Nepal - Technical Assistance Project

t,D?l B Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-1903-NEP REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE KINGDOM OF NEPAL FOR A TECHNICAIL ASSISTANCE PROJECT August 20, 1976 This document has a restricted distribution and may be used by recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT US$1 = NRs /a 12.50 NRl = US$0.0800 NRs 100,000 US$8,000 NRs 1,000,000 = US$80,000 FISCAL YEAR Nepal Fiscal Year - July 16 to July 15 /a Nepalese Rupees  FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE KINGDOM OF NEPAL FOR A TECHNICAL ASSISTANCE PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Kingdom of Nepal for the equivalent of US$3.0 mil- lion on standard IDA terms to help finance a technical assistance project. PART I - THE ECONOMY 2. The most recent economic report entitled "Review of the Economic Situation of Nepal" (Report No. 1180-NEP) was distributed to the Executive Directors on July 30, 1976. The principal findings and conclusions of this report are included below. Country data are shown in Annex I. 3. Nepal has been classified by the United Nations as one of the least-developed countries in the world. Its per capita income in 1975 was estimated at $111 per year and the literacy rate at about 14%. Serious efforts toward development have been underway only since the 1960s. Develop- ment expenditures have increased rapidly from NRs 232 million in 1964/65 to NRs 967.2 million in 1974/75. About half of this has been financed with external assistance, notably from India, the United States and the People's Republic of China. About 80% has been in the form of grants. 4. Nepal's economic growth has been slow. From 1965-67 to 1973-75, the average annual rate of growth of GDP was only 2.2% in real terms. During the same period, population increased at a rate of just over 2%. There was, therefore, hardly any increase in GDP per capita. Agriculture accounts for about two-thirds of GDP, 80% of export earnings and about 90% of employment. Foodgrain production has grown at a lower rate than population since the mid-1960's. If present trends continue, domestic consumption per capita or exports of foodgrains will fall. Nepal is currently exporting over 200,000 tons of rice a year, accounting for about 60% of export earnings. Some pro- gress was achieved in manufacturing, but this still accounts for only 3% of GDP. 5. This slow growth largely reflects Nepal's difficult mountainous ter- rain and limited resource potential, as well as the priority given to major road development with long gestation characteristics. This priority was probably an inescapable necessity. When the country began to come out of its isolation in 1951, it had no transportation and hardly any trained people to administer This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - 2 - economic development. At least one generation was needed to build the basic physical and administrative infrastructure required for successful development. In that respect, substantial progress has been achieved. 6. In the past, only 20% of public investments was made in the directly producing sectors, largely in the Kathmandu Valley, and, to a lesser extent, the eastern Terai plains. The development of the Kathmandu Valley, where 4% of Nepal's population lives, has been a success story. New cultivation meth- ods have been widely adopted and the farming community is enjoying an improved standard of living. With the Fifth Five-Year Plan (1975/76-1979/80), Nepal has shifted its priorities toward the productive sectors including the more quickly yielding area of its very substantial hydroelectric potential. Half of planned development expenditures is tentatively allocated to agriculture, rural develop- ment, industry and power. The agricultural objective of the Fifth Plan is greater balance in regional growth and more equal income distribution. Largely because of the spillover of large infrastructure projects from the Fourth Five-Year Plan and absorptive capacity problems, the country may experience serious difficulties in redirecting its development along this new and very pertinent course; initially, the Government will, therefore, have to concentrate its new development emphasis on a limited number of quickly yielding projects. 7. Nepal is handicapped by its landlocked location in Central Asia. The country depends on India for most of its requirements of capital goods, manufactured consumer goods and raw materials. In recent years, when India experienced raw material shortages of its own, Nepal felt compelled to pro- tect its development momentum by importing fairly large quantities of cement and fertilizer from overseas. At the high prices prevailing at the time, and due to high charges for overseas freight and transit through India, these imports resulted in a sharp increase of the trade deficit. Until the end of 1974, the trade deficit had been more than offset by remittances and pensions, interest on external reserves and tourism. Over this period, balance of payments surpluses amounted to about $10 million a year and foreign exchange reserves were at the comfortable level of $139 million in November, 1974 (more than 12 months of imports). However, because of the increase in overseas imports at high prices and a concurrent increase in the outflow of private capital, foreign exchange reserves declined to $105 million by September, 1975. Although the reserve level has stabilized since then, satisfactory balance of payments management will be difficult unless Nepal succeeds in increasing its foreign earnings and obtaining increased foreign assistance. 