Nepal Development Update December 2019 DATA Envisioning a Future Data Ecosystem in Federal Nepal NEPAL DEVELOPMENT UPDATE Envisioning a Future Data Ecosystem in Federal Nepal December 12, 2019 Standard Disclaimer: Photo credits: This volume is a product of the staff of the • Cover Design Concept by Sujata Bhandari. International Bank for Reconstruction and • The Executive Summary photo was taken by Development/The World Bank. The findings, Dwarika Kafle. interpretations, and conclusions expressed in this • Photos for the Recent Developments and paper do not necessarily reflect the view of the Outlook sections were taken by Narendra Executive Directors of The World Bank or the Shrestha. governments they represent. • The Special Focus photo is by the World Bank. The World Bank does not guarantee the accuracy of the data included in this work. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202- 522-2422, e-mail pubright@worldbank.org. Acknowledgments The Nepal Development Update is produced twice on the macro update. For the Special Focus, the a year to report on key economic developments over team gratefully acknowledges advice from the peer the preceding months, placing them in a longer- reviewers, Richard Record, Phillippe George Leite term and global perspective, and to examine (in the and Kenneth Simler and many helpful comments Special Focus section) topics of particular policy from Swarnim Waglé (Former Vice Chairman of significance. The Update is intended for a wide the National Planning Commission), Yam Nath audience including policy makers, business leaders, Sharma (UNDP), Jamie Boex (Duke Center for the community of analysts and professionals International Development), Gopal Gurung (JICA) engaged in economic debate, and the general public. and Carolyn O’Donnell (The Asia Foundation). Oversight in preparing the report was provided by This Update was produced by the World Bank Mona Prasad under the overall guidance of Manuela Macroeconomics Trade and Investment (MTI) Francisco, Benu Bidani, Faris Hadad-Zervos, and team for Nepal led by Kene Ezemenari and Nayan Idah Pswarayi-Riddihough. Richa Bhattarai managed Krishna Joshi. The Special Focus section was media relations and dissemination. Diane Stamm prepared by Poverty and Equity team consisting of edited the document. Sujata Ghising processed Hiroki Uematsu, Thomas Danielewitz, Grant James the document, and Sunita Bhandari managed the Cameron, Paul Cheung, Ashutosh Mani Dixit, Ravi publication process, under the guidance of Sunita Kumar, Liza Maharjan, Suraj Regmi and Baburam Yadav. Niraula, with generous financial support from the Evidence for Development Programme by the UK’s Department for International Development. Sabin The cutoff date for data included in this report was Shrestha provided extremely useful comments November 30, 2019. i Abbreviations AGIMO Australian Government Information Management Office BFI Banks and Financial Institutions CAD current account deficit CAR capital adequacy ratio CBS Central Bureau of Statistics CCD Credit to Core Capital Plus Deposit CDO Chief Data Officer CEO Chief Executive Officer CFO Chief Financial Officer CGD citizen-generated data CPR central population register CRD call detail records CTO Chief Technology Officer DoC Department of Customs DoFE Department of Foreign Employment EC Economic Census FCGO Financial Comptroller General Office FDI foreign direct investment G2B Government-to-Business G2C Government-to-Citizens G2G Government to Government GDP gross domestic product GFS Government Finance Statistics GIS Geographic Information System GNI Gross National Income GoN Government of Nepal GPS Global Positioning System HLCIT High-Level Commission for Information and Technology IDEA Institute for Democracy and Electoral Assistance IRC interest rate corridor IRD Inland Revenue Department JICA Japan International Cooperation Agency MoF Ministry of Finance MTEF Medium-Term Expenditure Framework MTI Macroeconomics Trade and Investment MW megawatt NASA The National Aeronautics and Space Administration NDO National Data Office NDP National Data Profile NDU Nepal Development Update NEPSE Nepal Stock Exchange NGOs nongovernmental organizations NIC National Information Commission ii NIH National Institutes of Health NITRD National Information Technology Research and Development NNRFC National Natural Resources and Fiscal Commission NPC National Planning Commission NRB Nepal Rastra Bank NSDS National Strategy for the Development of Statistics NSO National statistical offices NSS National Statistical System NTIS Nepal Trade Integration Strategy OCR Office of Company Registrar OGD Open Government Data PAN permanent account number PERC public expenditure review commission SDGs Sustainable Development Goals SLF Standing Liquidity Facility SSSPCR Strengthening Systems for Social Protection and Civil Registration VAT value-added tax y/y year-on-year iii Table of Contents Acknowledgments.................................................................................................................i Abbreviations....................................................................................................................... ii Executive Summary.............................................................................................................. 1 A. Recent Economic Developments....................................................................................11 B. Outlook, Risks, and Challenges..................................................................................... 25 C. Special Focus – Envisioning a Future Data Ecosystem in Federal Nepal................... 29 C1. Data for Development in Federal Nepal....................................................................................29 C2. A data revolution is transforming the world..............................................................................32 C3. Nepal’s growing data ecosystem...................................................................................................38 C4. Emerging data needs in the era of federalism...........................................................................48 C5. The way forward.............................................................................................................................63 Reference ........................................................................................................................... 72 List of Tables: Table ES. 1. Envisioning a future data ecosystem in federal Nepal...................................................... 8 Table 1. Macroeconomic projections of selected key indicators.......................................................26 List of Figures: Figure 1. Growth reached 7.1 percent in FY2019 driven by services and agriculture.....................12 Figure 2. ...as production of paddy, maize, and wheat crops reached historic highs.......................12 Figure 3. Private investment picked up in FY2019 whereas public investment contracted............12 Figure 4. ...as post-earthquake housing reconstruction continued to taper off ................................13 Figure 5. Inflation remained subdued due to low food prices.............................................................13 Figure 6. ...and the price trends in India..................................................................................................13 Figure 7. The interbank rate remained within the IRC in the second half of FY2019 ..................14 Figure 8. Money supply grew but was below the monetary policy target..........................................14 Figure 9. Credit growth has declined recently........................................................................................14 Figure 10. ...partly explained by a reduction in overdrafts and hire purchases..................................14 Figure 11. ...and the share of real estate credit to total credit also declined .....................................15 Figure 13. Deposit growth has declined..................................................................................................15 Figure 14. The CCD ratio remains close to the regulatory limit.........................................................16 Figure 15. ...as a result, interest rates remain elevated...........................................................................16 Figure 16. Net liquidity remained above the regulatory requirement of 20 percent for BFIs....... 17 Figure 17. NPLs remained low ................................................................................................................17 Figure 18. BFIs remain well capitalized...................................................................................................18 Figure 19. The number of branches of BFIs rose by double digits in FY2019...............................18 Figure 20. The Nepal Stock Exchange is gradually recovering............................................................19 Figure 21. Import growth plummeted.....................................................................................................19 Figure 22. ...and the real exchange rate depreciated in FY2019..........................................................19 Figure 23. ...while exports grew at FY2018 levels..................................................................................20 Figure 24. ...driven by exports of palm and soybean oils.....................................................................20 Figure 25. Nepal had a trade deficit with all major trading partners .................................................21 Figure 26. Migrant worker outflow has contracted for five consecutive years ................................21 Figure 27. The current account deficit narrowed marginally in FY2019...........................................21 Figure 28. The central bank’s foreign exchange reserves contracted for the first time in nine years. 