Regional Urban Development Project (RRP NEP 47252)

SECTOR ASSESSMENT (SUMMARY): WATER AND OTHER URBAN INFRASTRUCTURE AND SERVICES

Sector Road Map

1. Sector Performance, Problems, and Constraints

1. Challenges and opportunities of urbanization. has experienced rapid urbanization in recent years. Until May 2014, its designated urban areas totaled 58. These had a population of 4.4 million out of the national population of 26.5 million, equivalent to 17%. Between May 2014 and December 2015, the government declared 159 additional municipalities, bringing the total number of urban authorities to 217. It also upgraded eight municipalities1 to submetropolitan cities with the absorption of adjoining village development committees and increased the boundaries of 17 other municipalities.2 Urban centers as per the government’s designation now account for 42% of the national population.3

2. Urbanization in Nepal is characterized by the migration of people from rural areas to market centers, towns, and cities, primarily in search of employment and, earlier, fleeing conflict during the insurgency. Unplanned growth has created numerous problems, including deficiencies in basic urban services; lack of sanitation and solid waste management (SWM) systems; environmental degradation; encroachment of settlements on public lands, forests, and rivers; and sprawling settlements. The development of municipal infrastructure has not kept pace with the rapid urbanization, causing an acute shortage of urban services. The key challenge facing urban centers is to improve urban planning and land management; increase access to services for the urban population, including the poor; and ensure sustainable and high-quality service delivery. Concerns are that climate change impacts may create additional challenges.

3. The incidence of poverty in Nepal’s urban areas is rising—from 9.2% in 2004 to 23.8% in 2015.4 Given the country’s slow economic growth rate, especially in the industrial sector, which normally employs the bulk of unskilled and semi-skilled workers, urban poverty could well increase further unless the government is able to proactively manage urbanization and stimulate much-needed private sector growth. Unabated urban growth makes it imperative to maximize the economic opportunities offered by urbanization and agglomeration while securing environmental sustainability and social equity across various geographic regions.

4. Water supply. In 2014, 83.6% of the population was using an improved drinking water source,5 thus achieving the Millennium Development Goal Target 7c.6 Urban water supply service levels are generally poor, and significant disparities in access to services exist geographically and by income and ethnicity. Many systems are poorly maintained and not fully functional. From a gender perspective, women are disproportionately affected by poor water supply because it forces them to spend more time fetching water and fulfilling their household role of caring for those who

1 Bharatpur, , , , , , and . 2 Bhadrapur, Birendranagar, , Byas, Dhankuta, Jaleswor, , Kapibastu, Lahan, Lalitpur, Lekhnath, Malangwa, , Prithvinarayan, Ratnanagar, Siraha and Tribuwan Nagar. 3 Government of Nepal. Ministry of Finance. Economic Survey 2015–2016. . 4 National Planning Commission. Approach Paper for the Fourteenth Plan 2016/17-2018/19, Kathmandu. 5 An improved drinking water source is defined as one that is protected from outside contamination, particularly from contamination through fecal matter. 6 Government of Nepal. National Planning Commission. 2015. Sustainable Development Goals 2016–2030: National (Preliminary) Report. Kathmandu. The targets for 2030 for the Sustainable Development Goal No. 6 include 95% of households having access to piped water supplies and improved sanitation, all communities being free of open defecation, and all urban households being connected to a sewerage system. 2

fall ill from contaminated water. This leaves less time for income-generating activities and, in the case of school-aged girls, for study.

5. Sanitation. In 2014, 70.3% of the population used an improved sanitation facility,7 with numbers significantly higher in urban areas than in rural areas (footnote 6). About two-thirds of the population uses latrines and about one-third is connected to a sewer, although adequate wastewater disposal and treatment remains a challenge. About 41% of local authorities were declared “open defecation free” in 2015.8 In Nepal, each year, some 13,000 children under 5 years of age die of diarrheal diseases. Only 64% of public and community schools have toilet facilities, and only 31% of these have separate facilities for girls, which exacerbates absenteeism by adolescent girls.9 Stormwater drainage and sewerage system development in urban areas, along with wastewater treatment, lags the development of water supply facilities. The drainage network generally consists of roadside drains also used as sewers in most municipalities, and their design and capacity is inadequate. Poorly constructed and maintained drains contribute to waterlogging and unhygienic conditions in many municipalities. The waterlogging problem is severe in the Terai project municipalities, particularly in the monsoon season.10 Solid waste management is proving problematic in urban areas. On-site disposal and composting are widely practiced in smaller urban and rural areas, where around 60%–70% of solid waste content is organic. None of the project municipalities has a proper SWM system and waste management is often limited to sweeping streets and dumping the collected waste on nearby riverbanks or open land.11 A gap exists between the need for and capacity to deliver adequate SWM services. Elements of modern SWM (e.g., waste segregation at the source; door-to-door primary collection; application of waste reduction, reuse, and recycling; and operation of sanitary landfills) have yet to be properly applied in Nepal’s municipalities. Public awareness on SWM and related environmental and health risks is generally lacking.

