Nepal - Water Supply and Sewerage Project

A1CIRCULATING COPY TO BE RETURNED TO REPORTS DESK FILE ~~COPY ... DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. P-1415-NEP REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE KINGDOM OF NEPAL FOR A WATER SUPPLY AND SEWERAGE PROJECT April 15, 1974 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENTS Currency Unit = Nepalese Rupee (NRe) US$1 = NRs 10.56 NRe 1 = US$0.095 NRs 1,000 = US$94.70 NRs 1,000,000 = US$94,697 FISCAL YEAR Nepal Fiscal Year = July 16 to July 15 Nepal Calendar Year = April 16 to April 15  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE KINGDOM OF NEPAL FOR A WATER SUPPLY AND SEWERAGE PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Kingdom of Nepal for the equivalent of US$7.8 mil- lion on standard IDA terms to help finance a project for improving and ex- tending water supply and sewerage facilities in Kathmandu, Kathmandu Valley and Pokhara. The proceeds of the credit would be relent to the Water Supply and Sewerage Board (WSSB) with interest at 6 percent per annum, for a term of 25 years, including a five-year grace period on the payment of principal and interest. PART I - THE ECONOMY 2. The most recent economic report entitled "Economic Situation and Prospects of Nepal" (125-NEP) was distributed to the Executive Directors on April 18, 1973 (R73-78) and its sector annexes on August 30. 1973 (R73-217). The principal findings and conclusions of t:hat report, brought up to date, are summarized below. The country data sheet is given in Annex I. 3. Nepal has been classified by the United Nations as one of the least-developed countries in the world. It:s per capita income is esti- mated at $90 per year and the literacy rate at about 14 percent. Lack of dependable statistical data makes difficult: a precise assessment of recent economic performance. Available statistics should therefore be considered as indicating no more than orders of magnitude and broad trends. There is, however, evidence that since 1965 Nepal's real economic growth has been almost entirely neutralized by population growth, estimated at 2.2 percent a year. Agriculture accounts for about 70 percent of GDP and provides employment for over 90 percent of the labor force of which the great majority are subsistence farmers. The industrial st-ctor is very small and its contri- bution to GDP has been marginal. 4. Serious efforts toward development have been underway only since the late 1950's. Development expenditures have increased rapidly -- from NRs 232 milllon in 1964/65 to NRs 620 milllon in 1972/73. The great bulk of the resources available for development have been invested in infra- structure, particularly roads, power and irrigation facilities. About half of expenditures for development during this period have been financed with external assistance, notably from India, the United States and China. About 80 percent has been in the form of grants. Gross external reserves have been increasing and as of May 1973 stood at $127.5 million, of which about $110 million were convertible. Reserves are equivalent to about 12 months' imports.  - 2 - 5. In its efforts to formulate and implement development programs and projects, the Government (HMG) is faced with unusually severe constraints. The country is landlocked and the physical resource base is very narrow, consisting mainly of agricultural land, hardwood forests and abundant water resources available for both power generation and irrigation. No minerals in commercial quantities have been discovered. Nepal's internal market is small and production costs tend to be high. About 58 percent of the population live in the Hills 1/ at or near subsistence levels. For lack of transportation facilities, large numbers of communities are virtually isolated from each other. 6. One of the important constraints on Nepal's economic development has been the limited capacity of HMG to plan, appraise and implement development programs and projects. The problem is apparent in most sectors and its principal elements include poor coordination of closely related programs; lack of progress reporting and evaluation; defective project formulation and implementation; and general difficulty in taking decisions within HMG. Given Nepal's early stage of economic development, these prob- lems are not unexpected. While noteworthy attempts at improvements have been undertaken in the past few years, much remains to be done and substan- tial technical assistance will be required to supplement the limited Nepalese staff that possesses requisite skills. 7. In spite of these constraints, the prospects for increasing agricultural output are reasonably good. Within the agricultural sector, the best possibility over the short and medium term is increasing the production of foodgrains, particularly rice, wheat and maize. Preliminary analysis of Nepal's future foodgrain position indicates that, unless timely and effective measures are taken, the current export surplus (about 300,000 tons of rice per year mainly to India) may soon turn into a deficit. In the Hills, where no additional land is available and yields aire low, the principal requirement is to increase productivity by means of improved technology and to restructure agriculture away from foodgrains toward more suitable horticulture and livestock production. The Associa- tion is presently discussing with 1MG possible projects in the development of the Hills. In the Terai 2/ to the south, foodgrain production can be substan- tially increased not only by improved technology but also by expanding the area under cultivation and making use of the potential for extending irriga- tion and for controlled resettlement in cleared forest areas and waste land. 1/ The Hills in the central region consist of rugged mountains ranging from 1,000-4,000 meters in elevation and cut by the valleys and gorges of Nepal's major north-south river systems. 