22 Figure 29. Revenue growth was robust but below the target...............................................................22 Figure 30. ...while expenditures contracted for the first time since FY2003.....................................22 Figure 31. The bunching of capital spending continued in FY2019….............................................23 Figure 32. ...as did underspending of the capital budget .....................................................................23 Figure 33. Underspending of the capital budget was also rampant in the provinces......................23 Figure 34. The fiscal deficit declined significantly in FY2019.............................................................24 Figure 35. ...and as a result, public debt .................................................................................................24 remained close to the FY2018 level.........................................................................................................24 Figure SF.1. Conceptual visualization of Nepal’s evolving data ecosystem.......................................32 Figure SF.2. Inequality of access in Nepal -Travel time to nearest hospital......................................35 Figure SF.3. Nepal in global perspective: Digital adoption indexa and global innovation indexb... 37 Figure SF.4. Internet and electricity access for local governments ....................................................37 Figure SF.5. Overview of administrative databases in Nepal ............................................................41 Figure SF.6. Constitutional responsibility around data and statistics..................................................43 Figure SF.7. Local level names -Difference and Overlaps....................................................................44 Figure SF.8. Development partner support to the Government of Nepal on data and statistics.46 Figure SF.9. List of available surveys in Nepal since 2010 ..................................................................47 Figure SF.10. Province-level SDG data gaps ............................................................................................. 50 Figure SF.11. Number of SDG indicators (relative standard errors less than 20 percent).............51 Figure SF.12. Basic reference map developed using QGIS for Chaurjahari......................................53 Figure SF.13. Chaurjahari accessibility map from Banick and Kawasoe (2019)................................53 Figure SF.14. Reliability of infrastructure index and format of records at immovable property registry..........................................................................................................................................................56 Figure SF. 15. The Norwegian register-based statistics system............................................................58 Figure SF. 16. Schematic representation of an integrated statistical system .....................................59 Figure SF.17. Statistical budget and its share in the total fiscal budget ............................................61 Figure SF.18. Staffing of National Statistics Offices ............................................................................62 Figure SF. 19. Number of posts in CBS and statistical offices in the districts ................................62 List of Boxes: Box SF.1. Nepal’s historic transition to federalism ...............................................................................30 Box SF.2. Differentiating between a data ecosystem and a national statistical system ...................38 Box SF.3. First and second amendment of the Statistical Act Box SF.3. First and second amendment of the Statistical Act.............................................................................................................39 Box SF.4. Nepal’s first ever national economic census ........................................................................40 Box SF.5. Challenges of data merging under federalism ...................................................................44 Box SF.6. Data needs for Fiscal Equalization Grants .........................................................................49 Box SF.7. Deliberative decision making in rural municipalities of Nepal .........................................52 Box SF.8. Use and need of data in Nepal’s financial sector ...............................................................54 Box SF.9. Data needs to improve ease of doing business ..................................................................55 Box SF.10. The Strengthening Systems for Social Protection and Civil Registration (SSSPCR) Project ..........................................................................................................................................................57 Box SF.11. “Statistics Norway – An institution that counts”...............................................................58 Box SF.12. Methods of data integration ................................................................................................60 Box SF. 13. Governments across the world are launching big data projects ...................................67 Box SF. 14. Data sharing among government agencies as a first step to data integration ....................69 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Executive Summary Recent Economic Developments Economic growth in Nepal remained paddy, maize, and wheat production. Higher robust, reaching 7.1 percent in FY2019. This remittances also supported increased private is in contrast with past growth that averaged 4.1 consumption, while private investment expanded percent a year between FY2007 and FY2016. The because of regular electricity supply and greater service sector accounted for 57 percent of the political and policy stability. However, public growth, and the agriculture sector contributed investment contracted as post-earthquake housing an additional 24 percent. Higher remittance reconstruction slowed and national pride projects inflows and a surge in tourist arrivals translated like Melamchi water supply and Upper Tamakoshi into higher growth in retail trade, real estate, hydroelectric were further delayed. Net exports transport, and hotel and restaurant services. continued to underperform. Good monsoons and increased commercialization coupled with improved availability of fertilizers, A good agricultural harvest helped keep seeds, and irrigation facilities contributed to higher inflation subdued at 4.6 percent in FY2019. December 2019 World Bank Group 1 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Food price inflation remained low at 3.1 percent, restrictions on vegetables and fruit imports from while non-food price inflation rose to 5.9 percent, India reduced imports of food and beverages. In driven by housing and utility prices. Inflation contrast, exports grew by 10.7 percent (y/y) on the was also contained by the Nepalese rupee peg to back of increased demand for non-crude palm and the Indian rupee (at the rate of 1.6 to 1). Prices soybean oil from India. This was helped by tariff movements in Nepal follow those in India with a exemptions on Nepalese exports to India (under lag. However, in the last two months of FY2019, the South Asian Free Trade Area Agreement), inflation spiked to above 6 percent (y/y), triggered while other countries face tariffs of 54 percent on mainly by government testing of vegetables and palm oil and 45 percent on soybean oil. Despite fruits imported from India for pesticides. This the lower import growth, the trade deficit far reduced food imports and domestic supply. Private exceeded remittance inflows because of the high sector credit drove growth in the money supply dependence on imports. As a result, the current of 15.8 percent (y/y). Nepal Rastra Bank (NRB) account deficit (7.7 percent of GDP in FY2019) adopted measures to limit overdraft facilities and remained high. Foreign exchange reserves were hire purchases, which slowed private credit growth used to partly finance the external deficit, leading to 19.3 percent. Growth in deposits also slowed to a decline in international reserves of the central to 17.7 percent, mainly from a reduction of the bank for the first time since FY2010 to US$8 ceiling on the share of institutional deposits (out billion (6.8 months of imports) from a peak of of total deposits) held by banks. The continued US$9.5 billion in July 2018. higher level of credit relative to deposits growth limited the availability of loanable funds and kept Robust revenue growth coupled with persistent interest rates elevated. underspending of the budget reduced the fiscal deficit from 6.7 percent of GDP in FY2018 The financial sector remains stable, but a rising to 1.9 percent in FY2019. Revenues grew by 17.7 trend in non-performing loans point to some percent (y/y), driven by income tax, value-added emerging vulnerabilities. Non-performing loans tax (VAT), and excise tax collections, all of which (NPLs) remain low but increased by 25 percent in grew by more