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Countries and Regions Country Assistance Plans Document
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Country Assistance Plans - Nepal : III. Sector Strategies
A. Agriculture1. Agriculture and Rural Development51. Agriculture is the dominant sector in the country, accounting for about 40 percent of GDP and about 73 percent of total employment. The sustainable growth of the sector is a prerequisite for economic development and poverty reduction in the country. However, its growth has been disappointing, averaging 2.8 percent per year over the last six years. This is attributable to (i) spreading the use of scarce financial resources too thinly over subsectors and the isolated regions of the country; (ii) the degraded soil nutrient status of farmland in the country; (iii) lack of an effective and properly maintained rural transportation network; and (iv) weak institutions and poor Government service delivery that have led to ineffective public interventions, largely stifled private initiatives, and lack of beneficiary participation in project design and implementation. The second tranche of the ongoing Second Agriculture Program Loan was approved on 28 June 2000. Under the Program, the Government has made significant progress in liberalizing its agriculture sector over the last two years by expeditiously implementing the agreed reform measures. The progress of these reform measures, particularly the deregulation of the fertilizer trade, has already begun to contribute to improved agricultural performance in Nepal, for instance, by increasing the private sector's role in the fertilizer trade, and fertilizer supplies. Efforts will be made in future agricultural projects to increase the poverty focus, and involvement of NGOs, the private sector and beneficiaries in project planning and implementation, to improve project performance and beneficiary impacts. 52. Under the 1999 COS, ADB's assistance will concentrate on priority subsectors in line with the policy directions of the Agriculture Perspective Plan (APP), and where growth potential and positive impact on the rural poor are likely to be high. Given the level of poverty in rural areas, interventions in the agriculture sector will be one of the major focal points of the Poverty Reduction Strategy. To assist in focusing interventions in the sector, a TA to conduct an in-depth review of the agriculture sector as a medium-term assessment of APP is included in the 2000 program. ADB's future sector strategy for agriculture, rural development and poverty reduction in Nepal will in part be based on this assessment. The study will also examine ways of improving the effectiveness of institutions in the sector, a key priority of the Nepal COS. Projects in the sector would concentrate on the continuation of institutional reforms, crop production, irrigation, rural roads, rural electrification, and rural microfinance. A project preparatory technical assistance (PPTA) is planned in 2003 for an integrated agricultural development project that would directly address rural poverty and encourage greater private sector participation to improve agricultural production. 53. Consistent with the APP agricultural growth and poverty alleviation strategy, ADB's ongoing Rural Infrastructure Development Project supports the Government's pilot efforts to expand rural road networks and market infrastructure in three hill districts. The mid-term review of this Project is scheduled for August 2000. Based on the outcome of this review, including an assessment of institutional capacity, ADB will provide a PPTA in 2001 to prepare a detailed investment proposal for a Rural Infrastructure Sector Development Project in 2002. An ADTA is then planned for institutional strengthening of the Ministry of Local Development in 2002. 54. The Microcredit for Women Project is contributing to rural poverty alleviation, and rural microfinance is a priority area for further ADB assistance An ADTA to conduct a portfolio audit of the Agricultural Development Bank of Nepal is planned for 2001, and PPTAs are provided for rural finance development in 2002 and a women empowerment project in 2003 to support the poverty reduction thrust of the planned program in the agriculture sector. 2. Forestry and Natural Resources55. In the area of forestry and natural resources, ADB assistance will focus on activities to maintain environmental sustainability and social viability with the active involvement of local communities, NGOs, and the private sector. ADB will support the Government's efforts to enhance sound watershed management in the hill areas with a Watershed Management and Rehabilitation Project in 2003. An ADTA for capacity building of the Ministry of Forest and Soil Conservation will also be provided in 2002 to improve the Government's capacity to monitor the country's forest resources, and strengthen capacity in preparation for the loan in 2003. A PPTA is planned for 2001 to prepare the Third Irrigation Sector Project as standby for 2003. Both the Watershed Management and Third Irrigation Projects would contribute to direct poverty reduction and other development interventions.
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