Report and Recommendation of the President to the Board of Directors Sri Lanka Project Number: 43001 April 2009 Proposed Asian Development Fund Grant Nepal: Emergency Flood Damage Rehabilitation Project CURRENCY EQUIVALENTS (as of 1 March 2009) Currency Unit – Nepalese rupee/s (NRe/NRs) NRe1.00 = $0.0122 $1.00 = NRs81.823 ABBREVIATIONS ADB – Asian Development Bank CDO – chief district officer CNDRC – Central Natural Disaster Relief Committee CQS – consultants’ qualifications selection DADO – district agriculture development office DDRC – district disaster relief committee DOA – Department of Agriculture DOI – Department of Irrigation DOR – Department of Roads DWIDP – Department of Water Induced Disaster Prevention DWSS – Department of Water Supply and Sewerage EA – executing agency EIRR – economic internal rate of return FIRR – financial internal rate of return IA – implementing agency ICB – international competitive bidding ICS – individual consultants selection IEE – initial environmental examination IFRC – International Federation of Red Cross and Red Crescent Societies MOF – Ministry of Finance MPPW – Ministry of Physical Planning and Works NCB – national competitive bidding NGO – nongovernment organization NPMCC – National Project Management Coordination Committee NRCS – Nepal Red Cross Society PCO – project coordination office PIU – project implementation unit PSC – project steering committee SOE – statement of expenditures SPIU – subproject implementation units STW – shallow tube well UN – United Nations UNDP – United Nations Development Programme UN-HABITAT – United Nations Human Settlements Programme UNICEF – United Nations Children's Fund VDC – village development committee WFP – World Food Programme NOTES (i) The fiscal year (FY) of the Government and its agencies ends on 15 July. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2009 ends on 15 July 2009. (ii) In this report, "$" refers to US dollars. Vice-President X. Zhao, Operations Group 1 Director General K. Senga, South Asia Department (SARD) Country Director B. Hitchcock, Nepal Resident Mission, SARD Team leader K. H. Ryu, Head, Portfolio Management Unit, SARD Team members Y. Acharya, Economics Officer, SARD N. Chand, Procurement Officer, SARD G. Gewali, Senior Project Implementation Officer, SARD S. Gyawali, Assistant Project Analyst, SARD K. Karki, Project Implementation Officer, SARD K. R. Panday, Senior Project Implementation Officer, SARD N. Sapkota, Social and Environmental Officer, SARD L. Sharma, Project Officer, SARD S. Shrestha, Senior Governance and capacity Building Officer, SARD P. Spantigati, Senior Country Program Specialist, SARD S. Subba, Gender and Social Development Advisor, SARD C. Vandenabeele, Senior Council, Office of the General Counsel 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 GRANT AND PROJECT SUMMARY i MAP I. THE PROPOSAL 1 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Problems and Opportunities 2 III. THE PROPOSED PROJECT 8 A. Impact and Outcome 8 B. Outputs 8 C. Special Features 9 D. Project Investment Plan 10 E. Financing Plan 10 F. Implementation Arrangements 11 IV. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 16 A. Economic Benefits 16 B. Poverty and Social Impacts 16 C. Land Acquisition and Involuntary Resettlement 17 D. Environmental Impacts 18 E. Risks 18 V. ASSURANCES 19 VI. RECOMMENDATION 20 APPENDIXES 1. Design and Monitoring Framework 21 2. Floods and Flood Management in Nepal 23 3. Development Partners’ Cluster Activities 26 4. Agriculture 30 5. Irrigation 33 6. Water Supply and Sanitation 37 7. Roads 40 8. Detailed Cost Estimates 44 9. Project Management Structure 46 10. Implementation Schedule 47 11. Procurement Plan 48 12. Economic Analysis 58 13. Summary Poverty Reduction and Social Strategy 61 SUPPLEMENTARY APPENDIXES (available on request) A. Flood Damage and Needs Assessment Report B. Detailed Institutional Strengthening Program for Flood Preparedness C. Detailed Cost Estimates (COSTAB) D. Terms of Reference for Design and Supervision Consulting Services (Parts A to E) E. Detailed Economic Analysis F. Involuntary Resettlement Framework G. Summary Initial Environmental Examination H. Environmental Assessment and Review Procedures I. Government’s Return Strategy for Flood-Affected People in the Koshi Area J. Gender Equality and Social Inclusion Action Plan GRANT AND PROJECT SUMMARY Recipient Nepal Classification Targeting classification: Geographic intervention Sector: Multisector (agricultural production and markets, irrigation, drainage and flood protection, water supply and sanitation, road