than 15 percent. Trade-related taxes 7 of the 25 private commercial banks, as elevated were, however, lower than budgeted because of lending rates pushed some borrowers into default. lower import growth. The robust performance All banks and financial institutions (BFIs) are of revenues was supported by: (a) a 20 percent well capitalized and meet the capital adequacy surcharge on individual earnings of more than ratio requirement of 11 percent. However, capital NPR 2 million; (b) higher excise duties on alcohol adequacy ratios have declined over the past year, and tobacco and luxury vehicles; (c) a wider tax with development banks recording the largest base for the VAT (for liquor, cigarettes, sanitary decline. The NRB has been encouraging mergers products, electronics, and construction materials in and acquisitions to further strengthen the financial metropolitan and sub-metropolitan areas); and (d) system and curb unhealthy competition. introduction of a health risk tax on the production and import of cigarettes. On the expenditure side, With a lower growth in imports, the current total government spending dropped 2.7 percent account deficit narrowed marginally in FY2019 (y/y). Capital spending declined for the first time but remains large. Import growth decelerated to since FY2006 as earthquake reconstruction efforts 5.2 percent (y/y). Slower growth was evident across plateaued, national pride projects got further all categories of imports, except consumer goods. delayed and subnational governments were Imports of capital goods and industrial supplies unable to spend. Recurrent expenditures grew declined, as one-off capital imports to support marginally, by 0.9 percent, the lowest increase in federalism and housing reconstruction tapered the past 15 years, despite higher fiscal transfers to off. Quantitative restrictions on sugar imports local and provincial governments. Underspending (to protect domestic producers) coupled with of the budget persists mainly from limited December 2019 World Bank Group 2 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update technical capacity of existing staff and delays in connectivity through the implementation of the hiring of new staff at the subnational levels. new/revised air service agreements with different To address some of the challenges linked to countries including Australia, Cambodia, China, public expenditures, the government has started the United Arab Emirates, and Vietnam. However, implementing certain recommendations put forth the recent delays in the monsoons coupled with by the public expenditure review commission. climate-related natural disasters, the outbreak The lower fiscal deficit and large government of armyworms that damaged crops, and fake balances have constrained public debt to around paddy seeds used for growing crops are expected 30 percent of GDP. to reduce growth in agricultural production. Construction activities, new investments in the Fiscal federalism reforms are progressing cement and hydropower sectors, and improved with the increased transfer of resources to capacity utilization in the manufacturing sector subnational governments and ongoing reforms will support industrial growth. Efforts to build to strengthen the fiscal transfer system. Fiscal subnational capacity and the implementation of transfers to local governments increased to 9 performance-based contracts are also likely to percent of GDP in FY2019. An additional 3 improve government spending. percent of GDP was also transferred with the initiation of revenue sharing. Work is underway Private investment, in contrast, will be to refine and further align the fiscal transfer supported by the implementation of the framework with the Constitutional provisions 2019 national work plan to minimize the that stipulate a fiscal gap approach. This work trade deficit. The establishment of the Nepal also entails further clarification of functions and Infrastructure Bank, which will help finance service delivery norms that will define subnational large and critical infrastructure projects; and the expenditure needs. The basic elements of a operationalization of a one-stop service center functioning intergovernmental finance system are for investors. More recently, the government in place for budgeting and financial reporting. has set up the Investment Reform Delivery Unit Over the medium-term, the system will need to under the Prime Minister’s office to advance doing be upscaled to support program monitoring for business reforms. results and to inform subnational decision making. So far, the federalism successes have been possible The trade deficit is expected to trend because of implementation of key legislation such downward over the medium term. This is as the recent enactment of the Fiscal Procedures because import growth will likely slow further as and Financial Responsibility Bill that governs the spending on federalism-related infrastructure public financial management across all tiers of and post-earthquake reconstruction decline government. Progress has also been possible due while the government implements a work plan to the high-level political commitment. for encouraging import-substituting industries. Electricity exports are expected to improve in Outlook the next few years, but broader export growth will depend on structural reforms (to boost GDP growth is projected to average 6.5 competitiveness) yielding results. Remittances percent over the medium term. A steady as a share of GDP are projected to stabilize at inflow of remittances coupled with high tourist around 25 percent over the medium term. The arrivals is expected to drive growth in services. external gap will be financed primarily by long- Among the key measures and investments that term borrowing and some drawdown in reserves. will help buoy tourist arrivals are (a) the Visit International reserves are projected to cover close Nepal 2020 program; (b) completion of the to five months of imports by FY2021. There are second international airport; (c) construction negligible portfolio investments in the country and of several big hotels; and (d) the increase in air foreign direct investment is likely to remain low December 2019 World Bank Group 3 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update over the medium term. infrastructure and reverse the gains in poverty reduction. Recent delays in the monsoons The fiscal deficit is projected to average and the outbreak of armyworms that damaged around 3 percent of GDP, with a likely pickup crops in parts of the country are likely to lower in spending. Revenue performance is projected agricultural growth in FY2020. The government to remain robust as the government proceeds with has been implementing reforms to strengthen the reforms to improve tax mobilization. These include institutional framework for improved management (a) improvements in tax administration through of climate-related disasters, which will help mitigate the operationalization of systems for vehicle and some of these risks. Also, new construction is consignment tracking, biometric registration, and slated to be more resilient to climatic shocks, while electronic tax payments; (b) strengthening VAT there is increased emphasis on renewables through collection by providing an incentive for partial VAT investments in hydropower projects. refunds when payments are made electronically or through bank cards, (c) simplification of the In addition, capacity and staffing challenges tax structure by adopting a Single Tax Code to persist, particularly at the subnational levels, support greater compliance; and (d) the creation and this could continue to affect budget of a private-investment-friendly environment for execution and service delivery. Measures will be productive industries and businesses. Efforts are needed to strengthen planning and budgeting at also underway to strengthen own-source revenue of the subnational levels, including implementation subnational governments. As provincial and local of subnational Medium-Term Expenditure governments become fully functional, spending is Frameworks. Moreover, it will be important to likely to increase, and the fiscal deficit is projected adopt a legal framework for hiring staff at the to reach 3.3 percent of GDP by FY2021. The subnational level, and a capacity building program implementation of the Public Expenditure Review for all staff. Commission recommendations is expected to support greater spending efficiencies. In addition, Underpinning the above challenges is the Development Partners, including the World Bank, need for more and better data that will support are working to improve various facets of Public evidence-based reforms and risk mitigation Financial Management and Public Investment efforts. This is the focus of the special topic Management. The fiscal deficit will be financed by section of this Nepal Development Update on a mix of domestic and international borrowing, data, which outlines the key data gaps as well as and the availability of concessional financing is the legal and institutional framework for data likely to continue. and statistics in federal Nepal. It highlights the important role of data in supporting development Risks and Challenges and fostering transparency and accountability. The section aims to assist the government in Persistently high trade deficits raise risks to envisioning a future data ecosystem that harnesses the external sector. This could potentially be new technologies and new data sources to