8. The deterioration in the external payments position induced the authorities to devalue the Nepalese Rupee against the U.S. dollar from NRs 10.56 to NRs 12.50 in October, 1975. Rates for other foreign currencies are established daily by the Nepal Rastra (Central) Bank on the basis of the parity rates between the U.S. dollar and such currencies. The parity rate with the Indian Rupee remains unchanged. This selective devaluation was addressed to the problems of increasing earnings of convertible foreign ex- change and reducing the demand for such exchange, encouraging labor-intensive investments, reducing the diversion of trade through unofficial channels,  - 3 - restoring the profitability of jute exports and increasing revenues in Hill areas by enhancing the rupee value of pensions and remittances received mainly by retired Gurkhas who had served abroad. 9. This action followed measures in April, 1975, to strengthen domestic resource mobilization. Consumer subsidies on basic commodities, such as rice and sugar, which had been growing rapidly, were almost entirely rescinded. More recently, the authorities have substantially raised electricity and water charges from previously very low levels. In addition, the interest rate struc- ture was reformed to increase private savings and rationalize resource alloc- ation. This reform entailed an increase of the two-year fixed savings deposit rate from 9-3/4 to 16% per annum. Lending rates of commercial banks were raised to 15-18% per annum and those of financial institutions to 10-16%. These rates were introduced when the rate of inflation was about 20% a year. Fixed deposits have increased markedly since then and the inflation rate has declined to 8% a year. 10. It may be possible for development expenditures, including foreign assistance, during the Fifth Plan (between 1975/76 and 1979/80) to reach about $500 million (in 1974/75 prices), i.e., about 40% more in real terms than dur- ing the previous plan (1970/71- 1974/75), but 10% less than the Government's minimum program and 30% less than the maximum program. The main constraint on reaching the investment target is not only finance but also inadequate ability in Nepal to prepare and implement projects. Close consultations between the Government and foreign donors will, therefore, be needed to determine not only the right composition of development assistance but also the technical advice required for building up the domestic ability to prepare projects. 11. At the same time, the Government will have to continue its efforts to increase domestic saving. Due to poverty, slow economic growth and the low degree of monetization of the economy, revenues have remained at a relatively low proportion of GDP. In the light of these constraints, the 7.3% annual growth rate of revenues (in real terms) during the last five years gives proof of a commendable revenue effort. Even if revenues continue to rise at the same rate, however, budgetary savings are likely to decline gradually as a proportion of GDP. The reason is the expected sharp increase in recurrent expenditures in social sectors, especially in education, increased maintenance and management costs of previous infrastructure investments, and additional administrative outlays required to strengthen Government services. As a result, domestic resources are unlikely to finance more than about 40% of projected public investment in the next five years. Since it would be impru- dent for Nepal to draw down its foreign exchange reserves to any large extent, the Kingdom will have to rely largely on foreign financial assistance for the remainder of the investment program. In view of the scarcity of domestic resources, it is desirable that foreign financing continues to be in grants or highly concessional credits and to include part of the local currency requirements of development projects. 12. The prospects that aid will be forthcoming in the required amount appear favorable. As noted in paragraph 3, the bulk of foreign aid has been in  the form of grants. As of December 31, 1975, official foreign debt amounted to only $120 million, 28% of which were IDA credits. Of the $120 million, $86 million remained undisbursed. This low utilization is largely due to the fact that 80% of foreign loans has been contracted since 1970. Consequently, debt service was about $1.5 million in 1975 or equivalent to about 2% of exports of goods and services. However, future assistance may increasingly take the form of loans. Most of them will probably be on concessionary terms, which is highly desirable in view of Nepal's poverty and limited export pro- spects. In view of the accelerated development efforts, external public debt is expected to rise and, based on the trend in recent years, may reach about $350 million by 1980, of which approximately 50% could be in IDA credits. The total debt service ratio by 1980 is, however, projected to remain below 10%. Debt service to the Bank Group alone would be less than 1% of exports of goods and services. PART II - BANK GROUP OPERATIONS IN NEPAL 13. The first IDA credit to Nepal in the amount of $1.7 million equiva- lent was made in FY70 for a telecommunications project. This was followed by credits for highways ($2.5 million), tourism ($3.2 million), irrigation ($6 million), a second telecommunications project ($5.5 million), a water supply and sewerage project ($7.8 million), a settlement project ($6.0 million), a power project ($26.0 million), a rural development project ($8.0 million), and a groundwater project ($9.0 million). The proposed credit would bring the total amount of IDA assistance to Nepal to $78.7 million equivalent, net of cancellations. No Bank loan has been made to Nepal. IFC made its first in- vestment in Nepal (US$3.2 million) in a hotel