IRINnews.org, 1. august 2005

KATHMANDU, 1 Aug 2005 (IRIN) - The World Bank on Monday signed two grants totaling US $35 million with the Nepalese government for the development of rural road infrastructure and economic reform.

Under the terms of the agreement, $32 million will be financed to rehabilitate and upgrade over 4,500 km of rural roads, trails and tracks in 20 districts, as well in the construction of some 350 suspension trail bridges, which are often the only means of access to market areas and services. The grant would also include the maintenance of those bridges and trails destroyed by the Maoist rebels, who have been fighting a nine year insurgency against the government.

An estimated 36 percent of Nepal’s 24 million people live at least two hours walk from the nearest all-season road where public transport services may be available, while more than 15 of the 75 district headquarters are still not connected by road. Sixty percent of the road network in the country and almost all rural roads are dry-season tracks that cannot be used during the rainy season, according to the World Bank.

"The lack of access is more severe in hill districts," a Bank statement said.

"Agriculture is the mainstay of the Nepali economy and accounts for 85 percent of employment. One of the major constraints hampering the development of the sector is the low-level of access to markets and services due to poor road infrastructure in remote areas," Binyam Reja, a transport economist with the World Bank, explained.

The Bank said that poor infrastructure was one of the main constraints to economic growth and poverty reduction and also affected other key areas like health and education.

"Access to services and economic opportunities has been among the top casualties of Nepal’s ongoing conflict, especially in the remote rural hinterlands," Rajib Upadhyaya of the Bank told IRIN in the capital Kathmandu.

Meanwhile, various socioeconomic surveys in Nepal also show that children in remote districts are more likely to be malnourished, die before they reach five years of age, or are less likely to attend school than children living in districts that are more accessible.

The government’s Rural Access Improvement and Decentralisation Project (RAIDP) aims to generate a 20 percent increase in motorised and non- motorised trips by beneficiaries to key social and economic centres, while at the same time reducing travel time by 20 percent.

At a time when several key aid agencies have not agreed to sign any new project agreements with the government, the World Bank’s grant has brought a sigh of relief to the government. "The World Bank believes that these two new projects are consistent with the innovative development approach Nepal has pursued in the last few years and hence it believes that providing financial support to them is appropriate," said Ken Ohashi, World Bank country director for Nepal, in a statement released after the signing.

"Whether the Bank can continue to provide strong financial support in the coming months will depend heavily on the demonstration of political leadership in reinvigorating the pace of reform," he asserted.

The Bank has stressed that financial assistance to the Himalayan kingdom would continue but could be affected if the government failed in achieving economic reforms and implementation of development activities. "For Nepal to achieve faster economic growth and poverty reduction, it is absolutely necessary to resolve the conflict and to restore political stability. This, however, is likely to take time," Ohashi said.

But the Bank also believes that despite the ongoing armed Maoist rebellion, the country has been able to develop various innovative ways to continue development activities - mostly through community and user group participation.

Nearly $3 million will be financed on the country’s comprehensive reform agenda, which includes strengthening home-grown reform efforts in areas of public sector capacity, social inclusion and governance among others.

With this grant, the Bank said that it was trying to help the government implement innovative and indigenous solutions to the country’s problems, using qualified Nepalese from the public and private sectors, as well as the diaspora, wherever possible.

"Key policymakers in Nepal are keenly aware that these improvements are central to promoting social equity and building lasting peace," Upadhyaya noted. "This is reflected in Nepal’s Poverty Reduction Strategy and has formed the foundation for strong internal pressures to reform," he added.