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South Asia Subregional Economic Cooperation Airport Capacity Enhancement Project

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South Asia Subregional Economic Cooperation Airport Capacity Enhancement Project Report and Recommendation of the President to the Board of Directors Project Number: 38349-031 October 2020 Proposed Loan Nepal: South Asia Subregional Economic Cooperation Airport Capacity Enhancement Project Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB's Access to Information Policy. CURRENCY EQUIVALENTS (as of 7 October 2020) Currency unit – Nepalese rupee/s (NRe/NRs) NRe1.00 = $0.008527 $1.00 = NRs117.27 ABBREVIATIONS ADB – Asian Development Bank CAAN – Civil Aviation Authority of Nepal COVID-19 – coronavirus disease EMP – environmental management plan EMR – environmental monitoring report GASP – Global Aviation Safety Plan GBA – Gautam Buddha Airport GESI – gender equality and social inclusion ha – hectare ICAO – International Civil Aviation Organization MOCTCA – Ministry of Culture, Tourism and Civil Aviation O&M – operation and maintenance PAM – project administration manual SASEC – South Asia Subregional Economic Cooperation TIA – Tribhuvan International Airport NOTES (i) The fiscal year (FY) of the Government of Nepal and its agencies ends on 15 July. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2020 ends on 15 July 2020. (ii) In this report, "$" refers to United States dollars. Vice-President Shixin Chen, Operations 1 Director General Kenichi Yokoyama, South Asia Department (SARD) Director Ravi Peri, Transport and Communications Division (SATC), SARD Team leader Kai Wei Yeo, Senior Transport Specialist, SATC, SARD Co-Team leader Naresh Pradhan, Senior Project Officer (Transport), Nepal Resident Mission, SARD Team members Arlene Ayson, Senior Operations Assistant, SATC, SARD Sin Wai Chong, Transport Specialist, SATC, SARD Sajid Raza Zaffar Khan, Financial Management Specialist, Portfolio, Results, and Quality Control Unit; Office of the Director General, SARD Vergel M. Medina, Senior Social Development Specialist, SATC, SARD Taisuke Miyao, Senior Procurement Specialist, Procurement Division 1; Procurement, Portfolio, and Financial Management Department (PPFD) Kanzo Nakai, Principal Transport Specialist, SATC, SARD Lyailya Nazarbekova, Principal Counsel, Office of the General Counsel Joanne G. Pabis, Associate Project Analyst, SATC, SARD Ma. Theresa D. Prado, Project Officer, SATC, SARDa Dinesh Shiwakoti, Procurement Specialist, Procurement Division 1, PPFD Karma Yangzom, Principal Environment Specialist, Safeguards Division, Sustainable Development and Climate Change Department Peer reviewer Witoon Tawisook, Principal Transport Specialist, Transport and Communications Division, Southeast Asia Department a. Transferred to Pacific Department on 19 September 2020. In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area. CONTENTS Page PROJECT AT A GLANCE MAP I. THE PROPOSAL 1 II. THE PROJECT 1 A. Rationale 1 B. Project Description 4 C. Value Added by ADB 5 D. Summary Cost Estimates and Financing Plan 6 E. Implementation Arrangements 7 III. DUE DILIGENCE 8 A. Technical 8 B. Economic and Financial Viability 8 C. Sustainability 8 D. Governance 9 E. Poverty, Social, and Gender 10 F. Safeguards 11 G. Summary of Risk Assessment and Risk Management Plan 12 IV. ASSURANCES 13 V. RECOMMENDATION 13 APPENDIXES 1. Design and Monitoring Framework 14 2. List of Linked Documents 16 Project Classification Information Status: Complete PROJECT AT A GLANCE 1. Basic Data Project Number: 38349-031 Project Name South Asia Subregional Economic Department/Division SARD/SATC Cooperation Airport Capacity Enhancement Project Country Nepal Executing Agency Ministry of Culture, Borrower Goverment of Nepal Tourism and Civil Aviation Country Economic https://www.adb.org/Documents/LinkedDocs/ Indicators ?id=38349-031-CEI Portfolio at a Glance https://www.adb.org/Documents/LinkedDocs/ ?id=38349-031-PortAtaGlance 2. Sector Subsector(s) ADB Financing ($ million) Transport Air transport 150.00 Total 150.00 3. Operational Priorities Climate Change Information Accelerating progress in gender equality GHG reductions (tons per annum) 451 Strengthening governance and institutional capacity Climate Change impact on the Medium Fostering regional cooperation and integration Project ADB Financing Adaptation ($ million) 0.26 Mitigation ($ million) 0.94 Cofinancing Adaptation ($ million) 0.00 Mitigation ($ million) 0.00 Sustainable Development Goals Gender Equity and Mainstreaming SDG 9.1 Some gender elements (SGE) SDG 13.a Poverty Targeting General Intervention on Poverty 4. Risk Categorization: Low . 