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IN.286-19 20 September 2019

Validation Report Nepal: Validation of the Country Partnership Strategy Final Review, 2013–2018

The attached report is circulated at the request of the Director General, Independent Evaluation Department. The report is also being made publicly available.

For Inquiries: Marvin Taylor-Dormond, Independent Evaluation Department (Ext. 5953)

Walter Kolkma, Independent Evaluation Department (Ext. 4189)

Farzana Ahmed, Independent Evaluation Department (Ext. 5165)

Raising development impact through evaluation

EvaluationIndependent

NepalValidation of the Country Partnership Strategy Final Review, 2013–2018

Validation Report September 2019

Nepal: Validation of the Country Partnership Strategy Final Review, 2013–2018

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

Independent Evaluation: VR-36

NOTES

(i) The fiscal year (FY) of the Government of Nepal ends on 15 July. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2017 ended on 15 July 2017.

(ii) In this report, “$” refers to United States dollars. (iii) For an explanation of rating descriptions used in ADB evaluation reports, see ADB. 2015.

Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations. Manila.

Director General

Marvin Taylor-Dormond, Independent Evaluation Department (IED)

Deputy Director General Véronique N. Salze-Lozac’h, IED Director

Walter Kolkma, Independent Evaluation, Thematic and Country Division (IETC), IED

Team leader Farzana Ahmed, Lead Evaluation Specialist, IETC, IED

Team members Myrna Fortu, Evaluation Analyst, IETC, IED

Alvin Morales, Senior Evaluation Officer, IETC, IED

The guidelines formally adopted by the Independent Evaluation Department (IED) on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. To the knowledge of IED management, there were no conflicts of interest of the persons preparing, reviewing, or approving this report. In preparing any evaluation report, or by making any designation of or reference to a particular territory or geographic area in this document, the IED does not intend to make any judgments as to the legal or other status of any territory or area.

Abbreviations ADB – Asian Development Bank ADF – Asian Development Fund ANR – agriculture, natural resources, and rural development CCRM – climate change risk management COBP – country operations business plan COL – concessional ordinary capital resources lending CPS – country partnership strategy CPSFR – CPS final review CSO DMF

– –

civil society organization design and monitoring framework

DPC – development policy credit EIRR – economic internal rate of return FCAS FY

– –

fragile and conflict-affected situation fiscal year

GDP – gross domestic product GESI ICT

– –

gender and social inclusion information and communication technology

IED – Independent Evaluation Department IEG – inclusive economic growth IEM – independent evaluation mission MFF – multitranche financing facility NSO – nonsovereign operation O&M – operation and maintenance OCR – ordinary capital resources PCR – project completion report PFM – public financial management PPP – public–private partnership PSD – private sector development PSM – public sector management PVR – PCR validation report RCI – regional cooperation and integration SARD – South Asia Department SASEC – South Asia Subregional Economic Cooperation SDG – Sustainable Development Goal SSDP SWAp

– –

School Sector Development Plan sector-wide approach

TA – technical assistance TIA – Tribhuvan International Airport TVET – technical and vocational education and training WUS – water and other urban infrastructure and services

Currency Equivalents (as of 20 July 2019)

Currency unit – Nepalese rupee/s (NRe/NRs) NRe1.00 = $0.0091 $1.00 = NRs110.09

Contents Acknowledgments ........................................................................................................................... v Executive Summary……………………………………………………………………………………………….vii CHAPTER 1: Rationale and Context ................................................................................................... 1 A. Validation Purpose and Rationale .............................................................................................. 1 B. Country Context ........................................................................................................................ 1 C. Government Development Plans in the Context of Country Partnership Strategy, 2013–2017 .. 4 D. Country Partnership Strategy and ADB Portfolio ....................................................................... 4 E. Scope and Method of Evaluation………………………………………………………………………..8 CHAPTER 2: Validation of the Country Partnership Strategy Final Review ......................................... 10 A. Relevance ................................................................................................................................ 10 B. Efficiency ................................................................................................................................. 19 C. Effectiveness............................................................................................................................ 21 D. Sustainability ........................................................................................................................... 30 E. Development Impacts .............................................................................................................. 33 F. ADB and Borrower Performance .............................................................................................. 41 G. Overall Assessment .................................................................................................................. 42 H. Assessment of Country Partnership Strategy Final Review Quality ........................................... 44 CHAPTER 3: Key Issues, Lessons, and Recommendations ................................................................. 45 A. Issues ...................................................................................................................................... 45 B. Lessons .................................................................................................................................... 47 C. Recommendations................................................................................................................... 49 Appendixes ........................................................................................................................................ 51 Appendix 1: Nepal Country Lending Portfolio, 2013–Mid-2018 ......................................................... 52 Appendix 2: Asian Development Fund Priority Coverage During and Post-Asian Development Fund

Grant Provision ...................................................................................................................... 76 Appendix 3: Gender and Social Inclusion Performance in Selected Projects ........................................ 80 Appendix 4: Sector Outputs and Outcomes Achievement .................................................................. 84 Appendix 5: ADB Programmatic Response to Nepal’s Climate Change Challenge………………………92 Appendix 6: ADB Programmatic Response to the 2015 Earthquake Disaster…………………………….93 Appendix 7: Country Development Goals Achievement over the Country Partnership Strategy,

2013–2017………………………………………………………………………………………………94 Appendix 8: Linked Document…………………………………………………………………………………95

Acknowledgments This report was prepared by the Independent Evaluation Department (IED) of the Asian Development Bank (ADB). The validation was led by Farzana Ahmed, with IED team members Myrna Fortu and Alvin Morales. Director General Marvin Taylor-Dormond, Deputy Director General Véronique N. Salze-Lozac’h, Director Walter Kolkma, and Jose Antonio Tan III provided overall guidance. The international consultant was Gabriele Ferrazzi. Alexis Arthur Garcia and Bhoj Raj Poudel, national consultants, worked on the country portfolio and facilitated the in-country visits, respectively. Valuable inputs and comments at various stages were received from Renaud Meyer, Thailand UNDP Country Coordinator, as external peer reviewer and Joanne Asquith, Principal Evaluation Specialist as internal commenter. The IED team is grateful to Asian Development Bank staff at headquarters and the Nepal Resident Mission, and Government of Nepal officials and other stakeholders for useful discussions and inputs.

Executive Summary The Asian Development Bank (ADB) country partnership strategy (CPS), 2013–2017 for Nepal aimed to accelerate sustainable and inclusive economic growth. To meet this objective, ADB provided sovereign financing (including cofinancing) in the form of loans, grants, and technical assistance totaling $2,542.71 million from 2013–2018. This validation considers the program successful on the borderline. The CPS was relevant to the sustainable and inclusive growth objective of the government, although the program was less responsive to the country’s transition to federalism since ADB did not adjust existing and planned projects quickly enough. ADB operations are yielding outputs and some outcomes in key areas, particularly urban infrastructure, school reconstruction after the earthquakes, energy, and agriculture and/or rural development. Little progress was made in private sector development. Allowing for differences in various sector programs and after weighing their size, the program is on balance effective, although on the margin. Some sovereign flagship projects in water provision, energy, and transportation are well behind schedule, raising reputational risk to the government and ADB. Slow progress on institutional development against the country’s ambitious federalization goal, some poor results, and delays in many projects account for the validation’s rating of the program as less than efficient. The government struggles to achieve reforms and institutional arrangements that ensure the sustainability of project results, making the program less than likely sustainable. The development impacts are nevertheless satisfactory, in the expectation that delayed flagship projects will be concluded soon. This report makes five recommendations: (i) engage more intensively on institutional development and governance reform, and match project scale and complexity with emerging capacities in government; (ii) ensure that ongoing and new operations take due consideration of the emerging federal system of government and provide strategic support to key intergovernmental subsystems to facilitate the transition; (iii) clarify in the next CPS ADB’s position in the broad effort to support inclusive economic growth, indicating the specific contributions of key sector programs, and the Strategy 2030 priorities; (iv) make a strong effort to attract grant cofinancing and focus on capacity development; and (v) build resident mission capacity to ensure it plays a meaningful role in project processing, implementation, and policy dialogue.

The Independent Evaluation Department (IED) validated the country partnership strategy final review (CPSFR), Nepal 2013–2017, prepared by the South Asia Department of the Asian Development Bank (ADB). The CPSFR rated the program successful based on a program rated relevant, effective, less than efficient, likely sustainable, and with satisfactory development impacts. The corresponding assessment resulting from this validation is provided further ahead. IED’s validation is based on the information presented in the CPSFR, supplemented by a review of the project documents and reports, country data, and consultations with ADB staff,

the government, and other stakeholders during the validation mission in March 2019.

Country Context Located between the People’s Republic of China and India, Nepal is a landlocked country of about 30 million people. It is one of the world’s poorest countries, with a gross domestic product (GDP) per capita of about $1,000 in fiscal year (FY) 2018. Since 2015, Nepal has become democratized, abated violent conflict, and attained a measure of economic stability. It is now mid-stream in its

viii Nepal: Validation of the Country Partnership Strategy Final Review, 2013–2018

process of shifting to a federal form of government. During the country partnership strategy (CPS) period (2013–2017), Nepal experienced some political unrest and disruptions in commerce in the Terai region. It was also shaken by two earthquakes (April and May 2015) that took 9,000 lives and destroyed or damaged assets totaling about 25% of the country’s GDP. Nepal’s economy rebounded in FY2017, spurred by reconstruction, but fell back again in FY2018, partly because the floods of August 2017 had slowed agricultural output growth. Accelerated and inclusive economic growth is hampered by the country’s rugged terrain, inadequate infrastructure, and policies that do not support private sector investments. Acute power shortages, difficult labor relations, and fuel shortages have been a drag on economic growth. Remittances, historically an important boost to economic development, grew nominally but declined as a share of GDP from 26.3% in FY2017 to 25.1% in FY2018, as a result of policy actions in migrant destination countries. Nepal aims to become a middle-income country by 2030. To do so, it will need a breakthrough in its economic policies to attain growth rates of at least 7%–8%. This will mean shifting from remittance-led and consumption-based growth to one that is driven by investments and productivity. At the same time, as it seeks to accelerate growth, Nepal is dealing with the transition to federalism, shifting staff to subnational governments, and revamping intergovernmental transfers, institutions, and other features of a decentralized federation. Along with these changes and in recognition of the added fiduciary risk of new institutional arrangements, Nepal endeavors to improve public financial management. It does this against a backdrop of slow progress in many areas of governance.

Country Partnership Strategy and ADB Support The CPS was aligned with the strategic priorities of the Government of Nepal as articulated in its 13th Three-Year Plan (FY2014–FY2016), and with

the priorities set out in ADB’s Strategy 2020. Economic growth was to be driven by infrastructure development, with an emphasis on regional links. Access to economic opportunities was to be gained through education and skills development. Social protection was to be promoted through work on disaster risk management, skills development, and knowledge partnerships. Access to economic opportunities was also to be aided by mainstreaming gender and social inclusion (GESI), particularly through improved access to basic services. Over 2013–2017, ADB’s country program comprised 67 sovereign operations, including loans, grants, and technical assistance (TA) totaling $2,542.7 million (including cofinancing of $802.5 million). This represents an annual average of $509 million in approvals; higher than in the past. This level of ADB support is substantial, particularly for a medium-sized developing member country like Nepal. The leading sectors in the CPS implementation were energy (29%); water and other urban infrastructure and services (WUS, 24%); education (20%); transport (17%); and agriculture, natural resources, and rural development (ANR, 9%). This confirms the historical dominance of the infrastructure sectors; combined, they account for about 70% of the approved portfolio. Most ADB financing in Nepal historically involved grants and concessionary lending—lending from the Asian Development Fund (ADF) turned into concessional OCR lending (COL)—but grants were ended in 2013 (except for disaster management), when Nepal’s debt management improved. The portfolio has undergone a slight change since then, with fewer regional public goods (connectivity) and food security projects.

Assessment The CPSFR assessed the CPS as relevant, noting its consistency with national development plans and alignment with ADB’s Strategy 2020. It was not as focused as planned but managed to maintain a concentration in infrastructure sectors. The rather broad reach of the lending program was helpful in effectively pursuing the overarching objective of the CPS, i.e., inclusive economic growth (IEG). Moreover, the program was

Executive Summary ix

responsive to Nepal’s emergency relief and rehabilitation needs, particularly in the education sector. In this respect, it supported the access and social protection dimensions of IEG. It lost some relevance during the implementation period because it was not able to adjust sufficiently to the changes brought about by the shift to federalism. ADB nonetheless played a large role in supporting the government, especially after the 2015 earthquakes, which required flexibility. It also attracted a high level of cofinancing and played a role in coordinating the development partners in key sectors, even if the overall, government-led coordination of partners was weak. The lending program also lacked an explicit strategy or sufficient attention to furthering its engagement with civil society organizations (CSOs) as part of its stated partnership agenda. The rated projects, spilling over from the prior CPS period (2010–2012), were relevant. However, the national sector outputs in the country results framework were sometimes poorly selected and indicated a mismatch with the intended outputs and outcomes of many projects approved or carried over from the previous CPS period. IED has an issue with how ADB decided to structure its results frameworks, with attention to government targets but no output or outcome targets for the ADB-supported program. Nonsovereign operations were insufficient in number and lacked direction. ADB efforts faced an unpredictable and unfriendly business environment that discourages private sector investment. These efforts were also not firmly anchored to the Sustainable Development Goals (SDGs) framework, which calls for sharing of investment between the public and private spheres. Modalities in the program changed little (a results-based loan was piloted). Multitranche financing facilities (MFFs) were explored, but with little coherence—some project designs shifting from standalone to MFF and back to standalone. Despite some weaknesses, project designs on the whole were adequate. On balance, the validation team rates the CPS as relevant. The CPSFR was concerned with the efficiency of the country program, assigning it a rating of less than efficient. Despite some positive aspects, particularly the efficient ratings given to nearly all assessed projects spilling over from the previous

CPS, the CPSFR recognized the delays in implementation experienced across many projects, which arose from multiple causes and led to poor portfolio performance. Flagship projects were particularly affected, with contract management being the main shortcoming; they are posing a reputational risk to ADB. The government and ADB are making strong efforts to overcome portfolio performance issues, through tripartite meetings and training for executing and implementing agencies, but progress is slow, and approaches are not sufficiently oriented on institutional capacity. Some of ADB’s large flagship projects, which dominate their respective sectors, were inordinately delayed and contributed little to the nationally defined outputs and outcomes reflected in the CPS results framework for the period. Examples of delayed projects with long implementation periods are the Melamchi Water Supply Project and the South Asia Subregional Economic Cooperation Roads Improvement Project (representing 30% of the transport sector portfolio); and the Tanahu Hydropower Project, the South Asia Subregional Economic Cooperation Power System Expansion Project, and the Power Transmission and Distribution Efficiency Enhancement Project (representing 75% of the energy sector portfolio). On balance, the validation also finds the country program as less than efficient. Projects closed in the current CPS were largely assessed by the CPSFR favorably for their effectiveness, particularly in their physical components (civil works and/or equipment). However, several were less than effective in their soft components, particularly institutional strengthening. In the large Melamchi Water Supply Project, the tunneling work was delayed for 14 years. The unusually long delay and the likely effect of wear and tear on unused pipe systems downstream resulted in a less than effective rating for the period under review, since no water flowed from the Melamchi diversion into the water supply network. Projects ongoing as of the end of the CPS period show fewer outputs than expected, particularly as regards Kathmandu Valley water and/or sanitation (outside, the situation was better). The energy program also faces major delays. However, once projects are complete, they

x Nepal: Validation of the Country Partnership Strategy Final Review, 2013–2018

should enable major contributions to sector outcomes. Especially in transmission, and to a lesser extent in distribution, these outputs and outcomes are already being achieved. The transport program was rated effective. The education sector program included school reconstruction after the earthquakes, which was by and large effective, but the overall education efforts were less than effective, and while the current results-based loan program, a cooperation with many other donors, is at an early stage, it is already running into difficulties. Smaller ANR, finance, public sector management (PSM), industry, and disaster reconstruction projects proved more fruitful or are more promising in their outputs and outcomes. In conclusion, while the performance of the ADB portfolio in water supply and education fell short, on balance and after considering the size of various interventions, the validation rates the overall CPS program as effective. The CPSFR assessed the results obtained by the CPS program as likely sustainable. It can point to the government and ADB’s increasing attention to better operation and maintenance (O&M) budgets and institutional arrangements for project-built infrastructure. Strides are being made in adjusting tariffs to match costs, both in energy and water services. Local water-user committees are operating in some areas, and larger central organizations are seeking to bolster their capabilities to manage the sector in general and larger projects in particular—e.g., in the Kathmandu Valley. The efforts have yet to translate into consistent attention and action across all sectors—as evident at project level, where the “hand-off” at the end of a project is prone to risks, e.g., in the case of municipal roads; and at sector level, where tariffs as well as O&M funds and institutional arrangements are still insufficiently established to ensure the sustainable maintenance and expansion of services. The shift to a federal system has made the challenge more complicated, generating uncertainty about intergovernmental O&M roles and governance models that were being fashioned (e.g., municipal financial management). On balance, the validation rates the ADB program results less than likely sustainable.

The CPSFR rated ADB’s development impact as satisfactory. Development impacts are not well revealed in the selected country targets, but a more sector-based assessment suggests that ADB operations were important contributors to increased energy generation and use; greater movement of people and goods, including trade with neighbors; better urban services; and increased productivity and incomes in agriculture. The country program’s impacts are marred by slow progress in flagship projects, but ADB is well placed to increase its impact as projects come to completion. The results of cross-cutting priorities are less evident. Serious governance challenges persist. While the empowerment of women and disaster recovery are evident at local and/or project level, system-wide changes are less evident. Private sector development and governance show modest improvement but face many challenges in generating a significant impact. Environmental concerns are gaining more attention, which augurs well for a more determined effort—one that will need to be more intensive and robust on climate change measures, disaster risk management, and project-specific environmental safeguards. On balance, and expecting the conclusion of some flagship projects in the near term, the validation rates the development impacts as satisfactory. The CPSFR rated ADB’s performance as satisfactory. It noted its alignment with government plans, its responsiveness to earthquakes and floods, administrative flexibility, its leadership and coordination with other development partners in certain sectors, and capacity development efforts. The validation shares this general assessment as satisfactory, noting also ADB’s efforts to jointly review and improve the country portfolio with the government. Through its work with various municipalities, ADB was well placed in some sectors to conform with the government’s restructuring that came with federalism. In other sectors, ADB was not well prepared and was slow to adjust, particularly in education and in some dimensions of PSM. Some projects lost relevance because ADB did not adapt fast enough. More broadly, ADB has yet to make the most of its resident mission staff in terms of employing their processing support, exploiting their local knowledge, and enlisting them in policy dialogue

Executive Summary xi

with senior government officials. The resident mission needs to attract and maintain high-caliber staff across sectors to be effective in policy dialogue. A closer review of how implementation is managed is necessary, given the challenges in improving efficiency, achieving results, and ensuring sustainability. The CPSFR rated the borrower’s performance as satisfactory. It appreciated the government’s response during disaster management, where counterpart funds and budget allocations complemented ADB operations. The CPSFR adds that the government also complied with most of the loan and grant covenants, fulfilled tranche conditions for program loans, and submitted timely audited financial statements. It also sought to staff projects with experienced personnel and to minimize the turnover of project directors. The CPSFR does acknowledge weaknesses in project management (e.g., inadequate supervision by consultants, and shortcomings in procurement and contract management, or in the mobilization of contractors and consultants), and the lack of timely release of counterpart funds in the required amount. The validation finds the borrower’s performance as satisfactory but adds that the government could have approached its federal restructuring effort in a more systematic and prepared fashion, and worked harder to coordinate the key national agencies. The government also could have been more proactive in guiding some projects. In summary, the validation rates ADB’s program in Nepal during the CPS 2013–2017 period as relevant and effective, but less than efficient and less than likely sustainable. The early indications of development impacts suggest that these are satisfactory, provided some flagship projects come to fruition soon. The performance of the borrower and ADB is also satisfactory. The performance of ADB operations must be viewed against the backdrop of the very challenging development context in Nepal. As the CPSFR noted, Nepal has faced political and policy instability, earthquakes and floods, and trade and supply obstructions. ADB responded nimbly to most emerging needs but fell short on the federalism challenge. The responsiveness led to a more sprawling program than intended. ADB will have to make a substantial effort to ensure the

future success of its country program. Overall, the validation assesses ADB’s 2013–2017 program for Nepal as successful on the borderline.

Issues Nepal’s institutional context is comparable to that of a fragile and conflict-affected state. ADB’s portfolio performance provides ample evidence on this. ADB’s support to institutional strengthening was largely piecemeal and project-specific, without sustained development impact. Its longstanding support to subnational public financial management in Nepal was affected by the government’s decision to accept only grants for soft sector issues such as capacity development, and perhaps concessional loans for budget support. Given that Nepal no longer has access to ADB grants, ADB has lost influence by not being able to offer a grant or a policy loan that would enable it to stay at the center of the federalist restructuring dialogue. Weak and evolving institutions and governance continue to hamper Nepal’s capacity to deliver, post federalism, on its agenda of inclusive economic growth. Nepal needs strong institutions to attain political stability, reconciliation, justice for all; effective decentralized governance, and ethnically and regionally balanced growth. These challenges place a strain on any state, let alone one that has endured a long period of conflict that weakened its ability to deliver. The intended outcomes and sector outputs of the CPS were not well linked to the program actually offered. ADB’s CPS design reduced its potential to deliver, given its limited attention to how the development outcomes to be produced by the projects should be timed and synchronized so as to contribute optimally to the regional and national outcomes pursued. Lack of direction in ADB support for Nepal’s urbanization carries the risk of exacerbating Nepal’s gap in inter-regional development. The CPS noted that reducing regional disparities is a very high government priority, but it does not respond to this priority in any clear fashion—neither the underpinning program nor related support discuss this aspect.

xii Nepal: Validation of the Country Partnership Strategy Final Review, 2013–2018

Infrastructure delivery was not adequately complemented by support for government reforms and capacity development. ADB did not effectively use the mix of development support modalities to stay involved in key governance and capacity development efforts—in particular, in the transition to federalism. This suggests a long and difficult transition also for the existing and new projects, which will be impacted by political and implementation risk. Capacity development in the ADB program was hampered by poor design of project elements. What was called for were more explicit approaches and benchmarks, stronger monitoring and reporting, and a more balanced attention to project management. This should have been done with a broader focus on government institutions that themselves are mandated to develop the capacity of subnational governments.

Lessons The validation offers the following lessons: Poor sequencing of sector and country operations can prevent outputs and outcomes of individual projects from contributing effectively to the overall CPS and sector outcomes. For example, in Nepal, the success of a viable agribusiness program centered on public–private partnership would depend on a viable rural road network to transport goods, and that has not materialized. The efficacy of ADB’s development efforts is also linked to subnational and regional development outcomes. ADB’s program reflects the challenges and opportunities found in the quickly growing urban settlements. Its investments and policy support in rural areas and more remote regions, e.g., in agriculture and rural roads, represented a rather small share of the portfolio—the ANR sector accounted for 9% of approvals by value. Neglect of the urban–rural and regional imbalances in government or ADB programs contributed to the persistence of trends that are working against bringing development to all places in Nepal.

Recommendations The CPSFR offered five recommendations for ADB to consider in the formulation of the CPS for 2020–2024. The validation adds the following strategic and operational recommendations: 1. Strategic recommendations (i) Engage more intensively on institutional

development and governance reform, and match project scale and complexity with emerging capacities in government. This may require more effective communication on what ADB can offer as a knowledge and finance institution.

(ii) Ensure that ongoing and new operations

take due consideration of the emerging federal system of government and provide strategic support to key intergovernmental subsystems to facilitate the transition. A timely portfolio analysis centered on federalism-induced restructuring and carried out with key counterpart agencies will help ADB in managing the effects of federalization on project implementation and in adjusting existing projects. It might also identify issues of relevance to the design of new projects, including cross-sector aspects that would benefit from ADB support, such as the need for robust institutions and procedures to ease the transition to federalism.

(iii) Clarify in the next CPS ADB’s position in

the broad effort to support inclusive economic growth, indicating the specific contributions of key sector programs, and the Strategy 2030 priorities. Better coordination between sector divisions will allow for a more integrated CPS program design; particular attention needs to be given to the approach to private sector development, inclusion of marginalized groups and regions, climate change, disaster risk management, and CSO engagement.

Executive Summary xiii

2. Operational recommendations

(iv) Make a strong effort to attract grant cofinancing and focus on capacity development. The use of a variety of lending modalities will guard against a sudden drop in important support and help balance infrastructure spending with assistance to government reforms and capacity development.

(v) Build resident mission capacity to ensure it plays a meaningful role in project processing, implementation, and policy dialogue. Ensure sufficient capacity of the resident mission to allow for a balanced portfolio in terms of project size and the mission’s meaningful role in policy dialogue and project processing.

CHAPTER 1

Rationale and Context

A. Validation Purpose and Rationale 1. The Asian Development Bank (ADB) is preparing a new country partnership strategy (CPS) for Nepal for 2020–2024. Both a self-evaluation of the current CPS1 and an independent validation of that evaluation are needed to assess the strategy’s performance against its intended objective and to provide recommendations for the next CPS.2

2. The South Asia Department (SARD) prepared a self-evaluation, the CPS final review (CPSFR) covering the period from 2013 to Mid-2018, and this was received by the Independent Evaluation Department (IED) in mid-December 2018.3 The CPSFR assessed ADB’s country program as relevant to Nepal’s development efforts; effective in achieving results, with these results likely to be sustainable; and satisfactory in its development impact. The CPSFR acknowledged the program to be less than efficient in implementation but assessed it overall as successful. IED prepared a validation plan4 to (i) validate the CPSFR findings, (ii) identify lessons and recommendations for ADB’s future operations in Nepal, and (iii) contribute to the formulation of the forthcoming CPS 2020–2024 for Nepal. B. Country Context 3. Located between the People’s Republic of China and India, Nepal is a landlocked country with about 30 million people. It is one of the world’s poorest countries, with a poverty headcount of more than 25% of the population and gross domestic product (GDP) per capita that just crossed $1,000 in fiscal year (FY) 2018.5 Despite its troubled history, Nepal has made considerable progress toward a more inclusive democracy. It shed monarchical rule, abated violent internal conflict, and attained a measure of economic stability. Constitutional reforms, culminating in 2015 in the new Constitution declaring Nepal a federal democratic republic with seven provinces,6 enshrined provisions that seek to integrate ethnic and political groups into a more just society. In particular, the new constitution introduced measures for greater inclusion of women and disadvantaged ethnic groups such as the Dalits.7

4. During the CPS period, political unrest flared up in the southern Terai region. The country was also shaken by two earthquakes (April and May 2015) that took 9,000 lives and destroyed or damaged

1 ADB. 2013. Country Partnership Strategy: Nepal,2013–2017. Manila. 2 The validation of the CPSFR by IED is mandated under ADB’s operations manual. ADB. 2013. Country Partnership Strategy.

Operations Manual. A2/BP. Section A2, para. 5. Manila; ADB. 2013. Independent Evaluation. Operations Manual. K1/BP. Manila. 3 IED received the self-assessed CPSFR on 17 December 2018 through the Director General, SARD. 4 ADB. 2015. Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final

Review Validations. Manila. 5 Government of Nepal, National Planning Commission, Central Bureau of Statistics. 2018. Nepal in Figures 2018. Accessed on

19 December 2018. http://cbs.gov.np/publications/Nepal_Figure_2018; the poverty headcount data is based on the Nepal Living Standards Survey 2010/2011.

6 Following restructuring, many village development committees were merged, and district development committees were made administrative areas. Hence Nepal’s 753 elected local governments now include 460 village municipalities, 276 municipalities, 11 sub-metropolises, and 6 metropolises.

7 Government of Australia, Asia Foundation Partnership in Nepal. 2017. Diagnostic Study of Local Governance in Federal Nepal. https://asiafoundation.org/wp-content/uploads/2018/07/Diagnostic-Study-of-Local-Governance-in-Federal-Nepal-07112018. pdf.

http://cbs.gov.np/publications/Nepal_Figure_2018

2 Nepal: Validation of the Country Partnership Strategy Final Review, 2013–2018

assets totaling about 25% of the country’s GDP. Trade and supply disruptions with India in 2015 further hurt economic activity. 8 These constraints added to the pervasive and persistent challenges in governance, and left Nepal as South Asia’s least-strongly-performing economy in terms of GDP per capita. 9 On a more positive note, Nepal was able to achieve 7.4% growth in FY2017, spurred by reconstruction, a more stable trading and sociopolitical environment, and rebounding tourism. Unfortunately, this improvement did not last into FY2018 and growth fell back to 5.9%, in part because the floods of August 2017 had slowed agricultural output growth. 10

5. Seen from a longer-term perspective, Nepal has achieved a remarkable reduction in poverty and income inequality. The headcount poverty rate declined at an average annual rate of 2.2 percentage points between FY1996 and FY2011 (to 25.2%). It also kept unemployment low and women’s labor force participation high. Nepal is ranked 27th among developing countries in the inclusive development index of the World Economic Forum (2017), well ahead of Brazil, India, and South Africa.

6. Accelerated and inclusive economic growth is hampered by the country’s rugged terrain, inadequate infrastructure, and policies that do not support private sector investments. Acute power shortages, difficult labor relations, and fuel shortages have been a drag on economic growth. 11 The trade deficit surged to 37.7% of GDP in FY2018 (from 33.9% in FY2017). Remittances, historically an important boost to economic development, grew nominally but declined as a share of GDP, from 26.3% in FY2017 to 25.1% in FY2018. These factors led to an increased current account deficit in FY2018. The United States dollar–rupee exchange rate depreciated by 6.2%. Gross official reserves declined slightly but were sufficient to cover 8.3 months of imports (compared with 9 months in FY2017).12

7. Nepal aims to become a middle-income country by 2030. To do so, it will need a breakthrough in its economic policies to attain growth rates of at least 7%–8%, requiring a shift from remittance-led13 and consumption-based growth to one that is driven by investments and productivity. The shift calls for a more intensive engagement of the private sector, e.g., through public–private partnerships (PPPs), mobilization of domestic resources, and attraction of foreign direct investment.

8. Boosting investment and productivity is essential in both lagging and expanding sectors. Agricultural growth is low, hampered by low investment. On the other hand, hydropower energy projects are attracting a great deal of investment, but poor project management is hampering their development. 14

9. As Nepal develops, it is struggling to address urban–rural and inter-regional imbalances. Urban areas’ human development index score has been better than that of rural areas. 15 The fast urbanizing Kathmandu Valley and emerging border towns offer better access to services, resources, and opportunities. For instance, the expansion of credit was driven largely by an urban focus; metropolitan

8 World Bank, Independent Evaluation Group. 2018. Nepal CPS FY2014–2018 – Completion and Learning Review. Washington,

DC. 9 Nepal’s average per capita GDP during 2006–2016 was estimated at $595, compared with $853 for Bangladesh, $2,181 for

Bhutan, $1,318 for India, and $2,887 for Sri Lanka. World Bank. World Development Indicators. https://data.worldbank.org/topic/economy-and-growth?view=chart

10 ADB. 2018. Macroeconomic Update NEPAL. Volume 6, No. 2 September. Manila. 11 ADB and Nepal Fact Sheet. 31 December 2013. Manila. 12 World Bank. 2018. Nepal Development Update. Washington, DC. 13 World Bank. 2018. Climbing Higher: Toward a Middle-Income Nepal. Washington, DC. http://www.worldbank.org/en/region/

sar/publication/climbing-higher-toward-a-middle-income-country 14 World Bank. 2017. Climbing Higher: Toward a Middle-Income Nepal. Nepal Country Economic Memorandum. Washington, DC. 15 P. Manandhar. 2011. Contested Rural Development in Nepal. NCCR North-South Dialogue 32 (Working Paper, Research Project

1 - Contested Rural Development). Bern and Zurich, Switzerland: NCCR North-South.

https://data.worldbank.org/topic/economy-and-growth?view=chart

http://www.worldbank.org/en/region/sar/publication/climbing-higher-toward-a-middle-income-country

http://www.worldbank.org/en/region/sar/publication/climbing-higher-toward-a-middle-income-country

Rationale and Context 3

areas average nearly three accounts per person, while rural areas average only 0.16 accounts per person. 16 More than 60% of the road network is concentrated in the lowland areas of the country bordering India. 17

10. Nepal is mid-stream in turning the 2015 Constitution into a workable federal structure. The 2017 elections brought nearly 40,000 officials to local, provincial, and federal parliaments; these actors now need certainty in their mandates, institutional structures, intergovernmental mechanisms of coordination, financing, and reporting. Some sector legislation has been passed or is under preparation, promising more details on functional assignment and intergovernmental roles and mechanisms. Civil servants are being “adjusted” to provincial and local governments, and provincial civil service commissions are about to be established. Financial transfers to the new subnational units already are at 8.3% of GDP, and this is expected to increase; this shift augments fiduciary risk in the short to medium term. Ensuring accountability under a set of more decentralized fiscal arrangements will be a challenge, particularly since the Constitution includes few mechanisms for intergovernmental supervision and accountability and has raised local expectations with its generous wording on the standing of local and provincial governments. 18

11. Nepal has undertaken some important reforms to public financial management (PFM), such as single treasury accounts for national and subnational governments, and e-government procurement. It is currently working on many others, including the strengthening of internal and external auditing. Additional reforms are at their early stages, such as the strengthening of anticorruption institutions. These efforts need to be continued and allied to the state restructuring (para. 13). Development partners supported PFM strengthening, but more needs to be done, particularly subnationally.

12. Nepal’s government has received rather low to mid-level scores in governance assessments. The Worldwide Governance Indicators show some improvement in voice and accountability over the CPS period,19 linked no doubt to a more favorable political climate and less conflict. However, stagnation is seen in efforts to control corruption, and a decline is evident in government effectiveness, rule of law, and regulatory quality. Bad governance, in all of its facets but particularly in terms of corruption within elected bodies and the bureaucracy, has contributed to a lack of trust between citizens and their government, creating tensions and conflict that brought Nepal close to failed-state status. 20 Some progress was made following the quake disaster, an event that seemed to propel key actors to find compromise, conclude constitutional reforms, and recommit to good governance. The challenge is enormous, as evidenced by the work facing the Commission for the Investigation of Abuse of Authority, which received 15,126 cases of corruption 21 and finds it hard to reduce its backlog and apply proper investigative approaches. From 2004 to 2016, Nepal’s average rank in the corruption index was 133rd out of 175 countries.

