$49 Million Nepal Road Project to Link Remote Communities, Boost Trade

News Release | 28 October 2010

MANILA, PHILIPPINES - Nepal, with assistance from the Asian Development Bank (ADB), is to step up road improvements and customs systems enhancement to link remote, rural communities to markets and services, and to boost cross-border trade.

ADB's Board of Directors approved loan and grant assistance totaling $49 million for the Subregional Transport Enhancement Project.

"This initiative will promote economic development in the remote northeastern hill country and help increase trade along major international corridor routes," said Hiroaki Yamaguchi, Principal Transport Specialist in ADB's South Asia Department.

Poor road connections that limit access by remote communities to markets, economic opportunities and social services are a major cause of poverty in Nepal, where more than a quarter of the population live below the government poverty line of $140 per year. They also undermine opportunities for foreign trade. The northeast of the country has great potential for increased production and exports of herbs, spices, garments and vegetables, but is being held back by the low quality roads and overburdened border customs posts.

The project will upgrade about 195 kilometers of roads, enhancing road capacity of major international trade routes and providing rural communities in the northeast with a north-south link to the east-west highway, one of Nepal's main trade corridor routes. This north-south link could eventually become a major transit route connecting India to the People's Republic of China.

"Better roads will make it easier for farmers to get their products to neighboring markets, increasing their incomes and generating more rural jobs, which is critical in a region with high levels of poverty," said Mr. Yamaguchi.

Customs clearance systems will be upgraded and modernized to help ease congestion at border posts and capacity building support will also be given to sector oversight agencies to improve their capabilities and expertise in road asset management and the use of modern road technologies.

The loan and the grant each total $24.5 million equivalent, and come from ADB's concessional Asian Development Fund. The loan has a term of 32 years, including a grace period of 8 years carrying an interest charge of 1% per annum, which rises to 1.5% for the balance of the period. The government is financing the remaining $26.9 million for a total project investment cost of $75.9 million.

The Ministry of Physical Planning and Works is the executing agency for the project, which is expected to be completed by December 2014.