meet exacerbated if geopolitical tensions escalate in the growing demand for knowledge and evidence migrant receiving countries, thereby impacting to steer Nepal’s development progress. remittance inflows. Lower remittances could also adversely impact the liquidity of the financial Special Focus – Envisioning a Future Data system. This risk is mitigated, in part, by measures Ecosystem in Federal Nepal to support exports and reduce imports. Nepal’s historic transition to federalism has Climate-related natural disasters resulting created a surge in demand for more and from erratic monsoons could adversely better data. One of the primary purposes of impact agricultural production and existing December 2019 World Bank Group 4 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update decentralization is to improve public service owing to the vast improvements in computer delivery. Data and evidence-based analysis beyond processing power. heuristics and anecdotes play critical roles in achieving and measuring results. Aspirations are Nepal’s data ecosystem needs to build around apparent, as declared by the Rt. Hon’ble President three analogous dimensions that spurred the of Nepal during her address to the joint session global data revolution: data production, data of both Houses of the Federal Parliament in sharing, and data use, all of which must be built 2018, that the country’s “development in the on a strong data governance structure. So far, days to come will be based on intensive analysis the focus in Nepal has been on data production. of information and data, research and evidence.” Without improving data sharing and data use, About 60 percent of the newly elected local however, additional data production will not leaders are new to politics1, and a renewed sense contribute much to the growth and dynamism of of accountability is emerging as they strive to the ecosystem, represented by the volume of the deliver the promises to their constituencies. cube in Figure 1. The value of new data can be maximized only if the data can be widely shared Data can play a critical role for successful and used by many. implementation of federalism and accelerating development progress. Governments’ core Data evolve in an ecosystem, an environment activities – including policy development, program in which a wide range of actors produce, use, implementation, and performance monitoring – and exchange data and data analytics across all require data. The need for data is amplified as sectors and national boundaries. In many federalism brings the decision-making power to ways, this concept supersedes a national statistical provinces and local governments. As the United system, traditionally spearheaded by a National Nations put it, “Data are the lifeblood of decision- Statistics Office that serves as the custodian of making,”2 and it is difficult to successfully official statistics and is the main data producer implement federalism without high-quality data. for the government. It consists of more than government actors, such as the private sector, Globally, the internet and other digital civil society, media, academia, and development technologies have led to an unprecedented partners. increase in data production during the last two decades. At the turn of the 21st century, Nepal’s data ecosystem is facing a there were approximately 5 billion gigabytes of fundamental and inevitable paradigm shift. information available. By 2012, the same volume National Statistics Offices around the world are of information was created every two days. facing the need to graduate from data producers, By 2016, 90 percent of data in existence were relying on traditional surveys and censuses, to data produced in the preceding year. The preceding 12 integrators that exercise leadership and coordinate months produced nine times as much data as the key actors to foster an effective and sustainable world has produced previously. data ecosystem. Inaction will leave Nepal behind in the global data revolution and jeopardize the The global data revolution is propelled by three government’s lofty goals for building a prosperous mutually reinforcing factors. These include the Nepal. Timely and visionary leadership, however, ability to collect and store data digitally, the ability will enable Nepal to unlock the value of the data to share data instantaneously through the Internet, ecosystem to propel the economy and society and the ability to analyze large volumes of data forward. 1 World Bank 2018a. 2 United Nations 2014. December 2019 World Bank Group 5 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update The Central Bureau of Statistics (CBS) information about displaced populations, who are is at the core of Nepal’s data ecosystem. often vulnerable and in need of support. Established under the Statistical Act 1958, the CBS has long been regarded as the sole custodian Development partners play a significant of official statistics for the Government of Nepal. supporting role in Nepal’s data ecosystem. For example, the recently completed National There are at least 14 multilateral and bilateral Economic Census 2018 is a historical landmark, agencies providing support to more than 25 public as it is the first such census in Nepal. The CBS is agencies in Nepal in the area of data and statistics. preparing for the next round of the Population and They conduct a significant number of surveys Housing Census in 2021. This census is a golden on their own. Some development partners have opportunity to bring a fresh set of benchmark already started supporting provincial and local data for all three tiers of government. governments, and this trend will likely increase in the future. More than 60 years after the original Statistics Act, the CBS is no longer the sole government At the same time, the dearth of data is already authority collecting data. Many line ministries surfacing as a challenge for many prominent and specialized agencies maintain administrative federal initiatives. Fiscal equalization policies databases generated from the operation of achieved through intergovernmental fiscal transfers public agencies such as registration, transaction, rely on a heavily data-driven scheme, but so far it recordkeeping, and service delivery. All provincial still relies on some data collected pre-federalism. governments and local governments will join The National Data Profile (NDP), an open data the ranks of data producers and users in Nepal’s platform to disseminate data from all relevant data ecosystem. The unbundling report of the sectors across all three tiers of government, faces Constitution lists almost 50 responsibilities directly similar challenges, and it could only draw on its or indirectly related with data across the three tiers 2011 Population and Housing Census data at of government, including but not limited to data the time of writing. Localization of Sustainable collection and management, coordination, capacity Development Goals also needs more and better development, quality assurance, and protection data, and the National Planning Commission of statistics. A strong coordination mechanism is (NPC) already produced 120 provincial-level urgently needed in order to clarify responsibilities indicators, but not at the local level. and avoid duplications. Data needs of local governments are even An emerging group of private firms and more diverse, as are the local development nonprofit organizations are contributing challenges and priorities. Metropolitan cities to a nascent yet emerging data community like Kathmandu and Lalitpur would need data in Nepal. Citizen-generated data and private for urban planning, much like other metropolitan sector data also proved to be important data cities in other countries. Many rural municipalities sources to generate near real-time measurement likely need basic demographic and socioeconomic of the displaced population in the immediate indicators to set baselines. The way data are aftermath of the 2015 Gorkha earthquakes. In communicated must be carefully customized to the aftermath of the devastating earthquakes local contexts because the capacity to understand in 2015, Flowminder, a Swedish nonprofit data is extremely diverse. The need to grow company, used Ncell’s aggregate and anonymized capacity to use data is echoed across the spectrum call detailed record (CDR) data to create a map of the data ecosystem. of population movements. Near real-time and locally disaggregated measurement of population Nepal needs a data ecosystem that can fill the movements after natural disasters provided critical demand for reliable data from users within and December 2019 World Bank Group 6 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update outside of government. Most of the focus thus to satisfy specific data needs not addressed by the far was on data production. Without improving federal government. data sharing and data use, however, additional data production will not contribute much to the Short-term reforms that can drastically improve growth of the ecosystem. Realizing this vision data accessibility include: will be a long journey. Strategic planning and investments under strong leadership are of utmost • Publishing data appendixes in statistical abstracts importance. Given the cross-cutting nature of and reports in a machine-readable format. This will data, much deeper coordination will be needed immediately boost data usability and reduces the across government agencies, the private sector, chances