16 International Monetary Fund. 2019. Nepal – Selected Issues. IMF Country Report No. 19/61. February. 17 A. Dixit. 2017. Infrastructure Finance Strategies for Sustainable Development in Nepal. National Workshop on Financing

Strategies for Sustainable Development in Nepal, National Planning Commission of Nepal and the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), 24 January 2017, Kathmandu.

18 Section 232(1) of the Constitution (2015) notes that “The relations between the Federation, States, and Local level shall be based on the principles of cooperation, co-existence and coordination.”

19 World Bank. http://info.worldbank.org/governance/wgi/index.aspx#reports 20 Using the post-2014 terminology of “fragile state,” Nepal was ranked in the 30s during 2014–2018, out of 178 ranked countries.

Since 2015, it has been listed under the ‘Alert’ category. Fund for Peace, Fragile States Index: http://fundforpeace.org/fsi/ (accessed 25 January 2019).

21 S. Bhandari. 2017. Good governance: New hopes. The Himalayan. November. https://thehimalayantimes.com/opinion/good-governance-new-hopes/

http://info.worldbank.org/governance/wgi/index.aspx#reports

http://fundforpeace.org/fsi/


C. Government Development Plans in the Context of Country Partnership Strategy, 2013–2017

13. Nepal’s 13th Three-Year Plan (FY2014–FY2016) aimed to achieve sustainable, broad-based, inclusive economic growth. It set a target of 7% growth, prioritizing energy, transport, and urban service infrastructure. Energy security in rural and urban areas was pursued through dam hydropower and renewable energy schemes, and the expansion of transmission and distribution systems. Rural electrification was to be based on renewable sources (solar, wind, and hybrids) and mini run-of-the-river hydro plants. The longer-term objective in this sector is to export power to India and Bangladesh. In transport, the government aimed to expand the strategic and rural road networks and air transport capacity to increase connectivity, provide greater access to basic services and markets, and promote tourism and trade. For its towns and cities, the government sought to improve basic services such as water supply, wastewater management, and urban transport. In agriculture, the government wished to increase agricultural productivity and transformation, addressing poor water management and incomplete irrigation systems, the need for rural roads, and reforms around input supply and extension. In the tourism sector, the plan sought to modernize infrastructure (airports) and create conditions for private sector investment. Social services and social protection plans called for investments in health, education, and skills. These also were to contribute to achieving the Millennium Development Goals. The plan also included a food and employment program. Another priority was governance and public financial management, encompassing improvements in public procurement, results-based management, and corruption prevention and control. The government also intended to accelerate basic reforms to encourage greater private sector investment and PPPs. On the environmental front, the plan addressed climate change adaptation and mitigation and overall environmental protection. On other cross-cutting issues, the government attached high priority to pursuing gender equality, and to reducing regional disparities.

14. Nepal is currently developing its initial concept for the 15th National Plan, covering FY2020–FY2024. A longer horizon is found in the Status and Road Map 2016–2030 for the Sustainable Development Goals (SDGs). In pursuing the SDGs, Nepal points out their broad spread of sectors, and notes that support from ADB, the World Bank, and other financial institutions focused primarily on infrastructure and hydropower development. 22 Implied is an invitation to financial institutions to consider carefully how they are getting behind the SDG effort.

D. Country Partnership Strategy and ADB Portfolio

1. ADB Country Partnership Strategy 15. The CPS 2013–2017 makes the government’s development objective (accelerated, sustainable, inclusive economic growth) its key reference, directing support to all three elements of inclusive economic growth (IEG), in line with ADB’s Strategy 2020. Hence economic growth was to be driven by infrastructure development, with an emphasis on regional links. Access to economic opportunities was to be gained through education and skills development. Social protection was to be promoted through work on disaster risk management, skills development, and knowledge partnerships. Access to economic opportunities was also to be aided by mainstreaming gender and social inclusion (GESI), particularly through improved access to basic services. The country operations business plan (COBP), 2015–2017 that followed the CPS added that the ADB program was aligned with Nepal’s Three-Year Plan (FY2014–FY2016), which was still under preparation when the CPS 2013–2017 was drafted.

22 Government of Nepal National Planning Commission. 2017. National Review of Sustainable Development Goals. Kathmandu.


2. Planned ADB Country Program 16. ADB ended the previous CPS with a loan portfolio of 41 loans and grants with a net portfolio value of $1,300 million.23 The CPS 2013–2017 program called for $800 million in lending products and $25 million in nonlending products. The COBP 2015–2017 allocated $480 million for 2017, of which $300 million came from ordinary capital resources (OCR). In the planned program, the infrastructure focus is evident, 24 with a continuation of investment (additional financing) in flagship projects initiated under the previous CPS (Melamchi Water Supply Project; Kathmandu Valley Water Supply Improvement Project; and Gautam Buddha International Airport, delivered through the South Asia Tourism Infrastructure Development Project). This focus on infrastructure is seen in new projects as well: electrical power generation in the Tanahu Hydropower Project, priority sections of the Strategic Road Network—through the South Asia Subregional Economic Cooperation (SASEC) Roads Improvement Project—and water and sanitation improvements in urban settlements (Kathmandu Valley Wastewater Management Project and the Third Small Towns Water Supply and Sanitation Sector Project). In the agriculture, natural resources, and rural development (ANR) sector, the management of water resources was paramount (Bagmati River Basin Improvement Project). In education, ADB aimed to join a sector-wide approach (Supporting School Sector Development Plan), and subsequently responded to the earthquake disaster with relief and school reconstruction support. Much of the support for infrastructure development in energy, transport, and trade and border regulation was to be anchored on the SASEC program as part of the longstanding effort to enhance cross-border connectivity and trade.

17. Combining the original CPS allocation with the relevant year (2017) in the COBP 2015–2017 yields a total of $1,462 million planned. This averages $292 million annually over the 5-year CPS period, exceeding the resources allocated in the CPS 2010–2012, which averaged $262 million per annum.

18. The CPS results framework contains a country development goals section but is otherwise structured on a sector basis. Indicators for desired results and indicative sector allocations include energy (41%); transport, and information and communication technology (ICT) (together 25%); water and other urban infrastructure and services (WUS, 21%); ANR (8%); and education (6%). About 85% of the program was earmarked for the three core infrastructure sectors, with education and agriculture receiving about 15%. These figures cover the 2013–2016 period; subsequent COBPs defined the 2017 allocations. In view of the Finance ++ stance of ADB, the CPS and/or COBP 2014–2016 envisaged efforts to attract about $850 million in official and commercial cofinancing during that period, bringing the resources available for ADB projects to $2,312 million.

3. ADB Approved Portfolio

19. Over 2013–2017, ADB’s country program comprised 67 sovereign operations, including loans, grants and TA totaling $2,542.71 million (including cofinancing) (Appendix 1). This exceeds the planned (combined view in CPS and COBP 2015–2017) of $1,462 million and cofinancing of $850 million, or $2,312 million in total. The ADB-financed loan and grant operations of $1,721.80 million are less than the rolling (overprogramming) mode of planned operations, which amounts to $2,478 million (Appendix 1, Table A1.9). The actual CPS period amount represents an annual average of $508.54 million, if cofinancing is taken into account; this level of ADB support is substantial, particularly for a medium-sized country like Nepal. As Table 1 shows, the actual annual approvals were fairly evenly spread over the CPS period. Table 2 shows the emphasis on infrastructure sectors, education, and ANR.

23 ADB. 2009. Country Partnership Strategy: Nepal, 2010–2012. Manila. 24 ADB: 2017. Country Operations Business Plan, Nepal; 2018–2020. Manila.


Table 1: Annual Approved Operations by Value and Instrument in Country Partnership Strategy, 2013–2017

Type 2013 2014 2015 2016 2017 CPS overall

$ million No. $ million No. $ million No. $ million No. $ million No. $ million No. Loans 346.50 6 355.00 6 327.00 4 692.10 5 421.00 4 2,141.60 25 Grant 73.97 6 79.00 6 18.00 2 196.00 3 0.00 0 366.97 17 Technical Assistance

7.60 6 5.40 5 5.70 39 9.99 5 5.45 6 34.14 25

Subtotals 428.07 18 439.40 17 350.70 11 898.09 13 426.45 10 2,542.71 67 CPS = country partnership strategy. Note: Technical assistance is counted by project number. Includes cofinancing. No operations were approved in the first 6 months of 2018 (still part of the validation period). Source: Independent Evaluation Department. Compiled from the evaluation approach paper tables.

Table 2: ADB Approved Portfolio in Nepal, 2013–June 2018 by Sector and Instrument ($ million)

Sector

Sovereign Loans Technical Assistance Grants All Instruments No. of Loans

Amount Approved No.a

Amount Approved

No. of Grants

Amount Approved

Amount Approved %

ANR 3 155.50 6 4.85 1 4.50 164.85 9 EDU 2 320.00 4 5.60 1 20.00 345.60 20 ENE 4 480.00 2 1.00 1 21.00 502.00 29 FIN 0 0.00 1 0.22 0 0.00 0.22 0 IND 1 21.00 0 0.00 0 0.00 21.00 1 PSM 0 0.00 2 1.00 0 0.00 1.00 0 TRA 3 291.80 1 1.00 0 0.00 292.80 17 WUS 5 405.00 4 4.75 1 3.00 412.75 24 Total 18 1,673.30 20 18.42 4 48.50 1,740.22 100

ANR = agriculture, natural resources, and rural development; EDU = education; ENE = energy; FIN = finance; IND = industry and trade; PSM = public sector management; TA = technical assistance; TRA = transport; WUS = water and other urban infrastructure and services. a By TA number (supplementary financing is included in the same project number). Source: Independent Evaluation Department. Compiled by validation from ADB Listing of Loan, TA, Grant, and Equity Approvals Database.

20. The total $2,500 million in financing means an average project size of $100 million, a considerable increase from the average of $43 million in the prior CPS (footnote 23). Further, a comparison of planned and actual sector allocations (Table 3; and Appendix 1.9 for details) shows that the rolling amount of planned ADB financing came to about $2,500 million, considerably more than the $1,500 million that was the earliest complete allocation that could be pieced together (from the CPS results framework as updated in the COBP 2015–2017). The actual approved $1,721.80 million was close to the original allocation. So, about 69% of the intended lending program was realized. The approach nonetheless has its utility given ADB’s stated intention to “overprogram” in this way to ensure project readiness. 25

21. Infrastructure operations dominated the portfolio of approved projects (energy 29%; WUS 24%; transport 17%) combining for about 70% of the approved portfolio. However, the transport agenda was substantially smaller than planned, and the WUS operations somewhat larger. The education program was greater than planned because of the emergency school reconstruction support. The approved projects also show the dominance of loans, although the low amount for grants (four totaling $48.50 million) was supplemented by cofinancing, which added 12 grants totaling $308.47 million (about 39% of cofinancing).

25 ADB, South Asia Department. 2018. Country Programming Mission to Nepal. Aide-mémoire, 27 April–1 June 2018 (internal).


Table 3: Comparison of Planned and Approved Loans and Grants for the Nepal Country Partnership Strategy, 2013–2017

Sector Program

Project Success

Allocation in CPSa

($ million)

Share of Planned

(%)

Allocation Approved ($million)

Share of Approved

(%)

Compared with

Planned (%)

ENE 4/8 790 32 501 29 63 TRA 4/9 920 37 291.8 17 32 WUS 4/7 363 15 408 24 112 ANR 2/6 249 10 160 9 64 EDU 1/2 85 3 340 20 400 HLT 0/1 0 0. 0 0 n/a PSM 0/1 50 2 0 0 0 IND 1/1 21 1 21 1 100

Total 15/35 2,478 100 1,721.80 100 69 n/a = not applicable; ANR = agriculture, natural resources, and rural development; CPS = country partnership strategy; EDU = education; ENE = energy; HLT = health; IND = industry and trade; PSM = public sector management; TRA = transport; WUS = water and other urban infrastructure and services. aaCPS allocations as updated in the CPS results framework in the Country Operations Business Plan, 2015–2017.

Source: Independent Evaluation Department.

22. Approved TA financing ($18.43 million), together with cofinancing ($15.72 million), provided 25 projects for a total of $34.14 million. This was considerably more than the anticipated $25.00 million (but the latter did not include cofinancing). The average size of the TA projects was $1.37 million, considerably larger than the average TA size of $0.95 million in the 2010–2012 CPS.26

4. Asian Development Fund priorities as reflected in planned and approved portfolio

23. Leaving aside cofinancing, ADB’s program in Nepal was financed entirely from concessional resources, comprising ADF grants and OCR concessional loans.27 The Nepal program, or rather the portion consisting of completed projects with validated project completion reports (PCRs) and project evaluations, achieved a success rate of 76.2% from January 2013 to June 2018. 24. In relation to the ADF 12 priorities28, the sector focus of the Nepal program was on energy, transport, and WUS. These three alone comprise 55% of the portfolio since lending began. If Strategy 2020’s core areas of infrastructure, environment, regional cooperation and integration (RCI), finance sector development, and education are examined, the Nepal program appears to have attained the expected 80% in these areas. However, the range of sectors was quite broad in the last two CPS periods. 25. Nepal’s risk of debt distress was low during the CPS period (footnote 1), except for the moderate rating received in 2013.29 In keeping with this view, Nepal has not received ADF grants since 2013 (when it was, for that year at least, also deemed an FCAS country; 30 ). The composition of the country program in terms of sector coverage has not changed much, but the number of operations declined markedly in the 4 years after grants stopped (Table 4); 32 of the 45 lending operations (71%) were approved while

26 As reported in IED. 2013. Validation Report: Country Partnership Strategy Final Review in Nepal, 2010–2012. ADB: Manila. 27 In January 2017, the ADF concessional loan portfolio was combined with that of the OCR. 28 ADF 12 had the following seven priorities: (i) mainstreaming gender in operations, (ii) strengthening support for countries in a

fragile and conflict-affected situation (FCAS), (iii) promoting food security, (iv) supporting private sector development (PSD), (v) improving governance and capacities, (vi) strengthening preparedness and response to climate change and disasters, and (vii) promoting regional public goods.

29 IMF. 2014. Nepal Staff Report for the 2014 Article IV Consultation – Debt Sustainability Analysis. Washington, DC.; and IMF. 2017. Nepal Staff Report for the 2017 Article IV Consultation – Debt Sustainability Analysis. Washington, DC.

30 Nepal was also deemed FCAS in 2007. It is rather difficult to imagine how a country can slip in and out of FCAS status in this way. One might have expected Nepal to slide once more into FCAS status in 2015, when it was beset by strikes and/or border unrest, disaster, and resistance to constitutional changes. It could be said that Nepal has ongoing features that make it vulnerable to nearing a FCAS status.


ADF grants were still provided. Of these 32, 19 were grants. This explains in part why recent operations have become much larger. 26. The pattern becomes clearer when looking at the sector composition. From 2010–2013, ADF grants financed the larger number of or all the operations in ANR, public sector management (PSM), finance, and ICT. They also financed up to half of the operations in transport and energy. Only in the urban sector was the transition hardly felt, as most of the operations were already financed by COL.

Table 4: Number of Loans and Grants during 2010–2017 with Comparison before and after Asian Development Fund Grants

Sector 2010 2011 2012 2013 2014 2015 2016 2017 Total 2010–2013 2014–2017 ANR 2 1 1 1/1 1 - - 1 5/3 5/1 2 EDU - 1 - 1 - 1 1 - 2/2 2 2 ENE 1 1/1 - 1/2 1 - - 1 3/5 3/3 2 FIN 1/1 1 - - - - - - 2/1 2/1 - IND - - 1 - - - - 1 1/1 1 1 PSM - - 1 - - - - - 1 1 - TRA 3/2 1/1 - 1 1 - 1 - 4/6 4/4 2 WUS 1 1 1/1 1 2 1 - 1 1/8 1/4 4 Total 7/11 5/8 4/5 3/8 0/5 0/2 0/2 0/4 19/26 19/13 13

- = none; ANR = agriculture, natural resources, and rural development; EDU = education; ENE = energy; FIN = finance; IND = industry and trade; PSM = public sector management; TRA = transport; WUS = water and other urban infrastructure and services. Note: Grants in italics. Source: Independent Evaluation Department. 27. There was somewhat greater coverage of ADF priorities, with slightly more regional public goods (connectivity) and food security projects in the period when grants were provided. The coverage of gender, governance, and PSD was significant in both periods. Appendix 2 provides a condensed summary of ADF grant-funded projects by sector and in terms of coverage of ADF priorities. E. Scope and Method of Evaluation 28. The CPSFR evaluation provides the ADB Board of Directors and Management with a validation of the final assessment of the performance of ADB’s country program in Nepal during 2013–Mid-2018. It covers all ADB loans (sovereign and nonsovereign), grants, and technical assistance approved for Nepal from 2013 to Mid-2018 (the validation period). In addition, it reviewed projects that were approved before 2013 but were still active and implemented during the validation period. Appendix 1 lists the ongoing and completed loans, grants, nonsovereign operations (NSOs), and TA projects. The validation also considered any additional data after mid-2018 up to December 2018, when the CPSFR was submitted to IED. 29. The validation makes an overall assessment based on:

(i) A performance assessment of ADB’s programs and projects in the various sectors in terms of relevance, effectiveness, efficiency, sustainability, and development impacts. Where the projects in a sector are less than 2 years old, they are assessed in real time with no rating for effectiveness.

(ii) Individual sector program assessments rate the effectiveness of sector programs, to rate for the other evaluation criteria a different approach was taken, more aggregate and looking at different aspects, not sector specific.

(iii) An assessment (using a matrix assessment approach) of the relevance and development impacts of the key cross-sector themes pursued in the CPS is conducted covering PSD, RCI, GESI, governance and capacity development, environmental issues, environmental and social safeguards, and climate change and disaster management. Also included is the assessment of contributions to the government’s overall development objective of


accelerated, sustainable, inclusive economic growth, which is very much in line with ADB’s corporate strategy of inclusive economic growth.

30. This evaluation uses a mixed-method approach with both qualitative and quantitative assessments. The validation relies primarily on information presented in the CPSFR but also incorporates evidence gleaned from (i) document and file studies; (ii) portfolio data analysis; (iii) interviews with ADB staff, government counterparts, and other stakeholders; and (iv) field observations in Nepal. The information studied included PCRs and PCR validation reports (PVRs), and the findings of project performance evaluation reports for projects that closed during the evaluation period. A mission to Nepal on 3–14 March 2019 allowed for discussions with the government, ADB resident mission staff, and other stakeholders. This was preceded by a week of preparatory meetings with SARD and other staff in ADB headquarters in Manila. Several limitations were faced in the validation exercise beyond the usual brevity of the exercise. None of the loan and/or grant operations approved during the CPS had been self-assessed at the time of the validation, and only one TA project had a completion report. About 35% of operations (12 of 34) that started before the CPS but were completed during the CPS period were self-assessed as successful. Of the 12, IED validated 6 as successful so far. Also, during the CPS period, the Government of Nepal underwent extensive institutional restructuring and human resource changes, making it difficult at times to identify the available government officials most familiar with the projects. 31. The evaluation follows the assessment approach set out in the country assistance program evaluation guidelines of 2015. 31 The assessment ratings are highly successful, successful, less than successful, and unsuccessful. There are five evaluation criteria for sovereign programs, each weighted at 20% of the overall success rating: relevance, effectiveness, efficiency, sustainability, and development impacts. The ratings for the main public sector programs (the sovereign program) were weighted to assess the overall effectiveness of the program, depending on each sector program’s financial girth. No private sector operations required assessment. 32. The evaluation takes a matrix approach by assessing the CPS’s strategic agendas and cross-cutting themes for their relevance (appropriateness) and results (development impacts) and assigning some weight to their ratings next to those for the sector program ratings. The three strategic agendas of the CPS were IEG, environmentally sustainable growth, and RCI. The three special priorities identified as constants in the CPSs were knowledge and capacity development, gender equality, and catalyzing infrastructure investment and PPPs. These six themes were responsible for half of the scores for relevance and development impacts.

31 ADB. 2015. Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final

Review Validations. Manila.

CHAPTER 2

Validation of the Country Partnership Strategy Final Review

A. Relevance 33. The relevance criterion considers the alignment on several fronts: country needs and government policies and plans; ADB corporate policies such as Strategy 2020; the more recent Strategy 2030; and ADB priorities for concessional resources. Within this subcriterion, the appropriateness of the CPS objectives selected for a particular country is a crucial aspect. Another important subcriterion of relevance is the quality of design, which captures several aspects: the composition of the program and how it operationalized the strategy; how strategic objectives were adhered to during the implementation of the CPS; the choice of modalities; and the choice of project size seen against government needs and capacities, and also against ADB management capacity. Relevance also relates to coordination and partnerships with other development partners. 34. The CPSFR assessed the Nepal program relevant by considering the following: its consistency with national development plans; alignment with ADB’s strategy, sector selectivity, financing products and modalities, and nonlending operations; CPS objectives and cross-cutting themes; quality of the CPS results framework; and relevance ratings of completed and ongoing projects. These aspects correspond closely with the scope of the validation, but the validation is more explicit in covering the engagement with civil society organizations (CSOs) as intended in the CPS, and development partner and government coordination. The validation captures key points made in the CPSFR and adds other comments to fully address the relevance criterion.

1. Alignment of ADB’s program with key referents 35. The CPS objective of accelerated, sustainable, and inclusive economic growth was aligned with Nepal’s Three-Year Plan, Fiscal Years 2014–2016, matching closely the latter’s formulation of its overarching objective—“to achieve sustainable, broad-based, inclusive economic growth.” 32 The infrastructure sectors targeted by the ADB program were those prioritized in the three-year plan, with the bulk of assistance allocated to energy, transport, and urban infrastructure (85%). The rest was earmarked for education (largely skills development) and agriculture (mostly water management). ADB left the door open for some health support in both the urban and rural contexts. This set of sectors was justified in pursuing the multifaceted objective of the CPS. 36. The CPS support for the three core infrastructure sectors (85%) placed the strategy firmly within ADB’s Strategy 2020. In energy, the ADB focus was on the high potential of hydropower generation, transmission, and distribution. Nepal suffers from insufficient and variable domestic supply, and inefficient transmission, leading to imports from India in the dry season, which hampers economic growth. 33 Nepal has installed power generation capacity of just over 1,000 megawatts, but has the potential to reach 43,000 megawatts (deemed economically viable).34 ADB is also mindful of the need

32 In preparing the CPS 2013–2017, ADB made use of the government’s approach paper for the FY2014–FY2016 plan, approved

in July 2013. 33 S. Shakya. 2015. Ministry of Energy. Nepal Portfolio Performance Review – Energy Sector. Kathmandu. 34 https://www.hydropower.org/country-profiles/nepal

Validation of the Country Partnership Strategy Final Review 11

to reach rural and/or remote areas with energy, often only viable by tapping local sources (mini hydro) or renewable sources. In transport, ADB recognizes that road and air transport are critical to improving accessibility in the rugged geography of Nepal, and in determining access to opportunity, enterprise, markets, or services. Tourism, a key industry, hinges on the advancement of the infrastructure. The limited road system and poor ground transport to many remote areas will require improvements and will need to be accompanied by increased and safer air transport of passengers and freight from and to Nepal’s 47 airports. At border points, ADB has been supporting the strengthening of customs frameworks and institutions to make trade more efficient. 37. ADB put forward a program that in principle covers all three dimensions of IEG. In the case of support relating to energy and transport, the connection to economic growth is clear. However, some support for this dimension of IEG also comes from the program’s support for urban services, agriculture, and education. Moreover, these are supportive of the accessibility dimension of IEG, broadening access to economic opportunities by ensuring that health and education needs of the labor force are met. The social protection dimension of IEG was addressed in large part through certain thematic commitments of the program (para. 41). 38. Thematic commitments in the ADB program (PSD, RCI, GESI, governance, and environmental sustainability) were in principle supportive of all three dimensions of IEG. The potential for a direct contribution to economic growth is most readily seen in the PSD theme. Access to economic opportunities was to be aided by mainstreaming GESI in terms of broader access to basic services. ADB’s concern for social and environmental safeguards also held the potential to enhance social protection. These thematic drivers were continued from the previous CPS period, except for engaging civil society and nongovernment organizations. However, the latter was made the focus of the partnership agenda of the CPS. The continuity in the themes underscores the persistent need of Nepal to grow its private sector, urgently reduce disparities between groups, make progress across a broad range of governance areas, and ensure environmental sustainability. 39. Efforts were made in all these themes during the CPS. This was most noted in in GESI, where ADB operations were designated to give strong support; in environmental safeguards, where dedicated teams were established in project management units and government institutions; in RCI, where the SASEC strategy was embedded in key transport and trade operations; and in governance, where policy operations pushed reforms, particularly in PFM. The effort in PSD was to be directed largely to PPPs; these were promoted through several operations across sectors. ADB’s Trade Finance Program was expected to continue to work with local partner banks to fill gaps in trade finance. The CPS also expected ADB operations in education, energy, and WUS to contribute significantly to PSD. Support was in fact high if viewed from the operations’ formal designation, but in practice the efforts were not very visible. The drive to launch NSOs was particularly insufficient. The CPS acknowledged that private sector investment needed to be increased by reforming “an unpredictable and unfriendly business environment.” The government, in its three-year plan for FY2014–FY2016, aimed to accelerate basic reforms to encourage greater private sector investment and PPPs. However, ADB did not make any nonsovereign commitments during 2007–2017. On the other hand, efforts by ADB’s Private Sector Operations Department to structure OCR operations in hydropower are now underway. 40. Despite the importance of CSOs to the success of ADB’s country program, particularly in urban development, rural roads, and water no detail was provided. In terms of the partnership agenda—with its focus on CSOs—little was said in the CPSFR, other than that ADB “consulted closely with civil society, media, and the private sector during the CPS formulation and as part of its lending and nonlending operations.” CSOs were employed, but no observations or lessons were written up, although some dissatisfaction with their roles can be noted in project monitoring reports. 41. The connection of the ADB program to the social protection dimension of IEG could have been clearer. Mainstreaming of gender equality and social inclusiveness in projects and government structures


certainly contributes to this dimension, but the link to marginalized groups (e.g., Dalits) was not explicit. Also, the CPS notes that reducing regional disparities is a “very high” government priority but did not respond to this priority in its program in any clear fashion. It could have addressed the trends that undermine regional balance, such as the alarming rise in imports of basic food commodities from India, or the concentration of tourism infrastructure in some regions of Nepal. 42. The ADB program in Nepal was broadly aligned with ADF priorities, but in later years less so when access to ADF grants declined. The CPSFR did not provide an analysis of the grant vs. concessional loan composition over time. Table 3 and Appendix 2, prepared by the validation team, show that project documents exhibit a similar pattern of coverage of ADF priorities, but with slightly more regional public goods (connectivity projects) and food security projects in the period when grants were provided. This suggests a slight shift of the program portfolio away from ADF priorities as grants were being eliminated. Even a slight shift can be significant in some cases. For instance, the project preparatory facilities in infrastructure (for energy and roads) were grant-funded and appreciated by the government. It is not clear that the government would be willing to continue using such facilities if they were not funded by grants. Similarly, Strategy 2030 priorities that include areas that are not likely to attract borrowing could slip on the scale of priorities. 43. The ADB program provides sufficient resources to make a meaningful contribution to the desired outcomes, in comparison with ADB support provided to other South Asia countries (see Table 5). Within Nepal, the support compares favorably with that of other development partners, comprising 9% of the total external, annually disbursed assistance of $1,045 million during 2013–2016 (Figure 4). However, it is less than half of the International Bank of Reconstruction and Development–International Development Association’s share of 20%, suggesting that ADB can be a dominant player in only a few sectors, and only so if it is able to attract cofinancing and play a leading role in coordination.

Table 5: Comparison of ADB support to South Asia Developing Member Countries

Country Population

(million)

Latest CPS Allocation ($ million)

Relevant CPS Period

CPS Annual Allocation per

Capita ($) Pakistana 201 5000 2015–2018 6.22 Nepal 30 1085 2013–2016 9.04 Bangladesh 167 6000 2016–2020 7.19 India 1356 6852 2013–2015 1.68 Bhutan 0.819 287 2014–2016 117 CPS = country partnership strategy. a Pakistan is geographically situated in South Asia. Operationally, however, ADB

considers it to fall under the Central and West Asia region. Sources: Asian Development Bank database and Independent Evaluation Department.

44. ADB maintained a focus on infrastructure within a sprawling program that, when overprogramming is taken into account, delivered 69% of planned allocations. Appendix 1.9 provides a comparison between planned allocations and approved projects (considering mid-stream planning that exceeds original plans; what the COBP 2017–2019 refers to as "overprogramming"). Table 3 provides a summary of planned and approved amounts for the CPS period by sector. In terms of sector spread, the intention of the CPS to address the CPSFR’s recommendations of greater sector selectivity by focusing mostly on three sectors was not adhered to in the planning, and particularly not in the implementation, i.e., the approved program. Lending and/or grant operations straddled nine sectors, and TA projects—particularly in ANR, education, and PSM—made the support in these sectors more than a foray.


Figure 4: Composition of External Assistance Disbursed to Nepal (2013–2016)

Source: Organisation of Economic Co-operation and Development (OECD). 2018. Geographical Distribution of Financial Flows to Developing Countries – Disbursements, Commitments, Country Indicators. Paris.

45. The overall realization, $1,721.8 million, is 69% of the amount planned in a rolling fashion in the CPS and/or COBPs. While the sectors of engagement were many, a focus on the infrastructure sectors (energy, transport, and urban services) was maintained, combining for about 70% of the approved value. The chief source of variance across sectors was the response to the disaster emergency, which fell within the education sector, but in fact included considerable small-scale infrastructure support for other sectors or subsectors (e.g., roads). 46. ADB support in the CPS period was relevant to the SDGs but not explicit in its positioning. The broad coverage of the CPS and its implementation makes it plain that ADB was actively supporting many sectors and subsectors that are targeted in the SDGs. However, the SDGs have not become an analytical or organizing principle of ADB program design in Nepal; the CPS and subsequent planning documents do not indicate how ADB is positioning itself in providing support to Nepal’s efforts of achieving Millennium Development Goals and/or SDGs. As an example, the disaster risk reduction effort is addressed in the CPS, but is not linked to Goal 13: Take urgent action to combat climate change and its impacts. Since the financing of SDGs is expected to be shared about equally by public and private investments, the neglect of the SDG framework is a lost opportunity in ADB’s effort to launch NSOs, which is already insufficient in other respects. 47. Over the life of the CPS, some relevance was lost when ADB struggled to adapt to the introduction of federalism. The Interim Constitution in 2012 already signaled the shift from a unitary state to federalism. In 2015, the new Constitution adopted a unique federal model that left many of the details of restructuring and intergovernmental processes vague or for later elaboration. ADB struggled to adjust in some sectors. Even successfully implemented projects were affected. The Building Climate Resilience of Watersheds in Mountain Eco-Regions had much success on the ground and was able to involve rural municipalities that amalgamated their former partner village development committees. Even so, ADB did not revise its knowledge products to squarely support rural municipalities and provinces in their new roles in watershed management. Its adjustment in funds flow— channeling funds directly to project entities rather than through district development committees when these were dissolved—does not provide a model for directing state resources to rural municipalities that would merit dissemination. Other projects are finding (or will find) the adjustment more complicated. The disbursement-linked indicators in the School Sector Development Plan (SSDP), for instance, now fall largely under the mandate


of municipalities, but there is yet no well-functioning reporting system for them. In the Strengthening Public Management Program, some project outputs were already outdated before they were fully concluded. ADB could have anticipated the effects of federalism with well-timed analytical products and in dialogue with the government, and could possibly have offered suggestions on the details of restructuring to ease the transition. It is unfortunate that ADB and other partners, which together account for a large proportion of development funding, could not engage constructively to avoid some of the institutional stress now experienced. It can be argued that Nepal will find solutions to the gaps and shortcomings of the new federal arrangements, but this overall ad hoc design and passive approach on the part of ADB and other partners reduced the relevance of some of the portfolio.

2. Quality of Program Design 48. The design of the CPS program was not coherent in the cases of PSM and the finance sector. The CPS highlights governance as a thematic priority but did not put forward dedicated support for PSM. The previous two CPSs had provided significant PSM support, in both loans and/or grants and TA. A policy-based grant with national and subnational scope was approved late in 2012, and the two tranches were disbursed in the current CPS (2013–2017). The stance of ADB heading into the CPS formulation was not coherent. On the one hand it wished to propose PSM interventions to ease the political, institutional, and legal challenges of the transition to federalism.35 But in its dialogue with the government it sought to narrow the scope of governance and/or PSM support to project-related oversight, with a special emphasis on procurement, project management, finance, reporting, and monitoring. This shift (reducing PSM essentially to Government and Anticorruption Action Plan GACAP II concerns) is not explained in the CPS, nor in the CPSFR. 49. The finance sector was also not made a priority, even though the government had intended to maintain its priority in view of the opportunity to continue to apply ADB’s targeted support in some subsectors, such as capital market and infrastructure finance. However, it appears that the pressure to keep the program focused (an objective that was in any case not met) led to ADB’s decision to provide no new loan and/or grant operations in this sector in the current CPS.

