Nepal: Support for Formulating an Economic Development Vision

Sovereign Project | 45217-002

Summary

The proposed TA will support the Government in developing a long-term economic vision for Nepal aimed at higher and inclusive economic growth and forging a national consensus on such vision so that Nepal's economic policies and reform agendas going forward will be focused, coherent and within the framework of the long-term development vision. The TA will comprise 3 components:

- An review of Nepal's existing policies and development strategies and plans at the macro and key sectoral levels, and their performance against the present and emerging socioeconomic challenges.

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Project Name Support for Formulating an Economic Development Vision
Project Number 45217-002
Country Nepal
Project Status Approved
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8261-NEP: Support for Formulating an Economic Development Vision
Technical Assistance Special Fund US$ 700,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Partnerships
Private sector development
Sector / Subsector Energy - Energy sector development and institutional reform
Finance - Finance sector development
Industry and trade - Industry and trade sector development
Public sector management - Economic affairs management
Transport - Air transport - Road transport (non-urban)
Gender Equity and Mainstreaming
Description

The proposed TA will support the Government in developing a long-term economic vision for Nepal aimed at higher and inclusive economic growth and forging a national consensus on such vision so that Nepal's economic policies and reform agendas going forward will be focused, coherent and within the framework of the long-term development vision. The TA will comprise 3 components:

- An review of Nepal's existing policies and development strategies and plans at the macro and key sectoral levels, and their performance against the present and emerging socioeconomic challenges.

- Development of strategy and policy options for achieving higher, sustainable and inclusive economic growth and generating employment opportunities. In this context, a thorough and focused assessment will be made as to the reforms required to create enabling conditions for the private sector at policy, institutional, legal and regulatory levels. The impact of reforms in areas related to public resource and fiscal management, financial and capital market sector development, trade and investment, and good governance, vis- -vis private sector development will be examined.

- Development of a long-term economic vision by organizing a high-level economic summit, which will guide and inform the formulation of the next (starting FY2014) and other future medium-term development plans of the country.

Project Rationale and Linkage to Country/Regional Strategy

Nepal has been undergoing a historic peace process following the end of the decade-long civil in April 2006. The peace process has, however, been protracted given the complex and challenging tasks of reconciliation between the parties to the conflict, reconstruction of damaged infrastructure, rehabilitation of the conflict victims including the demobilization of the former Maoist combatants, and framing a new constitution that promises a new social and political order and a more inclusive and prosperous Nepali society. While the peace process has achieved substantial progress, the constitution drafting process a key milestone--has been particularly challenging given the task of building consensus in the 601-member diverse constituent assembly represented by some 25 political parties on the complex and divisive issues of federalism, form of governance and electoral system.

Despite the conflict and the protracted peace process, Nepal has been able to maintain reasonable macroeconomic stability. The country's economic reform and development agenda during this period have, however, been overshadowed by its preoccupation with the post-conflict political transition, preventing the realization of the country's potential for stronger economic growth which is estimated at 6 7% given its natural resource endowments, strategic geographic location and young population. Economic growth has, however, slowed to an average of 3.5% per annum since the conflict began, compared to about 5% in the previous years.

Nepal has been following planned economic development since the launch of the First Five-Year Plan (FYP) in 1956 followed by a series of such medium-term plans. Among these plans, the Tenth FYP (FY2003 2007) is considered the most significant and strategic in terms of candid recognition of the country's development challenges and the underlying causes of the civil conflict, and a focused vision for reducing poverty. Considered as the country's poverty reduction strategy, it included Medium Term Expenditure Framework to focus and prioritize investments contributing to poverty reduction. The period that followed the Tenth FYP was, however, marked by political uncertainties associated with the protracted peace process. The planning cycle was truncated to three-year plans since FY2008. While these three-year interim plans (TYIP: FY2008 2010 and FY2011 2013) continued to focus on addressing poverty reduction and social exclusion, they lacked a clear longer-term strategic framework, understandably so given the prevailing political uncertainties.

There is an expectation that the constitution building and peace process is nearing conclusion as early as the end of May 2012. With political stability going forward, there is a wide recognition within the Government that stronger and inclusive economic growth is critical for sustaining the hard-earned peace and establishing lasting stability. The Government is, therefore, making efforts to bring the country's economic development agenda to the forefront. The Nepal Investment Board was established in November 2011, and the Immediate Action Plan for Economic Progress and Prosperity and the Action Plan for Good Governance were announced in January 2012. They are aimed at strengthening governance and promoting both public and private investments for improving public service delivery and accelerating economic growth. With a new constitution expected to be in place in the near future marking a new era for the country, the Government envisages the need for a new long-term economic development vision, policies and priorities to respond to the people's aspirations for economic progress. In this regard, the Government sees the need to build a broad consensus on these directions at the political level. Further, given that the current TYIP will conclude in July 2013, the Government is considering to prepare the next plan based on the proposed long-term economic vision. Such vision and consensus will be critical for the country to realize its true potential for stronger economic growth and fulfill the aspirations of its people for economic progress and prosperity in the new era.