5. Safeguard Categorization Environment: B Involuntary Resettlement: C Indigenous Peoples: C . 6. Financing Modality and Sources Amount ($ million) ADB 150.00 Sovereign Project (Concessional Loan): Ordinary capital resources 150.00 Cofinancing 0.00 None 0.00 Counterpart 48.00 Government 48.00 Total 198.00 Currency of ADB Financing: US Dollar Source: Asian Development Bank This document must only be generated in eOps. 20082020095844301840 Generated Date: 28-Oct-2020 11:08:41 AM 82o 00'E 88o 00'E 30 o 00'N 30 o 00'N HUMLA Simikot DARCHULA KARNALI Darchula MUGU BAJHANG BAJURA Kimri Chainpur BAITADI Baitadi Kolti Gamgadhi Mahakali R. Patan Dadeldhura Martadi Jumla Silgarhi Bhatkanda ACHHAM JUMLA KALIKOT DADELDHURA Dipayal o o DOLPA 83 05'E 85 15'E Karnali R. Manma MUSTANG NEPAL DOTI Mangalsen Dunai GANDAKI SASEC AIRPORT CAPACITY ENHANCEMENT PROJECT Banbasa Bheemdatt Dailekh JAJARKOT Jomsom KANCHANPUR GGodawariodawari DAILEKH N RUKUM MANANG Jajarkot RUKUM PURWA Babiyachour PASCHIM 0 20 40 Chame Dhangadhi 80 Musikot MYAGDI Kilometers BBirendranagarirendranagar KAILALI Beni o o SALYAN 28 00'N KASKI 28 00'N SURKHET LAMJUNG ROLPA BAGLUNG PARBAT RASUWA Salyan GORKHA BAGMATI Sittalpat Baglung PPokharaokhara Dhunche BARDIYA Besisahar SUDURPASHCHIM Liwang Kusma Gulariya Kohalpur PYUTHAN GULMI PROVINCE 1 Pyuthan SINDHUPALCHOK BANKE Tulsipur Tamghas SYANGJA TANAHU Gorkha DHADING Bidur Chautara Syangja NUWAKOT Sandhikharka Damauli Nepalganj Ghorahi Waling TTRIBHUVANRIBHUVAN IINTERNATIONALNTERNATIONAL AAIRPORTIRPORT DOLAKHA Mugling Lamahi ARGHAKHANCHI KATHMANDU Tansen PALPA Dhadingbesi NAWALPARASI Kathmandu Charikot SANKHUWASABHA PURWA BHAKTAPUR TAPLEJUNG DANG Thankot Jiri BButwalutwal Bharatpur SOLUKHUMBU KAPILBASTU Bhaktapur NAWALPARASI Lalitpur PASCHIM Dakshinkali Salleri RUPANDEHI Meghauli CHITWAN LALITPUR Taplejung Taulihawa Narayani R. Bhimphedi RAMECHHAP Khandbari KABREPALANCHOK Bhairahawa Baruwa OKHALDHUNGA Bhojpur Parasi HHetaudaetauda Ramecchap Okhaldhunga Krishnanagar MAKWANPUR Bhimeshwar Diktel TERHATHUM Lohathar GGAUTAMAUTAM BBUDDHAUDDHA Phidim Lumbini PARSA BHOJPUR AAIRPORTIRPORT Sindhulimadi KHOTANG PROVINCE 5 BARA SINDHULI Basantpur Terhanthum o PANCHTHAR Ilam o 27 00'N Pathlaiya Dhankuta 27 00'N Project Airport Birgunj RAUTAHAT DHANKUTA National Capital Dhalkebar SARLAHI UDAYAPUR ILAM o Provincial Capital o 26 50'N 26 50'N District Headquarters Kalaiya Kakarbhitta Gaighat Koshi R. Dharan Town/Market Center Malangawa DHANUSHA Maikhola National Highway SIRAHA SUNSARI Lahan Feeder/District Road Gaur MAHOTTARI JJanakpuranakpur SAPTARI Itahari MORANG JHAPA 200748A 20NEP ABV 20NEP 200748A River Siraha Chandragadhi District Boundary Jaleswar PROVINCE 2 Rajbiraj Rangeli Provincial Boundary This map was produced by the cartography unit of the Asian Development Bank. SASEC South Asia Subregional Economic Cooperation The boundaries, colors, denominations, and any other information shown on this BBiratnagariratnagar Boundaries are not necessarily authoritative. map do not imply, on the part of the Asian Development Bank, any judgment on the o o legal status of any territory, or any endorsement or acceptance of such boundaries, 85 15'E 85 15'E colors, denominations, or information. 82o 00'E 88o 00'E I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on a proposed loan to Nepal for the South Asia Subregional Economic Cooperation (SASEC) Airport Capacity Enhancement Project. 2. The project will improve airport capacity at Tribhuvan International Airport (TIA) in Kathmandu and at Gautam Buddha Airport (GBA) in Lumbini by constructing a parallel taxiway extension and hangar apron areas at TIA and a new international terminal building at GBA. II. THE PROJECT A. Rationale 3. Macroeconomic context. Nepal’s economy grew by 7% in fiscal year (FY) 2019, compared to an average rate of 4.3% during FY2009–FY2018. Before the outbreak of the coronavirus disease (COVID-19) pandemic—despite some balance-of-payment pressure, financial stability risk, slower growth in neighboring countries, and sluggish remittance inflows— the near-term outlook for growth was moderate (about 6%), attributed to a stable political environment, a robust tourism industry, and ongoing reconstruction from the earthquake in 2015. Public debt is estimated at 30.1% of gross domestic product as of mid-2019, which is lower than in other low-income countries. Debt sustainability analysis indicates that none of the debt burden indicators breach the indicative threshold values although Nepal’s public debt is projected to gradually increase over the medium term. The COVID-19 shock, however, is expected to severely impact economic activities and lower growth to 2.3% in FY2020
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