to be pursued through the Town Development Committee.

C3.3.8 Inconsistent with decentralization of urban management

87 The Report and Recommendation of the President proposed implementing land pooling using powers under the Town Development Act rather than the Local Self-Governance Act:

The Town Development Act provides an elaborate legal framework for executing town planning. More specifically, for land development programs, the Act empowers a local body to conduct guided land development (GLD) and/or land pooling projects, and provides the means to overcome legal obligations that may arise if such projects are implemented under the Local Self-Governance Act.

88 However, the Town Development Committee is not an elected body.

C3.3.9 High transaction costs

89 Land pooling involves a long process with many discrete steps (Figure 7). The examination of land titles requires the involvement of the District Land Revenue Office and the District Cadastral Survey Office, whose officials may already have a heavy workload and whose records may not be adequate or consistent. An ADB TA report summarized the situation as follows:

Nepal’s land administration system, which keeps the information on land and its owners, including tenants, is largely traditional. Information is acquired, stored, updated, collated, and retrieved manually in rudimentary fashion in paper form, with a low level of precision and high risk of distortion and duplication. Consequently, land records are not reliable, land disputes are common, land registries are overwhelmed with associated problems, and integrated reliable land information is almost impossible to obtain. Land administrative services are costly for both the government and the people. Moreover, the people are rarely satisfied with the quality of the services.22

90 As it is necessary to get the agreement of landowners at successive stages, there is great potential for controversy and disagreement during implementation. In Nepal it takes between three and ten years to implement a scheme. Not all schemes reach completion. In the case of three of the UEIP municipalities, the ADB's requirement of up-front agreement by 100 per cent of landowners was not achieved and financing will now come from DUDBC’s revolving fund.

91 DUDBC staff have identified quite a number of problems that occur during the planning and implementation of land pooling projects:23

Lack of pre-feasibility studies of land pooling schemes.

Outdated cadastral maps and obsolete land records, as well as, discrepancies between the records of the District Land Revenue office and District Survey office.

Frequent transfers of project manager during the life of the scheme.

Ill-defined roles of project management committee and user’s committee.

22 ADB, 2007, Nepal: Strengthening Land Administration Services. Technical Assistance Report, Project Number 40544. 23 Suraj Raj Rajkarnikar, 2004, Land Development Project in Nepal- Problems, Issues and Solutions, in Sahari Bikas, Vol.7, pp 24-27.


A prolonged moratorium on land transactions deprives owners of economic benefits of their land holding.

Lack of planning standards for land pooling schemes.

92 Some of these problems are capable of easy remedy, but most are not.

C3.3.10 Inability to satisfy demand

93 In Nepal, most completed land pooling schemes are in the Kathmandu Valley, but even here they account for a tiny fraction of total new development. The output of the Kamalamai land pooling project was a mere 79 plots. Supposedly, UEIP’s goals include reducing migration to Kathmandu Valley; producing a mere 79 plots cannot possibly have a measurable impact on migration to Kathmandu Valley.

94 In the case of four municipalities, the DUDBC and the municipalities found that it was impossible to get 100 per cent agreement from landowners, an ADB requirement.24 Accordingly, DUDBC decided to fund the land pooling from its own revolving fund for land pooling.

C3.3.11 Mistaken view of “haphazard development”

95 The purpose of the land pooling sub-component is stated to be ―to reduce haphazard development and urban sprawl and land speculation‖.25 However, if development was controlled, the price of housing land and housing would be higher, and there would be more squatter settlements.26 A wide body of international research supports this finding.27

C3.4 Solid waste management

96 The ADB recognized that haphazard disposal of solid waste was causing pollution and that most solid waste was dumped in rivers.28 Supposedly, UEIP did not include a solid waste component because the ADB and GoN expected that a parallel project would develop composting. However, composting was but one part of an elaborate solid waste management component in the PPTA. Given the project’s goals of improving public health and stopping environmental degradation, the omission of solid waste management is surprising. Moreover, to invest in drainage without solid waste management improvements is even more surprising. Finally, it is surprising that the Revenue Generating Urban Facilities component included not a single investment in the solid waste management sub-sector. Accordingly, it is appropriate to review the PPTA proposals in detail.

C3.4.1 Collection and transportation

97 The PPTA proposed that waste be collected, as far as possible, at the point of generation. The waste would be collected in bio-degradable (wet waste) and non-bio-degradable (dry waste) separately. For this, the PPTA proposed door-to-door, source-segregated collection. Each household, hotel, restaurant and office would be provided with two different colored buckets, one for biodegradable and another for non-degradable wastes.

98 The main waste generation points being the core areas of towns, pollution-free electric three-wheelers were proposed as collector vehicles. Manual carts would collect waste from each 24 Until an amendment to the Town Development Act, GoN also required 100 per cent agreement. The amendment reduced the percentage to 75 percent. 25 ADB, 2002, op.cit. in Developing Cities. Workshop Paper 26 Ashna S. Mathema, 1999, Housing and Land Markets in Kathmandu, Nepal. ESF/N-AERUS International Workshop, Leuven and Brussels, Belgium, 23-26 May 2001. Coping with Informality and Illegality in Human Settlements. 27 See in particular Robert M Buckley and Jerry Kalarickal (Eds). 2006. Thirty Years of World Bank Shelter Lending: What Have we Learned? World Bank. ―There is ample evidence that when formal land development parameters (such as minimum plot sizes, setbacks, and infrastructure servicing standards) are not benchmarked against what the local population can afford to pay, most households are excluded from access to formal land ownership.‖ See also discussion in Volume 6 as to why there are so many squatters in Butwal. 28 Only three municipalities in Nepal have sanitary landfill sites: Kathmandu, Pokhara, and Tribhuwan Nagar.


household and bring it to the collector three-wheelers, which would in turn transfer waste to the waste-processing site. For larger towns a tractor-trailer combination was considered more suitable.

Figure 7 Flowchart of land pooling procedure

99 The number of buckets was estimated considering an average of two buckets of 15 L per household. Municipalities were to provide the buckets free of charge.

100 The general wastes were to be transported directly to the waste management site. Health care wastes were to be separately transported to the incineration plant (see C3.4.7). Septic tank waste was to go directly to a pit system composting site.

101 Closed containers (waste bins) were be provided at cross-roads, parks and gardens for collecting waste. The size of 1 m³ with two compartments, one for dry waste and another for wet seems appropriate. Waste from these containers was to be collected daily.

Selection of a Project area

Formulation of layout plan

Study of land titles

Feasibility study

Interaction with landowners and

tenants

Listing of different policies

Formation of project management bodies

Approval of implementation plan

Consultation with landowners and tenants seeking their agreement

Confirmation of land titles and project

boundary Replotting and

design

Explanation to landowners and tenants seeking their

approval

Construction work Resurveying to establish re-plotting

Transfer of public facilities

Land redistribution/

registration


C3.4.2 Street sweeping

102 Paved roads were considered to usually require daily sweeping. Semi-automatic vacuum type street sweeping vehicle were proposed. The vehicle would clean the road once a day. The dust and inert material from the street will be sent for final disposal straight to waste management site, or land reclamation area. However, depending upon the economy of the municipalities, the cost for such vehicle was not included and it was envisaged that initially the street sweeping would be done manually.

C3.4.3 Awareness campaign 103 The best solid waste management is not to produce waste at all, or at least generate the minimum amount of waste. Thus, awareness campaign, training, workshops etc were envisaged to encourage consumers to minimize production of waste.

C3.4.4 Material recovery

104 A material recovery unit was proposed with conveyor belt for the separation of the waste. Plastic, glass, metals and other non biodegradable waste will be separated and will be sent for reuse/recycling. Remaining biodegradable waste will be sent for processing (composting).

C3.4.5 Composting

105 Three quarters of waste generated being bio-degradable, it was proposed to compost it for use in gardens. There is no assessment of whether gardens could absorb the quantities involved or how to handle the distribution. The analysis did, however, review composting methods. Simple and natural methods of composting were proposed; organic pit system composting or vermin-composting.

Organic pit system composting

106 The organic pit system was proposed as a simple composting system, which could be organized in parallel with other activities. The size of the pit has to be designed so that not more than three layers of waste are sufficient to fill the pit. The depth of the pit would be limited to 10 m for easy handling of the waste. The biodegradable waste is dumped after separation and is covered with 25 mm of wet soil. The pit has to be covered by wood, plastics or straw. After one month the waste would be turned over until the third month when the compost would be ready use. This is an-aerobic method of composting.

107 In the meantime, the waste can also be processed wih heap system especially in the rainy season, an aerobic system. The waste is placed after the preparation of the ground, in layers of 30-40 cm and covered with a moist soil layer of 25 mm. Perforated bamboos are inserted from all sides of the heap. Usually a heap of 1 m is appropriate. The compost is prepared within 2 to 3 months.

Vermi-composting

108 The PPTA proposed vermi-composting, using earthworms. They feed on wastes and produce vermi-casts and immobilized microflora and enriched with balanced plant nutrients, vitamins, enzymes, antibiotics and plant growth hormones. The PPTA proposed designing wooden boxes as vermi-composting units with specific shapes and sizes depending on amount of waste.

C3.4.6 Recycling

109 Plastics, metals, glass, cans, papers etc. can be recycled. Thus, such materials, which are usually 15 per cent of the total waste will be recovered at material recovery unit and stored till enough quantity is available for sending it for recycling.

110 It was proposed to produce Honeycomb Briquette from biomass char. Wood, leaves, twigs, branches and other agricultural and forestry residues would be made into char by carbonizing in a charring drum. This char would then be ground into powder and mixed with 20 to 30 per cent bentonite clay by adding water. This mixture is put into moulds and made into briquettes. These briquettes are sun-dried and are then ready for use as fuel. The briquettes burn without any smoke and are suitable for both cooking and space heating.


111 It was estimated that out of 75 per cent of biodegradable waste, some 10 per cent will be finally screened out as inert material that has to be sent for final disposal. It was thus estimated that out of the total waste generated, only 17.5 per cent will be left to be finally disposed.

C3.4.7 Hazardous health care waste

112 Health care waste is a known biohazard. It is responsible for the spread of hepatitis, skin disease, respiratory disease, AIDS (by use of contaminated needles) and other contiguous ailments.

113 Incineration is the most common process for disposal of health care waste. The PPTA proposed adopting an integrated plan for safe management of medical wastes. There would be two types of closed containers placed in each hospital or health posts.

114 Containers for sharp objects like needles, used disposal syringes etc. were to be introduced at hospitals and health centres. These containers were transported unopened to incinerator and dumped directly in it. The staff authorized to handle these containers would be trained personnel and would work with protective clothing and masks, gloves and goggles. The PPTA assumed 1 kg of daily generation of hazardous medical waste per hospital.

C3.4.8 Waste management facilities

115 A pit type sanitary landfill was proposed. The bottom of the sanitary landfill would be made impermeable by using a bentonite liner. No substantial pollution of groundwater was anticipated. Leachate, mainly during the rainy seasons was thought unlikely to be harmful and therefore no treatment was thought necessary. The method of final disposal at the sanitary landfill would be dumping of waste by dumper/tractor and compacting it naturally. Each day dumping would be covered by at least 125 mm of soil. A special cell in the sanitary landfill would be maintained for disposal of dead animals. They have to be buried with a minimum cover of 1 m of soil.

116 The PPTA proposed and selected a final disposal for each town within a waste management site. However, it seems that the necessary GoN approvals were not obtainable for some at least of the sites. The Bharatpur site, for example, was already in municipal ownership (though just outside the municipal boundaries). The PPTA Initial Environmental Examination identified no adverse environmental impacts, but the Department of Forests considered that the site was forest land and refused its consent.

117 The sites proposed seem small. The total area required for each disposal site was estimated based on the facilities to be installed in the waste management site and the town populations. The minimum site area was estimated at 1 ha (Table 1). Table 1 Estimation of disposal site area

Facilities Area (m²) Remarks

Materials recovery unit 1,000 Shed

Briquetting/biogas 200 Shed

Pit system organic composting 2,000 Open

Office paper recycling 400 Shed

Vermi-composting, wash station for vehicle washing 200 Open

Access 600 Open

Garden, tree plantation 1,250 Open

Final disposal 4,350 Open

Total 10,000

118 However, it is not clear how long a life can be expected from each site based on the estimated quantities of waste. Moreover, there was no allowance for a buffer zone nor for the following items that the PPTA proposed for the waste management facility:

Incinerator for health care waste.


Cell for disposing of dead animals.

Septic tank pits.

C3.4.9 Enforcement and awareness programs

119 To obtain the benefit of a clean and healthy town, enforcement of by-laws and awareness efforts must complement the management system. Utilization of legislative support and effective waste related law-enforcement bodies as well as extensive programs of public education and environmental awareness is essential. However, UEIP awareness programs do not cover solid waste management to any significant extent.

C3.4.10 Private sector participation in solid waste management

120 The UEIP PPTA proposed to manage the solid waste under the PPP modality (Figure 8). Figure 8 Possible implementation modality

121 However, the PPTA identified many obstacles to PPP in solid waste management:

1. The need for consensus and community support

2. The need for the private sector to have adequate capital

3. Project gestation periods are likely to extend over a lengthy period

4. Division of responsibilities should be designed strategically to ensure viability

5. Capacity building is necessary for all partners and beneficiaries

6. It is difficult for the private sector to collect fees from the public directly, particularly when there is low willingness to pay and limited appreciation that solid waste collection and disposal is an important municipal function. Low cost recovery and small numbers of customers threaten the viability of private sector participation.

122 The PPTA did not review the performance of existing private sector operations in Nepal (at that time, in Kathmandu and Biratnagar).

C3.5 River training

123 The river training component covered three municipalities and comprises embankment works to protect urban areas and farmland. It is hard to believe that the benefits of river training

Private Sector

Initial investment on Basic Infrastructure of Operational System Funding of operational cost

Efficient management skill

Development of flexible & effective operation system

Additional revenue generation by providing better mode of services and recycling waste

Implementation and management of service charge based integrated municipal solid waste management operation

1.

Public Sector (Municipality)

Initial Capital investment Land for solid waste management Infrastructure of solid waste management site Co-funding operational cost Implementation of Environmental Rules and

Regulations Collection of service charge for waste collection

services

Strict monitoring and implementation of rules

Local NGO, CBOs Mobilization and motivation People participation in the program Awareness generation

Service Users (Resident) of the City


cover the costs. It would cost less to give financial compensation to farmers affected than to construct training works of the types seen in UEIP and accept the long term maintenance obligation. DUDBC staff seem to share this scepticism (unless for specific small scale works such as to protect a water supply intake).

C3.6 Road upgrading

124 The Road Upgrading component is limited to surface improvements. It excludes realignment, straightening and widening so as to avoid land acquisition and resettlement issues. Figure 9 Local access road in Dhulikhel

125 In some cases at least, the outcomes seem unsatisfactory. The consultant observed two UEIP roads without seeing any traffic on either of them (Figure 2).29 By contrast, DUDBC staff rightly emphasise that footpath development is desirable to balance the persistent unbalanced attention placed on roads; pedestrians are substantial users of urban thoroughfares and are too ignored. Footpaths also service and improve the market areas which are substantial sources of revenue for municipalities.

C3.7 Small Urban Community Facilities

126 The Small Urban Community Facilities component includes small community facilities such as public toilets, public waste collection points, improvements to public places and places of worship, improvements to lanes, sports grounds and small public parks. The urban facilities to be provided under this component were to be identified through ―intensive community participation‖ during implementation. It is not clear what the intended outcomes of providing these facilities were, and the Report and Recommendation of the President makes no mention of targeting the poor.30 The April 2009 Loan Mission commented that the selection of facilities should be based on recently completed poverty mapping, which seems unreasonable given that there was no requirement that the facilities target the poor.

127 The comments of the Loan Mission suggest a wider problem, that there is no clear rationale supporting the component. For example, PADECO looked at a park enhancement at Hetauda. All local residents recognized park enhancement as a good investment from the environmental point of view. However, the agreement with the park management committee does not favour the municipality. The financial return from the park can only be made after deducting the operation and 29 UEIP subsequently explained that the purpose of these roads was to facilitate tourist developments. 30 ADB, 2002, op. cit.


maintenance costs. Realistic, measurable figures need to be agreed at the time of making the agreement. Figure 10 Sahid Park walk way under construction, Hetauda

C3.8 Revenue Generating Urban Facilities

128 The intention of the project was that during implementation the municipalities would propose facilities such as bus terminals, bus/truck parks, marketplaces, small slaughterhouses, cold storage facilities, recreational facilities, and vocational training centers after intensive local consultation. A further intention was that the implementation would be mainly through private section participation. Figure 11 Intake works for infiltration sump site in risk of flood as monsoon starts


C3.8.1 Bus terminals

129 The bus terminal at Hetauda has been improved. However, there is no obligation or enforcement for buses to use the terminal. It is rather used for bus parking and waiting area. Buses travel through Hetauda and continue to collect/drop passengers on the highway which is unsafe. Therefore there is loss in revenue and local shop keepers are complaining due to loss of business. Figure 9 Hetauda bus terminal with newly built ticket counter and waiting jeeps for hill travel

C3.8.2 Marketplaces

Bharatpur

130 Bharatpur does not have a proper market place, but is served by several small, unauthorised markets, which have developed along the major roads.

131 Putali bazaar area and along the East-West highway are extensively used for commercial purposes and the open spaces along both sides of the main road are littered with hawkers. A small fruit and vegetable wholesale market also exists. Infrastructure facilities have to be extended.

132 Although not mentioned in the PPTA feasibility study, the Bharatpur sub-project includes upgrading of Balkumari Retail Vegetable Market in Ward 2, next to Balkumari high School. The site is 7,396 m2 and belongs to Balkumari High School; the municipality has a 20 year lease expiring in 2027. UEIP commissioned a feasibility study which concluded that the project was viable. Nonetheless, the study does not explain why traders would pay higher rents to use the ungraded market when they trade from nearby streets for free.

Vegetable and meat market at Hetauda

133 At Hetauda, the vegetable market is well established, but the rent could not be increased even after improvement. The meat market is rather a challenging project as all the downtown meat shops are proposed to be pooled in one market.

134 The difficulty of increasing rents is a problem across all municipalities. In real terms, rental income from shops and markets in the 58 municipalities declined at an annual rate of 0.9 per cent between 2002 and 2007.31 Managing property is best left to the private sector.

31 Calculated by the consultant from MLD, Detailed Revenue and Expenditure Breakdown with Budget and Key Financial Indicators, 2001/02 and 2006/07.


Figure 10 Meat market next to vegetable market under construction, Hetauda

C3.9 Community Development component

135 In each municipality, the Community Development component comprises (a) mass communication and demonstration of public health awareness campaigns involving the production of materials such as posters, folders, leaflets, storybooks, and spots on the local radio and TV; (b) public health education programs confined to the community under the responsibility of the Community Development Subsection of the Environment and Community Development Section; and (c) school public health education programs confined to the urban school system where rehabilitation and construction of school sanitation facilities will be undertaken under the Project.

136 The theme of Community Development consists mainly of public health awareness campaigns and education program, in particular targeting women. In the implementation part local CBOs/NGOs were given the responsibility to mobilize the local communities using mass-media, and health education programs, particularly school public health education programs. The plan was to entrust Environment and Community Development Section and Community Development Sub-sections to take the campaigns to the ward level involving more CBOs women's group and leaders of the community.

137 While the Community Development component comprises worthy activities, it lacks a rationale in terms of programs tailored to local needs and supporting the other components of UEIP. For example, workshops should precede design and construction. Stakeholders need to be mobilised through local trained mobilisers. As with STWSSSP, the approach to community awareness programs is a top-down approach rather than a community-mobilization approach.

138 Calling the component Community Development is inappropriate. A typical municipality, like a typical mid-hill Nepali village, is a common home of a socio-economically and politico-economically cross-sections of people. With a short history of urbanization in Nepal, and with built-in strong rural-urban functional ties, Nepal towns and cities retain many rural characteristics. Any project designed to improve the quality of life of the urban population must take the weaker and less accounted-for section of the residents into consideration in order to enhance their capacity mainstream them into an integrated 'urban population'. The issues of cohesion and absorptive capacity of the target population thus become crucial in the implementation of the Project activities. The UEIP documents refer to several such sections of the population, namely, ethnic minority/indigenous communities, dalits, disabled displaced, children, poor, oppressed, marginalized


and slum/squatter dwellers. Education, health and sanitation, employment opportunities, basic utilities, involvement in urban social cultural life and access to available resources are key issues that need to be considered in designing and implementing urban planning activities.

139 Both Hetauda and Bharatput municipalities have been carrying out social development activities through infrastructure development. Users groups have been formed in some areas. Skill training for women and other needy sectors have been conducted in Hetauda. With the help of preliminary poverty mapping some poverty stricken areas have been identified in Hetauda whereas in Bharatpur the poor are observed scattered in several wards of the municipality. Therefore, a new mapping is required to locate the poor.32

140 Field observation and discussion in June 2009 revealed an awareness of NGO activities under the project in the Bharatpur municipality in health education activities. In Hetauda, however, there was no awareness of the program, even though it had finished only six months earlier.

C4 Implementation arrangements and progress

C4.1 Governance

141 The UEIP is being implemented within an overall structure of multiple and sometimes overlapping Ministries and Departments, with attendant responsibilities; delegated (or not delegated) authority for decision making, and power and influence at central and municipal levels (Volume 9 reviews the roles and responsibilities of the various Government ministries and departments).

142 The TDF was involved in the implementation of the Small Urban Community Facilities component and the Revenue-Generating Urban Facilities component.

143 Governance of the UEIP project was through a Project Steering Committee (PSC), which the Secretary, MPPW, chaired, and which included Joint Secretaries from five other Ministries or central government Departments, plus two representatives from municipalities and one from the Municipal Association. The primary role of the PSC was one of coordination and overall project monitoring. Decisions were not binding on municipalities. Decision making authority remained with policy making and implementation Ministries and, to a lesser extent, with municipalities, rather than with the Steering Committee. 33 None of the PSC members was a woman.

144 Overall governance was reported to be further hampered by the lack of elected representatives at municipal councils.34 Achieving political consensus was reported to be difficult, and implementation dynamics further hampered by the overlap between MLD, which appoints Executive Officers to municipalities, and DUDBC, which has less authority over local activities.

145 Under the terms of the loan, the GoN undertook to establish (within three months of loan effectiveness) a steering committee in each municipality comprising the mayor, deputy mayor, three members of the municipal council to be appointed by the council, secretary, relevant department heads of the municipality, chief of the Division Office of DUDBC, four members representing the local disadvantaged communities, NGOs, community based organizations, and the private sector, to be appointed by the municipal council, and respective Project Manager. The Project Manager was to serve as the secretary. The function of the municipal steering committee was to advise on subproject implementation matters.

146 At the time of the loan execution, there had been no elected representatives for more than 15 months. Despite the lack of elected representatives, a Municipal Steering Committees, chaired by the 32 The Urban Water Supply and Sanitation Sector Policy now requires the undertaking of full social mapping before implementation of water supply and sanitation projects. This requirement was not in place at the time UEIP commenced. 33 This supports the view of other industry observers that most power and authority still rests with Central Government institutions, and that municipalities are more limited in what they can achieve. 34 This is a barrier to efficient local development and governance that has been mentioned consistently by respondent organizations.


Mayor or Executive Officer, was established in each town. Members included the Executive Officer, representing all municipal functions, the former Deputy Mayor, three former Council Members; and representatives from the District Office, local NGOs and disadvantaged groups.

147 However, UEIP staff considered the Municipal Steering Committees to have been ―not functional‖. Attempts to improve their effectiveness by including representatives from political parties were not regarded as successful, although there has been some engagement. Since the Interim Constitution, real power in the municipalities rests with the Executive Officer and the All-Party Committee.

148 Figure 11 illustrates the overall implementation structure. In fact, this still understates the implementation complexity, because it does not illustrate the multiplicity of interactions at municipal levels, or the interactions and involvement of different agencies in sub component implementation. For instance, Table 4 shows that up to eight institutions could be involved in subcomponents.

149 Implementation of national policies of decentralization and devolution appear not to have worked. DUDBC staff report that decisions were often referred by municipalities to central agencies, or reversed at a later date, and that this was a cause of delays.

150 Workloads on design reports and construction supervision in municipalities were underestimated at the time of project design. The Annual Report July 2008 – June 2009 says there were ―many reasons‖ for delays, and refers to increased scope of water supply projects and other infrastructure components. Other reasons identified later included the absence of elected local bodies and the frequent transfer of Executive Officers – both risk factors that have been identified in the institutional diagnoses for the STIUEIP.

151 It was recognized at the time of project design that four of the main risks for the project were (i) limited capacities of municipalities; (ii) uncertain political support for decentralization; (iii) uncertainty regarding municipal revenue improvement and (iv) uncertainty regarding willingness of local communities to contribute time and counterpart funds (8.3 per cent of budget) to project implementation. Preliminary conclusions are that these risks still remain for the current project.

C4.2 Implementation environment

152 During much of the implementation period, Nepal has been in political and social turmoil. Political instability and civil disturbances remain dominant features of the environment. An ongoing pattern of bandhs disrupts project activities and implementation efficiency.

153 Consultations were held with mayors and other stakeholders in the municipalities during the early preparation stage of the UEIP. However, municipalities had no elected representatives from 2002. All-Party Committees remained informal arrangements, without legal sanction or authority to make commitments. Delays in decision making also reflected the lack the appropriate authority of the Executive Officers, or their interest in, or commitment to, the project because of their short term tenure.

154 Other delays to the project resulted from the time required to resolve issues such as ownership of water resources in the municipalities of Dhulikhel, Banepa and Panauti, and difficulties of resolving land pooling issues.

C4.3 Project staffing

155 Day-to-day Project Management (as opposed to overall governance functions performed by the PSC) was under the overall supervision of a Project Coordination Office, based in DUDBC, and staffed by a Project Director, professional, sub-professional and support staff. Each municipality established a Project Implementation Units. A Project Advisory Unit was also established.

156 The original project design called for 29 person months of international consultants and 747 person months of domestic consultants. As at 30 June 2009, and with a closing date of September 2009, international inputs totalled 20 months and national inputs 445 months.

157 Project Advisory support was available for those towns requiring this assistance.


158 The Project Coordination Office was established with a total staff of 19 people, as follows:

Project Director 1 Deputy Project Director 1 Project Support Consultant (24 months) 1 Engineers 6 GIS Consultant 1 PPP Expert 1 Support staff 8

159 Of these staff, three engineers and three support staff were women.

160 Staff numbers at a municipal level and for project sub-components being implemented by TDF varied. Details are not readily available in the project records, since this was the responsibility of individual municipalities.

C4.4 Project efficiency

161 Project efficiency refers to the use of financial and human resources and achievement of outputs (completed infrastructure, training and systems) against plan. This, of course, assumes that the plan itself was realistic. Project efficiency is influenced by performance of all institutions involved in implementation. Efficiency has been assessed in the following paragraphs against financial performance; timeliness of outputs and compliance with covenants.

C4.4.1 Project financial performance

162 The proposed percentage allocation of based costs for each project component is provided in Table 2. Table 2 Percentage expenditure by component – base costs

Source: (i) RRP November 2002

163 There were two subsequent revisions of the loan amount, reflecting adjustments in project scope. In one instance reports state that the full value was not required by the project.35 Conversely, the loan estimate for urban mapping requirements was underestimated.36

164 Expenditure patterns suggest that the project design was too optimistic about the project progress. An analysis of cumulative disbursed expenditure ($) to 30 June 2009, bearing in mind a completion date of September 2009, amounted to disbursements of 37.3% of allocated funds. There was significant under expenditure in the TDF Urban Enterprise credit line (77.7% under); sanitation and wastewater management (62.7% under); river embankment training (53.6% under); and drainage (76.8% under).

165 The Time Extension Requirements report contains some surprising data. For instance, the first three line items indicate physical progress for each component at 100%, and the project completed, but expenditure to June 2009 at 51%, 15% and zero per cent for these three line items. There are other similar examples. 35 Annual Report July 2008 – June 2009, page 4. 36 Ibid page 5

Component Planned percentage

Municipal Institutional Strengthening and Revenue Mobilization 1.9

Urban and Environmental Infrastructure and Land Acquisition 65.9

Supplementary Urban Facilities 14.4

Community Development 3.5

Project Implementation Assistance 14.3

Total 100.0


166 ADB staff comment informally that the rigidity of the cost allocations to each towns and project component created inflexibility in adjusting for minor cost overruns that might easily have been covered by under-expenditure in other areas. If under-expenditure was as significant as the above paragraph suggests, then the need for flexibility assumes a greater importance. It also suggests poor initial cost estimates.

C4.4.2 Timeliness

167 The UEIP loan was approved in December 2002, and commenced implementation on October 2003. The initial project completion date was 30 September 2009 and the planned loan closing date was 31 March 2010. A request for an extension of the project completion date until 30 September 2011 has been made. With a planned project completion date of 30 September 2009, overall progress until June 2009 has been quoted as 55.7 per cent—a significant under-achievement (Table 3). Table 3 Project Achievements at June 2009

Town Percent complete

Remarks

Batch 1 towns Dhulikhel 72.8 Regional water supply Bharatpur 73.9 Hetauda 81.1

Batch 2 towns Banepa 43.6 Regional water supply Panauti 49.5 Regional water supply Ratnanagar 51.4

Batch 3 towns Bidur 55.3 Kamalamai 74.3

Kathmandu 58.3 Bishnumati Link Road Overall 55.7 Source: UEIP Annual Report July 2008 – June 2009

168 The M & E reports do not make clear what slippage has occurred in project implementation, or the extent of the delays. Only eight of the 99 line items headed ―Time Extension Requirements for Sub-Projects‖ relate to activities of the Project Coordinating (DUDBC) Office. A number of line items, such as Incremental Administrative Expenses (which appears for each municipality) are not time bound. The report also quotes 100 per cent completion for some items, so why the items appear on a time extension requirement at all is surprising.

169 Missions to review progress provided detailed action points to address project slippage, but do not appear to have been successful at eliminating the major delays. Possibly these reflect the practical difficulties of working in the present environment.

C4.4.3 Relationship with Town Development Fund 170 According to the subsidiary loan agreement between the MoF and TDF on September 15 2003 the MoF will lend SDR2.56m at 3.5 per cent interest rate available to TDF, to be repaid in 20 years with five years grace period. TDF has to extend loans to the municipalities in 80 per cent of total project cost for income generating projects and 40 per cent of total project cost for small urban facilities at 7 per cent interest rate for the period of fifteen years with a three years grace period.

171 Beside loans to the municipalities, TDF is responsible for the capacity enhancement of municipalities on their financial management as well as institutional development by conducting related training program. TDF is also responsible for loan recovery from municipalities and repayment to the GoN.

172 TDF has so far approved sub-loans for nineteen sub-projects out of twenty-three identified in eight municipalities. TDF has also signed sub-loans agreements for the approved sub-projects.


173 With these approvals and agreements, the total sub-loans approvals and sub-loans agreement have reached NRs164.39m. NRs26.67m is disbursed for 4 sub-projects which are 16.22 per cent of the total loan approved.

174 TDF is also preparing the appraisal of the remaining sub-projects.

175 Some of the projects are lagging behind the schedule. Municipalities not be able to complete the project within the grace period of the loans. This will create risk on recollection of loan to TDF and repayment to GoN in time. There is also need of coordination between municipalities and central level for timely implementation of project and management of cost construction activities.

176 Project delays with TDF sponsored projects is largely attributable to the fact that none of the projects had been subject to feasibility study at the time of UEIP commencement, and the project did not provide any resources or capacity building to TDF to manage the preparation of the necessary feasibility studies to ADB standards. The absence of an Executive Director, which delays Board approval, must also have been a factor.37

177 Feasibility studies for some TDF projects are still not complete. In two of these cases the contracts have been awarded but the feasibility studies are incomplete (bus park at Panauti and Layaku Chaur Area Improvement), while three have no contract awarded (public recreation park at Bidur; public toilet at Bharatpur and café at Dhulikhel). The time table for these is uncertain.

178 During discussions with the Water Supply Tariff Fixation Commission on sector structure and policy, they observed that TDF fails to acknowledge the need for compliance with legislation relating to obtaining approval of water tariffs.

C4.4.4 Loan covenant compliance

179 The loan contained 29 covenants. Of these, 8 are reported as complied; 18 ―being complied‖, ongoing, or under action; and 3 requiring planning or action.

37 An Executive Director has now been appointed and has commenced work.


Table 4 Implementation stakeholders by component

Component EA

PSC

PCU

Loca

l PIU

Proj

Adv

sr(1

)

MLD

TDF

DU

DBC

DW

SS

Use

r Gro

up

NW

SC

Municipal Institutional Strengthening and Revenue Generation √ √ √ √ √ √ √ √

Support for implementation of Urban Environmental Infrastructure major and minor projects

√ √ √ √ √ √ √

Urban Environmental Infrastructure a. Water Supply – 4 towns b. Sewerage and sewage treatment c. SWM d. Awareness campaigns e. River training and embankments f. Land Acquisition

√ √

√ √

√ √

√ √ √ √ √ √

√ √ √ √ √

√ √ √ √ √ √

√

√

Small Urban Community Facilities √

√

√

√

Revenue Generating Urban Facilities √

√

√

Urban Land Development Land Pooling sub projects under revolving fund

√

√

√

Community Development a. Public health awareness / education b. Women’s Development, including health clinics, education

and literacy and gender workshops c. Household sanitation – latrines for urban poor (subsidized

with user contribution) d. Primary school sanitation

√ √ √ √

√ √ √ √

√ √ √ √

Project Implementation Assistance √ √ √ √ (1) Only Hetauda has a Project Adviser.