project in Kathmandu in FY75. Annex II contains a summary statement of Bank Group operations as of June 30, 1976, and notes on the execution of ongoing IDA projects. It shows certain delays in the implementation of these projects, particularly during the in- itial periods. These delays are largely due to Nepal's limited technical and managerial capabilities. In order to assist Nepal in coping with this con- straint, considerable technical assistance is being given in the form of in- puts of staff time in Washington, from our Resident Mission in Kathmandu, and during frequent missions to Nepal. As a result, improvements in project im- plementation and the rate of disbursements are being realized. During FY76, $2.8 million were disbursed, compared to $4.3 million disbursed during the previous six years. However, there is scope for substantial further im- provement. 14. The Bank Group's objectives in Nepal are designed to: (a) place ma- jor emphasis upon directly producing sectors, particularly agriculture; and (b) continue assistance for the development of complementary infrastructure, including feeder roads, communications (particularly between the Hills and the Terai), and hydroelectric power. 15. Preparation work is being carried out for a number of projects, including a third irrigation project, a DFC project, a second water supply and  sewerage project and a feeder roads project. In view of the institutional con- straints on development and shortage of trained personnel in Nepal, technical assistance and training would be important components of these projects. PART III - THE NEED FOR TECHNICAL ASSISTANCE 16. Nepal's limited absorptive capacity at every stage of the project cycle is a major constraint on its development. It has restricted Nepal's ability to make full use of aid available from bilateral and multilateral sources, as few projects have been available which are adequately prepared for investment decisions by these agencies. Project selection, in turn, has sometimes been decided on the basis of available studies or the preferences of donors, rather than on the basis of development priorities, causing mis- allocation of some of the limited resources available. 17. Nepal is trying to raise the currently very low levels of productiv- ity of agriculture on which the majority of the population depend for their livelihood. Furthermore, the Government is elaborating a program to diversify agriculture into high value cash crops, partly for export, and to increase the range and efficiency of agricultural and other industries. To this end, there is an immediate need to generate and prepare projects suitable for external financing and to enhance project preparation capability. 18. Project preparation units exist in technical ministries. They were recently supplemented by the creation of two quasi-government consulting or- ganizations: the Agricultural Projects Services Center and the Industrial Services Center - both of which are designed to investigate and prepare pro- jects within their sectors for comparatively small-scale investments and to assist government agencies in project preparation. However, Nepal does not have a sufficient number of trained, experienced personnel to staff these units adequately while, at the same time, meeting the needs of project exe- cution to which the Government has, rightly, given highest priority in the allocation of its most highly qualified staff. Thus, the capacity of the ministerial units and the two agencies together is inadequate for the task of formulating projects on the scale the Government considers necessary. The proposed credit would augment this capacity by providing technical as- sistance, through these units and agencies, for the preparation of pre- investment studies. 19. While bilateral agencies and the UNDP are expected to continue to provide most of Nepal's requirements for technical assistance, the level of need is beyond that which can be expected of these agencies over the next two or three years, particularly because of the financial constraints under which UNDP will be operating during this period. Thus, the proposed credit is intended to supplement the technical assistance funds available from UNDP and other multilateral, as well as bilateral, sources in order to narrow the gap between these resources and Nepal's technical assistance needs.  PART IV - THE PROJECT 20. The proposed project would assist the Government in the prepara- tion of feasibility studies, design and engineering work in order to develop a pipeline of high priority projects suitable for financing by IDA and other donors. The proposed project would also assist in the strengthening of in- stitutions responsible for project preparation and implementation through the provision of consultants and training. It would be completed by the middle of 1980. A Credit and Project Summary is attached as Annex III. 21. Funds from the proposed credit would be allocated to specific sub- projects by mutual agreement between the Government and the Association (Sec- tion 3.01 of the draft Development Credit Agreement (DCA)). Sub-projects have not been specified in detail with a view to maintaining flexibility in imple- mentation, but are expected to fall primarily into the agricultural, agro-in- dustrial and industrial sectors. Investment possibilities include: minor irrigation, horticulture, livestock, textiles and flour-milling. They would form part of the pipeline of projects for consideration by the Government and external agencies through 1981. Organization and Implementation 22. Consultants would work directly with and for the technical minis- tries and other appropriate Government agencies in project preparation. The