The World Bank Digital Nepal Acceleration (DNA) Project (P176543) Project Information Document (PID) Concept Stage | Date Prepared/Updated: 17-Dec-2021 | Report No: PIDC33292 Dec 07, 2021 Page 1 of 9 The World Bank Digital Nepal Acceleration (DNA) Project (P176543) BASIC INFORMATION A. Basic Project Data OPS TABLE Country Project ID Parent Project ID (if any) Project Name Nepal P176543 Digital Nepal Acceleration (DNA) Project (P176543) Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) SOUTH ASIA Apr 01, 2022 Nov 30, 2022 Digital Development Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Ministry of Finance Nepal Telecommunications Authority, Ministry of Communications and IT Proposed Development Objective(s) To expand inclusive access to broadband connectivity, and to strengthen the digital enablers to improve the resilience of businesses, governments, and households. PROJECT FINANCING DATA (US$, Millions) SUMMARY-NewFin1 Total Project Cost 100.00 Total Financing 100.00 of which IBRD/IDA 100.00 Financing Gap 0.00 DETAILS -NewFinEnh1 World Bank Group Financing International Development Association (IDA) 100.00 IDA Credit 100.00 Environmental and Social Risk Classification Concept Review Decision Moderate Track II-The review did authorize the preparation to Dec 07, 2021 Page 2 of 9 The World Bank Digital Nepal Acceleration (DNA) Project (P176543) continue B. Introduction and Context Country Context 1. Nepal is a lower-middle income, landlocked South Asian country of about 29 million people over an area of about 147 thousand sq. km. Nepal has made significant progress in reducing poverty and increasing shared prosperity between 1996 and 2010, with sustained progress on key indicators of nonmonetary welfare such as health and education despite low domestic growth. However, inequalities in access to basic human opportunities has remained high. Bank analysis has found that “a child’s gender, parents’ wealth, education, and location accounted for 52–79 percent of the variation in access to basic human capital outcomes in Nepal in 2011.�1 2. Multiple crises have constrained economic and social inclusion. Most recently, the COVID-19 pandemic has exposed vulnerabilities facing various socio-economic groups; job losses and decreasing labor incomes affect vulnerable groups more severely. A recent assessment found that among people who did not lose a job, 51 percent of women and 44 percent of men reported losses in earnings. As a result, households that have lower incomes, are headed by women, have family members with disabilities, or reside in remote settlements face challenges of securing a source of income and tend to eliminate investments in the future, cutting down expenses on education, health, and wellbeing.2 3. Heavy dependence on tourism and remittances undermines the resilience of Nepal’s economy. A low level of diversification and a lack of sources of job creation expose the country to external shocks, such as the COVID-19 pandemic, which disrupted Nepal’s economy. With economic growth rates projected to reach 1.8 and 3.9 percent for 2021 and 2022 respectively, the long-term development prospects are still unclear.3 4. Nepal is also one of the world’s most disaster and climate vulnerable countries. An estimated 80 percent of the geographic area in Nepal is at risk from multiple hazards (floods, landslides, heavy rainfalls, glacial lake outburst floods) with much the country’s population inhabiting high risk areas. Nepal is also in a seismically active zone and is exposed to a range of adverse impacts of climate change. The complex terrain and risks of natural disasters combined with the nascent federal system of government and ongoing political uncertainties pose critical risks to Nepal’s resilience and long-term growth and are expected to contribute to rising inequalities. 5. Nepal seeks to strengthen the resilience of its households, businesses, and government, while ensuring economic and social inclusion. In September 2021, the Government of Nepal (GoN) and development partners declared their intention to develop a strategic action plan for Nepal towards Green, Resilient, and Inclusive Development (GRID). The Plan will coordinate priority investments in Nepal’s recovery from the crisis caused by the COVID-19 pandemic, including to promote “green growth, jobs, and infrastructure, and building resilience to climate change and shocks from disasters, as well as equitable access to services for Nepalis.�4 1 World Bank Group, Risks to Poverty, Vulnerability, and Inequality from COVID-19: Nepal Light Poverty Assessment (p. 9): http://documents.worldbank.org/curated/en/712891624283780459/Risks-to-Poverty-Vulnerability-and-Inequality-from-COVID-19-Nepal-Light-Poverty-Assessment 2 World Bank, Nepal light poverty assessment, 2021 3 World Bank, 2021. “Shifting Gears: Digitization and Services -Led Development� South Asia Economic Focus, Fall 2021 4 https://www.worldbank.org/en/news/press-release/2021/09/24/government-of-nepal-and-development-partners-join-forces-on-nepal-s-green-resilient-and-inclusive-development Dec 07, 2021 Page 3 of 9 The World Bank Digital Nepal Acceleration (DNA) Project (P176543) Sectoral and Institutional Context 6. The Government sees digital development as a key enabler of growth, and of resilient and inclusive development. Its Digital Nepal Framework (DNF) is a digital strategy adopted by the Government in 2019. It aims to use digital technologies to transform the economy by providing inclusive access to services and infrastructure for various groups of the population, promoting innovation and competitiveness in the private sector, and improving public service delivery.5 The DNF seeks to digitize 8 sectors (e.g., health, education, agriculture) through 80 initiatives. The planning commission has identified the DNF as a game-changer program. 