Figure 11 UEIP Project Management

Municipal Association of Nepal (MuAN)

Municipal Council

Municipal Steering

Committee

Ministry of

Finance

Ministry of Local

Development (MLD)

Municipal Development Division (MMD)

Department of Water

supply and Sanitation

Department of Urban Develop-

ment and Building Construction

Nongovernment organizations,

community-based organizations, and

User Groups

Project Advisor (PA) or Project Implementation Unit (PIU)

Project Coordination Office (PCO)

National Planning Commission Project Steering Committee Asian

Development Bank Nepal

Resident Mission

Town Development

Fund Ministry of

Physical Planning and Works (Executing Agency)

Project Implementation Support Advisory Team

Short Term Experts Pool

Parties contracted for Project implementation

Permanent unit Temporary unit for project implementation

Municipal Board

Mayor/Deputy Mayor/Secretary

Project Manager

In the case of the PIU model

Technical Coordination

Group

Consultant to Municipality

In the case of the PA model

Line of command Line of coordination Line of advice/Policy Guidance Membership


C4.5 Project effectiveness

180 Effectiveness refers to the success of UEIP in delivering the outcomes set out in the project logframe. In general, given that delivery of many project outputs has been delayed and a number of targets relate to 2009, 2010 and 2015, it is too early to reach conclusions on effectiveness. The most appropriate measures of effectiveness are through the Monitoring and Evaluation Framework. To some extent this is of limited value because of the Performance Indicators used. For instance, targets of ―20% reduction in waterborne diseases‖ or a ―20% reduction in infant mortality‖ are of limited meaning without quantification of the baseline number of such cases. 114 cases of waterborne diseases in 2006, and 540 cases in 2007 based on an unquanlified Household Survey size, may be good or bad results, depending on the survey size and the baseline. Cholera is a serious public health problem in the project area.38 The project lacks the focus on public health and the targeting on poor and vulnerable groups to have any impact on the incidence cholera, and the monitoring arrangements would not pick up any change in the incidence of cholera.

181 Some outputs can be assessed. For instance, mapping of house numbering systems is reported to be completed in seven municipalities, with work in progress in an eighth town. A target of training 5 professional staff in each town in urban management and revenue generation has been well exceeded, with training in a number of facets of municipal operations and management being provided for 1,110 participants, of whom 115 were professionals.39 Other training targets have also been achieved. However, what is more important than the number of people attending training is whether the training has resulted in improved outcomes, such as higher revenue collection.

C5 Financing issues

C5.1 Financing plan

182 At appraisal, the ADB estimated the cost of the project at $37.5m. The loan had an initial value of SDR22.7m (about $33.6m 40 ). The proportion of loan and grant differed between components. In most sub components the user or municipality contribution was 20 per cent, of which 5 per cent was cash and the rest in kind; the grant proportion was 50 percent; and the remaining 30 per cent was a 20 year loan, with a 3 year grace period and an interest rate that was reduced from a planned 8 per cent to 7 percent.

183 In the case of the UEIP financing plan, the municipalities, user groups and private sector are contributing only about 8.3 per cent of the project cost. This compares unfavourably with 16.8 per cent in the STWSSSP financing plan.

184 The sub-loan proportions are surprisingly high on components where the benefits are largely public:

Municipal institutional strengthening and revenue mobilization: 50 per cent

Small urban community facilities: 40 per cent

Sanitation and waste water management: 30 per cent

185 ADB policy is that construction of drains, sewer pumping stations and treatment facilities for septic tank sludge and sewage should be funded by the government.41

38 Tamang MD, Sharma N, Makaju RK, Sarma AN, Koju R, Nepali N, Mishra SK. 2005. An outbreak of El Tor cholera in Kavre district, Nepal. Kathmandu University Medical Journal. Vol. 3, No. 2, Issue 10, 138-142. 39 40 Quoted at $37.5 million in the original RRP, with differences being attributed to exchange fluctuations 41 ADB, 2006, Planning Urban Sanitation and Wastewater Management Improvements.


Table 5 Extract from Progress Report on performance targets

Design Summary Performance targets/indicators Status of progress IMPACT Enhanced urban environment, improved public health and quality of life in project towns leads to reduction in migration to Kathmandu Valley

TARGET: By 2015 Incidence of waterborne diseases reduced by 20%

Water borne diseases for 10% household survey (2006) - 114 cases (BM Value) 100% household survey (2007) - 540 cases (for 7 municipalities) Sample 10% HH will be surveyed in 2015 to assess the impact.

Percentage of urban population in absolute poverty reduced by 5%

Absolute poverty for 10% household survey (2006) - 3.7% (BM Value) 100% household survey (2007) - 7.5% (for 7 municipalities) Sample 10% HH will be surveyed in 2015 to assess the impact.

Infant mortality rate reduced by 20%

Infant mortality rate for 10% household survey (2006) - 0 cases (BM Value) 100% household survey (2007) - 6 cases (for 7 municipalities) Sample 10% household will be surveyed in 2015 to assess the impact.

Population growth from 2005 to 2015 in each project town is 1.3 times higher than in the respective district as a whole

Data compilation of municipality population is complete and being verified. District population is increased annually by avg. 2.1% from 2005 – 2007. Sample 10% household will be surveyed in 2015 to assess the population growth of project towns.

BOD 5 and E-coli count in surface waters surrounding each project town reduced by 20% (Downstream of RBTP)

The baseline data has been established and the values of BOD5 and E-coli of surface water D/S of RBTPS will be checked after the operation of all RBTPs in 8 municipalities.

Outcome Self sustainable urban development compatible with environmental improvement directly benefiting about 320,000 urban population.

TARGET: By 2010 Ratio of total annual revenue to total annual recurrent expenditure (including debt service but excluding capital expenditure) is 1.25

The average ratio of the total annual revenue to total annual recurrent expenditure for Batch I towns is 2.0 and 1.72 for Batch II & III towns.

Annual revenue increase for batch 1 towns between: 2003-2006, 50%; between 2006-2009, 20%; and 2009 onward 10%. Annual revenue increase for batch 2&3 towns between: 2004-2007, 50%; between 2007-2010, 20% and 2010 onward 10%

The average annual revenue is increased by 9.5 % from 2003 -2006 and 5.2% from 2006 – 2008 for Batch I towns and 13.7% from 2004 – 2007 and 43.5% from 2007 – 2008 for Batch II & III towns.

Property tax collection efficiency for Batch I towns, 30% by 2006 and 90% by 2009. Property tax collection for batch 2 & 3 towns, 30% by 2007; and 90% by 2010

The property tax collection is increased by avg. 44.7% by 2006 and 17.9% by 2008 in Dhulikhel for Batch I towns. The property tax collection started from 2006 in Bharatpur and not yet started in Hetauda. The avg. property tax is increased by 18.7% by 2007 in Banepa of Batch II towns. The tax collection started from 2006 in Bidur and Kamalamai, 2007 in Ratnanagar and 2008 in Panauti of Batch II & II towns.

Number of branch offices of banks increases by one number

The number of bank offices has increased by 3 number in an average from 2006 to 2008. The increase in the number of bank is 10 in Hetauda, 7 in Banepa and 6 in Bharatpur, 4 in Panauti, 2 each in Dhulikhel and Bidur, 1 in Kamalamai, while the number has decreased by 3 in Ratnanagar.

Number of connections to water supply system in each municipality increases by 15% (in average)

The existing household water connection in 2008 for Bharatpur and Hetauda is 15,027. After completing the water supply scheme in Bharatpur and Hetauda the expected number of additional household water connection in 2010 will be 9,577 which is 63.7% increase in connection.

Number of household sewer connected to sewer system and RBTP is 20%

All municipalities do not have HH sewer connections except Panauti. After the implementation of sewer system in all municipalities the total HH sewer connections in 2010 will be 18,330. The number of HH sewer connections are 4,269 in Banepa, 3,148 in Hetauda, 2,237 in Bharatpur, 1,896 in Dhulikhel, 3,026 in Panauti, 3,133 in Ratnanagar, 232 in Bidur and 389 in Kamalamai .

Land value within neighborhood development area in each municipality is 3 times of 2003 value

The land value of 2003 was not available and hence the land value in 2006 is taken as benchmark value. The average land value within the neighborhood development area in 2008 is 4 times of 2006 value. The land value in 2008 is 5 times of 2006 value in Banepa, 4 times in Bharatpur and 3 times in Kamalamai. Other municipalities do not have land development program.


C5.2 Loan repayment

186 It is too early to assess whether the UEIP Municipalities will be able to repay the loans.42 There has to be considerable doubt because of (a) the private high loan proportions on components producing public benefits rather than benefits, and (b) the poor state of municipal finances.

C5.3 Revenue enhancement

187 The general municipal institutional strengthening and support for revenue mobilization component of UEIP was designed to introduce new and improved revenue generation procedures and practices. The aim was to raise urban revenue generation capability such that the municipalities would be able to prepare and implement action plans that respond to critical needs. Specific training was to target improving the revenue mobilization capacity through preparation of detailed urban mapping, house numbering programs, house tax and customer databases of various urban services, and implementing improved computerized tax and service fee collection systems.

188 The project has been wholly unsuccessful in improving revenue mobilization. Analysis of municipal revenues between 2002/03 and 2007/09 shows that local tax revenues in UEIP municipalities increased at an average annual rate of just 2.8 per cent compared with 4.0 per cent in other municipalities. The inability of municipalities to increase revenues is a political problem rather than a technical problem; property tax rates in Nepal are extremely low and only a change in political will can change this.

189 There is a lack of attention to revenue enhancement and cost recovery from beneficiaries of the project. For most components, Project costs will have to be met from municipal revenues as distinct from direct charges to beneficiaries. Measures to improve municipal revenues seem to be limited to improving coverage and collection rather than appropriate increases in charges and tax rates. Even in respect of improving collection, there seems to be a lack of commitment. At Hetauda, for example, house numbering is limited to the original pilot in a single neighbourhood; this is limits the ability of the municipality improve revenue collection.

C6 Safeguards

C6.1 Social safeguards

190 In social terms the UEIP vary considerably. They fall into three main categories:

Tarai towns: Bharatpur, Hetauda and Ratna Nagar ( 3)

Hill towns: Dhulikhel, Banepa, Panauti and Bidur (4)

Others: Kamala Mai and Dhading Bensi (2)

191 The Socioeconomic Survey Report covers the following topics: i) Introduction, ii) Demographic Features, iii) Socio-cultural and Education Aspects, iv) Economic Conditions, v) Health and Sanitation, vi) Environmental Issues, vii) Development related Issues, and viii) Willingness to Pay for Improved Services.

192 Some of the findings of UEIP studies are interesting.‖ Willingness to pay for improved services‖ by users water supply, and sewage was very high: 100 per cent in one town (Panauti) , 94 per cent in 1 own ( Kamala Mai), 80 to 89 per cent in 5 towns (Dhulikhel, Dhadingbesi, Hetauda, Bharatpur and Ratna Nagar )and 75 to 78 per cent in 2 towns (Bidur and Banepa ). This does not seem entirely credible. There is a big gap between ―willingness to pay‖ and ―actually paid money‖ for the improved services. As there is a time gap while doing the survey and the implementation of the sub component of the project, commitment of consumers for the improved services has remained non-committal in many development projects such as the water supply system in the Kathmandu Valley. There may also be related institutional issues concerned with collection of 42 The grace period for municipality sub-loan is 5 years.


payments.

193 UEIP provided a ―Short Land Acquisition and Resettlement (LAR) Plan‖ for each town. A summary of land acquisition is provided for each subproject with purpose of land acquired, location of land, and size of land, present land use and tentative land price. However, the social safeguards documents were produced after the PPTA.

C6.1.1 No mention of indigenous, vulnerable and minority populations

194 Nowhere in any report of UEIP is there mention of the context and issues of indigenous, vulnerable and minority populations. So the problems and issues of these populations are little known. The ADB Guidelines (see below), The Tenth Five Year Plans (2002-2007) and the TYIP (2007-2010) adequately highlighted about the indigenous and vulnerable populations, and how they should be treated in any development project.

C6.1.2 Delays in acquiring land

195 With the establishment of the MPPW along with the Town Development Act (1988), two approaches were adopted to acquire land from the landowners in the urban development project: Land Pooling and Guided Land Development. In these approaches, land owners are not displaced but landowners are encouraged to contribute a portion of their land (25 per cent or more depending upon the situation) to implement a development sub- project.

196 Acquisition of land through purchase is not only time consuming but demands a lot of resources. There were disputes over land tenure (multiple claim of land ownership) and adequate compensation.43 This caused delays, one to three years in all subprojects.44 Delay was caused not only due to lack of adequate funds but also the political issues relating to land development. Since the onset of democracy in Nepal in 1990, local people are more aware about their rights as citizens and want to know more about the costs and benefits of a development project. Mitigation of this kind of problem was not anticipated.

C6.1.3 Availability of land

197 One of the objectives of the project was to reduce migration to Kathmandu. However, it seems that the design of the project did not consider whether sufficient suitable land was available for urban expansion on a scale necessary to reduce migration to Kathmandu. The UEIP studies on land use (Table 6) suggest that lands are available for the urban development project from two sources: a) rural/agricultural land, and b) forest. The extent of agricultural land within the municipal boundaries varies from 23 per cent in Kamalamai to 90 per cent in Ratnanagar. One of the serious bottlenecks here is that the implementers of the project must utilize a lot of agricultural/forest lands that are available within the municipality area for the development of any kind of infrastructure. Some 49 per cent of sample households in the UEIP survey were poor and their reported monthly income was below the mean reported monthly expenditure on food was NRs1,095 ($14.90). The laws of the Ministry of Forest, in many situations and contexts, are stringent enough to cause delays to acquire the forest land for the purpose of a development project.

43 Ensuring access to simplified and scientific land information, administration and services is a major thrust of the TYIP. The Department of Land Information and Archive is responsible for the introduction of Information Communication Technology (ICT) Components in land administration and management, and for the supply of Land Information to all parties concerned. In the last few years, the Cadastral Survey Branch of the Survey Department of the Ministry of Land Reform and Management has been carrying out digital cadastral mapping as a pilot project in Banepa municipality. 44 Mr. G.P. Gorkhaly (Deputy Director of Urban Development Project), pers. comm.


Table 6: Land Use in eight urban development towns

Name of the Town Total land(ha) Urban clustered land Rural/agricultural land Forest

Hetauda 4787(100%) 649(14%) 2,992(63%) 1,146 (24%) Bharatpur 7,746(100%) 766(10%) 5,003(65%) 1,978 (26%) Ratnanagar 3,697(100%) 176(5%) 3,335(90%) 187 (5%) Panauti 3,378 (100%) 83(2%) 2,581(76%) 715 (21%) Banepa 828 (100%) 98(12%) 435(53%) 296 (36%) Dhulikhel 1,401 (100%) 57(4%) 1,031(74%) 314 (22%) Bidur 3,290 (100%) 81(3%) 2,371(72%) 839 (26%) Kamalamai` 20,979 (100%) 37(0.2%) 5,821(23%) 15,121 (72%)

C6.1.4 Potential beneficiaries

198 Potential beneficiaries were all landowners, and their number was low in terms of investment of sub- projects. The report on ―Social Assessment and Preparation of Resettlement Plan‖ of Kamala Mai suggest that the number of beneficiary households were only 79 in number. The cost of the civil works worked out at $2,617 per person, to which must be added the cost of engineering design and the administrative work. Considering the diversity of Nepali society it is good to know the beneficiary households in this kind of urban development project and whether it fulfills the larger goal of ―inclusive democracy‖ in ―New Nepal‖. How the issues of poor, landless or low income groups will be addressed is another major concern of this kind of urban development project.

199 UEIP has multiple goals, which is now contrary to ADB guidelines. Some of them are plainly unattainable with the specified level of investment. UEIP is unusually complex for an investment of less than $40m. The consultant has received a lot of comment on the need for simplicity.

C6.1.5 Inputs

200 The Financing Plan for UEIP provided for the towns and user groups to together contribute about 8 per cent of the total cost. This percentage may be consistent with the financial capacities of the local governments, but it is sufficiently low to call into question allowing the local governments too much choice in how the money is spent. In fact, the local government only contribution is only four per cent on several components.

C6.1.6 Implementation

201 Land acquisition has been a problem for some sub-projects. In particular, it has often been necessary to find new sites for sewage treatment plants because of the objections of surrounding residents. In Dhulikhel, a sewage treatment plant had been built under another project with the support of the local community. Accordingly, there was no objection to the location of a similar plant (see Figure 1).

202 The UEIP has also experienced disputes over land tenure, site identification for waste water treatment and solid waste land fill, and sources (eg Kavre Water Supply Project). These disputes (as is well known from similar projects in other countries) substantially delay implementation. Some sub-projects have been dropped or suspended. Both solid waste management and slum/squatter upgrading have been excluded.

203 Similarly, there have been land acquisition problems with land pooling. The design of UEIP required that all the owners of land within a land pooling area agree to the scheme before land acquisition could begin. In some cases, this was impossible to achieve.

204 With regard to the amounts of compensation paid, it seems there have been no complaints. In fact, some affected persons admitted to getting better returns from the investment of their compensation in new activities that from their former land holding.


C6.2 Environmental safeguards

205 The PPTA prepared an Initial Environmental Examination in accordance with ADB requirements. Preparation of GoN environmental safeguard documents has taken place during project implementation, and at the end of March 2009 was still far from complete (Table 7). Table 7 Preparation of environmental safeguards documents

Municipality Sub-project ADB approval DUDBC endorsement Uploaded

Dhulikhel Sanitation and Waste Water Approved Approved Yes

Hetauda Sanitation and waste water Approved Approved Yes

Water supply Approved Approved Yes

Bharatpur Water Supply scheme II & III Approved Approved Yes

water supply scheme I Approved Approved Yes

Sanitation and Waste Water Approved approved to be uploaded

Ratnanagar Sanitation and Waste Water submitted for approval

Road Upgrading Approved approved yes

KMC BLR Approved approved yes

Bidur Sewerage TOR to be finalized

Panauti Sewerage+RBTP TOR to be finalized

Banepa Sewerage+RBTP TOR to be finalized

Kamalamai Sewerage+RBTP TOR to be finalized

Note; Kavre Valley Water Supply project needs EIA. But because of local conflict, design consultant has not yet been hired. EIA is not even in the process

C7 Implications for future integrated urban projects 206 It is too early to draw firm conclusive about UEIP.

C7.1 Typical shortcomings of IUDPs

207 The shortcomings of UEIP are more likely to be those common in IUDPs rather than representing failings of individuals responsible for the design and implementation of the project. ADB’s Operations Evaluation Office reports give mixed reviews of IUDP performance. The reports note the following common shortcomings: 45

1. The synergy benefits expected from the implementation of linked components (e.g., roads, drainage, and solid waste management) were seldom borne out in practice.

2. Many IUDPs have been carried out under a top-down approach whereby towns are selected for inclusion on the basis of national development plans or perceived infrastructure deficiencies, rather than on the basis of local government commitment to or preparation for development assistance.

3. There is often a mismatch between project target groups (generally low-income households) and the actual beneficiaries (who often included better-off households).

45 ADB. 1999. Urban Sector Strategy.


4. Poor cost recovery.

5. Lack of attention to operations and maintenance.

6. A lack of specific criteria and indicators to measure success in achieving project benefits.

7. Insufficient attention to institutional reform issues.

208 The RRP identified 12 lessons learned from previous projects. From an institutional perspective these included:

1. Avoiding complex and multi component projects where the EAs have limited experience. A need to thoroughly explore institutional capacities with respect to land acquisition and procurement. Given that such issues were reported to be a source of delays, it is possible to debate whether this was recognized in the UEIP design.

2. Involvement of all stakeholders in project identification and design from an early stage, including the involvement of NGOs and CBOs.

3. Institutional strengthening to be given high emphasis. Key staff should be in place before Board consideration. The Ministry of Finance had earlier agreed that the Project Manager and core staff should be appointed in advance.

4. The benefits of using relatively large packages of consulting services, in order to attract experienced consulting companies.

5. Using realistic implementation scheduling that reflects the experience of IAs.

6. The need for an appropriate Management Information System.

C7.2 Shortcomings of UEIP

C7.2.1 Lack of focus on a single goal 209 UEIP has multiple goals. It is not clear how some components relate to particular goals, if at all. This is particularly true of the Revenue Generating Urban Facilities component.

C7.2.2 Lack of synergy benefits

210 There is little evidence of synergy benefits from linking components. In particular, it is hard to find links between the Revenue Generating Urban Facilities, Small Urban Community Facilities, and Road Upgrading, River Training components and other components. However, in defense of UEIP, neither the PPTA report nor the Report and Recommendation of the President ever explicitly claimed that there would be synergy benefits.46

C7.2.3 Ineffective targeting of low income groups

211 One of the goals of UEIP is to reduce urban poverty. However, there is very little targeting of low income groups. In defense of DUDBC, there is little evidence of targeting in the PPTA documents.

C7.2.4 Insufficient attention to land acquisition in project preparation

212 The ADB has commented on the insufficient early attention to land:

Construction of sewerage and waste water treatment plants (RBTP) was substantially delayed due to delay in land acquisition, preparation of detailed design and completion of bid evaluation, and change in site location.47

C7.2.5 Complete failure to increase municipal own-source revenues

213 The PPTA did not offer any explicit strategies for cost recovery from beneficiaries. Cost

46 ADB, 2002, op. cit. 47 ADB Project Information Document.


recovery is not evident in components such as land pooling where one would expect to see full cost-recovery. The approach to revenue enhancement is limited to capacity building and there is a lack of attention to increasing charges and tax rates. In the absence of revenue increases, it is inevitable that maintenance of project facilities will be inadequate.

214 UEIP has been entirely unsuccessful in increasing own-source revenues in the project municipalities.

C7.2.6 Late attention to institutional arrangements 215 In the desire to get construction underway, the attention to institutional issues was too little and too late. The UEIP was constructing facilities for which there are no arrangements for operations and maintenance. Early formation of a joint committee of municipalities might have averted some of the difficulties with the Kavre valley water supply arrangement.

C7.2.7 A lack of specific criteria and indicators to measure success

216 With the exception of BOD 5 and E-coli counts in surface waters, the performance indicators specified for the project are likely to be achieved with or without the project. The level of project expenditure per beneficiary over five years is far too low to have measurable outcomes, especially in the context of the rapid growth of urban populations. Projects can achieve a higher expenditure per beneficiary either by a tighter geographical focus or by concentrating on fewer components. Attention to recovering costs from beneficiaries will ensure that such an approach is just as equitable as one where benefits are spread thinly over a larger population.

C7.2.8 Insufficient engineering design

217 With respect to UEIP, the ADB has concluded that: (The) project preparatory TA for such projects should have been more exhaustive. More time was needed for engineering design and community mobilization to build consensus.48

The PPTA engineering was sufficient for project preparation purposes for those components for which it was provided. However, there was no preliminary engineering for several components, and no economic and financial analysis for some. UEIP is in many respects more like a sector loan than a project loan:

Sector lending is a form of ADB assistance to a developing member country (DMC) for project-related investments based on considerations relating to a sector or subsector of the DMC as a whole. The purpose of a sector loan is to assist in the development of a specific sector or subsector by financing a part of the investment in the sector planned by the DMC. Such lending is particularly appropriate when a large number of subprojects in the sector or subsector are to be financed. A sector loan is expected to improve sector policies and strengthen institutional capacity.

C7.2.9 Insufficient attention to institutional reform issues 218 The UEIP was conceived as a serious initiative to decentralize urban management, and GoN’s ―first step in realizing this decentralization policy‖. Policies of decentralization and devolution of authority to local governments requires high levels of local involvement in project implementation. This can be a challenge in an environment where the local institutions lack expertise, or authority to make decisions remains centralized. DUDBC and the Project Coordinating Committee cannot be accountable for results when they have no authority over local implementation.

219 On UEIP the implementation performance reflected local expertise in small towns. Planned institutional fact finding for STUEIP in municipalities will pay considerable attention to local capacity and development needs, and priority actions to be incorporated to address capacity gaps.

220 UEIP shows considerable underutilization of national consulting inputs. It is reasonable to expect some ―bunching‖ to occur towards the end of any large project, but not to the extent that has occurred with this project. On the other hand, hindsight is a great virtue, and simply throwing 48 ADB Independent Evaluation Department, 2009, Nepal: Delivering Assistance in a Challenging Environment.


resources at a problem does not necessarily achieve faster outputs.

C7.2.10 Lack of elected representatives in local government

221 The ADB has commented that: ....the absence of elected representatives in local government bodies makes it difficult to predict the likelihood of sustainability and achieving the desired capacity-enhancement impacts. An ad hoc arrangement of seven-party political representatives cannot provide an alternative to a legitimate and accountable elected body.49

222 However, the ADB executed the loan agreement for the project knowing that there had been no elected representatives in local government bodies for over 15 months. Moreover, the ADB has funded many IUDPs in countries where there are no elected representatives in local government. The absence of elected representatives is more relevant to decentralization than to local capacity-enhancement.

C7.2.11 Project management tools

223 Time estimates and financial projections prepared by the consultant at the time of project design appear unreliable, and practical difficulties, such as land acquisition, appear to have been underestimated.

224 There appears to have been systemic difficulties with TDF’s involvement in the Revenue Generating Urban Facilities component. The ADB identified TDF management's capacity to professionally appraise the feasibility studies and screen the proposals during project implementation as a project risk, yet UEIP provided no capacity building to TDF to reduce this risk.50 Instead ADB reviewed all feasibility studies relating to revenue generating facilities itself.

225 Whether these were due to the absence of a Chief Executive or the need to undertake feasibility studies after commencement of the project remains to be seen.

226 Monitoring and Evaluation reports provided to the consultant do not clearly focus on the critical success factors involved in project management.

C7.2.12 Too many components

227 UEIP has too many components. Consequently, UEIP has a level of complexity appropriate to a $400m investment, not one of under $40m. The number of towns and the number f components necessitate too many contracts. It is absorbing too much of the best talent in DUDBC, and makes it harder to solve intractable problems of implementation, such as Kavre valley, when they arise.

228 The advantages of projects with few components are as follows:

Less complexity: multi-component projects tend to encompass more issues and more participants and are therefore more complex to implement.

Better focus on sub-sector policy and institutional needs: there are greater chances of success in introducing reforms, new methods and innovative approaches when the number of institutions involved is small; similarly, the capacity building effort is more focused.

Economies of scale: for any given total project investment, the fewer the project components, the greater the investment in each component and the greater are the economies of scale.

229 The GoN has commented that most projects suffer from time and cost overruns. It blames this partly on ―process conditionalities‖ of donors, the policies, practices and procedures of donors, and the limitations of Nepal’s institutional capacities. From a project preparation perspective, GoN and ADB procedures and policies are givens, but within these limitations it is important to design a project that is as straightforward as possible. That is likely to require limiting the number of

49 ADB Independent Evaluation Department, 50 However, the PPTA recommend capacity building for TDF.


components.

C7.3 Strengths of UEIP

230 UEIP has been valuable in paving the way for larger scale urban infrastructure projects in Nepal’s secondary towns. The PCO has been successful in terms of managing to implement a complex, ill-conceived project, and a pioneering one, in an extremely difficult political environment. The PCO has done especially well in terms of implementation schedule. This achievement is highly commendable. UEIP is important in underpinning the role of DUDBC in providing technical support to local bodies in urban development and implementing infrastructure projects. Many of the shortcomings during implementation are attributable to factors beyond the control of the PSC and PCO.

TA 7182-NEP D-1 Final Report, Vol. 1

Appendix D Tables compiled from NLSS and NLFS

1 This appendix contains tables that PADECO has extracted from the Nepal Living Standards Survey and the Nepal Labour Force Survey for the purposes of the PPTA.

D1 Nepal Living Standards Survey Table 1 Distribution of employed individuals by main sector of employment, 2003/2004

Municipalities Wage, agriculture

Wage, non-agriculture

Self-employed, agriculture

Self-employed, non-agriculture

Extended economy

Total

(%) (%) (%) (%) (%) (%)

Municipalities in Kathmandu Valley

0.5 45.8 11.8 31.5 10.4 100

Other municipalities 1.9 21.8 38.1 25.1 13.0 100

Source: NLSS. Table 2 Distribution of wage earners by industry

Municipalities Mining Manuf-acturing Electric Con-

struction Trade Transport Finance Personal Total

(%) (%) (%) (%) (%) (%) (%) (%) (%)

Municipalities in Kathmandu Valley

0.5 31.4 0.6 14.1 10.7 8.6 9.0 25.3 100.0

Other municipalities 1.6 23.9 3.3 21.3 5.0 6.3 7.5 31.2 100.0

Source: NLSS. Table 3 Distribution of population by nominal per capita income quintile, 2003/2004

Municipalities

Income quintile

Poorest (first) Second Third Fourth Fifth Nepal (%) (%) (%) (%) (%) (%)

Municipalities in Kathmandu Valley 1.2 0.6 3.3 14.9 80.0 100.0

Other municipalities 8.6 9.4 17.0 21.6 43.5 100.0

Source: NLSS.


Table 4 Migrant workers as proportion of the population aged 15 years and older

Municipalities Men Women All

1995/96 2003/04 1995/96 2003/04 1995/96 2003/04

(%) (%) (%) (%) (%) (%)

All municipalities 15.9 24.5 1.8 2.2 8.4 12.2

Kathmandu 10.6 7.4 1.9 1.2 6.4 4.2

Other urban 9.6 19.5 2.8 3.9 6.1 11.4

Source: Central Bureau of Statistics, National Living Standards Surveys

Table 5 Percentage of urban households with access to various services, 2003/2004

Urban centres Water piped to the house

Electricity Sanitary (sewerage) system(1)

Access to toilet Access to a garbage collection/ disposal system

% % % % %

Kathmandu valley municipalities

78.6 99.1 98.1 98.9 83.0

Other municipalities 39.3 80.9 30.4 71.6 24.1

Note: (1) Sanitary (sewerage) system refers to the liquid wastes connected to underground drains.

Source: NLSS

Table 6 Average number of rooms and average size of dwelling

Municipalities Average Number of Rooms

Average size of Dwelling (m2)

Average Area of Housing Plot* (m2)


4.8 180 354

Other municipalities 4.3 177 490

*Includes area surrounding the dwelling.

Table 7 Distribution of households by occupancy status

Urban centres Owner Renter Rent-Free Other Total

% % % % %

Kathmandu valley towns 62.5 33.1 3.0 1.4 100

Other urban centres 77.2 18.2 4.3 0.4 100


Table 8 Distribution of households by construction material of outer walls

Urban municipalities Cement bonded bricks/stones and concrete

Mud bonded bricks/stones

Wood/branches Other Total

% % % % %


65.8 34.2 0.0 0.0 100

Other municipalities 52.4 24.1 14.1 9.4 100

Table 9 Distribution of households by construction material of roof

Urban centres Straw/Thatch Galvanized sheet

Concrete Tile/Slate Other Total

% % % % % %


0.0 30.1 64.4 4.5 0.9 100

Other municipalities 12.6 34.3 39.6 13.0 0.5 100

Table 10 Distribution of households by construction material of floor

Urban centres Earth Cement/tile Wood Other Total

% % % % %


27.1 64.2 1.0 7.7 100

Other municipalities 43.2 49.5 3.3 4.1 100

Table 11 Distribution of employed individuals by number of hours worked

Municipalities 1 – 19 hours 20 - 39 hours 40+hours Total

% % % %

Kathmandu valley municipalities 15.6 14.3 70.1 100

Other municipalities 22.7 20.6 56.7 100


D2 Nepal Labour Force Survey

Table 12 Distribution of households by source of drinking water

Area Piped water

Hand pump/boring Well Spout/spring water Other Total

(%) (%) (%) (%) (%) (%)

Urban 62.2 28.2 4.3 3.1 2.2 100.0

Kathmandu valley 78.3 5.5 7.8 3.6 4.7 100.0

Eastern/Central Hill/Mt. 75.0 14.9 2.5 4.6 2.9 100.0

"West" Hill/Mt. 87.3 1.6 1.1 8.1 1.9 100.0

Eastern Terai (inc Biratnagar) 45.3 52.8 1.7 0.2 0.1 100.0

Central Terai (inc Birgunj) 25.3 72.7 2 0.0 0.0 100.0

"West" Terai (inc Butwal) 36.8 56 5.1 1.4 0.8 100.0

Nepal 45.0 39.1 3.6 9.6 2.7 100.0

Table 13 Distribution of households by main fuel used for cooking

Area Wood/ firewood

Dung Leaves/ straw

LPG gas

Kerosene Biogas Others Total

(%) (%) (%) (%) (%) (%) (%) (%)

Urban 35.8 2.7 1.6 51.8 4.9 2.3 0.9 100.0

Kathmandu valley 5.9 0.1 1.4 82.9 9.1 0.1 0.4 100.0

Eastern/Central Hill/Mt. 63.9 1.7 0.1 25.0 4.3 2.5 2.6 100.0

"West" Hill/Mt. 36.1 0.8 0.1 51.4 5.0 5.2 1.4 100.0

Eastern Terai (inc Biratnagar) 52.7 6.9 3.8 32.5 1.7 1.7 0.6 100.0

Central Terai (inc Birgunj) 44.1 5.7 3.7 42.2 1.3 2.8 0.3 100.0

"West" Terai (inc Butwal) 59.2 4.5 0.2 28.5 2.2 4.2 1.2 100.0

Nepal 68.4 10.7 4.3 12.3 1.4 2.4 0.5 100.0

Table 14 Distribution of households by main source used for lighting (in per cent)

Area Electricity Gas/oil/kerosene Other Total

Urban 93.1 6.2 0.8 100.0

Kathmandu valley 99.7 0.3 0.0 100.0

Eastern/Central Hill/Mt. 91.6 7.5 0.9 100.0

"West" Hill/Mt. 95.4 2.9 1.8 100.0

Eastern Terai 89.8 10.0 0.3 100.0

Central Terai 89.8 9.7 0.5 100.0

"West" Terai 82.7 15.1 2.2 100.0

Nepal 56.1 33.0 11.0 100.0


Table 15 Distribution of household by type of toilet used (in percent)

Area Flush toilet (connected to

public drainage)

Flush toilet (connected to

septic tank)

Ordinary Communal No toilet Total

Urban 20.3 42.7 21.8 0.6 14.6 100.0

Kathmandu valley 54.9 13.5 31.2 0.3 0.2 100.0

Eastern/Central Hill/Mt. 3.0 38.5 36.8 0.4 21.3 100.0

"West" Hill/Mt. 6.4 70.7 12.4 0.2 10.3 100.0

Eastern Terai 0.9 55.6 21.1 0.9 21.4 100.0

Central Terai 4.7 63.2 10.1 0.7 21.2 100.0

"West" Terai 1.9 51.6 10.5 1.5 34.6 100.0

Nepal 4.3 21.1 23.3 0.5 50.8 100.0

Table 16 Distribution of households by facilities (per cent)

Area Radio Television Telephone Mobile phone Computer

Urban 65.9 70.9 31.2 65.0 13.1

Kathmandu valley 72.0 87.3 48.3 83.0 25.6

Eastern/Central Hill/Mt. 68.1 60.0 18.8 53.4 7.1

"West" Hill/Mt. 66.6 65.1 24.5 52.2 8.3

Eastern Terai 60.8 66.6 24.0 54.4 6.6

Central Terai 62.5 65.3 25.4 61.4 8.6

"West" Terai 58.1 55.9 20.5 46.0 4.3

Nepal 57.9 33.2 9.8 28.3 3.1

TA 7182-NEP E - 1 Final Report, Vol. 1

Appendix E

Summary Poverty Reduction and Social Strategy

Lending/ Financing Modality: Department/ Division:

I. Poverty Analysis and Strategy

A. Linkages to National Poverty Reduction Strategy and Country Partnership Strategy

The Tenth Plan (FY2003-FY2007)—which was also the Government's Poverty Reduction Strategy, formulated and implemented in a conflict setting—aimed to reduce poverty through broad-based economic growth, inclusive social development, good governance, targeted programs and rural infrastructure development. After the conflict ended, a coalition of the major parties approved a Three Years Interim Plan (TYIP) for a transitional period, FY2008-FY2010. The TYIP provided continuity to the Tenth Plan’s long-term objectives of poverty reduction and addressed the root causes of the conflict (deep-seated social exclusion and wide social, economic and regional disparities). However, the TYIP is more focused on peace building, reconstruction, rehabilitation, and reintegration.