50. ADB committed, without a balanced rationale, to a shift to fewer and larger projects to avoid the high transaction costs imposed by the portfolio. This objective arose in response to the decline in the portfolio performance seen in the late stage of the CPS 2010–2012. However, in setting this objective, ADB did not discuss the apparent advantages of smaller and community-based projects in rural and urban areas. These were showing enough success to undermine the argument for larger projects. The "bigger is better" narrative needed some qualification—indicating where the balance would be struck. The CPS program, in its execution, did see a shift to larger projects, but the CPSFR did not discuss whether this entailed a shift away from smaller projects. The Nepal Resident Mission did tell the independent evaluation mission (IEM) that a balance between large core infrastructure projects and smaller ANR and/or urban development projects had been maintained. 51. The program has relied largely on investment lending and project grants, with the latter being particularly significant in the cofinancing portion of projects. Excluding cofinancing, ADB financing, loans, and grants combined to a value ratio of about 9:1. The loans were largely from ADF in earlier projects, and from COL in the latter part of the program, once ADF and OCR lending had been combined. Nepal is now classified as a COL access country. 52. Only one policy-based loan was approved during the current CPS period, the SASEC Customs Reform and Modernization for Trade Facilitation Program. However, several policy-based programs

35 (i) ADB (South Asia Department). 2012. Nepal Country Partnership Strategy – Preparation Workshop (29–30 March 2012),

(ii) Loan 2641/Grant 0208: Rural Finance Sector Development Subprogram 2 - Consultation Mission (27–28 March 2012), and (iii) NEP Strengthening Public Management Program – Consultation Mission (30 March–3 April 2012). Back-to-office report. 26 April (internal).


approved in the CPS 2010–2012 spilled over into the current CPS—SASEC Trade Facilitation Program; both tranches of the Strengthening Public Management Program; budget support from Nepal’s recovery from the earthquakes disaster, derived from the second tranche of the Rural Finance Sector Development Program; and the School Sector Program. A results-based loan (Supporting the School Sector Development Plan) was approved in 2016, with some anticipation that its structure might need revising as the structures of federalism emerged; a more anticipatory design would have been helpful in this regard. 53. ADB reports that government is once again keen to receive policy-based loans, and operations are planned in agriculture, water and/or urban development,36 and transport (civil aviation). However, the government signaled to ADB mid-stream in the CPS implementation that it did not wish to proceed with a previously planned PSM program loan directed at reforming subnational government PFM. This reluctance seems to have eased recently. 37 The government has tended to favor policy operations through the World Bank development policy credit (DPC) instruments, requesting ADB to focus instead on investment projects. ADB appears to struggle to make a meaningful contribution to policy through policy dialogue directly with the government or through the World Bank DPC platforms, making the more recent willingness of the government to accept program loans from ADB in some sectors an important step away from what could be too rigid and narrow a view of what ADB can offer. In fact, ADB should be able to leverage its investments and comparative advantage. 54. The Nepal program did not include multitranche financing facilities (MFFs). It came close to using the MFF vehicle for a while when it reformulated or renamed three planned standalone projects to be MFFs. These projects were subsequently further deferred or restructured to be implemented in their original standalone modality. 38 The CPSFR did not explain the mix of modalities employed over the CPS period and, in particular, does not flag the MFF redesigns and the return of two of these to their original modality. It is not clear, for instance, whether the MFF modality was abandoned in those cases because the sector did not have a road map and/or strategy—one of the important considerations for an MFF—or whether other considerations prevailed. It may be that establishing an MFF requires considerable sector coherence and consistency over time, which was difficult to attain in the CPS period with the political upheavals and changes in government. The IEM found openness toward the MFF (and any other modality) in the government, but the government would need to familiarize itself with such a new modality. 55. The CPS 2013–2017 acknowledges the presence of too many small projects in previous periods, which required numerous transactions and taxed the limited capacity of counterpart agencies. The average project size approved during 2013–2017 was $109.07 million (cofinancing included), compared with $36.00 million for projects approved before that CPS period. The average TA size also increased, from $0.95 million to $1.37 million. The resident mission believes that this did not appreciably alter the sector and/or subsector composition of the CPS program, but there is no analysis to confirm this assertion. The ADF analysis discussed in para. 42 suggests that there may be some change in program composition, in that relatively fewer true public goods (i.e., connectivity and food security) were provided than before. 56. The number of TA projects has held steady at 25 compared with the 29 reported in the CPSFR 2010–2012 validation and the 27 carried over into the current CPS. The administrative burden on

36 ADB (South Asia Department). 2018. Loan Review Mission to Nepal for Loan 1820-NEP: Melamchi Water Supply Project

(Subproject 1 and 2), Aide-mémoire, 23–28 March 2018. Back-to Office-Report .30 March (internal). 37 Communication of validation team with Director General of SARD on 27 February 2019 in Manila. 38 The Tribhuvan International Airport Capacity Enhancement Project became the MFF Concept: Tribhuvan International Airport

Capacity Enhancement Investment Program; not approved yet. The Integrated Development for Bigger Municipalities Project changed to an MFF modality when renamed as Integrated Urban and Economic Corridor Investment Program; it was renamed again as Regional Urban Development Project—approved in 2017 as a standalone project. The Kathmandu Valley Water Supply Augmentation was changed to an MFF and renamed as Kathmandu Valley Water Supply and Sanitation Management Investment Program; it was then deferred to 2018 as a standalone project.


headquarters and the resident mission from TA management therefore appears not to have increased unduly because of the portfolio expansion, since the project size has increased but TA numbers have stayed about the same. 57. The quality of sector assessments and project design was generally adequate. Sector assessments were conducted in the preparation of the CPS for the key infrastructure sectors. These were broadly sound, with clear sector objectives related to government plans, and relevant indicators that could reflect the ADB contribution. 58. The CPSFR noted that of the 12 projects that were closed during the CPS period and for which completion reports were prepared, 11 were rated relevant and one highly relevant. ADB endeavored to ensure project readiness, making it a key issue in tripartite portfolio review meetings. 39 Even so, the preparation of projects was insufficient in some cases. For instance, planned works did not match resources, or classification errors resulted in low disbursement in implementation.40 In 2014, a program to strengthen public management in Nepal was terminated before signing, suggesting that the design had proceeded quite far before ADB realized that this program would not be appropriate. 41 For some projects, the design and monitoring framework (DMF) was not well designed. For instance, the High Mountain Agribusiness and Livelihood Improvement project was much too optimistic on the internal rate of return of its business investments, particularly since these were staggered over a 5-year period (2013–2017). In the transport sector, the timing between the construction of the road leading to Buddha’s birthplace in Lumbini (through the SASEC Road Improvement Project ) and the construction of the international facilities at Gautham Buddha Airport (via the South Asia Tourism Infrastructure Development Project, approved in 2009) and of five bridges (managed fully by the Department of Roads) could have been better synchronized. 59. The design of TA appears to be generally appropriate. In some cases, the analysis could have been deeper, and the TA process better designed. For instance, it was realized after the design that the Parliament’s approval of climate-change-related reorganization in the Ministry of Environment, Science and Technology was not required. 42 In another TA project relating to climate change, more than $2 million of the TA project budget was unspent because costs had been overestimated at design. 43 In the case of engineering education, the TA project was not designed to adequately support counterparts in the consultation and assessment process required in a complex field, 44 resulting in the decision to drop the anticipated loan when momentum was lost. 60. Relevance of sector targets in the CPS results framework did not sufficiently consider data availability. While the CPS results framework contains only national sector outcomes to which ADB contributes an unspecified amount, the CPS-related sector assessments for the sectors contained in the framework specify some sector outputs, and the CPSFR accounted for both sets of indicators. It notes that the CPS sector outcomes had clear quantifiable indicators and targets with baseline figures, and areas of ADB interventions with indicative ADB resource allocation (for five sectors). It acknowledged that some indicators and targets could have been better specified, giving the example of the transport sector,

39 Spotlight. 2017. ADB Projects Have Made High Achievement in Nepal. Vol.10, No 13, February 24.

https://www.spotlightnepal.com/2017/02/27/adb-projects-have-made-high-achievement-in-nepal/ 40 The SASEC Power Systems Expansion Project’s grant amount was insufficient to install the planned mini hydro systems (L3139/

G0397/0398); G0299: Water Resources Project Preparatory Facility had insufficient funds to finish Package 7; G0179 REG: South Asia Tourism Infrastructure Development had low disbursement in the absence of grant budget allocation from the government; both grant and loan were placed in the loan category. ADB (South Asia Department). 2018. Meeting Minutes Tripartite Portfolio Review Meeting. 23 November 2018 (internal).

41 The program was a follow-on to the Strengthening Public Management Program, which was approved in late 2012 and disbursed in the CPS period.

42 ADB. 2013. Technical Assistance Completion Report: Strengthening Capacity for Managing Climate Change and the Environment in Nepal. Manila.

43 ADB. 2017. Technical Assistance Completion Report: for Mainstreaming Climate Change Risk Management in Development in Nepal. Manila.

44 ADB. 2013. Completion Report: Strengthening Higher Engineering Education in Nepal. Manila.

https://www.spotlightnepal.com/2017/02/27/adb-projects-have-made-high-achievement-in-nepal/


where the indicator “cross-border land cargo volume along the east–west corridor” is not directly measurable and required data is not easily retrievable from the government data system. In terms of the sector outputs, the CPSFR only commented that data for several sectors (e.g., ANR, energy, and WUS) are also not easily found, suggesting that the selection of indicators did not sufficiently consider data availability. 61. To the above observations, the validation further adds that the sector outcome and/or outputs were generally relevant to the selected sector objectives and to the ADB support provided. However, in some cases their relevance could have been improved. Specifically, in energy they omit spatial and/or poverty dimensions in access to or use of electricity. In transport, the focus is on roads of the strategic road network, omitting the possible contribution of ADB projects to easing urban transportation. In ANR, an indicator for the all-season rural road network was included, but ADB had no programming in this subsector until late 2017. The ANR outputs overall do not sufficiently reflect the water management focus of ADB support. Across the sectors, there is insufficient attention in the sector outputs to the results expected in terms of capacity development.

3. Coordination and Partnerships 62. The CPS included a commitment to partnerships. CSOs are used in several roles in ADB’s work:45 as conduits for people’s voices, facilitators for social mobilization, and technical consultants. This range is evident in ADB programming in Nepal. Many projects or country program planning processes are designed based on consultation with stakeholders, including CSOs; the CPS preparation itself was undertaken with input from civil society. Where communities are expected to become (more) organized to undertake project work, CSOs have been used to strengthen the organizations (e.g., in Establishing Women and Children Service Centers,46 and in urban projects such as the Secondary Towns Integrated Urban Environmental Improvement Project). CSOs are at times expected to bring specific technical skills to a project, as in the resettlement of people affected by project activities, e.g., in the Road Connectivity Project. 63. A high level of cofinancing suggests that ADB was able to elicit trust and show leadership in some sectors. ADB’s engagement with other development partners was fruitful, yielding $786.77 million in cofinancing for newly approved projects. The Nepal program also carried over $253.00 million in cofinancing from projects approved in the previous CPS. Approved TA cofinancing was $15.72 million, or 46% of $34.14 million. Combining all modalities, cofinancing represents about 32% of the approved portfolio, indicative of the strong trust of development partners in ADB’s focus and capabilities, particularly in energy and water. 64. ADB made diligent efforts to coordinate with development partners and the government in a difficult context. ADB is a member of the International Development Partners Group.47 As regards the challenges of Nepal’s transition to federalism, ADB also takes part in the Federalism Working Group (led by the World Bank, United Nations, and the Swiss Agency for Development and Cooperation), which meets regularly to harmonize the support to be provided to the government. ADB’s presence in this forum has become somewhat awkward in recent years for lack of concrete programming to bring to the table.

45 CSO is sometimes used interchangeably with "nongovernment organization" in the CPS and/or CPSFR documents. CSO, used in

this report, tends to be a broader term, also encompassing smaller and less-structured organizations than most nongovernment organizations.

46 The centers were expected to undertake outreach in part by strengthening and institutionalizing cooperation with CSOs: ADB. 2009. Grant Assistance Report. Nepal: Establishing Women and Children Service Centers (Financed by the Japan Fund for Poverty Reduction). Manila.

47 Includes the World Bank, United Nations, Australia, Denmark, Finland, France, Germany, Japan, Norway, Switzerland, United Kingdom, and United States.


65. From the government’s side, the aid effectiveness agenda is driven by the Local Donor Meeting, which serves as the main forum for dialogue and coordination between development partners and the government on development policy issues. This forum is chaired by the Ministry of Finance and co-chaired by a development partner. Beginning in 2007, the annual Nepal Portfolio Performance Review provided an important mechanism for bringing together core partners and key government agencies to identify bottlenecks in program implementation and actions to address them.48 However, the size of the group became unwieldy, and the government returned to a more “bilateral” approach to coordination. Development partners involved in reconstruction after the 2015 earthquake were coordinated through the National Reconstruction Authority. ADB played an important role in getting it off the ground and building its capacity as executing agency for the Earthquake Emergency Assistance Project. 66. Despite the bilateral approach favored by the government, development partners make an effort to coordinate and play to their strengths. A rough division exists in some sectors—for example, ADB and the World Bank are most active in on-grid energy, and Nepal’s other development partners more in off-grid. In many sectors and subsectors, multiple development partners are involved. Sometimes the development partners will seek to avoid duplication by coordinating the specific regions or institutions covered by similar projects, as in the case of skills development, where ADB selected 10 institutions that were not covered by the World Bank.49 In some cases development partners join in support of a national sector-wide program to highlight its importance and add impact, as was the case in the Local Governance and Community Development Project (supported by ADB through two PSM policy-based loans and associated TA projects). 67. ADB has the second-largest country program after the World Bank. Its longstanding contribution in Nepal’s education sector through finance and TA is recognized by the government and other development partners and has included the role of focal point for development partners supporting a sector-wide approach (SWAp) in the SSDP. ADB is particularly appreciated for its focus on project investments in the roads subsector and energy sector. Informally, ADB facilitates coordination of development partners in the energy sector. However, this role does not translate into a leadership role in policy support, where the World Bank appears to have taken the initiative through its DPC series for the energy sector, now approaching its second loan.50 68. In summary, ADB CPS program was consistent with national development plans and was aligned with ADB’s Strategy 2020. It was not as focused as promised, but managed to maintain a concentration on infrastructure sectors. The rather broad reach was helpful in effectively pursuing the overarching objective of the CPS, i.e., inclusive economic growth. Moreover, the program was responsive to Nepal’s emergency relief and rehabilitation needs, particularly in the education sector. In this respect, it supported the access and social protection dimensions of IEG. The program lost some relevance during its implementation when it was not able to adjust sufficiently to the changes brought about by the shift to federalism. ADB nonetheless played a large role in supporting the government. It also drew a high level of cofinancing and played a role in development partner coordination in key sectors, even if overall development partner coordination was weak. It lacked an explicit strategy or sufficient attention to furthering its engagement with CSOs as part of the stated partnership agenda. 69. The program’s rated projects, carried over from the prior CPS, were relevant. The design of the program rested on the key sector assessments, with sector outcomes and outputs from these assessments adopted in the CPS results framework. As intended, projects became larger in size, a trend accelerated by the ending of most ADF grants; these changes are likely to make the program more efficient but do raise the possibility of unintended changes in program composition. The PSD effort was insufficient and

48 World Bank. 2014. Country Partnership Strategy for Nepal FY 2014–2018. Washington, DC. 49 ADB. 2013. Report and Recommendation of the President to the Board of Directors: Proposed Grant to the Government of

Nepal for the Skills Development Project. Manila. 50 The first credit of $100 million was approved in 2018. World Bank. 2018. First Programmatic Energy Sector Development Policy

Credit. 18 September. Washington, DC.


not anchored to the SDG framework. Modalities in the program changed little (a results-based loan was piloted). MFFs were explored, but with little coherence or results. Despite some weaknesses, project design was adequate. Overall, the validation finds the program and the approach to the cross-cutting themes of GESI and inclusive growth to be relevant. B. Efficiency 70. The CPSFR rated the program less than efficient. Its assessment focuses on efficiency ratings, economic internal rate of returns (EIRRs), overall portfolio performance, and net resource transfer. These criteria are aligned with the ADB guidelines for efficiency analysis. The CPSFR noted that projected economic rates of performance are being achieved. Efficiency ratings in self-assessed projects are largely efficient. The CPSFR acknowledged delays in implementation across many projects, arising from several causes and leading to poor portfolio performance. In its view, the latter outweighs the positive ratings and returns, hence its rating of less than efficient. The validation summarizes the key evidence provided by the CPSFR, which underpins this assessment, and adds observations. 71. Completed projects were largely rated efficient, but these ratings do not reflect often considerable project delays. The CPSFR noted that of 12 assessed projects, 1 was assessed as highly efficient, 10 as efficient, and 1 as less than efficient. Yet implementation delays occurred in many of the projects. The CPSFR calculated that the ADB loans and grants that were closed during the CPS period took on average 29.3 months longer than originally envisaged. TA projects (33) closed with an average delay of 20.2 months, for multiple reasons: remoteness of sites and difficult terrain; frequent changes of project staff slowing the reform momentum; natural disasters (most notably the 2015 earthquakes); and the trade and supply disruptions with India in 2015. The CPSFR also noted project-specific challenges to implementation, including weak capacity of project management and contractors. 72. Projects with EIRR analysis exceeded the ADB economic hurdle rate, but few projects had such analysis. As regards their economic performance, the five completed projects, approved in the previous CPS, that used the EIRR as a design criterion exceeded ADB’s economic hurdle rate of 12% and were above the rates projected at appraisal. However, in some instances, implementation delays led to negotiations for contract variations and cost overruns beyond original contract amounts. The CPSFR did not connect these delays and cost overruns to their possible effect on the EIRR or another cost-benefit analysis. 73. Ongoing projects also face delays, spurring ADB and government efforts to find remedies. The CPSFR noted that ongoing projects experienced inadequate project readiness; projects are taking 1.2 years on average from approval to the award of the first contract. Efforts are being made to remedy this problem with a stricter application of readiness filters; projects approved since 2016 have tended to show shorter startup delays, which is good news. 74. During the CPS period, ADB and the Ministry of Finance, along with the executing and implementing agencies, addressed these issues in their tripartite portfolio review meetings. Improvements were subsequently attained in contract award and disbursement, partly attributable to (i) the regularity of these meetings (every trimester), (ii) the shift to fewer and larger projects, (iii) stricter compliance with readiness filters, and (iv) delegation of projects to the resident mission. These are helpful steps, but they may not fully respond to the government’s view of the causes of poor portfolio performance; the government emphasizes the challenges of implementing federalism and “inadequate fiduciary, technical, and project supervision capacity.”51 51 Shreekrishna Nepal, Joint Secretary and Chief, International Economic Cooperation Coordination Division, Ministry of Finance.

ADB. 2018. Improving Project Implementation Performance in Nepal Key to Getting More Funds for Development. News Release, 23 November. https://www.adb.org/news/improving-project-implementation-performance-nepal-key-getting-more-funds-development-adb

https://www.adb.org/news/improving-project-implementation-performance-nepal-key-getting-more-funds-development-adb

https://www.adb.org/news/improving-project-implementation-performance-nepal-key-getting-more-funds-development-adb


75. Flagship infrastructure projects have faced the most delays and threaten ADB’s reputation in Nepal. The Melamchi Water Supply Project (2000), Gautam Buddha Airport (part of the South Asia Tourism Infrastructure Development Project, 2009), and Tanahu Hydropower Project (2013) are highly visible projects dogged by contractor performance problems. ADB was able to accelerate the Gautam Buddha Airport construction recently, but in combination, these problematic projects weigh heavily on public and government perceptions of ADB, and of government performance. Specifically, they raise the issue of whether ADB was able to meet the required pace in strengthening the capacities of government executing and/or implementing agencies. It also raises the question of whether ADB has a sufficiently broad and robust institutional perspective in providing capacity development support. 76. ADB and the government made some efforts to address capacity issues through system-wide initiatives. ADB noted in a tripartite meeting that the national flagship projects (para. 74) were facing challenges that needed the government’s strong leadership, particularly as regards (i) its approval of annual programs; (ii) land acquisition and forest clearance; (iii) stringent contract management; (iv) implementation arrangements of projects affected by state restructuring; and (v) the importance of ensuring high project readiness for future projects at the time of approval. 52 Improvements in government regulations and practices were acknowledged as necessary to rectify these shortcomings. As part of the response, in 2015, the government established the Capacity Development Resource Center at the Nepal Administrative Staff College with the technical and financial support of ADB. Many officials have been trained since, but it is not clear how this is making a difference to ADB projects or, more widely, to the government’s project management. The approach seems limited to adding ADB-centric training. 77. The CPSFR noted the rebounding performance of the portfolio after the 2015 disruptions, with better disbursement and contract awards in 2016–2017 (Table 6). However, the overall performance of ADB operations in Nepal has again been lagging in the first half of 2018. As of June 2018, the $2.3 billion portfolio was 64% contracted and 40% disbursed, with energy having the highest share of uncommitted and undisbursed amounts. 53 The share of potential problem projects stood at 21%.

Table 6: Key Portfolio Performance Indicators for Nepal, 2013–2017

Item 2013 2014 2015 2016 2017 Financial Performancea Contract award ratiob (%) 20.3 21.1 13.7 30.5 35.6 SARD-wide contract award ratio (%) 26 28 29 30 34 ADB-wide contract award ratio (%) 20 24 23 24 24 Disbursement ratio (%) 16.9 13.4 12.6 15.8 20.8 SARD-wide disbursement ratio (%) 17 17 16 19 21 ADB-wide disbursement ratio (%) 18 18 17 18 18 Portfolio Ratingd On track [no. (%)] 26(79) 26(70) 28(76) 31(91) 32(89) Potential problem [no. (%)] 7(21) 8(22) 8(22) 3(9) 4(11) Actual problem [no. (%)] - 3(8) 1(2) - - SARD-wide projects with implementation risk (%) 21 17 18 14 21 ADB-wide projects with implementation risk (%) 21 20 24 20 27 ADB = Asian Development Bank, SARD = South Asia Department. a Covers project loans and grants only. b Without policy-based loans and grants. Source: ADB annual portfolio performance reports, 2013–2017; Data on start-up compliance indicators is based on the Procurement, Portfolio and Financial Management Department’s portfolio management indicators 2013–2017.

78. In summary, the CPSFR was rightly concerned with the efficiency of the program. Despite some positive aspects, particularly the efficient ratings given to nearly all assessed projects spilling over from

52 ADB (South Asia Department). 2018. Meeting Minutes Tripartite Portfolio Review Meeting. 2 August 2018 (internal). 53 ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013-Mid-2018. Manila.


the previous CPS, it recognizes the implementation delays across many projects, arising for multiple reasons but always leading to poor portfolio performance. Flagship projects are particularly affected, with contract management the main shortcoming, which creates a reputational risk to ADB. The government and ADB are making strong efforts to solve portfolio performance issues through tripartite meetings and training for executing and/or implementing agencies, but progress is slow, and approaches are not sufficiently oriented on institutional development. On balance, the less than efficient rating is warranted. C. Effectiveness54 79. The CPSFR rated the program effective. The validation also rates it effective, based on a combination of several sector programs that are rated effective and less than effective; and comes to a numerical weighted value of 1.6 on a scale of 0 to 3. Table 7 summarizes the effectiveness at a sector level; and the ensuing discussion, supplemented by information in Appendix 4, provides the justification for each sector rating. The overall rating is weighted by the proportion of each sector in the overall CPS portfolio. ADB’s TA financing represents only 1% in the value of the total portfolio. Given Nepal’s institutional weaknesses, special emphasis was given to progress in the institutional development components of projects—often very slow in a context where good progress is crucial. The assessment also recognizes that of 34 loan and/or grant projects and programs approved before the current CPS but ongoing or completed during 2013–2017, 12 were completed and self-evaluated. Of the 12, 6 were validated by IED and were rated effective and successful. IED regards this proportion of the overall portfolio that was validated (in different sectors) as too small to significantly determine the ratings done for this CPSFR validation. Table 7: Effectiveness of Loans, Grants, and Technical Assistance Implemented during 2013–Mid-2018

Sector Programs Supported by ADB

% of Total Loan, Grant, and TA

Portfolioa Validation Assessment 1 Water and other urban infrastructure services 26% Less than effective 2 Energy 21% Effective 3 Transport 21% Effective 4 Education 13% Less than Effective 5 Agriculture, natural resources, and rural development 9% Effective 6 Public sector management 4% Effective 7 Finance 3% Effective 8 Information and communication technology, and Trade 2% Effective TA (0.9% of the total portfolio of loans, grants, and TA

projects) 1% Less than Effective

Total effectiveness of loan, grant, and TA portfolio 100% Effective (1.6) ADB = Asian Development Bank, TA = technical assistance. a Percent of the portfolio represents the value of the approved projects as a percent of the total approved grant and loan projects during the country partnership strategy period. This excluded TA projects.

Source: Asian Development Bank database.

54 Effectiveness at the country partnership validation level is a combined assessment of four levels of contribution by ADB-funded

projects to a country’s development effectiveness. It assesses ADB’s contribution during the CPS period to (i) the broader CPS objectives—this being the most pertinent; (ii) the intended sector outcomes and outputs—recognizing that although individual projects may be successful against respective project outcomes, collectively the completed projects may not have advanced the broader country and sector outputs and outcomes; (iii) the cross-sector thematic priorities (such as GESI, disaster risk reduction, climate change, and knowledge management) being pursued—also considering the use of TA; and (iv) the intended project outputs and outcomes. The validation reviews all projects implemented in the current period that have some substantial outputs or where outcomes have been achieved. Attention is given to both physical and soft components. The size of the completed projects and of the sector relative to the total sector or country portfolio is also of significance when considering the relative contribution to sector and/or country outcomes.


1. Assessment of effectiveness of loan and grant portfolio by sector

80. The government’s objective to improve drinking water supply and sanitation services to all citizens was ambitious. In the CPS results framework, outcome indicators reflected targets of 100% of the population using improved water supply and using improved sanitation services by 2017. This was to be done by delivering on outputs that (i) improved the number of water supply schemes with treatment facilities; (ii) increased the number of open-defecation-free areas; (iii) installed new sewer lines; (iv) created new landfill sites; (iv) enhanced inclusion through GESI-responsive projects; and (vi) improved nonrevenue water in the Kathmandu Valley. By the end of 2017, 86% of Nepal’s population was using improved water and 92% was using sanitation facilities. The CPSFR acknowledged that more than 4 in 10 people are yet to have a decent toilet and more than 700 children under the age of 5 still die every year because of diarrhea. On outputs, Nepal has made strides in its infrastructure, with landfills, new sewer pipes, and water supply points meeting or exceeding targets. It has been less successful, however, in establishing open-defecation-free areas. The ADB-financed projects helped reduce the proportion of nonrevenue water in the towns of its projects to 22%, as reported by SARD, but the country average of 50% nonrevenue water (including in Kathmandu, where there are project delays) shows little improvement, indicating that a huge amount of water is being lost through leaks, not being invoiced to customers, or not paid by them, or all of these things. In view of the disparity in water availability, this level of loss is of great concern in some water-scarce areas, e.g., in the Kathmandu Valley. More details on achievements against sector outcome and output targets can be found in Appendix 4. 81. For ADB, WUS was the largest sector, comprising 26% of the CPS portfolio. ADB financed 10 projects during the CPS period, of which 6 had been approved before the CPS period and 2 received additional financing during the CPS period. Two projects closed and eight are ongoing. ADB’s support was directed to most of the sector outputs described in para. 80, with a focus on improving water supply, sanitation, roads, and sidewalks in major urban centers and small towns. Four of the 10 projects, 55 accounting for 50% of the approved portfolio, improved water supply in the Kathmandu Valley. The Kathmandu Valley water projects have not fared well. Crucial to their success is the diversion of water under the Melamchi Water Supply Project from the Melamchi River to the Kathmandu Valley. This complex undertaking proved challenging to contract management, pushing the completion of the tunnel work from an originally scheduled date in 2006 to 2020. Even when the project finally starts delivering water, the additional supply of a maximum of 170 million liters per day will still not meet demand, and the use of multiple water sources will persist, calling for a careful policy of user charges (not in existence now) to ensure a proper and sustainable mix—particularly in view of the growing threat of groundwater depletion. 56 82. Downstream of this diversion project, the Kathmandu Valley Water Supply Improvement Project laid a great deal of piping that lies idle as a result of the project delays and because the installation cannot be fully tested until it receives the Melamchi River flow. The pipes may be suffering some degradation from other civil works that do not report their excavation activities, aside from the special wear and tear of unused systems. The Kathmandu Valley Wastewater Management Project, nearing completion, is deemed effective based on its use of existing water sources but it, too, could benefit much more from a completed Melamchi river diversion. Overall, the physical progress of expanding and improving the water supply transmission and distribution network, the sewage network, and capacity of the water treatment plants is slow, largely because of to low project management capacity. 83. The balance of the portfolio was covered by ADB’s support to urban development (with three projects, 35% of the portfolio) and urban water supply and sanitation (with two projects,15% of the portfolio). These projects were more successful, not least thanks to integrated approaches involving

55 L1820: Melamchi Water Supply Project; L2776: Kathmandu Valley Water Supply Improvement Project; L3255: Kathmandu Valley

Water Supply Improvement Project-Additional Financing; L3000: Kathmandu Valley Wastewater Management Project. 56 Ojha, et al. 2018. Water Taxation and Subsidy Analysis Based on Consumer Water Use Behavior and Water Sources Inside the

Kathmandu Valley. Water, 10: 1802. 7 December.


community and local government participation and ownership. Here, the focus was on greater sewerage coverage, and construction or upgrade of wastewater treatment plants; improved solid waste management; stronger community awareness of solid waste disposal, hygiene, and sanitation; and increased capacity of town administrations for operational management and water loss reduction. The sanitation efforts proved more difficult, particularly solid waste management. On balance however, ADB support was met with high commitment of communities, and preparation and commitment of municipalities. The Regional Urban Development Project, approved in September 2017, was prepared with high readiness and builds in part on earlier projects, completing some of the facilities built or planned in the previous projects. One problematic feature of infrastructure projects in this sector is the perceived poor project planning that leaves municipal infrastructure (especially roads) in disarray for prolonged periods of time, leading to citizen complaints such as “When the roads were not dug and holes exposed, it was much better.” 57 This widespread perception constitutes a reputational risk to ADB. 84. Many projects in the sector included capacity development components, but it is unclear whether the support is directly relevant to the shifting institutional requirements of federalism. National reforms, aided by ADB, that could facilitate sector infrastructure efforts of subnational governments (e.g., Town Development Fund restructuring), are proceeding slowly. The slow pace of reforms, along with the delay in project completion, may impede the attainment of sector objectives and a smooth transition to federal arrangements in the sector. In other capacity development efforts, the second and third Small Towns Water Supply and Sanitation projects are helping establish service standards, modernize the operation of local water user associations, and raise public awareness of water conservation and hygiene in several towns across the country. Lessons from these projects are now being institutionalized within government-funded programs.58 The establishment in 2017 of the Urban Planning and Development Centre under the Department of Urban Development and Building Construction may help spread the lessons and proven models. 85. In summary, the performance of the WUS sector in the CPS portfolio under review was mixed, yielding both disappointing and positive results. Sector outcome and output targets set by the government were not met, although they were ambitious to start with. The ADB portfolio sought to tackle several issues in this sector with mixed success. The Small Towns Water Supply and Sanitation projects proved to be the most successful in delivering on intended sector outcomes and outputs, with a high degree of local ownership. However, the projects covered only a small number of towns in Nepal in the CPS period. Nonetheless, these projects do have the potential to have a larger impact once the institutional arrangements around community participation are duplicated and sustained, and success becomes dependent on financing being available. The larger water supply projects in Kathmandu have the potential to substantially impact a larger proportion of the population but have proved to be more challenging and also risk to be less effective than anticipated. In addition, ADB, despite considerable investment, has found it difficult to influence institutional and policy reform—a feature that is not unique to the WUS sector. The validation rates sector performance over the period less than effective. 86. The larger energy sector context was positive for Nepal during the CPS period, with an improvement in service coverage and reliability. Moreover, the government is being assisted by ADB and others in balancing generation with transmission and distribution and addressing the seasonal demand-supply imbalance—the latter possibly through innovative energy banking arrangements with India. 87. ADB’s contribution to the energy sector comprised seven investment projects, 21% of its CPS portfolio of implemented and approved projects. Two major projects, the Tanahu Hydropower Project and the SASEC Power System Expansion Project, together 45% of the approved energy portfolio, have yet to deliver on some of their intended outcomes or, more importantly, on the key outputs, even though

57 R. Tripathi. 2017. Budget Crunch Hits Birgunj Town Development. Republica, May 1. https://myrepublica.nagariknetwork.com/

news/budget-crunch-hits-birgunj-town-development/ 58 ADB. 2017. Tapping the Unreached: Nepal Small Towns Water Supply and Sanitation Sector Projects: A Sustainable Model of

Service Delivery. Manila.

https://myrepublica.nagariknetwork.com/%20news/budget-crunch-hits-birgunj-town-development/

https://myrepublica.nagariknetwork.com/%20news/budget-crunch-hits-birgunj-town-development/


more than 50% of the project time has elapsed. Both projects are experiencing multi-year implementation delays for various reasons. A third major operation, the Power Transmission and Distribution Efficiency Enhancement Project, was only approved in September 2017, so it is too early to assess its effectiveness. These three projects account for almost 75% of the portfolio. Hence, the contribution of the CPS under consideration to Nepal’s physical infrastructure is slow, though it will be substantial in the future. The rest of the energy sector activities are showing progress, particularly transmission expansion, even if this is sometimes constrained by contractor weaknesses and land compensation issues. 59 Progress was also made in expanding the distribution systems. Less work is being done to support the outputs in renewable energy. Improvements in overall sector performance will depend on reforms and institutional strengthening, which to date has had only modest support from ADB—somewhat disproportionate to its investment role. The Nepal Electricity Authority, strengthened with the support of ADB, has managed to reduce system losses to 20.5% in 2018, from 26.4% in 2012, but this validation still has concerns when it comes to institutional reform (Appendix 4, last para. on energy). 88. Beyond the outputs mentioned in the CPS, ADB supported other infrastructure that contributed to sector outcomes. For example, the grid substations completed in Matatirtha and Chapali have been instrumental in eliminating load shedding in Kathmandu Valley since 2016, and also in other parts of the country. ADB support contributed 766 megavolt-amperes (132 kilovolt and 66 kilovolt) as of June 2018 to the country’s grid substation capacity, out of a total capacity of 3,196 megavolt-amperes (132 kilovolt and 66 kilovolt) as of the end of FY2018, and upgraded 23 distribution substations with 264 megavolt-amperes. This support enhanced reliability, reduced losses, and broadened access to electricity, thereby contributing to the sector outcomes. The Energy Access and Efficiency Improvement Project facilitated 21,046 new household connections, exceeding its target of 20,000. Similarly, 39,500 consumers are likely to be connected with the completion of the Electricity Transmission Expansion and Supply Improvement Project and the SASEC Power System Expansion Project. More details on the performance of the portfolio can be found in Appendix 4. 89. ADB has played a constructive role in mainstreaming GESI issues and safeguard considerations into the management of the sector, and benefits may be more apparent in the years to come. But it proved more difficult to influence private sector engagement and general governance issues, notwithstanding its role as key financier. Nonetheless, some evidence exists that ADB was able to indirectly spur private sector participation by its work on the transmission lines, enabling investments by private power generators. The next CPS may realize more direct participation of the private sector in ADB-financed operations. Despite the remaining challenges to sector and National Electricity Authority reforms, and the delays in a large part of the portfolio (discussed in paras. 71–79), the validation rates the energy program effective. 90. Transport equaled energy as a major sector engagement for ADB. Projects focused on strategic road networks and air transport, with limited support for rural road reconstruction, and represented 21% of the CPS portfolio. The transport program targeted two sector outcomes: an increase in cross-border cargo volumes along the east–west corridor, and an increase in international and domestic passenger movements through Tribhuvan International Airport (TIA). Four of the seven sector outputs related to the construction, rehabilitation, and maintenance of the strategic road network, including the connection of the district headquarters to the network. Other targets were the addition of the Gautham Buddha International Airport, increased toll collection, and increased access to paved roads for the population in Kathmandu.

