The Asian Development Bank is working with Nepal to modernize its trade and customs procedures to meet international standards. The program supports the development of a national legal framework for trade, as well as simplified customs procedures to help Nepal increase exports and boost its competitiveness.
|Project Name||South Asia Subregional Economic Cooperation Customs Reform and Modernization for Trade Facilitation Program|
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Governance and capacity development
Private sector development
|Sector / Subsector||
Industry and trade / Industry and trade sector development - Trade and services
|Gender Equity and Mainstreaming||No gender elements|
|Description||The program will support the simplification, harmonization, and modernization of Nepal's trade processes to meet international standards. This will contribute to Nepal's national goals of promoting and diversifying exports, and help the country fulfill its commitments to the Trade Facilitation Agreement (TFA) of the World Trade Organization (WTO) and related international standards on customs.|
|Project Rationale and Linkage to Country/Regional Strategy||
A robust merchandise sector and increased merchandise exports are expected to serve as vehicles for economic growth and poverty reduction in Nepal. As a landlocked country virtually isolated from external markets, Nepal, however, has high trade costs, impeding export competitiveness. Inefficient, unpredictable, and opaque customs procedures are among the primary nontariff barriers which contribute to high trade costs, poor business climate, and inability to integrate into global value chains. Estimates show that for Nepal, nontariff trade costs are equivalent to applying a 325% ad valorem tariff on manufactured exports, 523% on agricultural products, and 391% overall.
Nepal has made a global commitment to undertake customs reforms by acceding to the WTO's TFA, which aims to simplify, modernize, and harmonize export and import processes primarily through reforms to customs clearance procedures. Implementing TFA reforms for Least Developed Countries like Nepal is expected to increase the number of products exported by destination by 11.8% 12.8% and raise the number of destinations by product by 14.1% 21.3%.
The program supports exports and economic growth through customs reform and modernization to lower trade costs, transforming Nepal's Department of Customs from a revenue-collecting enforcement body to risk-based, trade-facilitating operations. The program is consistent with ADB's country partnership strategy, 2013 2017 for Nepal, which highlights support for customs modernization and transport connectivity as complementary investments to be coordinated through the South Asia Subregional Economic Cooperation (SASEC) program. The program is in the project pipeline of ADB's Operational Plan for Regional Cooperation and Integration, 2016 2020 and aligns with the SASEC Operational Plan, 2016 2025.
|Impact||Nepal's exports expanded and export competitiveness increased|
|Description of Outcome||Legitimate trade's access to simplified, harmonized, and modernized trade processes increased.|
|Progress Toward Outcome|
|Description of Project Outputs||
National policy and legal framework for trade facilitation improved
Customs procedures improved
DOC organizational structure strengthened
DOC''s capacity enhanced
|Status of Implementation Progress (Outputs, Activities, and Issues)||
The program is supporting policy framework, which is detailed in the policy matrix in Appendix 4 of the program's RRP. The policy actions focus on six trade facilitation strategic priorities: (i) risk management, (ii) post-clearance audit, (iii) advance ruling, (iv) trade facilitation measures for authorized operators, (v) pre-arrival processing, and (vi) expedited shipment.
The policy actions for Tranche 1 are completed, and $10 million was disbursed as of 10 November 2017.
