Nepal : Urban Resilience and Livability Improvement Project

Project Name

Urban Resilience and Livability Improvement Project

Project Number

55346-001

Country / Economy

• Nepal

Project Status

Active

Project Type / Modality of Assistance

• Grant
• Loan

Source of Funding / Amount

Grant 0927-NEP: Urban Resilience and Livability Improvement Project

Source	Amount
Asian Development Fund	US$ 6.00 million

Loan 4433-NEP: Urban Resilience and Livability Improvement Project

Source	Amount
Concessional ordinary capital resources lending	US$ 160.00 million

Operational Priorities

• OP1: Addressing remaining poverty and reducing inequalities
• OP2: Accelerating progress in gender equality
• OP3: Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability
• OP4: Making cities more livable
• OP6: Strengthening governance and institutional capacity
• OP7: Fostering regional cooperation and integration

Sector / Subsector

• Transport / Urban roads and traffic management

• Water and other urban infrastructure and services / Other urban services - Renovation and protection of cultural heritage - Urban flood protection - Urban policy, institutional and capacity development

Gender

Effective gender mainstreaming

Description

The project will support to improve municipal infrastructures and governance of the selected project municipalities, thereby contributing to achieve inclusive economic growth and improved livability . This will be achieved through the following three outputs: (i) municipal infrastructure for resilience developed (Output 1); (ii) Tourism assets revitalized and managed (Output 2); and (iii) capacity of municipalities, provinces and Department of Urban Development and Building Construction strengthened (output 3). The project will support seven municipalities (Pokhara, Janakpur, and a cluster of five municipalities includes Devdaha, Lumbini Sanskirtik, Sainamaina. Siddharthanagar, and Tilottama).

Project Rationale and Linkage to Country/Regional Strategy

1.Economic growth. In recent years Nepal has made significant improvements in economic growth, quality of life, and poverty reduction at the national level. During FY20172019 gross domestic product (GDP) growth has risen on average 7.3% annually and in the past decade incidence of poverty fell from 25% to 18.7%. Despite these gains, the coronavirus disease (COVID-19) global pandemic has posed a setback, shrinking national GDP growth to an estimated 2.3% in FY21. Despite ongoing uncertainties related to the pandemic, modest growth of 4.1% is expected for FY22 as the country's vaccination rollout expands, industrial output increases, and tourist arrivals gradually increase. The vision for Nepal's recovery from the pandemic hinges on a Green, Resilient, and Inclusive Development strategy. In September 2021, the Government of Nepal (the government) and development partners endorsed the "Kathmandu Declaration", which pledges to develop a strategic action plan that aims to support Nepal"s recovery from the COVID-19 pandemic while addressing the interlinked challenges of climate change and rising inequality.

2.Urbanization and urban poverty. Urbanization and well-planned cities are central to Nepal's socioeconomic transformation and economic growth objectives. During 20102015, Nepal was ranked among the 10 least urbanized countries in the world, yet one of the fastest urbanizing with an annual urban growth rate of 3.2%. In 2011, 17.1% of Nepal's population resided in 58 designated urban areas, which increased to 66.1% in 2021. This sudden increase reflects the designation of 159 additional municipalities after the statutory reconstitution of municipal governments in 2016, though many of them are still more rural in terms of density and economic structure. The designation is expected to guide municipal growth and improve service delivery. While poverty across the country fell (para. 1), 12.3% of urban dwellers are still multidimensionally poor in 2021 with high disparities remaining between gender and social groups as well as between regions, and quality of life especially for urban poor is eroding due to unplanned development and poor service delivery.

3.Haphazard development impedes growth. While the contribution of cities to the national economy is significant, the inefficient nature of Nepal's urbanization poses several problems including deficiencies in basic urban services, environmental degradation, encroachment of settlements on hazard prone lands and heritage areas, and sprawling settlements. Nepal's fast-growing cities and towns lack integrated urban planning and capital development plans. Municipalities have not secured and service land in advance to guide development. As a result, unserviced 'ribbon development along inadequate road networks is occurring at a rapid pace. Ribbon development locks cities into an urban structure whereby it is costly to provide services, is an inefficient use of land and difficult to retrofit. Recently-established municipalities also face an infrastructure backlog and significant annual financing gap of $1.62.1 billion. The government recognized the need for improved urban and regional planning and capital investment as a national priority, with initial steps taken through adoption of the National Urban Development Strategy in 2017. Ministry of Urban Development has supported municipalities to develop Integrated Urban Development Plans and structure plans for strategically important urban economic corridors in the Terai region (including capital investment plans).