91. The transport portfolio had 11 projects (eight of them approved in the previous CPS period) with significant grant and loan components. Of the three approved during the current CPS period, the SASEC Roads Improvement Project is too early in its implementation to evaluate. Thus, 10 projects, eight for

59 For instance, the IEM learned from contracted project implementation staff on site in Markichowk substation that the

transmission line work along the Marsyangdi–Kathmandu corridor (financed by the SASEC Power System Expansion Project) is being slowed by disagreement on compensation.


roads and two for air transport, can be assessed for their contribution to sector outcomes and sector outputs. Four transport projects closed during the CPS period and were assessed as effective in their PCRs or PVRs. Six others either remained active or were approved in the CPS period.

92. Most of the eight strategic road network and rural road projects are nearing completion. They contributed to the sector outcome of greater cross-border cargo volumes by delivering on the output of enhanced connectivity of the strategic east–west road network. Less clear, however, is the link to the broader CPS objective of inclusive economic growth. Given the piecemeal approach to road construction on the east–west road network, the focus seems to have been much more on supporting the movement of goods at nodal points where traffic moving north and south from the Indian border is congested, than on moving east or west across Nepal. While this encourages imports from neighboring India, it has had limited effect on enhancing connectivity within Nepal, which would require strengthening connections to non-strategic district and rural road networks or creating synergies with the ANR sector to boost the commercialization of agricultural production in Nepal. 93. The two air transport projects were not completed during the CPS period, so ADB’s support did not contribute to the national outputs targeted for 2017; the contributions will be made later (Appendix 4, Table A4.5). The CPSFR also noted that some outputs under the Air Transport Capacity Enhancement Project are unlikely to be achieved because of cost escalation; the TIA would be one such output. The projects may contribute to the sector outcome of increased international and domestic passenger movement in the next CPS period, provided that issues surrounding the TIA are resolved, the associated road infrastructure is completed, and legal and regulatory provisions and certification hurdles are overcome. Appendix 4 details ADB’s contribution to the progress of sector outcomes and outputs. 94. Institutional progress was made in terms of capacity for road asset management, but less so in terms of coherent national road planning. In aviation, the main institutional challenges have yet to be directly tackled but may be addressed in a program lending operation anticipated for the new CPS. The substantial investment role of ADB, if translated into commensurate policy influence, could tip the discussion in the sector toward some needed innovations, such as PPPs in aviation and more nationally integrated planning for road systems. Capacity development efforts embedded in transport projects showed limited progress. The Road Connectivity Project (SASEC) is supporting the capacity development of the Ministry of Physical Infrastructure and Transport on road maintenance and asset management, but it is too early to say if the government has allocated enough human and financial resources to operation and maintenance. 95. On environmental safeguards, the performance of the sector institutions, as indicated by the portfolio performance reports, is suboptimal because of a lack of capacity to ensure that people, policy, and process are in place. On GESI, the portfolio implementation report shows that the transport projects showed good achievements on GESI action plan implementation and ADB is developing a GESI guideline for the sector. Under the SASEC road project, a draft GESI guideline for the Ministry of Physical Infrastructure and Transport was prepared and is being finalized. While this progress is being made, it is necessary to have a long-term plan for the GESI guidelines integration into mainstream operations. In conclusion, given ADB’s contribution to the stated CPS objective, to the intended sector outcomes, and to declared sector outputs, the validation rates ADB’s contribution to the transport sector effective. 96. The CPS aimed to help build an education system, and its outcomes targeted an efficient, effective, and accountable structure to ensure equitable and inclusive access to all levels of education. This was to be undertaken through increased educational attainment by both men and women, including socially excluded groups, and a better-skilled labor force. At the end of the CPS period, the sector indicators selected (Appendix 4, Table A4.9) show some improvement—in that the average number of years of technical and vocational education and training (TVET) was exceeded. The partial success must be seen against the backdrop of slow progress in learning achievements. Since ADB is the focal point for eight other development partners in a flagship results-based sector program (for 2018 and 2019), this


slow pace of progress is worrisome. Two sector output indicators (Appendix 4, Table A4.10) showed mixed results—an additional national assessment of student achievements was conducted but showed no progress, and the percentage of women teachers in primary education declined. 97. ADB’s engagement in the sector represented about 13% of the total CPS portfolio, comprising four grant or loan projects and eight TA projects. Three of the projects were active for the whole of the CPS period; the School Sector Program (approved in 2011), accounting for 16% of the education portfolio, closed early in the CPS period. The PCR and later the project performance evaluation report60 rated the School Sector Program less than effective in supporting its and the sector outcomes (though successful overall). It exceeded its access targets but fell short on enhanced learning.

98. The flagship program of the sector was and is the Supporting School Sector Development Plan (SSDP) program, approved in November 2016 and accounting for 30% of the portfolio. ADB joined eight other financing partners for a SWAp, contributing a results-based loan. The program is still in its early stages (only 30% of time elapsed) but significant challenges have emerged in structuring the SSDP in line with federalization and being able to obtain the requisite data on the disbursement-linked indicators. Federal restructuring is affecting teacher placement as well as fund flows and other aspects of PFM. The CPSFR acknowledged that these may slow the achievement outputs and outcomes of the program. ADB had hoped to adjust the SSDP to conform to the federal system in the course of the mid-term review, but the government’s approach to the transition did not allow for a systematic adjustment of the SSDP. While much of ADB’s education effort aims to build the capacity of government and delivery institutions, the transition to a federal system keeps creating capacity gaps, particularly in reporting procedures from local government to the federal level. ADB monitoring in Gandaki Province, for instance, revealed that local governments were largely unaware of the reporting requirements outlined in the Appropriation Act (2018) to receive the second tranche of SSDP funding, and were not submitting expenditure reports to the District Treasury Comptroller Office. No formal measures had been planned or budgeted to address this transitional challenge. Although a substantial TA grant ($6 million, cofinanced by Norway) attached to the SSDP is helping deal with some institutional issues,61 the validation is concerned about the likely outcome of the program. 99. The largest operation was the Earthquake Emergency Assistance Project (50% of the portfolio). A significant portion of the project (43%) was dedicated to the rehabilitation of earthquake-damaged schools, with some new schools to be built. However, most of it targeted the rehabilitation of infrastructure not related to education, such as government buildings, and district or strategic roads. After the mid-term review, the targets of the Earthquake Emergency Assistance Project were revised downward, recognizing that the post-approval demand of the government to include secondary schools meant that it could rehabilitate and retrofit fewer schools than originally envisaged. The model schools built by the project are robust, and the facilities provide a conducive physical environment for teaching and learning. There does not appear to be a governance component to the model. It is also not clear how the few model sites will have a demonstration effect that could lead to wider adoption. There is some hope that the SSDP will pick up the effort and augment the governance side, but this would still leave the dissemination question unanswered. The project is progressing. The contribution to the 2017 sector outcomes and outputs will need to come later. 100. The Skills Development Project, 5% of the education portfolio, is coming to a close with mixed results. The training activities are completed, and the quality improvement program is progressing. The project contributed to improving the training delivery system, and expanded quality improvement measures to TEVT schools. However, slow progress is made in developing the TVET road map within the institutional reform and in restructuring the activities to align with federalization. Moreover, monitoring

60 IED. 2019. Project Performance Evaluation Report: School Sector Program. Manila: ADB. 61 For instance, it is helping the government develop reporting formats for local governments on expenditures related to

educational and other conditional grants.


reports suggest that the rates of failure to graduate from some training units are very high.62 Given that this project was relatively small, it could only make a minimal contribution to the sector outcomes and outputs relating to TVET.

101. In conclusion, ADB faced considerable hurdles in implementation and in leveraging finances to ensure that interventions contribute appropriately to meeting the challenges in the education sector. It is surprising that the results-based lending modality was approved with little preparation for the changes that federalism would bring. The efforts to build earthquake-resilient school infrastructure will have a positive impact on the sector, and even more so if the design is replicated. Nevertheless, the progress in education outcomes and outputs during the CPS period was disappointing. The validation rates the performance in the education sector less than effective.

102. ADB’s ANR program, comprising 9% of the approved grant and loan portfolio, contains some successful or promising projects. These are strongly linked to communities and local governments that exhibit substantial ownership of and contribution to the projects.Six ADB-funded projects contributed or still contribute to the national goal of increased productivity and food security. These include (i) two irrigation and water resource projects (Community Irrigation Project and Community Managed Irrigated Agriculture Sector Project) as well as the Building Climate Resilience of Watersheds in Mountain Eco-Regions Project (funded by the Strategic Climate Fund), all contributing to greater agricultural productivity through increased and more reliable water availability for irrigation and agriculture support services; and (ii) three agro- or agribusiness projects (Commercial Agriculture Development Project, Raising Incomes of Small and Medium Farmers Project, and High Mountain Agribusiness and Livelihood Improvement Project) that are contributing to high-value crop development, value chain improvements, and agribusiness development, which in turn contribute to greater agricultural productivity and food security (increased income to farmers, improved nutrition). 103. The focus of the Water Resources Project Preparatory Facility is to support the update of the Irrigation Master Plan and develop new irrigation projects. It helps plan projects for the next CPS and should ultimately contribute to improved irrigation and increased productivity in Nepal. Rural connectivity is also critical for agriculture commercialization and availability of farm inputs, which in turn boost productivity. The Bagmati River Basin Improvement Project is indirectly related to the CPS outcome because it is about improved water management at basin level, which would contribute indirectly to agriculture through better water management and flood protection.

104. The CPS also supported sector reform, with some results. ADB projects adjusted to subnational government restructuring, but it is not clear if they are helping craft new and federalism-friendly arrangements in the sector. A more detailed analysis is in Appendix 4. The validation assesses the ANR sector as being effective. 105. Other sectors not featured in the CPS results framework had strong relevance to the portfolio performance. In addition to supporting ANR, energy, transport, WUS, and education (together 90% of the portfolio), ADB provided support to PSM (4% of the portfolio), capital markets (3%), ICT (2%), and trade facilitation (1%). Appendix 4 provides an analysis of these sectors and subsectors, but PSM is discussed in more detail here (para. 106) because it had strong relevance to the performance of the sector portfolio, even though it was not explicitly programmed for this CPS period.

106. That the CPS programming did not incorporate additional PSM projects is a major shortcoming given that ADB’s interventions across the board are affected by PSM and associated governance challenges. The Governance Support Program (Subprogram I) and Strengthening Public Management Program grants were carried over from the previous CPS and completed during the current CPS period. They were supplemented with five TA projects. The CPSFR noted that both grant operations were assessed 62 ADB (South Asia Department). 2018. Project Review Mission for the Skills Development Project. Back-to-office report. 9 July

(internal).


as effective. The Governance Support Program boosted the government’s Local Governance and Community Development Project, which brought several development partners together to support local government in its service delivery, use of e-procurement, and accountability mandates. Given the new federal structure and the government’s lack of interest in borrowing for soft sector issues, the indications are that there may be little appetite for another policy-based loan. After all, support to PSM is already being offered by development partners through two grant-funded programs—the Provincial and Local Government Support Program and the Multidonor Trust Fund for PFM. As such, ADB’s influence on PSM outputs and outcomes has been positive, and the validation concurs with the CPSFR assessment that the PSM program’s contribution was effective. 107. The finance sector was not addressed by the CPS results framework. The CPS program included one project and one program approved in the previous CPS period, accompanied by two TA projects. The Rural Finance Sector Development Cluster Program (Subprogram 2) was assessed by IED to be effective because key reform actions introduced under the program strengthened three banks (Agricultural Development Bank Limited, Nepal Small Farmers' Development Bank, and Grameen Bikas Bank). The program established a supportive rural finance infrastructure for greater efficiency of the sector and expanded the outreach of rural financial institutions. However, it was less than successful in helping the government divest or privatize the Agricultural Development Bank. 108. The smaller Capital Market and Infrastructure Capacity Support Project is ongoing, and the CPSFR deems it likely to be less than effective based on limited progress toward the intended outputs and outcome. The government is being assisted by ADB in institutionalizing a Public Debt Management Office within the Financial Controller General’s Office. It is also being supported in creating a conducive environment for PPPs and establishing a PPP demonstration project. The most recent information provided by SARD indicates that the Public Debt Management Office is now functioning and that a PPP law has been passed. The validation rates the small contribution to the finance sector effective. 109. ADB’s support to industry and trade is also not embedded in the CPS results framework. It included two programs and two TA projects. The SASEC Trade Facilitation Program (now closed) was carried over from the previous CPS, and the SASEC Customs Reform and Modernization of Trade Facilitation Program was approved during the CPS period. Both were accompanied by TA projects to help achieve the program’s policy actions and outputs. IED rated the SASEC Trade Facilitation Program less than effective (but successful overall); it has improved trade practices, but a contribution to outcomes could not be discerned. The ongoing SASEC Customs Reform and Modernization of Trade Facilitation Program is on track to meeting tranche 2 conditions and thus has better prospects of being effective. 110. The ICT sector also was not embedded in the CPS results framework. Nonetheless, two projects were in the program, carried over from the previous CPS. The ICT Development Project aimed to ensure affordable access to ICT for rural communities and businesses. The CPSFR rated the project effective based on achievement of almost all its outputs and progress toward outcome. However, the wi-fi expansion in rural areas is not yet apparent, and the improved e-services may not be attained for some time. In the case of the SASEC Information Highway Project, which aimed to make ICT more accessible, affordable, inclusive, and sustainable to a variety of users, the outputs have been achieved.

2. Use of technical assistance projects 111. The CPSFR explained that the ADB investment program was supplemented with significant TA to help prepare quality projects, buttress institutional capacity, and support policy and institutional reforms. The TA volume was indeed significant (Table 8). The newly approved TA projects are reasonably spread over the CPS period. Of the 10-capacity development TA and/or policy and advisory TA projects approved prior to the current CPS, seven were self-assessed by the operations department, which rated five successful and two less than successful. Only one capacity development TA approved in the current CPS was self-assessed, receiving a rating of successful.


Table 8: Share of Technical Assistance by Number and Value, by Sector

Sector Number of TA Projects %

Total Financing ($ million) %

ANR 13 25 21.39 31 EDU 8 15 14.00 20 ENE 12 23 12.79 18 FIN 3 6 1.13 2 IND 2 4 2.50 4 PSM 5 10 8.45 12 TRA 2 4 1.80 3 WUS 7 13 7.25 10 Total 52 100 69.31 100

ANR = agriculture, natural resources, and rural development; EDU = education; ENE = energy; FIN = finance; IND = industry and trade; PSM = public sector management; TRA = transport; WUS = water and other urban infrastructure and services. Source: Independent Evaluation Department.

112. The distribution of TA veers away from that of the loan and/or grant focus (Table 8). ANR and education received considerable support (nearly half of TA approved); while energy, transport, and WUS (areas of focus) received about half when combined—relatively low compared with their loan or grant allocations. The use of TA therefore adds to the sense of a sprawling program. The large TA portfolio enabled ADB to better address capacity development in all its dimensions: from the skills level to organizational and regulatory capacity. However, SARD believes that the large TA portfolio has placed a strain on the department and the resident mission, and there is now a departmental effort to limit TA strictly to loan projects. 113. As for the type of TA, the use of capacity development TA predominates, representing almost 58% in number and 68% in value of the total TA portfolio implemented (Appendix 1, Table A1.19). Evidence is scant, however, that capacity development TA significantly contributed to any improvement in the performance of the portfolio. Moreover, policy and advisory TA was not used in sectors where the it would have contributed to the necessary sector reform that was being targeted. Out of three policy and advisory TA projects, two were in the relatively small ANR sector, the other in PSM, a sector that was not even part of the current CPS programming. 114. In conclusion, the TA portfolio was wide-ranging, but in terms of effectiveness, it was only the project preparatory TA operations that showed promise, and that was to be expected since they were targeted to develop loans. The CPSFR was not able to demonstrate any significant contribution of the TA portfolio to the achievement of targeted CPS sector outcomes. Several studies were produced, but it was not clear what they eventually led to, either in terms of policy or project design. The validation rates the TA portfolio less than effective. 115. With the exception of GESI, the CPSFR provided scant evidence on the cross-cutting themes, which are dealt with under the chapter on development impact. In general, across sectors, GESI action plans show considerable attention and success, but the institutionalization of their planning and monitoring is not firmly embedded. The same can be said for climate change risk management, where institutional efforts built capacity, which however dissipated with the turnover of personnel, reflecting insufficient government commitment to institutional capacity. In terms of a TA pattern, ADB can be seen to have maintained a high level of utilization, covering all possible applications; but while TA extended and deepened the sector reach of the CPS program, capacity development results across TA projects vary considerably. In the use of CSOs, ADB efforts and results do not appear to reflect the CPS aim of making CSOs a meaningful part of its partnership agenda in a country that is committed to people’s empowerment. 116. In summary, the CPS program has contributed to sector outputs and outcomes set in the CPS results framework. A substantial portion of the portfolio was not completed and so may very well


contribute to results in the next CPS period. Although projects closed in the current CPS have largely been assessed as effective, particularly in their physical components (civil works and/or equipment), they have been less so in their soft components, particularly institutional strengthening, which is a crucial element of the projects in a situation of weak overall implementation capacity for a government undergoing decentralization and federalization. The energy and transport sector programs were rated effective, as were the smaller ANR, urban development, and disaster reconstruction projects, and some sectors not listed in the CPS results framework. The latter have been more fruitful or promising in their outputs and outcomes. On that basis, the CPS program is found to be effective, though when weighed against the WUS and education programs that were rated less than effective, the balance is only just positive. D. Sustainability 117. The CPSFR rated the ADB program likely sustainable. The final review points to several measures of the government in each of nine sectors that led it to assess the program as likely sustainable—e.g., government provisions for financing operation and maintenance (O&M), staffing and technical expertise, commitment to implementing environmental and social safeguard measures, and the policy environment supported by ownership and commitment of the government and beneficiaries. It also employs the findings on ratings of project sustainability. The validation assessment covers similar ground. 118. As a general observation, the sector-by-sector account of sustainability provided by the CPSFR painted a positive picture for all nine sectors that received ADB support during the CPS. Moreover, the assessment of 12 projects that closed during the CPS period and for which PCRs were prepared, speaks favorably of the sustainability of the results attained; 11 projects were assessed as likely sustainable, and 6 of these were validated by IED. The CPSFR noted that some projects face challenges in achieving sustainable results, citing the example of the Second Decentralized Rural Infrastructure and Livelihood Project; it fears that under the new federal structure, local government would not rise to the challenge of rural road maintenance. The overall positive finding of the CPSFR should be seen against the projects assessed; all were approved in the prior CPS period and varied in their duration in the current period. The validation adopts a more comprehensive view, encompassing developments in result areas that shed light on already assessed projects and also examining ongoing projects that offer some glimpses of their likely sustainability.

1. Government Commitment to Reform Policies 119. The positive view of the CPSFR in the energy sector reflected the steps taken by the government. By increasing tariffs, the Energy Access and Efficiency Improvement Project exceeded its financial internal rate of return at appraisal. More broadly, the Nepal Electricity Authority recently achieved profitability thanks to those increases. However, its balance sheet and practices suggest that it is not yet a viable entity. 63 Getting tariffs right, consistently, will be challenging in view of the slow staffing of the newly established tariff-setting body, the Nepal Electricity Regulatory Commission. 64 120. Other positive points put forward by the CPSFR included the introduction of electronic billing systems by water authorities, and the collection of user fees by water and irrigation user committees. However, there is little evidence in the project documents that established water groups persist and are in fact recovering their costs through tariffs and/or contributions. There is instead evidence beyond ADB reports that tariff increases in urban services, water in particular, are far from achieving cost coverage.

63 ADB. 2017. Report and Recommendation of the President to the Board of Directors for the Proposed Loan and Administration

of Technical Assistance Grant to the Government of Nepal: Power Transmission and Distribution Efficiency Enhancement Project–Financial Management Assessment. Manila.

64 B. Subedi. 2019. Cabinet puts appointment of Electricity Regulatory Commission officials on hold. Kathmandu Post, January 25. https://kathmandupost.ekantipur.com/news/2019-01-25/cabinet-puts-appointment-of-electricity-regulatory-commission-officials-on-hold.html

https://kathmandupost.ekantipur.com/news/2019-01-25/cabinet-puts-appointment-of-electricity-regulatory-commission-officials-on-hold.html

https://kathmandupost.ekantipur.com/news/2019-01-25/cabinet-puts-appointment-of-electricity-regulatory-commission-officials-on-hold.html


In the water sector, there is a strong dependency on development partner support for about 50% of the costs of water provision.65 121. Government commitment to making use of the outputs and lessons of ADB investment and TA projects is mixed. A success story is the effort of some ministries that have been assisted in developing GESI guidelines; they are now seeking to apply these consistently. At the local level, the formula of employing the Town Development Fund to leverage community participation has been applied in several ADB-financed projects. Less encouraging are instances where government is slow or unwilling to make use of TA outputs. For instance, the TA for Mainstreaming Climate Change Risk Management in Development recommended revisions to many policies, guidelines, manuals, and standards mandated for use by implementing agencies. Adoption has been slow, leading the TA completion mission to opine that “the likelihood of official adoption is low now that the TA has ended.” The interviewers preparing the TA completion report noted that “none of the agencies interviewed were able to expressly indicate how TA findings are being used by agency personnel.”66

122. Important policy actions associated with program loans also have a mixed record of adoption and scaling-up, even when supported with TA projects. The Strengthening Public Management Program, disbursed in two tranches during the early part of the CPS period, generated manuals and pilots in a number of PFM areas crucial to both national and local governments. Despite garnering a sustainable rating, several outputs do not seem to fit in the restructured intergovernmental system. The Ministry of Federalism and Local Development pilot of the medium-term budget framework was not continued under the restructured Ministry of Federalism and General Administration. The Village Development Committee accounting and internal audit systems are not used in the restructured municipalities. The Municipal Administration Revenue system piloted in Kathmandu Municipality was not replicated; the Ministry of Finance opted instead for the Sub-national Treasury Regulatory Application (SuTRA). 123. In the transport sector, the prospects for sustainability of roads in the strategic road network improved when the government recently committed to their maintenance. In contrast, the sustainability of ADB-constructed non-network roads is imperiled by the lack of communication that flows between the Department of Local Infrastructure and the municipalities, which should be expected to receive the new assets in line with the Constitution’s assignment of functions. ADB has not been able to bridge this gap in information, elevating the risk that the O&M of these roads will not be properly managed. 124. Gaining institutional backing to ensure sustainability has become somewhat more difficult in Nepal because of the institutional turbulence caused by the shift to a federal republic. An example of the institutional tensions arising from the transition is the ongoing tussle between the Water and Energy Commission Secretariat and the Ministry of Energy regarding institutional ownership of energy efficiency, which resulted in a cancelled workshop under TA for the Preparation of Energy Efficiency Policies and Guidelines for Bhutan and Nepal. Given the large and continuing restructuring necessitated by the shift to a federal state, many more demarcation disputes of this kind could emerge and hamper efforts to integrate successful lessons and models or continue them once integrated. 67 125. The experience of the TA for the Preparation of Energy Efficiency Policies and Guidelines is also instructive in another sustainability aspect. It shows that some results are so initial in their nature that they need to be followed by additional assistance to sustain outcomes. It is not clear that this has been forthcoming in this case, or in the case of other institutional support to energy (e.g., TA for Energy Sector

65 Government of Nepal, Ministry of Water Supply and Sanitation Sector Efficiency Improvement Unit (SEIU) 2016. Nepal Water

Supply, Sanitation and Hygiene Sector Development Plan (2016–2030). Kathmandu. 66 ADB. 2018. Technical Completion Report: Mainstreaming Climate Change Risk Management in Development in Nepal. Manila. 67 ADB. 2019. Project Data Sheet: TA 8276-REG: Preparation of Energy Efficiency Policies and Guidelines for Bhutan and Nepal.

Manila. https://www.adb.org/projects/46494-001/main#project-pds

https://www.adb.org/projects/46494-001/main#project-pds


Capacity Building). 68 It also does not seem to have happened in the case of climate change risk management support (para. 158).

2. Operation and Maintenance Practice and Capacity 126. SARD holds that the increase in funds for maintenance of roads (particularly strategic network roads) and in the budget for education, as well as the introduction of performance-based maintenance after road construction, are salient measures that are likely to sustain the benefits of ADB operations in Nepal. The issue of O&M appears in project monitoring. However, this comes rather late in the project cycle, during the handover of physical assets. The strengthening of the responsible institutions is also rather late, or is not given much attention, hence O&M systems handed over in this fashion appear sound at the time. It is not surprising that the monitoring of the Road Connectivity Project, to take an example, is reassuring on this point. But there is no testing of the true workability of O&M arrangements at that stage. Routine maintenance at the time of a project self-assessment (i.e., the PCR) may be in place, but this is no guarantee that it will persist, or, as the PVR for the Road Connectivity Project notes, that periodic maintenance funding will be found. 69 Periodic maintenance funding has also been an issue for the Subregional Transport Enhancement Project. Project monitors warn that “the funding gap for periodic maintenance may have detrimental effect on the economic life of the project if not addressed on time.”70 127. The tendency to address O&M arrangements late in the project cycle is also seen in the case of the Melamchi Water Supply Development Board, the body responsible for finalizing these arrangements for the Kathmandu Valley Water Supply Improvement Project. 71 This late approach can result in a poorly conducted handover. In another project, the Emergency Flood Damage Rehabilitation Project, the PVR notes that there was no proper handover of two completed water tanks to end-users, and that user fees were not collected. 72 An optimistic view might be that these arrangements will come about as necessity makes itself felt, but that is a risky supposition. 128. Unwarranted optimistic assumptions of O&M follow-through are also seen in the case of the Establishing Women and Children Service Centers project. ADB expects that “By the end of the Project, the recurrent costs of the centers will be fully subsumed under the regular budget of the Nepal Police.”73 Beyond a verbal vouching, nothing is offered to suggest that this will happen in a timely and sufficient manner. 129. In the ANR sector, the optimism is at least based on discussions with beneficiaries who will be responsible for O&M in many cases. The subprojects of the Commercial Agriculture Development Project are a case in point. 74 But even these reassurances cannot replace detailed work and testing of the arrangements. 130. Under a “maintenance first” campaign, prior to restructuring, districts were required to generate annual road maintenance plans and multi-year road maintenance plans and were funded based on results for maintenance. But recent federal restructuring has dissolved districts as levels of elected

68 The technical completion report rates the project successful but notes that “further work is needed for DOED to build full

capacity, to guide the development of Nepal’s power system or to evaluate potential hydropower projects on an economic basis.” ADB. 2013. Technical Completion Report: Energy Sector Capacity Building in Nepal. Manila.

69 ADB. 2017. Validation Report: Road Connectivity Sector I Project in Nepal. Manila. 70 ADB (South Asia Department). 2018. Project Completion Report Mission (G0225) Subregional Transport Enhancement Project.

Back-to-office-report (internal). 71 ADB. 2018. Project Brief-Loan 2776/3255: Kathmandu Valley Water Supply Improvement Project (with Additional Financing).

Kathmandu. 72 ADB. 2018. Validation Report: Emergency Flood Damage Rehabilitation Project in Nepal. Manila. 73 ADB. 2009. Grant Assistance Report: Establishing Women and Children Service Centers in Nepal (Financed by the Japan Fund

for Poverty Reduction). Manila. 74 ADB (South Asia Department). 2009. Project Review Mission, 24–27 November 2009 (Grant 0063) Commercial Agriculture

Development Aide Memoire. Back-to-office report. 11 December (internal).


government and placed the development and maintenance of rural roads75 under the jurisdiction of local and provincial governments. But no clear mechanism for O&M was established to go along with that new functional assignment.76 131. A similar mixed picture emerges in the water sector. The government is keenly aware of the importance of sustainability of drinking water systems, and points to inadequate O&M as the cause of systems failure. It reports that only about one-third of the schemes have a water supply and sanitation technician to take care of the scheme, and an equally low rate of registered water and sanitation user committees. Less than 5% of the water schemes have an O&M fund.77 132. As in the road subsector, the definition of responsibilities for O&M in the water sector is lacking. In the Kathmandu Valley Wastewater Management Project, the Kathmandu Upatyaka Khanepani Limited (KUKL)—a public company in charge of water provision—is aware of the O&M challenges, but seemingly unsure how to proceed. A project monitoring mission noted a lack of coordination between municipalities, KUKL, and other relevant bodies on identifying drainage needs and priorities, adding that “Ownership and O&M responsibilities of the networks being constructed by different agencies are not clearly defined.”78 133. In summary, the government and ADB are increasingly concerned about sufficient O&M budgets and institutional arrangements related to project-built infrastructure. Strides are being made in adjusting tariffs to match costs, both in energy and water services. Local water user committees are operating in some areas, and larger central organizations are seeking to bolster their capabilities to manage the sector and larger projects—in the Kathmandu Valley for instance. The efforts have yet to translate into consistent attention and action across all sectors, as evidenced at project level, where the hand-off at project end is risk prone (e.g., in the case of municipal roads), and at sector level, where tariffs and O&M funds as well as institutional arrangements are still insufficiently established or insufficient to handle sustainable maintenance and expansion of services. The shift to a federal system has made the challenge more complicated, generating uncertainty about the intergovernmental roles in O&M and the governance models that were being fashioned prior to federalism (e.g., in municipal financial management). The validation finds the ADB program less than likely sustainable. E. Development Impacts 134. The CPSFR assessed development impact to be satisfactory. The CPSFR assessed ADB’s overall contribution to development impacts based on the progress toward selected country development goals, CPS objectives, thematic drivers, and ratings of assessed projects on development impact. The validation covers similar ground.

1. Progress Toward Government’s Overall Targets and Country Partnership Objectives

135. The CPS listed four country development goals, and the CPSFR reported on these (Appendix 7) but could not do so for two indicators in view of the lack of poverty data. The available data shows that the 2015 disaster accounted for the large fall in GDP in FY2016. The outlook is 5.9% for FY2018 and 5.5 for FY2019.79 The more puzzling result is the stagnation of the gender inequality index in view of the considerable effort made by the government to be inclusive, and the support it has received from 75 Currently managed by the Department of Local Infrastructure Development and Agricultural Roads under the Ministry of Federal

and General Administration but given policy direction from the Roads Board Nepal. 76 Itad. 2017. Rural Access Programme Phase 3 Monitoring, Evaluation and Learning Component: Review of Rural Roads

Maintenance Planning in Nepal. November. 77 Ministry of Water Supply. Accessed on January 14, 2018 http://mowss.gov.np/content/about-ministry-of-water-supply.html 78 ADB (South Asia Department). 2016. Review Mission - Loan 2776-NEP: Kathmandu Valley Water Supply Improvement Project,

Loan 3255-NEP: Kathmandu Valley Water Supply Improvement Project – Additional Financing, and Loan 3000-NEP: Kathmandu Valley Wastewater Management Project. Aide-mémoire. 13 October (internal).

79 ADB. 2018. Asian Development Outlook. Manila. http://www.adb.org/countries/nepal/economy

http://mowss.gov.np/content/about-ministry-of-water-supply.html

http://www.adb.org/countries/nepal/economy


development partners in this effort, e.g., via the Local Governance and Community Development Programme (LGCDP). 136. ADB’s contribution to IEG is viewed positively by the CPSFR given the many sectors that yielded relevant results. As noted in Appendix 4, most CPS sector outcomes were achieved. The CPSFR indicated how these outcomes support its conclusions on impact. In energy, for instance, it concludes that ADB's support for power generation, transmission, distribution, and rural energy access with decentralized renewable energy sources helped Nepal move toward energy security. Improved transport connectivity brought people in remote and rural areas closer to markets, services, and economic opportunities. Small and secondary towns saw visible improvements in the supply of safe drinking water, and improved roads and sidewalks for the residents. Small and medium farmers can increase their income from the production of high-value and niche commodities, expanded irrigation coverage, and effective water management. Beneficiaries from TVET increased their income through self-employment. The support for the Earthquake Emergency Assistance Project resulted in improved physical facilities for teaching and learning in a safe environment. 137. These are all credible claims, underpinned by good achievement of the sector outcomes. On a project-level basis, as discussed in part under other evaluation criteria, the picture is less positive. The prolonged delay in the Melamchi water diversion reduces the potential impact of several projects in water supply, and to a lesser extent in wastewater treatment. Similarly, the enhancements at TIA and Gautam Buddha Airport will show less impact to the extent that they are delayed. Both of these water and transport projects are a decade or more into their implementation. In the energy sector, contracting snags of the 2013 approved Tanahu Power Generation Project also suggest that the impact will be impaired as delays accumulate. The framework and institutional shortfalls, in particular, suggest that the desired impact is and will be less than expected in some cases.

2. Progress on Cross-Cutting Thematic Issues 138. The CPS addresses the crosscutting thematic issues of the ADB program—PSD, RCI, GESI, governance, and environmental sustainability. Moreover, it adds” engaging with civil society and nongovernment organizations” as part of the partnership agenda of the CPS. 139. The CPSFR offered Nepal’s improved Doing Business rank (from 108th of 185 countries in 2013 to 105th of 190 in 2018) as evidence of impact. But after enumerating the dimensions that saw improvement or decline, the CPSFR came to the conclusion (shared by the validation) that impact in PSD will have been less than satisfactory. It did find a bright spot in ADB’s Trade Finance Program, which engaged with three banks and supported $78.71 million in trade involving 226 transactions, with about 51% financed by the private sector. 140. The search for nonsovereign investment opportunities in Nepal led initially to consideration of the transport sector, but government changes sidelined the effort. Ultimately, the analysis centered on energy, leading to the ADB Board approval of a loan of $30 million from OCR and $30 million COL from the Canadian Climate Fund to a Korean-led consortium planning to build a 216-megawatt run-of-the-river plant in the Upper Trishuli. ADB’s Private Sector Operations Department anticipates a closer association with the resident mission, will take an explicit part in the preparation of the next CPS, and will selectively consider projects for NSOs based on project bankability and resources. 141. As for sovereign operations, ADB was able to spur small entrepreneurs and cooperatives through ANR projects 80 In line with CPSFR commented on the Capital Market and Infrastructure Capacity

80 High Mountain Agribusiness and Livelihood Improvement Project (HIMALI) and Raising Incomes of Small and Medium Farmers

(RISFM).