After the Constituent Assembly elections of April 2008, a Maoist-led coalition drafted a National Development Strategy 2009-2011 (NDS), in the expectation of a longer transition. In May 2009, a change of Government put on hold the approval of the NDS. The UML-led coalition declared its intention to prepare a new national development plan. In terms of development priorities, there are no major differences between the Tenth Plan, the TYIP, and the NDS, as successive Governments based the plans on fundamental long term development needs and economic constraints. The Government’s main priorities and focus are likely to be similar to those of the Tenth Plan, the TYIP, and the NDS.

The TYIP put the issue of inclusion at the forefront of poverty alleviation: There is a big difference between castes/ethnicity, men and women in Nepal in terms of economic, educational and health opportunities. Similarly, there is a big gap between different groups and communities in terms of access in the political and administration fields. Dalit families are living below the poverty line. The average life expectancy of Dalit women is 5 years less than other women. During 1996 and 2004 the poverty in Nepal has been reduced by 11 percentage points. During this period, it was found that poverty of Brahmins and Chhetris had been reduced by 46 per cent, while that of Dalits by 21 per cent. Similarly, the poverty of Janajatis had been reduced by 10 per cent, while that of Muslims only by 6 per cent. There is a big difference among children and youths from the perspective of gender, region, caste/ethnicity and group in Nepal.

The TYIP proposed the following strategies (among others) to achieve inclusion:

• Mainstreaming the excluded communities to the whole development process and outcomes.

• Improving access to the resources.

• Proportional representation of the excluded communities will be ensured in all decision-making processes and structures of the State.

• Special targeted programs for the excluded communities.

The next plan is likely to emphasize the needs of a new federal structure and the importance of local governance. The announced budget for FY2010 confirmed that the main drivers and focus of the development agenda have been maintained, guided by the Common Minimum Program of the political parties. In particular, the Government's strategy envisions tangible improvements in the living standards of the poor, disadvantaged and socially excluded sections of the population through:

The water sector policy of the TYIP aims to help raise living standards and improve public health by making sustainable and equitable water supply and sanitation services available. The country poverty analysis describes the provision of basic services for the poor, including water-related needs, as being fundamental to poverty reduction. The plan includes that the drinking water projects will be made gender friendly and women will be involved institutionally and at all levels. The National Water Plan 2005 has set the target of achieving total population

Country/ Project Title: Nepal: Secondary Towns Urban and Environmental Improvement Project

Project South Asia, Urban Development, SARD


coverage of basic drinking water supply and sanitation services by 2017.

The urban water supply and sanitation sector policy has as its goal that the policy would be to ensure the socioeconomic development and improved health status of urban populations, including the poor and marginalized, through the provision of sustainable water supply and sanitation facilities.

The objectives of the devolution and decentralization sector policy are to promote good governance at the local level and to enhance effectiveness of local government in development works and service delivery by participatory methods. It advocates a rights-based approach to the inclusion of women, dalits, and disadvantaged groups.

Nepal is a signatory has to a number of important international agreements that relate directly to the project goal, gender equity, and poverty reduction. These agreements include the United Nations Millennium Declaration, the Convention on the Elimination of all Kinds of Discrimination against Women, the International Covenant on Economic, Social and Cultural Rights, and the Convention on the Rights of the Child. The TYIP was the first plan to fully reflect the Millennium Development Goals and Nepal’s international commitments,

Based on Nepal's fundamental long-term development needs and the Government's priorities, the ADB's Country Partnership Strategy for Nepal (2010–2012) has four pillars: (i) inclusive and broad-based economic growth; (ii) inclusive social development; (iii) governance and capacity building; and (iv) climate change and environment sustainability. In each of these four pillars, the ADB proposes to focus on one or more aspects of urban environmental improvement: urban infrastructure development, promotion of private sector development and participation (including PPPs), access to basic services (water, sanitation), strengthening local governance, mainstreaming social and environment safeguards in the government system, and clean urban development. The intention is that better municipal infrastructure and services will have a direct impact on inclusive social development. Muncipal services will benefit the health of the population by reducing waterborne and vector-transmitted diseases and will save health expenditures. Urban environmental improvement and better urban transport will contribute to environmentally sustainable growth. Similarly, ADB's support for greater participation and accountability, as well as measures for strengthening local governance, will support capacity building and good governance. Urban development in towns with economic growth potential will support broad-based, inclusive, and rapid economic growth.

The Project will contribute to helping achieve the Government's goal to provide sustainable and equitable drinking drainage, sanitation, solid waste management, and services through applying pro-poor approaches. In particular, the project will seek to ensure that everyone (subject to the components in each municipality) has access to improved sanitation, safe water supply, and solid waste collection. The Project will also ensure inclusion of the poor, women, and the disadvantaged caste and ethnic groups by implementing a gender equality and social inclusion (GESI) action plan.

B. Poverty Analysis Targeting Classification: ______________

1.Key Issues.

The National Living Standard Survey (NLSS) in 2004 indicated a sharp decline in the incidence of poverty—from 41.8% in 1996 to 30.8% in 2004. Increased remittance inflows, higher agricultural wages, and urbanization were the main drivers. Nepal has also made notable progress in human development. The child (under 5-years old) mortality rate has declined from 86 per 1,000 live births in 2000 to 59 in 2006, the infant (below 1-year) mortality rate has decreased from 64 per 1,000 live births to 46 in the same period, but the percentage of children underweight for their age increased slightly, from 38.2% to 38.8%. Despite this progress, the NLSS shows a marked increase in income inequality—the Gini coefficient increased from 34.2% in 1996 to 41.4% in 2004. Inequalities across geographic regions and ecological zones and between rural and urban areas remain significant, as do inequalities across gender, ethnic, and caste lines.

In Nepal, poverty is mainly a rural phenomenon. However, migration to urban centers is such that municipalities struggle to expand services rapidly enough to keep pace with population growth. The most recent living standards survey (2003/2004) showed that in urban areas outside the Kathmandu Valley only 39.3 percent of households have access to piped water supply, only 30.4 percent of households have access to sanitary facilities and only 24.1 percent have access to garbage collection and disposal services. Other data shows that only 15.0 percent of roads in towns outside the Kathmandu Valley are sealed compared with 60 percent of roads in Kathmandu Valley towns. In recent years, the expansion of infrastructure networks, especially the road and drainage networks, has failed to keep pace with the growth of the urban population, let alone improve coverage of the urban population. As a consequence, most of the expansion is in the form of ribbon development beyond municipal limits.

The standard of housing is very poor in the towns outside the Kathmandu valley. Some 43 per cent of houses have earth floors, compared to only 27 per cent in the Kathmandu valley, and 12.6 per cent have roofs of straw or thatch. Some 35 per cent of the population is in the three lowest per capita income quintiles, compared to only 5 per cent in the Kathmandu valley towns. Poor housing and low incomes translate into low effective demand for services.

The Report on the Nepal Labour Force Survey 2008 shows that access to piped water supply is far worse in the terai towns than in towns in the hills and mountain zones. The 2008 Survey also shows that the proportion of households without toilets is far higher in the terai municipalities than in the hills and mountain zone municipalities.


The poor neighborhoods are mostly on the periphery and generally completely lack basic infrastructure. Generally, the poor have less access to safe drinking water and sanitation facilities, are not connected to piped systems, and depend upon poor-quality water sources.

In addition to gender identity, the caste and ethnic identities have greatly influenced people's access to services, benefits, and participation in development programs. PPTA surveys showed that in each municipality vulnerable groups and indigenous people are concentrated in areas of poor housing.

During PPTA surveys, women and excluded groups expressed different priorities to the rest of the population. In Birgunj, all groups attached highest priority to drainage and sanitation. In Biratnagar, employment was the highest priority and water supply was a second priority for women, dalits, slum residents and squatters. In Butwal, a similar situation applied except that for slum residents and squatters river-training was the highest priority.

Design features

The starting point of the project design is providing drainage systems and wastewater treatment. The project aims ensure that everyone has access to improved sanitation (a Government objective for 2017 under the TYIP). The Project will therefore target people who have no access to improved sanitation. Water supply through hand-pumped wells and/or community water schemes will be provided or improved where necessary to achieve the sanitation objectives. By addressing the issues of gender, caste, and ethnic-based discrimination, the Project will adopt the policy of social inclusion for the excluded and vulnerable while targeting the beneficiary community. These groups will be identified through poverty mapping in accordance with the requirements of the National Urban Water Supply and Sanitation Policy.

Solid waste management is an essential component of the project if only to stop waste being dumped in drains and water courses (in the case of Biratnagar, there is no solid waste component because the SEAM-N project is providing assistance to the municipality).

Improvements to roads and lanes will be undertaken only in association with the drainage works. The inclusion of ―lanes‖ is to ensure equitable provision for slum and squatter residents. It also serves to facilitate solid waste collection.

II. Social Analysis and Strategy

A. Findings of Social Analysis

1. Key Issues.

The key issues for the project arising from social analysis are as follows:

The project towns have poor municipal infrastructure and services compared with towns in the hill and mountain zones because of more rapid population growth and proportionately less assistance from the Government.

Deficiencies in municipal infrastructure and access to services extend across the entire municipality but are nevertheless concentrated in particular tols that are disproportionately inhabited by people from disadvantaged groups.

Many of the environmental health problems can be tackled by awareness and community mobilization programs.

Enforcement of the Public Works Directives is important to poverty reduction.

The project cannot produce health benefits unless the environment is improved across the entire municipality.

B. Consultation and Participation

At the central level, workshops were held by inviting key stakeholders (government departments, NGOs, development partners, etc.) to discuss the Project design and the draft urban water supply and sanitation sector policy during the project preparatory technical assistance. A gender equality and social inclusion strategy has been drafted to ensure effective participation of stakeholders in the Project. In each of the three subproject towns, group discussions and workshops were organized to solicit views from potential beneficiaries of the Project, including vulnerable groups such as dalits and indigenous people. Strong support for the Project has been confirmed at these workshops, and suggestions and comments made have been reflected in the design of subprojects.


2. What level of consultation and participation (C&P) is envisaged during the project implementation and monitoring? Information sharing Consultation Collaborative decision making Empowerment 3. Was a C&P plan prepared? Yes No If a C&P plan was prepared, describe key features and resources provided to implement the plan (including budget, consultant input, etc.). If no, explain why. A C&P plan was not prepared because the gender equality and social inclusion (GESI) implementation plan to be developed and implemented in each town by a local NGO will ensure sufficient consultation and participation of beneficiaries, including women, the poor, and vulnerable groups.

C. Gender and Development

1. Key Issues The key gender and development issue is the exclusion of women from municipal decision taking processes. The all-party municipal boards are all-male. When there were elections for municipal councils, the Local Self-Governance Act guaranteed women and vulnerable groups representation. Key benefits accruing to women under the project will be:

Health benefits from environmental improvements Access to improved sanitation Improved participation in decision taking relating to municipal services Reduced burden of caring for the sick Savings in health expenditures

Gender plan prepared? Yes (as Gender Equity and Social Inclusion Action Plan)

Key Actions

Measures included in the design to promote gender equality and women’s empowerment—access to and use of relevant services, resources, assets, or opportunities and participation in decision-making process:

The GESI action plan includes:

placement of gender and social development officers in PIUs;

50% of awareness and community mobilization teams to be women;

20% of awareness and community mobilization teams to be from disadvantaged groups;

gender, caste, and ethnicity balanced tol committees;

representation from caste and ethnic groups in community task force;

GESI-related monitoring of project implementation and impact;

inclusion of gender and social indicators in monitoring;

equal employment opportunity to poor women and men in construction works;

one member of each Project Management Committee to have designated responsibility for gender-related issues;

gender-friendly sanitation and solid-waste management activities;

audits to ensure benefits to women and excluded caste, ethnic, and poor sections.


III. Social Safeguard Issues and Other Social Risks

Issue Significant/ Limited/ No Impact

Strategy to Address Issues

Plan or other Measures Included in Design

Involuntary resettlement

Limited impact. Alternative sites have been considered for all land acquisition requirements. The proposed sites have low involuntary resettlement.

Full Plan: No

Short Resettlement Framework: Yes

Indigenous Peoples Indigenous people will be among the beneficiaries of all subprojects.

No indigenous people will be affected except possibly at the regional waste processing site near Birgunj. This could displace a few indigenous families (Dhanuk ) ; the impacts could be minimized through project design ( moving a little further from their present settlements).

Labour

□Employment Opportunities

Under-employment and unemployment are a feature of all three municipalities.

Promoting local economic growth.

The Project will create short-term employment opportunities in infrastructure construction and maintenance for poor unskilled and skilled laborers. It will benefit both women and men. Labor-based construction methods will be used to the extent possible.

In the medium-term, the infrastructure improvements will facilitate economic growth.

□Labor retrenchment

In Birgunj and Butwal, ragpickers will lose their employment.

Re-employment and rehabilitation.

The project will provide jobs to rag pickers in the proposed land fill site; Make special provision for child rag pickers for basic schooling facilities.

□Core labor standards In Biratnagar and Birgunj project construction work will have a significant impact on the labour market.

Enforce Public Works Directives and follow ILO Nepal recommendations.

Enforce Public Works Directives and follow ILO Nepal recommendations.


Affordability

Other Risks and/or Vulnerabilities

The Project's GESI strategy is designed to ensure that dalit caste, including other vulnerable groups, will not be excluded from the Project and its benefits. The design, operation, maintenance, and financial arrangements will be adjusted to ensure their participation and benefit.

□x HIV/AIDS

Each municipality is associated with a major border crossing to India and therefore with the spread of HIV/AIDs

The Government has a range of programs.

In Birgunj and Butwal, the introduction of health care waste collection and rehabilitation of rag pickers will eliminate one of the ways HIV/AIDs is spread

□x Human trafficking

All three municipalities are prominent centers of trafficking.

National Plan of Action on Trafficking

No specific measures in project, but project will contribute indirectly by strengthening capacity of local government.

□x Other (conflict, political instability, etc.), please specify

Biratnagar and Birgunj have a high incidence of security incidents compared with other municipalities.

Risks cannot be brought within the control of the project. However, the project design has aimed for simplicity to minimize the impact.

Risks cannot be brought within the control of the project. However, the project design has aimed for simplicity to minimize the impact.

There is a significant risk from political instability.

Risks cannot be brought within the control of the project. However, the project design has aimed for simplicity to minimize the impact of the risk.

Risks cannot be brought within the control of the project. However, the project design has aimed for simplicity to minimize the impact of the risk.

Community management of facilities may not work.

Include adequate provision for community mobilization inputs.

Include adequate provision for community mobilization inputs.

IV. Monitoring and Evaluation

Are social indicators included in the design and monitoring framework to facilitate monitoring of social development activities and/or social impacts during project implementation? □ Yes □ No

TA 7182-NEP F - 1 Final Report, Vol. 1

Appendix F Town selection

1 The selection of towns for the project flows naturally from consideration of the characteristics of urban development in Nepal, including the state of urban infrastructure and services, and current and prospective GoN projects and initiatives.

F1 Identifying candidate towns

2 To compile a list of candidate towns for the project, it is first necessary to define the ToR terms “candidate”, “town” and “secondary”.

F1.1 Should urban areas or municipalities be selected?

3 The TOR use the term “town” and not “municipality”, the relevant administrative unit. In Nepal as in other countries, the relationship between an urban area and administrative boundaries can take three main forms:

Over-bounded: the urban areas that occupy only a small part of the administrative unit. Examples are Amargadhi, Dhanghadi and Kamamalai.

Under-bounded: the urban area extends beyond the administrative boundaries. Examples are Bharatpur, Birgunj and Kathmandu.

Multiple administrative units: the urban area extends across several administrative units. This typically occurs when nearby towns coalesce as urban clusters or urban corridors. Examples are (i) Biratnagar, Itahari, Dharan, (ii) Birgunj, Kalayia, and (iii) Butwal, Siddarthanagar.1 Biratnagar is also an example of a town growing across its boundaries on the east and west sides of the town where there is no highway corridor or nearby town.

4 Because the extent of urban areas does not match municipal boundaries, care has to be taken in interpreting municipal population data, which may seriously misrepresent the size of the urban population. As with UEIP, municipalities are likely to be the most appropriate implementing agency for the project. The available statistical data relates to municipalities, not towns. The selection of towns will therefore in fact be a selection of municipalities. Nevertheless, the selection of the municipalities should have regard to the size of the urban area and urban clusters or corridors.

F1.2 What are “secondary” towns?

5 Internationally, the term “secondary town” is in wide use but it does not have a standard definition. Kathmandu is an example of what is known as a “primate city”, that is a city that is disproportionately larger than the next largest centre in the urban hierarchy. In accordance with the LSGA, the largest towns after Kathmandu are termed “sub-metropolitan city”: Biratnagar, Birgunj, Pokhara. Some would say, therefore, that these are not secondary towns. However, GoN and ADB guidance was that the consultant should consider the sub-metropolitan cities as secondary towns.

6 The National Urban Policy classifies municipalities with 2001 populations under 50,000 as “smaller municipalities” and the sixteen municipalities with over 50,000 population as “large municipalities”.2 The National Urban Policy also recognizes the five Kathmandu Valley towns 1 See Halcrow, 2007, Nepal: Regional Development Strategy (ADB TA 4752) for descriptions of these. 2 The ADB Small Towns Water Supply & Sanitation Sector Project covers towns up to 40,000 population.


(municipalities) as a single planning unit; of these five towns, Kathmandu, Lalitpur and Bhaktapur have 2001 Census populations over 50,000, so for planning purposes there are thirteen secondary towns.3

F1.3 Are all secondary towns candidates for the project?

7 The ADB and GoN have agreed that the towns “will be selected strategically”. The consultant therefore excluded two categories of towns from consideration:

Towns that have received, or are receiving, substantial investment under other projects. The likely available funding for major urban infrastructure investments is insufficient to cover all urban areas, or even a majority of urban areas, let alone revisit towns that have benefited from recent projects. On this basis, the consultant considered that Pokhara and the UEIP towns were not candidates.4

Towns not on the strategic north-south corridors that the National Urban Policy defines:5

Possible regional economic centres6 Towns on associated N-S corridors Biratnagar Itahari, Dharan, Dhankuta, Birgunj Hetauda Butwal Siddarthanagar, Pokhara, Baglung Nepalgunj Birendranagar Dhangadi Amargadhi

8 These exclusions reduce the sixteen large municipalities to eight (Table 1).

9 However, the 50,000 population criteria might be a little too arbitrary in the context of the strategic importance of corridor towns. Accordingly, five smaller towns were added (Table 1). Lekhnath was mentioned as another town that might be added in these terms, as it is close to a north-south corridor and had a 2001 population of 41,369. However, Lekhnath has received assistance from the ADB through the STWSSSPP.

3 There is also legislative recognition of Kathmandu Valley in the form of the Kathmandu Valley Urban Development Act 2000. 4 Municipal infrastructure was included in the ADB’s First and Second Tourism Development Projects. On the Second Tourism Development Project, $5m was invested in environmental improvements. Pokhara municipality is not making interest or loan repayments (Municipality Profile of Nepal 2008), and is heavily dependent on GoN grants. Nevertheless, GoN and ADB requested that this should not preclude consideration of Pokhara for the project (email of Norio Saito John Freeman 19 June 09, video conference 24 June). The consultant believes that the town should not be considered as a candidate. Most municipalities have received development assistance in one form or another, but not on the Pokhara scale. 5 ADB has endorsed the regional economic centres and associated north-south corridors. The Country Partership Strategy Midterm Review Nepal 2005-2009 states: “Urban development areas should be prioritized on the basis of their economic growth potential, not simply because they lack basic infrastructure. The selection of the types of urban and regional infrastructure services should be based on promoting the economic potential of the selected industries and harnessing the competitiveness of urban–rural regions. An urban sector strategy should aim to achieve balanced and inclusive growth while at the same time investing in the country’s agriculture-based economy, such as (i) promoting agro-processing businesses in semi-urban or rural areas surrounding towns, (ii) developing north–south economic corridors to connect hill and regions, and (iii) integrating hinterlands with urban economic centers……ADB will ……assist the Government to (i) select towns for future development ventures based on rigorous analysis of their growth potential; and (ii) design projects with potential to bring economic growth to peripheral areas. Towns with such potential include border towns in the terai, towns that form part of a passage to a sea port in Bangladesh, and potential economic hubs in each of the five regions. Networking of such towns along north–south corridors is prerequisite for a balanced national urban structure, greater spheres of influence through rational distribution of investment, and greater integration.” 6 The National Urban Policy requires “at least one” regional economic centre in each development region. Pokhara may be considered as an existing regional economic centre as distinct from a potential one. However, the National Urban Policy does not mention Pokhara as such. Pokhara is not well-located to serve the whole of the Central Region, whereas Birgunj is vital to the economy of the entire region.


Table 1 Strategic selection: corridor analysis

Town (2001 population)(a) North-south

corridor Reason for exclusion Candidate town?

Thirteen secondary towns (over 50,000)

Biratnagar (166,674) Eastern Yes (1)

Pokhara (156,312) Western Yes (2)

Birgunj (112,484) Central Yes (3)

Dharan (95,332) Eastern Yes (4)

Bharatpur (89,323) UEIP -

Mahendranagar (80,839) Not on corridor -

Butwal (75,384) Western Yes (5)

Janakpur (74,192) Not on corridor -

Hetauda (68,482) Central UEIP -

Dhangadhi (67,447) Far-western Yes (6)

Nepalgunj (57,535) Mid-western Yes (7)

Triyuga (55,291) Not on corridor -

Siddharthanagar (52,569) Western Yes (8)

Five small towns on strategic corridors

Itahari (41,369) Eastern Yes (1)

Birendranagar (31,381) Mid-western Yes (2)

Baglung (20,852) Western Yes (3)

Dhankuta (20,668) Eastern Yes (4)

Armagadhi (18,390) Far-western Yes (5)

(a) 2001 census populations are used here for consistency with the National Urban Policy.

F2 Criteria and indicators for town selection

10 GoN and the ADB have agreed that the criteria for selection of towns will include economic growth potential, demands for environmental improvement, commitment, capacity and readiness of towns and “interrelationships between towns for strengthening urban-rural linkages”. These criteria relate to the three National Urban Policy objectives as follows:

National Urban Policy objectives Selection criteria Developing new regional economic

centres Economic growth potential,

interrelationships between towns for strengthening urban-rural linkages

Creating clean, safe and developed urban environment

Demands for environmental improvement

Improving urban management capacity

Commitment, capacity and readiness of towns

F2.1 Criteria approved by the Steering Committee

11 At its meeting on the 9th of August, the Steering Committee approved criteria for town selection as set out in Table 2.


Table 2 Criteria for town selection

OBJECTIVE CRITERIA

To achieve high economic growth of towns

In backward development region

Suitable for industrial development

Regional economic centre

On N-S corridor connecting to regional economic centre

On/near E-W highway

Potential for inter-linkage between towns

Potential for urban-rural linkage

Potential for population growth

Planned investment projects

To improve urban environment

Demands for environmental improvement and services

Urgency of improvement needs

To make urban management effective

Financial capacity

Management capacity

Technical capacity

Commitment

Readiness

F2.1.1 Indicators suggested by DUDBC and others

12 At the beginning of June 2009, DUDBC suggested assessing the towns against each criterion by considering various indicators.7 An ADB mission suggested “trend analysis” as an indicator of potential future growth.8 In late July, DUDBC suggested “working environment” as an indicator.9

13 A 2007 ADB TA carried out an exercise using a wide range of criteria to identify towns in Nepal with economic growth potential. 10 However, the TA did not consider the urban management capacity of municipalities. Two years have passed since the earlier TA, and those indicators that the TA derived from the 2001 census are therefore of less value.

14 Table 3 sets out the various suggestions for indicators in relation to the selection criteria.

7 Initially indicators suggested by Dr Mahendra Subba at a workshop on 3 June, but subsequently additional indicators requested by DUDBC on 20 July (email of Parag Kayastha to John Freeman). 8 Aide Memoire, Inception Mission, 11 June 2009. 9 Email of Parag Kayastha to John Freeman, 20 July 2009. 10 ADB, 2007, Nepal: Regional Development Strategy, Technical Assistance Consultant’s Report.


Table 3 Indicators suggested by others

Objective Criteria Suggested indicators

DUDBC ADB Regional Development Strategy TA and others

To achieve high economic growth of towns

Backward development region Human Development Index Suitable for industrial development

Working environment (security) Level of secondary and tertiary employment Manufacturing output Customs revenue Distance from Indian border crossings and Indian railheads Road distance from Kathmandu Origin/destination of cargo flows Air links GDP No. of telephones per capita

Regional economic centre On N-S corridor connecting to regional economic centre

On/near E-W highway On/near E-W highway Potential for inter-linkage between towns

Potential for urban-rural linkage Traffic volumes Agricultural resources Educational establishments

Potential for population growth Population Population density Inter-census population change City class

Population Population density Migration flows

Planned investment projects Major projects City class

To improve urban environment

Demands for environmental improvement and services

Urgency of improvement needs Pakki housing Households without toilets Households without electricity Households without piped water Black-topped road

To make urban management effective

Financial capacity Total revenue Own source revenue Per capita capital expenditure

Manageable accounts receivable Preparation of annual accounts to prescribed standards Demonstrable financial soundness

Management capacity Municipal staff per 1000 Staff structure

Technical capacity Commitment Major political parties agree on the

project

Readiness Adoption of periodic plan or underway

F2.1.2 Indicators adopted

15 The main considerations in deciding on which indicators to use are:

Quality of data

Date of data (recent data preferred)

Relevance of indicator

16 Data from the 2001 census (and even more so the 1991 census) is now too old and is anyway subject to serious inaccuracies (see 35); accordingly, only limited use of the census data is appropriate, especially where more recent data is available from other sources. In accordance with Occam’s razor ("entities should not be multiplied unnecessarily") the number of indicators


should be the minimum consistent with utilizing available data and covering all relevant issues.11

F3 Economic growth potential

17 Given the project goal of inclusive, broad-based economic development of secondary towns, economic growth potential is a fundamental criterion. For this criterion, the consultant ranked towns by considering a combination of quantitative and qualitative indicators, and appropriate weights for them.

F3.1 Economic theory on the growth of towns and its relevance to Nepal

18 The selection and weighting of indicators should reflect economic theory. Recently, work by Paul Krugman, winner of the Nobel prize for economic sciences in 2008, has provided a major advance in our understanding of regional economic growth.12 As of the 1970s, trade theory rested on the notion of comparative advantage. However, in the late 1970s, several researchers, including Krugman, independently formalized the idea that economies of scale and imperfect competition can give rise to trade even in the absence of comparative advantage. Krugman’s seminal contribution that gained him the Nobel prize was the core-periphery model. It explains why population concentrates in a few highly developed regions with the agricultural hinterland being comparatively thinly populated. Under this model, a complex interplay between transport costs, economies of scale, and the preferences of firms and individuals determine the balance between the highly developed core and the thinly populated periphery.

19 Unfortunately, regional planning in Nepal has been based on the theory of comparative advantage. As one former chairman of the National Planning Commission put it:

In fact, regional strategy is basically spatial planning for resource allocation based on comparative advantage.13

20 The ADB TA Consultant Report Nepal: Regional Development Strategy uses the term “comparative advantage” 104 times. However, the principle of comparative advantage applies to trade between countries rather than within countries. This is because movement of capital and labour is relatively free within countries, and therefore as between regions there can only be absolute advantages, not comparative advantages. This is why in Nepal internal migration to regions with absolute advantages over others can occur on a large scale. The principle of comparative advantage is usually attributed to Ricardo’s Principles of Political Economy and Taxation, published in 1817. Ricardo explicitly states that the principle applies to trade between countries, not within countries:

In one and the same country, profits are, generally speaking, always on the same level; or differ only as the employment of capital may be more or less secure and agreeable. It is not so between different countries. If the profits of capital employed in Yorkshire, should exceed those of capital employed in London, capital would speedily move from London to Yorkshire, and an equality of profits would be effected….

21 The main implications of substituting the core-periphery model for the principle of comparative advantage in town selection are as follows:

Locations that offer producers transport cost savings have the best economic growth prospects. Locations in the south of the north-south corridors areas much preferable to

11 Occam's razor is apocryphally attributed to the English logician, William of Ockham (c. 1285–1349). The principle states that the explanation of any phenomenon should make as few assumptions as possible, eliminating those that make no difference in the observable predictions of the explanatory hypothesis or theory. The term razor refers to the act of shaving away unnecessary assumptions to get to the simplest explanation. 12 This section relies on Prize Committee of the Royal Swedish Academy of Sciences, 2008, Trade and Geography─Economies of Scale, Differentiated Products and Transport Costs. Scientific background on the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2008. 13 Harka Gurung, 2005, Nepal Regional Strategy for Development, ADB Resident Mission Working Paper


those in the northern sections, locations in the middle of the east-west highway are preferable to those at the eastern and western extremities.

Because of the importance of economies of scale, the principal existing centres of manufacturing activity offer the best opportunities for further growth (absent congestion constraints, high labour costs etc).

Recognition and acceptance that the central region has the greatest economic growth potential, particularly the terai portion of the region which has proximity to both Kathmandu and Indian and overseas markets.

F3.2 Backward regions criterion

22 Towns in backward regions are likely to grow more slowly. In Nepal, the term “backward region” is in frequent use, but not with a consistent meaning. For electoral purposes, 9 of Nepal’s 75 districts are recognised by GoN as backward. None of the candidate towns is in one of these districts. If we consider the five economic development regions in terms of indicators such as literacy, household income, dependence on remittance income, only one development region is clearly more “backward” than the others: the Far West region.

23 While towns in backward regions are likely to grow more slowly, the National Urban Policy includes the following strategy:

To prioritize backward development region while establishing industry/enterprises and investing physical infrastructure.

24 However, this does not mean that town selection for the project, which GoN and ADB should target towns with high economic growth potential should favour towns in backward development regions.

F3.3 Suitability for industrial development criterion

25 Indicators for industrial development potential include manufacturing value added, proximity to the Indian border and railheads, telephones per thousand population, and the level of civil disturbances.