of data misuse as users will no longer civil society, media, academia, and development have to manually “scrape” data from PDF files or partners. The recommendations in this update are manually restructure data for analysis. To the extent organized around two broad themes: (1) making possible, methodological notes and programs to the most of existing data, which focuses on replicate the results should also be made available. short-term priorities; and (2) creating an enabling Transparency around how statistics are generated environment to nurture the data ecosystem, which is essential for building and maintaining trust. mainly consists of long-term reforms. • Developing a consistent data dissemination policy. Making the most of existing data would entail Anonymized microdata from sample surveys creating a more balanced data ecosystem should be consistently made available online across data production, sharing, and use. Since and free-of-charge. The revenue from sales of Nepal already has a lot of data, efforts around microdata is likely marginal compared to the future data production should prioritize: value of the data sets to society. The practice of charging for data limits use. It is crucial, however, • Continued and successful implementation of existing that the privacy of respondents and confidentiality core statistical activities. The National Economic are ensured. Trust is the main currency of national Census 2018 was a major accomplishment for statistical agencies and must be protected. Nepal. The 2021 Population and Housing Census offers an important opportunity for Nepal to Improved data sharing must be accompanied establish statistical benchmarks for the central, by efforts to boost demand for data use by provincial, and local governments. The core government agencies, private firms, academic statistical activities will need to be reinforced to institutions, and the general public including: remain authoritative data sources and to serve the purposes of subnational jurisdictions to avoid • Building basic data literacy for local governments across parallel data collections. the country. The need for capacity building for data collection, sharing, and use is echoed across • Developing a long-term data production schedule for all three tiers of the government and across the national censuses and surveys. Such a schedule would spectrum of the data ecosystem. Priority should be help avoid bunching of large-scale data production given to local governments as they are responsible activities as observed in recent years. The for the delivery of key public services, but their government should use it to plan ahead of time capacity varies significantly. Efforts to narrow this and to strategically align donor support to ensure capacity gap are needed to ensure that no local that these core activities cater to the data needs of governments are left behind. the country over the long run. Given the intensive support by development partners in this area, • Promoting innovations in data use that explore new sources development partners’ coordination is critical. It of data such as geospatial data, remote sensing will help provincial and local governments to plan data, private sector data, and citizen-generated December 2019 World Bank Group 7 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Table ES. 1. Envisioning a future data ecosystem in federal Nepal Reform Key recommendations themes Data Production • Continue to focus on core statistical products (censuses and national surveys) • Introduce geo-tagging in all relevant surveys, censuses and administrative registers • Develop a long-term calendar of censuses and priority surveys, reflecting user Make the most of the existing data feedback • Establish a data producer-user network to reflect user feedback in data production Data Sharing • Develop a comprehensive data dissemination policy and open government strategy • Promote data sharing in machine-readable formats Leadership and long-term vision • Invest more and further develop National Data Profile as a model for improved data sharing and exchange Data Use • Cultivate demand for data use by government agencies, private firms, academic institutions, and the general public • Promote innovations in data use that explore new sources of data such as geospatial data, citizen-generated data, and private sector data Data Governance • Establish a new data governance structure conducive for federal Nepal that clarifies leadership and coordination roles across the three tiers of government Create an enabling environment • Update the Statistics Act and follow through on recommendations in the National Strategy for the Development of Statistics Data Sharing • Develop a long-term vision for enhanced data integration • Develop an enabling legal and institutional framework conducive to active data exchanges across public agencies • Develop a set of common, foundational registers on people, places, and business Data Use • Invest more in staffing and capacity development for data and statistics December 2019 World Bank Group 8 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update data. New data sources must be sought out as not to establish an implementation mechanism based all data demands will be satisfied by traditional on an agreed roadmap. The eventual adoption of data sources such as surveys and censuses.3 To a new Statistics Act is critical for the establishment maximize the value of data produced by the of a sound national statistical system that makes private sector, governments should partner with up the core of the overall data ecosystem under one or two data providers to develop pathways for the new federalism. private data to flow for public good. Factors that support an effective partnership include ensuring Enhanced data sharing and integration of privacy and security, minimizing transaction costs, administrative databases is imperative for a and mitigating reputational risks. cohesive federated data ecosystem. This is an opportunity for Nepal to leapfrog as many Creating an enabling environment to nurture middle-income countries struggle to fully harness the data ecosystem would require reforms to the benefits of data integration. In Nepal, the strengthen governance; establish a strategy, governance framework could be strengthened to systems, and a related legal framework for data support improved data sharing and integration by integration; and increase staffing and capacity. developing: A robust data governance structure would enable data sharing across government institutions • A long-term vision for enhanced data integration, and facilitate enhanced data integration that can built on strong leadership and coordination beyond the connect data on people, businesses, and places, traditional statistical system. It needs an enabling and produce timely and locally disaggregated data. legal framework and a supporting institutional arrangement conducive to active data exchange Strengthening the data governance framework across public agencies, as well as a solid technical is a critical prerequisite for a functional data foundation to set standards, definitions, and data ecosystem. This would entail the following quality frameworks. Provisions for data privacy reforms: must be developed and encoded in legislation as required. • Establishing a new data governance structure conducive for federal Nepal that clarifies functions and roles and • Common and foundational registers of people, places, and facilitates increased coordination across the three tiers businesses, with unique identifiers for linking data of government. Intergovernmental coordination on people, businesses, and places. Nepal needs a becomes increasingly important to support Nepal’s set of common, foundational, national databases data ecosystem. The data governance should be on people, places, and business to form the institutionalized in such a way that data coming backbone of the new data ecosystem, with links to from different sources would “complement” rather sectoral management information systems such as than “compete” with each other and abide the education and health. Together these three registers “cooperation,” “co-existing,” and “coordination” could form the nexus for an integrated register- principle enshrined in the Constitution of Nepal. based data system with the potential to vastly We discuss three alternative models with examples increase the efficiency of government operations. from other countries. Countries such as Denmark, Norway, and Singapore make full use of integrated administrative • Following through on the recommendations of the databases to conduct their population census at a National Strategy for the Development of Statistics fraction of the cost for traditional censuses. The (NSDS) as a strategic platform for improving the national strong push for digitization of the Civil Registry statistical system. It is imperative for the government and implementation of a National ID should be 3 Recent applications of geospatial data and citizen-generated data in Nepal are discussed in the main text. December 2019 World Bank Group 9 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update expanded to other base registers, like the Company Nepal’s data ecosystem needs long-term Register and the Cadaster. strategic directions to modernize itself and improve data sharing and data use. Nepal already Finally, it will be important to invest more in staffing has a lot of data to start its own data revolution, but