Though it faces enormous challenges, Nepal is not without some significant assets. The evidence is compelling that the strength behind development in Nepal is highly concentrated at the community level. Success stories abound, from forestry user groups and women’s groups to community-based programs in rural drinking water, rural roads, micro-hydropower generation, community management of schools, and the Poverty Alleviation Fund (PAF). Many of the truly community-owned efforts demonstrated great viability even during the height of the conflict. Where a supportive framework has been created for communities to undertake such activities, there have been impressive development successes.
The World Bank Group in Nepal
In Nepal, the World Bank Group includes the International Development Association (IDA), the concessionary lending arm, and the International Finance Corporation (IFC), the private-sector arm. Two more World Bank Group organizations, the Multilateral Investment Guarantee Agency (MIGA) and the World Bank Institute (WBI), also provide investment insurance and capacity-building services respectively.
Given the transitional nature of Nepal’s current situation – with a new constitution being drafted and elections to follow – the World Bank Group has prepared an Interim Strategy Note covering fiscal years 2012 and 2013. It proposes development programs that are consistent with the government of Nepal’s Three-Year Plan.
Nepal has been selected as a pilot country to implement an enhanced joint strategy to leverage IDA and IFC resources and realize synergies. The strategy reflects considerable continuity, building on programs with successful track records that are adapted to local conditions. It also emphasizes greater selectivity, focusing on areas considered vital to Nepal’s development and complementing programs supported by other development partners.
Supporting the government of Nepal’s overarching goal to build a peaceful, prosperous and just Nepal, the strategy is organized around three “pillars” that emerged during consultations within the Bank Group and with the government, donor partners, and key stakeholders.
The first pillar intends to enhance connectivity and productivity for growth. The second focuses on reducing vulnerabilities and improving resilience. The third pillar concentrates on promoting access to better-quality services. Governance, accountability, gender equality, and social inclusion are themes that run across all three pillars.
Within each of these pillars, the strategy identifies specific areas where the Bank Group can make a difference. For IDA, these include roads, food security and livelihood vulnerability, education, health, urban services, and disaster management. For IFC, these include improving access to finance and investment climate, trade facilitation, lending to Small and Medium Enterprises, and trade finance facilities for local banks. IDA and IFC expect to work together on power development, agriculture, and climate change.
Over the next two years (FY12-FY13) Nepal can potentially benefit from an allocation of about $400 million from IDA, subject to performance and economic management. These funds could finance four to five new operations per year. IFC can potentially commit $25-30 million on average annually, depending on the availability of viable investments and improvements in the business climate.
Analytical and Advisory Services
The World Bank Group is also engaged in analytical and knowledge dissemination exercises. It provides regular economic updates and advises the Nepalese authorities on key economic policies. It also works with partners and the government on analyzing poverty trends in Nepal. For example, with support from the U.K.’s Department for International Development and Denmark, the Bank worked closely with the Central Bureau of Statistics to complete the latest Living Standards Survey (NLSS 3), to provide core data on poverty trends and access to services.
Strong IFC/private-sector engagement in the creation of the Nepal Business Forum is facilitating public-private sector dialogue and pragmatic problem-solving. Other areas of attention have included analysis of migration and remittances trends, medium-term public expenditure management, assessment of the investment climate, financial sector risk management, and implementation of the Right to Information and food security and nutrition challenges. In addition, teams have disseminated information on international experience on specialized topics (such as fiscal decentralization and civil service transition) at the request of Constituent Assembly committees and other government bodies.
Other areas of analytic focus include water resource management, where the Bank team is working with the Water and Energy Commission Secretariat to establish a geo-referenced water resources information system, develop river basin models, build capacity within the GON for river basin modeling, and support the formation of a Trans-boundary Waters Cell. A recently completed Ganges Strategic Basin Assessment built a knowledge base and promoted an open, evidence-based dialogue on the shared opportunities and risks of cooperative management of the Ganges River Basin. Analytical support to understand governance issues in the forestry sector and support to the REDD Readiness Plan preparation are under way.
Other ongoing IDA/IFC work is laying the foundation for carbon-based trading and financial support from the Pilot Program for Climate Resilience and other climate investment funds. Joint work on disaster management (in collaboration with the United Nations, Asian Development Bank (ADB), Red Cross and others) is expected to lay the basis for future program support from the Global Fund for Disaster Risk Reduction. In partnership with the government and other donors, the Bank continues to provide advice on ways to improve existing social protection systems and on the design of a national social protection framework.
Regional and Global Programs
In addition to nationally focused investment projects, the World Bank Group is actively supporting Nepal’s participation in regional and multilateral global initiatives. The Regional Wildlife Program, Strengthening Regional Cooperation for Wildlife Protection in Asia, is assisting participating governments to build capacity, institutions and incentives to collaborate in tackling illegal wildlife trade and other conservation threats to habitats in border areas. The Nepal-India Electricity Transmission and Trade Project enables power trade through imports into Nepal as needed, and eventually, export of surplus power to India. In the non-lending areas, IDA is channeling support to Nepal from regional programs like the South Asia Water Initiative (SAWI) and the South Asia Food and Nutrition Security Initiative (SAFANSI).
IFC is enhancing regional integration through investment activities, such as trade finance facilities for local banks and advisory activities, such as investment climate strengthening and trade facilitation. Nepal is also part of IFC’s SME Venture Fund global initiative which focuses on eight high-risk IDA countries. In addition, IDA and IFC plan to collaborate on two new tentative programs, IDA’s North Eastern Region Trade and Transport Facilitation Program (NER T&T) and IFC’s planned South Asia Regional Trade and Integration (SARTI) program. Trade facilitation work by IFC includes assisting governments to build efficient trade logistics systems and services through targeted reforms aimed at reducing the time and cost for the private sector to import and export. IFC’s trade logistics reform work relies on a strong private- sector partnership approach to identify issues and validate results.
At the global level, Nepal is the only country in the world that has been selected to participate in two Climate Investment Fund (CIF) Pilot Programs – the Scaling Up Renewable Energy Program (SREP) and the Pilot Program for Climate Resilience (PPCR). Both these CIF programs involve joint design and implementation by the ADB, IDA, and IFC, as well as collaboration with other donors (such as DFID, Denmark, the United States) to ensure complementarity with local programs.
As of June 2012, the IDA portfolio stands at 19 projects with a net commitment of approximately $1.38 billion and cumulative disbursements of $651.8 million (about 47.5 percent of net commitments). The Trust Fund (TF) portfolio consists of 71 active TFs (Bank and Recipient executed), with a total commitment amount of $202.14 million, out of which $99.50 million has been disbursed (i.e. about 49 percent of the net commitments). In FY2012, IDA approved $153 million in new commitments, including the Modernization of Rani Jamara Kularia Irrigation Project ($43m), the Sunaula Hazar Din Multi-Sector Nutrition Project ($40m), the Bridge Improvement and Maintenance Project ($60m), and Zoonoses Control Project ($10m).