STRENGTHENING THE FOUndatIOns FOR IncLUSIVE EcONOMIC GROwtH Nepal Economic, Agriculture, and Trade (NEAT) Activity: Final Report AUGusT 2013 This publication was produced for review by the United States Agency for International Development. It was prepared by Chemonics International Inc. © NEPAL NEAT STRENGTHENING THE FOUndatIOns FOR IncLUSIVE EcONOMIC GROwtH Nepal Economic, Agriculture, and Trade (NEAT) Activity: Final Report Contract No. EEM-I-00-07-00008 Task Order No. AID-367-TO-11-00001 under the General Business, Trade, and Investment II Indefinite Quantity Contract (GBTI II IQC) The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. ii CONTENTS CONTENTS EXECUTIVE SUMMARY ............................................1 CHAPTER ONE: ADVANCING POLICies TO UNLeash ECONOMIC GROWTH .............................................7 ChapTER TWO: STRENGTheNING VaLue ChaiNS TO INCRease COMpeTITIVENess. .25 ChapTER THRee: IMPROVING LiVELihOOds AND INCReasiNG ResiLieNCE ........................................45 ChapTER FOUR: TRANSFORMING RuRAL ECONOMies THROUGH ACCess TO FiNANCE ................................59 ChapTER FIVE: BuiLdiNG A SusTaiNabLE FuTURE FOR ECONOMIC GROWTH ............................................67 LEFT: Shyam Kumar Shrestha is from a traditional farming family in Sindulpalchowk, central Nepal. He produces and sells agricultural products at the local market. © NEPAL NEAT INSIDE FRONT COVER: High-quality tea from the Kanchanjangha Tea Estate factory is packed into triangular tea bags, which allow the tea to retain its quality. Acquisition of the packing machine, the first of its kind in Nepal, was supported by NEAT. © NEPAL NEAT FRONT COVER: Ram Kumari Tharu collects her earnings from selling vegetables at this collection and marketing center in Bardiya, western Nepal, one of 111 such centers strengthened by NEAT. © NEPAL NEAT BACK COVER: NEAT partner Kabilvastu Integrated Development Services introduced local farmers to good agricultural practices and established a weekly market for farmers to sell their vegetables, significantly increasing farmer incomes. © NEPAL NEAT CONTENTS iii Juna Puri, a 30-year-old cabbage farmer in Madan Pokhara, has belonged to the local farmers’ cooperative since it began. Juna manages the family’s farming business. NEAT training in good agricultural practices for vegetables has helped farmers like Juna increase their productivity and incomes. iv CONTENTS EXECUTIVE SUMMARY Nepal’s decade-long civil war, businesses and strengthen the which ended in a peace process platform for trade, with the idea and abolition of the country’s that empowered and efficient monarchy in 2006, left numer- economic enterprises and indus- ous political and social tensions: tries drive competitiveness and fragmented, underdeveloped economic growth. industries; a large segment of the population living below the An ambitious, multifaceted proj- poverty line; and a government ect with a $22.5-million budget grappling with transitioning to and a 2-1/2-year lifespan, NEAT a modern, democratic federal aimed to build capacities within system. Nepal’s number one industry — agriculture — to reduce poverty The United States Agency for and food insecurity, facilitate International Development important regulatory and ad- (USAID) launched the com- ministrative reforms to increase prehensive Nepal Economic, revenue generation and trade, Agriculture, and Trade (NEAT) improve access to finance, and Activity in December 2010 to attract investment. strengthen the foundations for rapid, sustained, and inclusive This report illustrates how economic growth that would NEAT helped advance policies lessen the pressures that could to unleash economic growth; lead to conflict, reduce pov- strengthened value chains erty, improve livelihoods, and and market access to increase generate revenue. The project competitiveness; improved also aimed to address deficien- livelihoods and increased the cies in the legal framework for resilience of households and EXECUTIVE SUMMARY © NEPAL NEAT 1 communities; and transformed private firms, to implement key the rural economy by increasing activities throughout Nepal. access to finance. The project’s four components worked togeth- Each component focused on one er to catalyze economic growth, of four intermediate results: (i) create socially inclusive opportu- strengthening economic policies nities, reduce poverty and food through reforms that increase insecurity, and improve lives. revenue generation, build public and private sector capacity, sup- NEAT’s assistance enabled port WTO compliance, improve farmers and agricultural firms agricultural competitiveness, or to experience growth they increase trade and investment; never