Nepal: Decentralized Rural Infrastructure and Livelihood Project

Abstract

At the time of project design, Nepal was among the poorest countries in the world. Poverty is high in rural areas where the incidence rate is 44%, which is almost double that in urban areas at 23%. Poverty incidence rate at 72% in the midwestern and far western regions and 56% in the mountain districts were much higher than the national average. The hill and mountain districts of these regions ranked lowest in socioeconomic and infrastructure development. Their livelihood indicators and road densities, which are substantially lower than in other districts, and their limited market access exacerbated poverty in these areas. Problems in mountain areas were aggravated by the civil war between 1996 and 2006. The civil conflict displaced about 400,000 landowners and directly affected 2.4 million people, primarily in the western regions. Poor access to inputs, services, and markets due to rugged terrain made it hard to increase agricultural productivity. Hence, improving physical access was seen as a prerequisite for significant economic development, mainly through reduced transport costs. It was also necessary to enhance the livelihood opportunities of socially excluded groups affected by the civil conflict. This would have to entail increasing consumer spending, diversifying agricultural production in rural mountain areas, and helping the residents with better government services.