Development Project, the validation also notes that efforts to establish PPPs were partially successful at local and/or project level, as in the O&M of public toilets in the Secondary Towns Integrated Urban Environment Improvement Project.81 ADB efforts to support the legal and institutional framework for PPPs yielded fewer results. For instance, the PPP section in the National Planning Commission is not effective. 82 However, after the recent enactment of a PPP law, the institutions concerned may function better. 142. Additionally, it should be noted that initiatives to reduce the crowding-out effect of the state have proceeded haltingly. The flagship effort in this regard was the divestment or privatization of Agricultural Development Bank Limited. This was partially achieved, but the search for an international strategic investor was futile, given the overall investment climate. 83 143. ADB’s rather modest effort in private sector support should be seen against that of other development partners, such as the International Finance Corporation and/or World Bank and Japan International Cooperation Agency. The International Finance Corporation made some small investments, and Japan International Cooperation Agency has been assisting the Investment Board of Nepal. Development partners overall have not had the impact they desired, but the World Bank is making private-sector-led jobs and growth one of its priorities (for 2019–2023).84 144. The CPSFR provided evidence that transport and trade facilitation contributed to strong growth in the movement of goods on the East–West Highway and to greater passenger traffic through international and domestic airports—even if traffic through TIA did not reach the anticipated target. As regards completed initiatives, the CPSFR also pointed to ADB's support for customs modernization and the adoption of the ASYCUDA system for customs clearance. These efforts helped increase cross-border trade of goods—by up to 31.6% thanks to the Subregional Transport Enhancement Project. 85 The SASEC Trade Facilitation Program is estimated to have contributed to a 10% increase in custom revenues.86 In the energy sector, transmission and distribution infrastructure supported by ADB allowed for more power trade with India. 145. The validation accepts these points and underscores the potential impact of better links in road transport, air travel, trade, and the electricity industry on households, businesses, government enterprises, and national revenues. The SASEC strategy could have been better explained in CPSFR in terms of which priorities are given the RCI designation, and how that helps Nepal move forward more assertively. 146. The CPSFR stated that ADB contributed to the development of GESI guidelines, structures, and mechanisms in the energy and WUS sectors. It also stated that GESI impacts are visible in ADB operations in terms of participation, representation, capacity development, livelihood skills enhancement, and employment opportunities for women and excluded groups. It cites examples such as those found in an ADB knowledge document focused on ADB’s support for gender equality over the period 2011–2015.87 147. ADB’s consideration of GESI elements pertains to operations classified as having some gender benefits, gender mainstreaming, or focus on gender (thematically). Appendix 2 provides a list of all assessed projects as well as additional long-lived projects in Nepal with their ADB classification by gender. Most projects have some gender elements and/or benefits or seek to mainstream gender; there were no 81 ADB (South Asia Department). 2017. Loan Review Mission: Secondary Towns Integrated Urban Environment Improvement

Project in Nepal. Back to-office report. 29 June (internal). 82 ADB. 2018. Nepal Project Brief: G0252 Capital Market and Infrastructure Capacity Support Project. Manila. 83 ADB. 2016. Completion Report: Rural Finance Sector Development Cluster Program (Subprogram 2) in Nepal. Manila. 84 World Bank: https://www.worldbank.org/en/country/nepal/overview#2 85 ADB. 2018. Completion Report: Subregional Transport Enhancement Project in Nepal. Manila. 86 ADB. 2017. Validation Report: SASEC Trade Facilitation Program in Bangladesh, Bhutan, Nepal. Manila. 87 ADB. 2015. Gender Equality and Social Inclusion in ADB Operations in Nepal. Manila.

https://www.worldbank.org/en/country/nepal/overview#2


gender-themed projects. The reporting on gender and/or GESI has some shortcomings, but in general the projects seeking to mainstream gender do prepare GESI action plans, monitor these plans, and report considerable success in achieving the planned actions. However, the country portfolio review mission reports, beginning in 2013, alert ADB to the institutional weaknesses that beset GESI efforts, particularly the use of external consultants (intermittent and not always capable) to monitor GESI plans. 88 Over the CPS period, ADB trained government staff and supported the establishment of GESI units, but ADB notes that it is critical to follow up on these actions to make them effective and sustainable. It concludes, in 2017, that more ownership and commitment is necessary from the leadership, and that the GESI focal points in departments and ministries should be engaged for project monitoring and supervision. 89 Gender action plans still tend to receive late attention in mid-stream reporting, as opposed to DMF or policy action. The quality of the action plans is mixed; too frequently the targets are not realistic, or the indicators are not operational or sufficiently aligned with the project outputs—a systemic issue in ADB operations. 148. The shortcoming mentioned in the country development goals, which resulted in a stagnation of Nepal’s gender inequality index ranking during the CPS period, suggests that a more incisive analysis of the country’s GESI efforts and of ADB’s support is needed. The analysis of the list of these projects provided by the validation in Appendix 2 indicates that the implementation and the tracking of GESI plans are not always well carried out. Moreover, the plans are not always well constructed in terms of indicators or well linked to the DMF or policy actions of programs. ADB may not be as successful in embedding GESI capabilities as it believes it is, and this may somewhat explain why Nepal has much happening in GESI (e.g., quotas for elected officials, gender budgets) but is not making large strides in practice. 149. Some of the ADB–CSO partnerships yielded good results. The TA for strengthening government in mainstreaming climate change fostered strong partnerships between government agencies and nongovernment organizations.90 Undoubtedly, part of the success of the CSO engagement was the ADB strategy of selecting community mobilizers from the local area and ensuring that a good proportion are derived from disadvantaged groups. Also, when all development partners and the government acknowledge the role of CSOs, they can play a useful role, as borne out in the education sector, where CSOs are part of the local education development partner group (school education SWAp) and have a formal mechanism for consultation in planning, implementation, and monitoring. A less successful effort is evident in the Road Connectivity Project, where poor CSO performance led to the termination of the CSO specialized in resettlement. Another project that faced difficulties, the Secondary Towns Integrated Urban Environmental Improvement Project, experienced “constant protest from Charange community and stopping the contractor every time from accessing the landfill site” in Butwal Municipality; the integrate solid waste management component in this municipality was dropped as a result. 91 This setback suggests that community engagement in the planning or implementation was insufficient. Overall, the CPS’s desire to make the engagement with CSOs a part of its partnership agenda was not always realized in a meaningful way. 150. The CPSFR rightly noted that in Nepal “good governance is wanting.” Still, it finds that the CPS intention of working on project-related oversight (procurement, project management, finance, reporting, and monitoring) was realized. It alludes to administrative reforms in several sectors but does not indicate the contribution arising from ADB. It does hold that the Governance Support Program promoted community empowerment in planning and obtaining access to more resources, and in holding local bodies accountable. It adds that the Strengthening Public Management Program helped improve local

88 ADB. 2013. Nepal Portfolio Performance Review 2013 (26–7 September). Nepal Resident Mission. 89 ADB. 2017. Nepal Portfolio Performance Review 2016 (26–27 February). Nepal Resident Mission. 90 ADB. 2013. Technical Assistance Completion Report: Strengthening Capacity for Managing Climate Change and the

Environment in Nepal. Manila. 91 ADB (South Asia Department). 2018. Loan Review Mission: Secondary Towns Integrated Urban Environment Improvement

Project in Nepal. Back to-office report. 14 December (internal).


revenue mobilization, and budget and fiscal management; enhanced accountability and lowered fiduciary risks of results-based capital expenditures; and helped introduce external audits of municipalities and the e-government procurement system. These are large claims that are only partly supported by the outcome achievements. 151. The CPSFR raised the issue of the shift to federalism. It noted that public service delivery will depend on clarity of mandates and responsibilities among the three tiers of government, adequate funding to subnational governments through revenue mobilization and intergovernmental transfers, and adequate capacity of government agencies to plan and implement quality projects and programs. This observation is in line with recent ADB observations that the fiduciary risk landscape has changed with the federally reshaped functional assignment to provinces and local government. 92 Acknowledging the temporary disruptions in reporting systems as new PFM systems are established, ADB project teams are taking care to address project-specific fiduciary risk through the usual risk assessment and risk management plan (RAMP) as well as special measures, such as the Fiduciary Management Action Plan used in the School Sector Development Project. A greater impact of ADB’s support for the transition to federalism would require dedicated programming. 152. The CPSFR found that the strategic focus on environmentally sustainable growth increased significantly during the CPS period. This was seen in the attention given to clean energy and energy conservation, wastewater management and solid waste management, water resource management, climate-resilient agriculture, disaster-resilient infrastructure, awareness raising, and building of capacity to mitigate the risks of disasters. This is too broad a claim to properly assess, leading the validation to break down this section into the following three subsections of social and environmental safeguards, climate change, and disaster risk management. 153. ADB made considerable efforts to enhance government capacities for social and environmental safeguards. For instance, it developed an implementation performance grading system to be applied to ADB projects. Even as early as the first year of the CPS 2013–2017, ADB could point to progress in the adoption of good practices in government. At the same time, it recognized that compliance was incomplete, and that greater capacity and commitment were required from the government. 93 The IEM noted the deleterious effect on project progress when land issues arise, as seen along the Marsyangdi–Kathmandu transmission route financed by the SASEC Power System Expansion Project, where the subproject is being slowed by the disagreement over compensation (footnote 59). ADB itself may need to fortify its approaches in places. The IEM noted that workers at Gautam Buddha Airport were not wearing noise protectors, work hats, or shoes. The ADB-financed road construction on the way to Lumbini generated swirls of impenetrable and unabated dust that surely affected the health of the population and road users; the fact that no environmental baseline data for noise, and air and water quality was obtained suggests that these issues are not being taken seriously in this project. Embedding good practices in Nepal for the long term calls for appropriate modeling in the current set of projects. Sometimes this comes down to simple issues, like wearing safety equipment or visiting the site to see what is really happening in practice. 94 154. Long-term adoption of good practices also calls for institutional adjustments. ADB monitoring over the CPS period indicates that often government staff is lacking, or units are difficult to develop quickly within projects or within regular government structures. It is not uncommon for projects to fall behind in these aspects of project work. In the SASEC Road Connectivity Project, for instance, ADB

92 This was noted, for example in ADB (South Asia Department). 2018. Nepal School Sector Development Plan Joint Review

Meeting. Aide-mémoire. 3 December (internal). 93 ADB (South Asia Department). 2013. Nepal Country Portfolio Review Mission (26–27 September 2013). Request for Mission

Permission. 12 September (internal). · 94 As noted by ADB monitors in the case of the Power Transmission and Distribution Efficiency Enhancement Project, “To properly

identify safeguard impacts, not only national but also international consultant should visit major project sites.”


monitoring noted a significant delay in mobilizing social and environmental focal persons at all project levels (project directorate, construction supervision consultants, project site office, and contractors); the safeguard activities were performed on an ad hoc basis by the project director. 95 Efforts are being made, however, to build in-house capacity in executing agencies by establishing safeguard units and employing qualified full-time staff to service government-administered projects across the sector; this can be seen in the executing agencies for the SASEC Road Connectivity Project and Kathmandu Valley Water Supply Improvement Project. 96 The establishment of the Capacity Development Resource Center at the Nepal Administrative Staff College (with the technical and financial support of ADB) in 2015 was to help add capacity in areas such as social and environmental safeguards. Training is proceeding but may be too ADB-project-centric, and not sufficiently oriented on imparting skills that would institutionalize safeguards in the government system. 155. The CPS indicates that climate proofing is a primary area of engagement for ADB, and the CPS results framework sector objective for ANR indicates that agriculture stands to benefit. Several projects, largely initiated in the previous CPS period, have contributed to these aims, albeit with mixed results; small local initiatives look more promising than those that aim for institutional strengthening. ADB seemed to be keener to make an impact in this area in the previous CPS. Given the increasing urgency of action on this front in Nepal, ADB may need to match support in a more consistent way with its ambitions to arrive at a meaningful impact. 156. An aspect of the ANR sector objective put forward in the CPS results framework was the adoption of eco-friendly technologies to adapt to climate change. ADB provided some support in this area but did not go as far as including outcome or output indicators in the CPS results framework to track progress, limiting the scope for holding the program accountable for results in this important area for Nepal. The country is highly vulnerable to glacial lake outburst floods and to landslides as a result of climate-change-induced glacier thinning and retreat in the Himalayas. In the lowlands, climate change projections indicate a higher risk of flooding, of the kind seen in 2017 and early 2018. The increasing risk in Nepalese river basins arises from more monsoon precipitation.97 Nepal has given attention to climate change, preparing the National Adaptation Programme of Action (2010) and Climate Change Policy (2011), but its institutional setup needs further development. 157. ADB was quite active in supporting climate change management in the previous CPS (2010–2012), and these operations spilled into the current CPS and closed during the period. The effort was consistent with the CPS 2010–2012, which included climate change adaptation and environmental sustainability as one of four strategic pillars. This support seems to have waned in the current CPS, since only one project was added in 2013, slated to close in 2020 (Appendix 5). At any rate, ADB’s effort was aimed largely at elaborating and strengthening the institutional side of climate change management. 158. Strengthening Capacity for Managing Climate Change was rated partly successful in strengthening the Ministry of Environment, Science and Technology enough to reorganize its environment unit and conduct public education on climate change. However, the ministry’s ownership was weak with respect to the output that aimed to create a climate change fund, and it did not pursue the finance-related recommendations made by the consultants. 98 A large TA project focused on

95 ADB (South Asia Department). 2014. Loan Inception Mission: South Asia Subregional Economic Coordination Road

Connectivity Project in Nepal. Back-to-office report. 25 November (internal). 96 Communication with Linda Adams, IED staff member involved in the corporate evaluation study for Effectiveness of ADB’s

Safeguard Policy Statement (for ADB staff and executing agency and/or implementing agency officials). Interview conducted on 7 February 2019.

97 World Bank. 2018. Systematic Country Diagnostic: A new approach for a federal Nepal. Washington, DC. 98 ADB. 2013.Technical Assistance Completion Report: Strengthening Capacity for Managing Climate Change and the Environment

in Nepal. Manila.


institutional changes targeted at the Ministry of Population and the Environment as executing agency.99 Several implementing agencies were involved in an effort to integrate climate change risk management (CCRM) into development planning and practices. The project was able to establish and train focal points for climate change in sector agencies, but most were soon transferred and the CCRM capacity quickly dissipated. 159. ADB appears to have more success with small-scale infrastructure projects than the institutional CCRM work that remains to be done. For instance, the Building Climate Resilience of Watersheds in Mountain Eco-Regions project is exceeding its expected outputs, reaching more than 50,000 households with more reliable drinking water and irrigation sources.100 In contrast, institutional CCRM work requires considerable and sustained effort. Yet the pipeline for such support has dried up. The COBP 2018–2020 still mentions climate change as an area of support but provides no programming. Its country assistance results area reformulated the ANR strategy, dropping the climate change dimension that was in the CPS results framework. 101 160. ADB adheres to the principle of building back better and of ensuring that reconstruction goes hand in hand with development programs already planned.102 Its response to the earthquake disaster suggests that it made an attempt to build back better, as seen in the “model schools” pursued in the School Sector Development Program. 161. It is not clear whether ADB is making a meaningful contribution to the institutional framework for disaster risk management and sharing its lessons and influence practices more broadly. For instance, it notes in its Nepal Earthquake Disaster Response Humanitarian Assistance project that it may have been best to provide temporary housing in kind rather than in cash. At a time when the global discourse is heavily leaning toward cash, this kind of empirical lesson is worth highlighting. 103 162. As the CPSFR pointed out, about a quarter of Nepal’s population remains below the poverty line, with higher poverty rates in rural and geographically disadvantaged locations. This population is more vulnerable to natural disasters. A broad range of assistance is required to reduce the risk and vulnerability, as indicated in the broad scope of the Emergency Flood Damage Rehabilitation Project (Grant 0150; 2009–2015) in response to the floods of 2008; it covered subprojects in agriculture, irrigation, water, supply and sanitation, and roads. Rated successful, this project was appreciated by the government for the timely response and needs assessment conducted. 104 163. The capacity development side of disaster risk reduction does not seem to have received enough support in the abovementioned project. The PVR notes that efforts to enhance flood preparedness under the Department of Water Induced Disaster Prevention of the Ministry of Irrigation did not achieve their expected results. 164. The 2015 earthquake disaster response was on a larger scale, as befitted the severity of the disaster. It focused on the education sector (Appendix 6), for reasons not explained in the CPSFR, but which were subsequently explained by SARD as hinging on the government’s recognition of ADB’s comparative advantage in education thanks to its long experience and knowledge in the sector. These

99 ADB 2011. Technical Assistance: Mainstreaming Climate Change Risk Management in Development in Nepal. Manila. TA 7984

was approved on 14 December 2011 for $7,163,000. 100 Quarterly project report (October–December 2018) update of the DMF status provided to the IEM by the Nepal Resident Mission. 101 The CPS results framework says: “Increase agricultural and livestock production, productivity, and commercialization; and adopt

eco-friendly technologies to adapt to climate change.” The COBP 2018–2020 says: “Increased agricultural production, productivity, and food security.”

102 ADB. 2015. ADB Offers $600 Million Assistance to Help Nepal Rebuild After Earthquake. News Release. 25 June, Manila. 103 ADB. 2016. Asia Pacific Disaster Response Fund Grant Closing Report: Nepal Earthquake Disaster Response Humanitarian

Assistance. Manila. 104 ADB. 2018. Validation Report: Emergency Flood Damage Rehabilitation Project in Nepal. Manila.


projects are closed or well advanced in their implementation. The $3 million Asia Pacific Disaster Response Fund grant was channeled through the Prime Minister’s Disaster Relief Fund to partially finance the government’s cash grant provided to victims of the earthquake for building temporary shelters. This was quickly disbursed, 105 although apparently not evenly, nor always consistent with state guidelines on the amounts to be received. The grant closing report opines that in the case of Nepal’s earthquake, it might have been more effective for the project to purchase shelter equipment and/or facilities directly and distribute these to beneficiaries (footnote 102). 165. In education, the Disaster Risk Reduction and Livelihood Restoration for Earthquake-Affected Communities (schools, credit, and disaster risk reduction), SSDP (budget support through SWAp for school safety improvement) and Earthquake Emergency Assistance Project (schools and roads) are well advanced in their implementation. Their monitoring reports suggest good progress on physical outputs, with some delays in some works, e.g., roads and municipal buildings. 166. Less obvious is the progress toward softer outputs related to capacity and resilience. The Disaster Risk Reduction and Livelihood Restoration project has an output called “disaster risk management capacity of the affected communities strengthened.” Training targets are partially met for masons (construction) and a handful of staff of small farmer cooperatives (in disaster risk management); 106 there is no information on how this training is being used or will be used. Anecdotal evidence suggests that these skilled masons can extract higher wages from the market, but it is not clear whether this means more buildings are being built according to resiliency standards. 167. The SSDP has a disaster risk reduction and school safety component that updated the safety guidelines for schools and is retrofitting schools accordingly (more than 40 school blocks were retrofitted in FY2018). It also supported a comprehensive school safety master plan with a phased approach to retrofitting; whether this plan sees execution will be critical. The Earthquake Emergency Assistance Project is focusing on reconstruction to safety standards, akin to the SSDP. It also seeks to ensure that water supply infrastructure and slope stabilization is carried out where needed. All these efforts contribute to disaster risk reduction capacity and resilience, but aside from the school guidelines and building codes, they tend to be very micro in scale. What may need more emphasis in ADB support is a contribution to the broader institutional framework and/or practices for disaster risk reduction. 168. In summary, ADB made a positive contribution to Nepal’s development over the course of the CPS, and the program is well placed to increase its impact as projects come to completion. While this is not well revealed in the achievement of selected country targets specified in the results framework, a more sector-based assessment suggests that ADB operations will be solid contributors to increased energy generation and use; greater movement of people and goods, including trade with neighbors; better urban services; and increased productivity and incomes in agriculture. On balance, and in the medium term, the development impacts of the sector portfolio are satisfactory.

169. On several cross-cutting themes, the impacts are more mixed. While empowerment of women and disaster recovery is evident at local and/or project level, system-wide changes are less evident. PSD and governance show modest improvements but face many challenges in generating a significant impact. Environmental sustainability is gaining more attention, which augurs well for a more determined effort, one that will need to be more intensive and robust on climate change measures, disaster risk management, and project-specific environmental safeguards. On balance, the development impacts of the pursuit of cross-cutting corporate priorities in the Nepal program are satisfactory.

105 The $3 million grant for the Nepal Earthquake Disaster Response Humanitarian Assistance was approved within 2 days of the

disaster and made effective within 4 days. 106 ADB (South Asia Department). 2018. Review Mission of Japan Fund for Poverty Reduction: Disaster Risk Reduction and

Livelihood Restoration for Earthquake-Affected Communities Project in Nepal. Aide-mémoire. 31 August (internal).


F. ADB and Borrower Performance

1. ADB Performance 170. The validation finds evidence that ADB has contributed in some coordinating forums. However, there is a perception in the development partner community that ADB’s voice is not always well heard. Perhaps this is because the government appears to regard ADB as primarily useful in infrastructure development, without fully appreciating the knowledge side of ADB; the IEM’s discussions with the Ministry of Finance supports this view. This perception suggests that the combination of resident mission and headquarters staff is not perceived as comparable to experts working within other development partner agencies. It may also suggest that ADB is not communicating well about what it does or can do. This last point may pertain to ADB’s engagement with the government as well as with stakeholders. 171. In some sectors, ADB was already well placed to conform to the government restructuring that came with federalism; such as in ANR and urban development projects, where municipalities were already used as implementing agencies. But even there, ADB did not sufficiently bridge the communication or decision gaps between ministries and municipalities that can affect project sustainability. In other sectors, ADB seems to have been slow to adjust fully, particularly in education and some dimensions of PSM. It was able to scramble and address the reporting gap arising in the results-based project in education, but other projects lost some of their relevance because of ADB’s inability to adapt early enough. Transition challenges will undoubtedly continue to arise, and it is to be hoped that ADB can sufficiently anticipate and respond. 172. The implementation of the Nepal program revealed some shortcomings in ADB’s approach to capacity development, GESI, and safeguard institutionalization. Its project monitoring could also be tightened in places to allow for quicker problem solving and timely decisions on extensions where necessary.107 This may require more resources. In the case of safeguard monitoring and supervision, the resident mission staff concerned pointed out that they were addressing 35 projects, with 25 delegated to the resident mission—all to be monitored by a small regular staff supplemented with project TA experts. 173. Resident mission staff also believe they could add more value by being drawn into a processing team, to provide inputs that maximize their local knowledge (e.g., on safeguards and GESI). Resident mission and headquarters staff could equally benefit from more cross-project and cross-sector discussions to converge on development constraints, possible solutions, and ways of shaping the ADB program.

174. The validation finds ADB’s performance satisfactory. It agrees with the CPSFR that ADB was well aligned with government plans, responsive to national disasters, flexible in its administration, and able to show leadership and coordination with other development partners in relevant sectors. It adds that the tripartite meetings to review the country portfolio are held regularly to address project implementation concerns and serve to track agreed actions and their implementation. In general, the quality of implementation will have to be reviewed given the various shortcomings in implementation progress. It is not simply about disbursement, but the achievement of the necessary results.

107 The IEM found that the Earthquake Emergency Assistance Project in Ghorka had not been visited by ADB staff for a very long

time, and that the continued slow progress in reconstruction of district buildings was not being addressed through any request for extension beyond the project end date of 23 June 2019.


2. Borrower Performance 175. The CPSFR appreciated the government’s response during disaster management, with counterpart funds and allocated required budget complementing ADB operations. The CPSFR added that the government also complied with most of the loan and grant covenants, fulfilled tranche conditions for program loans, and submitted timely audited financial statements. It also sought to staff projects with experienced people and to minimize the turnover of project directors. The CPSFR acknowledged weaknesses in project management (e.g., inadequate supervision by consultants,108 weak procurement and contract management, poor mobilization of contractors and consultants), and the lack of timely release of counterpart funds in the required amount. 109 176. The validation adds to this that the government restructured many national organizational units over the CPS period, shifting units, or recombining them.110 Functional reassignment to provincial and local levels, with its attendant resource flows, also required new units and procedures. 111 The sometimes unpredictable changes had some effect on most ADB-financed projects, leading to a loss of momentum. The transition challenge persists and could affect the country program in the new CPS. 177. In designing new governance elements for subnational governments in the context of federalism, the federal government could have paid more attention to coordinating the relevant national agencies. For instance, the differences between the Ministry of Federal Affairs and the Ministry of Finance over the choice of financial management software (MARS vs. SuTRA) led to unnecessary waste of effort, money, and time. 178. Executing agencies could have been more proactive in guiding some projects. For instance, in Urban Transport Planning and Management, government could have established a TA steering committee earlier to supervise and monitor TA activities. The validation concurs with the CPSFR and finds the borrower’s performance satisfactory.

G. Overall Assessment 179. The ADB-supported program in Nepal during the CPS 2013–2017 period was assessed relevant and (borderline) effective, but less than efficient and less than likely sustainable, though with satisfactory development impact. The usual caution needs to be exercised, particularly with respect to the effectiveness, sustainability, and impact ratings—evidence to date on the likely effectiveness, sustainability, and impacts of the ongoing portfolio by the time the projects mature is obviously absent, and assumptions had to be based on observations, sometimes giving the benefit of the doubt. The performances of the borrower and ADB are also rated satisfactory. The performance of ADB-financed operations is significant in view of the very challenging development context. As the CPSFR notes, Nepal has shown a good economic performance in the face of political and policy instability, natural disasters (earthquakes and floods), and trade and supply obstructions. ADB responded nimbly to most emerging needs (but fell short in our opinion on the federalism challenge). The responsiveness led to a more 108 One such case of insufficient supervision is that provided by the Ministry of Communication and Information Technology in the

SASEC Information Highway Project. 109 The validation also noted such cases. The grant project Support for Targeted and Sustainable Development Programs for Highly

Marginalized Groups experienced startup delays because of the omission of the project in the government's budget book for FY2012, which was finally resolved in April 2012. ADB (South Asia Department). 2012. Special Project Administration Mission: Support for Targeted and Sustainable Development Programs for Highly Marginalized Groups in Nepal. Back-to-office report. 21 November (internal).

110 For example, in April 2012, a new Ministry of Urban Development was established, comprising the Department of Urban Development and Building Construction and the Department of Water Supply and Sanitation of the then Ministry of Physical Planning and Works.

111 The Soil and Watershed Management Offices under the provincial government became the new implementing agencies, replacing the former District Soil Conservation Offices in the six project districts. The spending authority of the offices was late in being resolved. ADB (South Asia Department). 2019. Review Mission: Building Climate Resilience of Watershed in Mountain Eco-Regions Project in Nepal. Aide-mémoire. Back-to-office-report. 7 January (internal).


sprawling program than intended. However, the breadth of the program allowed it to support the key dimensions of accelerated and sustainable IEG, the overriding objective of the CPS—this is why the medium-term development impacts are still rated satisfactory, despite the program being only marginally effective at the stage of the evaluation and at the end of the CPS period. 180. The validation assesses the ADB-supported program performance successful on the borderline (score of 1.6). The rating combines the individual sector program ratings of relevant, less than efficient, effective, less than likely sustainable, and satisfactory development impact (Table 9) with the cross-sector CPS objective ratings of relevant and satisfactory development impact (Table 10). Only on effectiveness did the validation team review the performance sector by sector, and then applied a weight to the rating in accordance with the financial size of the programs, to come to an overall effectiveness rating. To assess the program’s relevance, efficiency, sustainability and development impacts, it adopted other approaches. Compared with the CPSFR ratings, the validation includes one downgrade on sustainability. Under effectiveness, some sector programs were downgraded, but overall, the program just passed in terms of effectiveness, at an overall weighted score of 1.60.

Table 9: Program (Sector Emphasis) Ratings – Comparison between CPSFR and Validation Evaluation Criteria

CPSFR Ratings

Validation Ratings Reasons for Rating Deviations

Relevance Relevant Relevant Efficiency Less than

efficient Less than efficient

Effectiveness Effective Effective WUS and education sector programs and the TA program are rated less than effective, other programs are rated effective leading to a passing rate of 1.6 (on the border) after weighing for the financial size of each program

Sustainability Likely sustainable

Less than likely sustainable

Insufficient adoption of project outputs related to institutional strengthening; insufficient attention to tariffs, operational and maintenance concerns. Insufficient adaptation of some projects to reflect federal restructuring.

Development impact

Satisfactory Satisfactory

Overall rating Successful Successful on the borderline

The success rating is within the margins that will require it to be called borderline.

ADB performance


Borrower performance


CPSFR Quality Satisfactory This is despite the change applied to one rating.

CPSFR = country partnership strategy final review; TA = technical assistance; WUS = water and other urban infrastructure and services. Source: Independent Evaluation Department.


Table 10: Overall Score of ADB program (Sector Emphasis) and Country Partnership Strategy Objectives

Item Relevance Efficiency Effectiveness Sustainability Development

Impact Overall Overall sector program (50% weight for relevance and impacts)

2.0 1.0 2.0a 1.0 2.0 1.6

CPS objectives (50% of weight)

2.0 2.0

Weighted score 2.0 1.0 2.0 1.0 2.0 1.6 CPS = country partnership strategy. a The score is rounded up to an integer like all other scores, although as an aggregate of several program scores it would have been 1.6 (passing rate for effectiveness in Independent Evaluation Department guidelines). Source: Independent Evaluation Department.

H. Assessment of Country Partnership Strategy Final Review Quality 181. The validation finds the quality of the CPSFR to be satisfactory. The CPSFR quality is critical to the validation exercise because it is the core source of information for the validation team. This information is then triangulated with information from other sources to come to a validation assessment of the portfolio. The CPSFR provided a good description of the Nepal context and ADB operations. It assessed the program sector by sector, identifying project outputs and reporting against them. A detailed assessment was also done appropriately under the relevance and development impact assessments for the crosscutting strategic agendas and the drivers of change. In this, it largely adhered to IED guidelines. 182. The rating of each sector program under the effectiveness criterion suggests a level of depth and precision of assessment that was not always borne out by the data presented. The institutional dimension of the program was given limited attention, and the CPSFR did not provide sufficient evidence that good progress was being made in the difficult context of Nepal. The effectiveness of interventions was compared sometimes without reference to the sector outputs and their time targets listed in the CPS results framework. In several instances, details of the assessments were not substantiated by empirical evidence.

CHAPTER 3

Key Issues, Lessons, and Recommendations

A. Issues 183. Nepal’s institutional context is comparable to that of a fragile and conflict-affected state. ADB’s portfolio performance provides ample evidence on this. ADB’s support to institutional strengthening has largely been piecemeal and at the project level. The longstanding support of ADB for subnational PFM in Nepal was affected by the government’s decision to only accept grants for soft sector issues. Given that Nepal no longer has access to ADB grants, ADB has lost influence by not being able to offer a grant or a policy loan that would enable it to stay at the center of the federalist restructuring dialogue. 184. The government’s stance on loans versus grants and the ADF’s restructuring may lead to a different composition of the portfolio, with less attention to regional public goods and softer sectors that could address people’s vulnerabilities. While the government is receptive to a variety of modalities, it communicates some resistance to accepting loans for the softer sectors and activities, voicing its continued preference for grants. The composition of ADB’s Nepal portfolio is slowly drifting from its former structure, when grants were a significant component. This shift may affect ADB’s ability to fully reflect ADF and Strategy 2030 priorities. 185. ADB’s corporate Strategy 2030 gives special attention to the characteristics of its clients. It recognizes that some are deeply affected by factors that make the state fragile (e.g., conflict, ethnic tensions). It puts forward approaches that are suitable to these developing member countries, the first being institutional development and governance reforms. The investment made by ADB in these areas has not been commensurate with the risk presented by the capacity of the state. Moreover, the positioning of its support in ADB’s communications with the government has not underscored ADB’s full potential in these areas. Renewed efforts are being made to provide policy-based operations in several sectors, and these may be fruitful in the next CPS, but in terms of institutional development that could influence project management, much more is needed to respond to the particular needs of fragile and conflict-affected states. 186. Weak and evolving institutions and governance continue to hamper Nepal’s capacity to deliver, post federalism, on its agenda of inclusive economic growth. This also impacted the performance of ADB’s projects. Disappointment in the discretion given or benefits received under federalism could reignite ethnic and other divides in Nepal, unmasking what is still a fragile state that struggles to put a violent past behind it. The upheaval in the Terai area suggests that maintaining peace is an ongoing challenge. Nepal has at some point been deemed a fragile state, and in 2019 it received a “high warning” in the Fragile State Index. 112 Regardless of its formal designation, Nepal clearly felt the effects of a 15-year gap in democratic representation at subnational level (2002–2017). Conflict kept many lower-level governments from operating properly for many years. Nationally, political fragmentation has made it difficult to find compromise. The mismanagement of flagship operations such as the Melamchi Water

112 Fund for Peace. 2019. Fragile State Index – Annual Report 2019. Washington, DC.


Supply Project (where charges of corruption were leveled), 113 and the planning and execution of Nepal’s transition to federalism are exposing the weak capacity of the state. 187. Getting institutional arrangements right is key to making federalism work. It takes time to do this well. The International Monetary Fund noted recently that “the transition to fiscal federalism is being implemented over a short time span, rather than in a calibrated and sequenced manner, which adds to the transition challenges.” 114 The expected political and efficiency (fiscal decentralization) gains of federalism may be undermined in practice by poor design and execution. For instance, the insufficiently defined roles and responsibilities of subnational governments could lead to the disruption of public services. It is not clear that the state can withstand the possible strains of this transition. To help the government in this transition, the International Monetary Fund suggests that a review of the costs of delivering services in the federal structure be conducted as a matter of priority. In view of ADB’s long involvement in PFM support to subnational governments, an opportunity arises to go beyond the International Monetary Fund’s prescription. ADB can align existing and planned programming to reflect new institutional arrangements, produce relevant analyses and other knowledge products, and engage in strategic policy dialogue to assist in the transition. As ADB has not brought PSM programming to the table for some years in this area, it would need to work intensively with both the government and development partners (e.g., in the Federalism Working Group) to find its niche and make a meaningful contribution to policy and the capacity development of subnational governments. ADB will need to have a sound knowledge base of the social and political-administrative context, a commitment to programming with conflict sensitivity in mind, and a keen sense of risk in the portfolio and how to manage that risk—rather than merely avoiding the risky work that inevitably presents itself. Risk is likely to revolve around issues of inclusiveness, regional imbalances, sufficiency of resources for nascent subnational governments, and national fiscal stability. 188. In various parts of this validation report it is made clear that ADB has lacked incisiveness in undertaking capacity development (see the effectiveness discussions by sector, in particular). ADB has fallen short in supporting project management skills and the transition to federalism. The government is taking steps to make it easier for development partners to be helpful—through the Federalism Working Group and the preparation of a federalism needs assessment to identify capacity gaps and aid the transition to the federal structure. At the same time, the government has recognized that subnational governments have a key role to play in achieving the SDGs. The two issues are intertwined. As the government states in its SDG road map, “the vigor and sincerity with which the local governments work to deliver SDGs, especially those related to basic social services, will determine to a large extent the success of federalism in Nepal.”115 This is an opportunity for ADB to clarify its strategy on the SDGs—offering both to build the necessary capacity for delivering on SDGs and to bolster the capacity of subnational governments to operate within the emerging federal framework. 189. Further, the implementation and reputational risks of much-delayed flagship projects highlighted in the CPSFR and in this validation reinforces the notion that the Government of Nepal and its various layers and units have weak project and program implementation capacity, not least in the context of contractors. This means that ADB, in its support for project design and implementation, must pay sufficient attention to the dynamics of government processes. The selection of project managers, approaches to project preparation, the pattern of staff transfers, and the political-administrative nexus will all impinge on project design and implementation. These must be understood and considered in the scale and complexity of projects. ADB’s efforts to improve project management training have merit but must be stepped up and broadened to have a systemic effect. In Nepal, with its history of citizen–state distrust, it is important for ADB to invest in state institutions that serve to build the capacity of the state

113 C. K. Mandal. 2019. Nepali bureaucrats regularly asked for "their cut" from the Melamchi contractor, Italian officials say.