and capacity development for improved data they exist in silos. In a way, Nepal’s data ecosystem use and growth of the data ecosystem. Meeting today is like society at the dawn of the digital the growing data demands such as fiscal federalism transformation in which many have a computer, but and National Data Profile needs significant financial no internet. The volume of information exchange and human resource support to cover the bottom would be severely limited in such a constrained line. National statistical agencies have limited environment. The culture of data use will not opportunities for generating revenue, and given grow unless there is an active exchange of data the public good of their product, sufficient public that encourages data-driven innovations. A positive funding via national and subnational budgets is feedback loop must be created, whereby improved needed. data sharing leads to enhanced data use, which in turn can reveal data gaps and quality issues to The transition to federalism is a testament to improve data production. Nepal’s desire to accelerate its development progress to achieve a series of ambitious goals. Even in the age of artificial intelligence, it Nepal aspires to be a prosperous middle-income will remain a distinctive advantage of humans country by 2030 and committed to achieving a to ask the right questions. Data itself have no range of aspirational development goals, including value, no matter how big they may be. Data must the Sustainable Development Goals (SDGs). Goals be used to measure things we care about and to cannot be achieved without monitoring progress, and generate knowledge that inspires change. Data must progress cannot be monitored without high-quality drive actions on results that count. This requires data. To translate aspirations into actions, there is visionary leadership to push through necessary an emerging thirst for more data and knowledge to reforms to create an enabling legal and institutional design effective policies to accelerate development environment for the data ecosystem to thrive and progress by all three tiers of the governments. contribute to Nepal’s development. December 2019 World Bank Group 10 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update A. Recent Economic Developments Real Sector Nepal grew by more than 6 percent in FY 2019, the expansion of retail trade (10.9 percent, y/y) a break from past tepid growth rates. Real gross and real estate (6.1 percent y/y), whereas higher domestic product (GDP) grew by 7.1 percent tourist arrivals boosted the transport (5.9 percent compared with 4.1 percent during FY2007– y/y), and hotel and restaurant (8.3 percent, y/y) FY2016. Growth in the past year was mainly subsectors. The agriculture sector expanded by 5 driven by the service and agriculture sectors, percent (y/y), well above its 30-year average of 3.1 the latter supported by good monsoons. On the percent. Good monsoons together with increased demand side, a surge in private sector investment commercialization of agriculture, the availability and increased consumption, fueled by remittances, of fertilizers and seeds, and irrigation facilities drove output expansion. helped raise paddy production to the historic high of 5.6 million tons (Figure 2). In addition, maize On the supply side, growth was driven by and wheat production grew by 3.5 percent and 4.5 services (a 3.9-percentage-point contribution percent, respectively. These three crops together to GDP growth) and the agriculture sector (a constitute more than 30 percent of agricultural 1.6-percentage-point contribution) (Figure 1). GDP. The services sector grew by 7.5 percent (y/y) in FY2019, boosted by higher remittance inflows and an uptick in tourist arrivals. Remittances supported December 2019 World Bank Group 11 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure 1. Growth reached 7.1 percent in FY2019 regular supply of electricity4 and greater political driven by services and agriculture... and policy stability. Public investment, however, contracted, reducing growth by 0.5 percentage points, as post-earthquake housing reconstruction slowed5 (Figure 4) and national pride projects like Melamchi water supply and Upper Tamakoshi hydroelectric were further delayed. Figure 3. Private investment picked up in FY2019 whereas public investment contracted... Sources: CBS and World Bank staff calculations. Figure 2. ...as production of paddy, maize, and wheat crops reached historic highs Sources: CBS and World Bank staff calculations. Figure 4. ...as post-earthquake housing reconstruction continued to taper off Sources: MoAD and World Bank staff calculations On the demand side, private investment and consumption were the main drivers of growth (Figure 3). Both contributed 4.9 percentage points each to overall GDP growth in FY2019. Private consumption grew on the back of higher remittances (discussed below), while private investment expanded because of the Sources: MoUD and World Bank staff calculations 4 The 22 megawatt (MW) from the Bagmati Hydropower project and the 60 MW from the Upper Trishuli 3A were added in FY2019. 5 There has been growing concern that post-earthquake housing reconstruction is contributing to the increase in household debt as households increasingly borrow from informal sources (family, relatives, neighbors, and cooperatives) at high interest rates to construct their houses. Increased household borrowing from informal sources is due to insufficient government housing grants (NPR 300,000) and the inability of households to borrow from formal sources (banks and financial institutions) (see United Nations [2018] for details). In addition, there is a significant variation in the cost of housing reconstruction across earthquake-affected districts. That is why even after four years, only around 27.8 percent of earthquake survivors in the Kathmandu Valley have completed reconstruction works compared with 63.3 percent for the other 11 earthquake-affected districts. December 2019 World Bank Group 12 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Inflation set at the same level as FY2018. The NRB has been using the interest rate corridor (IRC) since Inflation remained subdued in FY2019, driven FY2017 to help control the short-term interest by good agricultural production and the rate (weighted average interbank rate) and keep Indian Rupee. Average inflation was 4.5 percent in FY2019, lower than the revised monetary policy Figure 6. ...and the price trends in India target of 5.5 percent. The price of non-food items grew by 5.8 percent, driven mainly by housing and utilities (Figure 5), whereas food prices rose only by 3 percent, supported by the good agricultural harvest. The Nepalese rupee is pegged to the Indian rupee at the rate of 1.6 to 1 (India is the largest trading partner) and thus, inflation in Nepal follows the price movements in India, but with a lag (Figure 6). In the last two months of FY2019, inflation spiked to above 6 percent (y/y), mainly driven by higher food prices. This was triggered Sources: NRB, Ministry of Statistics and Program Implementation of India, and World Bank staff calculations Figure 5. Inflation remained subdued due to low food prices... it in the target range. In FY2019, the lower limit and the upper limit of the target range were set to the two-week deposit collection rate (3.5 percent) and the standing liquidity facility (SLF6) rate (6.5 percent), respectively. This range was narrower than FY2018 by 1 percentage point. The interbank rate remained below the lower limit of the IRC in the first half of FY2019 but was largely range bound in the second half (Figure 7). The deviation in the first half stemmed from the NRB’s decision not to mop up excess liquidity in order to lower the lending rate. Following the central bank’s directive on December 26, 2018, to allow interbank loans to be treated as deposits Sources: NRB and World Bank staff calculations when calculating the credit-to-core capital and domestic deposits (CCD) ratio, the interbank rate by the government’s decision to conduct pesticide surged. This directive, together with the use of tests on vegetables and fruits imported from India 14-day repurchase agreements (equivalent to NPR which resulted in lower uptake of imported food 5.7 billion in the second half of FY2019), helped and an increase in domestic prices. keep the interbank rate within the IRC in the second half of FY2019. However, the interbank Monetary Policy and the Financial Sector rate slumped toward the end of the fiscal year, Monetary policy remained accommodative and remained below the lower limit, because of in FY2019, with the policy repo rate (14 days) increased liquidity resulting from underspending 6 Under the SLF, the central bank provides collateralized loans up to 90 percent of the face value of collateral to meet a short-term liquidity requirement (up to five days) of BFIs. December 2019 World Bank Group 13 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure 7. The interbank rate remained within the Private sector credit growth, while lower than IRC in the second half of FY2019 last year, remained robust. Credit grew by 19.3 percent in FY2019, lower than the monetary policy target of 20 percent and the FY2018 growth of 22.4 percent. The deceleration was primarily because of the slowdown in growth of real estate loans and the macroprudential measures introduced by the NRB (Figures 9 and 10). The NRB adopted measures related to overdrafts and hire purchases to contain