F3.3.1 Manufacturing value-added

26 Outside the Kathmandu Valley, manufacturing activity is highly concentrated in a few districts (Table 4 and Figure 1). Table 4 Manufacturing activity

2000/2001 2006/2007

Municipality District Establish-

ments Employees Value added Establish-

ments Employees Value added

(no.) (no.) (Rs m) (no.) (no.) (Rs m)

Biratnagar Morang 295 21,092 3,016 295 20,641 3,458

Birgunj Parsa 159 6,054 1,177 218 8,034 3,027

Dharan Itahari

Sunsari 212 18,103 2,819 216 17,122 2,154

Butwal Siddarthanagar Rupandehi 237 6,335 800 225 7,485 1,752

Nepalganj Banke 89 3,893 532 96 3,367 609

Pokhara Kaski 120 2,735 366 145 3,326 496

Dhangadhi Kailali 82 3,724 202 107 4,268 195

Dhankuta Dhankuta 6 228 7 12 351 20

Birendranagar Sarkhet 9 144 17 19 258 13

Baglung Baglung 5 34 2 6 74 5 Armagadhi Dadeldhura 0 0 0 0 0 0

Source: Central Bureau of Statistics. 2006/07. Census of Manufacturing Establishments. Kathmandu. and Central Bureau of Statistics. 2001/02. Census of Manufacturing Establishments. Kathmandu.


Figure 1 Location of manufacturing activity, 2007

27 Biratnagar and Birgunj alone account for the majority of manufacturing output in secondary towns. While industry only accounts for about ten percent of Nepal’s GDP (see Appendix L, Table 1, its importance for urban development lies in its strong multiplier effects on other sectors. However, it is also evident from

28 Table 4 that in Biratnagar, Dharan, Itahari, and Nepalganj manufacturing activity has been stagnating. The potential for future expansion of manufacturing really only lies in the terai, which has the advantages of flat terrain, readily available water supply, and proximity to Indian cities and transport infrastructure. Only in Birgunj and Butwal/ Siddarthanagar has there been significant expansion. Investment in municipal infrastructure may contribute little if anything to local economic growth if the town relies on administrative functions or remittance income.

29 The 2001 census indicates that in many municipalities nearly half the economically active population was engaged in agriculture. In truth, some municipalities were not urban centers at all. In other municipalities, the boundaries are such that only a tiny proportion of the working population is engaged in agriculture. The urban workforce can be estimated by subtracting from the total workforce (2001 census) those working in agriculture, forestry and fishing or in “elementary occupations” or “not stated”. However, it is not a good indicator because of the passage of time since the census and the various inaccuracies in the data.

F3.3.2 Proximity to Indian border and Indian railheads and highways

30 There are only a few major corridors for carrying Nepal’s international trade. Birgunj Customs point handles almost 80 percent, Biratnagar covers 16 per cent of overseas trade (ie excluding trade with India), and Siddarthanagar covers a tiny fraction. The only access points to the Indian rail network for transit purposes are at Birgunj and Siddarthanagar, but the former is much superior for a number of reasons. In terms of road access to the mega-cities of Delhi, Kolkata, and Dhaka, Siddarthanagar and Birgunj are better positioned than is Nepalganj.14

31 The Eastern Development Region and the Central Development region thus account for almost all Nepal’s overseas (ie excluding India) exports and imports (Table 5).

14 Vidya Nath Nepal, 2006, Policy Reorientation Study on Transit Trade of Nepal, Economic Policy Network, Policy Paper 20.


Table 5 Overseas trade by region, 2007/2008

Far West Mid West West Central Eastern Total

(%) (%) (%) (%) (%) (%)

Imports 0.0 0.7 1.2 82.0 16.2 100.0

Exports 0.0 0.4 0.0 67.7 32.0 100.0

Source: Trade and Export Promotion Centre, Ministry of Commerce and Supplies.

32 Birgunj and Biratnagar are handling almost all overseas trade while other crossings are handling trade with India but almost no overseas trade. The use of containers and the geography and other characteristics of the Indian and Bangladesh rail networks mean that most overseas trade and much Indian trade will pass through Birgunj and Biratnagar for the foreseeable future.

F3.3.3 Telephones per thousand population

33 The number of telephones per 1000 population is an indicator of income. It has been used to good effect as a proxy for income on other urban studies in Nepal.15 Another possible indicator would be the number of televisions per 1000 population. Plotting televisions per 1000 against telephones per 1000 population shows a reasonable correlation, confirming the appropriateness of the indicator (Figure 2). Figure 2 Relationship between telephones/1000 population and TV/100 households

F3.3.4 Political disturbances, civil unrest

34 The consultant assessed the level of civil unrest in project towns by reference to the

15 See Portnov, Adhikari and Schwartz, 2007, Urban Growth in Nepal: Does Location Matter? Urban Studies 44, 915-937. The statistical analysis in this paper shows that wealthy municipalities (as indicated by telephone proliferation) tend to grow faster than less fortunate counterparts. It also demonstrates that strategic location on the highway network is a crucial determinant of municipal performance.


reports of the UN Office for the Coordination of Humanitarian Affairs. These reports give details of security incidents (see Appendix K for details). The number of incidents reported in the candidate towns over a one year period ending 2 July 2009 was as follows:

Biratnagar: 24 incidents

Dhangadhi: 17 incidents

Nepalganj: 15 incidents

Birgunj: 11 incidents

Itahari: 9 incidents

Dharan: 7 incidents

Dhankuta: 6 incidents

Butwal: 2 incidents

Siddarthanagar: 1 incidents

Baglung: 1 incidents

Pokhara: 1 incidents

Birendranagar: 0 incidents

Armagadhi: 0 incidents

F3.4 Regional economic centres

35 One of the policies of the National Urban Policy is:

To develop regional economic centres with large industrial and trade activities, fulfilling the regional need and promoting export in every development region by twenty-year planning period matching with long-term vision of periodic plan of that region.

36 The National Urban Policy identifies Biratnagar (Eastern Region), Birgunj (Central Region), Butwal (Western Region), Nepalgunj (Mid-western region) and Dhangadi (Far Western Region) as possible regional economic centres. Of course Pokhara and Kathmandu Valley are existing regional economic centres. Pokhara, however, does not have the industrial or trade potential that the five possible regional economic centres have (with the exception of Dhangadi, which is too peripheral to have much potential).

F3.5 North-south corridors connecting to regional centres criterion

37 The National Urban Policy proposes developing north-south to link core market centres of the mountain and hill zones to the core towns of the terai. It further proposes directing public and private investment into urban centres along the corridors. Towns on the southern sections of north-south corridors have greater accessibility than those on the northern sections.

F3.5.1 Proximity to the East-West Highway criterion

38 The East-West Highway is a national highway that runs across the country from Mechi district in the east to Mahakali district in the west. Towns in the middle sections of the corridor are more accessible than those at the extremeties.

F3.5.2 Potential for linkages between towns criterion

39 Section F1.1 pointed out that many urban areas in Nepal extend across municipal boundaries or form urban corridors along highways and gave examples.

F3.5.3 Population potential criterion

40 There are two population figures for each municipality: the CBS figure in Urban Indicators of Nepal and the figure in the Municipality Profile of Nepal. The two sets of figures are very different (Table 6).


Table 6 Comparison of population projections

Candidate municipality

Census population

2001

Projected population

2006*


2008**

Implied annual growth 2008/2006

% 2001/2006 %

2001/2008 %

Amargadhi 18,390 24,629 19,867 6.0 1.1 81

Baglung 20,852 27,926 25,908 6.0 3.2 93

Biratnagar 166,674 223,221 198,529 6.0 2.5 89

Birendranagar 31,381 42,028 38,911 6.0 3.1 93

Birgunj 112,484 150,646 157,119 6.0 4.9 104

Butwal 75,384 100,959 108,357 6.0 5.3 107

Dhangadhi 67,447 90,330 89,355 6.0 4.1 99

Dhankuta 20,668 27,680 23,595 6.0 1.9 85

Dharan 95,332 127,675 122,194 6.0 3.6 96

Itahari 41,210 55,191 55,297 6.0 4.3 100

Nepalgunj 57,535 77,055 65,412 6.0 1.8 85

Pokhara 156,312 209,344 219,215 6.0 5.0 105

Siddharthanagar 52,569 70,404 64,084 6.0 2.9 91

Average 70,480 94,391 91,373 6.0 3.8 97

* CBS, Urban Indicators of Nepal ** Municipality Profile of Nepal

41 The consultant used the CBS figures. The Municipality Profile of Nepal figures give too low an average population growth rate in relation to the CBS national demographic projections of. The Municipality Profile of Nepal figures appear to be extrapolations from the change 1991 to 2001; extrapolations are of dubious value given the changing situation in Nepal, the inaccuracies in census data and the fact that 1991 is 18 years ago.

42 The 2001 Census data is not accurate for a variety of reasons:

The Royal Palace incident. The Royal Palace Massacre on 1 June 2001 halted all census activities. Communications were completely disrupted and this delayed the enumerators' training and field enumeration. This also affected the quality of the training in some parts of the country.

Data processing. Most data processing was outsourced to two private organisations because of the limited resources of CBS; there were problems in quality control.

Occupation and industry classification. Problems were encountered with the classifications of occupation and industry and their application.

Maoist insurgency. From the beginning of the field operations, the Maoist insurgency disturbed enumeration in 12 districts, affecting almost 2 per cent of Nepal’s population.

Census budget. Originally, GoN allocated Rs. 280m for the census. Later, GoN adopted an austerity programme and there was a budget cut. Finally, only Rs. 180m was made available for the field work.

Enumeration area maps. The enumeration area maps were deficient.

43 A post enumeration sample survey indicated that the census had under-enumerated the population by 5.3 percent. The published census figures are not adjusted for this.16 It follows that the populations of some of the candidate towns could be much larger than stated in this chapter.

16 CBS, 2003, Population Projections for Nepal 2001-2021.


F3.6 Potential for urban-rural linkages criterion

F3.6.1 Financial inclusion

44 Economists normally define the money supply of a country as consisting of currency (banknotes and coins) and “deposit money” (the balance held in checking accounts and savings accounts). These demand deposits usually account for a much larger part of the money supply than currency. In Nepal, however, the reverse is true (Table 7). Table 7 Increase in narrow money, Nepal

Type of money 2006/2007

(Rs m)

2007/2008

(Rs m)

2007/2008

(Rs m)

Currency 4,864 11,608 21,907

Demand deposits 1,570 2,720 -3,600

Total narrow money 6,434 14,328 18,307

Currency as proportion of narrow money 76% 81% 120%

Source: Ministry of Finance, Economic Survey (fiscal years 2007/2008 and 2008/2009)

45 The reason for this state of affairs is that access to banking services in Nepal is very low by international standards: the number of bank deposit and loan accounts per inhabitant is very low, and lending targets for low-income households have generated excess liquidity among microfinance institutions without significantly increasing their outreach. 17 Only a handful of countries have fewer bank branches per 100,000 people. Access to banking services is vital for economic development and poverty alleviation. Between April 2007 and April 2009, the population per bank branch fell from 47,120 to 42,832, so the situation is improving.18 Therefore, the number of branches of banks and financial institutions makes a good indicator for the economic growth potential criterion.

F3.6.2 Projected district population increase by 2021

46 Linkages between urban and rural areas are important to the economies of both, particular in Nepal where the level of urbanization is so low and where many rural areas are distant from urban centres. However, there is a lack of relevant data available on a comparable basis for all the municipalities. Linkages between urban and rural areas come in many forms: transport, communications, economic, demographic, social, educational, health service and government. The ToR also refer to “spillover effects”, presumably referring to the positive externalities that may flow from urban development to a rural hinterland. There is no reliable means of estimating such externalities before knowing the proposed investments, and even after knowing it would be extremely difficult. However, the CBS projected 2021 district population increase is a reasonable indicator for potential enhancement of urban-rural linkages; districts with faster growing populations have more potential for urban-rural linkages than slower ones.19

F3.6.3 Natural resources

47 Proximity to natural resources is positive for economic growth of secondary towns. Table 17 Aurora Ferrari, Guillemette Jaffrin, and Sabin Raj Shrestha, 2006, Access to Financial Services in Nepal, World Bank. 18 Ministry of Finance, Economic Survey Fiscal Year 2008/2009. 19 Methods of assessing actual (as distinct from potential) linkages include analysing commodity flows, traffic flows, migration, social networks, and service networks (United Nations Economic and Social Commission for Asia and the Pacific, United Nations Human Settlements Programme, 2002, Rural-Urban Linkages and the Role of Small and Medium-sized Towns in Development: Issues, Concepts and Policies). However, suitable data is not available, and quantifying the rural externalities from urban project investments would be difficult. It would be necessary to consider possible negative externalities, for example an increase in air pollution and particulates.


8 is a summary of arable land in Nepal. Table 8 Arable land by development region and ecological zone

Development region

Mountain Hill Terai Total

1991/92 2001/02 1991/92 2001/02 1991/92 2001/02 1991/92 2001/02 (%) (%) (%) (%) (%) (%) (%) (%)

Eastern 5.3 6.1 21.8 19.9 56.5 59.3 24.6 24.9

Central 8.7 10.1 18.3 18.1 42.6 44.3 24.4 25.2

Western 0.3 0.3 13.6 12.3 42.3 36.8 16.1 14.3

Mid Western 1.1 1.7 8.9 10.6 20.0 20.2 6.9 7.8

Far Western 3.6 4.3 7.2 9.6 23.2 22.3 9.7 10.6

All regions 3.1 3.9 14.2 14.1 37.9 38.0 15.8 16.0

Source: CBS.

48 The implications for the selection of towns are clear: towns in the Western, Central and Eastern regions have better access to cultivated lands than do other towns; towns in the terai have better access to cultivated lands than do towns in the other two ecological zones.

F3.6.4 Tourism assets

49 The number of column pages in tourist guidebooks is an indicator of the value of tourism assets:20

Pokhara 40

Siddharthanagar 15

Nepalganj 8

Biratnagar 3

Dhankuta 2

Dharan 2

Birgunj 2

Butwal 2

Dhanghadi 0

Itahari 0

Birendranagar 0

Armagadhi 0

Baglung 0

F3.6.5 Educational facilities

50 Table 9 is a summary of education facilities in the candidate towns.

20 The guidebook used was Nepal, 2006, Lonely Planet.


Table 9 Education facilities in candidate towns Town Higher

secondary Technical school

University campus

Pokhara 10 11

Dharan 4 5 8

Birgunj 6 10

Biratnagar 7 7

Nepalganj 6 3 1

Butwal 8 2

Siddharthanagar 4 1 4

Dhankuta 1 2 1

Dhangadhi 3 1

Baglung 3 1

Itahari 2 1

Armagadhi 2 1

Birendranagar 3

Source: Municipality Profile of Nepal.

F3.7 Planned investment projects criterion

51 Table 10 is a list of major GoN projects as at April 2009), and also some of the DUDBC indicators for which no cardinal number data is available. Proximity to major GoN projects would support urban growth, and therefore the selection of the relevant town. Table 10 Major GoN projects, 2009

Project Cost (Rs m) Towns

Airports

International airport at Nijagarh (Bara) 1,000 Kalayia

Regional airport at Pokhara 3,000 Pokhara

Bhairahawa 1,000 Siddarthanagar

SEZs

Bhairahawa 2,500 Siddarthanagar

Panchkhal 2,500

Birgunj 2,500 Birgunj

Simra 2,500 Birgunj

Dhangadi 2,500 Dhangadi

Roads

Fast track Kathmandu to Tarai 6,375 Hetauda, Birgunj

Other

Infrastructure at Birgunj dry port 270 Birgunj

Source: NPC, 2009, National Development Strategy Paper. Prepared for Nepal Development Forum 2009. The road project information has been taken from other sources because the National Development Strategy Paper does not itemize the specific highway projects included in the proposed investments in new highways.

F3.8 Ranking of towns according to economic growth potential criterion

52 The normal methodology for assessing local economic development potential is Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis. SWOT analysis is a strategic planning method that evaluates the Strengths, Weaknesses, Opportunities, and Threats involved in a project. Applied to town selection, it involves identifying the internal factors (strengths and weaknesses) and external factors (opportunities and threats) that are favourable


and unfavourable to a town’s economic growth. 21 The SWOT analysis considered both quantitative and qualitative data. Weights were assigned to the criteria as follows:

2 In backward development region 12 Suitable for industrial development (manufacturing value added 4, proximity to

Indian rail network 2, incomes 4, security 2) 4 Regional economic centre 2 On north-south corridor 2 On/near east-west highway

12 Urban-rural linkages (bank branches 4, projected district population increase 4, access to natural resources 1, tourism assets 1, educational facilities 2)

2 Inter-linkage between towns 4 Population potential 2 Planned investment projects

53 Table 11 is a summary of the numerical indicator data while Figure 4 is a summary of the SWOT analysis; both list the towns in accordance with the SWOT analysis ranking of the towns. Table 11 Numerical indicators for economic growth potential criterion

SWOT ranking

Town Projected

2006 population

Manufacturing value added, 2006/2007

Telephones per 1000

population

Branches of financial

institutions

Projected district population

increase by 2021 („000s) („000s) (no./1000) (no.) (%)

1 Birgunj 151 27 107 21 53

2= Biratnagar 223 33 92 34 47

2= Butwal 101 18 172 15 55

4 Siddharthanagar 70 9 152 17 55

5 Pokhara 209 39 76 23 51

6 Dharan 128 20 87 9 54

7 Nepalganj 77 13 86 10 55

8 Itahari 55 7 109 15 54

9 Dhangadhi 90 8 74 8 61

10 Dhankuta 28 3 54 3 38

11= Birendranagar 42 6 63 3 49

11= Baglung 28 4 53 4 40

13 Amargadhi 25 2 20 4 44

Average for 13 candidate towns 94 14 88 13 51

Average for 40 other towns22 44 5 44 n/a 46

21 The technique is credited to Albert Humphrey, who led a research project at Stanford University in the 1960s and 1970s using data from Fortune 500 companies. 22 Excluding Kathmandu Valley towns.


Figure 3 Summary of SWOT analysis

Town

Internal factors External factors

SWOT score(1) Strengths Weaknesses Opportunities Threats

Larg

e po

pula

tion

(2)

Goo

d fin

anci

al s

ervi

ces

(2)

Abo

ve a

vera

ge in

com

e (2

) G

ood

man

ufac

turin

g ba

se (4

) G

ood

educ

atio

nal f

acilit

ies

(1)

Tour

ism

ass

ets

(1)

Sm

all p

opul

atio

n (2

) In

bac

kwar

d re

gion

(1)

Poo

r fin

anci

al s

ervi

ces

(2)

Bel

ow a

vera

ge in

com

e (2

) P

oor e

duca

tiona

l fac

ilitie

s (1

) R

egio

nal e

cono

mic

cen

tre (4

)

Nor

th-s

outh

cor

ridor

tow

n (2

) E

ast-w

est h

ighw

ay (2

) N

earb

y ur

ban

cent

re (1

) A

cces

s to

Indi

an ra

il ne

twor

k (2

) P

lann

ed in

vest

men

t pr

ojec

ts (2

) A

cces

s to

nat

ural

reso

urce

s (1

) H

inte

rland

pop

ulat

ion

grow

th (2

)

Poo

r sec

urity

(2)

Hin

terla

nd p

opul

atio

n st

agna

tion

(2)

Birgunj

23

Biratnagar

19

Butwal

19

Siddarthanagar

14

Pokhara

10

Nepalgunj

7

Dharan

7

Itahari

7

Dhanghadhi

5

Dhankuta

-7

Birendranagar

-8

Baglung

-8

Armagadhi

-10

Notes: (1) The SWOT score is the count of the black boxes less the count of the white boxes. The numbers in brackets are the maximum no. of boxes, ie the “weights” for each indicator.

(2) The poor security assessment is derived from the number of security incidents reported on the UN Information Platform. See Appendix K.


F4 Urban management capacity

54 The ADB’s Urban Sector Strategy (1999) states that candidate cities and towns should be selected only if the potential beneficiary local government demonstrates commitment and has urban management capacity, and:

Participation criteria should include (a) a staff structure and complement adequate to undertake current obligations and project activities; (b) preparation of annual accounts to prescribed standards; (c) demonstrable financial soundness (e.g., an accumulated surplus, no recent deficit, and positive net working capital); and (d) manageable accounts receivable.

55 Such is the importance ADB attaches to urban management capacity that the Urban Sector Strategy does not mention either economic growth potential or demand for services as selection criteria.

F4.1 Financial capacity criterion

F4.1.1 Own-source revenue

56 Own-source revenue is an indicator of the capacity of a municipality to borrow. On average, the candidate municipalities have substantially higher own-source revenues per capita than do other municipalities. Own-source revenues per capita correlate with the average incomes of the municipality and with the urban population of municipalities. The indicator is a good one as there are data on a comparable basis for all municipalities for 2006/07 and earlier years.

57 In constant price terms municipal revenues per capita have been falling (Figure 4). Figure 4 Municipal revenues (excluding Kathmandu Valley towns)

Source: calculated by consultant from MLD and MoF data.

58 There are several possible explanations for falling municipal revenues:

Tax rates not keeping pace with inflation.

Coverage of local taxes not expanding in line with the growth of the urban population.

Inability of GoN to maintain the level of grant aid to municipalities because of other calls on its resources.

59 In the next stage of project preparation, household surveys will provide data on willingness-to-pay for infrastructure improvements and other surveys will examine the coverage


of taxes across the municipal population. In turn, the willingness-to-pay data will enable the development of new methods to recover costs.

F4.1.2 Grants

60 The average annual value of grants per capita is a measure of a municipality’s dependence on grants. A municipality dependent on grants is unlikely to be able to participate in a loan project. There is a strong relationship between dependency on grants and population (Appendix A). Larger towns are less dependent on grant revenues.

F4.2 Management and technical capacity criteria

61 The most readily available indicator of management and technical capacity is the number of permanent staff excluding sweepers. Unfortunately, the available data on staffing is not reliable, and the numbers for one municipality may not be comparable with those for another. For example, some municipalities use contractors to collect solid waste, some do not.

62 A better indicator is reference to the Minimum Conditions & Performance Measure (MCPM). The LBFC uses this to assess the capacity of local bodies in fiscal management and service delivery and to measure the performance of Municipalities.

63 Indicators of Minimum Conditions under 5 broad categories have so far been identified. They are as follows:

Formation Committees: As per LSGA and its regulation, Account Committee, Supervision & Monitoring Committee and Revenue Advisory Committee has to be formed in Municipality.

Use of Formats: The financial transaction of Municipality should be compatible to the formats set by Local Bodies Financial Administration Regulation, 2007.

Public Procurement Plan: Public Procurement Plan has to be prepared and then approved by Municipality for procurement.

Property Management : The records of all the immovable property in Municipality's ownership and regularly being used by it , imperishable goods and other public property and infrastructures within its boundary has to be kept intact and up to date.

Tax and income source documentation: Disaster Management: In order to cope with disaster, Natural Disaster Relief Special

Fund has to be formed and necessary budget has to be allocated. Job Description of Employees: The written job descriptions (TOR) of all (permanent,

temporary and contracted) personnel. Organization Development Plan: The organization structure, personnels’ adopted

position and remuneration along with other fringe benefits of the municipality has to be approved by the Municipal Council.

National Building Code: Municipality has to implement National Building Code in urban area.

Board Meeting: The meeting of the Municipal Board has to be taken place at least 12 times in the last fiscal year.

Municipal Budget: The programme and budget of current FY (Annual Municipal Development Plan) has to be approved by Municipal Council of previous year.

64 Performance data against these indicators is not yet available, but apparently only two municipalities fail to meet the minimum standards, and neither is a candidate town.23

65 As regards financial management, MLD compiles a range of financial management ratios. Siddarthanagar and Butwal are particularly impressive in terms of the ratios (Table 12).

23 Govinda Bahadur Thapa, Under Secretary, Municipal Planning Division, MLD, pers. Comm.. 12 August.


Table 12 Financial management ratios for candidate towns, 2006/2007

Indicators \ Municipality

Ben

chm

ark

stro

ng

Ben

chm

ark

wea

k

Nep

alga

nj

Bire

ndra

naga

r

Birg

unj

Am

arga

dhi

Bag

lung

Dha

ngad

hi

Dha

nkut

a

Itaha

ri

Pok

hara

Dha

ran

Bira

tnag

ar

But

wal

Sid

dhar

than

agar

Recurring revenue/ total revenue ,%

>65 <50 o W S

w

w

o

w w S o S

S S

Current expenditure/total expenditure, %

<40 >43 w S w S S S S S S S S S S Current expenditure/ recurring revenue), %

<50 >100 o o S S S o o o S S S S S Capital investment + social development)/ total expenditure, %

>60 <40 w S

o S S

S S S S S S

S S

Total expenditure/ total revenue, %

<95 >100 S S W

S S S S o w o S S S Grant/ Recurring Revenue, %

<33 >50 o w

S w

w

w w w S S S

S S

Change in current expenditure/ change in recurring revenue, %

<100 >100 w S S S S S w S w S w S S Actual current expenditure/ Budgeted current expenditure, %

<50 >100 S o o o o o o o o S o o o

>100 <45 w o

w

w

o

o o o w w w

w o

Notes: S = strong, w = weak, o = satisfactory. Source: MLD.

F4.3 Readiness of the municipalities

66 The TYIDP defined 42 quantitative targets for municipalities. Several of these targets are relevant to “readiness”.

F4.3.1 Establishment of GIS

67 Almost all larger towns have a GIS and digital map database. These are essential for project preparation.

F4.3.2 Detailed study of sanitary landfill sites

68 The construction of sanitary landfill sites is a challenge for all the municipalities (except for Pokhara, which already has one). The major obstacle is finding a site that is acceptable to the surrounding land-owners. This is an important indicator because a sanitary landfill site is highly likely to be a project component.

F4.3.3 Resource maps

69 Under the LSGA, the Ward Committee is responsible for preparing “resource maps” that show public objects, things and places of religious, natural and cultural importance, such as population, houses and land, public rest houses, inns, shelters, shrines, temples, mosques, monasteries, divine places, Madarasa, barren land, ponds, lakes, wells, deep water, taps, stone water taps etc. and similar other objects. Resource maps are a form of constraint map, and as such are important for the preparation of integrated urban development projects.

70 The maps available are not at the scale required. The Department of Mines and Geology (under the Ministry of Industry and Commerce) has prepared land capability maps for urban areas at a scale of 1:25,000 scale of 1:25,000. In addition to geological features, the basic features for urban planning that this map contains are lithographical mapping units, erosion and mass movement, areas susceptible to hazards, features of environmental significance (eg drinking water reservoirs, waste disposal sites, industrial zones), mineral resources and other natural


resources. The maps also show potential sanitary landfill sites. They will be available in digital and hard copy formats, and will obviate the need for municipalities to prepare resource maps.

F4.3.4 Periodic plans

71 The availability of a periodic plan facilitates project preparation. Only three candidate towns have completed periodic plans, but some others have periodic plans under preparation. Some of those that do not have completed plans are preparing plans. If one accepts the need for further strategic planning work within each town, then the status of periodic plans is not particularly relevant for town selection. They have significance for project preparation because of their statutory status, but that is a different matter from significance for town selection.

72 Examination of the three periodic plans that are available shows that, valuable as they are, they are not sufficient for identifying investment priorities for the project:

Some assume a quantum of available funds way below the quantum likely to be available under the project. There are wide variations in proposed investment per capita.

Some of the identified priorities are questionable in terms of the objectives of the project, for example an emphasis on noise abatement in one town.

On loan projects, the GoN is looking for projects with high economic returns, and this objective is not always evident in the periodic plans.

Normally, selection of major infrastructure investments would have regard to a detailed inventory of existing assets and a master plan for the relevant sub-sector. The content of inventories appears insufficient for prioritising maintenance works and new works.

73 Table 13 is a summary of investments in municipal infrastructure and services that periodic plans propose. Table 13 Investments in municipal infrastructure and services proposed by periodic plans

Proposed investments Biratnagar Birendra-nagar Birgunj Itahari Lekhnath Pokhara

Physical development plan

Programs related to physical plan 1 0 0 0 0 0

Urban residential expansion program 210 0 0 0 0 0

Infrastructural commercial development 143 0 22 6 0 0

Physical development infrastructure plan 0 0 0 0 0 0

Road construction and maintenance 671 183 379 228 150 14

Transport improvements 93 0 0 8 0 9

Bridges 123 354 0 0 56 22

Housing 0 0 0 30 0 6 Drinking Water Supply 89 0 60 0 0 2 Sewage connection 1,255 129 128 261 87 2 Irrigation 0 0 4 0 0 2

Environment 0 37 40 123 1 5 Social infrastructure and services 0 0 0 0 0 0

3 Social inclusion 37 9 0 0 0 0 4 Poverty alleviation and community

development 19 0 0 0 0 28

Total planned investment 2,641 713 633 656 293 89

Total in $m equivalent 35.2 9.5 8.4 8.7 3.9 1.2

2006 population 223,221 42,028 150,646 55,191 55,404 209,344

$ per capita 158 226 56 158 71 6

74 The per capita investment varies from $6 (Pokhara) to $226 (Birendranagar). The periodic plans include very little water supply investment because they assume that the NWSC


will take care of water supply.

75 Periodic plans integrate different thematic plans according to social, economic, environment, physical, financial, and institutional aspects. This comprehensive plan requires a municipal data profile and a participatory planning process with a log frame format that includes a rolling budget. Compared to Integrated Action Planning, the main merit of periodic plans is their legal status. However, there has been criticism of periodic plans:

Periodic planning processes, even when supported by UDLE, have been extremely slow due to endless data collection, the limited analytical capacity to utilise existing proxy data, the unwillingness to make decisions due to the changing political climate and the conflict within the country, the lack of local representation, and other priorities that override periodic planning. Periodic plans are often viewed as tools that provide legitimacy or fulfill bureaucratic requirements rather than as management tools that actually organise the future development of municipalities according to agreed and balanced priorities voiced by local people.24

76 DUDBC and UDLE are discussing possible improvements in the preparation process.

77 For the purposes of the project, Integrated Action Plans are as useful as the Periodic Plans. Integrated Action Plans preceded Periodic Plans, and are widely available. In the case of Biratnagar, for example, the Integrated Action Plan is actually of more use than the Draft Periodic Plan because it includes more relevant maps.25

78 The surveys that the consultant plans for the project preparation will provide the necessary data to prepare master plans for the various sub-sectors (water supply, sanitation, roads etc) and a sound basis for assessing the feasibility of sub-projects.

F4.3.5 Overall assessment of readiness

79 To rank the municipalities according to readiness, the consultant simply summed the number of TYIDP targets substantially realised (Table 14).

24 Urban Development through Local Efforts Programme, 2006, Responding to Urban Development Needs in Nepal. 25 This assessment is based on the draft Periodic Plan. The final Periodic Plan for Biratnagar was approved in July but is not yet available to the consultants. Another relevant point that Biratnagar illustrates is the importance of sub-sector master plans as distinct from the overall Periodic Plan; Biratnagar has a drainage master plan.


Table 14 TYIDP Local Development Targets

Corridor/town GIS Poverty mapping

Human resource develop-

ment plan26

Detailed study of landfill sites27

Resource maps

Periodic plans28

Overall ranking on readiness criterion

Dhankuta X X X X 2008

1

Biratnagar 2007 X X 2006

Pokhara 2007 X X X 2007

Dharan 2003 X X X 2009

Butwal 2001 X X X 2009

Dhangadi 2006 X X X 2009

Birgunj 2004 X X 2008

Itahari 2006 X X 2007

Nepalganj X

2 Siddarthnagar X X

Birendranagar X

Baglung X X

Amargadhi X

80 This analysis showed that the candidate towns fall into two groups, those with GIS and periodic plans and those without.

F4.4 Commitment criterion

F4.4.1 Meaning and significance of commitment

81 Measuring commitment long in advance of a project is not possible; what people say and what they do may be different. Commitment is also likely to vary according to the nature of the project. Commitment is only one institutional driver for success. Competence and delegated authority also contribute to “ownership”. Without all three drivers, there are risks for successful implementation. Commitment is meaningless unless there is capacity to contribute financially. Successful implementation of the project will depend on the commitment of three groups of stakeholders: government, municipalities and users.

F4.4.2 Government

82 Government stakeholders include the ministries and agencies likely to be participating in the project. The GoN has a policy of decentralization and devolution to local government and of introducing federal government. The progress (or lack of it) with devolution will change the meaning of “commitment” at lower levels.

F4.4.3 Municipalities

83 Municipalities cannot sensibly make a commitment to any project without first knowing the potential financial liabilities. In the case of UEIP, the financing plan was for ADB to provide 80 percent of the project financing, GoN 11.7 percent and municipalities, private sector and local communities 8.3 percent. GoN makes grants to the municipalities of between 30 and 50 percent of the cost for most of the components and municipalities borrow the balance. With terms like these, municipalities are likely to be eager to participate.29

26 The plans are not as comprehensive as they should be, and contain little more than projections of human resource needs. 27 EIA or IEE available for landfill sites according to MuAN or MLD sources. 28 The year is the year of commencement. In some cases the periodic plans have not yet been approved. 29 GoN provides no grants for “revenue generating facilities” or land pooling, but these are not a major part of the project cost.


84 All telephone consultations with candidate municipalities have revealed enthusiasm about the project. Municipalities are returning PPTA questionnaires. By itself, these responses do not indicate commitment, and the variations in levels of enthusiasm are not sufficiently discernible to help with town selection. In one instance there was an indication of a willingness to explore opportunities for contributing matching funds – a more tangible first step to commitment.

85 Both anecdotal information and the available statistics indicate that municipalities’ own source revenues are insufficient for the project. The scope for increasing revenues is a matter for further investigation. The sources and use of funds will be considered to determine the ability of the municipality to support new investments, and to increase own-source revenues. This is less a question of commitment, and more one of ability to contribute to loan repayments. If municipalities are to be implementing agencies then their capacity to implement individual project elements (staff resources, spare capacity and skills) will also need to be considered. At this stage it is only possible to consider these issues in general terms. At the town selection stage the best indicator of “commitment” at the municipal level is the financial and institutional capacity of the municipality. In particular, high own-source revenue per capita indicates effort the municipality to collect revenue to fund infrastructure investment and services.

