fbpx 50254-001: South Asia Subregional Economic Cooperation Customs Reform and Modernization for Trade Facilitation Program | Asian Development Bank

Nepal: South Asia Subregional Economic Cooperation Customs Reform and Modernization for Trade Facilitation Program

Sovereign (Public) Project | 50254-001 Status: Active

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 Details

Project Officer
Tadateru Hayashi South Asia Department Request for information
  • Nepal
  • Loan
  • Industry and trade
Project Name South Asia Subregional Economic Cooperation Customs Reform and Modernization for Trade Facilitation Program
Project Number 50254-001
Country Nepal
Project Status Active
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3546-NEP: South Asia Subregional Economic Cooperation Customs Reform and Modernization for Trade Facilitation Program
concessional ordinary capital resources lending / Asian Development Fund US$ 21.00 million
Strategic Agendas Inclusive economic growth
Regional integration
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
Project Outcome
Description of Outcome Legitimate trade's access to simplified, harmonized, and modernized trade processes increased.
Progress Toward Outcome
Implementation Progress
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.

Policy actions for Tranche 2 are targeted to be completed by September 2019, and $11 million will be disbursed.

Geographical Location Nation-wide
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
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.

Business Opportunities
Consulting Services Not applicable.
Procurement Not applicable.
Responsible ADB Officer Tadateru Hayashi
Responsible ADB Department South Asia Department
Responsible ADB Division Regional Cooperation and Operations Coordination Div, SARD
Executing Agencies
Department of Customs
[email protected]
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 18 Jul 2019

Loan 3546-NEP

Approval Signing Date Effectivity Date Closing
Original Revised Actual
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%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 07 Jul 2017 10.00 0.00 47%

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Procurement Plan

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