Announcement of Six Million US Dollars Credit for a Settlement Project in Nepal on June 17, 1974

tfITERNATIONAL DEVELOPl\IBNT ASSOCIATION ·1e1e H STREET. N.W .. WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No.74/33 Subject: $6 million credit for a settlement June 17, 1974 project in Nepal. A credit of $6 million from the International Development Association (IDA), an affiliate of the World Bank, will assist Nepal in financing a project for the removal and sale of timber from areas suitable for agriculture in the Terai Plain and to enable families belonging to the lowest income groups to move from the over-crowded hills and to settle there. The project, to be completed in 1981, will introduce in Nepal a novel and cheap method of extracting timber, provide new training and experience for Nepalese loggers and sawmillers and employment in forestry to about 1,100 workers. The project will also make fertile agricultural land swiftly and effectively available for settlement! reducing population pressure in the hills. At a very low cost it will help to settle and substantially improve the standard of living for about 7,900 families consisting of landless farm workers. The project will result in an incremental output of timber valued at $16 million over a five-year period. At full development, the project will result·in an additional agricultural production valued at $2.9 million a year. Nepal has been classified by the United Nations as one of the 25 least- • developed c.,ountries in the world with a per capita incpme of $90 a year. Nearly two-thirds of the country's population of 12 million live in the Hills, wher~ ~ne- third of the country's arable land is situated. Population pressure therP :ts g-".'~~t" Over population in the Hills and the consequent unorganized migration to the Terai pose serious constraints to future development. A greatly expanded land clearance and resettlement program in the Tera! will help to absorb part of the excess population, reduce wasteful destruction of forests and help to increase agricultural production and incomes. The IDA credit will finance a sevf.:.i1L1--year project which includes: a) felling of timber by the Timber Corporation of Nepal from about 19,000 hectares of land; b) sale of logs in the initial period, followed by sawmilling and sale of logs and lumber when sawmills are established; c) settlement of about 7,900 families and provision of timely availability of cultivable land for an additional 1,500 families; d) provision of timber extraction and sawmilling equipment, farm inputs, infrastructure and technical assistance. The project is estimated to cost a total of $11.5 million, including a foreign exchange component of $6.9 million. The IDA credit will finance 52% of the cost of the project, and the World Food Program 16%. The IDA credit to the Government of Nepal is for a term of 50 years, including a 10-year grace period, and is interest free except for a 3/4 of 1% service charge to cover IDA's administrative costs • • Note: Money figures are expressed in US dollar equivalents. PROJECT: TECHNICAL - Settlement project - DATA ---- June 17, 1974 • COUNTRY: Nepal TOTAL COST: $11.5 million TD.A FIBANCING; -,6 __million, term of 50 years, in~lt!di!lg a !0-yeA-r.. grace period. It is interest free except for a service charge of 3/4 of 1% to meet IDA admini$trative costs~ OTHER FINANCING: Government of Nepal World Food Program, $1.8 million as a grant. IMPLEMENTING ORGANIZATION: Timber Corporation of Nepal (TCN) for forestry operations, including sawmilling. Nepal Re$ettlement Company for the se'ttlement. The Agricultural Development Bank, for agricultural credit. PROJECT DESCRIPTION: The project consists of: a) felling timber by TCN, over a period of five years, from about 17,600 hectares of new land, and 1,000 hectares of land already allocated for settlement in Terai; b) sale of logs in the initial period followed by sawmilling and • sale of logs and lumber when sawmills are established; settleme of about 7,900 families and provision of timely availability of cultivable land for about 1,500 more; provision of timber extraction and sawmilling equipment, farm inputs, infrastructure and technical assistance. PROCUREMENT: All equipment contracts in excess of $50,000 financed from the credit w:f..11 be on the basis of international competitive bidding. Qualified domestic manufacturers will be allowed a preference of 15% or the level of customs duties, whichever is lower. Fertilizer will be purchased by international tender procedures. Civil w~rks will be subject to local tender procedures. CONSULTANTS, TECHNICAL ASSISTANCE: An expert lumber sales adviser, an agricultural adviser, a soil surveyor, consultants to assi"fJt the Department of Irrigation, winch lorry operators and mechanics and sawmill operators will be recruited. ESTIMATED COMPLETION·DATE: 1981 • -o-