F4.4.4 User groups

86 Under GoN directives, user groups are expected to contribute 20 percent of an investment cost. Commitment is best measured by willingness and ability to pay surveys, quantified through focus group discussions, and these are a vital part of project preparation. Until these surveys are carried out, the variations between municipalities are entirely a matter for conjecture. Some activities, such as drinking water supply, are relatively easy to assess willingness to pay. Others, like road and bridge repair and rehabilitation, will require funding through local taxation, since they do not lend themselves to payment by use. The interaction with municipalities and their funding priorities and constraints will therefore be important.

87 Some further segmentation may be necessary to identify appropriate user groups, such as WUSCs. It would be prohibitively expensive to complete surveys of all user groups in order to provide a detailed and objective assessment of commitment over a range of probably ten to twelve different investment opportunities across all the candidate towns.

F4.5 Overall ranking according to urban management capacity

88 To arrive at an overall ranking on urban management capacity, it follows from sections F4.1 to F4.4 that the following approach is appropriate:

Readiness criterion. Towns that do not have digital mapping should be excluded from consideration.

Management and technical capacity criteria. Towns should be regarded as of equal capacity. While the number of staff perhaps has some relevance when considering all 58 municipalities, in the case of the 13 candidate towns it begs the question “Is a large number of staff good or bad?”

Commitment criterion. Towns should be regarded as of equal commitment at this stage.

Financial capacity criterion. Towns should be evaluated according to their own-source revenue and dependence on GoN grants.

89 Table 15 shows the overall ranking of towns on this basis.


Table 15 Ranking of candidate towns according to urban management capacity

Not considered

Ranking Town

Own source revenue per

capita, 2006/07

Grants per capita,

2006/2007

Debt payments as proportion of expenditures

Permanent staff per 1000

population

(Rs) (Rs) (%) (no.)

1 Birgunj 933 5 0.9 2.24

2 Siddarthanagar 491 125 8.4 2.68

3 Biratnagar 424 68 2.4 2.42

4 Butwal 460 110 5.4 1.94

5 Nepalganj 346 96 7.7 1.43

6 Pokhara 277 58 0.0 0.90

7 Dharan 245 78 0.5 1.30

8 Dhangadhi 189 137 0.8 0.80

9 Itahari 259 311 5.8 1.41

10 Baglung 234 350 0.0 1.82

11 Dhankuta 183 490 1.2 1.45

12 Birendranagar 142 450 0 1.21

13 Armagadhi 109 590 0 0.71

Candidate towns average 322 119 n/a 1.49

Other towns average 212 423 n/a 1.20

F5 Urban environment

F5.1 Demands for environmental improvement and services

90 Analysis of CBS population projections shows that the urban population outside the Kathmandu Valley will increase by about 40 percent over the next five years. This means that massive investment in urban infrastructure will be necessary even in those towns that have relatively high levels of service. In considering priorities, it is necessary to consider both level of service and demand for services. However, there is only data available for level of service. Table 16 shows quantitative indicators for levels of service.


Table 16 Level of service indicators

Ranking according to average

level of service

Town

Proportion of households without flush

toilet

Proportion of households

without piped water

supply

Proportion of solid waste

not collected

Proportion of roads that

are not sealed

Unweighted average

(%) (%) (%) (%) (%)

1 Itahari 67 77 81 94 64

2 Dhangadhi 42 65 90 92 58

3 Biratnagar 84 28 70 83 53

4 Baglung 39 11 97 86 47

5 Birgunj 49 40 84 59 46

6 Butwal 46 67 40 74 45

7 Birendranagar 48 15 62 92 43

8 Nepalgunj 47 53 28 78 41

9 Dharan 54 4 76 66 40

10 Siddarthanagar 51 51 4 70 35

11 Dhankuta 59 14 25 74 34

12 Pokhara 4 5 73 56 28

13 Armagadhi 33 9 43 50 27

Candidate towns average 49 34 88 74 Other towns average 65 48 n/a 81

91 This data is not reliable:

There is no means of knowing whether the data for each town has been calculated on the same basis or at the same date (by contrast, the financial data for towns has been subject to audit). For example, in some towns the water supply data may include water supply by WUSCs and in other towns not.

The indicators are crude measures. For example, water supply coverage is not very meaningful without also knowing the number of hours per day that supply is available or the quality of the water.

Different sources give different values for similar data (see discussion in Appendix C on water supply).

92 Therefore, no great weight can be attached to the data in the town selection process.

93 The NLSS has established that as incomes rise, demand for water supply and sanitation increases (Section F6). A town with a low level of service might have low demand for service because incomes are low. Only a willingness-to-pay survey can determine the level of effective demand for a service.

F5.2 Assessed urgency of environmental problems

94 The criteria for selection include the urgency of environmental improvements in the candidate towns. There is a paucity of environmental data at the local level. The following generalisations may be made about environmental problems in secondary towns:

Where there is no sanitary landfill site, the environmental impacts of solid waste collection can be assumed to be proportional to the municipal population.

Wastewater impacts can be assumed to be proportional to the municipal population, but worse in the main industrial towns.

Air pollution is likely to be worse in the terai towns and in particular the main industrial towns and on the main transport routes.

Groundwater impacts are worse in the terai towns.


95 On this basis, the ranking of towns on urgency of environmental problems is as follows:

1 Biratnagar 2 Birgunj 3 Dharan 4 Butwal 5 Dhangadhi 6 Nepalgunj 7 Siddarthanagar 8 Pokhara 9 Itahari 10 Birendranagar 11 Baglung 12 Dhankuta 13 Armagadhi

96 This is a very crude assessment. Accordingly, the ranking of towns according to level of service is the best ranking that can be made for the demand for services criterion.

F6 Conclusions on town selection

F6.1 Summary of results of analysis

97 Table 17 is a ranking of the municipalities according to the criteria. Table 17 Ranking of municipalities according to the criteria

Town Economic growth potential criteria

Urban management

capacity criteria

Urban environment

criteria

Birgunj 1 1

Data too unreliable to use, for selection, and indicates level of

service rather than demand for

services.

Biratnagar 2= 2

Butwal 2= 3

Siddarthanagar 4

Pokhara 5 4

Nepalganj 6=

Dharan 6= 5

Itahari 6= 7

Dhangadhi 9 6

Baglung Exclude from consideration because no

manufacturing base

Exclude from consideration

because no GIS

Dhankuta

Birendranagar

Armagadhi

98 There is a close match between the rankings for economic growth potential criteria and for urban management criteria.

F6.2 Number of towns

99 GoN and the ADB agreed the project should cover between 3 and 5 towns. The number of towns in which GoN can support an integrated project depends on the population size of the


towns, and the consequent investment needs. If GoN selects towns in accordance with Table 17, then there will only be sufficient GoN and ADB funds for 3 towns (Table 18). Table 18 Likely size of project

Project Population covered

Investment per capita

Total investment

Remarks

($) ($m)

UEIP 302,500 120 36 Excludes solid waste management and water supply to 4 towns.

STWSSP 2 320,000 225 72 Includes water supply, sanitation and solid waste management

STIUEIP— 3 towns 615,000 225

280 76 94

Water supply, sanitation and solid waste management only Add roads and miscellaneous municipal facilities

5 towns 725,000 225 280

126 156

Water supply, sanitation and solid waste management only

Add roads and miscellaneous municipal facilities

Notes: (1) STIUEIP populations from Table 11, multiplied by 1.187 to allow for population growth 2006 to 2011 in accordance with CBS projections.

100 UEIP included minimal expenditure on roads. If the project includes a reasonable level of road investment, it will be significantly larger in size. With rapid population increase, all towns will need to make significant investments in new roads and road improvements.30

101 However, if the number of towns increases, then the investment packages will cease to be integrated urban environmental improvement projects. In each town it will unavoidably be either a single component project, or a minor works project with multiple locations and components, or a multiple component single location project (Figure 5). Figure 5 Hypothetical $6m infrastructure investment packages for a town of 100,000

30 For example, the Biratnagar Periodic Plan proposes $35m of investments in UEIP sectors, of which roads account for $8.9m.

SINGLE COMPONENT MULTIPLE COMPONENTS, MULTIPLE LOCATIONS

MULTIPLE COMPONENTS, SINGLE LOCATION

WATER MAINS MARKET

ROAD

SOLID WASTE MANAGEMENT TREATMENT PLANT

DRAINAGE


102 In each case, the overall impact on the town will be small. Only the multi-component, single-location option would in any sense be “integrated”, but it would be integrated development of one neighbourhood rather than of the town.

F6.3 Level of expenditure affordable by towns

103 There are good reasons for believing that the levels of expenditure per capita in Table 18 are affordable:

Some of the periodic plans propose higher levels of investment.

Water supply might be funded separately from other investments (the finances of the NWSC branches are independent of the municipal finances).

The proposed towns are financially strong towns, much more so than the UEIP towns.

The attitude of municipalities to the establishment of local water supply boards and the possible timing of this is uncertain, and the consultant has yet to fully investigate these matters.

F6.4 Proposed towns

104 Accordingly, the consultant proposes Birgunj, Biratnagar and Butwal for the project. Another reason for three towns only is that the adequacy of project preparation and consultation would decline with additional towns. The funds available for the necessary surveys would be grossly insufficient.

105 The main reasons for selecting these towns are as follows:

There are insufficient funds relative to needs to select more than three municipalities.

Birgunj and Biratnagar are by far the largest manufacturing centres.

Butwal is the fastest growing manufacturing centres, and already one of the largest.

All three towns are designated as possible regional economic centres in the National Urban Policy.

With the exception of Siddarthanagar, the three municipalities have the strongest financial capacity of the candidate towns.

All three towns have digital mapping and periodic plans either complete or nearly complete.

F6.5 Balance between development regions

106 The National Urban Policy calls for at least one regional urban centre in each development region. Birgunj, Biratnagar and Butwal are in different regions.

F6.6 Balance between ecological zones

107 Birgunj, Biratnagar and Butwal are all in the same ecological zone, the terai. No document calls for a distribution of project investments across different ecological zones. If GoN selects towns in ecological zones other than the terai, the local contribution to the cost of the project will necessarily be substantially less because of the lower financial capability of the municipalities in the other zones. Moreover, the economic benefits will be less because lower incomes mean that the effective demand for services is less.

F6.7 Security

108 If ADB and GoN attach greater weight to security incidents, there is a case for dropping Biratnagar and substituting Siddarthanagar. Biratnagar has by far the worst record of security incidents among candidate towns. Moreover, manufacturing activity has been stagnant in recent years. There is, therefore, a case for excluding Biratnagar.


F6.8 Alternative approaches to town selection

F6.8.1 Scoring all criteria by making assumptions

109 In Table 19Table 19, all criteria are given a score and weight, including criteria for which there is insufficient reliable and up-to-date data. The purpose of the exercise is simply to judge whether additional data, if obtainable, would make any difference. The weights of 20% for economic growth criteria, 60% for urban management criteria and 20% for environmental improvement needs criteria reflect the guidance in the ADB Urban Sector Strategy, which puts urban management criteria before all others in town selection. The result of this exercise is that Butwal, Birgunj and Biratnagar still come out top. Table 19 Scoring all criteria by making assumptions Town Overall

score ECONOMIC GROWTH (20%) URBAN MANAGEMENT ENVIRONMENT

(20% weight) (60% weight) (20% weight)

In b

ackw

ard

regi

on

Indu

stri

al p

oten

tial

Reg

iona

l eco

nom

ic c

entr

e

Nor

th-s

outh

cor

ridor

East

-wes

t hig

hway

Tow

n in

ter-

link

age

Urb

an-r

ural

link

age

Popu

latio

n po

tent

ial

Plan

ned

inve

stm

ent p

roje

cts

Total score

Fina

ncia

l cap

acity

Man

agem

ent c

apac

ity

Tech

nica

l cap

acity

Rea

dine

ss

Com

mitm

ent

Total score

Dem

and

for

serv

ices

Urg

ency

of n

eeds

Total score

WEIGHTS 20 60 20

Biratnagar 22.8 0 6 4 2 0 1 4 2 0 19 4 4 6 5 5 24 9 14 23

Butwal 22.4 0 5 4 2 2 1 4 1 0 19 5 4 3 5 5 22 17 10 27

Birgunj 21.8 0 6 4 2 1 1 5 2 2 23 2 4 5 5 5 21 11 12 23

Siddarthanagar 18.2 0 5 0 2 1 1 3 0 2 14 5 5 3 0 5 18 15 8 23

Dharan 15.2 0 3 0 1 1 0 2 1 0 8 2 2 3 5 5 17 9 8 17

Itahari 12.4 0 4 0 1 1 0 2 -1 0 7 3 3 2 5 1 14 11 2 13

Pokhara 12.4 0 2 0 1 0 1 3 2 1 10 3 2 3 5 1 14 7 3 10

Dhanghadi 10.8 -1 -1 4 1 0 0 0 1 1 5 2 2 2 5 1 12 7 6 13

Nepalgunj 10.4 0 1 4 1 0 0 3 -1 0 8 3 3 3 0 1 10 9 5 14

Dhankuta 7.0 0 0 0 1 0 0 -3 -2 0 -4 2 3 2 3 1 11 5 1 6

Baglung 6.8 0 -1 0 1 0 0 -6 -2 0 -8 2 3 2 0 5 12 5 1 6

Birendranagar 3.4 -1 -1 0 1 0 0 -5 -2 0 -8 1 2 2 0 1 6 6 1 7

Armagadhi 1.0 -1 -2 0 1 0 0 -6 -2 0 -10 1 1 1 0 1 4 2 1 3

F6.8.2 Using numerical data only

110 As a further cross-check on the town selection, the consultant calculated overall scores for those indicators with cardinal number values (as distinct from ordinal number values, ie rankings). Table 20 shows that the results are similar, with the same three towns at the top.

TA 7

18

2-N

EP F - 30

Fin

al Repo

rt, Vo

l. 1

Table 20 Cross-check on town selection using scores and weights (numerical indicators only)

OVERALL SCORE CONSIDERING ALL

NUMERICAL INDICATORS

(See note)

(20% weighting) (60% weighting) (20% weighting) ECONOMIC GROWTH POTENTIAL

URBAN MANAGEMENT CAPACITY

DEMAND FOR SERVICES

Indicators (not wholly reliable): Score (see

notes)

Indicators: Score (see

notes)

Indicators (not reliable):

(4) Score (see notes)

(1) (2) (3) (4) (5) (1) (2) (1) (2) (3)


2006

Manufact-uring value

added, 2006/2007

Telephones per 1000

population

Financial institution branches

2009

Projected district popu-

lation increase by 2021

Own source revenue

per capita

Grants per capita

Households without flush

toilet

Households without piped water supply

Proportion of solid

waste not collected

Length of unsealed roads

as % of total

SCORE/TOWN (score) (score) (no.) (score) (score) (score) (score) (score) (score) (score) (score)

23 Birgunj 16 33 12 16 10 18 29 0 29

12 12 8 10

11 Biratnagar 24 38 10 26 9 22 15 6 7 17 8 10 11 12

8 Butwal 11 13 19 12 11 13 14 9 5 9 20 5 10 11

7 Siddarthanagar 7 7 17 13 11 11 15 11 5 10 15 1 9 9

6 Pokhara 22 5 8 18 10 13 9 5 4 1 1 10 8 5

5 Nepalgunj 8 7 10 8 11 9 11 8 3 10 16 4 11 10

4 Dharan 13 8 10 7 11 10

8 7 1 11 1 10 9 8

1 Dhangadhi 10 2 8 6 12 8 6 12 -6 9 19 12 12 13

-6 Itahari 6 16 12 12 11 11 8 26 -18 14 23 11 13 15

-11 Baglung 3 0 6 3 8 4 7 29 -22 8 3 13 12 9

-17 Birendranagar 4 0 7 2 10 5 4 38 -33 10 4 8 12 9

-19 Dhankuta 3 0 6 2 7 4 6 41 -35 12 4 3 10 7

-26 Armagadhi 3 0 2 3 9 3 3 50 -46 7 3 6 7 6

NOTE: NOTES: NOTE: NOTES: The overall score is a weighted average of the criterion scores, using the weights at the top of the table.

1. The scores were derived from Table 25 by dividing the town value for each indicator by the relevant 13-town average and multiplying the result by 10.

2. The overall score is the unweighted average of indicator scores, but NB that the SWOT analysis, which includes important qualitative indicators as well as the above numerical indicators is the better ranking.

The scores were derived from Table 15 by dividing the town values by the relevant 13-town average and multiplying by 10. The total score is derived by subtracting column (2) from column (1) and dividing by 2. Column (2) has to be subtracted because high values are bad not good.

1. The indicator scores were derived from Table 2 by dividing the town values for each indicator by the relevant 13-town average (Table 2) and multiplying by 10.

2. The overall score is the unweighted average of indicator scores.

TA 7182-NEP G - 1 Final Report, Vol. 1

Appendix G

Periodic Plans

1 Urban plans in Nepal are guided by the periodic plan manual and individual municipal plans prepared under the provisions mentioned in Local Self Governance Act (LSGA)-1999.

1.1 Statutory requirements

1.1.1 Periodic Plan

2 Urban areas are very dynamic in Nepal. A periodic plan is thus highly desirable to address the rapidly changing scenarios in the urban areas and the associated factors.

3 LSGA mentions that every municipality requires preparing and implementing a periodic plan. The Government manual sets out a step by step methodology for preparing the municipal periodic plan. The steps include review of urban planning materials (current national periodic plan, district development plan, integrated action planning, etc), consultations and discussions (with experts and municipal stakeholders) through field visit, and workshops (for sharing of results). As indicated in the Act (clause 111-1), the municipal periodic plan should have ten components including: financial, physical development, water resources, environment and sanitation, education and sports development, culture, works and transport, health service and control of contagious diseases, social welfare, industry and tourism, and miscellaneous. According to the provisions given in LSGR-1999 (regulation 135-1), the duration of the periodic plan is five years and it should include a long term vision, objectives, strategies, sectoral programmes, and resource maps.

4 The content of the municipal periodic plan thus seems to be exhaustive and therefore outputs reflecting the municipalities’ state of affairs are expected to be generated. Until now, 18 municipalities have periodic plans that are either completed or under preparation.

5 However, the municipal periodic plan manual has some deficiencies that need to be improved. For instance, the plan does not provide information on economic variables like production sectors, flows, market chains of major goods, employment, etc. The environmental aspect does not deal with the condition and hazardousness of environment and conservation plans of cultural heritage sites and their definition and delineation. The transport network should also describe major village routes and regional road network via the municipal town. Long term vision should also include the facilities/infrastructure needed to address income generating activities, facilitating incremental rural production and strengthening urban rural linkages. A buffer zone concept along the major thoroughfare is considered essential. Planning of urban informal activities including for commercial retail vendors is to be provided.

1.2 Land use zoning

6 The LSGA mentions that the municipalities are required to prepare a land use zoning map to ensure planned development of changing urban activities in a judicious manner. According to the provisions given in the Act, delineation of municipal land use zones is to be made defining residential, commercial, industrial, monuments, agricultural, institutional, opens spaces, protected areas and others. Regulations of each of the land use zones are also specifically provided.

7 According to the Act, provisions of both existing and future land use zone maps and their analysis are to be made. However, until now, no acts or laws governing land use zoning are available. Like a periodic plan, Butwal does not have a study report on land use zones; however its description is being made based on the information available in its municipal profile.


2 Biratnagar

2.1 Economic context

8 Biratnagar has significant importance for economic growth in the eastern region of Nepal. Biratnagar together with nine other municipal towns 1 serve 16 districts and their 5.3 million population of the eastern region that borders with China to the north and India to the south and east. The region makes up 18 per cent of Nepal's Gross Domestic Product (GDP).

9 Biratnagar is the oldest industrial city, as well as the second largest city of Nepal in terms of number of manufacturing establishments, population size and contribution to gross fixed asset in industries. Biratnagar contributes 11 per cent to the national revenue from customs and 7 per cent to tax and non-tax revenue.2 There is large liquidity of capital to invest in entrepreneurship development in both farm and non-farm activities. In Biratnagar city alone, 63 government and private financial institutions are functioning for entrepreneurship development.

10 Manufacturing and trade are major economic bases and linkage functions of Biratnagar. Over 80 per cent of the economically active population is engaged in secondary and tertiary activities. However, service infrastructure remains inadequate. About 24 per cent of the population of Biratnagar comprises migrants. Contribution of manufacturing accounts for 21 per cent of national GDP, while that of trading is 18.5 per cent of region’s GDP.3

11 Major manufactures in Biratnagar urban region include food processing, mineral based, forest based, chemicals, cement, iron rods, jute, tea, biscuits, flour, textile and apparels. Of these, jute, tea and apparels are export-oriented industries. Potential manufacturing activities are vegetable oil, dairy products, sugar, jute products, beverages, etc. In recent decades, Biratnagar as an economic centre has expanded beyond its urban boundary attracting more industrial activities. Joint-venture industries4 mostly based on local natural resources and products (cement, cold storage, electricity generation, herbal products, juice and squash, pashmina sweater, instant noodles, tea gardening, and processing) have come up. Biratnagar contributes about 20 per cent of total cargo flows in the strategic transport network. There are three industrial districts in Dharan and Dhankuta (FNCCI 2007). There were altogether 7,314 registered economic enterprises, of which commercial activities accounted for 77.5 per cent, while catering activities including hotels, lodges and restaurants represented 16.9 per cent. The industrial establishments shared 3.32 per cent.

12 The labour-intensive garment industry is becoming attractive due to the location of Biratnagar as a transportation node, cheap labour, and trained human resources in garment manufacturing. There are about 300 transport enterprises involved in providing transport services of goods.5

13 Tourism has recently opened up in the region due to the Makalu-Barun National Park (east of the Everest region), Kanchanjanga Conservation Area, and Wildlife in the Koshi Tappu. These offer potential for trekking and biodiversity tourisms. Other potentials for tourism development include hill stations like Bhedetar, Hile, Shree Antu, and Pashupatinagar and the Barahachhetra area as religious and tourist place. Over 66,000 incoming and outgoing tourists were estimated annually for Biratnagar.

14 However, agriculture is still the main economic activity, which accounts for 43 per cent of the region's GDP. The major potential commodities/activities of the region are herbs and spices, garments and handloom, and vegetables. Of these, herbs, spices and garments are oversees exportable items. Cardamom, tea, and ginger are among the important herbs and spices. Jute, sugarcane, dairy, and cereals (rice) are other important products for income generation in the area. The hill areas are particularly important for six principal cash products such as cardamom (Alainchi), milk products

1 Bhadrapur, Damak, Dhankuta, Dharan, Ilam, Inaruwa, Itahari, Khandbari, and Mechinagar 2 NPC/ADB (2007), Regional Development Strategy, Nepal. Kathmandu: National Planning Commission and Asian Development Bank. 3 NPC/ADB (2007), Regional Development Strategy, Nepal. Kathmandu: National Planning Commission and Asian Development Bank. 4 There are 23 joint venture industrial units invested by countries such as Austria, Bermuda, Bhutan, China, France, Germany, Hong Kong, and India. 5 Biratnagar Periodic Plan 2007.


(Olan), ginger (Aduwa), chilly (Akbare), Amareso (broom), and potato (Alo). These products have replaced the traditionally produced crops like rice, wheat, maize, millet, etc and the farmers have increased their living standard from the income selling of the crops as ‘cash’.

15 Recently, Biratnagar has managed to export off-season vegetables and fruits to the Middle-East countries. Two programmes such as Commercial Agricultural Development Programme (CADP) and Commercial Agricultural Alliance (CAA) are indulged to strengthen the agricultural enterprises. Chamber of Commerce in a joint effort with Public-Private Partnership (PPP/UNDP) is playing lead role in the development of economic enterprising activities. There is a great scope to expand and intensify off-season vegetables in areas accessed by road and within road buffer areas of 3 km.

16 Forest-based resources such as bamboo, NTFPs, medicinal herbs etc. are processed in Biratnagar for export. The bamboo products like chopstick, baskets (doko and Dalo), and naglo (a winnowing tray) can be items for exports, as well as for the domestic market.

17 The region is one of the principal suppliers of dairy products such as milk, cheese, cream, and butter and is a producer from the ecological regions in Nepal.

18 Of course, tea is the most popular and favourable commodity for income and employment generation. The eastern part is older, but new growing areas are being expanded in Dhankuta to the west. Commercialized rice cultivation and integrated farming of paddy-cum-fish farming can be developed for domestic demand.

19 Biratnagar enjoys favourable a gateway location in the east Nepal, surrounded by countries with huge consumer markets such as India (Bihar and North Bengal States) and China, as well as by third countries like Bangladesh (with a 54 km distance, separated by the Siliguri Corridor of India popularly known as ‘chicken-neck’) and Bhutan. Recently, the Railway Minister of India has inaugurated the broad railway line up to Jogbani, the border town of India close to Biratnagar and announced a plan to extend it up to Biratnagar. There are eight cities with population 100,000–500,000 lying within 170 km in India from Biratnagar crossing point. So, Biratnagar has a comparative location advantage for exporting local high value products. Externally, there is a broad-gauge railway line along the Indian border. Internally, its 14 districts except Solukhumbu and Sankhuwasabha and all nine towns except Khandbari are linked by roads. Three major roads such as east-west highway and two north-south highways penetrating into the hills to link the towns and villages have facilitated the flows of goods and people in the region. Almost 90 per cent of the region's residents live within 8 hours of an all-weather road. Construction of roads to link China under a ‘growth corridor’ programme is underway. All these support the growth and development of economic activities and the flows of goods and people in and around Biratnagar.

20 A 30-km ring road around Biratnagar is planned to be developed for a well-managed urban development. The ring road project is in progress.6 A detailed plan report (DPR) and road alignment report have been completed and construction of an earthen road was completed in fiscal year 2007/08. Land required along the right of way of the proposed ring road is to be acquired through land consolidation. The project DPR for a section of 30 km long road is prepared in fiscal year 2008/09 through the land development system.

21 The Inaruwa-Duhabi-Itahari-Dharan corridor is one of the five corridors to be developed in Nepal for the preparation of Master Plan for expanded towns. Evaluation of financial and technical proposals of this corridor is underway.

22 A power exchange capacity enhancement agreement has principally been agreed between Nepal and India. Under this agreement, three transmission lines will be constructed in the southern region of Nepal to solve the problem of load shedding. Preparatory works are underway for the construction of 400 kV transmission lines of 75 km length between Duhabi-Jogbani.7 Work on another transmission line of Dhalkebar-Birtamod that also lies in the eastern region has already begun.

6 source: Economic Survey: Fiscal Year 2008/09, Ministry of Finance, Government of Nepal, July 2009 7 Of the three transmission lines, the rest one is Butwal-Sunauli. Source: Economic Survey: Fiscal Year 2008/09, Ministry of Finance, Government of Nepal, July 2009.


23 There is appeared of clustered cities, comprising Biratnagar and two other towns such as Dharan and Itahari, which are located within 30 km along the growth corridor (Biratnagar-Itahari-Dharan road). In addition, Inaruwa is the fourth town at 18 km west from Itahari. Dharan has evolved as a gateway for the northern hill hinterland. It has a road connecting Dhankuta in the hill with the east-west highway. Nearly half of Dharan’s population are surrounding hill migrants. Itahari lies at the cross-roads between east-west and north-south highways and is growing rapidly. Recently, Itahari has received most of the manufactures moved from Biratnagar. Regional university and campuses with different subjects, i.e. medical science, sciences, engineering, humanities and social sciences, and commerce are located in this cluster. The process of this clustering will further be strengthened after the construction of ring road in the near feature in Biratnagar. Public-Private Partnership (PPP) programme has agreed to develop bypass road from Jogbani (India’s border town) to Duhabi (on the road to Itahari) in the north via Biratnagar.

24 The infrastructures required for unleashing economic growth of the eastern region include road & transports network, electricity, access by nearest road link via Chicken Neck (India) to Bangladesh sea port, dry port, transport with refrigerator, etc.

25 Of these, particularly access to the nearest sea port of Bangladesh is essential in order to utilize the region's locational advantage to a fuller extent. Currently, transportation cost is high for importing raw materials and exporting products to India and elsewhere via Birgunj and Kolkota port. International trade of the region’s export products with Bangladesh and abroad through the Bangladesh port via the ‘chicken neck’ (Siliguri Corridor Strip with a width between 21 and 40 km) has been hindered due to unavailability of 54 km road through the Kakarbhitta-Banglabandh route. This route is the shortest to reach the sea port for Nepal’s eastern region. Bangladesh has emerged as a good market for goods and foods produced in Nepal.

26 The next most important is the construction of growth (economic) road corridor to Kimathanka, a border Nepali settlement close to Tibet (China) that will help to exploit the economic potentials of local areas and support to export Nepali local products. Tibet is an arid marginal land in terms of production of food grains. As there is increasing investment in Tibet, the population is growing and it has been opened up to tourists, there is an increasing demand for food crops and other household goods. The cost of the products would be cheaper from Nepal to Tibet than mainland China. This opportunity should be tapped by Nepal.

27 The region requires transporting and storage facilities. The producers have suffered from not marketing their perishable agri-products (vegetables, potato & fruits) at fresher condition at large demand or collection centres due to lack of transport with refrigerator. They have also suffered from the loss (damage) of these perishable products. Further, there is also the problem of storing of the products due to lack of cold storage. Furthermore, chilling centres for dairy products and go-down for storing large volume of grains are urgently needed for the same reasons.

2.2 Periodic Plan

28 Biratnagar periodic plan was prepared in 2007. The plan contains all required contents, as well as 21 thematic maps of Biratnagar. However, the specific elements as shown in Table 1 are not being covered, or have inadequate information, as per the given contents of the periodic plan manual.


Table 1 Assessment of Biratnagar Periodic Plan

Specific contents Lacking or to be added up

Detailed urban development sub-projects have been identified and their cost estimation and total duration have also been made. Multi sectoral investments plan scheme including projects, estimated total project duration cost and breakdown by year (five years) and investment agencies (municipality, government, non-government, local people, finance and private sector) has also been given.

Verification of the already identified sub-projects and their detail, priority needs and possible impacts required.

Description of spatial pattern of urban development is being attempted.

Analysis of factors of spatial growth pattern of the urban sprawl in different locations can substantiate the spatial urban development pattern.

There 21 different thematic maps, as required by the periodic plan manual.

Of those scanty or not specifically covered, particularly the environmental sensitivity or vulnerability and resources mapping at the compatible scales of the existing thematic maps can be prepared.

Source: Biratnagar Periodic Plan. Department of Urban Development & Building Construction, 2007

29 The Biratnagar periodic plan has identified the urban development projects as shown in Table 2. In terms of estimated cost, telecommunication among all is being the most important sector that shares slightly over 34 per cent of the total cost. Among the potential investment projects, sewage connection is the most important. This is followed by the road construction and maintenance sector for urban development. Urban expansion and transport system management are other important sectors. Detail description of sub-projects under each of the six major programmes like quantity/length/number, locations, nature, construction or upgrading is given in the periodic plan report (pages 151 – 207).

30 The Biratnagar periodic plan has prioritized its urban development sectors based on the number of demands by ward. Thus, the two most demanded sectors in terms of priority order are sewerage and then road, which are consistent with the priority order listed in the Integrated Action Plan prepared 10 years ago. In order of importance or demand, these two are followed by water supply, social awareness, urban expansion and public toilets. Other sectors to follow in order of importance are income generating/skill development training, taxation system, health, education, solid waste, greenery, poverty alleviation, electricity, sports and entertainment, security, telecommunication, river training, squatter settlements, land development, open space, hat bazaar, and protection and rehabilitation.

31 The periodic plan mentions that, implementation of the proposed programmes requires detailed feasibility study including technical suitability and political commitment and follows the town development act and other economic and social regulations.

2.3 Municipal land use zones – current and future

32 Delineation of the land use categories for Biratnagar is found to be made as to the provisions mentioned in the LSGA. However, two land use categories such as monuments and protected areas are not included in the report, which might be due to too small size to be mapped, or non-existent (Table 3).


Table 2 Summary of investment in development projects, Biratnagar

Types of development project Estimated NRs ('000)(1) Per cent

Potential project investments 2,640,627 60.4


Programs related to physical plan 1100 0.03

Urban residential expansion program 210,000 4.8

Infrastructural commercial development 143,000 3.3

Physical development infrastructure plan

Road construction and maintenance 670,577 15.3

Improvement in transportation system 216,300 4.9

Drinking Water Supply 89,150 2.0

Sewage connection 1,254,500 28.7

Social infrastructure and services

Social inclusion 37,000 0.8

Poverty alleviation and community development 19,000 0.4

Other periodic plan investments 1,731,721 39.6


Park , open space and sports development program 10,900 0.3

Protection of cultural heritage 45,000 1.0

Physical development infrastructure plan

Electricity supply 95,500 2.2

Telecommunication 1,505,600 34.4

Social infrastructure and services

Human Resource development 48,693 1.1

Public health 14,388 0.3

Food investigation and quality improvement 5,400 0.1

Children welfare 4,240 0.1

Miscellaneous (social security) 2,000 0.1

ALL TOTAL 4,372,348 100.0

Note: (1) The costs in this table are not comparable to the cost estimates for the proposed STIUEIP. Inflation, the ADB guidelines for preparing cost estimates, definition of scope of work, and several other factors together make direct comparison impossible. However, the figures are important in indicating proportionate investment needs in each sector as seen by the municipality.