7. The DNF predates the GRID approach; but it enables and supports several priorities identified in the Kathmandu Declaration. The DNF proposes digital initiatives that would boost inclusion and resilience, as well as green growth.6 Other national development plans, such as the Fifteenth National Plan7 also envisage enhancing various areas of the digital ecosystem and building the country’s resilience through digital means. Stakeholders from the private sector and civil society also note the need for Nepal to accelerate digital development, especially to ensure inclusion and to promote innovation. Indeed, many Nepalis consider digital access as a critical part of the response to the COVID- 19 pandemic and its challenges.8 And there is interest from the private sector to play a more-strategic role, building on investments in telecoms connectivity, digital financial services, and e-commerce platforms. 8. Nepal’s ability to use digital development to support GRID is at risk of being held back due to gaps in digital inclusion, the limited capabilities of people and businesses to use digital technologies innovatively, and weaknesses in the foundations of digital service delivery. Digital inclusion (ensuring that all individuals and businesses have access to affordable, high-speed connectivity and secure digital services) is held back by gaps in coverage and affordability of high-speed connectivity. Coverage gaps are typically due to high costs of deployment especially in rural and in mountainous areas, due to high prices of upstream international connectivity, but also limited competitive pressure on the telecommunications market to expand coverage and innovate services. Digital innovation (firms and people using digital technologies to boost productivity and competitiveness) is limited by poor skills including digital and higher-level skills, and management expertise among SMEs, and gaps in the supporting ecosystem especially outside of the capital, Kathmandu. Digital public and private service delivery is hampered by gaps in the infrastructure (e.g., limited data center capacity), poor coordination among public agencies, institutional capacity constraints, limited funding, and gaps in foundational elements (e.g., identification, digital signatures). Relationship to CPF 9. The CPF Performance and Learning Review (PLR) proposes adjustments, including harnessing digital solutions as part of the COVID-19 pandemic recovery phase. The draft PLR introduces a new CPF objective on accelerating digital development which is proposed to be added under Focus Area 2, with an indicator on increasing the use of the internet to 85 percent of the population by the end of FY24. The PLR also recognizes that harnessing digital solutions can provide significant opportunities to unlock Nepal’s resilient recovery from COVID-19. Hence, it proposes that the World Bank will support investments to build Nepal’s digital foundations. The proposed Project also draws on the findings of 5 https://mocit.gov.np/pages/digital-nepal-framework 6 For instance, the DNF seeks to ensure universal access to the internet, build digital skills and literacy, and deploy technology to expand access to education, healthcare, and financial services—all of which support economic and social inclusion objectives. The DNF also seeks to improve the innovative capacity of people and firms across sectors such as tourism and agriculture, which will boost their economic resilience, while using digital means to improve public service delivery, which will support resilient and inclusive government to citizen interactions. And, the DNF seeks to support areas of green growth, such as climate-smart agriculture and smart grids, and promote innovations in water resource management. 7 https://npc.gov.np/images/category/15th_plan_English_Version.pdf 8 The survey found that 19 percent of respondents felt that promoting digital and internet services was among the top three areas to “focus on for COVID-19 recovery,� alongside tourism development (23%), and development of the private sector (11%). World Bank, Public Perception Survey 2021 Dec 07, 2021 Page 4 of 9 The World Bank Digital Nepal Acceleration (DNA) Project (P176543) the Bank’s Digital Economy for South Asia (DE4SA) assessment undertaken for Nepal, implementing those aspects which are aligned with the DNF and not covered through other programs or initiatives (see Annex 1). In addition, the Bank team has engaged with a range of development partners, who have confirmed their interest in supporting specific aspects of digital development and possibly specific DNF initiatives. C. Proposed Development Objective(s) To expand inclusive access to broadband connectivity, and to strengthen the digital enablers to improve the resilience of businesses, governments, and households. Key Results (From PCN) • People provided with access to the Internet • Share of firms that started or increased the use of digital platforms • Share of citizens using digital services delivered through the Project activities D. Concept Description 10. Component 1: Enhancing Broadband Infrastructure: This will aim to increase access to affordable broadband for all, enabling digital inclusion. Activities would seek to increase competitive pressure across multiple segments of the broadband value chain (first-, middle-, and last mile) to drive affordability while mobilizing private investment to expand access to connectivity. 