Foreign Aid and Program Division of the Ministry of Finance is the Government's agency for coordinating all foreign aid. Although it is not a large Division, it has competent, qualified staff. The Division would be responsible for ensuring effective coordination of the various government ministries and agencies involved in the implementation of the project (Section 4.01 (b) of draft DCA). The Foreign Aid and Program Division would have ultimate responsibility for the screening and selection of the studies to be undertaken. The consultants employed shall be satisfactory to the Association, and their terms of reference and the final contracts between the Government and the consultants would be subject to agreement between the Government and the Association (Section 4.02 of draft DCA). Consultants' terms of reference would emphasize the importance of training local staff so as to reduce the need for foreign technical assistance in the long term. It is expected that most of the technical assistance would be provided by foreign consultants. However, qualified local consultants may be used either independently or in collaboration with foreign firms. The Association would also provide assist- ance to the Government in supervising the work of the consultants. Project Cost 23. Although proposed subprojects have not as yet been fully identi- fied, it is expected that approximately ten studies would be prepared under the proposed project. Total cost of the studies would amount to about US$4.0 million equivalent, US$2.7 million of which would be in foreign exchange and US$1.3 million in local currency. For a program of studies of this size, the  - 7 - Government contribution in counterpart staff to work with the consultants, plus equipment and facilities, would amount to approximately 25% of total cost or about US$1.0 million equivalent. Disbursement 24. The credit would finance 100 percent of the total costs of consult- ants, whether foreign or local, and whether hired directly or as sub-con- tractors, and 100 percent of foreign expenditures for equipment and materials for sub-projects. Credit funds would also be available for financing the foreign exchange cost of training programs associated with project preparation and implementation (Section 2.02 (b) of draft DCA). Equipment and materials required to carry out sub-projects would be procured on the basis of inter- national competition under procedures consistent with the World Bank Group guidelines (Section 3.03 (a) of draft DCA). Equipment and material cost- ing less than US$10,000 equivalent may be procured through normal Government procedures, provided that the total cost of such procurement does not exceed US$100,000 equivalent (Section 3.03 (b) of draft DCA). Benefits and Risks 25. The major benefit of the proposed project would be the building up of a pipeline of projects suitable for financing by the Government and external agencies. This, in turn, should help Nepal make more effective use of domes- tic and external resources for the development of its economy. The proposed project would also assist in enhancing project preparation capabilities of the technical ministries and associated agencies, and in the long term, reduce dependence on foreign assistance for these purposes. 26. Risk in implementation of the project arises mainly from the lengthy decision making process within the Government which could cause delays in ap- pointment of consultants. In order to reduce this risk, the Foreign Aid and Program Division of the Ministry of Finance would be responsible for ensuring effective coordination of the various Government agencies involved (paragraph 22). Ultimately, the proposed project would not benefit Nepal if the Govern- ment and external agencies fail to act on the pre-investment studies. Consider- ing the general shortage of well prepared projects, and taking account of the prospects for the formation of an aid coordination group for Nepal later this year, these risks are regarded as slight. PART V - LEGAL INSTRUMENTS AND AUTHORITY 27. The draft Development Credit Agreement 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 of the Association, and the text  of a draft resolution approving the proposed credit are being distributed to the Executive Directors separately. Features of special interest include those referred to in paragraphs 21, 22, and 24 of this Report. 28. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 29. I recommend that the Executive Directors approve the proposed Development Credit. Robert S. McNamara President Attachments August 20, 1976  TABLE 3A PYA I Of 4 pages NEPAL - SOCIAL INDICATORS DATA SHEET LAND AREA (THOU KM21 NEPAL REFERENCE COUNTRIES (1970) TCTAL 140.8 MOST RECENT AGRIC. 39.8 1960 1970 ESTlltATE INOOhESIA INDIA TURKEY GNP PER CAPITA tUS$S 60.0 60.0 90.0 100.0 110.0 450.0 POPULATION AND VITAL STATISTICS POPULATION (MID-YR, MILLION) 9.2 11.1 12.0 115.6 538.1 35.2 PGPULATICN DENSITY PER SQUARE KM. 65.0 80.0 85.0 61.0 168.0 45.0 PER SQ. KM. AGRICULTURAL LAND .. .. 24.o VITAL STATISTICS CRUDE BIRTH RATE PER THOUSAND 46.3 44.7 42.9 45.9 42.7 40.6 CRUOE DEATH RATE PER THOUSAND 27.8 Mg.6 20.3 20.6 18.8 14.4 INFANT MORTALITY RATE (/THOU) .. 2-30D.0 .. .. 130.0 145.0 LIFE EXPECTANCY AT BIRTH (YRS) 35.6 40.6 43.6 45.0 47.2 54.4 GROSS REPO3DUCTION RATE 3.0 3.0 2.9 3.2 2.9 2.6Z'Ab POPULATICN GROWTH RATE tS) TOTAL 1.5 1.8 2.8 2.0 2.3 2.5 URBAN 6.4 4.0 5.6 3.6 3.5 4.2 URRAN PCPULATION (I OF TOTAL) 3.6 410 4.0 17.5 20.2 31.2 AGE STRLCTURE tPERCENT) 0 TO 14 YEARS 39.9 42.0 40.4 44.1 42.0 41.8 15 TO 64 YEARS 57.0 55.0 56.5 53.4 55.0 53.9 65 YEARS AND OVER 3.1 3.0 3.1 2.5 3.0 4.3 AGE DEPENDENCY RATIO 0.6 0.8 0.8 0.9 0.8 0.9 ECONOMIC DEPENDENCY RATIO 1.C .. 