2/ The Terai is the narrow plain along the Indian border with elevations up to 1,000 meters.  -3- 8. Over-population in the Hills and consequent unorganized migration to the Terai pose serious threats to future development. A greatly expanded land clearance and resettlement program in the Terai would help to absorb part of the excess population and, if carefully planned and controlled, could substantially reduce wasteful destruction of forests and severe erosion of arable land. Intensive farming of new irrigated land would also provide a livelihood for migrant farmers as would a program for systematic and efficient utilization of Nepal's forest resources. 9. Over the past nine years (1964/65-1972/73), domestic revenue and total expenditures grew by about 16 percent per year - or about 10 percent in real terms - substantially faster than the growth of GDP. Development expenditures alone nearly tripled and increased their share of GDP from 3.9 percent to about 5.7 percent. About half of the development expenditures is financed by external assistance (grants and. loans). With a quickening of the pace of the development effort, a major constraint on further develop- ment is Nepal's ability to mobilize resources, both domestic and foreign. 10. Current domestic budget revenue dloes not exceed 6 percent of GDP. This tax effort may appear rather low, but the country's ability to pay taxes is also very low. Since the monetized sector of the economy is small (covering perhaps 20 percent of active population) and is generating most of Government's revenue, the fiscal pressure is indeed quite high on the limited number of tax payers. There iEs probably some room to increase further the taxation of the monetized sector, which in the past benefited from the bulk of public investment, and alEio for better tax enforcement but, by and large, it would be reasonable t:o expect a moderate growth of revenue in the future. 11. In that respect, the very comfortable level of foreign exchange holdings should be seen in its proper perspective. Despite substantial balance of trade deficits both with India and third countries, Nepal has been able to generate substantial overall surpluses (the equivalent of an average of $10 million a year for the last 6 years), thanks to its export of services (Gurkha pensions and remittances, remittances from Nepalese working in India, tourist industry, etc.). It would be nonetheless unwise to expect this situation to remain unchanged since development expenditures are bound to increase much faster than domestic revenue collection and expected foreign savings inflow. Moreover, increases 1/ in the price of petroleum are bound to result in a slight balance of payment deficit in 1974. 1/ Except for the small industrial sector, whose energy needs are largely based on diesel stations, they are expected to have only a limited impact on economic activity.  - 4 - 12. In summary, on one hand, the extreme poverty of the country points to its limited capacity to generate resources; on the other hand, urgent development needs and the expected gradual improvement in the country's absorptive capacity will lead to an early utilization of foreign exchange holdings. Consequently, Nepal's requirements for foreign assistance on soft terms will rise rapidly in the future and there is a clear need for local cost financing, as most projects with high development priority have larger domestic cost component than can be mobilized from internal sources. 13. So far, Nepal's external debt has been very low. The bulk of foreign aid has been in the form of grants. As of March 1973 foreign debt, which was all contracted with countries other than India, amounted to only $65 million of which $50 million remained undisbursed. $ 8.4 million of foreign debt was in IDA credits, of which only $0.8 million was disbursed. This low utilization is largely due to the fact that 2/3 of foreign loans have been contracted after mid-1970. Consequently, debt service was about $0.6 million in 1973 or equivalent to 2% of exports of goods and services to countries other than India. IDA's share in the debt service was negligible. However, future assistance may increasingly take the form of loans, albeit soft. In view of the accelerated development efforts, external public debt is expected to rise and, based on the trend in recent years, may well reach $250 million by 1980, of which 1/3 could be in IDA credits. Debt service ratio by 1980 is forecast at below 10%, of which Bank Group share would account for less than 1%. PART II - BANK GROUP OPERATIONS IN NEPAL 14. The first IDA credit to Nepal in the amount of $1.7 million equivalent was made in FY 1970 for a telecommunications project. This was followed by credits for highways ($2.5 million), tourism ($4.2 million), irrigation ($6 million) and a second telecommunications project ($5.5 mil- lion). The proposed credit would bring the total amount of IDA assistance to Nepal to $27.7 million equivalent. No Bank loan has been made to Nepal. IFC is considering an investment in a hotel project in Kathmandu. Annex II contains a summary statement of IDA credits as of March 31, 1974 and notes on the execution of ongoing projects. It shows certain delays in the implementation of these projects, particularly during the initial periods. These delays are largely due to Nepal's limited technical and managerial capabilities. In order to assist Nepal in coping with this constraint, considerable technical assistance in the form of inputs of staff time in Washington, from our Resident Mission in Kathmandu, and during frequent missions to Nepal is required. 