Nepal: Sustaining reforms should be essential part of government's agenda - World Bank

News and Press Release
Originally published

WASHINGTON, AUGUST 1, 2005 - The World Bank signed two grant agreements with his Majesty's Government of Nepal in Kathmandu today, totaling US$ 35 million.

Rural Access Improvement and Decentralization Project

The first grant of US$ 32 million signed today will finance essential road infrastructure in rural areas. The Rural Access Improvement and Decentralization Project hopes to address one of Nepal's main constraints to economic growth and poverty reduction: the poor access to markets and services needed by residents in remote, rural and hilly areas of the country.

The project will be implemented in 20 districts across the country through two components: (a) rural transport infrastructure improvement in participating districts; and (b) capacity building and advisory services to the Department of Local Infrastructure and Agriculture Roads (DOLIDAR) and participating District Development Committees (DDC). The first component comprises the rehabilitation and upgrading of about 800 km of existing dry-season rural roads to all-season standard; the upgrading of about 200 km of existing rural trails and tracks to dry-season standard in remote hill districts; the maintenance of about 3500 km of rural roads, covering routine and recurrent maintenance; the construction of about 350 suspension trail bridges; and the development of small, community infrastructure, including construction of markets and community trails and roads.

The second component comprises implementation of training-related activities; the provision of technical assistance and advisory services; and the undertaking of a study to assess the mobility and transport needs and travel patterns of the rural population, among others.

Economic Reforms Technical Assistance Project

A second grant of US$ 3 million signed today will help finance the technical assistance needs of Nepal's comprehensive reform agenda. The Economic Reforms Technical Assistance Project is structured to provide flexibility in the use of the funds, and can be used to finance the hiring of skilled professionals, consultants and training, with a particular focus on using qualified Nepalis from the public and private sectors, as well as the diaspora.

"The World Bank believes that these two new projects are consistent with the innovative development approach Nepal has pursued in the last few years and hence it believes that providing financial support to them is appropriate," said Ken Ohashi, World Bank Country Director for Nepal, in a statement released after the signing. "Whether the Bank can continue to provide strong financial support in the coming months will depend heavily on the demonstration of political leadership in reinvigorating the pace of reform", he said.

"Unfortunately, as the Bank sees it, the overall pace of reform implementation has slowed over the past year", Ohashi said, adding, "It may be worthwhile here to revisit a fundamental principle of the Bank's engagement in Nepal. The Bank's longstanding position has been that as long as reforms continue and development activities can be implemented, there will be a basis for the Bank to continue providing financial assistance. Another way to understand this principle is that if the Government is unable to bring focused efforts on sustaining and deepening reforms, continuing to provide large volumes of funding would unlikely have beneficial impacts."

"For Nepal to achieve faster economic growth and poverty reduction, it is absolutely necessary to resolve the conflict and to restore political stability. This, however, is likely to take time," Ohashi said. "In the meantime, what has given Nepal a measure of credibility and has earned it continued donor support is the strength of the reforms. These reforms are fundamental for building a lasting peace and a well-functioning democracy in the future for Nepal. The on-going conflict no doubt poses a severe challenge to implementation, but Nepal has over the past few years, developed various innovative ways to continue development activities, mostly through increased community and user group participation. Therefore, sustaining the on-going reform package should be an essential part of any government's agenda," Ohashi said.

The World Bank's Country Assistance Strategy for Nepal, covering the period 2004-2007, is up for mid-term review later this year.

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