credit growth. Figure 9. Credit growth has declined recently... Sources: NRB and World Bank staff calculations. of the budget. This has created a large interest rate gap with India, putting pressure on the exchange rate peg. Figure 8. Money supply grew but was below the monetary policy target Sources: NRB and World Bank staff calculations. Figure 10. ...partly explained by a reduction in overdrafts and hire purchases... Sources: NRB and World Bank staff calculations. Money supply (M2) growth was below the FY2019 monetary policy target (Figure 8). M2 grew by 15.8 percent (y/y) in July 2019 and remained below the FY2019 target of 18 percent. Sources: NRB and World Bank staff calculations. The private sector was the key driver of M2 growth, contributing 15.1 percentage points. Net For overdrafts, the maximum limit for personal claims on the government contributed another overdraft loans was reduced to NPR 5 million 3.6 percentage points as government deposits in July 2018 from the previous level of NPR 7.5 declined. However, net foreign assets made a million, whereas for hire purchases, the loan-to- negative contribution of 2.2 percentage points to value threshold was reduced from 65 percent M2 growth. December 2019 World Bank Group 14 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update to 50 percent in November 2019. As a result of Figure 12. Real estate continues to be the these measures, overdrafts and hire purchases preferred form of collateral for BFIs declined, reducing overall credit growth. Despite the slowdown in credit growth, commercial banks, development banks, and finance companies met their priority sector lending targets and channeled 30.3 percent, 24.7 percent, and 17.6 percent, respectively, of their total credit to agriculture, energy, and tourism. The direct exposure of BFIs to the real estate sector has declined (Figure 11). In July 2019, the share of real estate loans (including residential loans) to total credit decreased to 13 percent, significantly below the regulatory limit of 25 percent. This decrease came from a fall in the share Sources: NRB and World Bank staff calculations. of residential real estate (of value less than NPR 15 million) and commercial real estate loans by However, real estate continues to be the BFI’s 13.2 percent (y/y) as lending rates remained high. preferred collateral for lending. In FY2018, real However, the share of residential real estate loans estate backed loans explained 62.7 percent of total of value up to and including NPR 15 million, was credit growth, up from 60.3 percent in FY2017. unchanged at 8 percent. It should be noted that In the absence of any further policy measures in the reported direct exposure may not reflect the FY2019, the contribution of real estate backed true exposure as some personal overdraft loans are loans to total loan growth swelled to 79.4 percent also being channeled to the real estate sector. (Figure 12). Figure 11. ...and the share of real estate credit to Deposits growth also slowed in FY2019 (Figure total credit also declined7 13). Deposits grew by 17.7 percent in FY2019, slightly lower than the 18.8 percent growth in FY2018. The slowdown in deposit growth was driven primarily by institutional depositors Figure 13. Deposit growth has declined Sources: NRB and World Bank staff calculations. Sources: NRB and World Bank staff calculations. 7 The threshold for residential home loans was NPR 10 million prior to October 2017. Currently, loan amounts of less than NPR 15 million fall under personal home loans. Anything above that is lumped together with commercial real estate. December 2019 World Bank Group 15 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update (like insurance companies, Employees’ Provident (a) allowing commercial banks to borrow from Fund) because of the reduction in the NRB- Indian BFIs, in Indian rupees, from August mandated ceiling for institutional deposits to 15 2018. This is in addition to the existing provision percent of total deposits (from 20 percent earlier) enabling convertible currency borrowing from in July 2018. There was also some slowdown in foreign BFIs. The limit for both INR and foreign individual deposits because of the deceleration in currency borrowing was initially set at 25 percent remittance growth. In a positive step forward, in of core capital. In February 2019, this limit was November 2018, the NRB increased the coverage raised to 100 percent. Development banks and amount of deposit insurance by NPR 100,000 to finance companies were also allowed to borrow NPR 300,000 per depositor per bank. from Indian BFIs, but they can use these funds to invest only in the productive sectors such as The measures introduced by the NRB to tourism, agriculture, microfinance, and physical increase the availability of loanable funds has infrastructure, but not in real estate; (b) allowing not had much impact. Higher credit growth BFIs to add loans obtained through the interbank relative to deposit growth put pressure on the window to deposits when calculating the CCD availability of loanable funds. The Local Currency ratio (December 2018); (c) allowing BFIs to Credit to Core Capital and Local Currency Deposit deduct concessional credit8 from total credit (CCD) ratio of BFIs – a measure of the availability when computing the CCD ratio (December 2018); of loanable funds – increased in July 2019 and and (d) encouraging commercial banks to issue continues to hover around the regulatory limit of debentures. Despite these measures, the CCD 80 percent, reflecting a shortage of loanable funds ratio remained high. As a result of the shortage of (Figure 14). Among BFIs, the increase in the CCD loanable funds, the long-term interest rates remain ratio was the highest for finance companies and elevated (Figure 15) at 12.2 percent. the lowest for state-owned commercial banks. The NRB introduced several measures to increase the Figure 15. ...as a result, interest rates remain availability of loanable funds, which included elevated Figure 14. The CCD ratio remains close to the regulatory limit... Sources: NRB and World Bank staff calculations. The liquidity position remains adequate Sources: NRB and World Bank staff calculations. but there was a declining trend in FY2019 8 The concessional loans are provided to the following loan categories as per the FY2019 budget: loans to youth with higher education to start their own business; project loans for returnee migrants; project loans for women; business loans to the Dalit community; education loans to economically deprived, marginalized, and targeted communities for pursuing higher studies and for technical and vocational education; loans for the construction of private housing of earthquake victims; and commercial agriculture and livestock loans. December 2019 World Bank Group 16 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update (Figure 16). Net liquidity – measured as net liquid emerging among private commercial banks. assets to total deposits – for all BFIs remained Non-performing loans (NPLs) – defined as the above the regulatory requirement of 20 percent ratio of loans which are overdue by 90 days or during FY2019. more to total loans for all categories of BFIs – were in the low single digits in July 2019 (Figure Figure 16. Net liquidity remained above the 17). regulatory requirement of 20 percent for BFIs Figure 17. NPLs remained low Sources: NRB and World Bank staff calculations. Sources: NRB and World Bank staff calculations. However, BFIs did witness a decline in liquidity during the year. The liquidity position was However, NPLs increased by 8.1 percent (y/y) for supported by the reduction in the cash reserve private commercial banks, as against a reduction ratio and the statutory liquidity ratio and by the in NPLs in other financial institutions. Seven of open market operations of the NRB. The NRB the 25 private commercial banks saw an increase reduced the cash reserve ratio to 4 percent for in NPLs of more than 25 percent (y/y), with four commercial banks and development banks from of these registering a growth of more than 150 6 and 5 percent, respectively, and the statutory percent (y/y) as elevated lending rates pushed liquidity ratio to 10 percent, 8 percent, and 7 some borrowers into default.9 percent for commercial banks, development banks, and finance companies from 12, 9, and 8 Nevertheless, all BFIs are well capitalized percent, respectively (July 2018). In addition, the and meet the capital adequacy ratio (CAR) NRB injected liquidity worth NPR 316.8 billion, requirement of 11 percent. In July 2019, the consisting of regular repo of NPR 162.5 billion CAR of state-owned and private commercial and a Standing Liquidity Facility of NPR 154.3 banks stood at 16.9 percent and 13.5 percent, billion. The reverse repo and deposit auctions respectively (Figure 18) while the CAR of were much smaller. Although, these actions on the development banks and finance companies were part of the NRB increased the liquidity and hence also above the regulatory requirement. Although investible funds, they did little to change the CCD BFIs maintained strong capital positions, capital ratio and hence the loanable funds. ratios declined in July 2019, with development banks recording the largest decline. Stress test While overall non-performing loans remain results from NRB show that the CAR of 24 out below 5 percent, some vulnerabilities are of 28 commercial banks fell below the regulatory 9 Since the NRB does not report NPL ratios by