Source: Biratnagar Periodic Plan 2007. Department of Urban Development & Building Construction; see pages 151 – 207 for detailed description of sub-sectors under each major programme.


Table 3 Existing and expected land uses, Biratnagar

Categories Current - 2006 Proposed - 2031

Area (ha) Per cent Area (ha) Per cent

Residential 1,083.9 18.1 2,235.6 37.3

Residential cum commercial 193.8 3.2 354.5 5.9

Commercial - - 58.6 1.0

New business districts - - 268.2 4.5

Industrial 99.9 1.7 99.9 1.7

Institutional 76.7 1.3 76.7 1.3

Agricultural 4,077.8 68.1 2,157.8 36.0

Water bodies 111.3 1.7 111.3 1.9

Roads and transports 257.5 4.3 302.4 5.1

Green and open spaces 89.5 1.5 187.5 3.1

Special economic zone - SEZ - - 77.9 1.3

Dry port - - 59.9 1.0

Total 5,990.4 100 5,990.4 100

Notes: Projected land uses are computed based on extant combined population density of residential, institutional and commercial area and projected population. Source: Biratnagar Periodic Plan. Conversion: 100 ha = 1 km² or 5990.4 = 59.904 km² (total area of Biratnagar municipality).

3 Birgunj


33 Birgunj is important for economic growth in Nepal in general and in the central economic region in particular. It serves the economic region linking India’s Bihar state on the south with the Kathmandu capital region on the north.

34 Birgunj is the prime commercial gateway centre for the export and import of goods, for the most parts of the country. About 70 per cent of the export and import with overseas countries takes place through Birgunj.8 It contributes over 40% to the country’s total revenue through its custom check post.

35 It has the only dry port in the country, which is directly connected with Indian railway network. An integrated check post is under construction with the assistance of the Government of India. A six lane road linking the dry port with Amlekhganj along the east-west highway to the north is under construction. Upon completion of all these activities, all heavy loaded vehicles will be diverted from the current narrowed road passing through central Birgunj. Further, Amlekhganj has a depot of Nepal Oil Corporation (NOC) for the distribution of all petroleum products in the central region. Work is underway for laying pipeline between the Amlekhganj depot of NOC and Raxaul depot of Indian Oil Corporation in India for the direct supply of petroleum products.

36 Birgunj together with two other towns (viz. Hetauda and Bharatpur) has the second largest industrial base in the country after Biratnagar and contributes 27% of the national GDP, but has the

8 The Periodic Plan of Birgunj Sub-Metropolis.


highest share of manufacturing activities, with 38% of total industrial value addition in the country.9 The Birgunj industrial area occupies 98.83 ha, making up of 4.37 per cent of its total urban area. The town has altogether 156 industrial establishment units, ranging from large to small ones, comprising different types like textiles, sugar, iron and steel, leather, plastics, foods and beverage, etc.

37 The Government of Nepal has identified Birgunj as one of the four SEZ (Special Economic Zone) ideal sites for provision of basic infrastructure. SEZ is being established for achieving high economic growth rate through attracting foreign investment. Feasibility study on setting up SEZ in Simara, which is directly linked to Birgunj by road, has already begun and is expected to complete in the year 2009. Construction of boundary walls, inner roads, and land development works have however been initiated.

38 Agriculture is still the largest sector in terms of employment and economic production. Having a fertile alluvial plain land together with relatively better irrigation facilities (canal and hand pump), this is agriculturally the most productive region, accounting for over two-fifths of the region’s GDP.10 Productivity of major cereals including rice, wheat, and maize is higher than national average. Commercial growing of vegetables is being practiced in most of the areas accessed by roads and motor transports. Other potential competitive products include herbs and spices, mustard, mango, and timber/NTFPs, etc for income generation in the region.

39 Residential land developments by private initiative have taken place in several places, particularly along the newly opened roads such as the Kalaiya road and bypass road in the east and around the roads linking dry port in the western part of Birgunj.

40 The Birgunj urban economic region lies at the hub of the national transport systems, including the section of the east-west highway, Tribhuvan Rajpath, and other roads. Thus, all urban areas, small towns and market centres, and most of the major villages are connected by roads. The people here have to travel over 3 hours to reach the nearest road. Besides, Simara has an airport with over 5 daily flights with Kathmandu. An international airport is being proposed to be built at Nijgarh, which is linked by a wide road with Birgunj. A fast track road including tunnel is also being proposed to link Kathmandu with Nijgarh international airport, which will be the shortest physical link between them.

41 Because of commercial hub, industrial centre, commercial vegetables farming, and prime gateway of national and international trade transactions, there is not only large volume of flow of people from the surrounding areas, but also large trans-border movements of people and goods take place between Nepal and India. Being one of the major railway networks of northern India, Raxaul is the most attractive junction for travelling of Nepali people in different parts of India, as well as those from India to Nepal. Birgunj is the only centre that has convenient and direct access to Indian Kolkota port than other Terai border towns.

42 Unlike Birgunj, other towns such as Bharatpur, Hetauda, Ratnanagar, Kalaiya and Gaur of the central economic region have less importance in the region’s economic development. The latter towns are emerging and expanding, while Gaur is another border town. However, tourism is one of the largest industries due mainly to the Chitwan National Park. It is the third largest tourist inflow place of Nepal after Kathmandu and Pokhara. It received about 58 per cent foreigners and 23 per cent Nepalese in 2005.11 This is a part of triangular tourism link such as Chitwan (wild lives), Kathmandu (cultural element) and Pokhara (natural uniqueness). Three towns, (viz. Bharatpur, Ratnanagar, and Hetauda) receive more direct benefits from tourism than Birgunj.

43 In terms of basic urban infrastructures (roads and transports, electricity, transport with refrigerator, cold storage and chilling facilities, irrigation, etc) required for the economic growth, Birgunj has relatively better facilities (39%) than other two urban areas – Bharatpur and Hetauda (36

9 NPC/ADB (2007), Regional Development Strategy, Nepal. Kathmandu: National Planning Commission and Asian Development Bank. 10 NPC/ADB (2007), Regional Development Strategy, Nepal. Kathmandu: National Planning Commission and Asian Development Bank. 11 NPC/ADB (2007), Regional Development Strategy, Nepal. Kathmandu: National Planning Commission and Asian Development Bank.


and 19% respectively). 12 However, poor management of overcrowding of vehicular traffic, load shedding, narrow roads, lack of transports with refrigerator, inadequacy of cold storage and chilling centres, poor participation of business and industrial enterprises in local development, etc are major constraints to the potential economic growth of the region. In addition, frequent strikes and disturbances and weak local governance, as well as cross border issue, such as unequal treatment of merchandise of Nepali origin by Indian authorities remain disincentives for private sector investment.

44 Reduction of disparities through targeting less developed pocket area, and managed development of residential, commercial, industrial, and transport sectors in the urban areas have been core elements of the recently prepared Government urban periodic plan.

3.2 Periodic Plan

45 The periodic plan of Birgunj was prepared in 2009. However, the contents of the report do not follow to those mentioned in the periodic plan manual (Table 4). The contents shown in Table 5 are not being covered, nor have inadequate explanation. Table 4 Assessment of Birgunj Periodic Plan Contents

Periodic Plan Manual Birgunj Periodic Plan

culture, works and transport economic and employment state

education and sports development institutional sources and capacity

environment and sanitation land use

financial physical and public infrastructure

health service and control of contagious diseases social infrastructure

physical development urban environment condition

social welfare, industry and tourism urbanization and settlement pattern

miscellaneous

Note: Bold faces show some similarity.

Table 5 Assessment of Birgunj Periodic Plan

Specific contents Lacking or to be added up

Detailed urban development infrastructure sub-projects have been identified, together with their cost estimation and time duration. Multi sectoral investments plan scheme including projects, time duration, cost breakdown by year and investment agencies (municipality, government, non-government, local people, finance and private sector) has also been given.

Verification of the already identified sub-projects and their detailedness, priority needs and possible impacts require to be done.

Description of spatial pattern of urban development is being attempted.

Analysis of factors of spatial growth pattern of the urban sprawl in different locations can specifically substantiate the spatial urban development pattern.

The periodic plan report has 13 different thematic maps, as required by the periodic plan manual.

Of those not specifically covered, particularly the environmental sensitivity or vulnerability and resources mapping at the compatible scales of the existing thematic maps can be prepared.

Source: Biratnagar Periodic Plan. 2007. Department of Urban Development & Building Construction.

12 ADB (2009), ‘Unleashing Economic Growth: Nepal’s Region-Based Urban Development Strategy.’ Draft Report. Asian Development Bank.


46 The investment plan for Birgunj as mentioned in its periodic plan report includes four major sectors like physical infrastructure, social development, environment development plan and economic development plan (Table 6). Of these, physical infrastructure including 6 components shares the largest proportion of the estimated total investment. This sector includes two important sub-projects such as roads and sewerage; juxtaposing of these two makes up about 58 per cent of the estimated total budget.

47 Social development plan comprising education, health, sports, and religion is next important sector for investment. Of these, religion followed by education is significant in terms of sharing of estimated development cost. Two other sectors, viz. environment and economic investment plans have shared lowest estimated budget.

Table 6: Summary of investment in development projects, Birgunj

Major development programs Estimated NRs (‘000) Per cent

Physical Infrastructure Development 770,191 70.7

Construction of roads 379,125 34.8

Construction of sewage 260,616 23.9

Drinking water supply 59,750 5.5

Electricity 64,500 5.9

Irrigation 4,000 0.4

Telephone 2,200 0.2

Social development 256,600 23.6

Education 86,600 8.0

Health 26,000 2.4

Sports 21,700 2.0

Religion 122,300 11.2

Environment development plan 40,450 3.7

Economic development plan 21,900 2.0

ALL TOTAL 1,089,141 100.00

Note: (1) The costs in this table are not comparable to the cost estimates for the proposed STIUEIP. Inflation, the ADB guidelines for preparing cost estimates, definition of scope of work, and several other factors together make direct comparison impossible. However, the figures are important in indicating proportionate investment needs in each sector as seen by the municipality. Source: Birgunj Periodic Plan. Department of Urban Development & Building Construction

48 The periodic plan report of Birgunj has prioritized development sectors in terms of estimated amount13 required for each sector. Accordingly, the first three priority sectors with their percentage shares (in parenthesis) are as follows:

Road (33.4%)

Canal (26.2%)

13 This is based on detail description given in Birgunj period plan report, pages 50 – 73.


Religion (13%)

49 Other sectors in terms of priority of demand are education, electricity, water supply, environment development plan, health, irrigation, economic development plan, sports and telephone.

3.3 Municipal land use zones – current and future

50 Birgunj municipal periodic plan report shows seven major categories of existing land uses (Table 7). Like Biratnagar, in Birgunj too, agriculture land occupies the largest proportion with almost three-fourths of the total area. Next to it is the residential cum commercial area or built-up area with sharing slightly over a quarter of total land area.

Table 7 Existing and expected land uses, Birgunj

Categories Current Proposed

Area (ha) Per cent Area (ha) Per cent

Resident cum commerce 565 22.5 827 32.9

Institution 65 2.6 65 2.6

Agriculture 1606 63.9 1233 49.1

Open area 8 0.3 8 0.3

Roads 111 4.4 237 9.4

Industry 125 5.0 111 4.4

Others (river, road, canal, lake, etc) 31 1.3 31 1.2

Total 2516 100 2512 100.00

51 In the proposed land use zoning, agricultural land use is expected to decrease to 49 per cent of the total municipal area, while residential cum commercial area is expected to increase by almost 33 per cent. Interestingly, industrial area is expected to decrease from 1.25 km2 to 1.11 km2, whereas all other land uses are expected to increase.

52 Proposed industrial area is expected to expand in the north of the municipality and western part of the main city thoroughfare, and residential and commercial zones are proposed in the eastern part around main highway. Environmental sensitivity is only described in terms of location of water bodies and cultural heritage sites, but not in the form of possible magnitude like poor drainage, flash floods. There is constraint to the urban development in southern border area. The plan document has identified infrastructure needs, but there is a long list of priority order. For instance, there are 52 road sections in the first priority; 71 in the second priority; 68 in the third priority; 61 in the fourth priority; and 48 in the fifth priority. Likewise, other infrastructures also follow the same. Location of water bodies and cultural heritage sites is given under the title of economic development. Lastly, no basis for the explanation of projected land use zones is given.

4 Butwal


53 Butwal is a rapidly emerging commercial, as well as an industrial centre, in western Nepal. It has a significant importance for economic growth in the entire region, as well as in the country as a whole. Its hinterland region consists of six districts; three each in the hills and the terai. The region occupies about 30 per cent of the western region’s total area (29,398 km²), but shares 55 per cent of


the total region’s population (4,571,013 in 2001). There are 5 urban areas14, with Butwal being the largest.

54 Industry is the second largest economic sector. This sector shares 20% of the region's GDP. Industries are growing and concentrated at sites accessed by road network and surrounded with large population pockets. There are 10 industries under joint-venture15. Current manufacturing industries include wood and furniture, plastic, stationery, engineering, construction, auto/diesel, shoes, textiles and thread, computer assembling, packaging, utensils, forest-based goods, beverages, chemical and others. Potential manufacturing comprises fruits-based, livestock-based, vegetable-based, cement, etc. There is a huge potential markets for the local products across India, such as Gorakhpur city with population below 1 million lies at 100 km from Nepal border.

55 Tourism has recently emerged as an attractive economic activity in the region due to Lumbini, the birth place of Gautam Buddha, which is a world heritage site16. There is a Buddhist education centre such as the Buddhist University. However, tourism potential is yet to be fully exploited. The region is also an education centre of medicines, where three medical colleges are located at 20 -30 km distance.

56 Bhairhawa, a border town close to Butwal, is identified as one of the four SEZ ideal sites for Export Processing Zone (EPZ), which will further help to grow industrial activities in the region. The work on the provision of necessary infrastructure is underway and the construction of Bhairhawa Export Processing Zone occupying about 34 ha of land is expected to be completed within this fiscal year (by 2010). Further, Bhairhawa has been selected as one of the four integrated check posts being constructed with the assistance of the government of India. The government of Nepal has already acquired land for the check post.

57 Preparatory works are underway for construction of 400 kV transmission lines between Butwal-Sunauli. Gautam Buddha Airport (known as Lumbini) is being developed as a regional international airport. Land acquisition and resource identification for the airport are on progress.

58 Trading is growing not only within the region and the country, but also in neighbouring states of India. It shares about 12 per cent of the total trading GDP in the country. Transportation network connecting major cities, towns and villages within the country, as well as cities across the border in Indian has provided opportunities for commercial and industrial developments, mainly agro-processing. Lumbini airport, which is going to be an international one, is another asset of the region, to attract particularly Buddhist tourists/pilgrims. The internal marketing system is being reinforced by the network connection of small market centres and the occurrence of periodic markets (hāt) throughout the Terai region. The Mandi (market places for selling and storing) for vegetables and fruits in Butwal is the second largest after Kalimati of Kathmandu.

59 Agriculture is the main economic activity, which accounts for 42 per cent of the region's GDP. Eighty-six per cent of the active population is involved in non-primary production activities in Butwal, followed by Siddarthnagar and Tansen, each with 76 per cent. The urban migration rate in Butwal in the last census was 56.6 per cent, the highest among the urban areas in Nepal. This has been an encouraging trend for Butwal to play role for the development of surrounding hinterland areas. More importantly, Butwal has generated revenues of 89 per cent from its own source, the third largest among the Nepalese urban areas, compared to 79 per cent of Siddarthnagar.

60 Butwal is the largest market of agro-products and the second largest market place of vegetables and fruits in Nepal. Rice is grown extensively in all three Terai districts and in the river valleys. Rice is now an important exportable crop in international trade to mitigate the food crisis in the poor developing countries. Domestic market is big, since rice is a main staple crop. Commercialized rice cultivation combined with livestock farming in the Terai districts and in the river valleys is an activity to be promoted for income generation of this region. Two other important high value products are

14 Other four municipal towns are Siddarthnagar, Kapilbastu, Tansen, and Ramgram. 15 The joint venture countries include USA, China, India, Japan, Norway and Pakistan. 16 The site area has several historic elements such as Kapilbastu, the capital of Shakyas, Tilaurakot, Ramgram, Gotihawa and Niglihawa etc. Several countries have constructed shrines, monasteries and all these are expected to attract more visitors.


ginger and coffee. Ginger is produced as an income of farm households extensively in the hill pocket areas. There exist widely scattered collection centres in rural areas that attest to its economic importance. Butwal is the main centre for processing and exporting dried ginger, called ‘Sutho’. Coffee being produced from the hill pocket areas has already entered into market as an organic product. In addition, vegetables of assorted types are produced in different seasons across different parts of the region. The off-season vegetables produced in the hill pockets have high demand at the Terai and Indian cities.

61 Two cities - Butwal and Siddarthnagar – lying at distance of 22 km tend to form clustered cities. They lie along the growth corridor (road) joining the Indian border in the south to the east-west highway in the north. Siddarthnagar is a primary gateway border town which acts of exporting and importing of commodities, whereas Butwal is an emerging secondary town. Besides having an industrial estate, many manufacturing have recently moved along this growth corridor. This process of clustering will be further strengthened after the construction of ring road surrounding Butwal in the near future. Several small towns have already developed along the east-west highway at reasonable distance, enabling the clustering process.

62 Butwal is at the confluence site between hill and Terai plain. It lies at the cross-roads of the national transport systems. By virtue of being at the crossroads of east-west highway and south-north (Siddhartha) highway, Butwal is playing a crucial role to integrate several places economically and socially in the western Nepal. All urban areas, as well as small towns and market centres are connected by roads. In addition, there is a domestic airport to link Kathmandu. The region’s people have to travel about 7 hours to reach the nearest road.

63 The industrial base of Butwal urban region needs to be expanded and strengthened, since it has comparative advantage position. Overall, the infrastructure available is fairly poor. Butwal and Siddarthnagar have relatively better facilities than other three municipal towns. On the agriculture side, commercialized systems are yet to be established. Labour based light manufactures depending on the locally available most potential products are not yet developed. There is rising social capital or awareness among the region’s inhabitants about the development of their region. The infrastructure required for supporting growth of the region include the following:

There is haphazard growth of urban built-up due to lack of integrated urban land use plan. Number and size of unauthorized settlements (squatters) has increased on the bank of the Tinau River. There is a need of proper size of land for housing development (small size of plotting). Lack of traffic management is another problem for the city. The local urban planners and policy makers have a thought of greater Butwal city that will enclose many outlying localities within the road and coalesce between Butwal and Bhairahawa to form a huge city.

Butwal together with Bhairhawa has not exploited benefits from border trade with India due to lack of export and import facilities at Bhairahawa and the narrow road preventing heavy vehicles, which has made it inconvenient to access the Indian railway heads. There is a cross border issue, i.e. unequal treatment of merchandise of Nepali origin by Indian authorities.

This region requires the building of a regional international airport for utilising its tourism potential, comprising a circuit of Lumbini, Tansen and part of Chitwan national park, spiritual tourism stopover tourist destination.

64 Transports with refrigerator, cold storage and chilling centres are to be provided for perishable agri-products.

4.2 Land use

65 The information on the existing land uses of Butwal is based on its town profile prepared in 2006, but there is no information on its predicted land uses. The periodic plan report is yet to be prepared.17 The forest coverage is quite significant, with a preponderant proportion of 83 per cent in the total municipal area (Table 8). In fact, Butwal lies at the Chure foothill and its arable land is

17 DUDBC contracted out to a private consultancy to prepare periodic plan of Butwal, but the latter did not begin work until September 2009.


associated with the banks of the Tinau River, which is flowing through the middle of the town. Much of the Butwal municipal area is expanded over the Chure hill slope and has mostly dense forests. Table 8 Existing land uses, Butwal

Categories Area (ha) Per cent

Residential cum commercial 16 0.2

Residential 226 3.3

Industrial sector 45 0.7

Heritage 7 0.1

Institutional 29 0.4

Agriculture 419 6.1

Forest 5726 82.7

Others 457 6.6

Total 6928 100

Source: Butwal Town Profile, 2006

66 Based on the observation of the geographical features and the map of existing spatial pattern of land uses, it can be said that the expansion of Butwal urban area in the future will likely take place to the west and the east where there is adequate plain land. While much of the open spaces are in the western and eastern parts, there is limited opportunity to expand its urban areas to the south plain land due to the fact that the densification of urban buildings has already taken place over there and that Butwal’s southern boundary is bordered with Siddarthnagar municipality. The latter is also expanding northwards. In view of rapid expanding of the urban areas due to the shift of populations from both southern (border area) and northern (marginal hill) parts, urban land use zoning has become essential for Butwal.

67 This section concerns urban development plans and their components and issues of the three municipal towns. This draws on the information derived from the extensive field observation and consultation meeting being made in each of the towns. During the field observation, several sites related to urban planning and development were visited.

4.3 Summary

There are large tracts of agricultural lands in the both sub-metropolitan cities of Biratnagar and Birgunj. Keeping in view the current urban growth that has taken place mainly over the agricultural land, such land possibly may be encroached by future urban expansion and associated urban activities, which however require to be verified in the field. In Birgunj, the eastern half from the main road thoroughfare and some parts in the north of the municipality are defined as opportunities for future urban development activities (See Birgunj Periodic Plan Report; Map 10). The largest forest coverage and then the agriculture area of Butwal share a substantial portion of the Chure hill slopes, where urban expansion is not suitable due to its fragile geological structure and steep slope. On the other hand, Butwal’s precious limited agricultural land is a tremendous challenge to protect from the rapidly growing urban population. It is to be noted that Butwal has an urban growth rate of over 5.5% (2001), which is one of the largest in the country and much larger than that of Biratnagar (2.6%) and Birgunj (5.0%). Further, rapid growth of the urban areas will likely take place in Butwal in the future, due to its favourable, inland Terai location. Among the three cities, Butwal is the largest in terms of municipal area coverage, but its urban built-up area is the lowest.

The current spatial growth pattern of the urban built-up area in the municipalities appears to have been directed by the roads. Buildings (residential and commercial) and other urban related development activities like factories are used to take place in the localities, which are


connected by roads. More so are the roads that connect other towns and major villages, along which newer urban built-ups have begun to place.

Both periodic plan reports of Biratnagar and Birgunj have no similarity in the major components being dealt with. For instance, there is larger number of thematic map layers in the Biratnagar report than in the Birgunj report. Likewise, no delineation of monuments and protected areas in the existing land uses is being made in the both municipalities. Environmental hazard due to overflow of drainage is defined in an unclear manner for Birgunj.

While delineation of expected land use zones is often based on the trend of existing spatial growth patterns of urban components, that is not always the only practice. Suitability analysis of the land that based on geographical, economic, political, social and cultural factors is a method that delineates urban zoning in a rationale manner. This method has not been adopted for preparing urban land use zones in Nepal.

Both the preparation of the periodic plan for the municipalities (that do not have) and the implementation of the already completed periodic plans have been delayed due to lack of elected political personnel in the municipalities.

One of the apparent of urban expansion due mainly to an inadequate municipal government response in the three towns is the proliferation of slums and squatter areas. Though there is unavailability of data, the consultation meetings held in those towns indicate that a number of squatter settlements occupying the public marginal lands has increased in the last decade. One major reason is the internally displaced persons (IDPs) caused by armed conflict.18 Slums refer to the settlement localities in urban areas with dwelling units that are either dilapidated or lack basic sanitary amenities. But there is lack of official definition of slums in Nepal. The slums including both legal (ownership certificate) and illegally occupied lands and are usually characterised by unhealthy, poorly serviced and infrastructure-deficient settlements and therefore are hazardous areas. The main problems associated with them are poor access to proper (safe) housing, limited access to pipe (safe) drinking water, inadequate sanitary facilities (toilet and sanitation), among others.19

Analysis of the factors of growth of both current urban areas and possible future directions of urban sprawls in the municipalities, map-based displays, is to be included in the periodic plan.

Statistical data and mapping information is required.

Preparation of the periodic plans for the rest of the municipalities and updating of the existing ones which are already over 5 years is required.

4.4 PPTA Works for the Municipal Land Use Plan

68 All the existing urban areas are being developed on the agricultural land and its future growth will also take place on the cultivated land in the three STIUEIP Terai towns. But the urban expansion is of an uncontrolled nature. Keeping in view the haphazard growth of urban built-ups, the environmental sensitivity or vulnerable areas such as flood areas on the banks of the rivers in the project towns need to be defined and delineated on the map. This is for the municipalities to protect such vulnerable areas from the possible encroachment by future urban growth. If there exists encroached vulnerable areas due to urban expansion, they are to be analysed. Statistical data and mapping information is required.

18CBS, World Bank, DFID & ADB (2006). Resilience amidst Conflict: an Assessment of Poverty in Nepal, 1995-96 and 2003-04. Kathmandu: Central Bureau of Statistics/World Bank/Department for International Development/ Asian Development Bank. 19CARE Nepal (2008). Study on Status of Unemployed Slum Youths and their Possible Linkages with Job Market in Greater Kathmandu. Kathmandu: CARE Nepal.


The municipalities should prepare land use zoning plans and define parameters of buffer zones on both sides of the rivers, roads, and historic, cultural and natural sites20, if they do not exist. Sites for waste water collection and solid wastes dumping need to be defined.

Analysis of the factors of growth of both current urban areas and possible future directions of urban sprawls in the municipalities, with also showing on the map.

Database for urban planning and development should be prepared and generated at preferably large scale map for the STIUEIP municipal towns, based on GIS technique. Any further development activities that will take place in the municipalities need to be linked with GIS. Such spatial based information would help the municipalities to deliver their services in an effective and transparent manner and thereby strengthening the municipal institution system.

5 Institutional Status of GIS and Database Management

5.1 GIS Database and Map Outputs

69 This section intends to describe the status of GIS database and management related to the municipal development and planning of the STIUEIP three towns. This is to gather and consolidate data and information available on urban development and supporting data required by this STIUEIP. The data is how being used to assist the PPTA in project preparation and selection through using GIS. The project also provides a process to help keep up the information system and use of GIS in project planning and monitoring and evaluation of the urban sub-projects. Below is a brief description of the GIS related activities under the STIUEIP.

5.2 Status of STIUEIP-II Municipal Database

70 Municipal database is a prerequisite for all kinds of urban project planning activities such as project selection, rationale decision-making, feasibility or monitoring and evaluation. The database also helps to provide information for improvement of the required urban plans. Therefore, regular updating of the data is essential for the urban planning processes and efficient decision-making.

71 The STIUEIP-II three towns - Biratnagar, Birgunj and Butwal - have spatial base map prepared at 1:2,500 scale in different years. The base map of Butwal was prepared in 2001 by UDLE, while that of Birgunj and Biratnagar was prepared in 2004 and 2007 respectively with the support of DUDBC. Both these sub-metropolises also do have periodic plans prepared in 2008 and 2006 respectively, which also contain several thematic maps in both digital and analogue forms. The digital base maps of Birgunj and Biratnagar are available in both AutoCAD and GIS formats, while that of Butwal is available only at AutoCAD format. The information of the database includes different components of data and their sources, year, and location related to municipal planning and development. Other attributes are also included in the database.

72 But the status of the municipal GIS database is poor and not being updated once it has been prepared. In fact, the municipalities do not have updating system due to lack of separate GIS facilities. In Butwal, only the AutoCAD is being used, due to lack of GIS software. Biratnagar and Birgunj do have GIS software, but not an updated version. Few technical (engineers) and planning personnel of the three municipalities have obtained basic training in GIS21, which is indeed inadequate to manage the existing GIS database and serve the map outputs as demanded by the municipal planning and the clients. There is an extreme lack of GIS refreshing and advanced trainings for those who already have obtained GIS training. Those trained in GIS even do not have time to spend on GIS activities in their municipalities, as they rather have to busy in day-to-day works to serve clients’ demands other than GIS works.

73 In addition, other major problems with the GIS database management of the three municipalities are: (i) limited trained human resource in GIS, (ii) lack of separate working GIS

20 In the cities of Kathmandu Valley, parameters for the right of way of roads, rivers, etc have been defined. 21The municipal personnel have obtained basic GIS training from different organizations like Central Department of Geography, Tribhuvan University, sponsored by UEIP-I and PPPUE.


environment and (iii) financial constraint. As a result, they are not able to continue to work in the spatial database upgrading for planning of their respective municipalities.

74 Therefore, the STIUEIP-II three municipalities strongly call for a separate GIS unit for working environment in their premises. The unit should be equipped with all required hardware and software and adequately trained human resources in GIS.

5.3 STIUEIP GIS works for future

5.3.1 Municipal GIS database components

75 The GIS database sets required for the STIUEIP municipalities are shown in Table 1. The database should consist of both tabular and map coverage. GIS map coverage requires to be accessed by ArcGIS (9.2) and ArcView (3.1 or 3.2).

Table 9 Municipal GIS datasets

Datasets : Data Components – description

Base map : Control points, topographic contours and spot height

Area data : Boundary – municipality and its wards

Environmental resources : Land cover and land uses - agriculture, forest, parks, roads, bad land, water bodies, building foot-prints, soil, minerals, hazardous types

Population features : Population size, composition, growth, distribution and structure by area, employment structure, density, and so on

Infrastructure : Roads, irrigation, electricity, drinking water, telephones, sewerage

Socio-economic : School, health, bank, cultural heritage, industries, markets, etc

Development projects : Number, type, year, distribution, and other features

76 The Municipal GIS system22 is to be used to fulfil mainly the following purposes:

Maintaining information of all buildings and households therein in view of collecting fees or taxes. The system should allow enforcing the collection for user-pay services such as utility departments (water, electricity, sewerage, and others).

Keep systematic recording of all changed buildings and streets, whether newly built or demolished ones. This is basic for obtaining knowledge about the pattern of urbanization and types of buildings.

5.3.2 Use of STIUEIP GIS datasets

77 The personnel of the three municipalities and the DUDBC should be familiarised with the STIUEIP database and use of GIS software (Arc GIS) in analysing the datasets and producing outputs for urban project planning, monitoring and evaluation. GIS training should be given immediately to the related personnel in order to enable them to handle the datasets with the GIS, once the digital datasets, GIS software and computer hardware are provided.

78 For the long term, GIS training should be a continuous process for the supply of required GIS personnel, as well as for upgrading GIS knowledge. For effective use of GIS technology particularly in urban planning, three levels of GIS training should be provided through the recognised GIS training institutes.23 They include: (i) policy level – capability and use of GIS to mangers or decision/policy makers, (ii) professional level – function, applications and analysis of GIS to senior level personnel

22 This system has been developed for Kathmandu Metropolitan City by KVMP (Kathmandu Valley Mapping Programme – Project No. ALA/96/14) basically for systematic collection of taxes and revenue generation. See HMG/EU 2001, Manual on Metric Addressing System. Kathmandu Metropolitan City. 23The Central Department of Geography (CDG), Tribhuvan University is the pioneer institute of GIS education activities such as training, research, workshop, curriculum and dissemination. CDG has been providing these GIS activities to all interested since 1994, and ICIMOD has been a core collaborative partner.


such as engineers, planners, etc, and (iii) technical level – GIS concept, data preparation, database management, and map output, etc to junior planners, engineers or administrators.

Monitoring and evaluation

79 The data updating should be a continuous process. So, the following datasets as examples are to be added to the existing GIS database for future work for the municipal planning.

Hydrology – volume & quality of river water, river course

Major building foot-prints, population size by localities and ward

Rainfall and temperature Major urban development projects by ward

Transportation - road types Major industrial locations

80 Updating of the municipal GIS data through using a structured format is essential for monitoring of the municipal development activities. It should be a routine working system. The digital municipal GIS database is to be protected with a regular backup every week or fortnightly, depending upon the volume of data being updated.

81 The cost of generating spatial data is usually high. Therefore it is desirable that once the data are generated in digital form, they are to be shared so other agencies do not incur the data generation cost. For sharing and dissemination purpose, both tabular and GIS thematic coverages (in jpg format) of the STIUEIP datasets on CD are to be made available upon request by interested organizations. For record purposes, the STIUEIP/PPTA project office or the STIUEIP municipalities or the DUDBC should keep recording of the agencies receiving the data.

82 It is essential to know the name and address of agencies holding the STIUEIP data. It is also essential that users should duly code the data sources while using these data in reports or for other purposes.

TA 7182-NEP H-1 Final Report, Vol. 1

Appendix H

Population projections

1 There are no GoN population projections for individual municipalities. Growth rates of urban populations in Nepal have in the past varied substantially from town to town; the appropriate design for the project components in each town is sensitive to the population growth assumptions. This Appendix explains the basis of the consultant’s projections for the purposes of the PPTA.

H1 Components of population growth

2 The future population of a municipality depends on:

Net migration

Natural increase

Change of boundaries

Changes in mortality

3 To make population projections for the purposes of the PPTA requires assumptions about each of these.

H1.1 Net migration

4 Net migration has hitherto been the second most important source of urban population growth in Nepal after re-classification. This is simply because urban populations were small and the scale of rural-urban migration was large. However, as urban populations grow and rural populations remain stable, net migration will become relatively less important (see Table 1).

H1.2 Natural increase

5 The CBS predicts that the natural increase in Nepal’s population will steadily fall (Table 1) over the next 20 years. Fertility rates are much higher in rural areas than in urban areas, but are declining in both.1 Fertility rates are still very high by international standards, so natural increase will still contribute significantly to urban population growth.

