Nepal : South Asia Subregional Economic Cooperation Highway Improvement Project

Project Name

South Asia Subregional Economic Cooperation Highway Improvement Project

Project Number

52097-001

Country / Economy

• Nepal

Project Status

Active

Project Type / Modality of Assistance

• Loan
• Technical Assistance

Source of Funding / Amount

Loan 3722-NEP: South Asia Subregional Economic Cooperation Highway Improvement Project

Source	Amount
Concessional ordinary capital resources lending	US$ 180.00 million

TA 9604-NEP: Institutional Strengthening of Road Safety and Gender Equality

Source	Amount
Technical Assistance Special Fund	US$ 750,000.00

Strategic Agendas

• Environmentally sustainable growth
• Inclusive economic growth
• Regional integration

Drivers of Change

• Gender Equity and Mainstreaming
• Governance and capacity development
• Partnerships

Sector / Subsector

• Transport / Road transport (non-urban)

Gender

Effective gender mainstreaming

Description

The project will support capacity, quality, and safety improvements of the East-West Highway (EWH), which is the main domestic and international trade corridor of Nepal, and which forms part of the South Asian Association for Regional Cooperation (SAARC) corridor 4 linking Kathmandu to Dhaka and Chittagong through India. The project will (i) rehabilitate and widen about 87 kilometers (km) of the EWH between Kanchanpur and Kamala in southeastern Nepal; (ii) improve road safety, asset management, and gender equality and social inclusion (GESI) on the 1,027 km EWH; and (iii) strengthen the road safety and GESI capacity of road sector agencies. The project will promote economic growth and contribute to improving the competitiveness of Nepal's exporting industries by enhancing the efficiency of the transport system, strengthening national and regional connectivity, and improving the safety of the road network.

Project Rationale and Linkage to Country/Regional Strategy

Country context. Nepal is landlocked and bordered to the north by the People''s Republic of China (PRC), and to the south, east, and west by India. Consequently, Nepal relies heavily on its direct neighbors for international trade particularly India, with which it shares 19 official trading posts. In fiscal year (FY) 2017, 65% of Nepal''s imports were from India, and 13% from the PRC; India received 57% of Nepal''s exports, and the PRC 2.3%. Biratnagar, located 68 km east of Kanchanpur, is Nepal''s largest export gateway, handling 29.5% of its exports, while the port of Kolkata is the primary transit point for seaborne freight.

Economic rationale. The gross domestic product of Nepal grew at an average annual rate of 4.5% during FY2007-FY2017 and is forecast to grow at 5.9% in FY2018 and 5.5% in FY2019. The economy of Nepal suffers from a structural lack of competitiveness; exports have alarmingly decreased at an average annual rate of 6.1% in real terms during FY2007-FY2017, while the agriculture sector still employs 69.4% of the labor force. The trade deficit is widening, as foreign remittances have sustained import growth, which increased by 21.3% annually during FY2007-FY2017. The economy is hampered by deficient domestic and cross-border infrastructure networks, which increase transport costs and impede regional integration and trade with indirect neighbors: excluding India, trade with other SASEC and SAARC member countries accounts for just 0.8% of Nepal''s total trade.

Transport sector context. Road transport carries over 90% of passengers and goods in Nepal. The strategic road network (SRN) totals 12,494 km, 51% of which is paved, and is developed and maintained by the Department of Roads (DOR) of the Ministry of Physical Infrastructure and Transport (MOPIT). The SRN provides vital linkages to major economic centers and neighboring countries, and features eight northsouth and three eastwest corridors, including the 1,027 km-long EWH which carries the highest traffic volumes. The local road network totals 57,600 km, 3.5% of which is paved. The road density of Nepal, at 2.5 km of road per 1,000 people, is low, and there are few alternatives to road transport. Although projects supported by development partners are expected to increase the capacity and density of airport, railway, and inland waterway networks, road transport will continue to have a major role in the economic development of Nepal.

Road safety. Vehicle ownership remains low, with only 0.08 vehicles per capita, but vehicle sales increased by 17.5% annually during FY2007-FY2017, and the number of registered vehicles is expected to quadruple in the next decade. Motorcycles account for 79.7% of sales, which further increases road safety risks, particularly on deteriorated or wet pavements conditions. The traffic fatality rate is estimated at 302 fatalities per 100,000 vehicles, one of the highest rates in Asia, and reported traffic accidents increased from 3,800 in FY2002 to 13,580 in FY2013.