Kathmandu Post. 21 March. https://kathmandupost.ekantipur.com/news/2019-03-21/nepali-bureaucrats-regularly-asked-for-their-cut-from-melamchi-contractor-italian-officials-say.html

114 IMF. 2019. Nepal -Selected Issues. Country Report No.19/61. Washington DC. 115 Government of Nepal, National Planning Commission. 2017. Sustainable Development Goals – Status and Roadmap: 2016–

2030. Kathmandu.

https://kathmandupost.ekantipur.com/news/2019-03-21/nepali-bureaucrats-regularly-asked-for-their-cut-from-melamchi-contractor-italian-officials-say.html

https://kathmandupost.ekantipur.com/news/2019-03-21/nepali-bureaucrats-regularly-asked-for-their-cut-from-melamchi-contractor-italian-officials-say.html

Key Issues, Lessons, and Recommendations 47

for delivering on its mandates, both nationally and subnationally. Equally important is investment on the demand side and in the institutions (e.g., CSOs) that mediate between the state and citizens. This mediation can also smoothen project preparation and implementation; the solid waste management efforts supported by ADB (para. 149) attest to the difficulties faced when local populations are not sufficiently informed or given voice and attention in the early stages of projects. ADB’s use of CSOs seems to not receive much attention in the CPS or the CPSFR. Investment in state institutions devoted to capacity development has been limited (para. 188). In the long term, project risk will only be reduced if both avenues are pursued vigorously. 190. The intended outcomes and sector outputs of the CPS were not well linked to the program actually offered. ADB’s CPS design reduced its potential to deliver because it gave limited consideration to how the intended development outcomes should be timed and synchronized so as to contribute optimally to the regional and national outcomes pursued. The validation provides a more positive analysis of the relevance of the CPS program, while declaring the program less than effective in delivering on intended results (outcomes and outputs). These two criteria are however linked, and weak design can also impact effectiveness. 191. Lack of direction in ADB support for Nepal’s urbanization carries the risk of exacerbating Nepal’s gap in inter-regional development. Because urban areas are ill-prepared to manage the population growth and/or migration (Kathmandu Valley is growing by 4% annually), much attention is being given to urban centers by government and development partners. The agricultural stagnation in productivity and the slow bleed of human capital from rural areas (resulting in the feminization of agriculture), which are chronic conditions, do not register the same urgency. 192. Infrastructure delivery was not adequately complemented by support for government reforms and capacity development. ADB has not sufficiently used the mix of development support modalities to stay involved in key governance and capacity development efforts—in particular, the transition to federalism. Consequently, it will also be a long and arduous transition for existing and new projects, fraught with political and implementation risk. 193. Capacity development in the ADB program was hampered by poor design of project elements. It would have been necessary to adopt more explicit approaches and benchmarks, ensure stronger monitoring and reporting, and balance the attention to project management. This should have been done with a broader focus on government institutions that themselves have the mandate to address capacity development for subnational governments. B. Lessons 194. Poor sequencing of sector and country operations can prevent outputs and outcomes of individual projects from contributing effectively to the overall CPS and sector outcomes. For example, the sustainability of an agribusiness program centered around PPP is dependent on a viable rural road network to transport goods. In the energy sector, stronger links between generation, transmission, and distribution would have been valuable. In the water sector, the implementation of water supply and distribution projects needs to be better synchronized. The validation notes that the CPS program design was relevant but that the program outcomes were less than effective, efficient, and less likely sustainable at the time of the evaluation. While these criteria are elaborated separately in the validation, they are very much interlinked. 195. The efficacy of ADB’s development efforts is also linked to subnational and regional development outcomes. ADB’s program reflects the challenges and opportunities found in the quickly growing urban settlements. Its investments and policy support in rural areas and more remote regions—such as in agriculture and rural roads—were relatively small within the CPS 2013–2017 portfolio—the ANR sector accounted for just 9% of approvals by value. Neglect of the urban–rural and regional imbalances in


government or ADB programs contributed to the persistence of trends that are working against bringing development to all places in Nepal.

196. The validation notes the CPS program’s emphasis on the urban centers and the southern east–west corridor (border areas) of Nepal. While this is indeed where the population is growing and where economic opportunities are most evident, ADB needs to rather help Nepal redress its regional imbalances—an effort that is cross-sector and can be complex. ADB’s focus on national highways was supposedly linked to better trade across the country, but because of the disjointed design, it did not contribute to reducing the local bottlenecks in the traffic of goods within Nepal itself, although it did in the north–south direction from India. Thus, the road network assistance did not contribute significantly to reducing the regional disparities or the urban–rural divide mentioned above. Hence, the validation offers only qualified support for those CPSFR lessons that focus on consolidation and simplification of projects, and supports these only if they do not work against pursuing regional balances and intergroup equity—objectives that often call for complex and dispersed projects. The validation’s comments on the CPSFR lessons are summarized in Table 11. 197. The success of federalism will depend largely on how subnational governments rise to the challenge of achieving the SDGs that are now largely their responsibility. ADB can clarify its strategy on the SDGs and offer to build capacity for delivering on SDGs and to bolster the capacity of subnational government to operate within the emerging federal framework. Its capacity development approach will need to expand beyond ADB project delivery concerns to embrace institutional design and technical skills that will enable institutions to play their expected roles. 198. Finally, a sector range beyond that advised and intended does not necessarily undermine the effectiveness of a program. In the Nepal program, the combination of headquarters and resident mission staff was able to manage the growing program. This suggests that the scope of the program should first and foremost follow the logic of the CPS analysis and its objectives, with some vigilance toward government and ADB capacity.

Table 11: Validation Comments on Country Partnership Strategy Final Review Lessons Lessons (CPSFR report) Validation Comment

1. The design of ADB operations needs to ensure resilience to climate change impacts and withstand natural disasters.

2. ADB operations are more sustainable if accompanied by a clear sustainability mechanism.

3. Policy reforms need to be well coordinated and have strategic linkages both at the national and subnational level.

4. Regular ADB portfolio review meetings with the government, stricter application of project readiness filters, and delegation of projects to Nepal Resident Mission soon after effectivity tend to contribute to improved performance of ADB operations.

5. Less complex projects with fewer implementing and executing agencies are likely to be more effective and implemented efficiently compared to those that are complex and require coordination among several agencies.

6. It may be more effective to design and implement ADB operations in geographically contiguous areas rather than scattered all over the country.

7. The government needs to strengthen criteria for the selection of contractors and to ensure that the problems associated with absent and poorly performing contractors can be avoided.

1. Support, but with balance at strategic and/or policy level

2. Agree 3. Agree 4. Agree, provided resident mission capacity

is strengthened 5. May be the case, but this could clash with

the desire for regional balance and inter-group equity

6. See #5 above 7. Agree

ADB = Asian Development Bank, CPSFR = Country Partnership Strategy Final Review. Source: Independent Evaluation Department.

Key Issues, Lessons, and Recommendations 49

C. Recommendations 199. The CPSFR offered five recommendations for ADB to consider in the formulation of the CPS 2020–2024. The validation comments on these (Table 12) and adds strategic and operational recommendations.

Table 12: Validation Comments on Country Partnership Strategy Final Review Recommendations Recommendations (CPSFR report) Validation Comment

1. Continue to focus on inclusive economic growth, environmentally sustainable growth, and regional cooperation and integration.

2. Support an enabling environment for private sector investment, including public–private partnerships.

3. Maintain selectivity in ADB operations

4. Further improve implementation efficiency with intensive consultations and project reviews, application of readiness criteria, and support to strengthen institutional capacity, public procurement, and contract and project management.

5. Deepen strategic partnerships with other development partners.

1. Agree, but link interventions more tightly to these objectives.

2. Agree but ensure interventions are supported by sound

analysis 3. Reducing sectors is advisable if breadth strains government

and ADB capacity. 4. Agree, with more rigor and support for capacity

development. 5. Feasible if resident mission capacity is also strengthened

ADB = Asian Development Bank, CPS = country partnership strategy, CPSFR = CPS final review. Source: Independent Evaluation Department.

1. Strategic recommendations

(i) Engage more intensively on institutional development and governance reform, and match project scale and complexity with emerging capacities in government. This may require more effective communication on what ADB can offer as a knowledge and finance institution.

(ii) Ensure that ongoing and new operations take due consideration of the emerging federal system of government and provide strategic support to key intergovernmental subsystems to facilitate the transition. A timely portfolio analysis centered on federalism-induced restructuring and carried out with key counterpart agencies will help ADB in managing the effects of federalization on project implementation and in adjusting existing projects. It might also identify issues of relevance to the design of new projects, including cross-sector aspects that would benefit from ADB support, such as the need for robust institutions and procedures to ease the transition to federalism.

(iii) Clarify in the next CPS ADB’s position in the broad effort to support inclusive economic growth, indicating the specific contributions of key sector programs, and the Strategy 2030 priorities. Better coordination between sector divisions will allow for a more integrated CPS program design; particular attention needs to be given to the approach to private sector development, inclusion of marginalized groups and regions, climate change, disaster risk management, and CSO engagement.


2. Operational recommendations

(iv) Make a strong effort to attract grant cofinancing and focus on capacity

development. The use of a variety of lending modalities will guard against a sudden drop in important support and help balance infrastructure spending with assistance to government reforms and capacity development.

(v) Build resident mission capacity to ensure it plays a meaningful role in project processing, implementation, and policy dialogue. Ensure sufficient capacity of the resident mission to allow for a balanced portfolio in terms of project size and the mission’s meaningful role in policy dialogue and project processing.

Appendixes

APPENDIX 1: NEPAL COUNTRY LENDING PORTFOLIO, 2013–MID-2018

Table A1.1: Country Portfolio: Sovereign Loans, Grants, and Technical Assistance, 2013–Mid-2018

ADB Support Carried Forward from the Previous CPS New Commitments Total Total Number $ million Total Number $ million Total Number $ million

Loans and grantsa 34 1,301.30 16 1,721.80 50 3,023.10 Technical assistanceb 27 10.04 25 18.42 52 28.46 Total 61 1,311.34 41 1,740.22 102 3,051.56 ADB = Asian Development Bank, CPS = country partnership strategy. Note: Approved amount in million United States dollar only includes ADB-approved amount. a Includes a sovereign project excluded in the CPSFR. The Subregional Transport Facilitation (Loan 2097-NEP) was approved prior to CPS period

but closed during the CPS period with an ADB financing of US$20 million. b Includes stand-alone and attached technical assistance. Sources: Procurement, Portfolio and Financial Management Department Project Completion Report and Technical Assistance Completion Report Ratings as of 30 June 2018; Controller’s Department database as of 30 August 2018; ADB eOps and ADB's project website, as of 24 September 2018; and ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

Table A1.2: Overall Sovereign Loan and Grants During Country Partnership Strategy 2013–Mid-2018 for

Nepala

Sector Number of

Projects

Total Approved ADB Amount

(US$) Agriculture, natural resources, and rural development 9 285,500,000 Approved before CPS period 7 125,500,000 Approved during CPS period 2 160,000,000 Education 4 405,000,000 Approved before CPS period 1 65,000,000 Approved during CPS period 3 340,000,000 Energy 7 643,800,000 Approved before CPS period 3 142,800,000 Approved during CPS period 4 501,000,000 Finance 3 77,500,000 Approved before CPS period 3 77,500,000 Approved during CPS period 0 0 Information and communication technology 2 34,000,000 Approved before CPS period 2 34,000,000 Approved during CPS period 0 0 Industry and trade 2 36,000,000 Approved before CPS period 1 15,000,000 Approved during CPS period 1 21,000,000 Public sector management 2 127,300,000 Approved before CPS period 2 127,300,000 Approved during CPS period 0 0 Transport 11 634,100,000 Approved before CPS periodb 9 342,300,000 Approved during CPS period 2 291,800,000 Water and other urban infrastructure and services 10 779,900,000 Approved before CPS period 6 371,900,000 Approved during CPS period 4 408,000,000 Total 50 3,023,100,000 Approved before CPS period 34 1,301,300,000 Approved during CPS period 16 1,721,800,000

CPS = country partnership strategy. a Includes approved projects during CPS period, and those approved before the CPS period but are ongoing and completed during

2014–2018. Additional financing projects approved during CPS period and of which its original project has been approved before the CPS period are counted separately.

b Includes a sovereign project excluded in the country partnership strategy final review. The Subregional Transport Facilitation (Loan 2097-NEP) was approved prior to CPS period but closed during the CPS period with an Asian Development Bank (ADB) financing of US$$20 million.

Sources: Procurement, Portfolio and Financial Management Department Project Completion Report and Technical Assistance Completion Report Ratings as of 30 June 2018; Controller’s Department database as of 30 August 2018; ADB eOps and ADB's project website, as of 24 September 2018; and ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

Nepal Country Lending Portfolio, 2013–Mid-2018 53

Table A1.3: List of Sovereign Loans and Grants Approved Before the Country Partnership Strategy Period but Closed or Ongoing During the Country Partnership Strategy Period

Project Number

Loan/Grant/ Number

Project Count Project Name

Approval Date

Closing Date

Total ADB Financing (US$)

Self-Assessment, Validation Rating

Instrument or

Modality Source of Fund

Agriculture, natural resources, and rural development 34306-013 2143 1 Gender Equality and Empowerment

of Women Project 16/12/2004 11/12/2013

10,000,000 S, S Project COL

33209-013 2102 2 Community-Managed Irrigated Agriculture Sector Project

17/11/2004 22/09/2015 20,000,000

Project COL

34308-022 0063 3 Commercial Agriculture Development Project

16/11/2006 30/06/2013 18,000,000

S, S Project ADF

38417-022 0219 4 Community Irrigation Project 27/09/2010 15/07/2018 26,400,000

Project ADF

38423-022 0233 5 Raising Incomes of Small and Medium Farmers Project

24/11/2010 30/06/2019 20,100,000

Project ADF

37292-042 0248 6 High Mountain Agribusiness and Livelihood Improvement Project

25/03/2011 16/07/2018 20,000,000

Project ADF

45206-001 0299 7 Water Resources Project Preparatory Facility

27/07/2012 30/06/2019 11,000,000

Project ADF

Subtotal 7 Subtotal 125,500,000 Education 35174-082 0272 8 School Sector Program 22/11/2012 31/12/2014 65,000,000 S Program ADF

Subtotal 1 Subtotal

65,000,000

Energy 40553-013 0182 9 Energy Access and Efficiency

Improvement Project 27/11/2009 30/09/2014

300,000 S Project CCF

2587 9 27/11/2009 10/04/2018 65,000,000

Project COL

43281-022 0215 10 Detailed Engineering Study for the Upper Seti Hydropower Project

02/09/2010 30/06/2016 2,500,000

Project ADF

41155-013 0270 11 Electricity Transmission Expansion and Supply Improvement Project

15/11/2011 31/03/2020 19,000,000

Project ADF

2808 11 15/11/2011 31/03/2020 56,000,000

Project COL

Subtotal 3 Subtotal 142,800,000 Finance 36169-023 0208 12 Rural Finance Sector Development

Cluster Program (subprogram 2) 18/06/2010 31/12/2014

12,100,000 S, S Sector

Project ADF

2641 13 18/06/2010 18/08/2015 60,400,000

Sector Program

COL

43490-013 0252 14 Capital Market and Infrastructure Capacity Support Project

19/04/2011 31/07/2019 5,000,000

ADF

54 Appendix 1

Project Number

Loan/Grant/ Number


Approval Date

Closing Date



Instrument or


Subtotal 3 Subtotal 77,500,000 Information and communication technology 40054-013 0099 15 South Asia Subregional Economic

Cooperation Information Highway Project (Bangladesh, Bhutan, India, Nepal) - grant for Nepal

17/12/2007 31/03/2017 9,000,000

Project ADF

38347-022 0106 16 Information and Communication Technology Development Project

28/01/2008 31/12/2018 25,000,000 Project ADF

Subtotal 2 Subtotal 34,000,000 Industry and trade 45260-001 0322 17 South Asia Subregional Economic

Cooperation Trade Facilitation Program

29/11/2012 31/12/2015 15,000,000

S Program ADF

Subtotal 1 Subtotal 15,000,000 Public sector management 36172-042 0118 18 Governance Support Program

(subprogram 1) 22/10/2008 30/06/2013 106,300,000 S, S Program ADF

36172-063 0305 19 Strengthening Public Management Program

26/09/2012 31/12/2016 21,000,000 S Program ADF

Subtotal 2 Subtotal 127,300,000 Transport 37266-032 0051 20 Roads Connectivity Sector Project 10/08/2006 31/07/2014 55,200,000 S, S Project ADF 40554-022 0093 21 Rural Reconstruction and

Rehabilitation Sector Development Program (project grant)

12/12/2007 23/06/2014 50,000,000 S, S Project ADF

43001-012 0150 22 Emergency Flood Damage Rehabilitation Project

21/04/2009 30/06/2015 25,600,000 S Project ADF

39399-013 0179 23 South Asia Tourism Infrastructure Development Project (Bangladesh, India, and Nepal)

16/11/2009 15/06/2019 12,750,000

Project ADF

2579 23

16/11/2009 15/06/2019 12,750,000

Project COL 38349-013 0181 24 Air Transport Capacity

Enhancement Project (formerly Civil Aviation Airport Development Project)

23/11/2009 31/12/2018 10,000,000

ADF

2581 24 23/11/2009 31/12/2018 70,000,000

Sector COL 44058-013 0212 25 Kathmandu Sustainable Urban

Transport Project 22/07/2010 30/06/2018 10,000,000

Project ADF

2656 25

22/07/2010 31/12/2017 10,000,000

Project COL 44143-013 0225 26 Subregional Transport

Enhancement Project 27/10/2010 30/06/2017 24,500,000 S Project ADF


Project Number

Loan/Grant/ Number


Approval Date

Closing Date



Instrument or


2685 26 27/10/2010 19/12/2017 24,500,000 Project COL 43216-012 0227 27 Transport Project Preparatory

Facility (formerly Transport Project Preparatory and Capacity Development Facility)

29/10/2010 31/12/2018 12,000,000 Project ADF

38426-023 0267 28 Decentralized Rural Infrastructure and Livelihood Project (additional financing)

31/10/2011 30/06/2017 7,000,000

Project ADF

2796 28

31/10/2011 30/06/2017 18,000,000

Project COL Subtotal 9 Subtotal 342,300,000 Water and other urban infrastructure and services 31624-023 1820 29 Melamchi Water Supply Project 21/12/2000 30/06/2019 120,000,000 Project COL 36609-013 2059 30 Kathmandu Valley Water Services

Sector Development Program 18/12/2003 03/09/2015 10,000,000 SDP

project COL

2058

18/12/2003 31/03/2009 SDP program

COL

41022-022 0157 31 Second Small Towns Water Supply and Sanitation Sector Project

17/09/2009 31/12/2017 45,100,000

ADF

36188-023 2650 32 Secondary Towns Integrated Urban Environmental Improvement Project

07/06/2010 31/12/2018 60,000,000

Project COL

34304-043 2776 33 Kathmandu Valley Water Supply Improvement Project

16/09/2011 30/06/2019 80,000,000 Project COL

42161-013 0284 34 Integrated Urban Development Project

14/02/2012 31/12/2018 12,000,000

Project ADF

2851 34

14/02/2012 31/12/2018 44,800,000

Project COL Subtotal 6 Subtotal 371,900,000 Total 34 Total 1,301,300,000

ADB = Asian Development Bank, ADF = Asian Development Fund, COL = concessional ordinary capital resources lending, S = successful, SDP = sector development program. a Not included in the country partnership strategy final review. Sources: Procurement, Portfolio and Financial Management Department Project Completion Report and Technical Assistance Completion Report Ratings as of 30 June 2018; Controller’s Department database as of 30 August 2018; ADB eOps and ADB's project website, as of 24 September 2018; and ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

56 Appendix 1

Table A1.4: List of Sovereign Loans and Grants Approved During Country Partnership Strategy Period

Project Number Loan/Grant

Number Project Count Project Name

Approval Date

Closing Date


Instrument or Modality

Source of Fund

Agriculture, natural resources, and rural development 43448-013 0367 1 Bagmati River Basin Improvement

Project 21/10/2013 29/02/2020 4,500,000 Project ADF

3057 1 31/10/2013 29/02/2020 25,500,000 Project COL 33209-013 3124 -a Community-Managed Irrigated

Agriculture Sector Project (additional financing)

10/04/2014 31/01/2022 30,000,000 Project COL

48218-003 3620 2 Rural Connectivity Improvement Project

11/12/2017 31/07/2023 100,000,000 Project COL

Subtotal 2 Subtotal 160,000,000

Education 38176-015 0345 3 Skills Development Project 25/06/2013 15/01/2019 20,000,000 Project ADF 49424-001 3452 4 Supporting School Sector

Development Plan 02/11/2016 31/05/2022 120,000,000 Results-based loan COL

49215-001 3260 5 Earthquake Emergency Assistance Project

24/06/2015 31/12/2019 200,000,000 Project COL


Energy 43281-013 2990 6 Tanahu Hydropower Project 21/02/2013 30/06/2021 120,000,000 Project COL 2991 6

21/02/2013 30/06/2021 30,000,000 Project COL

47036-001 0361 7 Project Preparatory Facility for Energy

24/09/2013 30/06/2020 21,000,000 Project ADF

44219-014 3139 8 South Asia Subregional Economic Cooperation Power System Expansion Project

04/07/2014 30/06/2022 180,000,000 Project COL

50059-002 3542 9 Power Transmission and Distribution Efficiency Enhancement Project

29/06/2017 30/06/2022 150,000,000 Project COL

Subtotal 4 Subtotal 501,000,000 Industry and trade 50254-001 3546 10 South Asia Subregional Economic

Cooperation Customs Reform and Modernization for Trade Facilitation Program

07/07/2017 01/08/2021 21,000,000 Program COL


Transport 38350-013 3012 11 South Asia Subregional Economic

Cooperation Road Connectivity Project

30/07/2013 30/06/2019 75,000,000 Project COL


Project Number Loan/Grant

Number Project Count Project Name

Approval Date

Closing Date



Source of Fund

39399-013 3117 -a South Asia Tourism Infrastructure Development Project (additional financing)

28/03/2014 15/06/2019 30,000,000 Project COL

48337-002 3478 12 South Asia Subregional Economic Cooperation Roads Improvement Project

01/12/2016 31/07/2022 186,800,000 Project COL

Subtotal 2 Subtotal 291,800,000 Water and other urban infrastructure and services 43524-014 3000 13 Kathmandu Valley Wastewater

Management Project 26/04/2013 30/06/2019 80,000,000 Project COL

31624-023 3110 -a Melamchi Water Supply Project (additional financing)

11/02/2014 30/06/2019 25,000,000 Project COL

35173-013 3157 14 Third Small Towns Water Supply and Sanitation Sector Project

19/09/2014 31/07/2021 60,000,000 Sector project COL

49197-002 0430 15 Nepal Earthquake Disaster Response Humanitarian Assistance

27/04/2015 29/10/2015 3,000,000 Special assistance APDRF

34304-043 3255 -a Kathmandu Valley Water Supply Improvement Project (additional financing)

24/04/2015 31/12/2020 90,000,000 Project COL

47252-002 3566 16 Regional Urban Development Project

22/09/2017 30/06/2023 150,000,000 Project COL

Subtotal 4 Subtotal 408,000,000 Total 16 Total 1,721,800,000

ADB = Asian Development Bank, ADF = Asian Development Fund, APDRF = Asia Pacific Disaster Response Fund, COL = concessional ordinary capital resources loan. a These are additional financing whose original project started prior to the country partnership strategy period. Sources: Procurement, Portfolio and Financial Management Department Project Completion Report and Technical Assistance Completion Report Ratings as of 30 June 2018; Controller’s Department database as of 30 August 2018; ADB eOps and ADB's project website, as of 24 September 2018; and ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

58 Appendix 1

Table A1.5: List of Sovereign Technical Assistance Approved Before the Country Partnership Strategy Period but Closed or Ongoing During the Country Partnership Strategy Period

Project Number

Technical Assistance Number

Technical Assistance

Count Project Name Approval

Date Closing Date

Total ADB Financing

(US$)

Total Cofinancing

Amount (US$)

Self-Assessment, Validation

Rating


Type Source of Fund

Agriculture, natural resources, and rural development 40545-012 7173 1 Strengthening Capacity for

Managing Climate Change (including supplementary)

04/11/2008 27/09/2013 500,000 775,000 S AOTA TASF| JSF | CCF

37292-012 7298 2 High Mountain Agribusiness and Livelihood Improvement Project

08/06/2009 15/03/2013 730,000

PPTA JSF

7298

08/06/2009 15/03/2013 620,000

PPTA CCF 7298

08/06/2009 15/03/2013 160,000

PPTA TASF

43447-022 7762 3 Preparation of the Agricultural Development Strategy

14/12/2010 31/12/2013 1,500,000

S PATA TASF

7762

14/12/2010 31/12/2013

500,000

PATA IFAD grant

44214-023 7883 4 Building Climate Resilience of Watersheds in Mountain Eco-Regions

10/10/2011 30/11/2014

900,000

PPTA STCF

7883

10/10/2011 30/11/2014

500,000

PPTA MTF-WFPF

44168-012 7984 5 Mainstreaming Climate Change Risk Management in Development

14/12/2011 30/06/2017

7,163,000

CDTA STCF

7984

14/12/2011 30/06/2017

600,000

CDTA NDF 43448-012 8050 6 Bagmati River Basin

Improvement Project 24/01/2012 30/09/2014

800,000

PPTA JFPR

8050

24/01/2012 30/09/2014

470,000

PPTA MTF-WFPF

46514-001 8286 7 Portfolio Management Capacity Enhancement

14/12/2012 31/12/2017 825,000

CDTA TASF

Subtotal 7 Subtotal 2,985,000 13,058,000

Education 35174-012 7760 8 Support for the

Implementation of School Sector Reform Program

16/12/2010 31/07/2013 225,000

S CDTA TASF

7760

16/12/2010 31/07/2013

190,000

CDTA Denmark 38176-012 7992 9 Skills Development Project 09/12/2011 25/09/2013

500,000

PPTA JFPR

35714-082 7935a 10 Capacity Development for School Sector Program Implementation

22/11/2011 31/03/2016 500,000

CDTA TASF


Project Number




Date Closing Date

Total ADB Financing

(US$)

Total Cofinancing

Amount (US$)


Rating


Type Source of Fund

7935

22/11/2011 31/03/2016

525,000

CDTA ATF-ATG 45192-001 7973 11 Strengthening Higher

Engineering Education 13/12/2011 30/09/2013 550,000

PS CDTA TASF


Energy 43281-012 7590 12 Preparing Hydropower

Development for Energy Crisis 02/09/2010 31/12/2014

2,000,000

PPTA JFPR

43299-012 7504 13 Increasing Access to Energy in Rural Nepal

05/03/2010 30/10/2013

833,000 LS CDTA Denmark and

Finland 7504

05/03/2010 30/10/2013

100,000

CDTA ATF-FG

41154-012 7628 14 Energy Sector Capacity Building

27/10/2010 31/01/2016 600,000

S CDTA TASF

41155-013 7923a 15 Gender Focused Capacity Building in Clean Energy

15/11/2011 31/12/2015 250,000

PPTA TASF

45126-001 8081 16 Scaling Up Renewable Energy Project

28/05/2012 31/12/2014

580,000

PPTA STCF

45217-002 8261 17 Support for Formulating an Economic Development Vision

12/11/2012 30/09/2018 700,000

CDTA TASF

44219-013 8272 18 Subregional Electricity Transmission Capacity Expansion Project

13/12/2012 31/12/2014 225,000

PPTA TASF

Subtotal 7

Subtotal 1,775,000 3,513,000

Finance 36169-023 7546a 19 Capacity Building for Rural

Finance Sector Development 18/06/2010 31/12/2014 300,000

CDTA TASF

40558-012 7777 20 Improving Access to Finance Sector Development Program

27/01/2011 19/04/2013

600,000 S PPTA JFPR

Subtotal 2 Subtotal 300,000.00 600,000

Public sector management 41126-012 7165 21 Strengthening Capacity for

Macroeconomic Analysis 04/11/2008 30/06/2013 675,000

S AOTA TASF

44502-001 7752 22 Strengthening Public Procurement Management and Portfolio Performance

16/12/2010 31/12/2011 225,000

S CDTA TASF

36172-063 8173 23 Supporting the Strengthening Public Management Program

26/09/2012 30/06/2017 500,000

S CDTA TASF

8173

Supporting the Strengthening Public Management Program (+ supplementary)

26/09/2012 30/06/2017

3,100,000

CDTA ATF-DFID

60 Appendix 1

Project Number




Date Closing Date

Total ADB Financing

(US$)

Total Cofinancing

Amount (US$)


Rating


Type Source of Fund

8173

Supporting the Strengthening Public Management Program (supplementary)

26/09/2012 30/06/2017

2,950,000

CDTA SSPMP


Transport 44238-012 7948 24 Urban Transport Planning and

Management 07/12/2011 31/10/2014 800,000

S CDTA TASF

Subtotal 1 Subtotal 800,000 -

Water and other urban infrastructure and services 44069-012 7597 25 Capacity Building for Waste

Management 16/09/2010 30/09/2013 500,000

S CDTA TASF

43524-012 7936 26 Kathmandu Valley Urban Environment Improvement Project

01/12/2011 31/07/2013

700,000

PPTA JFPR

42161-014 7982 27 Strengthening Municipalities for Urban Service Delivery

14/12/2011 30/06/2014 1,000,000

S CDTA TASF

Subtotal 3

Subtotal 1,500,000 700,000

Total 27

Total 10,035,000 25,136,000

ADB = Asian Development Bank, ADF = Asian Development Fund, AOTA = advisory and operational technical assistance, ATF-FG = Asian Tsunami Fund-Finnida Grant, CCF = Climate Change Fund, CDTA = capacity development technical assistance, DFID = Department for International Development of the United Kingdom, IFAD = International Fund for Agricultural Development, JFPR = Japan Fund for Poverty Reduction, JSF = Japan Special Fund, LS = less than successful, MTF-WFPF = Multi-Donor Trust Fund under the Water Financing Partnership Facility, NDF = Nordic Development Fund, PATA = policy and advisory technical assistance, PPTA = project preparatory technical assistance, PS = partly successful, S = successful, STCF = Subregional Telecommunications Forum, TA = technical assistance, TASF = Technical Assistance Special Fund. a Attached technical assistance. Sources: Procurement, Portfolio and Financial Management Department Project Completion Report and Technical Assistance Completion Report Ratings as of 30 June 2018; Controller’s Department database as of 30 August 2018; ADB eOps and ADB's project website, as of 24 September 2018; and ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.