15. Bank Group lending to Nepal has so far been at a modest level compared to the country's needs for, and total receipts of, external assis- tance. This is due to the relatively large amounts of assistance given to Nepal by other donors and the country's limited absorptive capacity, affecting the rate of project identification, preparation and implementa- tion. Prospective Bank Group objectives in Nepal reflect the country's  - 5 - needs: (a) to place major emphasis upon directly productive sectors, particularly agriculture and forestry; (b) t:o give special attention to integrated schemes within the agricultural Esector upon which economic development in Nepal basically depends; and (c) to continue assistance for the development of complementary infrastructure, including feeder roads in support of other development expenditure ancl other forms of communications, particularly between the Hills and the Terai. The proposed credit would contribute to infrastructure development in the Hills by meeting social and health needs in the project area. 16. A settlement project was appraised in October/November 1973. Prep- aration work is being carried out for a number of projects, including a second highway project, a rural development project and a second irrigation project. In view of the institutional constraints and shortage of trained personnel in Nepal, the identification, preparation and implementation of these projects are likely to require more time and effort on the part of the Bank Group as well as greater inputs of technical assistance, than usual. For this reason, technical assistance in feasibility studies, project preparation and training, will be an important element in the proposed project as well as in most future projects. PART III - WATER SUPPLY AND SERERAGE IN NEPAL 17. The water supply and sewerage sector in Nepal is in a very early stage of development. Near the end of the last century the first water supply systems were constructed in the Kathmandu Valley and Pokhara. Only about 5 percent of the population have piped water supplies and the majority of these live in the larger urban areas. Village water supplies are generally restricted to the provision of public standpipes together with a small number of private connections to hospitals and public buildings. Several towns and villages are supplied either with untreated water from perennial streams with varying levels of pollution or by groundwater supplies. Most of the water supply systems have proved inadequate in terms of source, reservoir capacity or standby pumping capacity. Water supply hours are consequently restricted. For example, Kathmandu, the capital city, is supplied with water for only six hours in each day. 18. Apart from a small section of Kathmandu, there are no sewage dis- posal facilities. In the old city of Kathmandu, several properties are connected to a covered surface water sewerage system constructed at the beginning of the century. Outside this area, raw sewage and odorous septic tank effluent flow into and clog open roadside drains. 19. Not until about 1950 was an effort made to organize the sector, when the Department of Irrigation and Water Supply under the Ministry of Water and Power was made responsible for construction of water supply schemes. Following a recommendation in a study by WHO as executing agency for UNDP, HMG separated water supply functions from the Department of Irrigation and Water Supply in late 1972 and created a new Department of  - 6 - Water Supply and Sewerage (Water Department). In 1973, WSSB was estab- lished to take over responsibility for the sector. Its seven-member Board represents the relevant ministries and the Planning Commission. The Chair- man is the Secretary of the Ministry of Water and Power. The Chief Execu- tive of WSSB is the Project-in-Charge, to whom the Board of Directors delegates most of its powers. The staff and premises of the Water Depart- ment now serving Kathmandu Valley and Pokhara areas, are the base upon which WSSB is being built. The ultimate goal is to create a corporation to replace WSSB and to be fully responsible for water supply and sewerage in Nepal. 20. Lack of qualified Nepalese staff has hampered the sector's devel- opment. Since 1954 an Indian Cooperative Mission has provided technical manpower in a program for the construction of nine urban and 14 rural water schemes. Under a technical assistance program by UNICEF, about 87 rural water supply schemes serving some 7300 houses have been under- taken. In addition to these, there is a modest program (run by a WHO expert with some U.S. Peace Corps and German volunteers) under which aid is given to small rural communities in the form of materials and technical assistance, to improve their water supply facilities. As regards waste disposal, pilot projects have been initiated to provide earth latrines in model rural com- munities. A considerable decrease in the incidence of hookworm has been reported following the initiation of one such scheme. There are no proposals at present for providing water-borne sewerage outside Kathmandu Valley or for improving rural sanitation. 