1.2 .. 1.21A 1.1 /a FAMILY PLANNING ACCEPTCRS (CUMULATIVE, TICU) .. 86.5 378.9 / 259.3 11308. USERS (I OF MARRIED WOMENI .. .. 13.7 .. ,. 8.2 EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 4300.0 ., 4900.0 *- 221000.0 l 14500.0 d LABOR FCRCE IN AGRICULTURE tS) 94.0 .. 94.0 .. 71.0 67.0 UNEMPLOYED (I OF LABOR FORCE) .. .. .. 2.0 / 3.0 / 4.0 /a INCCME DISTRIBUTION % OF PRIVATE INCOME REC O BY- HIGHEST 5Y OF HOUSEHOLDS .. .. .. .. 25.0 d 32.8 HIGHEST 202 OF HOUSEHOLDS .. .. .. .. 53.0 60.6 LCWEST 202 OF HOUSEHOLDS .. .. .. ., 4.T 2.9 LOWEST 40% OF HOUSEHOLDS .. .. .. .. 13.1 j 9.4 DISTRIBUTION OF LAND OWNERSHIP Y OWNED BY TOP 10 OF OWNERS .. .. .. .. .. 53.0 S OWNED BY SPALLEST IO OWNERS .. .. .. .. .. 0.9 HEALTH AND NUTRITION POPULATICN PER PHYSICIAN 72000.0 49770.0 ., 27650.0 4800.0 2220.0 POPULATION PER NURSING PERSON .. 35600.0 .b .. 8010.0 5110.0 1880.0 PCPULATICN PER HOSPITAL BEC 7000.OL& 6750.0 .. 1720.0 1620.0 490.0 PER CAPITA SUPPLY OF - CALCRIES (Y OF REQUIREMENTS) 92.0 93.0 95.0 89.0 93.0 110.0 PROTEIN (GRAMS PER DAY) 51.0 52.0 49.0 43.0 53.0 78.0 -OF WHICH ANIMAL AND PULSE 9.O A 11.0 .. 14.0 16.0 22.0 DFATH RATE I/THOU) AGES 1-4 .. .. .. .. 15.0 b EOUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 10.0 31.0 34.0 69.0 68.0 j 111.0 L SECCNDARY SCHOOL 6.0o. 7.0 *- 12.0 28.0 28.0 YEARS OF SCHOOLING PROVIDED (FIRST ANC SECOND LEVEL) 10.0 10.0 10.0 12.0 12.0 11.0 VOCATIONAL ENROLLMENT tS OF SECONDARY) 0.2 6.0 29.0 6.0 I 14.0 AOULT LITERACY RATE t2) 10.0 I4.0 .. .. .. 55.0 a HOUSING PERSCNS PER ROOM IAVERAGEI 2.0 . .. .. .. .. 1.9 OCCUPIEO DWELLINGS WITHOUT PIPED WATER I) 50 .. .. .. .. 64.0 ACCESS TO ELECTRICITY IS OF ALL DWELLINGS) 30.0Zj .. .. ,. .. 41.0 RURAL DWELLINGS CONNECTED TO ELECTRICITY (S) .. .. .. .. 18.0 CONSUMPTION RADIO RECEIVERS (PER THOU PCPI 1.0 5.0 9.0 114.0 21.0 89.0 PASSENGER CARS (PER THOU POP) O.2 4f 0.4 *- 2.0 1.0 4.0 ELECTRICITY (KWH/YR PER CAPJ 1.0 6.0 9. /a 20.0 114.0 247.0 NEWSPRINT 1KG/YR PER CAP) _ _ _ 0.2 0.3 0.7 SEE NOTES AND DEFINITIONS ON REVERSE  Page 2 of A pages NOTES Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961, for 1970 bo tw.ec 1968 and 1970, and for Most Recen.t fotimce between 19 71 ad 1973. - Over the past forty years, Turkey's econoy has grow ora epec,table pace, starting from a very emai been. in so doing the coe-try has formulated objecives and Race.d problema and o-tralots which, tot a. cniderabledegree,, ar ot iie oton Npa Iia cowfacing. Among othera three inlue Inceasing outpnt from the productive setr,arcl eand idtry, acclerating inPr nu~betitutiona, di-eralfying end increasing enprts . IInblein re rce improving educa.tion, bealth, trsining aod employment opportunitin, laod refor and improving incoe diatribation. NEPAL 1960 I 1965. /b 1964-66' Ic 6-10 end 11-15 yearn of age e-pectively, Id Dat for capital end -ain cl-eo, /c 1963. 1970 Ia ersonnel In governent nerviren only, /b Inoludieg oidwivea, c 6-li and 11-16 years of egerespocrine1y. MOST RECENT ESTIM'ATt: /n 1974, /b 1975. INDONtSIA 1970 / Registered applican.ts for work. INDIA 1970 / Ratio of popation under 15 ad 60 end ove r to labor force in age group 15-59, /6AID est inte ci labor furo in age _____ ____ __ ~~~~~~group 15-59. IBRD report gives e figu re of 190.4 million hate.d on 197 1 PoPoati on census. The difference us due to changes in the definition of a corker, In the 1971 census, peronn acre cl-sufied only on the hauls of thei r main ctioitue This Led to the exclusion of several cetegorino ouch as hooe-ivnn In Registered applicants for work, Id 1967- 68, /e 5-10 yearn of age, /f 1967. TURKEYI1970 Ia OccldesI17 eastern provinces lb 1965-67, Ic Ratio of population under 15 and 65 end over to labor Force 1) y_ eos old and ovr, Id 15 yearn sod evr,- ouldo..une..ployed, /o Rgeg-terod only, /f Diupoaabie -ncom, L& I tlucding asco t n-rue sod nidwives. /h 1964-66, /t 7-Il yeers of age. / Persns uio peers nid and over ebo tol the n teuo tker-that they cao rood aed ante. R8, Juno 10, 1976 DEFfNITIONS OF SOCIAL INDICATORS Lsod Area (ebhnbog Poov1:iatio cur nurgsus cerau - P.pol-rco div-ded.by onbor of pre...c.tng Total -Tetal surface area comprisiog land area and iclend watery, maeed femal grduate -u-ou, "traind' or "certified" nuse, and Agric. -Most trecent entLanate of agricultural ar.a 0usd texyor-ily or ..uniliury personnel with training or onpeniecce. permanentlty fur crops, pastures, market 6 kitchen garde-n or to lie Ppltion per hospiaul bed P-Popultio d!ivde,d.by osber o.f hospital bedu fa lee available npbi and priut . genraladupeceed buIta and rehabilitationnncu u-Iude- -oruilg hunnu and -utabltuh-etu for GNP oerceft (0$ N-IP p-er capita estlmateu at market pciceu, culc- cunno.dis1 and proveti-o care. latd bynn overnion nethod as Wourld Bsek Atlas (1972-74 bufi.). Pelecancl fcinea (2 of reuuirenentu 7 Ciofopod from energy eqiaetofnetfo snptnaalble cnrcer per navpto por da., Populatio and vital stat-tstIc available -npplies conprne domeutic production inporu lois n-po-ts Populatio (mid-yr. million) - Au ofJuly first' if cot avilable, and changesi- uok ne upitoeld anIn feed. u-da, qunt- ave rage of two end-year eati-nt.e. ties uue ccfd - provensing ad losoe cn ditrT'Ibuto,rqieet were - etunated by FAO based on phyosieg ico1 needu fur nomn1 activity Poecl ieio denaity - cot suf an.he- Mud-yea population Per square kiln- ad b..Itb conoideriugoeuire tnea temperature,, bo,dy,weigbhu,," age nd meter (100 bhtares)o total sce. 00di'ut-b-iona of populat'ion, and a11_wiug 15% for -atetachouehold Population demaity - Per sseh farc land - Computed aa ehov for level., ugricultoral lend only;.. .ek fgi.Per caPita uoly of prutefo. (grem pan day) - Protein cotent.. of per cpita net supply of food per day, net supply of food Ii defined au Vital statiotiicn shv,rqioet or all coun.tries established by USDA Ecomi C,oude bPirtPh rate per thounsed - An..a I live birth. Per thou. nod of nid- Research Servioen provide for a :nui II-aloance pof 0 giren f oa 'year popuation,ta-year aritbontin averages ending in 19 60 s-d 1970, protein per day, ed 20 graom of anima sod puls poto,of ib and five-year ave agesdiog in 1975 for moat resent estimate. 