H1.3 Change of boundaries

6 In the ten years to 2001, re-classification of rural areas as urban accounted for just over half the increase in Nepal’s urban population.2

7 For the purposes of this PPTA, the possibility of expansion of boundaries is relevant to the Solid Waste Management and Water Supply components but not to the other components of the project:

The practicable locations for wastewater treatment plants do not lend themselves to serving areas outside the municipal boundaries.

The Roads and Lanes component includes works that mainly benefit residents within the existing municipal boundaries.

8 For the purposes of the Solid Waste component, the CBS district projections (Table 1) may

1 CBS. 2003. Population Monograph. 2 CBS, op. cit.


be more relevant than a municipal projection depending on the location of the waste processing facility. A regional facility could serve a population at least five times that of a facility serving only the municipal population.

Table 1 District population projections

9 In all the districts relevant to the project, the CBS projects population growth at rates above the national growth rate.

H1.4 Mortality

10 Falling mortality rates have contributed significantly to the growth of urban and rural populations in Nepal. Since age specific mortality rates are still high by the standards of neighboring countries, it is likely that falling mortality rates will continue to contribute to urban population growth.

District 2001 2006 2011 2016 2021

Morang and Sunsari 1,468,853 1,652,456 1,439,148 2,016,737 2,205,372

Annual growth rate over previous 5 years 2.4% 2.2% 1.9% 1.8%

Bara and Parsa 1,056,354 1,197,853 1,337,428 1,477,936 1,621,374

Annual growth rate over previous 5 years 2.5% 2.2% 2.0% 1.9%

Rupandehi and Kapilbastu 1,190,395 1,348,241 1,504,127 1,621,266 1,821,900 Annual growth rate over previous 5 years

2.5% 2.2% 1.5% 2.4%

National growth rate

2.3% 2.2% 1.5% 2.4%

Source: CBS. 2003


H2 Municipal projections and underlying assumptions

11 Table 2 gives the consultant’s projections for the three project municipalities and the underlying assumptions.

Table 2 Municipal projections (assuming no boundary adjustments)

Municipality 2001(1) 2006(2) 2011(3) 2016(4) 2021(5) 2026(6) 2031(7)

Biratnagar 166,674 223,221 254,000 284,000 313,000 339,000 362,000

Birganj 112,484 150,646 172,000 192,000 212,000 230,000 246,000

Butwal 75,384 100,959 112,000 124,000 134,000 142,000 149,000 Notes:

(1) From Appendix F, Table 6. (2) 50% (Butwal 40%) of national urban growth rate (Table 1), the balance of urban growth assumed to be outside

municipal boundary. (3) 45% (Butwal 40%) of national urban growth rate (Table 1), the balance of urban growth assumed to be outside





municipal boundary.

TA 7182-NEP I - 1 Final Report, Vol. 1

Appendix I

Decentralization of water supplies

I.1. Introduction

1 The Terms of Reference require the consultant to review the state and assess the effectiveness of transferring water supply management to local water supply management boards and the potential role of DWSS.

2 The assessment has been based on discussions with key agencies in Kathmandu and with local water supply groups in the target towns. Funding was not available to undertake a wider quantitative survey of efficiency and effectiveness throughout the country as a whole.

3 Conclusions have therefore been based on discussions with:

Nepal Water Supply Corporation (NWSC)

Department of Water Supply and Sewerage (DWSS)

Kathmandu Valley Water Supply Management Board

Water Supply Tariff Fixation Commission

Kathmandu Upatyaka Khanepani Ltd.

Local municipalities and water supply user groups in the target towns

TDF, to the extent that they become involved in water supply management

Groups such as Water Aid and Lumanti, focusing on local water supplies.

I.2. Experience of Nepal Water Supply Corporation under Transfer of Responsibilities

4 An important component of restructuring has been the establishment of an independent company, Kathmandu Upatyaka Khanepani Ltd (KUKL) to take over the responsibility for water supply in Kathmandu Valley. Linked to this has been the formation of the Kathmandu Valley Water Supply Management Board and the Water Supply Tariff Commission.

5 NWSC now has 22 Branches and serves 23 municipalities. 12 of these have sufficient cash flows effectively subsidise “in loss” Head Office staff number 38, while total employees number 600, including temporary and contract employees. There are 4 Departments: Engineering; Finance; Corporate Services (including Administration) and Audit.

6 NWSC undertakes water supply projects, but has done little or nothing in the way of sewerage activities, which was with their original teams Government by default has fallen more within the responsibility of municipalities, and for which NWSC does not receive funding assistance. NWSC now only has only limited number of fully qualified engineers, as many chose to move to KUKL at the time of restructuring. The span of control is large, with all engineers in all Branches reporting to the Superintendent Engineer in Kathmandu.

7 Taken overall, NWSC describe themselves as “financially weak” but strong in technical terms, even though they have lost many of their skilled engineers to KUKL. They have questioned the technical design features of a number of projects in which they have had no implementation role, and the capacity of local management groups to provide the right level of technical knowledge to ensure sustainable schemes. A Government development loan of NRs110m at 5% interest in 2007-08 has been increased to NRs180m in the current financial year. NWSC is reported to be making timely payments.


8 The system installed at Pokhara is considered to be particularly successful, with on-time loan repayments, and further revenue increases are expected as additional connections are provided.

9 Each Branch has a separate budget. There is considerable cross subsidization between Branches, with over half the Branches running financial deficits and only the larger towns operating profitable supply services.1

10 Increased cost recovery has not been permitted by the Water Supply Tariff Commission. Tariffs are considered to be only 50% of what is required to cover full operations and maintenance costs, resulting in medium term supply risks. Disconnections for nonpayment are difficult because of social reasons, especially relating to the poor. Added to this only about 50% of customers pay in a timely manner, with the remaining 50% being difficult to collect – often with overdue amounts of 2- 3 months. This has implications if future sewerage charges are to be collected by NWSC. In general terms, collection costs are high in relation to invoiced value, but a more detailed study would be required to confirm the overall situation.

11 System losses within the Kathmandu Valley (not now a NWSC responsibility) are estimated to be some 40% of supplies and within NWSC areas 25%. (which appear low)

12 Consumers have separate accounts, and computerized billing has been started in some locations.

13 There was little coordination between NWSC and UEIP, even for those cases where supplies were being laid alongside the main pipeline. NWSC were concerned about technical standards, and the ease with which illegal connections can be added to supply pipes.

14 NWSC are not convinced that the establishment of Water Users and Sanitation Committees and Water Supply and Management Board has been fully qualified successful. WUSCs and WSMB lack technical skills, and although some training is provided, this has not proved sufficient for sustainable operations. Some systems, such as at Hetauda, have now been returned to NWSC management, after an initial period of operations under a municipality board.

I.3. Experience of Department of Water Supply and Sewerage (DWSS) under Transfer of Responsibilities

15 NWSC has focused responsibility for water supply in major urban areas except Kathmandu. The role of DWSS has been over the remainder of the country including small towns and smaller municipalities. It has five Regional Offices, covering all seventy-five Districts, and a series of performance targets.

16 Earlier recommendations on devolution were not fully followed, resulting in overlaps of responsibility, in particular between MLD and DWSS, but also to Local Development Officers, who lack both time and technical skills, and who are more liable to frequent transfer or relocation. DWSS believe they can offer greater continuity, as well as expertise.

17 A series of 9 criteria have now been developed to determine whether individual projects should be the responsibility of DWSS or MLD. Each project is now subject to such screening, and those that are defined as DWSS responsibility then follow a privatization procedure prioritized for funding. TDF become involved in funding for “commercial” projects, with the flow of funds and cost recovery being through the Fund. The implementation arrangements can become complex, with funds flows and repayments involving Users Committees, local bodies, TDF and DWSS.

18 In a number of instances decisions on project selection have been made at a political level. Rural water supply projects tend to receive a much higher grant component, and therefore lower cost recovery targets.

19 Like NWSC, DWSS has had no involvement with the original UEIP. Again like NWSC, it

1 If the project target towns assume responsibilities currently filled by NWSC, as they would like given that they are presently “in profit then, the overall financial situation for water supply will deteriorate still further.


is critical of lack of coordination and performance under that project.

20 User groups are generally considered to be “satisfactory”, but lacking technical skills, and less capable of managing large (technical) projects. Training is required, as is TA comment assistance with the introduction of billing systems. Help with the latter has come through TDF or through UN Habitat. Guidelines and training are necessary if user groups are to be successful at managing sustainable projects. DWSS believe that clearer delineation of responsibilities of MLD, DWSS, and User Groups will assist clarifying roles and responsibilities in the future.

21 However, training in the effective operations and maintenance of electrical equipment and large water supply distribution systems takes a long time. If is not realistic to presume that this can be accomplished in the short term. It is not easy to recruit and retain competent engineers in Nepal because good employment opportunities are readily available in other countries.

I.4. Expertise of Kathmandu Upatyaka Khanepani Ltd.

22 Kathmandu Upatyaka Khanepani Ltd (KUKL) is a limited liability company, and in 2008 was formed to take over responsibility for water supplies in the Kathmandu Valley. It operates under a 30-year license from the Kathmandu Valley Water Supply Management Board (“the Board”), the body that is given the sole responsibility to look after water supply in the Kathmandu Valley.

23 There is a considerable shortage of potable water in the Valley, and this is exacerbated during the dry season. Operational improvements over the past 10 years are stated by KUKL to be minimal, and even after commissioning of the new Melamchi supply scheme a supply gap (not quantified) will remain given deficiencies in the reticulates system as a whole (such as control of customers pumping directly from the mains).

24 Other industry providers state that at the time of its formation KUKL is reported to have advertized 1298 positions, but with no clear organization structure and no aptitude testing prior to appointments being made.

25 Other sector providers are critical of the lack of technical expertise within KUKL. The Water Supply Tariff Commission point to an outstanding debt of NRs900m as evidence of poor performance, while, for its part, KUKL state that collections are improving, but complain that it is not possible to operate on a non subsidized basis at the tariff levels that have been determined. And are outside of their control.

26 KUKL was unable to provide the consultant with (i) any audited financial results; (ii) any Business Plan (despite this being a requirement for the Tariff Commission), or (iii) any Key Performance Indicators or objectives that the organization seeks to achieve.. They state that they have a number of priorities, including (i) development of a physical plan; (ii) administrative restructuring; (iii) financial improvement: (iv) production improvement; (v) leakage control: (vi) metering improvement; (vii) customer care; and (viii) household surveys. It is less clear what resources are being dedicated to achieve these objectives; there is no allocated budget to achieve these improvements nor is there a timeline, or quantification of improvements expected. In the meantime KUKL feel unable to commit to defined interim performance targets such as 1 hour of quality water supply per customer per day.

27 KUKL believe that experience with Water Users and Sanitation Committees is mixed, but that in general such committees lack technical capability, financial transparency, and that they suffer from political affiliations.

I.5. Expertise of Kathmandu Valley Water Supply Management Board

28 The Kathmandu Valley Water Supply Management Board (“the Board”) is responsible for (i) monitoring the performance of KUKL; (ii) identifying water projects and (iii) identifying sources of funds; (iv) monitoring and control of groundwater projects, where it is concerned about the rate of


depletion of water (falling water levels), and for which a policy document is under preparation; and (v) sewerage projects.

29 The Board believes there is a very large shortfall of funds (US$100m) that needs to be addressed to successfully resolve all water supply requirements.

30 Board staffing totals about 25 people, which they consider insufficient to handle all the work required. They are considering outsourcing work, in order to achieve the necessary results but without permanently increasing staff numbers.

31 Although their role is currently restricted to the Kathmandu Valley they have a vision of acting as a wider resource center, providing training; a network of expertise; human resource management advice and equipment on national basis. The consultant believes that following this model could lead to some overlap and duplication with NWSC and DWSS.

32 The Board has identified a number of issues relating to sector performance:

Efficient operations and maintenance, including activities of water users groups. At the moment the technical issues are not necessarily well understood by those responsible for post-construction operations.

“Ownership”. A somewhat similar issue to the preceding one, where lack of involvement in initial development carries the risks of subsequent neglect because training and background knowledge is inadequate.

Lack of wider networks to discuss technical issues and possible solutions

Lack of career prospects for those involved in local water supplies

Lack of comparative performance benchmarking, making it difficult to identify successful and less successful operations

Lack of governance and management skills.

33 The Board has not yet made any assessments of the effectiveness of User Committees, nor has it developed criteria to complete such an assessment. Their current responsibilities limit their authority to the Kathmandu valley only. Their general impression is that the major issue with such Boards is one of training and competence.

I.6. Water Supply Tariff Commission Responsibilities and Effectiveness

34 Established in 2007, following legislation enacted in the preceding year, the Water Supply Tariff Commission is responsible for approving all tariffs for water supplies and sales, from bottled and tanker water to bulk reticulated supplies.

35 The effectiveness of the Commission is limited by the low staff numbers, with four people only, including receptionist, accountant, peon and guard.

36 The tariff approval process requires submission of (i) a 5 year Business Plan; (ii) historical data for the past 3 years; (iii) projections for the following 5 year; (iv) information on sources of supply; (v) quality control proposals, and (vi) an environmental impact assessment. However the resource limitations within the Commission and the supply problems demonstrated in Kathmandu in particular, make this a somewhat academic exercise. This viewpoint is reinforced by discussions with KUKL.

37 Groups like KUKL complain that tariffs are inadequate to ensure adequate cost recovery. For its part, the Commission wishes targets to be set for activities such as availability of supply in the Kathmandu Valley, where anecdotally service has deteriorated considerably since restructuring, but KUKL is reluctant to make any commitments.

38 Other groups, including TDF, are stated to ignore requirements for tariff approvals by the Commission.


39 The Commission feels that Water User Groups are “doing OK”. However there is no formal benchmarking process to assess results; no inter group comparisons to identify best practice, and no records of financial performance or minimum levels of operations and maintenance necessary for sustainability.

I.7. Conclusions

40 The overall impression of water supply decentralization is that the verdict is “still open”. If statements made about inadequate tariff levels, especially in the Kathmandu valley, are correct, then sustainability must be an issue. This risk is compounded by the inability of KUKL and the Tariff Commission to present clear, quantifiable cost structures to support either their statements on funding shortfalls or to justify approved tariffs.

41 None of the relatively recently formed institutions responsible for water services within the Kathmandu Valley can point to explicit, clearly quantifiable performance indicators. The Water Supply Tariff Commission is limited in its ability to perform by the very low staff numbers, but does not appear to have embarked on a plan to remedy this situation. It also appears to have failed to undertake any modeling of what tariffs are required for long term sustainable operations, thus raising some questions about the long term viability of the sector.

42 For its part, KUKL could not point to (i) any quantifiable performance targets; (ii) any “gap analysis” between funding requirements for system operations and maintenance and available funds under the permitted tariff, or plans to close this gap; (iii) financial projections based on present limited supplies available within Kathmandu; or (iv) any structured preventive maintenance planning.

43 NWSC appears hampered by loss of key staff to KUKL, and by inadequate cost recoveries across many of its smaller towns, meaning that tariffs in other towns are higher than needed in order to provide some measure of cross-subsidization. In the medium term, this will inevitably lead to pressures for water supply in these towns to be relinquished to municipalities or independent water users groups. However, there may be other explanation of the situation in particular towns. There might be insufficient inability to supply sufficient water to meet demand or a lack of demand for water from a centralized system because ground water in readily available.

44 DWSS appears to have suffered less from the restructuring process, and to have benefited from the policy of lower levels of cost recovery for water supplies for rural populations that in general terms fall into higher poverty brackets than those in urban areas. Whilst the level of consultation during design and construction may remain limited, DWSS management state that their implementation strategies include training and technical assistance during the commissioning process.

45 The question of effectiveness of Water Users Groups is harder to determine. In reality, much will depend on the individual commitment competency and motivation of local leaders, making generalizations difficult.

46 In the absence of any benchmarking process or inter-group comparisons there is little alternative other than to rely on anecdotal evidence of success or difficulties. Even this is varied, and to some extent reflects the interest of the respondent. For instance, DWSS report that they provide adequate training for rural institutions. NWSC report that they have been asked to resume responsibility for some water supply installations, and that there are payment and collection difficulties. Municipality and community groups variously declare successful commissioning of new community based schemes, but also report: (i) illegal connections, making full cost recovery harder to achieve; (ii) a lack of important technical operational training, and (iii) only limited attention to operations and maintenance, which is further restricted in its effectiveness by limited technical expertise. It is to be noted that “new” schemes are easier to operate and maintain, and to assure cost recovery than older schemes with ageing assets.

47 Perhaps the most important improvements that can be considered, as part of a separate study that falls outside the scope of this assistance is to:


Agree explicit, short term, measurable key performance indicators on each of the major institutions in the sector, that reflect what results it is reasonable to expect given the funding limitations for each institution;

Introduce simple performance benchmarking for all Water User Groups, reflecting a small number of key indicators such as supply duration; water quality; system breakdowns; revenue collection rates;

Prioritize the applications to be reviewed by the Tariff Fixation Commission to those that are most critical, and where there is an element of monopoly provision. To some extent the Commission must also become accountable for supply disruptions caused by tariff limitations restricting essential operations and maintenance. Ancillary price regulation for matters such as bottled water can be left in the short term to “market forces”.

Prohibit tariffs for any new schemes (such as those funded by TDF) from by-passing the Commission, but at the same time establish a “benchmark profile” for schemes of approximately similar configuration where approval will be automatic, provided the proposal fits within defined parameters. This will significantly reduce the Commission workloads associated with reviewing individual Business Plans and projections. The profile can be updated annually, based on national benchmarking, which should be an urgent responsibility of a combined monitoring group consisting of the Commission, NWSC and DWSS, perhaps Chaired by a representative of the National Planning Commission.

TA 7182-NEP J - 1 Final Report, Vol. 1

Appendix J

Design and monitoring framework

1 At the back of this Appendix (Table 1) is the Design and Monitoring Framework (DMF) for the project. It comprises:

A design summary Key performance targets and indicators Data sources and reporting mechanisms A statement of assumptions and risks A summary of activities and milestones A summary of inputs

2 The construction of the DMF is in accord with the latest ADB guidelines.1

J.1 Design summary

3 The design summary outlines the main elements of the project and shows the logic of how the project will contribute to achieving the desired impact (improved health). Improvements in municipal infrastructure and services will lead to a healthier environment, leading in turn to better health. While the DMF does not mention economic growth, better health leads to higher productivity, higher educational attainments, and savings in private and government health expenditures.

J1.1.1 Definition of environmental health

4 As the proposed project is about improving environment health, the proposed DMF adopts WHO definitions:

The environment is all the physical, chemical and biological factors external to the human host, and all related behaviours, but excluding those natural environments that cannot reasonably be modified.

This definition excludes behaviour not related to environment, as well as behaviour related to the social and cultural environment and genetics.

J1.1.2 Definition of a healthy city

5 One of the strategies that the National Urban Policy enunciates is to develop healthy cities. In contrast to the static concept of environmental health, a healthy city refers to the dynamic process of sustainable development.2 Respondents to a survey by WHO’s South-East Asia Region nominated the characteristics of a healthy city are as follows:

40 Quality of physical environment

35 Environmental infrastructure management

1 ADB, 2007, Project Performance Management System: Guidelines for Preparing a Design and Monitoring Framework. Second Edition. 2 WHO. 2000. Strengthening Healthy City Projects in the South-East Asia Region. An opinion survey. Regional Office for South-East Asia. New Delhi.


32 Social and environment and well-being

19 Health and health care

14 Performance of the municipality

10 Community participation

7 Economic well-being

6 City planning

3 Population density and size

1 Political commitment

6 To the extent possible, the DMF includes characteristics of a healthy city.

J1.1.3 Economic growth and other impacts

7 Improvements in the health environment will generally promote economic growth and the realization of MDGs (Table 2).

J1.1.4 Social inclusion

8 The GoN and the ADB have agreed that the project should promote more socially inclusive local development. Socioeconomic status is an important determinant of the likelihood that individuals and social groups are exposed to environmental risk factors for health.3 Focussing the DMF on health impacts and environmental health outcomes will help ensure that the project is socially inclusive.

J.2 Key performance targets and indicators

J2.1 Health improvements

9 A consistent and comparative description of the burden of diseases and injuries and the risk factors that cause them is an important input to efforts to improve environmental health. The data on mortality and health in populations in Nepal and around the world is fragmentary and sometimes inconsistent. Some twenty years ago the WHO and others recognized the need for a framework for integrating, validating, analyzing and disseminating information so to assess the comparative importance of diseases, injuries and risk factors in causing premature death, loss of health and disability in different populations.

10 The first Global Burden of Disease study (1990) introduced a new metric – the Disability-Adjusted Life Year (DALY) – as a single measure to quantify the burden of diseases, injuries and risk factors. The DALY is based on years of life lost from premature death and years of life lived in less than full health. Subsequent studies have attributed the burden of various diseases to different factors, including environmental conditions. This study was updated for the year 2000-2002 and included a more extensive analysis of the mortality and burden of disease attributable to 26 global risk factors using a consistent analytic framework known as Comparative Risk Factor Assessment. These estimates were most recently updated for the year 2004.

11 When planning and implementing urban environmental improvements, one of the main objectives is usually to achieve positive impacts on people’s health. Agencies therefore regularly attempt to evaluate the health impacts that are attributable to their interventions.4

3 Tony Blakely, Simon Hales, Alistair Woodward. 2004. Poverty: Assessing the distribution of health risks by socioeconomic position at national and local levels. WHO. Environmental Burden of Disease Series, No. 10. 4 As was the case with UEIP, see ADB, 2002, op. cit.


J2.2 Outcomes

12 The key performance targets and indicators for the project are state of the environment targets and indicators. The selection of indicators will be from the list of environmental health indicators that the WHO recommends.5

J.3 Data sources and methods

J3.1 Health data

13 Column 2 of Table 3 is the WHO estimate of the health burden in Nepal attributable to environmental factors. The only way to estimate changes in this burden is through data on then incidence of diseases. Data from local health care providers has limitations for DMF purposes because the catchment areas for patients typically bear little relationship to the project area. Not all morbidity is reported. Also, the incidence of disease over a particular period and in a particular locality is highly variable according to weather, natural disasters, and epidemics. Many factors affect statistics on infant and child mortality apart from “just” water and sanitation, so indicators by themselves are not necessarily going to explain a lot. But to the extent that “what get measured gets done” is true, the absence of health indicators in the DMF would undermine the credibility of the project.

J3.2 Improvements in health environment

14 Volumes 17 to 19 report such state of the environment data as is available for the municipalities. It is not adequate for the purposes of the DMF. However, the DMF proposes targets that for the most part should not be difficult to survey. However, in total the monitoring outcomes and outputs on the project will require a wide range of quantitative and qualitative data. To collect this data before, during, and after implementation is beyond the resources of the implementing agencies. Particularly for the crucial sanitation programme, municipalities will need to engage consultants to make independent assessments using the Balanced Score Card technique.

J3.3 Balanced Score Card

15 The Balanced Scorecard technique is a quantitative and qualitative assessment method originally designed for the private sector, later adapted to assess public services. It involves identifying and measuring a few key objectives in four perspectives of performance that counterbalance one another:

The operational efficiency perspective emphasizes the need for the municipality to deliver services at the lowest possible cost. Unit costs, changes in expenditures over time, or administrative overheads to direct service costs ratios are all indicators of operational efficiency. This perspective is a counterbalance to the other three, making sure that the municipality is not spending too much to accomplish its goals.

The residents perspective focuses on how satisfied residents are with a service, its timeliness, quality and cost. The residents perspective is a counterbalance to the operational efficiency perspective, as serving residents properly costs money.

The mission perspective focuses on the primary public service mission of the municipality. This perspective is a counterbalance to the operational efficiency and residents perspectives. It reminds managers that the agency should not pursue efficiency and residents’ satisfaction at the expense of the other parts of the larger mission (environmental improvement).

The organizational learning and improvement perspective focuses on the capital, labor and processes investments a municipality needs to make to prepare its future and ensure

5 WHO, 1999, Environmental Health Indicators: Framework and Methodologies, WHO/SDE/OEH/99.10, Geneva.


its sustainability. Examples of indicators include the staff training accomplishments, absenteeism, accidents, and new procedures or technologies introduced. This perspective is also a counterbalance to the operational efficiency perspective.

16 The Balanced Score Card can therefore provide a broader picture of a municipality’s performance than traditional technical records or financial accounts alone. It encourages executive officers to optimize the performance of the municipality by balancing the four perspectives over the longer term. Importantly, this method focuses on ongoing improvement rather than impact.

17 The Sector Efficiency Improvement Unit of DWSS is establishing performance indicators for water and sanitation service providers (under SSTWSSSP, see section 4.7.3). There are no standard performance indicators for roads authorities or providers of waste management services. The responsible agencies for establishing such performance indicators are Roads Board Nepal and the SWMRMC.


Table 1 Summary of Design and Monitoring Framework

Design summary Key performance targets/indicators(1)

Data sources/reporting mechanisms

Assumptions and risks(2)

Impact Healthy cities Incidence of diseases attributable to

environmental conditions:(3) diarrheal diseases, intestinal nematode infections, acute respiratory infections, dengue, lymphatic filariasis, trachoma, schistosomiasis.

District health records National economic growth Political stability Security

Outcome Improved health environment

Biratnagar and Birgunj Assumptions Success of community mobilization. Satisfactory operations and maintenance. No change in other factors affecting health environment. Risks Lack of expertise and adequate skilled staff. Lack of real local commitment. Frequent changes in Executive Officers. Lack of enforcement.

Total sanitation (good hygiene, no outdoor defecation)

Balanced Scorecard Method(3)

No local flooding in core areas, no standing water.

Municipal records

All urban properties adjoin sealed road or lane.

Municipal records(4)

Birgunj and Butwal

All municipal waste collected, no waste in drains or rivers. No hazardous waste in municipal waste stream.

Balanced Scorecard Method(3)

Municipal records(4)

Indoor PM10 reduced by 10%. Air quality sampling Biratnagar, Birgunj and Butwal

All environmental services workers wearing appropriate clothing and footwear.

Municipal records of absenteeism and accidents.

Outputs Drainage and Sanitation (Biratnagar and Birgunj) Risks Wastewater collection and treatment systems

Projected 2034 wastewater flows of 259 L/s (Biratnagar) and 135 L/s (Birgunj); 60.5 km of separate sewer (Biratnagar) and 44.3 km of combined drainage (Birgunj).

Municipal records.(4) Adequate municipal staffing. Earthquake and flood risks. Inability of municipalities to acquire sites. Community mobilization not successful. Poor coordination with schools. Lack of participation by women and vulnerable groups. Reluctance to tackle slums and squatter settlements.

Stormwater drainage Improved stormwater drains totaling 25.5 km in Biratnagar and 11.2 km in Birgunj.

Municipal records

Domestic toilets All dwellings have improved toilets (requires estimated 12300 new installations in Biratnagar and 8200 in Birgunj)

Municipal records

School toilets All schools have separate male and female toilets, functional and clean.

Municipal records

Public toilets All locations frequented by visitors have public toilets (estimated to require an additional 15 toilets in Biratnagar, 12 in Birgunj).

Municipal records

New or improved communal taps

Everyone can get safe water from a communal tap.

Municipal records. DWSS monitoring.

Sewage awareness All properties in service areas have conforming connections (requires and estimated 21,400 domestic connections in Biratnagar, 13,300 in Birgunj)

Municipal records

Community mobilization

Every part of municipality has active TLO.

Municipal records

Solid Waste Management (Birgunj and Butwal)

Solid waste collection and processing

Capacity 19 m3/d in each town. Seventy per cent of organic waste composted and all compost given away or sold.

Municipal records Opposition from trade unions.


Design summary Key performance targets/indicators(1)

Data sources/reporting mechanisms

Assumptions and risks(2)

Solid waste awareness

No dumping of waste in drains or rivers. All health care facilities practicing safe disposal. No burning of waste. No use of dung cakes for cooking. 50% of households cooking with wood using improved stoves.

Municipal records Nepal Labour Force Survey

Lack of real local commitment.

Street sweeping All sealed roads swept at least once a week.

Municipal records

Roads and Lanes (Biratnagar and Birgunj)

Footpath improvement

13500 m of footpath improved in Biratnagar and 8840 in Birgunj

Municipal records

Road surface improvement

Additional 119,000 m2 sealed in Biratnagar and 40,000 m2 in Birgunj.

Municipal records Need for improved project management skills.

Carriageway upgrading

81,000 m2 of carriageway upgrading in Biratnagar, 53,000 m2 in Birgunj

Road awareness programs

No. of blocked drains, encroachments, damage etc

Municipal records Lack of real local commitment.

Butwal Mainabagar Auto village

Infrastructure complete, full cost recovery from beneficiaries.

Municipal records

Butwal water supply To be determined To be determined To be determined To be determined

Activities with milestones Inputs ADB: GoN: Municipalities:

Land acquisition completed (Q4 2010) Formation of Project Steering Committee (Q4 2010) Formation of Project Management Committees (Q1 2011) Appointment of DUDBC Project Director (Q4 2010)

Notes: (1) Performance targets vary from municipality to municipality. See Table 2.

(2) See text of this volume for full statement of risks. Not all risks are stated in this table. (3) See Volumes 2 and 3 for details of the relationships between environmental conditions and the

incidence of these diseases.


Table 2 Relationships between environmental health and MDGs

MDG Intervention Relationship to MDG

Eradicate extreme poverty and hunger

Minimize exposures to environmental risk factors

Many environmentally mediated diseases result in lost earnings. Disability or death of one productive household member can affect an entire household.

Achieve universal primary education.

Providing safe drinking water and latrines at school (particularly for girls).

Encourages primary school attendance.

Providing households with access to improved sources of drinking water and cleaner energy sources,

Improves student attendance.

Promote gender equality and empower women.

Access to improved drinking water, cleaner energy sources,

Reduces environmentally attributable burden of childhood diseases and thereby time spent caring for sick children. Reduces time spent collecting water and fuel.

Reduce child mortality. Providing safe drinking water and achieving total sanitation.

Can prevent two-thirds of deaths of children aged under 5

Improve maternal health. Providing a safe home environment. Improves health of mother and unborn child.

Combat HIV/AIDS, malaria and other diseases.

Reducing occupational hazards and environmental risks.

Reduces incidence of diseases

Ensure environmental sustainability.

Reducing use of biomass and coal, enhancing access to improved sources of water, sanitation and clean energy.

Reduction in pressures on ecosystems from air and water contamination. Improve health of slum dwellers.

Develop a global partnership for development.

Joint action by health and non-health actors.

More effective interventions

Source: Annette Prüss-Üstün and C. Corvalán C. 2006. Preventing disease through healthy environments. Towards an estimate of the environmental burden of disease. WHO.


Table 3 Target reductions in environmental health burdens in project municipalities

Disease

Health burden in

Nepal, 2004

Proportion attributable to environment

Environ- mental burden,

2004

Target reduction in incidence of disease for purpose of DMF (shading indicate inclusion

in DMF as key performance targets)

Nepal Nepal Nepal Biratnagar Birgunj Butwal (DALYs/

100,000/y) (%) (DALYs/

100,000/y) (%) (%) (%)

Infectious and parasitic diseases

Tuberculosis 686 19 130 0 5 0 STDs excluding HIV 270 9 24 0 0 0 HIV AIDS 79 15 12 0 0 0 Diarrheal diseases 1,345 94 1,264 40 50 5 Childhood cluster diseases 408 24 98 15 20 0 Meningitis 247 11 27 15 20 0 Hepatitis 131 1 1 15 20 0 Malaria 4 42 2 15 20 0 Leishmaniasis 136 27 37 15 20 0 Lymphatic filariasis 406 82 333 15 20 0 Leprosy 10 0 0 0 50 Dengue 10 95 10 25 50 10 Japanese encephalitis 29 95 28 20 20 5 Trachoma 118 100 118 0 50 10 Intestinal nematode infections 45 100 45 30 50 10

Lower respiratory infections 2,034 42 854 10 20 10

Upper respiratory infections 27 24 6 10 20 10

Maternal conditions 1,541 11 170 10 10 2

Perinatal conditions 1,990 11 219 10 10 2 Nutritional deficiencies 1,219 50 610 10 10 2 Non-communicable diseases

Lung cancers 118 29 34 10 10 2 Other cancers 1,198 14 168 10 10 2 Diabetes mellitus 364 10 36 0 0 0 Endocrine disorders 91 10 9 0 0 0 Neuropsychiatric conditions 3,395 13 441 0 0 0 Sense organ diseases 2,212 16 354 0 0 0 Cardiovascular diseases 4,020 14 563 0 0 0 COPD 572 42 240 10 20 2 Asthma 344 44 151 10 20 2 Digestive disorders 991 0 0 10 10 2 Genitourinary diseases 386 0 0 10 10 2 Skin diseases 68 10 7 10 10 2 Musculoskeletal diseases 485 17 82 10 10 2 Congenital anomalies 315 5 16 10 10 2

Oral conditions 176 0 0 10 10 2 Injuries Road traffic accidents 493 40 197 10 10 2 Poisonings 91 71 65 0 0 0 Falls 280 31 87 0 0 0 Fires 297 7 21 0 0 0 Drownings 168 72 121 0 0 0 Other unintentional injuries 756 44 333 0 0 0 Self-inflicted injuries 364 30 109 0 0 0 Interpersonal violence 1,098 9 209 0 0 0

All diseases 29,017 24 7,230 12 17 3

Sources: Column 1: WHO. 2008. The Global Burden of Disease: 2004 Update. Columns 2 and 3: WHO. and Annette Prüss-Üstün and C. Corvalán C. 2006. Preventing disease through healthy

environments. Towards an estimate of the environmental burden of disease and WHO. 2007. Public Health and the Environment. Country Profiles of Environmental Burden of Disease.