11. Component 2: Building Digital Capabilities: This component will support activities that enhance skills (of individuals) and capacities (of small businesses and within the public sector) to engage with the digital economy. 12. Component 3: Supporting Digital Transformation: This will strengthen the foundations for digital transformation to deliver more inclusive and resilient public services while enabling private services. Legal Operational Policies Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Areas OP 7.60 No Summary of Screening of Environmental and Social Risks and Impacts . 13. The project coverage is nationwide in scope and centers on three components that seek to enhance digital infrastructure, build digital capabilities, and support digital transformation, including several high-priority activities following the Digital Nepal Framework (DNF) 2019. Nepal’s vision for digital development is outlined in the DNF which is a comprehensive digital development strategy. It seeks to digitize eight sectors (e.g., health, education, agriculture) through 80 initiatives. The Government has sought the Bank’s assistance in implementation of this framework. The private sector and civil society also note the need for inclusive digital development. There is interest from the private sector to play a more-strategic role, building on investments in telecommunication connectivity, digital financial Dec 07, 2021 Page 5 of 9 The World Bank Digital Nepal Acceleration (DNA) Project (P176543) services, and e-commerce platforms. The Government of Nepal (GoN) recognizes that digital development plays an important enabling role to support the Green, Resilient, and Inclusive Development (GRID) Agenda. 14. Digital inclusion (ensuring that all individuals and businesses have access to affordable, high-speed connectivity and secure digital services) is held back by gaps in coverage and affordability of high-speed connectivity. Coverage gaps are typically due to high costs of deployment especially in rural and in mountainous areas, due to high prices of upstream international connectivity, but also limited competitive pressure on the telecommunications market to expand coverage and innovate services. Digital public and private service delivery is hampered by gaps in the infrastructure (e.g., limited data center capacity), poor coordination among public agencies and institutional capacity constraints, limited funding for digitization of public services, limited human resources to support digitization efforts in the public and private sectors, and missing foundational elements (e.g., a foundational ID, digital signatures). Further to this, the rural-urban gap in internet use is 32 percent, the gender gap similarly is 33 percent, and a 67 percent gap related to disability status. The disparities in the access and use of online services are caused by lack of awareness and digital skills, affordability issues, as well as absence of women-specific programs and accessible platforms. These digital divides cause further inequalities, widening opportunity gaps in access to online learning, telehealth, and digital financial services. For example, UNICEF has found that two-thirds of Nepal’s schoolchildren were unable to access remote learning during school closures. Therefore, the Government of Nepal has identified Digital Nepal Framework (DNF) as an important framework to accelerate digital development, especially to ensure inclusion and to promote innovation. The Project will strengthen digital foundations while facilitating digitization across the economy as part of its effort to build back better from the COVID-19 pandemic and implement the GRID framework. 15. The Ministry of Communications and Information Technology (MoCIT) will oversee implementation of the Project. It is proposed that MoCIT will constitute a Project Steering Committee (PSC), chaired by the Secretary of MoCIT and with the participation of representatives of key agencies involved in the implementation of various activities, including the MoCIT itself and its Department of IT (DoIT) and the National IT Center, the NTA, and possibly Ministry of Education, Science, and Technology. MoCIT and NTA have limited experience in implementing externally funded projects and no recent experience of implementing World Bank financed projects following Environmental and Social Framework (ESF). The borrower will need significant capacity building in E&S planning and management. An E&S capacity assessment will be conducted as part of Environmental and Social Assessment of the project prior to the appraisal to establish E&S capacity gaps in light of the ESSs requirements. 16. Both the environmental and socials risks have been categorized as moderate at the concept stage of the project. The relevant ESSs are ESS1, 2, 3, 4, 6, 7, 8 and 10. The project activities to be financed include small civil works related to the potential construction of a towers and new data centers, the deployment of fiber optic broadband connectivity to facilitate remote work during and after the COVID-19 pandemic, minor rehabilitation and retrofitting activities in existing buildings (e.g., in educational institutions and government or public agency offices and buildings). 