21. Leakage and wastage are estimated at about 50 percent of supply. An inadequate rate structure for water service has contributed to wasteful use of water. As WSSB extends its area of activities and improves service, water charges in all areas will have to be increased, if services are to be provided on a self-supporting basis. PART IV - THE PROJECT 22. The proposed project is the first stage, 1974-78, of a 25-year master plan for water supply and sewerage, prepared under the WHO/UNDP study (paragraph 19 above) by Binnie & Partners, London, engineering and management consultants, with assistance of the Government of Nepal. The project is based on these studies and on the findings of an appraisal mission which visited Nepal during May/June 1973. The report of the appraisal mission entitled "Nepal Water Supply and Sewerage Project" (No. 270a-NEP) dated April 10, 1974 is being circulated separately. A credit and project summary is attached as Annex III. 23. Negotiations were held in Washington in January 1974. The Government of Nepal was represented by Messrs. A.B. Rajbhandary, Secretary, Ministry of Water and Power and Chairman of WSSB, B.P. Rimal, First Secretary, Royal Nepalese Embassy, Washington, D.C., H.S. Shrestha, Under Secretary, Ministry of Finance, B.S. Malla, Under Secretary, Ministry of Law and Justice.  -7.- Description of the Project 24. The proposed project would improve! and extend water supply and sewerage facilities in Kathmandu and Lalitpur, a suburb of Kathmandu, and water supply facilities in Kathmandu Valley and in Pokhara, a major center with tourism potential. It would also develop WSSB as a viable entity capable of taking responsibility for water supply and sewerage development throughout Nepal; and would finance a tariff study and studies for the preparation of a second stage development arLd assist in training of staff. 25. The water supply facilities for KELthmandu include the development of a new water supply spring source, five new wells, a pumping station, a reservoir, and about 55 km of transmission End distribution pipelines. In Pokhara, a new water supply spring source, End one well would be developed and about 18 km of transmission and distribution pipelines would be connected. Improvements and repairs would be made to existing installations and the equipment needed for leak detection and waste prevention would be provided. As a result of these measures, wEastage and leakage are expected to be reduced from the current 50 percent of supply to 35 percent. These facilities would be adequate to meet daily r equirements of water supply in the project areas up to about 1981. The sewerage component, which would serve Kathmandu and the suburb of Lalitpur, includes about 40 km of sewers, a sewerage pumping station for Kathmandu ancl a waste stabilization lagoon for each. WSSB staff would be trained in administration, accounting, engineering, operations and maintenance. Adequate facilities, equipment and vehicles are included in the project for this purpose. Special equipment required for collecting hydrological data would also be provided. Project Cost and Financing 26. The total project cost is estimated at US$10.4 million equivalent; US$4.9 million equivalent is for water supply, US$4.7 million equivalent for sewerage, and US$0.8 million equivalent for tariff and second stage feasibility and project preparation studies.. The foreign exchange com- ponent is estimated at US$6.5 million equivalent net of duties and taxes. The proposed credit of US$7.8 million equivalent would cover the entire foreign exchange cost of the project - including retroactive financing of up to $260,000 for consultants' work and equipment for the preparation of the project, incurred after December 1, 1972 - and would include a substan- tial contribution to the local costs. The remaining US$2.6 million equivalent, or 25 percent of total project c:ost, would be financed by HMG. HMG's average annual contribution to the project cost from FY 1974 through FY 1981 is expected to be more than three times its average annual capital expenditures on the development of the sector in recent years. It would not appear realistic to require a larger contribution, or to require even higher water and sewerage charges during the construction period than proposed (paragraph 30 below). The proceeds of the credit would be relent to WSSB at 6 percent per annum for a term of 25 years including a five-year grace period on the payment of principal an<l interest. Project Organization 27. The project would be executed by WSSB, which is still in its formative stages. Simultaneously with technical assistance financed  - 8 - under the proposed credit for project preparation and training in a local engineering institute, the Overseas Development Administration of the United Kingdom (ODA) is providing a team of about five experts for tech- nical assistance in the establishment of procedures and systems in accounting, administration, and engineering and in training Nepalese counterparts. It is