Columns 4 to 6, estimates by consultants (see Volumes 2 and 3 for additional data).

TA 7182-NEP K-1 Final Report, Vol. 1

Appendix K

Security incidents

1 This appendix lists the security incidents in candidate towns that the UN Office for the Coordination of Humanitarian Affair has reported over the 12 months ending 2nd July 2009.

Biratnagar Morang 24 incidents Dhangadhi Kailali 17 Nepalganj Banke 16 Birganj Parsa 11 Itahari Sunsari 9 Dharan Sunsari 7 Dhankuta Dhankuta 6 Butwal Rupandehi 2 Siddharthanagar Rupandehi 1 Baglung Baglung 1 Pokhara Kaski 1 Birendranagar Surkhet 0 Amargadhi Dadeldhura 0


Candidate town

Security incidents

Biratnagar (Morang)

2009 On 6 June, workers of the Sunsari-Morang industrial corridor took to the streets to protest the UCPN-M demonstrations.

On 6 June, the UCPN-M enforced a bandh to protest over the CoAS issue and the 'encroachment' of Nepali land by India in Morang, Jhapa and Sunsari districts. In Morang, a vehicle belonging to Kantipur Publications was vandalized and set on fire by UCPN-M cadres for defying the bandh. On 17 May, the UCPN-M organized rallies and mass meetings in several different parts of the country including Biratnagar, Nepalgunj, Dhangadhi and Kathmandu. In Kathmandu, the rally was well attended by UCPN-M affiliated organizations including members of Young Communist League (YCL) and disrupted traffic for the better part of the day. The demonstrators called for the President to rescind his decision to reinstate the CoAS. On 21 May, an IED exploded near the Raghupati Jute Mill, Biratnagar Municipality at about 2300hr. An on-duty security guard at the mill was injured in the incident On 4 April, an IED explosion injured a butcher at Gudri Chowk in Biratnagar, Morang District. The Nepal Defense Army (NDA) claimed responsibility for the explosion. Frequent clashes between youth and other groups allied to political parties continued, sometimes with tragic consequences. On 2 April, a CPN-UML allied Youth Force (YF) cadre was reportedly stabbed to death by three UCPNM allied Young Communist League (YCL) cadres in Biratnagar, Morang District. The District leadership of YCL denied the alleged YCL involvement. The situation remained tense and protests continued for most of that week. UN vehicles were denied access and had to resort to alternative routes. On 8 April, four individuals were seriously injured in a clash that ensued between the cadres of UCPNM and CPN-M Matrika Yadav faction at Sarochiya in Morang District. On 23 March, Madhesh Mukti Tigers (MMT) detonated an IED in front of Birat Hostel in Biratnagar, Morang District. The windowpanes of the hostel were broken but no other damage occurred. On 6 February, Madheshi students affiliated to the Madheshi Peoples Rights Forum (MPRF) obstructed public vehicle movement at Duhabi, Sunsari District, on the Biratnagar-Itahari route for several hours, protesting against a previous incident where students were beaten up at Purbanchal Engineering Campus in Dharan, Sunsari District, on 2 February On 12-13 February, students affiliated to MPRF blocked the roads and executed a two day transportation strike in Biratnagar, Morang District. The students issued a four-point demand, including security for Madheshi students in Dharan; relocating the college to another Terai district and immediate action against the perpetrators that had attacked 12 Madheshi students. The students also demanded that upcoming exams be conducted in Inaruwa, Sunsari District. On 12 February, claiming that the daily had published false news about them, individuals allied to the Federal Limbuwan State Council (FLSC) burnt a local daily newspaper Aujar, at Pathari in Morang District. On 21 January, in Morang District, several people were injured during a fight between the student wing of the Unified Communist Party of Nepal (Maoist) (UCPN-M) and student groups affiliated to the Nepali Congress (NC) and Communist Party of Nepal (Unified Marxist-Leninist) (UML). 2008 Between 25 and 29 December, CPN-M affiliated All Nepal Communications, Printing and Publications Workers Union (ANCPPWU) stopped the office and publication work of Kantipur Publication’s Regional office in Biratnagar, Morang District on claims that its 12-point demand had not been met. From 2 November, vehicle movement on the Biratnagar-Itahari route in Morang and Saptari districts remained obstructed after businessmen and locals closed down the market and vehicle movement in Duhabi of Sunsari district, protesting against police intervention in a dispute that led to the injury of some local residents. On 3 November, MPRF called for an indefinite Biratnagar bandh, demanding among other things action against suspects and compensation to the family of their cadre, who was killed in a scuffle over tender dispute at Hattimuda, Biratnagar, the previous day. However, the party suspended their bandh program for two days on 4 and 5 November due to Chhath religious festival. On 19 October, protesting against the reduction in working hours and subsequent cut in wages, workers of Reliance Spinning Mills in Khanar of Sunsari district shut down the factory and launched an indefinite transport strike in the Khanar (Biratnagar- Itahari route). On 4 October, Muslim community of Eastern Region closed down markets and obstructed transportation in Sunsari and Morang districts to protest against the recent bomb explosion at the Jamia Masjid mosque located in Morang. In the incident four persons were injured. No one has claimed responsibility for the incident. On 11 August, a student was killed by an unidentified armed group in Biratnagar On 12 August, an unidentified gang detonated a socket bomb at a house in Biratnagar


On 12 August, a civilian was found dead in a sack in Biratnagar of Morang On 31 July, an unidentified group abducted a local of Biratnagar-14 in Morang district. On 4 August, two persons were injured when an explosive device went off at a teashop in Biratnagar, Suditole. On 13 July, District treasurer of Maoist-affiliated Kirant Mukti Morcha (KMM) assaulted the Chairman of the Community Forest Department in Morang district for not providing timber as per their demand. Concerned over the state of lawlessness and growing insecurity in Morang, the Maoist-affiliated The Nepal Federation of Trade Unions (ANFTU) demanded District Administration Office in Biratnagar for the effective security arrangement to prevent growing number of abduction in the region. In Siraha, members of the ruling party Nepali Congress (NC) organized called a general strike on 7 July protesting against lack of action by the district administration towards controlling the increasing criminal activities

Dhangadhi (Kailali)

2009

On 23 June, UCPN-M cadres pelted stones at the State Minister of Energy at Tikapur (Kailali district), Chandra Singh Bhattrai, when he was attending the Municipality Council. Following the incident the situation became tense and the Municipality Council meeting was cancelled until further notice. On 17 May, the UCPN-M organized rallies and mass meetings in several different parts of the country including Biratnagar, Nepalgunj, Dhangadhi and Kathmandu. In Kathmandu, the rally was well attended by UCPN-M affiliated organizations including members of Young Communist League (YCL) and disrupted traffic for the better part of the day. The demonstrators called for the President to rescind his decision to reinstate the CoAS. On 18 and 19 May, protest rallies were organized by the Tharuhat Autonomous Council (TAC) to protest against the 28 Feb 2008 eight-point agreement between the Government and the United Madhesi Democratic Front (UMDF). The TAC President then issued a press statement, requesting the new CPN-UML led government not to implement the agreement. The Tharuhat Joint Struggle Committee (TJSC) began peaceful protests in Kailali district on 18 May, urging political parties to address their demands. On 12 May, UCPN-M affiliated All Nepal Landless Union (ANLU) submitted a demand letter to the Chief District Officer (CDO) of Kailali demanding the implementation of revolutionary land reform, distribution of land to the landless people, formation of the landless commission and representation of the landless people in the commission. On 8 April an unidentified group planted an IED that exploded at a medical store at Pahalmanpur VDC, Kailali District On 9 March, Muslims in Banke district and other parts of Nepal decided to show solidarity with the Tharus by joining the strike. Other demands by TJSC include; correction of the Madheshi list adopted by the Government of Nepal (GON), scrapping of the Inclusive Civil Service Ordinance, compensation for those injured and killed during the protests, adoption of a fully proportional electoral system in the upcoming student union elections and proportional representation of indigenous population in the state organs. Due to Hindi and Muslim religious festivals, the strike was partially relaxed between 8-11 March, but started intensifying on 12 March. During this period, a number of vehicles were vandalized by the protestors in various places including Dang, Banke and Kailali. On March 4 demonstrations by students went on in Kailali, demanding the establishment of the proposed FWR University in their own district. The demonstrating students vandalized government offices including District Education Office (DEO), District Livestock Services Office (DLSO) and Dhangadhi Municipality Office. On March 17, the Kailali District Administration Office issued prohibitory orders against displaying and carrying home made weapons (Khukris, spears, sticks) in rallies and mass gathering in Kailali District to discourage any untoward security eventuality in Kailali. On 22 March, three individuals including a woman and two children of the same family were injured when a stray IED exploded in Sadepani VDC of Kailali District. On 19 February, Seti Mahakali Landless People’s Committee (SMLPC) started an indefinite strike at the DAO office Kailali, seriously disrupting normal administrative and other activities in the District and adjoining areas. On 13 February, an unidentified group detonated a pressure cooker bomb at the Nepali Congress (NC) office in Dhangadhi Municipality. The explosion caused minor damage to the NC and adjoining offices. On 20 January. Demanding appropriate food and shelter, landless people obstructed traffic movement along the East-West highway in several locations of Kailali District between 19 and 21 January. The landless people warned of further protests if their demands are not met. 2008 Unlawful seizure of land by various groups continued. Accusing the government of ignoring provision of relief and resettlement materials to them, around 30 flood-affected families of Tikapur Municipality, Kailali district captured seven Bigha of public land. On 4 November, a meeting convened by the local Government, political parties and concerned stakeholders failed to reach a decision on the issue of resettlement of the flood-affected households. In the Far West Region (FWR), the kailali chamber of commerce and Industries (KCCI) organized


indentifinite strike on 18 august of the shipment of good to protest against the truck syndicate system. Previously, the KCCI has prevented the loading of trucks from 6-11 august. All districts in the FWR had already been hit by the July transportation strikes that lasted almost three weeks. On 6 August, the Kailali Chamber of Commerce and Industries (KCCI) resumed its protest programmes against the truck Syndicate System by ceasing trucking services in the FWR. The Nepalgunj Chamber of Commerce and Industry (NCCI) also announced from 8 August that it will stop the loading trucks or delivery of the goods. Strikes called from Kailali District since 13 July halted transportation in all Districts of the FWR to date. From 13-24 July, the Kailali Chamber of Commerce and Industry (KCCI) organised a strike to protest the syndicate system. On 9 July, local businessmen in Dhangadhi of Kailali District, staged a sit-inprotest at the District Administration Office (DAO), urging an end to the syndicate practiced by the Seti-Mahakali Truck Operators Association (SMTOA) and the Seti-Mahakali Bus Entrepreneurs Association (SMBEA). The Federation of Nepalese Commerce and Industry (FNCCI) central Chairman and Vice Chairman, among others, joined the protest and since 13 July, they organised an indefinite strike. Although KCCI ended the strike on 24 July, the SMBEA continued its strike from 20-26 July demanding the government to provide security of the SMBEA staff and compensation for their buses vandalized during the strike.

Nepalgunj (Banke)

2009

On 17 May, the UCPN-M organized rallies and mass meetings in several different parts of the country including Biratnagar, Nepalgunj, Dhangadhi and Kathmandu. In Kathmandu, the rally was well attended by UCPN-M affiliated organisations including members of Young Communist League (YCL) and disrupted traffic for the better part of the day. The demonstrators called for the President to rescind his decision to reinstate the CoAS. On 18 and 19 May, protest rallies were organised by the Tharuhat Autonomous Council (TAC) to protest against the 28 Feb 2008 eight-point agreement between the Government and the United Madhesi Democratic Front (UMDF). The TAC President then issued a press statement, requesting the new CPN-UML led government not to implement the agreement. The Tharuhat Joint Struggle Committee (TJSC) began peaceful protests in Kailali district on 18 May, urging political parties to address their demands. On 9 March, Muslims in Banke district and other parts of Nepal decided to show solidarity with the Tharus by joining the strike. Other demands by TJSC include; correction of the Madheshi list adopted by the Government of Nepal (GON), scrapping of the Inclusive Civil Service Ordinance, compensation for those injured and killed during the protests, adoption of a fully proportional electoral system in the upcoming student union elections and proportional representation of indigenous population in the state organs. Due to Hindi and Muslim religious festivals, the strike was partially relaxed between 8-11 March, but started intensifying on 12 March. During this period, a number of vehicles were vandalized by the protestors in various places including Dang, Banke and Kailali. March 13-14, Clashes between student and other wings of respective political parties continued to be observed during this period. On the night of 13/14 March, the office of Nepali Congress in Nepalgunj, Banke District was burnt down. The Terai Janatantrik Mukhti Morcha claimed responsibility for the arson. On 14 March, an IED exploded in the offices of UCPNM in Nepalgunj, Banke District. On 23 March 2009, one person died and the building of the Transportation Office in Nepalgunj, Banke was damaged in an IED explosion. ATMM claimed responsibility for the explosion. On 23 February, an improvised explosive device (IED) exploded at the Municipal office building in Nepalgunj, and in Ganapur area of Banke District. A group calling itself Madheshi Mukti Tiger took responsibility for the explosions. On 22 February, Security Forces (SF) safely detonated an IED planted in the premises of District Land Revenue Office (DLRO) in Nepalgunj, Banke District. JTMM-Jwala Singh is suspected of planting the IED in the premises. On 13 February, a socket bomb exploded in the office premises of the United Nations High Commissioner for Human Rights (OHCHR) in Nepalgunj, Banke District. On 14 February, an IED found at the Banke District Development Committee (DDC) office was diffused by police. On 18 January, a boy was injured when an IED exploded at Buddha Gumba in Nepalgunj, Banke District On 16 January, Terai Madhesh Democratic Party (TMDP) organized anti government sit-in protests in front of District Administration Office (DAO) and at Nepal Electricity Authority (NEA) office in Nepalgunj, 2008 On 3-4 December The Nepalgunj- Gulariya road section was obstructed by Transport Workers protesting against the beating of a bus owner and workers. On 19 November, normal life was disrupted in Nepalgunj, Banke District after the youth wings allied to UML’s Youth Force (YF) and CPN-M’s YCL called a transport strike and blocked vehicular movement along the Nepalgunj-Kohalpur road after members of Bheri Transport Entrepreneur Committee beat up the Secretary of Narayani Transport Workers Union. On 19 October, Hajj pilgrims of Muslim community continued their weeklong sit-in protest program in front of DAO, Banke in Nepalgunj, protesting against the increase on fare for hajj pilgrims.


On 6 August, the Kailali Chamber of Commerce and Industries (KCCI) resumed its protest programmes against the truck Syndicate System by ceasing trucking services in the FWR. The Nepalgunj Chamber of Commerce and Industry (NCCI) also announced from 8 August that it will stop the loading trucks or delivery of the goods.

Birganj (Parsa)

2009

On 11 June, UCPN-M announced for Bhojpura Rajya bandh, protesting against the President's ‘unconstitutional move’ over CoAS. The effect of this bandh was observed in Rautahat, Bara and Parsa districts with no vehicular movement and closure of markets. On 3 April, three children were injured when an Improvised Explosive Device (IED) exploded at Ganesh Chowk in Birgunj Municipality, Parsa District. On 7 April, an IED explosion at the Pashupati Plastic Industry in Birgunj, Parsa District injured a factory employee. On 18 March, an IED exploded at a crowded vegetable market near Maisthan Temple, Birgunj of Parsa district. Eight people were injured in the incident. Akhil Terai Mukti Morcha (ATMM) owned up for the explosion. On 19 February, an unidentified group shot at a journalist and coordinator of Birgunj-based Gadhimai FM, near Pratimachowk of the southern district of Parsa As from 30 January, Terai Madhesh Loktantrik Party (TMLP) enforced a bandh in Sarlahi District protesting against the government’s decision to move the government offices from Malangawa DHQ and open the United Administrative Service Centre in Hariwan of Sarlahi district. The bandh affects transportation services and closed businesses. Similar bandhs were organized for the same reasons by TMLP in Parsa, Rautahat and Bara districts. 2008 On 7 December, an indefinite strike was announced by the Workers Union shutting down Bara-Parsa Industrial Corridor, demanding the government to raise their salary and to meet other issues they have put across. This strike lasted until 14 December. On 23 November, an IED exploded in Mina Bazar of Birgunj, Parsa district, causing minor injury to one person. Nobody claimed responsibility for the explosion. On 2nd September, a bomb was exploded targeting a textile factory in Birganj, Parsa, for which the Janatantrik Terai Mukti Morcha (JTMM)-Prithvi has claimed the responsibility. On 30 July, activists of Madhesh Youth Forum affiliated to MPRF set fire to all copies of Kantipur and Annapurna Post in Birgunj for not favourably reporting their protests. On 16 July, Akhil Terai Mukti Morcha (ATMM) exploded an IED in Birgunj seriously injuring a woman and local journalist Prakash Tiwari.

Itahari (Sunsari)

2009

On 6 June, workers of the Sunsari-Morang industrial corridor took to the streets to protest the UCPN-M demonstrations. UCPN-M supporters had reportedly vandalized seven factories along the corridor and had attacked workers for defying the Sunsari, Morang and Jhapa bandh called by the UCPN-M on 6 June. From 29 March, the Koshi flood Victims Struggle Committee (KVSC) demonstrated in Sunsari District, demanding the implementation of recommendations of government appointed High Level task force, which includes full compensation for the flood-affected land and crops resettlement to alternative land for those unable to return, livelihood support and continued provision of assistance in camps. On 20 March, demanding for proportional FSU elections following the death of a student on 19 March the Limbuwan Students Council (LSC), affiliated with the Federal Limbuwan State Council (FLSC), announced an indefinite bandh in Taplejung, Panchthar, Ilam, Jhapa, Sankhuwasabha, Terhathum, Dhankuta, Sunsari and Morang Districts. This strike disrupted transport, academic institutions and markets in most of the districts. On 19 February, ‘Koshi Victims' Struggle Committee’(KVSC) demonstrators vandalised a Kantipur Publication’s vehicle at Haripur VDC along East-West highway in Sunsari district on claims that the media house did not publish their news. From 2-3 February, the construction of the Shreepur-Bhantabari section of the East-West Highway in Sunsari District was obstructed by the Koshi Flood Victims Struggle Committee demanding the fulfillment of 13-point demands. The various bandh throughout the District and neighboring Districts also delayed the recovery and reconstruction efforts of the flood response. On 6 February, Madheshi students affiliated to the Madheshi Peoples Rights Forum (MPRF) obstructed public vehicle movement at Duhabi, Sunsari District, on the Biratnagar-Itahari route for several hours, protesting against a previous incident where students were beaten up at Purbanchal Engineering Campus in Dharan, Sunsari District, on 2 February On 22 January, members of the All Nepal National Free Students’ Union (ANNFSU) and the All Nepal National Independent Students’ Union- Revolutionary (ANNISU-R) clashed in several locations, including the Mahendra Multiple Campus in Dharan, Sunsari district, and in Gorkha District.


2008 From 2 November, vehicle movement on the Biratnagar-Itahari route in Morang and Saptari districts remained obstructed after businessmen and locals closed down the market and vehicle movement in Duhabi of Sunsari district, protesting against police intervention in a dispute that led to the injury of some local residents. On 19 October, protesting against the reduction in working hours and subsequent cut in wages, workers of Reliance Spinning Mills in Khanar of Sunsari district shut down the factory and launched an indefinite transport strike in the Khanar (Biratnagar- Itahari route).

Dharan (Sunsari)

2009

On 6 June, workers of the Sunsari-Morang industrial corridor took to the streets to protest the UCPN-M demonstrations. UCPN-M supporters had reportedly vandalized seven factories along the corridor and had attacked workers for defying the Sunsari, Morang and Jhapa bandh called by the UCPN-M on 6 June. From 29 March, the Koshi flood Victims Struggle Committee (KVSC) demonstrated in Sunsari District, demanding the implementation of recommendations of government appointed High Level task force, which includes full compensation for the flood-affected land and crops resettlement to alternative land for those unable to return, livelihood support and continued provision of assistance in camps. On 20 March, demanding for proportional FSU elections following the death of a student on 19 March the Limbuwan Students Council (LSC), affiliated with the Federal Limbuwan State Council (FLSC), announced an indefinite bandh in Taplejung, Panchthar, Ilam, Jhapa, Sankhuwasabha, Terhathum, Dhankuta, Sunsari and Morang Districts. This strike disrupted transport, academic institutions and markets in most of the districts. On 19 February, ‘Koshi Victims' Struggle Committee’(KVSC) demonstrators vandalized a Kantipur Publication’s vehicle at Haripur VDC along East-West highway in Sunsari district on claims that the media house did not publish their news. From 2-3 February, the construction of the Shreepur-Bhantabari section of the East-West Highway in Sunsari District was obstructed by the Koshi Flood Victims Struggle Committee demanding the fulfillment of 13-point demands. The various bandh throughout the District and neighboring Districts also delayed the recovery and reconstruction efforts of the flood response. On 5 February, an estimated 200 Madheshi students of Purbanchal Engineering Campus in Dharan left the campus citing security reasons. On 22 January, members of the All Nepal National Free Students’ Union (ANNFSU) and the All Nepal National Independent Students’ Union- Revolutionary (ANNISU-R) clashed in several locations, including the Mahendra Multiple Campus in Dharan, Sunsari district, and in Gorkha District.

Dhankuta (Dhankuta)

2009

On 21 June, UCPN-Maoists seized about 147 bighas of landform a local in Chhitaha, Sunsari. The same dates, 12 government staff including the CDO were locked in the DAO office for the whole day. Two senior government officials in Dhankuta were injured by the UCPN-Maoists demonstrators. On 5 June, the UCPN-M affiliated Tharu Rastriya Mukti Morcha enforced a one-day bandh in Banke, Dang, Bardiya and Kailali districts. According to media reports, three people were injured in clashes in Bardiya district when UCPN-M cadres tried to enforce the bandh. On 20 March, demanding for proportional FSU elections following the death of a student on 19 March the Limbuwan Students Council (LSC), affiliated with the Federal Limbuwan State Council (FLSC), announced an indefinite bandh in Taplejung, Panchthar, Ilam, Jhapa, Sankhuwasabha, Terhathum, Dhankuta, Sunsari and Morang Districts. This strike disrupted transport, academic institutions and markets in most of the districts. From 21-23 March, the Dhankuta DAO imposed a curfew following a clash between two Political party factions allied to UCPN-M (Young Communist League) and CPN-UML’s Youth Force. The situation reverted back to normal after an agreement was reached between the political groups that the incident that led to the clashes would be investigated. Dhankuta returned to normalcy following an agreement between the UML and UCPN-M. 2008 All Nepal Free Transport Workers Association and other transport organization demanding government to ensure safety and security of transport workers and transportation on the highway. They called of the strike of 16 August after the transporters and the government signed an agreement addressing security concers and a compensation of Rs 1 million to the family of a driver murdered by an unidentified gang in Sarlahi. The bandh seriously affected the hilly districts Ilam, Dhankuta, Sankhuwasabha and Tehrathum, which largely rely on food materials transported from the Terai. Enraged by the strike, vegetable farmers of Dhankuta district staged demonstration and briefly seized a police van and motorcycle to protest against the loss they incurred due to the bandh, as around 500 quintals of vegetables were ruined before reaching the market. Ambulance services of Dhankuta were also obstructed due to fuel shortage. On 4 August, an unidentified group abducted a former Nepal Army soldier from Dhankuta district.


Butwal (Rupandehi)

2009

On 11 February, a group reportedly led by students of Glorious College attacked two media houses in Butwal of Rupandehi District. The group also burnt over 1,000 copies of a local daily newspaper (Mechikali), alleging that the daily carried false news about a student of the same college. On the same day, another group also forced their way into the office of the local Tinau FM radio and reportedly took control of the radio station for over an hour. In the wake of these incidents, the local chapter of the Federation of Nepal Journalists (FNJ) condemned the attacks and accused the local administration of indifference in containing attacks against the media. The indefinite strike called by student unions brought several districts in all the regions of Nepal to a grinding halt protesting against the transport operators raising fares more than 25 percent and refusing to provide 45 percent concession. The student-led strikes started in Palpa on 12 July and spread to six other districts including Arghakhanchi, Rupendehi, Gulmi, Doti, Parbat, Bardiya and Baitadi including the capital. Hundreds of people were stranded along the East-West, Mahendra, and Siddhartha Highways. Lack of transport also constrained supplies of essentials like fuel, food and other daily commodities and risked the lives of patients needing medical aid.

Siddharthanagar (Rupandehi)

The indefinite strike called by student unions brought several districts in all the regions of Nepal to a grinding halt protesting against the transport operators raising fares more than 25 percent and refusing

to provide 45 percent concession. The student-led strikes started in Palpa on 12 July 2009 and spread to six other districts including Arghakhanchi, Rupandehi, Gulmi, Doti, Parbat, Bardiya and Baitadi including the capital. Hundreds of people were stranded along the East-West, Mahendra, and Siddhartha Highways. Lack of transport also constrained supplies of essentials like fuel, food and other daily commodities and risked the lives of patients needing medical aid.

Pokhara (Kaski)

On 22 January 2009, ANNFSU called a strike in Pokhara, Kaski District following a fight between ANNFSU and ANNISU_R members in the town the previous day that left 33 students from both sides injured.

Baglung (Baglung District)

Dalit Janajatis announced a Baglung district bandh on 22 June 2009, after a clash ensued between the police and Dalit Janajatis on the issue of inter-caste marriage. The area remains tense, with no vehicular movement and entire market areas, academic institutions, and industries have been closed in Baglung district.

Birendranagar (Surkhet)

None

Amargadhi (Dadeldhura)

None

TA 7182-NEP L-0 Final Report, Vol. 1

Appendix L

Maps

L1 Biratnagar: Location Map

L2 Birgunj: Location map

L3 Location map of Biratnagar Municipality


PARSA DISTRICT

BARA DISTRICT

TA 7182-NEP L-3

Final Report, Vol. 1

TA 7182-NEP M - 1 Final Report, Vol. 1

Appendix M

Proposed contract packaging

1 The proposed contract packaging derives from the following general principles:

1. To simplify implementation, realize economies of scale, and maximize tenderer interest, the number of contracts should be small and the size of contracts as large as possible.

2. No contract should cover more than one municipality. However, tenderers for the two international consulting services contracts should be invited to offer reduced prices for the simultaneous award of similar contracts in two municipalities.

Table 1 Proposed contract packages

Component/description Total no.

of contracts

Procurement method

Estimated values ($m)

Contracting party

Drainage and Sanitation, Roads and Lanes

EIA and consulting services for design and supervision

2 International QCBS

1.5 Biratnagar

2.3 Birgunj

Treatment plant and collection systems 2 ICB 18.9 Biratnagar

23.1 Birgunj

Consulting services for community mobilization and awareness programs

2 National QCBS

0.8 Biratnagar

0.6 Birgunj

Public toilets, school toilets 2 NCB 0.3 Biratnagar

0.3 Birgunj

Solid waste management Collection systems vehicles 2 NCB/

shopping 0.3 Birgunj

0.3 Butwal

EIA and consulting services for design and supervision

2 National QCBS

0.2 Birgunj

0.2 Butwal

Waste processing facility construction 2 ICB 1.3 Birgunj

1.6 Butwal

Auto-village Consulting services for design and supervision

2 National QCBS

<0.1 Butwal

Construction 2 NCB 2.3 Butwal

Project management

PCO and PIU consultants, Multiple ICS 2.0 DUDBC

Vehicles and equipment Multiple Shopping 0.1 DUDBC

ICB= International competitive bidding, ICS= International consultant selection; NCB=National competitive bidding, QCBS= quality and cost-based selection.

TA 7182-NEP N - 1 Final Report, Vol. 1

Appendix N

Comparison of STIUEIP with UEIP

Shortcoming of UEIP STIUEIP Remarks

Project preparation

Insufficient engineering design.

Fewer components The STIUEIP PPTA provides very few person-months for engineering design, many fewer than on UEIP.

Insufficient attention to land acquisition.

Implementation schedule will allow adequate time for land acquisition.

On STIUEIP it is not sensible to commence implementation until the sites for the regional landfill facilities have been acquired.

Insufficient preparation for public private partnerships

STIUEIP will not include public private partnerships unless there is clear evidence of private sector interest. STIUEIP will include training in PPP.

No private sector interest in the municipality public private partnership proposals. None of the project municipalities have promulgated guidelines for public private partnerships.

Insufficient involvement of stakeholders in design from an early stage, including involvement of NGOs and CBOs.

Focus Groups and Community Questionnaire surveys will amend for these shortcomings. The project design takes these shortcomings into account in its consultation and participation plan.

Project rationale

Too many goals STIUEIP seeks one impact and one outcome.

However, it is not clear that municipalities and DUDBC are really committed to these.

STIUEIP consistent with MDGs Except in Butwal due to decision of Steering Committee/municipality

Insufficient connection between inputs and intended outcomes

STIUEIP inputs all directed to improving environmental health

Project outputs

Too many components Fewer components

Absence of synergy benefits Physical integration of components

Lack of success with institutional reform

Fewer components so that project can have institutional reform weight.

All ADB urban projects emphasize institutional reform. KUDP emphasized reform at the municipal level, SSTWSSSP has institutional reform component for sanitation at the central level.

A comprehensive approach to each component (sub-sector).

Inappropriate use of land pooling.

Land pooling is not proposed as a component.

None of the three municipalities expressed interest in land pooling. GoN land pooling is inconsistent with GoN policies on role of private sector. The private sector does far more land pooling than GoN. Land pooling is not socially inclusive. Land pooling is inequitable. Land pooling is inconsistent with gender equity because most landowners are male.

TA 7182-NEP N - 2 Final Report, Vol. 1

Shortcoming of UEIP STIUEIP Remarks

The transaction costs are high.

Insufficient attention to arrangements for operations and maintenance.

Project design will include incremental staffing and equipment.

On UEIP, institutional arrangements were made after commencement of construction.

Ineffective revenue enhancement capacity building.

Focus on raising property tax rates rather than capacity building.

Requires Government and MuAN initiatives. LGCDP will support reforms in local government financial system.

Institutional and implementation arrangements

Complex arrangements Much simpler project management arrangements (after taking larger size of project into account).

Fewer PIUs, fewer components, integration of technical committee and steering committee at municipal level.

Municipal steering committees

Municipalities to establish project management committees with representation of women and vulnerable groups in accordance with the LSGA.

No arrangement is likely to work satisfactorily in the absence of elected bodies. No representation of women on all-party committees. Important that STIUEIP focus on the role of the TLOs and TLO task force.

Inadequate arrangements for participation of women and vulnerable groups

Financial arrangements

Poor cost recovery from beneficiaries

Emphasis on raising the property tax rates.

See above (project outputs).

Risk management Insufficient attention to risks. STIUEIP has more risks than UEIP. STIUEIP must focus on risk management.

TA 7182-NEP O - 1 Final Report, Vol. 1

Appendix O

Letters from Biratnagar and Butwal

municipalities


Biratnagar Submetropolitan Municipality Office

Biratnagar

Fax:

Ph:

Ref:

Sub: For attention and project implementation

DUDBC

Office of STIUEIP IInd

Babar Mahal

On the issue mentioned above (Subj.) we want to remind you once again that in the later dated 2066/05/04 we have mentioned about the selected and prioritized projects based on the Periodic Plan as follows:

Priority Project Plans 1. Surface water major drain plan (based on Master Plan) 2. Internal by-pass road 3. (public toilets- erased?) 4. Income generating projects (ABCD, shopping complex,

rehabilitation and

Integration through providing overhead bridge and view tower, gudri bazaar shopping complex and hat khola whole sale bazaar, etc.

We have come to know that the projects of our priority list and those we have submitted and defended in the Kathmandu workshop and in the steering committee meetings such as the income generation projects and internal by-pass roads have not been considered at all for construction. Therefore, we like to draw your attention in this matter. We like to let you know that there will be serious problem in the implementation of these projects if otherwise is decided.

Dilip Kumar Chapagain

CEO


Butwal Municipality office

Butwal , Rupandehi , Nepal

Date: 12 October, 2009

Subject: To select projects as per the need of the Municipality.

Department of Urban Development and Building Construction (DUDBC)

Babarmahal, Kathmandu

In relation to project TA 7182-NEP: Preparing the secondary Towns Integrated & Urban Environmental Improvement Project, a meeting of a multi-party committee was held in the presence of the consultants for the project. This meeting and the meeting of Municipality Board decided on identifying the need of the municipality for selecting the projects which has already been corresponded to DUDBC.

Since the meeting of the Project Steering Committee which was chaired by the Secretary of Ministry of Physical Planning and Construction on 2066/06/25 also concluded that all the projects are not as per the need and demand of the Municipality. I request you to address all the needs of the municipality while selecting the projects. I would also like to inform that the municipality is not being able to feel committed and own the projects as they lack in the areas of social service as well as in the areas of skill development and resource mobilization.

The types of projects identified by the municipality are as follows:

1. Management of Auto Village and improvement of infrastructures

2. Construction of Bus Terminals and shopping complexes

3. Construction works of Exhibition site of Butwal Mandal

4. Works on constructing sewerage and its management

5. Identifying the site for landfill and its planning

6. Management of water supply

7. Improvement of lanes, parking lots and works for beautifying the city

8. Development and conservation of the historical sites

Thank you.

Narayan Prasad Bidari

Executive Officer,Butwal Municiaplity