10 grams uh-uId be aima IProtein, these utu-dardi are lower th`an thour Crud dea:th :rate7 peribsand - Annual dea thsper thouuad of mid-year of 71 gram of total protein and 23 grama of a.nial protein an an population; ten-year eritlnetic averagen ending in 1960 and 1970, aod average fur the world, proposed by FAO in the Third World Food Survy. fiv-year A"eag nsing ian 1975 for meet recent astieate. Per caitaf protein, sup froma oimel and pulse - Protein nupply of food Infant mortalit rae i/thou) - Annual deaths of infanta under one year of deidfrmamls ndpssingoa eray ag e housa nd live birh. Death rate f/thou) aces 1-4p- Annul deatho per thossand is age gronp life eapetancy at birth (ic Average comber of years of life re-inoing -4yas tecidnin th Is age group, auggeated aan indicator of at birth, ually five-year averagni ending in 1960, 1970 and 1975 for maotrIton. devel.P Ing ostrIes. Drsos reproduction rate - Average nunber of live daughters a wenn will Education heariis her norma re productive period if she e-periencen prene.nt age- Ad)unted enroi11-nt ra%tio p- prmryshool - forolleent of all agesa oPeel fiefertility rates, usualy five-year averages ending in 1960, prerentage of primar schol-gepopulation, iscludes children aged 1970 and 1975 fordevlpn osni 6-il yeari hut adjs ted for diffarene lengths of primar y education, Population growth rate(2 -v~ .toa - Composd annual growth rates of mid- for countries with universal education, eorull1entma esed10 year popuation for1950-60, 1960-70, aod 1970 to noot recent year. since soo pupils are below or above the officialn1 oo ge. ponuetion growth rate ()-urban -oComputed like growth rteiof total Adluuted enrllent rtio-seco ndar school - Computed as aboe PoPu lation, differest definitiono of urban areas may affect copra- seodraduainrqirsstes I four years of approved primary bilI oftdai among countries inutruction, provides general, vocational or teacher trainig Urban esoulation (% of tonal) - Rat i.osf urbo to total population, instruttmon for pupils of 17 to 17 years of age, correspondence. differest definitions of urban are.. may affect comparability of data courses -e gene rally oluded. -mog ontrieaY. Iarao Oc ln rvdd (firer and secood levels) - Totl1 ysaru of Age struture feer...t) - Children (0-14 yearn), working-age (15-64 years), schooling, at -ecodery level, voctional instruction may be par- sd reired (65 years and over) as percentgen of mid-year population. tialiy or-coPletely exclded. ,madepndency ratio - Ratio of population omder 15 end 65 end over to Vocational enrollmet (2 of o-cedary) - Vocational institutiona thuse of ages 15 through 64. include technical, industrial or other progras which operate Ecnmcdependency ratio_-Ratio of populatio der 15 sod 65 sod over independently or as departmetn of secondary inurtirt,tiono to the ebor forc in age group of 156 yao Adult literacy rate7.1 Literate adults(able tor rad and write)as rm_iiv planing - acceptors cmlaie thou) C-.Cuultive nsober of percentage of total adult population aged 15 ye are and over. acceptors of birth-control devices under aupices of national fonily famI,i g planigr- uers fioemariMed women) - Pereectagnuo mared Prsn per roo (average) - Average somber of persons per room In women of child-bearing age (15-44 ye.ar) who use birth-control device occu...pied ce-ventienal dwellings in urban areas, deIliinga -olude to all maried woe In none age groep. non-permaat at-'utur- aed unucuspied parts. Occupied dwlig ihu ppdwtr(. ..opied conventional Deployment dwellings in urbacIand rural aea wihout inside or outside piped Tota labr force (thouand) E-7feono icly active persenu, including water facilities an percentage of all o....pied doellinga. armd forces and unoployed hut soIding houseives, tudents, etc.; Access to electricity (7. of all dwellings) - Conentional dwellings i defntesi aiou coseries are not comparable, with electricity in living quarters ao percent of total dwellingsi Labor force iinagriculture (.- gic lturaI laker force (in farming, urban end rural arean. foresry, hntingand fishing) an percentaeo oa labor force. iural d,ellisos onnected to electricity (. Computeda above for Snamioved (7 of la8bo force) - Uhsnployedtaeuulydfne spren rra wlig ny woaeable and willing to take e Job, out ofa job on iven day, rniedot of a job, and seeking work fu.raseiiend mnmmpro onmt nor e..eed ig one-wek;may not he comparable between coutries due to Radiorcevr (Pe thou pop) - AllIypsof receivero for radio broad- differeng. 