expected that over the next three or four years enough progress in the building up of WSSB will have been achieved to permit converting it into a corporation with greater powers and independ- ence of management and budget. Procurement and Disbursement 28. Contracts would be awarded on the basis of international compe- titive bidding in accordance with IDA guidelines, except for minor civil works, equipment and electrical connections from the grid, the total of which would not exceed US$250,000 equivalent. Disbursement would be made against 100 percent of foreign expenditures for imported equipment and of local expen- ditures (ex-factory) for locally manufactured equipment, against 100 percent of total expenditure for consultants services, and against 60 percent of civil works contracts. Production of sewer pipes is a simple process and it is expected that some local enterprise may participate in bids for their supply. Local suppliers of equipment would be granted a preference of 15 percent or the rate of applicable customs duty, whichever is lower. Financial Aspects 29. Examination of the finances of WSSB and preparation of the normal public utility financial projections have been seriously constrained by the almost complete lack of data. Past financial information presented in the appraisal report is based on the best efforts of the consultants. 30. Present water charges cover operating costs, but only part of depreciation, and there is no sewerage charge. HMG agreed to introduce a tariff based upon an increase of 60 percent in the basic water charge, starting in FY1975, and a new charge for the sewerage service at the rate of 50 percent of the water charges starting three years later, in FY1978. The objectives of this tariff are to allow WSSB to earn sufficient revenues to produce a positive rate of return on net fixed assets while giving the lower income groups benefits from the new and improved services. WSSB's cash flow during the construction period would be adequate. The return on average net fixed assets in service is estimated to reach at least 1 percent during FYs1976-78, and is expected to increase to about 5 percent by FY1981 and to 8 percent by FY1987. In view of the stage of development of the sector, the recent establishment of WSSB, and the social and health character of the service, these rates are considered acceptable. As the proposed tariff is based on the very limited information available to the consultants who had to make many assumptions, there is need for constant review and revision of financial policies based upon the experience gained. A study covering all aspects of demand for services and the level of tariffs is therefore included in the project, to be made by consultants in FY1977, when adequate data on demand should be available.  -9- Justification 31. The basic justifications for the proposed project are the social and health benefits of: (a) providing an adequate supply of safe water to 327,000 people representing 9S percent of the population of the project area in Kathmandu Valley and Pokhara; (b) improving the sanitary condition in Kathmandu and Lalitpur; and (c) reducing the pollution of the Bagmati River in the densely populated Kathmandu Valley. Another important benefit is the strengthening of WSSB as an :Lnstitution capable of improving and extending water supply and sewerage services also outside the project area with the ultimate goal of serving the whole country. The financial rate of return is about 7.6 percent ^" the basis of the incremental revenues attributable to the project. PART V - LEGAL INSTRUMENTS AND AUTHORITY 32. The draft Development Credit Agreiement between the Kingdom of Nepal and the Association, the Recommendation of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement and the text of a resolution approving the proposed credit are being distributed to the Executive Directors separately. 33. The special features described in paragraphs 26 (including re- troactive financing and the five year grace period on the payment of interest by WSSB), 28, and 30 (including the proposed tariff increases and the rate of return to be met by WSSB) of this Report are reflected in Sections 3.02, 3.11 and 4.06 of the draft Development Credit Agreement as well as in Part A (2) (b) of Schedule 3 thereto. 34. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 35. In formulating this proposal, it has not been possible to take full account of the consequences of recent increases in petroleum prices. However, available information indicates that the proposed credit remains fully justified. 36. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachments April 15, 1974   ANNEX I ODUNTRY DATA - NIA1. Page 1 oi- 3 pa1-$ AREA POPUJLATION DE-NSITY mUo,?9? bOi 115 illion (mid-1971) 63i Per losSof a..abi la,nd SOCIAL INDICATORS 11opaletnen Pr Austria 196 _ 39 1970 1970 1971, GNP PEN CAPITA UNS$ (ATLAS B3ASIS) f, 87 9., dO )590 1,21o DEMOGRAPHIC Cr-udebSi-rth rate (Per thmusemd) h 5 /u 51) /a 7 2 Crude death rate (Per thomean.d) .. 27 / 25 7 12 1 3..1 Ina.nt mortality rate (per thousand live births) . ...75 25.3 Life expectancy at birth (years) .7 ,395 0. 5 G-ose reproduction rate 12.. 3.0 2.9 2.9 1.3 Population growth rate Ij1.5 1.6 2.2 3.10. Popalatien growth rate - arban 5/u 5/c /d -. 1.2/ Age structure (percnt) 0- 15 .0 /1 52 55 25.5 15-65 577? 55 S5/I 5? 