knew was possible. In (ii) increasing competitiveness in total, NEAT assisted four value the lentil, tea, ginger, and veg- chains, 20 private firms, and etable crop sectors by improving 66,780 farmers, increasing production and quality, facili- farmer incomes by 718 percent tating linkages between buyers and sales by $26.5 million, with and markets, and improving another $10 million in incremen- business and marketing skills; tal farmer sales projected for the (iii) enhancing food security by summer of 2013. In addition, linking subsistence farmers to more than 19,000 rural custom- formal value chains, increasing ers now have access to financial their productivity and access to services through either new bank improved inputs, and promot- branches or branchless banking, ing diversification into vegetable and more than $2.3 million in crops to increase incomes; and rural loans have been disbursed. (iv) increasing access to formal In only 2 1/2 years, NEAT ana- financial services for rural clients lyzed 40 policy or administrative lacking bank accounts and reforms. Of these, nine are being building the capacity of financial implemented and the remaining institutions to design and pilot actionable reforms are pending new products. approval. Among the reforms NEAT supported, 11 are reve- nue-generating initiatives, nine are World Trade Organization (WTO) accession activities, and seven are initiatives to increase agriculture competitiveness. Implemented by Chemonics with partners Fintrac, CEAPRED, METCON, Making Cents, Kaizen, WOCAN, Land O’ Lakes, and invaluable Nepalese partners, NEAT built the capacity of more than 40 local organizations, including financial service institutions, business service providers, and 2 EXECUTIVE SUMMARY NEAT PRODUCTIVITY AND MARKET FACILITATION INITIATIVES BY DISTRICT DAILEKH JARJAKOT KAILALI SURK HET RUK UM BARDIYA SALYAN ROLPA ARGHAKHANCHI BANKE PYUTHAN DANG SYANGJA PAPLA NUWAKOT SINDALPULCHOK KATHMANDU E BHAK TAPUR X NAWALPARASI E KABILBASTU CU LALITPUR KAVRE T IV E PARSA S UMMARY TERATHUM PANCHTHAR BARA DANKHUTA SARLAHI ILAM RAUTAHAT SIRAHA 3 SAPTARI Food securityLentil Ginger CollectionTea Center Vegetable NEAT Activity: Key accomplisHments $26.5M $2.39M 560,000 Technical and material Assistance to microfinance Initiatives to improve agricultural assistance to farming institutions (MFIs) resulted inputs, production, and post- households and communities in $2.39 million in new harvest handling practices, create resulted in a $26.5 million microloans to rural clients. market linkages, and provide increase in sales, including access to bank accounts and $14.7 million in vegetable loans benefited 560,000 people. sales alone. 3,000 1,204 718% Partner Annapurna Organic NEAT introduced 1,204 small- Under the food security Agriculture Industries entered scale irrigation schemes in 14 component, farmers who into contract arrangements with food security districts, newly received productivity training more than 3,000 ginger farmers, irrigating more than 2,500 and were linked to markets most of them supported by hectares. increased their incomes by 718 NEAT productivity training. percent on average. 67% 60 40 More than two-thirds of farmers Public-private dialogues are In only 2 1/2 years, NEAT assisted under the food security critical for effective policy analyzed 40 policy or component were linked to reform. NEAT helped business administrative reforms, nine of markets by NEAT. associations facilitate 60 public- which are being implemented, private policy dialogue events and the remaining actionable that engaged government reforms are pending approval. officials, private sector representatives, academics, and development partners. 4 EXECUTIVE SUMMARY NEAT Activity: Key accomplisHments 263,000 17,030 14,913 More than 263,000 training NEAT partnered with Better technology and higher posters and handouts were FORWARD to build the quality agricultural inputs distributed to district agricultural capacity of 17,030 lentil-growing brought 14,913 hectares under development officers, extension households in good agricultural improved management. service centers, and training practices (GAP) and facilitate centers that previously had none. market access. As a result, household yield increased by more than 50 percent, and sales by more than 100 percent. 300 208% 111 NEAT assistance resulted in 300 Farmers assisted under the food NEAT provided infrastructure, mobile money agents becoming security component increased built management capacity, and operational. the area under vegetable facilitated market linkages for 111 cultivation by 208 percent. tea, lentil, ginger, and vegetable collection centers. 20 19% 1 Material and technical assistance