1p tp tdeinition ofuaplsyed and aeree of data, e.g., employ- cnstgEnera pblic per thsuasnd of popuition, e-olden ment ottice atiotics, saPle suvys opulsory unmploy-ne insurane, u"",Ic 'd receIvers In contries and In years when registration of resdio tetw .in effect, data for recent years may not be comparable incomne distribution - Percentege of private income (both in cash and kind) since most oontrien abolished lie..naing. receiveddby richest 57., richeut 207., poorear 202, and poorcut 40% of Psenecas(per thou pop) -Psegrcr opiemtrcr houeholds unating 'les than eight perwons; e-cludeu ambulan.es, heerses and oiilitary vehicles Discribution of land owership - Per-ntageo of lend owssd by wea1thiost Electririty (kwh/yr Per cap) - Annual onoumption of industrial, cn 107% and poorest 10. uf land mer., mercuol, public and private e~lectric.ity intkilowatt hours per capita, geonrally bused on productio dta, withoutIIewao for lessen in Health end Nutrition grids but allowing for importi ond eaports of electricity. fPoula.t i pe phscan-Ppulation divided.by somber of procticing Newprint (kg/yr per capn - Per capita annual conoumption is kilogramu  AhINNEX I Page 3 o'f 4 Pages NEPAL ECON0MIC IlIDICATORS ONP PER CAPITA in 197: 2 US $111 GROSS NATIONAL PROIWJCT IN 1974/75 ANNUAL RATE OF GRWrJTH (% constant price US $ Mln. % Approximately 2.2 (1965-67 to 1973-75) GNP at Market Prices 1,584 100.0 Gross Domestic Investment Gross National Saving Current Account Balance Exports of Goods, NFS Imports of Goods, NFS OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1973/7 Value Added US $ 4Mln. % Agriculture 889 69.1 Industry 127 9.9 Services 271 21.0 Total/Average 1,287 100.0 GOVERNWENT FINANCE Central Government (1974/75) (Rs Mln.) %ofI GDP Current Receipts 998 6.0 Current Expenditure 551 3-3 Current Surplus 447 2.7 Capital Expenditures 926 5.6 External Assistance (net) 366 2.2 1, Calculated by the same conversion technique as used in the 1975 World Atlas. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered .. not available  I 1. _.4 1 Page o r4 pagcs COUNTRY DATA - IEPAL MONEY, CREDIT and PRICES 1965 1972 1973 1974 1975 (Million Rs outstanding mid-Ju Y7 Money and Quasi-Money 554 1,240 1,493 1,850 2,250 Bank Credit to Public Sector (net) -149 - 39 117 251 490 Bank Credit to Private Sector 136 400 459 652 934 Money and Quasi-Money as % of' GDP 8.0 11.9 13.2 13.7 13.5 BALANCE OF PAYMENTS Sl424ARY (US $ millions 1974 197 Exports f.o.b. 78.8 80.9 Imports c.i.f. 126.0 161.2 Trade Balance - 7.2 _ 80.3 Transfers and Services(net) 72.6 80.5 Current Acc.Balance 25. 0.2 Official capital (net) 7.9 8.3 Private non-bank capital (net) - 26.8 - 49.2 Surplus(+) or + 6.5 - 40.7 Deficit (-) EXTERNAL DEBT, DECEMBER 31, 197h Gross Official Reserves US$ 11ln. July 1973 July 1974 Sep.1975 Public Debt, incl.Guaranteed 35.2 (US $ millions) Non-Guaranteed Private Debt .. 128.6 135.7 94.0 Total Outstanding & Disbursed 35.2 RATE OF EXCHANGE DEBT SERVICE RATIO FOR 1974 2 About 1.9' Up to February 20, 1973 US $ 1.00 = NR 10.125 IDRD/ID4 LENDING, June 30, 1976 NR 1.00 = US $ 0.099 (US$ millions) IBRD IDA Since February 20, 1973 Outstanding and Disbursed - 6.9 US $ 1.00 = NR 10.56 Undisbursed - 68.8 , NR 1.00 US $ 0.095 Outstanding,incl.Undisbursed - Since October 9, 1975 US $ 1.00 = NR 12.50 NR 1.00 = US $ 0.080 2 Ratio of Debt Service to i.7crts of GcoclS an"c Services. 2/ Net of cancellaWiozis. .. not available  ANNEX II Page 1 STATUS OF BANK GROUP OPERATIONS IN NEPAL A. STATEMENT OF IDA CREDITS (as of June 30, 1976)/ US$ Million Credit Amount (less cancellation) No. Year Borrower Purpose IDA Undisbursed 166 1969 Kingdom of Nepal Telecommunications 1.7 0.1 223 1970 Kingdom of Nepal Highways 2.5 0.7 291 1972 Kingdom of Nepal Tourism 3.2 2.3 373 1973 Kingdom of Nepal Irrigation 6.0 4.7 397 1973 Kingdom of Nepal Telecommunications 5.5 5.4 470 1974 Kingdom of Nepal Water Supply and and Sewerage 7.8 6.6 505 1975 Kingdom of Nepal Settlement 6.0 6.0 600 1976 Kingdom of Nepal Kulekhani Hydroelectric 26.0 26.0 617 1976 Kingdom of Nepal Rural Development 8.0 8.0 654 1977 Kingdom of Nepal Groundwater 9.0 9.0 /b Total Outstanding 75.7 /c Total Undisbursed 68.8 B. STATEMENT OF IFC INVESTMENT (as of June 30, 1976) Amount of US$ Million Year Obligor Type of Business Loan Equity Total 1975 Soaltee Hotel Hotel 2.70 0.48 3.18 (Pvt) Ltd. Total commitments now held by IFC 2.70 0.48 3.18 Total Undisbursed 2.70 0.48 3.18 /a No Bank loans have been made to Nepal. /b Credit not yet effective. /c Prior to exchange adjustments.  ANNEX II Page 2 C. PROJECTS IN EXECUTION- Credit No. 166 - Telecommunications Project US$1.7 million Credit of November 10, 1969; Effective Date: February 26, 1970; Closing Date: July 31, 1974 - Revised Closing Date: September 30, 1976 This was the Association's first project in Nepal. In the early stages, there was delay in setting up the Nepal Telecommunications Board, later converted into a corporation (NTC), followed by delays in obtaining expert assistance with consequent delay in procurement. There have also been delays in civil engineering work. Satisfactory progress has been made over the last four years and almost all the facilities to be provided under this project are now in service, more than two years behind schedule. Very real progress has been made in developing a satisfactory organization for the sector and NTC showed its first profit in FY 1974. Credit No. 223 - Highway Project US$2.5 million Credit of December 21, 1970; Effective Date: February 3, 1971; Closing Date: June 30, 1975 - Revised Closing Date: December 31, 1976 Initially, project implementation was delayed mainly due to land acquisition difficulties and a national shortage of cement and fuel. With a delay of about eighteen months, the last of the five project road bridges and the remaining two of the five porter suspension bridges are expected to be opened in 1976. All project road maintenance equipment has been received and is now part of the Road Department fleet. Equipment workshop construction has been slow due to contractual difficulties stemming from price escalation; however, workshop construction should be completed by the end of 1976. Bid prices, although above appraisal estimates, are within contingencies. Total project cost is approximately 11% above appraisal estimate. In view of the effect of general inflation on the benefits, this is not likely to affect the rate of return. The project is expected to be completed by the end of 1976. 