1 65 and ocer 37?T -, -7112 De,ondeocy ratio /6 1.0o7 1.0 /I S. c 1).3 Urban population an percent of total /b 5I/ 9 Id 52 /j i I Family planning: RNa of ecreptors cuulative (thous.) ..- 6 -. No. of users (% of married women) . FIMP WYlENT Total labor force (thousands) 4,jiU / 5.300 . ,111 3,(30' Percentage employed in agiculture 35' 7? 35 . .5 13 Prerentage unemployed . .. INlOME DISTRIAUTION Percent o=f national, income recived by higheat 5% 3... .Ick/ Percent ofnational income re eived by highest 20% .... ci 7T Pnr-ant of national incone received by lceent 202% . ....7 Percent of national . Icome received by lowest 612% . ....7 7k DISTRIBUTION IF LAND DOWERSHIP S owned by top 16% of nenere S owned by sm,alleet 10% nf owners HEALTH AND NUTITIONI Population per Physician 72,000 3 ~ 7 ' 71 iso( /2 2,0 7:15.c Population per nureing person .. 1 31,) 1 7T i I ,o6 7r Papulation per boapital bed 7,01)0/ 6 15 /c, 3,03i 350i~ Per capita calorie supply an % of requirements /5.. 8" /, 1 951' Per cepita pr-tnin supply, totel (gra.s per dayT~/6 . 2~ 77r 63 55 1. 77 Of ohich, aninal and pulse ..7 5 i13 Death rate 1-5 yerar /7... EDUCIATDIN Adj-usted /8 Prinary school enrollment ratio 13~ 1'I, /1 210 in / Adjueted 7 secondary echool enoletratio 2 45 7? 1 , ~ Yoars of schooling provided, firet and second level io 1, 12; 23 Vczahiuoa1 enrollment as 5 of sec. school enrollment - / /1 21 'I,7 Adult literacy rate 5 10lo5727 lx ..,7 HOUDINI Average No. of persons per roan (urban) 2.. .0 , Percont of occupied unite withovt piped water 7..~- c A.cnos to electricity (an 5 of total populatine) ...., Percect of rural ppuletiom connected to electricity.... Radio receiners per 1000 peoeulation / 5 6 134 732 Pa-engee care per 10D0 population ILI. / 17 Electric power conmuiption (kwh P.c.) 1I/f 620 502 3,332p Newsprint consumption p.c. kg per year ...0.02 3.5 25.0 Nuton, Figurin refer either to the latewt perinde or to account of environmental tempera ture, body weighte,an the latest years. Lateet periods refer in prinoiple to dietribati-r by age and mex of national popalatiore. the years 1956-60 or 1966-70; the latest yeare in prim- /6 Protein standards (requtrementa) for all countrien an e-tab- ciple to i960 and 1970. Only significanstly different limbed by USDA Economic R-enroh Servine provide for a m.i-ici periods or yeare are footnoted eeparately. allowance of 60 grams of total protein per day, and 20 grams of /1 The Per Capita GNP estimnatee for yearn other thans 1960 animal and pulse protimi, of which 10 grams should be animal is at marke.t pricee, caloulated by the mane cnvnerelom protein. Thesm st-andards are somewhat lover than thone of 75 technique as the 1972 World Bank Atlas. gas of total prutein and 23 grain of animal Protein an an /2 Aca-ge ouriber of daughters pe woman or reprodantive average for tha world, propuned by FAQ in the. Third W-rlA Focd age. Surve.. /3 Papulation greeth rat" are for the decadee ending in /7 Some tudien have suggested that nrude death rates of children 1960 and 1970. ages 1 through S nay be used an a first approxlmation index of /A Ratio of under 15 and 65 ana over age brackets to malnutrition. those in labor fame. bracket of ages 15 throagh 64. IN Percetage enrolled of correspondiog population of scuco1 age /5FAO reference atandards represent physiological re- an defined for ach country. qairenent. for norml activity and health, taking /a il noctimate; /b Cites of 5,000 inhabitants or more; /0 fities of 10,100 or oars ith.labi tan in identifiable aggla- orations alth Tseneeialaly arban cbaracteristics; Id Urban pouplation defineid an AddAm Auaba, Ainnura, towns and snerkt cente..; Ine Cn-onne (Gese.inden) of more tranr 5,000 inhabitants; /f 1911: /g 35-59 y...rn; Ic (10 Y.a,o andner /1 baton of populatino under 13 and 35 and over to total labor forco; 7j Gnpitaju of dintrieto -nedtiovoe -pulatod nc<r attn anch urban enaracterietion as streets, plazas, water supply s301tv, seirg nynte-, electric ligh to, ntc.; lb t-ce to ve-nn-l-aly active pcpulation; /I 1969; In M-ae-nidai-oe nod puilie: Oualta nurnan, In Includin,g edcai-a; In 11; /p Including naternity hospital bode; rq Inclading local urrurol1 aod naternity heopi-tal beds,; /r 13-; 77 1 969170; /t 30ccluden Indian jungle population; Iu 196d; Ic lfiniti-n If literacY un~chcn; Iw 1Q71-- In lace, I; ya-.cr ai-19591 a Inclading cenice- operatod by police atcer gararceneta) security nrg~nnllticcu. R3 Docenber 213,, 1973  ANNEX I Page 2 of 3 pages 1/ ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1971/72 ANNUAL RATE OF GROWTH (%, constant prices) US$ Mln. GNP at Market Prices 1,000 (Approx) Approximately 2.2% (1964/65-1969/70) OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1970 Value Added Labor Force-/ V. A. Per Worker US$ Mln. % in 000' US $ Agriculture 635 69.0 4,579 94.h 139 Industry (incl cottage ind.) 83 9.0 Services 92 10.0 ( 273 ( 5.6 (1,044 Unallocated 110 1?.0 Total/Average 920 100.0 2 100.0 190 GOVERNMENT FINANCE General Government ( NR Mln.) (NR Mln.j % of GDP 1971/72 1972/73 1971/72 Current Receipts 553 614 5.3 Current Expenditure 325 403 381 Current Surplus 72 11 2.2 Capital Expenditures 565 618 5.3 External Assistance (net) 281 248 2.6 Internal borrowing and use of' Cash Balances 56 159 0.5 Mid-July Mid-July Mid-July Mid-July Mid-July MONEY, CREDIT and PRICES 1965 1970 1971 1972 1973 (Million NR outstanding end period7 Money and Quasi Money 489 892 1056 1239 1490 Bank credit to Public Sector 87 167 ?18 289 313 (April 1973) Bank Credit to Private Sector 136 2'9 321 00 443 (Percentages) Money and Quasi Money as % of GDP 7.0 10.0 10.1 Bank credit to Public Sector (in % GDP) 1.2 1.8 2.1 Bank credit to Private Sector (in % GDP) ?.0 ?.9 3.0 1/ These figures should be treated with extreme caution. Estimates of agricultural production are highly tentative and as a consequence, the growth and level of GDP ae subject to wide margins of error. 