|Summary of Environmental and Social Aspects|
|Environmental Aspects||The Program has no environmental aspects.|
|Involuntary Resettlement||The Program has no social aspects with regard to involuntary resettlement.|
|Indigenous Peoples||The Program has no social aspects with regard to indigenous peoples.|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design||The stakeholders are trade-related public and private sector entities, represented in the Customs National Trade Facilitation Committee (CNTFC), including: Ministry of Finance, Department of Customs, Customs field offices, other trade-related government ministries (Ministry of Commerce, Ministry of Agricultural Development, Ministry of Industry), banks, manufacturers, producers of agricultural goods, traders, freight forwarders, customs agents, among others. Upon conception of the program in September 2014, initial consultation sessions were held in Kathmandu and the field locations. At the field locations, local chambers of commerce, manufactures, cooperatives, customs clearing agents, and freight forwarders were visited in addition to local government offices. Following the initial consultation, a number of stakeholder consultations have been held as part of the project review missions at an interval of 4-6 months. In November 2016, a national consultation session workshop was organized, inviting these public and private sector representatives. While the workshop's primary aim was to discuss the draft Customs Reform and Modernization Strategies and Action Plan (CRMSAP), 2017-2021, the agenda included discussions on the CRMSAP reform areas to be supported by ADB's policy-based lending. Major reform actions to be supported by the Program were confirmed, together with endorsement of the CRMSAP design.|
|During Project Implementation||
The program will be implemented over 4 years starting July 2017. The executing and implementing agency will be the Department of Customs (DOC). A program steering committee, chaired by the Director General of the DOC, will be formed to guide and monitor implementation. Members will be drawn from the Ministry of Finance, Ministry of Commerce, Department of Industry, and the DOC. Members of the CNTFC and ADB may be invited to the steering committee meetings. The steering committee will present the progress and discuss issues on program implementation at regular CNTFC meetings. The DOC will form a program implementation framework, headed by its Deputy Director General (Management), supervising five thematic task forces of: (i) coordination; (ii) legislation; (iii) automation; (iv) risk management; and (v) organization and development. The disbursement of loan proceeds will be made in accordance with the Loan Disbursement Handbook (2015, as amended from time to time).
The loan agreement for this program was signed on 10 September 2017 in Nepal and the loan effectiveness was declared on 26 September 2017. The Tranche 1 was disbursed on 10 November 2017. The Tranche 2 is scheduled to be disbursed in 2019.
|Consulting Services||Not applicable.|
|Responsible ADB Officer||Hayashi, Tadateru|
|Responsible ADB Department||South Asia Department|
|Responsible ADB Division||Regional Cooperation and Operations Coordination Div, SARD|
Department of Customs
Tripureshwar, Kathmandu, Nepal
|Concept Clearance||05 Dec 2016|
|Fact Finding||25 Jan 2017 to 05 Feb 2017|
|MRM||29 Mar 2017|
|Approval||07 Jul 2017|
|Last Review Mission||-|
|Last PDS Update||07 Sep 2018|
|Approval||Signing Date||Effectivity Date||Closing|
|07 Jul 2017||10 Sep 2017||26 Sep 2017||01 Aug 2021||-||-|
|Financing Plan||Loan Utilization|
|Total (Amount in US$ million)||Date||ADB||Others||Net Percentage|
|Project Cost||21.00||Cumulative Contract Awards|
|ADB||21.00||07 Jul 2017||10.00||0.00||47%|
|Cofinancing||0.00||07 Jul 2017||10.00||0.00||47%|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
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|Title||Document Type||Document Date|
|Loan Agreement (Ordinary Operations [Concessional]) for Loan 3546-NEP: SASEC Customs Reform and Modernization for Trade Facilitation Program||Agreements||Sep 2017|
|South Asia Subregional Economic Cooperation Customs Reform and Modernization for Trade Facilitation Program: Project Data Sheet (Nepali Translation)||Translated PDS||Sep 2017|
|South Asia Subregional Economic Cooperation Customs Reform and Modernization for Trade Facilitation Program: Report and Recommendation of the President||Reports and Recommendations of the President||Jun 2017|
|South Asia Subregional Economic Cooperation Customs Reform and Modernization for Trade Facilitation: Concept Paper||Concept Papers||Dec 2016|
|South Asia Subregional Economic Cooperation Customs Reform and Modernization for Trade Facilitation: Initial Poverty and Social Analysis||Initial Poverty and Social Analysis||Dec 2016|
Safeguard Documents See also: Safeguards
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ADB to Help Nepal Improve Customs Reform, Modernize Trade FacilitationADB's Board of Directors has approved a $21 million policy-based loan to support the Government of Nepal’s efforts to simplify, harmonize, and modernize the country’s trade processes to meet international standards.
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