transport) Theme: Economic growth (promoting macroeconomic stability), Social development (disaster risk management) Location impact: rural (high) and regional (high) Environment Category B Assessment Project Description The Project will rehabilitate and restore damage caused by the 2008 monsoon floods in the eastern region and far western region. It will enable people to resume their normal lives by restoring access to livelihoods and basic infrastructure. The project design is based on (i) the post-flood joint damage and needs assessment, led by the Asian Development Bank (ADB) in October–November 2008, with the participation of United Nations (UN) agencies; and (ii) the Government’s preliminary estimate of flood damage. The Government—supported by UN agencies, bilateral partners, and nongovernment organizations (NGOs)— responded effectively in the initial phase of the disaster. However, 47,000 people remain displaced in temporary accommodation, and damage to infrastructure and livelihoods has been severe. The Project has been designed in coordination with central and local governments in recovery activities to move effectively from the humanitarian relief activities of the Government, UN agencies, and NGOs to recovery and reconstruction. The Project supports increased disaster preparedness and mitigation of damage from future recurrent floods by enhancing the Government’s disaster management capacity, and improving the disaster recovery system in cooperation with the Government of India. Rationale The devastating 2008 floods—affecting 300,000 people mainly in three districts—caused severe damage to livelihood, infrastructure, and other assets. They also disrupted economic activities, inflicting heavy losses to crops and slowing expansion in industries and services. The combined losses of the floods in both regions are estimated at $88 million. Direct losses to assets and output because of flooding amount to $30 million; indirect losses are estimated at $58 million. The floods slowed progress in poverty reduction, with the poor and the vulnerable suffering most in terms of losses to crops, livestock, property, and housing; and reduced income opportunities. ii Impact and Outcome The objective of the Project is to restore economic activities quickly, mainly in the three districts; and to improve the livelihoods of about 300,000 people seriously affected by the 2008 floods. It will contribute to sustainable economic growth by minimizing the devastating impact of the floods and reduce future risk from similar disasters. The Project will focus on augmenting incomes and self-reliance by reviving agriculture in the affected farmland and restoring the livelihoods of affected persons, as well as rehabilitating infrastructure. The interventions were identified in consultation with the Government, NGOs, and other civil society organizations; and involve community participation. The Project includes mitigation of damage from future recurrent floods by enhancing cost-effective construction specifications of rehabilitated infrastructure, and supporting capacity building and the Government’s disaster preparedness. It has five parts. Part A: Agriculture. Restore the livelihood of affected people through revival of agriculture by distributing seeds and compost to grow crops suitable for sandy soil, as well as basic farm equipment—supported by extension services, skills development training, and social mobilization. It will also rehabilitate fishponds and minor irrigation, distribute fingerlings, and reconstruct agriculture collection centers and marketplaces. Part B: Irrigation. Rehabilitate damaged structures of 2 large and 25 small surface irrigation systems, including 25 head works; 127 kilometers (km) of canals; 196 canal structures such as drain syphons, aqueducts, gates, outlets, and inlets; 36 km of canal service roads; 45 culverts and small bridges; 1 medium-sized bridge; and 700 shallow tube wells. Part C: Water Supply and Sanitation. Rehabilitate 28 gravity flow water supply systems in Kailali and Kanchanur, construct 4 small overhead water supply systems, and install 3,500 shallow tube wells in Sunsari to provide access to drinking water and sanitation facilities. A health and hygiene awareness program will be integral to part C. Part D: Roads. Rehabilitate damaged strategic roads in the far western region, including bridge and culvert protection works and landslide stabilization works; and provide alternative access to the far-eastern region by constructing the Koshi bridge at Chatara with the objective of minimizing the damaging impact