2. Government’s Sector Strategy and Policy Framework

6. Local Self-Governance Act and national plans. The Local Self-Governance Act (1999) forms the overarching legal platform that (i) establishes a decentralized governance structure; (ii) sets out the powers, functions, and duties of the municipalities in relation to urban service delivery; (iii) delineates the ownership of natural resources as assets of local bodies and empowers local bodies to levy a natural resource tax; and (iv) allows local bodies to transfer assets to consumer groups. The Local Self Governance Regulation (1999) and the Local Governance Financial Rules (2000) have further established municipalities as self-governing autonomous urban local bodies with a central role in urban development.12

7. National Urban Policy (2007). The policy highlights the country’s historical imbalances and haphazard nature of urban development. It views urban centers as catalysts for economic development linked to north–south and east–west corridors and highlights poor sanitation, environmental degradation, and lack of access to basic services by the urban poor as key issues

7 An improved sanitation facility is defined as a toilet system that hygienically separates human excreta and is connected to drainage or a septic tank. 8 Water, Sanitation and Hygiene Resource Centre Network, December 2015. Open defecation free status update in Nepal. Kathmandu. [is the Water, Sanitation..Network a government body? If so, please add ‘Government of Nepal.’ to the beginning of the quote. 9 Water Aid Nepal. 2011. The State of School Sanitation in Nepal. Kathmandu. 10 The Terai is the southern plain area bordering India. 11 Ongoing projects financed by the Asian Development Bank (ADB) are implementing SWM subprojects in various municipalities in the Terai, excluding Province 7. 12 The Local Governance Financial Rules (2000) were replaced by the Local Bodies Financial Administration Regulation (2007). 3 requiring attention. The policy identifies five possible regional economic centers in addition to the existing centers of Pokhara and the Kathmandu Valley. It also proposes developing north–south links from the market centers of the mountain and hill zones to the core towns of the Terai. It further proposes directing public and private investment into urban centers along these corridors, including Siddharthanagar, which is currently upgrading its airport to international standards.

8. National Urban Water Supply and Sanitation Sector Policy (2009). The policy provides targets and guidelines for achieving equity in the delivery of urban water supply and wastewater services by ensuring that financially marginalized households are supported through design and implementation of financial incentive schemes. The policy discourages central subsidies for the operation of urban water schemes, encourages private sector participation and involvement of users, and provides directions for achieving full cost recovery for operation and maintenance and part of the capital cost in the urban water subsector.

9. Gender equality and social inclusion. Operational guidelines were developed and implemented to mainstream gender equality and social inclusion (GESI) in the operations of the Ministry of Urban Development (MOUD), which is responsible for water supply and sanitation, roads, and urban development. A social coordination unit was established at MOUD and GESI units were set up in 35 divisional or district offices under the Department of Urban Development and Building Construction. The National Urban Development Strategy (2017) calls for cities to be socially inclusive in terms of ethnicity or caste, gender, and economic class.13 It promotes inclusion in city planning for nurturing social and cultural diversity with sensitivity to the disadvantaged, marginalized and minority groups, the poor, and youth in general.

10. Government’s Fourteenth Three-Year Plan (FY2017–FY2019). The plan also targets high and inclusive economic growth through more capital investment in infrastructure and urban services. Support for reducing regional disparities is given high priority. The plan provides guidance on water, sanitation, and urban development, and highlights the need to counter the effects of rapid urbanization on basic urban services, water quality, sanitation, environment, and system maintenance. It proposes the full integration of on-site sewage sanitation and SWM in all urban schemes and specifically endorses cost recovery from consumers.