2/ Total labor force; unemployed are allocated to sector of their normal occupation. "Unallocated1' consists einly of unemployed workers seeking their first job. .. not available  ANNEX I Page 3 of 3 pages TRADIT, PAYMENTS AND CAPITAL FLOWS a/ TRANSACTIONS IN CONVERTIBLE CURRENCIES 1972/73 (Revised) 1970/71 1971/72 Estimates EXTERNAL DEBT. MARCH 1973 (Millions US $) US $ Mln Receipts 25.l 32-3 33.1 Exports 8.6 12.7 13.1 Public Debt 64.3 Other receipts 16.5 19.6 20.0 Non-Guaranteed Private Debt 0.9 Total outstanding (including Payments 16.9 24.3 22.9 50.4 undisbursed) Imports 7. 15.217 Other payments 9.1 9.1 5.3 Surplus or deficit (-) 8.2 8.0 10.2 GROSS OFFICIAL RESERVES (US$ MLN) July 1970 July 1971 July 1972 May 1973 IBRD/IDA LENDING (January 19714) (Million US $): 98.4 108.3 121.1 127.5 IBRD IDA Of which Outstanding & Disbursed - 2.3 Indian rupee Undisbursed - 17.6 holdings 26.2 26.0 23.7 16.8 Outstanding incl. Undisbursed - 19. 9 RATE OF EXCHANGE Up to Februr 20,19~73 US $ 1.00 NR 10.125 NR 1.00 - US $ 0.099 Since Febr-uary 20, 1973 UST$1.00 - NR 10.56 NR 1.00 = US $ 0.095 a/ Since substantial parts of Nepal's foreign trade are unrecorded, there is no overall balance of payment available. This table is a balance of payments with countries other than India and represents about 10% of Nepal's foreign trade. Note:- Petroleum imports, which amounted to about $7 million in 1972, we!re so far purchased from India and paid in Indian rupees.   ANNEX II Page 1 STATUS OF BANK GROUP OPERATIONS IN NEPAL A. Statement of IDA Credits as of March 31, 1974 US$ Million Credit Amount (less cancellation) No. Year Borrower Purpose IDA Undisbursed 166-NEP 1969 Kingdom Telecommu- 1.7 0.4 of Nepal nications 223-NEP 1970 Kingdom Highways 2.5 1.6 of Nepal 291-NEP 1972 Kingdom Tourism 4.2 4.2 of Nepal 373-NEP 1973 Kingdom Irrigation 6.0 6.0 of Nepal 397-NEP 1973 Kingdom Telecommu- 5.5 5.5 of Nepal nications Total Outstanding 19.9 - Total Undisbursed 17.7 B. ProJects in Execution 2/ Credit No. 166 Telecommunicattions Project US$1.7 million Credit of November 10, 1969; Closing Date: July 31, 1974 After initial delays in making the credit effective, delay in signing an agreement with India for some oif the complementary aid provisions and delays in taking procurement action, this project is now proceeding satisfactorily and completion is expected by December 1974, some 18 months behind schedule. 1/ Prior to exchange adjustments. 2/ These notes are designed to inform the Executive Directors regarding the projects in execution and in particular to report any problems which are being encountered, and the action being taken. They should be read in this sense and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II Page 2 Credit No. 223 Highway Project US$2.5 million Credit of December 21, 1970; Closing Date: June 30, 1975 Difficulties in acquiring land and procuring certain materials have delayed construction of the five project bridges by over 12 months. Procedures involved in opening letters of credit with some suppliers and procurement problems with a foreign contractor delayed the delivery of certain workshop and highway equipment by about eight months. Further delay is anticipated and the bridges are not expected to be completed before the end of 1974. The bid price for road bridges is about 10 percent above the cost estimate; however, it is still within the contingency allowed. The estimated cost of other project elements is the same as appraised. The project is expected to be completed by the end of 1975, a year behind schedule. Credit No. 291 Tourism Project US$4.2 million Credit of March 22, 1972; Closing Date: September 30, 1975 The Credit became effective on November 9, 1972. Due to delays in appointing qualified architectural, engineering and project management consultants, and the sponsors proposing changes in the scope of the subprojects, the project is more than a year behind schedule. Consultants have been appointed and begun design work on the Yak and Yeti subproject; construction should begin towards the end of this year. The basic scope of the Annapurna subproject has been agreed by the parties con- cerned. Appointment of consultants and arrangements for the future management of the hotel are being finalized. Credit No. 373 Bir_anj Irrigation Project US$6.0 million Credit of April 18, 1973; Closing Date: December 31, 1978 A Project Board has been established and a General Manager nominated. A detailed engineering and construction program up to September 1974 has been drawn up and the necessary staffing schedule agreed. Progress is satisfactory. Credit No. 397 Telecommunications Project II US$5.5 million Credit of June 20, 1973; Closing Date: June 30, 1980 The Credit became effective on September 11, 1973. No problems are expected at this stage.  