17. Key environmental risks and impacts are expected to be site-specific, short-term, and reversible. Some of the anticipated potential impacts may include: (i) soil removal and vegetation clearance for the construction of the new data center, and for the deployment of fiber optic cables; (ii) generation of solid waste from residual construction materials; (iii) management and disposal of electronic waste (E-waste) as a result of the decommission of old equipment which includes unused e-gadgets, fibers and electronic wires (iv) nuisance related to dust generation, vibration and noise during construction activities; and (v) Occupational Health and Safety (OHS) hazards for the workers. Dec 07, 2021 Page 6 of 9 The World Bank Digital Nepal Acceleration (DNA) Project (P176543) 18. Potential social risks include i) temporary restriction of access to land/property and livelihood impacts during construction of new data center and laying of fiber optic cables depending on the length and location of the cables (e.g. roadside vendors); ii) cumulative and/or more severe impacts faced by IPs and other vulnerable groups such as women- headed households, elderly population, people with disabilities on livelihoods/physical displacement on the potential route of fiber optic network; iii) the project implementation units (PIU?s) management capacity to engage in safeguarding social risks; iv) weak enforcement of national regulation; v) potential influx of labor into targeted areas; vi) lack of adequate consultation of affected persons and access to functioning grievance redress mechanisms; vii) social risks associated with protection of personal data and data privacy considerations, and; vii) social exclusion of women, population living in rural and small town areas, persons with disabilities and other members of vulnerable groups in accessing project benefits. 19. Given the proposed project activities will include enhancing digital infrastructure, building digital capabilities, and supporting digital transformation, for which exact locations and extent of the work are not yet known, the Borrower will prepare a draft ESMF in line with the Bank’s Environmental and Social Standards and national regulations including Government of Nepal’s Environmental Protection Act 2019 and Environmental Protection Rule 2020. The ESMF will analyze the positive and negative, direct and indirect environmental and social impacts of the project and define appropriate mitigation and management measures in accordance with the mitigation hierarchy (anticipation and avoidance, minimization, mitigation, offset or compensation). The ESMF will provide guidance on environmental and social screening and procedures for the development of environmental and social management plans (ESMPs) to be prepared by the Implementing Agencies. Given the type of investments to be financed in the Project, the draft ESMF will include a draft generic E-waste Management Plan (EWMP) and a generic Chance Finds Procedure for limited civil works. During implementation stage, site specific environmental and social impact assessments (ESIAs) and ESMPs will be developed based on the screening guidance and risk level of each specific activity. These measures will be implemented, and their status of implementation will be reviewed as part of project monitoring and evaluation. In addition, the task team will ensure that the Borrower is also familiar with the World Bank's incident reporting and management should they occur. 20. The Borrower will prepare and disclose a Stakeholder Engagement Plan (SEP) by project's appraisal. The SEP will (i) describe the project stakeholders, making a distinction between those directly affected by the project and other interested parties; (ii) describe the timing and methods of engagement with key stakeholders throughout the life cycle of the project; (iii) describe the type of information that will be provided to stakeholders and how feedback from stakeholders will be solicited and recorded, (iv) if necessary, include differentiated measures to remove obstacles to participation as well as allow the effective participation of those identified as disadvantaged or vulnerable, and (v) describe the project-level Grievance Mechanism to be developed by the borrower. The SEP will be a living document and will be updated as required throughout the project’s life cycle. 21. In addition, a Labor Management Procedure (LMP) will be prepared following ESS2 and will be disclosed prior to appraisal. Although the impacts on indigenous population cannot be determined at this stage, an Indigenous Peoples Policy Framework (IPPF) will be prepared by project's appraisal to provide guidelines on how to avoid adverse impacts of the project on these communities and ensure their access to services and potentially participation in project activities and benefits. 22. The Environmental and Social Commitment Plan (ESCP) will include a timeline for implementation of mitigation measures as well as other requirements, including the preparation of site specific ESMPs and RAPs as needed and Dec 07, 2021 Page 7 of 9 The World Bank Digital Nepal Acceleration (DNA) Project (P176543) additional risk management documents that may be identified during project preparation. The ESCP, ESMF, SEP and IPPF will be disclosed by the Borrower and the World Bank before Project Appraisal. . CONTACT POINT World Bank Siddhartha Raja Senior Digital Development Specialist Borrower/Client/Recipient Ministry of Finance Ishwori Prasad Aryal Joint Secretary, IECCD iaryal@mof.gov.np Implementing Agencies Nepal Telecommunications Authority Surendra Lal Hada Director, Infrastructure Division slhada@nta.gov.np Purushottam Khanal Chairperson chairman@nta.gov.np Ministry of Communications and IT Anil Dutta Joint Secretary anil.dutta@nepal.gov.np Baikuntha Aryal Secretary secretary@mocit.gov.np Dec 07, 2021 Page 8 of 9 The World Bank Digital Nepal Acceleration (DNA) Project (P176543) FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects APPROVAL Task Team Leader(s): Siddhartha Raja Approved By APPROVALTBL Practice Manager/Manager: Country Director: Lada Strelkova 17-Dec-2021 Dec 07, 2021 Page 9 of 9