Table A1.6: List of Sovereign Technical Assistance Approved During Country Partnership Strategy Period

Project Number




Date Closing Date

Total ADB Financing

(US$)

Total Cofinancing

Amount (US$) Self-Assessment, Validation Rating


Type Source of

Fund Agriculture, natural resources, and rural development 43448-013 8500a 1 Institutional and Legal

Support for Improved Water Management Systems and Formation of the Bagmati River Basin Organization

31/10/2013 31/07/2019

500,000.00

PATA MDTF WFPF

8500

Institutional and Legal Support for Improved Water Management Systems in Nepal and Formation of the Bagmati River Basin Organization (supplementary)

31/10/2013 31/07/2019 500,000

PATA TASF

48218-001 8690 2 Agriculture Sector Development Program

24/07/2014 31/10/2017 900,000

PPTA TASF

48339-001 8847 3 Enhancing Portfolio Performance

12/12/2014 30/06/2019 2,000,000

CDTA TASF

43448-015 9337 4 Bagmati River Basin Improvement Project (additional financing)

07/03/2017 31/12/2018 225,000

PPTA TASF

48218-007 9444 5 Support for Value Chain Development Under the Nepal Agriculture Development Strategy

12/05/2017 30/06/2019 225,000

RDTA TASF

48218-003 9457a 6 Rural Connectivity Improvement Project

11/12/2017 30/09/2019 1,000,000

CDTA TASF

Subtotal 6 Subtotal 4,850,000 500,000

Education 46433-001 8521 7 Supporting Education

and Skills Development

12/02/2013 30/11/2020 1,500,000

CDTA TASF

45192-003 9053 8 Strengthening Higher Engineering Education

16/12/2015 31/12/2018 800,000

PPTA TASF

49424-001 9215 a 9 Supporting School Sector Development Plan

02/11/2016 31/12/2021 500,000

CDTA TASF

62 Appendix 1

Project Number




Date Closing Date

Total ADB Financing

(US$)

Total Cofinancing



Type Source of

Fund 9215

02/11/2016 31/12/2021

4,720,000

CDTA European

Union 9215

02/11/2016 31/12/2021

594,858

CDTA ATF -

Norway TA grant

49215-001 8910 a 10 Support for Project Implementation of the Nepal Earthquake Rehabilitation and Reconstruction Program

24/06/2015 31/12/2019 2,800,000

CDTA TASF

8910

Support for Project Implementation of the Nepal Earthquake Rehabilitation and Reconstruction Program (supplementary)

24/06/2015 31/12/2019

600,000

CDTA PRC PRRCF


Energy 43281-013 8329 a 11 Support for

Sustainable Energy Management and Reforms

21/02/2013 31/12/2016

1,500,000

CDTA JFPR

44219-014 8678 a 12 Supporting Rural Electrification Through Renewable Energy

04/07/2014 31/12/2017 500,000

CDTA TASF

44219-015 8412 13 South Asia Subregional Economic Cooperation Power System Expansion Project

30/07/2015 31/12/2016

1,000,000

PPTA JFPR

8412

30/07/2015 31/12/2016

500,000

PPTA PRC PRRCF 50059-001 9144 14 Power Transmission

and Distribution Efficiency Enhancement Project

22/07/2016 31/12/2019 500,000

PPTA TASF

9144

22/07/2016 31/12/2019

1,500,000

PPTA CEF-CEFPF 50059-002 9334 a 15 Power Transmission

and Distribution Efficiency Enhancement Project

29/06/2017 29/06/2020

2,000,000

CDTA JFPR


Project Number




Date Closing Date

Total ADB Financing

(US$)

Total Cofinancing



Type Source of

Fund Subtotal 5

Subtotal 1,000,000 6,500,000

Finance 48360-002 9280 16 Hydroelectricity

Financingb Project 14/12/2016 31/01/2019 225,000

CDTA TASF

Subtotal 1 Subtotal 225,000 -

Industry and trade 47028-001 8442 17 Supporting

Participation in the South Asia Subregional Economic Cooperation Trade Facilitation Program

09/02/2013 31/08/2017

1,500,000 S CDTA JFPR

50254-002 9346 18 South Asia Subregional Economic Cooperation Customs Reform and Modernization for Trade Facilitation

24/07/2017 29/02/2020

1,000,000

CDTA JFPR

Subtotal 2 Subtotal - 2,500,000

Public sector management 38097-012 8627 a 19 Supporting the

Establishing Women and Children Service Centersc

25/03/2014 31/12/2018 500,000

CDTA TASF

36172-064 9150 20 Strengthening Subnational Public Management

08/04/2016 30/04/2018 500,000

PATA TASF

Subtotal 2

Subtotal 1,000,000 -

Transport 38350-013 8413 a 21 Capacity

Strengthening for Sustainable Road Transport

30/07/2013 30/06/2018 1,000,000

CDTA TASF

Subtotal 1 Subtotal 1,000,000 -

Water and other urban infrastructure and services 35173-012 8346 22 Third Small Towns

Water Supply and Sanitation Sector Project

05/04/2013 31/12/2015 800,000

PPTA TASF

8346

05/04/2013 31/12/2015

300,000

PPTA MTF-WFPF

64 Appendix 1

Project Number




Date Closing Date

Total ADB Financing

(US$)

Total Cofinancing



Type Source of

Fund 47252-001 8817 23 Far Western Region

Urban Development Project

16/12/2014 31/12/2018 1,500,000

PPTA TASF

45339-001 9171 24 Second Kathmandu Valley Water Supply Improvement Project

15/09/2016 28/02/2020 1,450,000

PPTA TASF

47252-002 9384 a 25 Strengthening Capacity for Urban Planning, Urban Design, and Investment Planning

22/09/2017 30/06/2020 1,000,000

CDTA TASF

Subtotal 4

Subtotal 4,750,000 300,000

Total 25

Total 18,425,000 15,714,858

- = none, ADB = Asian Development Bank, AOTA = advisory and operational technical assistance, ATF = Asian Tsunami Fund, CDTA = capacity development technical assistance, CEF-CEFPF = Clean Energy Financing-Clean Energy Financing Partnership Facility, JFPR = Japan Fund for Poverty Reduction, MTF-WFPF = Multi-Donor Trust Fund under the Water Financing Partnership Facility, PATA = policy and advisory technical assistance, PPTA = project preparatory technical assistance, PRC = People’s Republic of China, PRRCF = Poverty Reduction Regional Cooperation Fund, S = successful, TA = technical assistance, TASF = Technical Assistance Special Fund. a Attached technical assistance. b Classified under public sector management in country partnership strategy final review. c Classified under health in country partnership strategy final review. Sources: Procurement, Portfolio and Financial Management Department Project Completion Report and Technical Assistance Completion Report Ratings as of 30 June 2018; Controller’s Department database as of 30 August 2018; ADB eOps and ADB's project website, as of 24 September 2018; and ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

Table A1.7: List of Sovereign Cofinanced Loans and Grants Approved Before the Country Partnership Strategy Period but Closed or Ongoing During the

Country Partnership Strategy Period

Project Number

Loan/Grant/ Number


Approval Date

Closing Date

Total Cofinancing Amount (US$)


Rating

Instrument or

Modality Source of

Fund Agriculture, natural resources, and rural development 33209-013 8222 1 Community-Managed Irrigated

Agriculture Sector Project 14/12/2004 25/05/2016 7,000,000

Project OFID


Education 35174-082 0289 2 School Sector Program 08/06/2012 31/12/2014 3,465,000 S Program Australian

grant Subtotal 1 Subtotal 3,465,000

Energy 40553-013 0183 3 Energy Access and Efficiency

Improvement Project 24/11/2009 30/09/2015 4,200,000 S Project CEFPF

41155-013 0271 4 Electricity Transmission Expansion and Supply Improvement Project

15/11/2011 31/03/2020 25,000,000

Project NGLR


Project Number

Loan/Grant/ Number


Approval Date

Closing Date



Rating

Instrument or

Modality Source of

Fund Subtotal 2 Subtotal 29,200,000 Health 43103-012 9157 5 Reducing Child Malnutrition

through Social Protection 28/02/2011 15/01/2016 2,000,000

Project JFPR

42498-012 9144 6 Flour Fortification in Chakki Mills 12/09/2009 30/09/2013 1,800,000

Project JFPR 40115-012 9110 7 Strengthening Decentralized

Support for Vulnerable and Conflict-Affected Families and Children

10/10/2007 15/07/2012 2,000,000

Project JFPR


Multisector 42321-012 9159 8 Support for Targeted and

Sustainable Development Programs for Highly Marginalized Groups

30/03/2011 31/01/2016 2,700,000 S Project JFPR


Public sector management 36172-042 0206 9 Governance Support Program

(Subprogram I) Supplementary 12/04/2010 30/06/2013 8,800,000 S, S Program Canadian

grant 38097-012 0277 10 Establishing Women and Children

Service Centers 18/05/2011 19/03/2014 195,894

Project UKNI

9135

03/07/2009 30/04/2014 750,000 S Project JFPR 43118-012 9141 11 Capacity Building for the Promotion

of Legal Identity Among the Poor in Nepal

12/10/2009 31/12/2014 2,000,000

Project JFPR

36172-063

0306 12 Strengthening Public Management Program

26/09/2012 31/12/2016 4,000,0000 S Program UKNI

0368

05/11/2013 31/10/2015 2,950,000

Program EU Subtotal 4 Subtotal 18,695,894

Transport 37266-032 8231 13 Roads Connectivity Sector Project 11/09/2006 11/07/2016 10,000,000 S, S Project OFID 40554-022

0093 14 Rural Reconstruction and Rehabilitation Sector Development Program (project grant)

12/12/2007 23/06/2014 10,000,000 S, S Project OFID

0093

20,000,0000

Government of the United

Kingdom 8234

04/12/2007 25/11/2014 10,000,000

Project OFID

39399-013 8247 15 South Asia Tourism Infrastructure Development Project (Bangladesh, India, and Nepal) - Nepal

17/06/2009 15/06/2019 15,000,000

Project OFID

66 Appendix 1

Project Number

Loan/Grant/ Number


Approval Date

Closing Date



Rating

Instrument or

Modality Source of

Fund 44058-013 0239 16 Kathmandu Sustainable Urban

Transport Project 30/11/2010 30/06/2018 2,520,0000 Project GEF

38426-023

8257 17 Decentralized Rural Infrastructure and Livelihood Project (additional financing)

21/12/2011 31/05/2018 20,000,000

Project OFID

0267

Decentralized Rural Infrastructure and Livelihood Project-Additional financing (grant)

7,060,000

Project Government

of Switzerland


Water and other urban infrastructure and Services 31624-023

8191 18 Melamchi Water Supply Project 22/11/2000 31/12/2008

Project OFID 8235

03/07/2008 11/11/2015 9,000,0000

NDF

Loan

21/12/2000 31/12/2013 18,000,000

MOF Japan Loan

21/12/2000 31/12/2013 47,500,000

JBIC (ODA)

36188-023 8249 19 Secondary Towns Integrated Urban Environmental Improvement Project

18/06/2010 31/12/2018 17,000,000

Project OFID

Subtotal 2 Subtotal 91,500,000 Total 19 Total 252,940,894

ADB = Asian Development Bank, CEFPF = Clean Energy Financing-Clean Energy Financing Partnership Facility, EU = European Union, JBIC = Japan Bank for International Cooperation, JFPR = Japan Fund for Poverty Reduction, MOF = Ministry of Finance, NDF = Nordic Development Fund, NGLR = Norwegian Grant (Other Projects), ODA = official development assistance, OFID = OPEC Fund for International Development, S = successful, UKNI = UK-Norway Initiative. Sources: Procurement, Portfolio and Financial Management Department Project Completion Report and Technical Assistance Completion Report Ratings as of 30 June 2018; Controller’s Department database as of 30 August 2018; ADB eOps and ADB's project website, as of 24 September 2018; and ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.


Table A1.8: List of Sovereign Cofinanced Loans and Grants Approved During Country Partnership Strategy Period Project Number

Loan/Grant/ Number


Approval Date Closing Date



Source of Fund

44214-024

0357 1 Building Climate Resilience of Watersheds in Mountain Eco-Regions

23/09/2013 31/07/2020 23,537,000 Project SCF

0358

23/09/2013 30/06/2019 4,630,000 Project NDF 33209-013

8288 2 Community-Managed Irrigated Agriculture Sector Project (additional financing)

12/09/2014 31/01/2022 30,000,000 Project OFID

Loan

05/04/2015 31/07/2018 17,000,000

Kuwait Fund for

AED Subtotal 2 Subtotal 75,167,000

49202-001 9180 3 Disaster Risk Reduction and Livelihood Restoration for Earthquake-Affected Communities

07/10/2015 31/03/2019 15,000,000 Project JFPR

49424-001

Grant 4 Supporting School Sector Development Plan

02/11/2016 166,000,000 Sector project Multidonor

Loan

150,000,000

World Bank 49215-001

0529 5 Earthquake Emergency Assistance Project

12/12/2016 23/06/2019 10,000,000 Project USAID

Loan

115,300,000

JICA Subtotal 3 Subtotal 456,300,000

44219-014

0397 6 South Asia Subregional Economic Cooperation Power System Expansion Project

04/07/2014 30/06/2022 60,000,000 Project Government of Norway

0398

04/07/2014 30/06/2022 11,200,000 Project SCF 0520

29/11/2016 30/06/2022 20,000,000 Project SCF

Loan

120,000,000

EIB Subtotal 1 Subtotal 211,200,000

38097-012

0382 7 Establishing Women and Children Service Centers (additional financing)

25/03/2014 23/04/2018 300,000 Project GDCF

0406

25/03/2014 30/09/2018 3,200,000 Project Government of the United

Kingdom Subtotal 1 Subtotal 3,500,000

39399-013 0383 8 South Asia Tourism Infrastructure Development Project (additional financing)

28/03/2014 15/06/2019 3,000,000 Project ACEF (CEFPF)

68 Appendix 1

Project Number

Loan/Grant/ Number


Approval Date Closing Date



Source of Fund

Subtotal 1 Subtotal 3,000,000 43524-014

0342 9 Kathmandu Valley Wastewater Management Project

26/04/2013 30/06/2019 300,000 Project OFID

8269

21/03/2013 30/06/2021 16,000,000 Project OFID 35173-013

0405 10 Third Small Towns Water Supply and Sanitation Sector Project

19/09/2014 30/06/2019 1,300,000 Sector Project SFPTF

8304

10/03/2015 28/02/2020 20,000,000 Sector Project OFID Subtotal 2 Subtotal 37,600,000

Total 10 Total 786,767,000 ADB = Asian Development Bank, ACEF = Asian Clean Energy Fund, AED = Arab Economic Development, CEFPF = Clean Energy Financing-Clean Energy Financing Partnership Facility, EIB = European Investment Bank, GDCF = Gender and Development Cooperation Fund, JICA = Japan International Cooperation Agency, JFPR = Japan Fund for Poverty Reduction, NDF = Nordic Development Fund, OFID = OPEC Fund for International Development, REG = regional, SCF = Strategic Climate Fund, SFPTF = Sanitation Financing Partnership Trust Fund, USAID = United States Agency for International Development. Sources: Procurement, Portfolio and Financial Management Department Project Completion Report and Technical Assistance Completion Report Ratings as of 30 June 2018; Controller’s Department database as of 30 August 2018; ADB eOps and ADB's project website, as of 24 September 2018; and ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.


Table A1.9: Sovereign Loans and Grants Planned and Approved in Nepal Country Partnership Strategy, 2013–2017 from Asian Development Bank Fundsa

Project/Sector

Planned Approved

Remarks

Loan/ Grant

($ million) Year

Planned

Loan/ Grant

($ million) Year

Approved Energy 1 Tanahu Hydropower Project 150 2013 150 2013 Approved prior to the CPS 2013–2017

finalization 2 Project Preparatory Facility for

Energy 21 2013 21 2013

3 South Asia Subregional Economic Cooperation Power System Expansion Project

145 2013 180 2014 Previously the Subregional Electricity Transmission Capacity Expansion Project) (2014); Loan 3721-NEP: South Asia Subregional Economic Cooperation Power System Expansion Project-Additional Financing in 2018

4 Rural Electrification through Renewable Energy Project

19 2015 Dropped in the COBP, 2015–2017

5 Hydropower Development through Public–Private Partnership Project

110 2015 Deferred to standby for 2017 in COBP, 2015–2017, renamed to Nalsyau Gad Hydropower Public-Private Partnership Project and deferred to 2018 in COBP, 2016–2018

6 Dudh Koshi Hydropower Project

195 2016 Planned in COBP, 2015–2017; deferred to 2018 in COBP, 2016–2018, and to 2019 (standby) in COBP 2017–2019. The project is now standby in 2020 and firm in 2021 in the latest COBP

7 Nepal Energy Sector Reform Development Program

50 2017 Planned in COBP, 2016–2018, deferred to 2018 (standby) in COBP, 2017–2019

8 Power Transmission and Distribution Efficiency Enhancement Project

100 2017 150 2017 Planned in COBP, 2017–2019

Subtotal 790 501 Transport/information and communication technology 9 South Asia Subregional

Economic Cooperation Road Connectivity Project

75 2013 75 2013 Approved before the finalization of CPS/COBP, 2014–2016

10 South Asia Tourism Infrastructure Development Project (Bhairawa Airport) (additional financing)

30 2014 30 2014

11 Second South Asia Subregional Economic Cooperation Road Connectivity Project

45 2015 186.8 2016 Merged with the Second South Asia Subregional Economic Cooperation Trade Facilitation Project (2016) as the South Asia Subregional Economic Cooperation Transport and Trade Facilitation Sector Development Program and deferred to 2016, and returned to the South Asia Subregional Economic Cooperation Roads Improvement Project (2016) in COBP, 2017–2019

12 Second South Asia Subregional Economic Cooperation Trade Facilitation Project

60 2016

Merged with the Second South Asia Subregional Economic Cooperation Road Connectivity Project, becoming the South Asia Subregional Economic Cooperation Transport and Trade

70 Appendix 1

Project/Sector

Planned Approved

Remarks

Loan/ Grant

($ million) Year

Planned

Loan/ Grant

($ million) Year

Approved Facilitation Sector Development Program and deferred to 2016 (at $140 million) in COBP, 2015–2017; to $160 million in COBP, 2016–2018; returned to the South Asia Subregional Economic Cooperation Customs Reform and Modernization for Trade Facilitation Program (2017) in COBP, 2017–2019 (see industry and trade sector)

13 Second Air Transport Capacity Enhancement Project

60 2016

Deferred to 2016 in CPS/COBP 2014–2016; advanced to 2015 in COBP 2015–2017 (but was not in Appendix list) and is not in any other COBP that follows

14 Tribhuvan International Airport Capacity Enhancement Project

60 2015

Planned in COBP 2015–2017; deferred to 2017 in COBP 2016–2018 (became investment program as MFF facility); deferred to 2019 in COBP 2017–2019

15 MFF Facility Concept: Tribhuvan International Airport Capacity Enhancement Investment Program

240 2015

Deferred to 2017 in COBP, 2016–2018; proposed in September 2017

16 TIA Terminal Building Modernization Programc

100 2016 Planned in COBP, 2016–2018; deferred to 2017 in COBP, 2016–2018

17 South Asia Subregoinal Economic Cooperation Transport Projectc

250 2017

Planned in COBP, 2016–2018; no longer shown in COBP, 2017–2019. This project was replaced by the South Asia Subregional Economic Cooperation Road Connectivity Program.

Subtotal 920 291.8 Water and other urban infrastructure and services 18 Kathmandu Valley Wastewater

Management Project 80 2013 80 2013 Approved prior to the CPS, 2013–2017

finalization 19 Third Small Towns Water

Supply and Sanitation Sector Project

42 2014 60 2015

20 Melamchi Water Supply Project (additional financing)

25 2014 25 2014 Connected to previous CPS investments approved in 2008 (has longer history)

21 Integrated Development for Bigger Municipalities Project

30 2016 150 2017 PDA ($2 million) planned for 2015 in COBP, 2015–2017; deferred to 2017 and $70 million; PDA dropped in COBP, 2016–2018, changed to MFF, renamed Integrated Urban and Economic Corridor Investment Program, then renamed Regional Urban Development Project (2017) as stand-alone (for $147 million)

22 Kathmandu Valley Environment Management Projectc

60 2016 Deferred to 2017c in COBP, 2015–2017

23 Kathmandu Valley Water Supply Improvement Project

(additional financing)

50 2015 90 2015 Planned in COBP, 2015–2017. In COBP, 2016–2018, the project was renamed as the Kathmandu Valley Water Supply and Sanitation Management Program


Project/Sector

Planned Approved

Remarks

Loan/ Grant

($ million) Year

Planned

Loan/ Grant

($ million) Year

Approved 24 Nepal Earthquake Disaster

Response Project (special fund) 3 2015 3 2015 Could not be planned in CPS; was a

response to the April 2015 quake disaster

25 Kathmandu Valley Water Supply Augmentation

76 2017 Planned in COBP, 2015–2017, changed to MFF in COBP, 2016–2018 as the Kathmandu Valley Water Supply and Sanitation Management Investment Program, deferred to 2018, then stand-alone project in 2019 in COBP, 2017–2019

Subtotal 363 408 Agriculture, natural resources, and rural development 26 Bagmati River Basin

Improvement Project 30 2013 30 2013

27 Community-Managed Irrigated Agriculture Sector Project (additional financing)

30 2014 30 2014

28 Agriculture Sector Development Program

40 2015 Planned in COBP 2015–2017 Deferred to 2016 in COBP 2016–2018 and deferred to 2017 and split in COBP 2017–2019

29 Second Bagmati River Basin Improvement Project

29 2016 Revised to $40 million in COBP 2015–2017; deferred to 2018 in COBP 2016–2018. In the COBP 2016–2018, Bagmati River Basin Improvement Project II (additional financing) is listed as firm under 2016. It was deferred to 2018 as firm in COBP 2017–2019

30 ADS Rural Infrastructure Support Sector Project

110 2017 Planned in COBP 2017–2019; Split the Agriculture Sector Development (ADS) Program into the ADS Implementation Support Program (2017) and Agriculture Sector Development Strategy Rural Infrastructure Support Sector Project. The project was renamed as Rural Connectivity Improvement Project in 2018–2020 COBP

31 Agriculture Sector Development Strategy Implementation Support Program

40 2017 Planned in COBP 2017–2019; Split the Agriculture Sector Development Program into the Agriculture Sector Development Strategy Implementation Support Program (2017) and the Agriculture Sector Development Strategy Rural Infrastructure Support Sector Project

32 Rural Connectivity Improvement Project

100 2017 Not planned in CPS or COBPs. This was previously the Agriculture Sector Development Strategy Rural Infrastructure Support Sector Project

Subtotal 249h 160 Education 33 Skills Development Project 20 2013 20 2013 Was already approved when

CPS/COBP, 2014–2016 were being finalized. The new Skills Development Project/Program was introduced in

72 Appendix 1

Project/Sector

Planned Approved

Remarks

Loan/ Grant

($ million) Year

Planned

Loan/ Grant

($ million) Year

Approved 2016–2018 (modality of which has been different in the latter COBPs)

34 Second School Sector Program 45 2015 120 2016 Raised to $70 million in COBP, 2016–2018. Further increased to $120 million in COBP, 2017–2019 and renamed the Supporting School Sector Development Program

35 Strengthening Higher Engineering Education Project

40 2017 0 Dropped Planned in COBP, 2015–2017; PDA ($2 million) planned in COBP, 2017–2019; deferred to 2019 (standby) in COBP, 2017–2019; dropped in 2018

36 Earthquake Emergency Assistance Project

200 2015 Could not be planned in CPS; was a response to the April 2015 quake disaster

Subtotal 85 340 Health 37 Establishing Women and

Children Service Centers Project (additional financing) i

0 2014 0 2014 Cofinanced. Labelled as multisector in some documents, but health and social protection in grant document

Subtotal 0 0 Public Sector Management 38 Second Strengthening Public

Management Program 50 2017

Planned in COBP, 2016–2018; modified to Strengthening Subnational Public Management Program for 2018 (standby) in COBP, 2017–2019. The project was dropped in the latest COBP, 2019–2021.

Subtotal 50 Industry and trade 39 South Asia Subregional

Economic Cooperation Customs Reform and Modernization for Trade Facilitation Program

21 2017 21 2017 Planned in COBP 2017–2019; Separated from the South Asia Subregional Economic Cooperation Transport and Trade Facilitation Sector Development Program (planned 2016)

Subtotal 21 21 ADB = Asian Development Bank, COBP = country operations business plan, CPS = country partnership strategy, MFF = multitranche financing facility, PDA = project design advance. a Totals not provided as data spans shifting program over COBP, 2014–2016 and COBP, 2015–2017. b Standby (others are firm; if project is listed as both, the firm date is used). c Excludes the Agriculture Sector Development Program that split into two operations. d Cofinanced entirely ($3.1 million). Source: Independent Evaluation Department and Asian Development Bank database.


Table A1.10: Analysis of Technical Assistance by Type, Number, and Cofinancing

Sector or Technical Assistance Type Number

Total ADB Financing ($ million)

Total Cofinancing Amount

($ million)

Total Financing ($ million)

Agriculture, natural resources, and rural development

13 7.84 13.56 21.39

CDTA 5 4.33 8.54 12.86 PATA 2 2.00 1.00 3.00 PPTA 5 1.29 4.02 5.31 RDTA 1 0.23 - 0.23

Education 8 6.88 7.13 14.00 CDTA 6 6.08 6.63 12.70 PPTA 2 0.80 0.50 1.30

Energy 12 2.78 10.01 12.79 CDTA 6 1.80 4.43 6.23 PPTA 6 0.98 5.58 6.56

Finance 3 0.53 0.60 1.13 CDTA 2 0.53 - 0.53 PPTA 1 - 0.60 0.60

Industry and trade 2 - 2.50 2.50 CDTA 2 - 2.50 2.50

Public sector management 5 2.40 6.05 8.45 CDTA 4 1.90 6.05 7.95 PATA 1 0.50 - 0.50

Transport 2 1.80 - 1.80 CDTA 2 1.80 - 1.80

Water and other urban infrastructure and services

7 6.25 1.00 7.25

CDTA 3 2.50 - 2.50 PPTA 4 3.75 1.00 4.75

Overall 52 28.46 40.85 69.31 CDTA 30 18.93 28.15 47.08 PATA 3 2.50 1.00 3.50 PPTA 18 6.81 11.70 18.51 RDTA 1 0.23 - 0.23

- = none, ADB = Asian Development Bank, CDTA = capacity development technical assistance, PATA = policy and advisory technical assistance, PPTA = project preparatory technical assistance RDTA = research and development technical assistance, TA = technical assistance. Source: Asian Development Bank database.

74 Appendix 1

Table A1.11: Percent of Technical Assistance by Total Sector Number and Value by Type

Sector or Technical Assistance Type

Total Number

ADB Financing Cofinancing

Total Financing

% Number % Value % Value % Value Agriculture, natural resources, and rural development

CDTA 38 55 63 60 PATA 15 26 7 14 PPTA 38 16 30 25 RDTA 8 3 0 1

Education

CDTA 75 88 93 91 PPTA 25 12 7 9

Energy

CDTA 50 65 44 49 PPTA 50 35 56 51

Finance

CDTA 67 100 0 47 PPTA 33 0 100 53

Industry and trade

CDTA 100 0 100 100 Public sector management

CDTA 80 79 100 94 PATA 20 21 0 6

Transport

CDTA 100 100 0 100 Water and other urban infrastructure and services

CDTA 43 40 0 34 PPTA 57 60 100 66

Overall

CDTA 58 66 69 68 PATA 6 9 2 5 PPTA 35 24 29 27 RDTA 2 1 0 0

ADB = Asian Development Bank, CDTA = capacity development technical assistance, PATA = policy and advisory technical assistance, PPTA = project preparatory technical assistance RDTA = research and development technical assistance, TA = technical assistance. Source: Asian Development Bank database.


Table A1.12: Technical Assistance Implemented or Approved in the Country Partnership Strategy Period

Year PSM ANR ENE TRA EDU IND HLT ICT FIN WUS Total From pre-2013 3 7 7 1 4 2 3 27

2013 1 1 1 1 1 1 8 2014 1 2 1 1 5 2015 1 2 3 2016 1 1 1 1 1 5 2017 3 1 1 1 5

CPS, 2013–2017 2 6 5 1 4 2 0 0 1 4 25 Total 5 13 12 2 8 2 0 0 3 7 52 PPTA 0 5 6 0 2 0 0 0 1 4 18

ANR = agriculture, natural resources, and rural development; CPS = country partnership strategy; EDU = education; ENE = energy; FIN = finance; HLT = health; ICT = information and communication technology; IND = industry and trade; PPTA = project preparatory technical assistance; PSM = public sector management; TRA = transport; WUS = water and other urban infrastructure and services. Source: Asian Development Bank. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

APPENDIX 2: ASIAN DEVELOPMENT FUND PRIORITY COVERAGE DURING AND POST-ASIAN DEVELOPMENT FUND GRANT PROVISION

Table A2.1: Loans and Grants Approved During Country Partnership Strategy Period, 2013–2017

Projects Gender

Fragile and Conflict-Affected

Situations Food

Security Private Sector Development Governance

Climate Change and Disaster

Response Regional

Public Goods

Agriculture, natural resources, and rural development Bagmati River Basin Improvement Project (Grant 0367-NEP) Community-Managed Irrigated Agriculture Sector Project (additional financing) (Loan 3124-NEP)

Rural Connectivity Improvement Project (Loan 3620-NEP) Energy Tanahu Hydropower Project (Loan 2990-NEP and Loan 2991-NEP)

South Asian Subregional Economic Cooperation Power System Expansion Project (Loan 3139-NEP)

Power Transmission and Distribution Efficiency Enhancement Project (Loan 3542-NEP)

Project Preparatory Facility for Energy (Grant 0361-NEP) Education Skills Development Project (Grant 0345-NEP) Supporting School Sector Development Plan (Loan 3452-NEP) Earthquake Emergency Assistance Project (Loan 3260-NEP) Industry and trade South Asia Subregional Economic Cooperation Customs Reform and Modernization for Trade Facilitation Program (Loan 3546-NEP)

Transport South Asia Subregional Economic Cooperation Road Connectivity Project (Loan 3012-NEP)

South Asia Tourism Infrastructure Development Project additional financing) (Loan 3117-NEP)

South Asia Subregional Economic Cooperation Roads Improvement Project (Loan 3478-NEP)

Water and other urban infrastructure and services Kathmandu Valley Wastewater Management Project (Loan 3000-NEP)

Melamchi Water Supply Project (additional financing) (Loan 3110-NEP)

Asian Development Fund Priority Coverage During and Post-Asian Development Fund Grant Provision 77

Table A2.1: Loans and Grants Approved During Country Partnership Strategy Period, 2013–2017

Projects Gender

Fragile and Conflict-Affected

Situations Food

Security Private Sector Development Governance

Climate Change and Disaster

Response Regional

Public Goods

Third Small Towns Water Supply and Sanitation Sector Project(Loan 3157-NEP)

Nepal Earthquake Disaster Response Humanitarian Assistance (Grant 0430-NEP)

Kathmandu Valley Water Supply Improvement Project (additional financing) (Loan 3255-NEP)

Regional Urban Development Project (Loan 3566-NEP) FCAS = fragile and conflict-affected situations. Source: Asian Development Bank. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

Table A2.2: Loans and Grants Approved Before the Country Partnership Strategy Period but Closed or Ongoing During the Country Partnership

Strategy Period

Projects Gender

Fragile and

Conflict-Affected

Situations Food

Security

Private Sector

Development Governance

Climate Change and

Disaster Response

Regional Public Goods

Agriculture, natural resources, and rural development Gender Equality and Empowerment of Women Project (Loan 2143-NEP) Community-Managed Irrigated Agriculture Sector Project (Loan 2102-NEP)

Commercial Agriculture Development (Grant 0063-NEP) Community Irrigation Project (Grant 0219-NEP) Raising Incomes of Small and Medium Farmers Project (Grant 0233-NEP) High Mountain Agribusiness and Livelihood Improvement Project (Grant 0248-NEP)

Water Resources Project Preparatory Facility (Grant 0299-NEP) Education School Sector Program (Grant 0272-NEP) Energy Energy Access and Efficiency Improvement Projec (Grant 0182-NEP)t Detailed Engineering Study for the Upper Seti Hydropower Project (Grant 0215-NEP)

Electricity Transmission Expansion and Supply Improvement Project (Grant 0270-NEP)

78 Appendix 2

Table A2.2: Loans and Grants Approved Before the Country Partnership Strategy Period but Closed or Ongoing During the Country Partnership Strategy Period

Projects Gender

Fragile and

Conflict-Affected

Situations Food

Security

Private Sector


Climate Change and

Disaster Response


Finance Rural Finance Sector Development Cluster Program (subprogram 2) (Grant 0208-NEP)

Capital Market and Infrastructure Capacity Support Project (Grant 0252-NEP)

Information and communication technology South Asia Subregional Economic Cooperation Information Highway Project (Bangladesh, Bhutan, India, Nepal) (Grant 0099-NEP)

Information and Communication Technology Development Project (Grant 0106-NEP)

Industry and trade South Asia Subregional Economic Cooperation Trade Facilitation Program (Grant 0322-NEP)

Public sector management Governance Support Program (subprogram 1) (Grant 0118-NEP) Strengthening Public Management Program (Grant 0305-NEP) Transport Roads Connectivity Sector Project (Grant 0051-NEP) Rural Reconstruction and Rehabilitation Sector Development Program (project grant) (Grant 0093-NEP)

Emergency Flood Damage Rehabilitation Project (Grant 0150-NEP) South Asia Tourism Infrastructure Development Project (Bangladesh, India, and Nepal) (Grant 0179-NEP)

Air Transport Capacity Enhancement Project (formerly Civil Aviation Airport Development Project) (Grant 0181-NEP)

Kathmandu Sustainable Urban Transport Project (Grant 0212-NEP) Subregional Transport Enhancement Project (Grant 0225-NEP) Transport Project Preparatory Facility (formerly Transport Project Preparatory and Capacity Development Facility) (Grant 0227-NEP)

Decentralized Rural Infrastructure and Livelihood Project (additional financing) (Grant 0267-NEP)

Water and other infrastructure and services Melamchi Water Supply Project (Loan 1820-NEP) Kathmandu Valley Water Services Sector Development Program (Loan 2059-NEP)

Asian Development Fund Priority Coverage During and Post-Asian Development Fund Grant Provision 79

Table A2.2: Loans and Grants Approved Before the Country Partnership Strategy Period but Closed or Ongoing During the Country Partnership Strategy Period

Projects Gender

Fragile and

Conflict-Affected

Situations Food

Security

Private Sector


Climate Change and

Disaster Response


Second Small Towns Water Supply and Sanitation Sector Project (Grant 0157-NEP)

Secondary Towns Integrated Urban Environmental Improvement Project (Loan 2650-NEP)

Kathmandu Valley Water Supply Improvement Project (Loan 2776-NEP) Integrated Urban Development Project (Grant 0284-NEP)

FCAS = fragile and conflict-affected situations. Source: Asian Development Bank. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

APPENDIX 3: GENDER AND SOCIAL INCLUSION PERFORMANCE IN SELECTED PROJECTS

Loan/Grant Number Project Name

Closing Year Rating

Gender Class GESI Plan/GAP/Action

Monitoring Treatment PCR/PVR Treatment

Validation Comment

322 South Asia Subregional Economic Cooperation Trade Facilitation Program (Nepal)

2015 S SGE GESI objective in trade as a policy action. Gender-focused TA planned in RRP

Some mention of women as proportion of client group for trade information

PVR noted policy action complied, and gender focused TA not mobilizeda

No reasons offered for dropping the TA

0051 | 8231

Roads Connectivity Sector Project

2014 S, S NGE RRP has gender development section with some analysis and policies; e.g., jobs and wage parity for women in project work and reaching women in HIV campaign

Reports note compliance with HIV campaign to reach women and children

PCR noted compliance with HIV campaign and gender-wage parity; concluded project could have done more detailed GESI communication

The project was not classified in term of gender elements. No details provided on jobs and/or wage parity compliance; likely because not placed in targets or covenants.

63 Commercial Agriculture Development Project

2013 S, S EGM RRP commits to and to include achievement of the gender in regular project reporting. Contains a GAP

Reporting on GAP begins in 2010, and provides recommendations for project to more fully achieve GAP

PCR reports in detail on the results of the GAP; shows good performance against indicator targets (17 of 20 targets achieved or bettered)

GAP was expended to GESI action plan in the reporting – noting the participation of disadvantaged groups

0093 | 8234

Rural Reconstruction and Rehabilitation Sector Development Program (project grant)

2014 S, S EGM RRP has GAP, and DMF and policy matrix have commitments on civil service participation and three implementing agencies ministries preparing approved gender strategies.

Not available (yet)

PCR reports on the DMF indicators, policy objectives (one tranche) and GAP. States “Gender mainstreaming is constrained by lack of budgets, human skills, and institutional controls.”

GAP has mixed results and gaps; (no data provided on leadership). Gender strategies approved by ministries; not well implemented due in part to lack of associated TA.

