Nepal - Multimodal Transit and Trade Facilitation Project

Report No. PID893 Project Name Nepal-Multimodal Transit and Trade (@ +) Facilitation Project Region South Asia Sector Infrastructure Project ID NPPA10509 Borrower His Majesty's Government of Nepal (HMG/N) Implementing Agency Ministry of Commerce Kathmandu, Nepal Contact: Secretary Tel: 977-1-215347 & 215324 Fax: N/A Date this PID was revised November 24,1997 Project Appraisal Date End June, 1996 Project Board Date November 25, 1997 1. Country and Sector Background. Since Nepal is a landlocked country with no direct access to a sea port, over 98% of its foreign trade (in value terms) is transported by road and rail, with transit through India. However, the present methods of handling and transporting Nepal's transit traffic through India are highly inefficient and expensive. 2. Project Objectives. The main project objective is to reduce the transport and transit costs associated with Nepal's imports and exports through India which will help reduce the internal price of imported goods, increase export competitiveness and improve the terms of trade. The reduction in transport costs would be achieved through reducing transport, transit and storage costs, minimizing pilferage and loss of cargo, increasing service reliability, and increasing competition in the provision of transport services. The project would help streamline trade and transit procedures and make the transit trade more efficient and better organized. 3. Project Description. The proposed project will include four major components: (a) construction of an inland container depot (ICD) facility for rail and road transport at Birgunj; (b) construction of an ICD for road transport at Biratnagar and at Bhairawa; (c) procurement of essential major equipment for the IFTs; and (e) technical assistance to the Ministry of Commerce (MOC) and the Ministry of Works and Transport (MOWT). The technical assistance component would support: (i) technical assistance and training for trade facilitation; (ii) computer-based information systems to simplify transit procedures at Birgunj, Bhairawa and Biratnagar (Automated Systems for Customs Data - ASYCUDA); (iii) installation of Advance Cargo Information System (ACIS); and (iv) consultancy services for design and supervision of physical works. Linked with the project, India will, as part of its bilateral assistance to Nepal, fund the construction of a 5 km rail  spur to link the current rail terminus at Raxaul, India, with the proposed ICD at Sirsya (Birgunj, Nepal). 4. Project Financing. Total cost is presently estimated at US$28.5 million equivalent with a tentative IDA contribution of US$23 million equivalent. The cost estimate was updated after receipt of bids for the civil works. Apart from the proposed IDA credit the balance will be funded by the Government of Nepal. Additional equipment for the three ICDs will be provided by the lessee. 5. Project Implementation. The project will be implemented over about a three year period. Project preparation has been supervised by a project coordinator in MOWT and an inter-ministerial Project Steering Committee. The project will be implemented by the Ministry of Commerce under the oversight of a reformulated Project Steering Committee. The management of ICDs, on completion, will be on a commercial basis with the terminal operators selected on a transparent competitive basis with suitable leasing arrangements. 6. Project Sustainability. Project sustainability is expected to be ensured by extensive private sector involvement in the long- term operation of the ICDs with a well-conceived and transparent regulatory framework. This, together with the expected financial returns, should enhance the private sector's willingness to invest and operate the ICDs. The result of the competitive process should be to accelerate the development of the rail freight and container transport mode and to further strengthen the road transport of containers, thus ensuring the long-term sustainability of the project. The institution building goals underlying the project should be sustained through the development of human resources. The institutional components of the project should lead to a long term and permanent reduction in the cost of moving freight to and from Nepal. This should in turn enable a more rapid growth in trade volumes which should generate increasing amounts of business for the three IFTs, further enhancing their long-term sustainability. 7. Poverty Category. Not applicable 8. Environmental Aspects. Environmental Category is B. No adverse environmental impact likely. The project should have significant environmental benefits through reduced air pollution and reduced traffic congestion in Birgunj. This will be caused by the gradual diversion of traffic from trucks to the new rail service on the Sirsya (Birgunj) - Calcutta transport corridor. The civil works contracts would provide for appropriate environmentally acceptable construction methods. A baseline social and economic survey has been prepared together with a resettlement action plan which has been considered to be in full compliance with the relevant Bank Group's ODs. 9. Program Objective Categories. They are transport, trade and private sector development. -2-  Contact Point: InfoShop The World Bank 1818 H Street, N.W. Washington, D.C 20433 Telephone: (202) 458 5454 Fax: (202) 522 1500 Note: This is information on an evolving project. Certain activities and/or components may not necessarily be included in the final project. Processed by the World Bank InfoShop week ending December 12, 1997. - 3 -  ANNEX ENVIRONMENTAL ANALYSIS: A SUMMARY 1. There are no significant environmental issues associated with the proposed project and no adverse environmental impact is likely. The only environmental risks relate to those normally associated with civil works. The civil works contract would provide for: (i) full restoration and landscaping of burrow areas, quarries and spoil tips opened specifically for this project; (ii) provision of storage areas, especially for petroleum products; (iii) adoption of sanitary arrangements in offices, yards and on site; and (iv) avoiding contamination of water courses and groundwater. The terminal construction and operation should therefore result in minimal adverse environmental impact. 2. The project is expected to have major net environmental benefits in the form of reduced air pollution and reduced traffic congestion in Sirsiya (Birgunj). This will be the result of the gradual but substantial diversion of traffic from road transport to the much more environmentally friendly rail transport in the Sisya (Birgunj) - Calcutta transport corridor which accounts for the bulk of Nepal's foreign trade. -4-