Nepal : Enhancing Portfolio Performance

Agriculture, natural resources and rural development / Rural water policy, institutional and capacity development

Transport / Transport policies and institutional development

Water and other urban infrastructure and services / Urban policy, institutional and capacity development

To improve portfolio performance, the Government needs support in its implementation capacity. The Government needs to prepare a pool of projects with high readiness for implementation. The efficiency of Government's annual budget preparation, approval, authorization and execution processes also needs improvement. This requires better coordination and monitoring among the National Planning Commission (NPC), the Ministry of Finance (MOF) and the lines ministries supported by efficient Information Technology management system.

As a less developed and fragile country, Nepal lacks institutional capacity in several areas but especially in project planning, preparation and implementation, and procurement. There is a lack of robust procurement plans critical to monitor procurement and contract execution. The public procurement environment is less conducive to maintain stringent procurement process due to weak enforcement of Public Procurement Act and Regulations. While some progress has been made in e-procurement, such as, rollout of first phase of electronic government procurement (eGP) launched in 2013 human resources and capacities of a central regulating agency the Public Procurement Monitoring Office (PPMO) remains weak. The PPMO does not have effective mechanism to monitor the procurement performance of executing and implementing agencies (EAs and IAs). It suffers from high turnover of key officials. Procurement capacities of local bodies also remain insufficient. They lack trained human resources in procurement and the weak financial management capacities expose to a high level of fiduciary risks.

Weak performance of contractors and consultants continue to be an issue in a number of projects. Contractors' performance is often hampered by the absence of lead firm and delays in equipment deployment, leading to weak implementation, and time and cost overrun. Performance of consultants has also often been poor, with high turnover of key personals and weak contract management, and oversight skills of government's executing agencies. A system of performance evaluation and monitoring system for contractors and consultants is also lacking.

The fragility of the country from the impact of the decade-long civil conflict has also undermined the government agencies' project implementation capacity. Other than the ordinarily allocated ADF resource and Technical Assistances (TAs), there are no special supports to help address these weaknesses.

These weaknesses are reflected in ADB operations in the country. ADB's active portfolio as of 31 July 2014 comprises of 39 investment projects with a net loan and grant amount of $1.75 billion, and58% of this amount remains uncontracted and 75% undisbursed. This compares unfavorably with other countries in the subregion. Year 2012 posed particular challenges, due to disruptions caused by the dissolution of the Constituent Assembly and difficulties associated with the partial and delayed budget. However, in 2013, the Nepal portfolio achieved $229.0 million in contract award and $159.4 million in disbursements, with contract award and disbursement ratios of 24% and 16%, respectively. Nepal's disbursement performance is far below the ADB-wide achievements of 22 % and 21% in 2012 and 2013, respectively. Furthermore, project implementation is often delayed, with most of the projects not being completed within the stipulated project implementation period.

Improving procurement, project management, contract management and financial management and strengthening the capacity of EAs/IAs in these areas are imperative to improve portfolio performance in Nepal. In addition, project preparation capacity must improve with a pool of implementation-ready high-priority infrastructure projects prepared.

A study report to recommend action plans to enhance capex have been prepared for the urban, transport, and energy sectors.

54 trainings for 1,525 EA/IA staff on six thematic areas conducted from Dec 2015 to May 2019.

4 clinics on procurement and consulting services and social safeguards conducted in 2017-2019.

Draft standard operating procedures for projects in Nepal prepared and being finalized after incorporating NPC and MOF's comments.

Output 1: Project budgetary and monitoring process improved

Output 2: Action plan for enhancing capital expenditure of key infrastructure sectors developed and launched

Output 3: Capacity of executing and implementing agencies improved