The Government, whose capacity is streched by the tasks invovled in the peace process, needs support for developing a long-term economic development vision based on the views and priorities of key stakeholders, including the political parties, the private sector, civil society and the academia. In order to build consensus on the country's economic development agenda against the backdrop of divergent views with different political, ethnic and social dimenstions, the Government intends to organize a high-level economic summit (the Summit) as early as September 2012 inviting internationally reknowned development economists and practitioners to interact with key political leaders and other stakeholders on Nepal's development opportunities and appropriate strategies and policies including reform measures to attain them.

Impact Economic reform and development programs initiated toward achieving the government's vision of achieving double-digit and more inclusive economic growth by 2022
Project Outcome
Description of Outcome Broad-based national consensus on economic policies, reform agenda, strategic directions and actions, and key programs for achieving the vision of double-digit and more inclusive economic growth by 2022
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

A comprehensive diagnostic synthesis report prepared on Nepal's key development challenges and opportunities

A high-level international economic summit organized.

A framework for Nepal's long-term development vision and a medium-term development plan prepared

Status of Implementation Progress (Outputs, Activities, and Issues) Following a long delay to the change in government and turnover of key officials associated with the TA implementation, TA implementation commenced in January 2015 with the engagement of four short-term consultants. The consultants submitted inception reports in February and March 2015. Their interim reports are due in early April 2015 and final reports in end-April 2015.
Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design

Ministry of Finance

OPMCM

National Planning Commission

DFID

World Bank

The consultations with Ministry of Finance, Office of the Prime Minister and Council of Ministers, National Planning Commission, DFID, and World Bank were held during a formal reconnaissance mission and frequent informal dialog meetings. The discussion focussed on conceptualizing the process of formulating the proposed economic development vision for the country, the timing for undertaking this process, preparations for the various TA activities, particularly the Summit, and the targeted development outcome and impact of the proposed TA.

During Project Implementation Stakeholder consultations are planned for April 2015 as the consultants' progress reports become available.
Business Opportunities
Consulting Services

The TA will require 20 person-months of consulting services (9 person-months international and 11 person-months national). The consultants will be recruited through a reputable organization (consultant firm) that is highly professional and experienced in preparing and organizing similar high-level international economic forums. Within this framework, the selected organization will also undertake specialized studies on the sectors and themes selected for the summit through the engagement of local experts, from which additional 12 person-months of inputs will be required. Based on the selected sectors and themes to be finalized in consultation with the government and other stakeholders (from among the tentative list in para. 12), these additional experts will be selected by the consultant firm in consultation with ADB from among the best-qualified and available local experts. In addition, the consultant firm will further engage an event management agent to manage the logistics for the summit. The outline terms of reference for consultants are in Appendix 3.

In view of (i) the need to engage a highly reputed organization that can manage the summit with high-level international experts (a critical component of the TA), and (ii) urgency to organizing the summit by September 2013 and to reflect the outputs in the medium-term development plan of the government within 2013, the TA will recruit the consultant firm through the quality- and cost-based selection method with simplified technical proposals. ADB will adopt fast-track measures, including advance actions. The consultants will be selected in accordance with ADB's Guidelines on the Use of Consultants (2010, as amended from time to time). Office equipment required for the implementation of the TA will be procured in accordance with ADB's Procurement Guidelines (2010, as amended from time to time), and will be handed over to the government upon completion of the TA. Disbursements under the TA will be in accordance with ADB's Technical Assistant Disbursement Handbook (2010, as amended from time to time).

The TA will be implemented over 15 months, from 1 February 2013 to 30 April 2014. The steering committee will meet for the inception of the TA, and at least every 2 months thereafter to review the implementation progress and resolve any related issues. It will provide policy guidance to the SOC for effective day-to-day implementation of the TA and for organizing the summit. The steering committee and the SOC may invite representatives of the private sector, civil society, and other stakeholders to their meetings. ADB will field frequent missions to review implementation progress, and to guide the TA consultants (in consultation with MOF). These missions will make appropriate recommendations to MOF and ADB management should the implementation environment change drastically, affecting the achievement of the TA objectives.

Responsible ADB Officer Raju Tuladhar
Responsible ADB Department South Asia Department
Responsible ADB Division Nepal Resident Mission
Executing Agencies
National Planning CommissionSingha Durbar
Kathmandu, Nepal
or P.O. Box 1284
Timetable
Concept Clearance 29 Oct 2012
Fact Finding 05 Jul 2012 to 06 Jul 2012
MRM -
Approval 11 Dec 2012
Last Review Mission -
Last PDS Update 20 Mar 2015

TA 8261-NEP

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
11 Dec 2012 09 Jan 2013 09 Jan 2013 30 Apr 2014 31 Jul 2016 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
700,000.00 0.00 0.00 0.00 0.00 0.00 700,000.00 11 Dec 2012 35,560.30
Title Document Type Document Date
Support for Formulating an Economic Development Vision Technical Assistance Reports Dec 2012

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