ANNEX III Page 1 NEPAL - WATER SUPPLY AND SEWERZAGE PROJECT CREDIT AND PROJECT SUMMARY Borrower: Kingdom of Nepal (HMG). Beneficiary: Water Supply and Sewerage Board (WSSB). Amount: US$7.8 million equivalent. Terms: Standard. Relending Terms: HMG will onlend the proceeds of the credit to WSSB at 6 percent interest per annum for 25 years including 5 years grace on the payment of the principal and interest. Project Description: The project provides for improving and extending water supply and sewerage facilities in Kathmandu Valley and Pokhara and consists of the following: A. Water Suppl (i) construction and equipment of three wells and a pumping station including the development of three springs at Pharping to supply about 200 1/sec for Kathmandu; (ii) construction of a 4500 m3 reservoir, transmission and distribution pipelines including house connections and water meters for Kathmanclu, Pokhara and eight villages; (iii) construction of three intakes and pipelines at the Kali Khola Springs to augment Pokhara water supply; (iv) improvements and repairs to existing water supply facilities, new maintenance facilities including vehicles, buildings and equipment for data collection and billings for Kathmandu Valley and Pokhara; and (v) drilling and testing five exploratory wells in Kathmandu and one in Pokhara.  ANNEX III Page 2 B. Sewerage (i) construction of about 40 km of severs in Kathmandu and Lalitpur including waste stabilization ponds at Dobighat and Kodku; and (ii) maintenance facilities including one vehicle. C. Training Institutional and on the job training of WSSB staff. D. Consultants Services Engineering and management services to complete the project, and conduct a tariff study and feasibility studies and detailed engineering for future construction.  ANNEX III Page 3 Estimated Costs: (US$ 000) Item Local Foreign Total Water Supply Spring and well sources 34 308 342 Pumping Station 23 160 183 Pipelines 430 914 1,344 Reservoir 90 117 207 Treatment Plant improvements 17 *59 76 Meters and fittings 38 296 334 Vehicles and equipment 14 97 111 Staff quarters 21 7 28 Subtotal 667 1,958 2,625 Sewerage Sewers 673 493 1,166 Sewer outfall 123 153 276 Pumping Station 106 273 379 Treatment Plant 384 147 531 Vehicles and equipment - 20 20 Subtotal 1,286 1,086 2,372 Land 437 437 Training 4 - . 4 Consulting services 163 1,580 1,743 Subtotal 2,557 4,624 7,181 Contingencies Physical 391 609 1,000 Price 973 1,217 2,190 Subtotal 1,364 1,826 3,190 TOTAL 6,450 10,371 Financing Plan: IDA Credit 1,350 6,450 7,800 HMG 2,571 - 2,571 TOTAL 3,921 6,450 10,371  ANNEX III Page 4 Estimated Disbursements: Annual Cumulative IDA Fiscal Year US$'000 US$'000 1975 850 850 1976 2,400 3,250 1977 2,950 6,200 1978 1,600 7,800 Total 7,800 Procurement Arrangements: Goods and services required for the project (except for con- sultants' services) would be by international competitive bidding, except for the following which may be either by force account or procured by the Borrower according to the usual governmental procedures: (i) Contracts for civil works for water supply and sewerage extensions, house connections and metering, small repairs, improvements and small buildings each costing less than the equivalent of $50,000; (ii) Contracts for electricity sup- plies each costing less than the equivalent of $50,000; and (iii) items of equipment each costing less than the equivalent of $25,000. The total to be expended on such contracts would not exceed the equivalent of $250,000. The credit provides for the retroactive financing not exceeding $260,000 of expenditures incurred after December 1, 1972 for consultants' services and equipment required for the on-going exploratory drilling program. Consultants: 1. For design, preparation of bidding documents, bid evaluation and supervision of construction of the project; 2. For a tariff study; and 3. For feasibility studies and preliminary and final engineering for the next stage project. Rate of Return: The financial rate of return is estimated at 7.6 percent. Appraisal Report: No. 270a-NEP, dated April 10, 1974.  82- 5u 56 5 . N3 82- S4' N E p A L -_ WATER SUPPY AND SEWERAGE PROJECT I N D In A T I E T EXISTING AND PLANNED WATER SUPPLIES O Existing Water Supplies A Water Supplies Under Construction o Towns and Villages Enist,.g Roads Roods Under Construction tobe cornpleted by 1974 / - - - 5 /Roads Expected to be completed by 1976 A < t ( | K A R N A L I X <+<;, > ' - - Railways IDondeldhuro \ _OSilgar,-Doti 0 tS Jurnlo ) ~< a _ -X- Ropeway * Comn,ercial Airports Tonokp| f > |// > R,rikot f j_\ Riven - d ->R- <Zonal Boundories Insernt tional Boc,daries 1- Gar I sDoilekh DHAWA\L AGIpRI .8jho,ia&Lnigorki <T,) 9\rF \/ 1J1 Chisal I rkhet <,, CHIN A 't. B ung0 GA N PK .ro8 k 0 ( T I B E T) 28' AopT e 9aI ni.. &Iarm/r Kodac'sj ~ 25 _________ _________ ________ _________ Jarwi~ U M N I Naroyang h C 'milayL-Ua i aoy i " rw ~ ~ ~ nci tTr. r nis 4"Ba~aDcI Cjkarikiot ~o Lko* ~ ~ ... ef- 1,~~~~~~~~~~~~~~~~~~~~~~~~~' .~ Rnju eranm IND A INA2 -u..0 bn Jo ,holdp Lhong0Naslbr. (Tbt)Bik ~ , ,ekgnI.0 9 Lo dnd ~~~-' 0 20 Ad 60 80 00 20 iuo 00~~~~~~~~~~~~~~~~kI.y. igt, 0 " SIKKIM *Q .1~~~~~~~~~~~~6 5 LN o0 20 0 10 K.iprii no .baeem S.u ,' Ii~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4_Jb1 26 8?' 84' ~~~~~~~~~~~~~~~~~~~~~~~~~~, i-i~~~~~~bhD.   NEPAL WATER SUPPLY AND SEWERAGE PROJET /- KATHMANDU SEWERAGE EXISTING AND PROPOSED SEWERAGE SYSTEM - Existing Mo,, Sowers r) c; . Proposed S.wars(200-m dameter ond ab\n-el -1-Proposed Pumping Mo,is "'. Open Sewers Proposed Purpirg Sation |( E TREATMENT PLANTS Present Project. Future Ep.ns-on- Cl >11 Built-up Areos Lu -.. Main Roads.