1/ 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 3 Credit No. 291 - Tourism Project US$3.2 million Credit (Net of Cancellation) of March 22, 1972; Effective Date: November 9, 1972; Closing Date: September 30, 1975 Revised Closing Date: December 31, 1977 Due to delays in appointing qualified architectural, engineering, and project management consultants, and repeated changes in scope proposed by the sponsors of the sub-projects, the project is two years behind schedule. Construction of the Yak and Yeti sub-project is underway and is expected to be completed by January 1977. On the other hand, it was not possible to reach a firm agreement with the sponsors on an appropriate revision of the Annapurna sub-project, and $1.0 million of the Credit was cancelled from the original allocation ($2.88 million) for that sub-project. The remaining $1.88 million would meet increased costs of the Yak and Yeti sub-project and finance feasibility studies for further tourism facilities outside the Kathmandu Valley. Credit No. 373 - Birgani Irrigation Project US$6.0 million Credit of April 18, 1973; Effective Date: July 9, 1973; Closing Date: December 31, 1978 Implementation of the project was initially delayed by the Govern- ment's delay in appointing consultants for detailed engineering and con- struction supervision, slow field surveys, and procurement difficulties. Contracts to the value of 20% of the total under the project have been awarded. After a slow start, present progress is satisfactory. Cost-over- runs are approximately 50% of appraisal estimate. The Project remains viable in view of increases in agricultural commodity prices, and is expected to be completed by late 1978. Credit No. 397 - Telecommunications Project II US$5.5 million Credit of June 20, 1973; Effective Date: September 11, 1973; Closing Date: June 30, 1980 Due to organizational problems, lack of continuity in senior management, and delay in obtaining expert assistance, there have been delays in procurement and the project is, to date, about 12 to 18 months behind schedule. Good progress is now being made with the assistance of consultants and experts provided through the British Overseas Development Ministry and present estimates allow for completion by December 1979, about 6 months be- hind schedule. Credit No. 470 - Water Supply and Sewerage Project US$7.8 million Credit of May 8, 1974; Effective Date: June 26, 1974; Closing Date: June 30, 1978 Project implementation is proceeding with approximately 20% of the contracts awarded. Tender documents for the major contracts have been ad- vertised and bids received. Because of recent price escalations, significant  ANNEX II Page 4 cost overruns are expected. The Government has requested that we investigate the possibility of financing remaining cost overruns as part of a second water supply and sewerage project. Pending determination of major tender prices, other possibilities being considered are Government financing of the increased costs or reducing the scope of the project. Implementation of the project is proceeding satisfactorily and is expected to be completed by June, 1978. Credit No. 505 - Settlement Project US$6.0 million Credit of August 14, 1974; Effective Date: February 20, 1975; Closing Date: July 15, 1982 Project implementation is more than a year behind schedule due to delays in signing and making the credit effective; also due to delays in preparing bidding documents. Supervision has recently been intensified in order to accelerate project implementation. A short-term action pro- gram is being prepared by concerned agencies which will set out land clear- ing and settlement proposals for the 1976/77 dry season. Action has also been taken to accelerate the winch lorry procurement and training program. Credit No. 600 - Kulekhani Hydroelectric Project US$26.0 million Credit of January 9, 1976; Effective Date: May 18, 1976 Closing Date: December 31, 1981 Consultants (Nippon Koei of Japan) have been appointed for field investigation, detailed designs, specifications, tender documents, procurement and supervision of construction. Prequalification of contractors and prepara- tion of bidding documents for civil works are underway. Credit No. 617 - Rural Development Project US$8.0 million Credit of April 30, 1976; Effective Date: July 16, 1976 Closing Date: December 31, 1981 This credit became effective on July 16, 1976. Credit No. 654 - Bhairawa-Lumbini Groundwater Project US$9.0 million Credit of July 9, 1976; Effective Date: November 9, 1976; Closing Date: December 31, 1980 This credit is not yet effective.  ANNEX III NEPAL - TECHNICAL ASSISTANCE PROJECT Credit and Project Summary Borrower: The Kingdom of Nepal Amount: US$3.0 million equivalent Terms: Standard Project Descriptions: Technical assistance for pre-investment planning, feasibility and engineering studies, consulting and advisory services, and training for staff of agencies responsible for project planning and preparation. Estimated Cost: US$4.0 million equivalent, US$2.7 million of which would be in foreign exchange and US$1.3 million in local currency. Financing Plan: The credit would finance 100 percent of the total costs of consultants, whether foreign or local, and 100 percent of the foreign exchange costs of material and equipment procured by the Govern- ment in support of such consultants' services and of training programs. The Government would pro- vide counterpart staff, equipment, and facilities amounting to about 25% of total project costs. Estimated US$ Million Disbursements: FY77 FY78 FY79 FY80 Annual 0.3 1.0 1.0 0.7 Cumulative 0.3 1.3 2.3 3.0 Procurement Arrangements: All contracts for consultant services would be subject to prior approval of the Association.   ~~ X al