4.Climate and disaster risk impact on urban livability. Haphazard development is not only expensive and inefficient for service delivery, but also drives disaster risk and puts hard-to-manage pressure on existing infrastructure systems and environmental and cultural heritage assets. Nepal is highly vulnerable to the impacts of natural hazards and climate, ranking 12 of 180 countries analyzed for 2019 and 10th based on long term climate risk index for the period 2000-2019. Nepal also lies in one of the most active earthquake zones in the world. Climate projections (CMIP6 2020) indicate that climate change is increasing rainfall variability and temperature in Nepal. Heavy rains and droughts may impact the quality, quantity and reliability of water sources, and flooding may exacerbate the occurrence of landslides, water logging, and accelerate erosion. Multiple factors lead to increased climate and disaster vulnerability in Nepal cities, including the lack of drainage infrastructure, environmental degradation of watersheds, and inadequate gender equality and social inclusion (GESI) responsive green open spaces for stormwater attenuationall these directly impact urban livability. The failure to adequately account for natural hazards, and the impacts of climate and disaster risk over the short to medium term needs to be addressed if Nepal's green, resilient, and inclusive urban ambitions are to be met.

5.Government strategy. The Constitution of Nepal (2015) entrusts provinces and local governments with the functions of developing public infrastructure and delivering services. Nepal's fifteenth five-year plan identifies sustainable urbanization as a key driver of the country's socioeconomic transformation to make cities inclusive, safe, resilient, and sustainable (footnote 4). Aligning with government's National Urban Development Strategy (footnote 9), the fifteenth plan emphasizes improved service delivery, developing interlinked urban corridors, and targets high and inclusive economic growth through capital investment in quality and resilient urban infrastructure and services. Maintaining the cultural heritage assets of Nepal's cities is noted by the government as an integral part of urban development and livability improvement. Specific priorities of the government include a national program for integrated urban development, implementing policies and investments from urbanizing corridor strategies, heritage conservation and tourism infrastructure thereby opening major opportunities for development, providing a significant source of employment and contribution to poverty reduction. The government has identified several towns with high tourism potential, with recently improved access that is likely to increase visitors, and where investment is urgently required to safeguard heritage and enhance the visitor experience while improving quality of life for residents. Accordingly, the government requested ADB to focus on municipalities that are of strategic importance and build on integrated development strategies for the better performance of tourism sector. The project will target eight municipalities, benefiting 1,057,210 people, that are strategically important economically, but with unique physical, spatial and resilience characteristics and challenges

Impact

Improved living standards achieved (The Fifteenth Plan, FY20202024)

Sustainable climate-resilient tourism development achieved (National Adaptation Plan, 20212050)

Project Outcome

Description of Outcome

Improved resilience, livability, and sustainability of urban service delivery and tourism by project municipalities.

Progress Toward Outcome

Implementation Progress

Description of Project Outputs

Municipal infrastructure for resilience improved.

Tourism assets revitalized, and management improved

Capacity of communities, municipalities, province, and DUDBC strengthened.

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

Geographical Location

Devdaha, Janakpur Dham, Lumbini Sanskritik, Pokhara, Ramgram, Sainamaina, Siddharthanagar, Tillotama

Safeguard Categories

Environment

B

Involuntary Resettlement

B

Indigenous Peoples

B

Summary of Environmental and Social Aspects

Environmental Aspects

Involuntary Resettlement

Indigenous Peoples

Stakeholder Communication, Participation, and Consultation

During Project Design

During Project Implementation

Contact

Responsible ADB Officer

Lavery, Patrick

Responsible ADB Department

Sectors Group

Responsible ADB Division

Water and Urban Development Sector Office (SG-WUD)

Executing Agencies

Department of Urban Development and Building Construction

Ministry of Urban Development

Timetable

Concept Clearance

27 May 2022

Fact Finding

17 Apr 2023 to 12 May 2023

MRM

31 Aug 2023

Approval

13 Dec 2023

Last Review Mission

-

Last PDS Update

21 Mar 2024

Funding

Grant 0927-NEP

Loan 4433-NEP