150 Emergency Flood Damage Rehabilitation Project

2015 S EGM RRP calls for GESI action plan and GESI guidelines within 3 months of grant effectiveness to ensure that benefits accrue to

Show guidelines were done 2 months late, and GESI plan was satisfactorily implemented

PCR reports on the GESI pan implementation; showing generally good achievement against targets.

Some key indicators of benefits accrued are vague, cannot tell if women benefitted (not

Gender and Social Inclusion Performance in Selected Projects 81


Closing Year Rating



Validation Comment

women and other groups.

gender disaggregated)

0305 | 0306 | 0368 | 8173

Strengthening Public Management Program

2016 S SGB RRP policy action includes earmarking expenditures for GESI in block grant.

Reports give fiscal year 2014 figures for GESI expenditures; showed them falling short.

PCR reports that GESI expenditure guidelines were met but does not explain or add update on GESI expenditures.

GESI expenditures in following years not reported. Unclear if these norms survived restructuring of local government

0182 | 0183 | 2587

Energy Access and Efficiency Improvement Project

2018 S NGE Brief gender analysis in RRP concludes project will improve health conditions for women and increase security on the streets as a result of the improved street lighting; but no actions specified.

Not available (yet)

PCR reports that project covenant that Poverty Summary actions relating to women’s participation be carried out has been complied with; but no such actions were set up.

No actions or indicators set that respond to analysis or expectation of benefits, e.g., if street lighting was oriented to women’s needs.

0277 |9135

Establishing Women and Children Service Centers

2014 S EGM GAP makes it clear that the women and children who are victimized in various ways are the focus of the project.

Not available (yet)

ADB records show a project completion report (or ICM) was prepared, but this was not available to IED.

Project data sheet indicates projects activities have been completed and well executed.

0118 | 0206

Governance Support Program (Subprogram I)

2013 S, S EGM DMF and policy matrix contains several GESI indicators. GAP prepared in the RRP.

Not available (yet)

PCR reports against DMF, policy matrix and GAP, but some indicators are qualitative or not operational, and benchmarks or baseline data is often missing.

The overall impression of the rather flawed indictors and reporting is that substantial progress has been made on GESI.

0208 | 2641 | 7546

Rural Finance Sector Development Cluster Program (subprogram 2)

2015 S,S EGM DMF contains some gender indicators. GAP is also prepared in the RRP.

Reports track DMF and/or policy actions but not GAP.

PCR reports against DMF and/or policy actions and GAP

GAP is largely successful in its implementation, though it is weak in some indictors

0225 | 2685

Subregional Transport Enhancement Project

2017 S SGB RRP requires HIV/AIDS and anti-trafficking program that includes raising awareness of

Track HIV/AIDs campaign qualitatively. Independent

PCR reports on HIV/AIDs campaign, with data on improved awareness

Definition of “access” is not explained in RRP and becomes very

82 Appendix 3


Closing Year Rating



Validation Comment

gender issues and child labor. DMF calls for improved women’s access to social and health services and employment opportunity.

review on effect not reported; project deems it successful.

increase. Also reports on improved access – defining it as reduced time to travel to relevant centers.

narrow in assessing its achievement.

9159 Support for Targeted and Sustainable Development Programs for Highly Marginalized Groups

2016 S EGM The report places GESI unit of MLD as PMU head. DMF indicators require gender reporting. GAP also prepared.

GAP reporting starts in 2015 (near end of project life)

ICM reports against DMF (which overlaps with some measures and indicators of the GAP).

Important indicators in GAP are not reported, i.e., the seed grants given to women.

2143 Gender Equality and Empowerment of Women Project

2013 S, S GE Goal is to reduce poverty in rural Nepal by empowering poor rural women and members of other disadvantaged groups, such as ethnic and low-caste women; DMF contains gender indicators.

Reporting was relevant to gender indicators since project is focused on their empowerment.

PCR reports on DMF fully as per ADB guidelines.

DMF outputs and outcomes were adjusted during implementation; projects were successful against these reduced results.

0272 | 0289 | 7935

School Sector Program

2014 S GEN RRP has program “feature” of strong focus on GESI, with some gender indicators used in the DMF (but policy matrix has none). A GVAP is also prepared.

Track tranche conditionalities. Only in 2015 is there brief reporting on gender parity in schools.

PCR reports against both DMF and GAP, indicating effective achievement, particularly on gender parity.

Not clear why tranche conditionalities would not reflect gender commitment.

0106 Information and Communications Technology Development Project

Open Open SGB RRP analysis indicates women would benefit through better access to higher education and health. DMF targets are not gender disaggregated.

Tracked number of women trained for e-governance (but no target or link to education and health)

Ongoing Does not seem that the benefits to women on education and health access have been made operational or are tracked in any way.

Gender and Social Inclusion Performance in Selected Projects 83


Closing Year Rating



Validation Comment

0106 South Asia Subregional Economic Cooperation Information Highway Project

Closed October

2017

Closed October

2017

NGE RRP analysis indicates women would benefit through better access to higher education and health. DMF targets are not gender disaggregated.

No tracking of gender and/or GESI issues and/or indicators

Closed October 2017 Analysis in RRP is superficial and strikingly similar to that for Grant 0106 (ICT) Development Project.

2776/3255 Kathmandu Valley Water Supply Improvement Project

Open Open EGM RRP calls for GESI action plan

Track GESI action plan (even though the baseline/status does not seem to be clear)

Ongoing KUKL GESI action plan was to be adopted by October 2015; but as of 2018 project brief this was not yet done.

2058/2059 Kathmandu Valley Wastewater Management Project

Open Open EGM DMF contains gender indicators. GESI action plan prepared

Ongoing

2851/0284 Integrated Urban Project


Track GESI implementation

Ongoing By 2018, the vast majority of GESI targets are said to be achieved.

2650/8249 Secondary Towns Integrated Urban Environment Improvement Project



Ongoing Tracking is done in detail against GESI action plan in later monitoring reports.

0345 Skills Development Project

Open Open GEN DMF contains gender indicators. GESI action plan prepared


Ongoing

ADB = Asian Development Bank, DMF = design and monitoring framework, EGM = effective gender mainstreaming, GAP = gender action plan, GE = gender element, GEN = gender equity theme, GESI = gender and social inclusion, GVAP = gender and vulnerability action plan, HIV/AIDS = human immunodeficiency virus/acquired immunodeficiency syndrome, ICM = implementation completion memorandum, ICT = information and communication technology, IED = Independent Evaluation Department, KUKL = Kathmandu Upatyaka Khanepani Limited, MLD = Ministry of Local Development, NGE = no gender elements, PCR = project completion report, PMU = project monitoring unit, PVR = project validation report, RRP = report and recommendation of the President, S = satisfactory, SGB = some gender benefit, TA = technical assistance. a Assessing Gender Dimensions in Regional Cooperation and Integration in South Asia. With a budget of $500,000; was to conduct policy-oriented research on increasing women’s

participation in intraregional trade, promote safe labor migration, and mitigate risks of cross-border movements of goods and people. Sources: Validation analysis from the Report and Recommendation of the President, monitoring reports, and project completion reports and/or project completion report validation reports.

APPENDIX 4: SECTOR OUTPUTS AND OUTCOMES ACHIEVEMENT A. Agriculture, Natural Resources, and Rural Development

Table A4.1: Achievements against Country Partnership Strategy Agriculture, Natural Resources, and Rural Development Sector Outcome Targets Supported by ADB

Sector Outcomes Indicators and Targets Achievement Reported in CPSFR

Validation Comment

Agricultural GDP per capita 2017 target: NRs12,660 2012 baseline: NRs9,866

Current prices NRs24,056 (2017) NRs18,840 (2012)

The operations department refers to the following sources: national accounts data from the Central Bureau of Statistics for “agriculture GDP per capita”; Ministry of Agriculture Development. 2016. Nepal: Zero Hunger Challenge National Action Plan 2016-2025. Kathmandu for “proportion of people generally food secure”

Proportion of population generally food secure 2017 target: 65% 2010 baseline: 58%

65% (2016) Ministry of Agriculture Development. 2016. Nepal: Zero Hunger Challenge National Action Plan 2016-2025. Kathmandu for “proportion of people generally food secure” The WFP noted that, as per its index on food security Nepal, had only reached about 45% food security.

ADB = Asian Development Bank, CPSFR = country partnership strategy final review, GDP = gross domestic product, WFP = World Food Programme. Source: ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

Table A4.2: Achievements against Country Partnership Strategy Agriculture, Natural Resources, and Rural Development Sector Output Targets Supported by ADB

Sector Output Indicator and Target Achievement

Reported in CPSFR Validation Comment Area with year-round irrigation 2017 target: 1.5 million ha 2012 baseline: 1.3 million ha

1.473 million ha(2018)

Close to target (87% achievement) ADB’s contribution is about 51,000 ha (small in percentage but large in any other more relevant sense) Community-Managed Irrigated Agriculture Sector Project (Loan 2102-NEP), Community-Managed Irrigated Agriculture Sector Project (additional financing) (Loan 3124-NEP), and Community Irrigation Project (Grant 0219-NEP)

All-season rural road network 2017 target:14,000 km 2012 baseline:10,200 km

14,827 (2016) Exceeded target. ADB’s contribution was significant. The Rural Reconstruction and Rehabilitation Sector Development Program constructed and/or rehabilitated and/or upgraded 859 km rural roads and constructed 15 bridges with combined length of 405 meters. The Decentralized Rural Infrastructure and Livelihood Project constructed and/or rehabilitated and/or upgraded 527 km rural roads and 29,314 meters of 422 trail bridges

Area used for commercial crops 2017 target: 929,610 ha 2012 baseline822,664 ha

1,035,219 (2017) Exceeded but ADB contribution not evidenced, can only be hypothesized

Percent of rural households covered by agricultural services and programs 2017 target: 17% 2012 baseline12%

21% (2017) Exceeded target, but ADB contribution can only be hypothesized.

ADB = Asian Development Bank, CPSFR = country partnership strategy final review, ha = hectare, km = kilometer. Source: ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

Sector Outputs and Outcomes Achievement 85

1. For the agriculture, natural resources, and rural development (ANR) sector, comprising 9% of the country partnership strategy (CPS) portfolio, there were nine projects under implementation targeting the two sector outcomes, on agricultural productivity and enhanced food security. The country partnership strategy final review (CPSFR) indicated that the outcome and output targets were exceeded. Given the mix of project level outcomes, due to the fact that six projects (mentioned in para. 102 of the main text) are contributing to increased productivity and food security, it can be assumed that the Asian Development Bank (ADB) supported ANR projects contribute significantly to national sector outcome targets. 2. Turning to outputs, of the four ANR sector outputs, the sole project related to the sector output on rural road networks was only approved late in the CPS period and, therefore, it is early to assess. There were no projects that explicitly delivered outputs on agricultural services and programs to rural households. This left the contribution of eight projects to the two sector outputs mentioned in the CPS as (i) agricultural infrastructure and systems expanded and improved and (ii) access to agricultural services increased. These were to be measured by (i) area with year-round irrigation, (ii) all season rural road network, (iii) area used for commercial crops, and (iv) percentage of rural households covered by agricultural services and programs. 3. The validation notes that ANR projects during the CPS period contributed to sector outputs as follows: During the CPS period, irrigation coverage increased from 1.3 million hectares (ha.) to 1.473 million ha. Three ADB-supported projects collectively contributed to augmented irrigation in a significant 51,690 ha command area: the Community-Managed Irrigated Agriculture Sector Project (CMIASP); the Community-Managed Irrigated Agriculture Sector Project-additional financing, and the Community Irrigation Project. During the CPS period, the all-season rural road network expanded from 10,200 kilometers (km) to 14,827 km, to which several ADB-funded projects (though some reclassified to transport sector in 2014) have been contributing. The area used for commercial crops increased from 822,644 ha to 1,035,219 ha, a nationwide output to which several ADB-supported projects contributed as well. Though difficult to independently verify during a validation mission, during the CPS period, the percentage of rural households covered by agriculture services and programs allegedly increased from 12% to 21%. Similarly, official sources state that the Commercial Agriculture Development Project directly supported 23,379 poor and landless farming households; that the High Mountain Agribusiness and Livelihood Improvement Project created jobs for 11,918 persons; and the Raising Incomes of Small and Medium Farmers Project is estimated to have benefitted around 79,181 farmers. The three projects all included agriculture support services and/or training component for farmer beneficiaries, which contributed to sector output iv. 4. The projects supporting community-based irrigation proved to be the most successful in delivering the targets. Among these are four projects that are on track to increase irrigated acreage, raise crop yields, increase crop production, and manage water users’ associations. Another 20% of the ANR portfolio focused on commercialization of agriculture, agribusiness, and raising household incomes have had mixed results in contributing to ensure that farmers are better linked to markets. Better synergies with the rural infrastructure programs will help. 5. The CPSRF credits the Bagmati River Basin Improvement Project and Water Resources Project Preparatory Facility for driving policy reforms relating to flood hazard risk mapping of priority river basins, updating the Irrigation Master Plan, amending the Water Policy and Water Act, operationalizing flood forecasting and early warning systems, and helping the government to set up river basin organizations. In western Nepal’s mountainous region, the Building Climate Resilience of Watersheds in Mountain Eco-Regions Project (Loan 3057-NEP and Grant 0367-NEP), aided by a technical assistance project, 1 has contributed to improved plans, policies, and practices on water and soil conservation. These are all significant results, even when progress is slow and there is only an initial indication in most efforts to suggest that the good practices will be institutionalized and broadly spread.

1 ADB. 2013. Technical Assistance to Nepal for Institutional and Legal Support for Improved Water Management Systems. Manila

(TA 8500-NEP).

86 Appendix 4

6. Institutional challenges in ANR relate to the fragmentation of functions among agencies dealing with ANR. Recently, this was made more complicated by the urgency to discern new provincial and/or local roles in these sectors and deal with the changes in fund flows resulting from state restructuring. The changes have required adjustments in Community-Managed Irrigated Agriculture Sector Project (additional financing, Loan 8288-NEP), and Rural Connectivity Improvement Project. 2 Other reforms expected in the sector relate to the deepening of integrated water resource management, land use management, financing of enterprises; and giving the sector a stronger knowledge base. ADB plans to provide a program loan soon to spur these reforms. B. Energy

Table A4.3: Achievements against Country Partnership Strategy Energy Sector Outcome Targets Supported by ADB

Sector Outcomes Indicators and Targets Achievement Reported in

CPSFR Validation Comment Households using electricity 2017 target: 70% (on-grid) 2012 baseline: 56% (on-grid)

69% (2017) Tanahu will run into a major delay; much of the current portfolio will contribute to the physical target set for 2017 only later.

Per capita electricity consumption 2017 target: 180 kWh 2012 baseline: 102 kWh

177 KWh (2017)

Level of power trade 2017 target: 400 MW 2012 baseline: 150 MW

450 MW (2017)

ADB = Asian Development Bank, CPSFR = country partnership strategy final review, kWh = kilowatt-hour, MW = megawatt. Source: ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

Table A4.4: Achievements against Country Partnership Strategy Energy Sector Output Targets

Supported by ADB

Sector Output Indicator and Target Achievement

Reported in CPSFR Validation Comment Installed electricity generation capacity 2017 target: 1,590 MW 2012 baseline: 705 MW

1,074.1 MW (2018)

Below target (369 MW, or 42% achievement) and ADB’s flagship generation project should contribute, but at a likely much later date.

Installed off-grid renewable energy generation capacity 2017 target: 50 MW 2012 baseline: 35 MW

100 MW (2018) Exceeded by a large margin though ADB’s contribution is small.

New transmission lines installed 2017 target: 2,000 km 2012 baseline: 0 km

897 km (2018) ADB’s contribution to energy sector outputs has been most significant for this output.

New distribution lines installed 2017 target: 1,000 km 2012 baseline: 0 km

600 km (33 kV) 1,200 km (11 kV) (2018)

Exceeded though ADB contribution is small during the CPS period, but likely to be much larger afterwards.

Cost-reflective electricity tariff 2017 target: Tariff reflects 100% of costs 2012 baseline: 75%

Electricity tariffs are cost reflective. (2017)

ADB contributed through sector-related covenants like financial restructuring of NEA, improvement in financial ratios, and system loss.

ADB = Asian Development Bank, CPS = country partnership strategy, CPSFR = country partnership strategy final review, km = kilometer, kV = kilovolt, MW= megawatt, NEA = Nepal Electricity Authority. Source: ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

2 ADB. 2018. Meeting Minutes Tripartite Portfolio Review Meeting, 2 August 2018. Kathmandu. The independent evaluation

mission also notes that ADB. 2013. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Grant to Nepal for Building Climate Resilience of Watersheds in Mountain Eco-Regions Project. Manila (Loan 3057-NEP and Grant 0367-NEP) had to rely more on ad hoc (project) structures rather than the local government structures that were previously receiving funds from the national government.


7. ADB made contributions towards the sector outputs and outcomes through seven investment projects and 12 technical assistance projects during the CPS period. The key project carried over from the previous CPS is the Energy Access and Efficiency Improvement Project (Loan 2587-NEP), entailing transmission lines and substations work packages; measures to save energy; and solar street lighting in Bhaktapur, Kathmandu, and Lalitpur. All physical assets were completed and commissioned except one transmission line and one switching substation. The Nepal Electricity Authority (NEA) has taken over some civil works due to nonperformance by the contractor. The intervention to support the NEA in moving into public–private partnership (PPP) arrangements for three distribution areas was only addressed at a study level as there was insufficient enthusiasm in NEA for this modality. 3 Efforts to reduce the NEA accounts receivables from 4.3 months to 3.75 months by the end of 2017, against a target of 3 months, also fell short. The project was nonetheless self-assessed as successful. 8. Also approved in the earlier CPS, the Electricity Transmission Expansion and Supply Improvement Project (Loan 2808-NEP) seeks to increase electricity transmission, expand distribution, and enhance electricity generation. It is primarily focused on the first of these aims, to facilitate power trade between Nepal and India, initially for import and later for export as generation capacity in Nepal expands. The construction is ongoing, with some transmission works now operating. 9. Early in the CPS, ADB approved the 140-megawatt Tanahu Hydropower Project (2013), the Preparatory Facility (2013) and the South Asia Subregional Economic Cooperation Power System Expansion Project (2014). The Tanahu project aims to increase the generation of electricity from storage-type hydropower plants. The project included pilot programs to expand access by women and other marginalized groups to energy resources and energy-based livelihoods, in partnership with the NEA, the Alternate Energy Promotion Center, and nongovernment organizations. The South Asia Subregional Economic Cooperation power expansion focuses on the transmission and distribution systems and adds alternative energy (solar/wind) mini grid systems; it is making headway on its grid components but is lagging in renewables, so far completing only 3 out of 10 wind/solar mini grid projects. All these investment projects are in early stages of implementation. The Tanahu project has been slowed by the insolvency of the main international contractor; the government is now likely to rebid the work. Workers have suffered lack of payment. Any results of this key project will only be seen late into the next CPS period. Capacity development support to NEA and Alternate Energy Promotion Center were also provided in these projects, but for these to be meaningful, they will need to be front ended by considerable institutional reform as described in the main text. 10. Future hydropower development has also been given attention by ADB, through a grant for the Detailed Engineering Study for the Upper Seti Hydropower Project. 4 Over time, ADB expects to invest in Nepal through ordinary capital resources. The postponed investment in the Dudh Koshi Hydropower Project may take the form of a PPP when it is designed. A nonsovereign operation is also being prepared for 2019 from ordinary capital resources financing, working with a consortium led by the Republic of Korea. 5 Both of the mentioned initiatives may bear fruit in the next CPS period, greatly boosting generation. 11. A key feature of the energy sector is the institutional reform of the NEA. As ADB’s own portfolio report has summarized, the two major issues reform are (i) inadequate planning, policy, and regulation; and (ii) inadequate capacity and governance leading to underinvestment and difficulty in sustaining the sector. Safeguards are another issue highlighted where the key areas requiring improvement in the sector were found to be (i) lack of a systematic safeguards implementation mechanism in the projects; (ii) lack of environment consultant to plan, implement, and monitor environmental management plan requirements and prepare quality reports in timely manner; and (iii) lack of enough monitoring from NEA resulting into inadequate inputs from environment expert. These problems are further exacerbated by 3 ADB. 2018. Completion Report: Energy Access and Efficiency Improvement Project in Nepal. Manila. 4 ADB. 2010. Report and Recommendation of the President to the Board of Directors: Proposed Grant to Nepal for the Detailed

Engineering Study for the Upper Seti Hydropower Project. Manila (Grant 0215-NEP, $2.50 million). 5 This will be a 216-megawatt run-of-river plant currently labeled the Nepal Water and Energy Development Company Private

Limited Upper Trishuli 1 Hydropower Project.

88 Appendix 4

the facts that (i) NEA lacks clear business processes that will allow advance action for preparation of tree-cutting plan and compensatory plantation and (ii) NEA’s practice and overreliance on already overstretched Environment and Social Studies Department for environmental management plan implementation and monitoring. Despite being a major financier in the sector, ADB has struggled to influence reform through its portfolio. Broader efforts to support the institutional setup in energy (e.g., unbundling into generation transmission and distribution—with a separate regulator) appear to be progressing slowly. ADB had planned a sector program loan in the country operations business plan, 2016–2018 but deferred it and now is intending to influence the World Bank’s Development Policy Credit series in energy in supporting sector reforms. It felt steered into this division of labor by the government. The new constitution on federalism now adds another layer of complexity in energy sector governance. To deal with federalism the NEA has established shell distribution companies at the provincial level, but has yet to confirm how these will dovetail with provincial governments that have been given jurisdiction over distribution. C. Transport Table A4.5: Achievements against Country Partnership Strategy Transport Sector Targets Supported by

ADB

Indicator and Target Achievement Reported

in CPSFR Validation Comment Cross border land cargo volume along the east–west corridor (tons/year) 2022 target: 608,300 2012 baseline: 553,000

2,771,226 tons/year (2017)

Exceeded. ADB’s South Asia Subregional Economic Cooperation road network must have contributed to this though perhaps more North South than East West or smaller sections of East West as ADB had a piecemeal approach to road construction and rehabilitation.

TIA international passenger movement (million/year) 2017 target: 7.5 2012 baseline: 2.7

3.9 million (2017) Not achieved (25% of expected). ADB work on TIA not completed so ADB’s contribution is negligible.

TIA domestic passenger movement (million/year) 2017 target: 1.94 2012 baseline: 1.58

4.06 million (2017)

Exceeded. However, not sure how much ADB contributed since Gautam Buddha Airport has not been completed.

ADB = Asian Development Bank, CPSFR = country partnership strategy final review, TIA = Tribhuvan International Airport. Source: ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

Table A4.6: Achievements against Country Partnership Strategy Transport Sector Output Targets

Supported by ADB

Sector output Indicator and target Achievement

Reported in CPSFR Validation Comment Population with access to paved roads within 30 minutes’ walk 2017 target: 65% 2012 baseline: 51%

66% (2013) Achieved with ADB contribution

New SRN roads added 2017 target: 3,000 km 2012 baseline: 0 km

1,263 km (2016) 42% of target achieved with some ADB contribution

SRN roads rehabilitated and/or upgraded 2017 target: 2,100 km 2012 baseline: 0 km

3,265 km (2017) Exceeded with some ADB contribution

SRN maintained in good or fair condition 2017 target: 85% 2012 baseline: 80%

85% (2017) Achieved with ADB contribution

District headquarters connected to strategic road network

No new connection

No ADB contribution


Sector output Indicator and target Achievement

Reported in CPSFR Validation Comment 2017 target: 75 2012 baseline: 73 Toll collection coverage 2017 target: 330 km 2012 baseline: 270 km

298 km (2017) No ADB contribution

Number of international airports 2017 target: 2 2012 baseline: 1

1 (2017) Not achieved (but work is ongoing)

ADB = Asian Development Bank, CPSFR = country partnership strategy final review, km = kilometer. Source: ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

12. The The Emergency Flood Damage Rehabilitation Project, Road Connectivity Sector I Project, Rural Reconstruction and Rehabilitation Sector Development Program, Decentralized Rural Infrastructure and Livelihood Improvement Project, South Asia Subregional Economic Cooperation Road Connectivity Project and Subregional Transport Enhancement Project have constructed and rehabilitated roads resulting to some degree in lower unit transport costs, lower vehicle operating costs, and increase in cross-border trade. There is relatively sparse data on whether the construction has resulted in improving other project level targets, such as proportionately fewer road accidents and fatalities, easier access to markets and social services including in remote areas and especially for women, as well as increased awareness about health, and prevention of child labor and human trafficking. The policy actions of the Rural Reconstruction and Rehabilitation Sector Development Program helped in implementing the 3-year strategic action plan and manual for the development of rural roads and legislating financial administration and operational standards. 13. The Kathmandu Sustainable Urban Transport Project has achieved most of the envisaged outputs, including completion of a mass transit options study for the city, measures to improve traffic management such as installation of 21 CCTVs with a control center, and implementation of a public transport plan. On the negative side, its piloting of mass transit was limited, and it had to cancel its Intelligent Traffic Signals Package due to time limitations and uncertainty over the appropriateness of costing received by bidders. 6 The public transport route restructuring and industrial restructuring guidelines have been prepared and approved for Kathmandu valley. A diagnostic assessment study for current maintenance management system for Strategic Road Network was prepared, which recommended improvement and use of asset management system. 14. In the air transport subsector, the Air Transport Capacity Enhancement Project supported the improvement of a domestic terminal and installation of a baggage-handling system in the international terminal at the Tribhuvan International Airport. Moreover, basic infrastructure was upgraded at three remote airports in Lukla, Rara, and Simikot to increase access to the Himalayas, but no data has been made available on the passenger traffic. Under the South Asia Tourism Infrastructure Development Project, the upgrading of the Gautam Buddha Airport to international standards has long been delayed and the airport is expected to be operational in 2020, in the expectation that it receives international certification and there are no issues with the permission to use the Indian airspace. Another factor affecting the use of the airport and the surrounding facilities will be the completion of the associated transport infrastructure; in particular, the road from the new airport, which is being funded by the South Asia Subregional Economic Cooperation Road Improvement project and which is early in its implementation phase. 15. The Air Transport Capacity Enhancement Project made limited progress toward building organizational and management capabilities at the Civil Aviation Authority of Nepal. On large reforms, ADB has discussed program lending with the government to support the aviation subsector regulatory and institutional reforms. Salient among these is the separation of regulation from airport service

6 ADB (South Asia Department). 2017. Midterm Review Mission: Loan 2656/Grant O212/Grant 0239 NEP: Kathmandu Sustainable

Urban Transport Project. Back to-office report. 14 June (internal).

90 Appendix 4

delivery. The the Civil Aviation Act and Civil Aviation Requirements have been prepared though submission for cabinet approval is pending a modification to create another government authority in the form of Airport Service Authority of Nepal instead. Moreover, the modality of investment in the subsector needs to be revisited. In this respect, discerning the potential of a PPP approach to Gautam airport management is a point requiring clarity; the PPP form is much supported by the local government, whereas the Civil Aviation Authority of Nepal appears uninterested. 16. While projects are taking longer to implement than expected in the transport sector, most outputs appear to be reached or within reach. A few are being dropped for lack of time and funds, as noted above in the discussion on the Kathmandu mass transit. In another example of reduced outputs, the project completion report for the Road Connectivity Project note a decrease in the length of the non-sample roads from 263 km to 78 km due to increase in cost during detail design and implementation. D. Water and Other Urban Infrastructure and Services Table A4.7: Achievements against Country Partnership Strategy Water and Other Urban Infrastructure

and Services Sector Targets Supported by ADB

Indicator and Target

Achievement Reported in

CPSFR Validation Comment Population using improved water supply would increase from 85% in 2012 to 100% in 2017

86% (2017) No appreciable progress

Population using sanitation facilities would increase from 62% in 2012 to 100% in 2017

92% (2017) Although target not achieved, there has been significant improvement. However, ADB’s contribution is limited.

ADB = Asian Development Bank, CPSFR = country partnership strategy final review. Source: ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

Table A4.8: Achievements against Country Partnership Strategy Water and Other Urban Infrastructure

and Services Sector Output Targets Supported by ADB

Sector Output Indicator and Target Achievement reported in

CPSFR Validation Comment Number of water supply schemes with treatment facilities 2017 target: 70 2012 baseline: 50

111 (2017) Exceeded but ADB’s contribution is limited

Number of open defecation free areas 2017 target: All VDCs and municipalities 2012 baseline: 647 VDCs and 4 municipalities

Districts: 60 Municipality: 223

Rural municipality: 414

Fell short (there are 753 municipalities) but shows improvement. Again ADB’s contribution is limited

Length of new sewer network installed 2017 target: 520 km 2012 baseline: 0 km

1,300 km (2017) Vastly exceeded

Number of landfill sites 2017 target: 6 2012 baseline: 2

6 (2017) Largely achieved (but ADB projects did not proceed with two sites)

Percentage of budget that is GESI responsive 2017 target: 30% 2012 baseline: 22

Data not available (may be due to restructuring of municipalities)

Nonrevenue water in Kathmandu Valley 2017 target: 20% 2011 baseline: 50%

50% No improvement due to the delays in Kathmandu, though the department reports improvements in smaller towns, to 22% NRW

ADB = Asian Development Bank, CPSFR = country partnership strategy final review, GESI = gender and social inclusion, km = kilometer, VDC = village development committee. Source: ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.


E. Education

Table A4.9: Achievements against Country Partnership Strategy Education Sector Outcome Targets Supported by ADB

Outcome Indicator and Target Achievement

reported in CPSFR Validation Comment Mean years of schooling (15 years of age and above) 2017 target: 10.0 years 2011 baseline: 8.1 years (males, 8.2 years; females, 8.0 years)

8.7 (2017) Not achieved, but shows substantial improvement

TVET qualifications 2017 target: 15,500 TSLCs/diplomas, and 86,200 short-term courses 2012 baseline: 13,300 technical school leaving certificates and/or diplomas, and 46,200 short-term courses

Technical school leaving certificates: 164,826 (2017) Diploma: 44,766 (2017) Short term: 250,333 (2017)

Exceeding targets

TVET = technical and vocational education and training. Source: ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

Table A4.10: Achievements against Country Partnership Strategy Education Sector Output Targets

Supported by ADB

Sector Output Indicator and Target Achievement reported

in CPSFR Validation Comment

Percentage of female teachers in primary level 2017 target: 42.5% 2012 baseline: 37.5%

38.6% (2016) Dropped below baseline

National assessment of student achievement 2017 target: Two rounds completed for grades 3, 5, and 8 2012 baseline: One round for grade 8 completed

Two rounds completed for grades 3, 5, and 8 (2016)

Achieved

Source: ADB. 2018. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018. Manila.

APPENDIX 5: ADB PROGRAMMATIC RESPONSE TO NEPAL’S CLIMATE CHANGE CHALLENGE

Project/Programa (Including Cofinancing) Duration Amount

($ million) Modality Strengthening Capacity for Managing Climate Change (including supplementary)

2008–2013 0.500 0.775

Grants (TASF, CCF)

Building Climate Resilience of Watersheds in Mountain Eco Regions

2011–2014 0.900 PPTA

Building Climate Resilience of Watersheds in Mountain Eco Regions

2013–2020 23.537 Grant (SCF)

Mainstreaming Climate Change Risk Management in Development

2011–2017 7.163 CDTA

CCF = Climate Change Fund, CDTA = capacity development technical assistance, TASF = Technical Assistance Special Fund, PPTA = project preparatory technical assistance, SCF = Strategic Climate Fund. a A$5 million grant (Disaster Resilience of Schools Project) was also approved on 10 September 2018 (after the validation period). Asian Development Bank. 2016. Technical Assistance for Strengthening the Enabling Environment for Disaster Risk Financing (Phase 1). Manila (TA 9007-REG) was also approved in 2018 that may include Nepal. Source: Asian Development Bank estimates.

APPENDIX 6: ADB PROGRAMMATIC RESPONSE TO THE 2015 EARTHQUAKE DISASTER

Project/Programa (Including Cofinancing) Duration Amount

($ million) Modality Earthquake Emergency Assistance Project 2015–2019

2018–2022 202.1

10 Loan Grant

Disaster Risk Reduction and Livelihood Restoration for Earthquake-Affected Communities

2015–2019 15 Grant

School Sector Development Plan (budget support through SWAp for school safety improvement)

2016–2022 20 Results-based loan

Rural Finance Sector Development Cluster Program (budget support through tranche release for rural finance)

2015 28 Grant and/or loan

Nepal Earthquake Disaster Response Humanitarian Assistance 2015–2016 3 APDRF grant

Support for Project Implementation of the Nepal Earthquake Rehabilitation and Reconstruction Program

2015–2019 3.4 Technical assistance

APDRF = Asia Pacific Disaster Response Fund, SWaP = sector-wide approach. a A $5 million grant (Disaster Resilience of Schools Project) was also approved on 10 September 2018 (after the validation period).

ADB. 2018. Technical Assistance for Strengthening the Enabling Environment for Disaster Risk Financing. Manila (TA 9007-REG) may include Nepal.

Source: Asian Development Bank estimates.

APPENDIX 7: COUNTRY DEVELOPMENT GOALS ACHIEVEMENT OVER THE COUNTRY PARTNERSHIP STRATEGY, 2013–2017

Evaluation Criteria Country Partnership Strategy

Final Review Reporting Reasons for Rating Deviations Average annual gross domestic product growth rate accelerated to 6% by 2017

From 0.2% FY2016 to 7.4% fiscal year 2017

Average was 4.5%, considerably below goal, due to disaster impact

Poverty incidence reduced by 2017 to 18.0% based on the national poverty line (from 25.2% in 2011) and to 15.0% based on $1.25 per day (purchasing power parity) (from 24.8% in 2011)

Updated data for poverty and inequality are not available; likely rose and fell due to 2015 disaster

Data not found

Gender inequality index ranking improved from 113th out of 187 countries (at 0.558) in 2011

The index was stagnant, and Nepal’s rank dropped from 98 out of 187 countries to 118 out of 189 countries (below 2011)

As the World Bank notes regarding the Nepal context, “plans and policies do not always spur positive changes in reality”a

Rate of decline in poverty within the poorest ethnic group is higher than the national average decline

Not reported Data not found

a http://blogs.worldbank.org/endpovertyinsouthasia/long-road-gender-equality-nepal. Source: Asian Development Bank.

APPENDIX 8: LINKED DOCUMENT 1. Country Partnership Strategy Final Review: Nepal, 2013–Mid-2018

https://www.adb.org/sites/default/files/linked-documents/NEP-CPS-final-review-2013-mid-2018.pdf



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