Impact

Transport connectivity within Nepal and with neighboring countries improved

Physical connectivity and multimodal linkages for land-based transport along major trade routes enhanced

Project Outcome

Description of Outcome

Efficiency and safety of the road transport system improved

Progress Toward Outcome

Civil works contracts for KK-01 and KK-02 signed on 25 June 2020 and has commenced the work from 29 October 2020. As of June 2023, the physical progress in KK-1 and KK-2 is 29.40% and 31.97% respectively, which gives the average physical progress of 30.78% against the time elapsed of about 89.04% against the original allocated time. As of June 2023, construction of PD-Office building has achieved 19% of physical progress. Road safety awareness programs is being implemented from December 2022 and planning to conclude the activity within December 2023.

Implementation Progress

Description of Project Outputs

Road network upgraded and maintained

Planning and management for road safety strengthened

Facilities and project readiness of Project Directorate (ADB) improved

Status of Implementation Progress (Outputs, Activities, and Issues)

Civil works contracts for KK-01 and KK-02 signed on 25 June 2020 and has commenced the work from 29 October 2020. As of June 2023, the physical progress in KK-1 and KK-2 is 29.40% and 31.97% respectively, which gives the average physical progress of 30.78% against the time elapsed of about 89.04% against the original allocated time.

The road safety assessment of EW Highway was carried out by TA consultant and submitted the final report. The report was cleared by the DOR. The implementation of Road Safety construction work is being initiated from Q3 2023. The activity is being conducted and total of 1,104 (487-boys, 44.11% and 617-Girls, 55.89%) students of various schools were already provided with road safety awareness. The plan is to complete the whole activity by December 2023.

129 divisional and regional officers, engineers, administration, and data managers of all divisional and regional offices from seven Provinces trained on GESI Operational Guidelines. Among trainees, 29 (22.48%) were women and 100 (77.51%) were men officials.

Contract for construction of PD Office building was awarded on 24 January 2022 and commenced work from 10 April 2022. As of June 2023, construction of PD-Office building has achieved 19% of physical progress.

Geographical Location

Kamala River, Kanchanpur

Safeguard Categories

Environment

B

Involuntary Resettlement

B

Indigenous Peoples

C

Summary of Environmental and Social Aspects

Environmental Aspects

Environmental impacts will be mainly restricted to the construction stage with no expected irreversible impacts.

Involuntary Resettlement

Land acquisition and resettlement impacts are expected to be limited as the project is developed in the current right-of-way of DOR.

Indigenous Peoples

There are no indigenous people in the project area.

Stakeholder Communication, Participation, and Consultation

During Project Design

Consultations with the local communities, including women, were conducted to ensure that they were involved in the preparation and analysis of the project design. Consultations on poverty and social assessment, resettlement plan, and environmental assessment are currently being carried out, and overall highlight a high level of support for the project.

During Project Implementation

Stakeholders will be consulted during project implementation, particularly for the design and conduct of community awareness campaigns to be undertaken under the project.

Business Opportunities

Consulting Services

All consultants and nongovernment organizations will be recruited according to ADB''s Procurement Regulations (2017, as amended from time to time). All firms will be recruited using ADB's quality- and-cost-based selection (QCBS) under full technical proposal (FTP) and a standard quality-cost ratio of 90:10.

Procurement

All procurement of goods and works will be undertaken in accordance with ADB''s Procurement Policy (2017, as amended from time to time) and Procurement Regulations for ADB Borrowers (2017, as amended from time to time). Open competitive bidding (OCB) procedures will be used for all civil works contracts with provision for domestic preference. Requests for quotations will be used for procurement of works and goods estimated to cost less than $100,000.

Contact

Responsible ADB Officer

Bhatt, Bhupendra Chandra

Responsible ADB Department

Sectors Group

Responsible ADB Division

Transport Sector Office (SG-TRA)

Executing Agencies

Ministry of Physical Infrastructure and Transport

Project Directorate (ADB) - Department of Roads

Timetable

Concept Clearance

05 Apr 2018

Fact Finding

21 May 2018 to 01 Jun 2018

MRM

13 Jul 2018

Approval

03 Oct 2018

Last Review Mission

-

Last PDS Update

28 Jul 2023

Funding

Loan 3722-NEP

TA 9604-NEP