3. ADB Sector Experience and Assistance Program

11. The Asian Development Bank (ADB) has been the largest development partner in the water supply and other municipal infrastructure and services sector in Nepal. In addition to physical investments, ADB has supported the improvement of the technical and managerial capabilities of sector institutions. It is supporting the government in (i) improving urban infrastructure including water supply, sanitation, and urban transport; and (ii) institutional strengthening and capacity building of local governments and water user and sanitation committees. Some of the key lessons from ADB’s past involvement in the sector are that (i) effective social mobilization is essential; (ii) upfront consultations with key stakeholders should be made to ensure effective communication and to avoid start-up delays; (iii) poor functional relationships, collaboration, and unclear roles and responsibilities of sector agencies can lead to inefficient use of resources and suboptimal outcomes; (iv) weak institutional capacity of key stakeholders can have a direct and adverse impact on the implementation and success of urban projects; (v) larger physical works packages should generally be used to attract qualified contractors; and (vi) project quality should be carefully monitored at all stages of project execution.

13 Government of Nepal. 2017. National Urban Development Strategy. Kathmandu.

4 Problem Tree for Water and Other Urban Infrastructure and Services

Source: Asian Development Bank.

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Sector Results Framework (Water and Other Urban Infrastructure and Services, 2013–2017)

Country Sector Outcomes Country Sector Outputs ADB Sector Operations Sector Sector Outcomes with Indicators with Outputs with ADB Targets and ADB Indicators with Main Outputs Expected from Contribution Baselines Contribution Incremental Targets Planned and Ongoing ADB Interventions ADB Interventions Increased use Population using Water supply, Number of water supply Planned key activity areas Planned key activity areas of water supply improved water supply sanitation schemes with treatment Water supply and sanitation (drinking water and pipeline projects and sanitation Target (2017): 100% systems, and facilities systems, sanitation systems, wastewater 90.5 million liters wastewater services Baseline (2012): 85% other urban Target (2017): 70 management, operation and maintenance, treated per day; services Baseline (2012): 50 tariff policies, and sector development) (69% 750 km of water supply Population using expanded, of funding) pipeline installed; sanitation facilities improved, and Number of open Other urban infrastructure and sector 500 km of sewers installed; Target (2017): 100% sustained defecation-free areas development (urban governance, urban 30,000 households served Baseline (2012): 62% Target (2017): All VDCs planning, urban environmental policies, with improved water supply; and municipalities urban roads, drainage, solid waste 200 km stormwater drains Urban population with Baseline (2012): management) (31% of funding) constructed or rehabilitated; medium–high service 647 VDCs and 4 240 km of roads improved; level of water supply municipalities Pipeline projects and Target (2017): 27% Regional Urban Development Project ($150 4 sanitary landfills constructed. Baseline (2012): 12% Length of new sewer million); network installed Third Small Towns Water Supply and Ongoing projects Population using Target (2017): 520 km Sanitation – Additional Financing ($100 203,136 households served services for Baseline (2012): 0 km million); and with improved water supply; wastewater Melamchi Water Supply– Phase 2 ($165 1,910 km of water supply management Number of landfill sites million). pipeline installed; Target (2017): 1.9m Target (2017): 6 7 wastewater treatment Baseline (2011): 1.2m Baseline (2012): 2 Ongoing projects facilities constructed and Melamchi Water Supply ($192 million); 2 rehabilitated; Percentage of budget Second Small Towns Water Supply and 4 sanitary landfills constructed; that is GESI-responsive Sanitation Sector ($45.1 million); and GESI responsive Target (2017): 30% Secondary Towns Integrated Urban mechanisms for planning and Baseline (2012): 22% Environment Improvement ($60 million); monitoring established Kathmandu Sustainable Urban Transport Nonrevenue water in ($20 million); Kathmandu Valley Integrated Urban Development ($56.8 Target (2017): 20% million); Baseline (2011): 50% Kathmandu Valley Water Supply Improvement Project ($170 million) Kathmandu Valley Wastewater Management ($80 million); and Third Small Towns Water Supply and Sanitation ($60 million). ADB = Asian Development Bank, GESI = gender and social inclusion, km = kilometer, MOUD = Ministry of Urban Development, VDC = village development committee. Source: Asian Development Bank estimates based on discussions with the Government of Nepal.