sectors, it was not possible to identify the key drivers of the deterioration in these seven banks. December 2019 World Bank Group 17 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update minimum in July 2018, when subjected to a Financial inclusion improved further in combined credit shock consisting of the following: FY2019 (Figure 19). As of July 2019, the number i) 15 percent of performing loans downgraded of bank branches grew by 20.3 percent (y/y), to substandard; ii) 15 percent of substandard enabling nearly 732 of the 753 local governments loans downgraded to doubtful; iii) 25 percent to have a bank branch in their locality. This was of doubtful loans downgraded to loss; and iv) 5 up from 631 local governments in July 2018. In percent of performing loans downgraded to loss. FY2019 the government and the NRB introduced The results of the stress test indicate that although additional measures to expand financial inclusion, the banking system is well capitalized, there is a including: i) simplification of the paperwork need to monitor emerging vulnerabilities. required for opening new bank accounts (April 2019); and ii) stipulation of mandatory bank Figure 18. BFIs remain well capitalized accounts for all employees of government, non- government organizations, and the private sector for salaries and financial pay incentives (July 2018). Figure 19. The number of branches of BFIs rose by double digits in FY2019 Sources: NRB and World Bank staff calculations NRB has been encouraging mergers and acquisitions to further strengthen the financial system and curb unhealthy competition. As a result, in the last three years, the number Sources: NRB and World Bank staff calculations of commercial banks decreased to 28 from 30, development banks to 29 from 76, and finance This program was first rolled out to government companies to 23 from 48. However, there were employees (October 2018) and was followed no mergers among commercial banks in FY2019. by employees in the service sector including Contrary to NRB expectations, commercial international NGOs (January 2019). The remaining banks were able to meet the enhanced capital employees will be required to comply with this requirements by raising capital through the requirement from January 2020 onwards. issuance of bonus shares, rights shares, public offerings, and through mergers with non-bank Stock Market financial institutions (development banks and finance companies). At the request of the NRB, The stock market recovered partly toward most commercial banks submitted either the the end of FY2019 in response to measures names of the banks they sought to merge with or undertaken by the NRB and the government a commitment letter for merger by July 2019. It (Figure 20). The benchmark index, the Nepal is unclear whether such mergers will discourage Stock Exchange Index (NEPSE), declined 21.9 unhealthy competition and a detailed analysis of percent from April 2018 to May 2019, driven by the same needs to be undertaken. (a) elevated lending rates; (b) higher interest rates on fixed deposits, which are less risky than the December 2019 World Bank Group 18 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update stock market; (c) a reduction in the margin lending External Sector ceiling by the NRB to 25 percent of core capital in July 2018 from 40 percent, previously; (d) a Import growth plummeted, driven largely by decrease in the personal overdraft limit from NPR lower demand for capital goods and industrial 7.5 million to NPR 5 million in July 2018; and supplies. In FY2019, import growth decelerated (e) the government’s mandatory requirement for to 5.2 percent (y/y), down from 27.6 percent secondary market traders with daily transactions (y/y) in FY2018 (Figure 21). The fall in import above NPR 500,000 to have a permanent account growth was broad based and observed across number (PAN). To shore up the stock market, in all categories of products, with the exception December 2018, the NRB introduced a series of of consumer goods. The largest declines were measures that included (a) a reversal in the decline witnessed in capital goods and industrial supplies Figure 20. The Nepal Stock Exchange is as one-off capital imports (such as bulldozers) to gradually recovering support housing reconstruction and federalism continued to taper off. Figure 21. Import growth plummeted... Sources: NRB, NEPSE, and World Bank staff calculations in the margin lending ceiling to bring it back to Sources: DoC and World Bank staff calculations 40 percent of core capital; (b) an increase in the Figure 22. ...and the real exchange rate loan-to-value ratio to 65 percent from 50 percent depreciated in FY2019... (value being the minimum of either the 180-day average price or the prevailing market price of the stock); (c) a reduction in the risk assigned to margin lending to 100 percent from 150 percent, previously; and (d) the introduction of margin loans through stockbrokers. In addition, the Nepal Stock Exchange provided a license in June 2019 to eight stockbrokers for providing a margin trading facility to the 31 listed companies eligible for margin trading. In addition, the budget speech of FY2020 also announced a capital gains tax reduction for individual investors from 7.5 percent to 5 percent (effective from FY2020). Source: IMF and World Bank staff calculations With the introduction of these measures, there was some revival in the stock exchange, with the In addition, the demand for cement clinkers NEPSE index up by 3.8 percent (y/y) in July 2019. declined as domestic production of clinkers December 2019 World Bank Group 19 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update increased. The import growth of food and soybean oil began in FY2019, primarily to India, beverages also declined because of the and were helped by the import tariff differential government’s decision to impose quantitative Nepal enjoys compared with other countries restrictions on sugar imports (between April 2018 exporting these products to India. Exports to and July 2019) to protect domestic producers. In India from Nepal are exempted from tariffs under addition, the depreciation of the real effective the South Asian Free Trade Area Agreement. exchange rate (Figure 22) also disincentivized However, tariffs of 54 percent on palm oil and 45 imports. percent on soybean oil are levied by India when importing these products from other countries. The growth in exports was sustained at Nepal capitalized on this arbitrage opportunity FY2018 levels, supported by higher exports of and significantly increased exports of these two crude palm and soybean oil (Figures 23 and 24). products. However, it might not be a sustainable In FY2019, exports grew by 10.7 percent (y/y) on option in the long run. The export performance the back of increased demand for food and of products under the Nepal Trade Integration Strategy (NTIS) 2016 – all fabrics, textile, yarn, and Figure 23. ...while exports grew at FY2018 levels rope, cardamom, carpet, footwear, ginger, leather, medicinal and aromatic plants, pashmina, and tea – was, however, dismal in FY2019, contracting by 4.8 percent (y/y) compared with the expansion of 17.9 percent (y/y) in FY2018. Consequently, the NTIS export value to GDP reached 1.1 percent, markedly lower than the target of 4 percent to be achieved by 2020. The key reasons for the weak performance included the lack of raw materials, skilled manpower, and infrastructure (processing centers, lab testing, storage facilities). Sources: DoC and World Bank staff calculations. With a deceleration in imports, the trade deficit as a share of GDP declined. The decline Figure 24. ...driven by exports of palm and in import growth coupled with a low exports- soybean oils imports ratio resulted in the reduction of the trade deficit to 37.1 percent of GDP in FY2019 compared with 37.4 percent in FY2018. Nepal’s trade remained concentrated in a few countries, highlighting vulnerabilities. In FY2019, although Nepal imported goods from 150 countries and exported goods to 45 countries, nearly 65 percent of the trade was with India. India and China together accounted for more than 80 percent of merchandise imports, while India and the United States accounted for more than 80 percent of merchandise exports. This concentration together with the high import- Sources: DoC and World Bank staff calculations. to-export ratio (at 12.3) makes Nepal highly susceptible to developments in India. Nepal also has a goods trade deficit with all major trading beverages, especially, non-crude palm and partners (Figure 25), indicating low export soybean oil. Exports of non-crude palm and competitiveness. December 2019 World Bank Group 20 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure 25. Nepal had a trade deficit with all major Remittance inflows remained robust, but trading partners their growth rate has slowed. Remittance inflows at US$7.8 billion in FY2019, grew by 7.8 percent, lower than the 10.2 percent recorded in FY2018. The sustained inflow of remittances was attributable to several factors. The depreciation of the Nepalese rupee against the U.S. dollar encouraged migrant workers to remit a greater share of their savings to benefit from the favorable exchange rate. This, coupled with an increased use of formal channels for remittances, contributed to higher officially recorded remittance inflows. In addition, Nepalese migrants are increasingly remitting money from Japan and the Republic of Sources: DoC and World Bank staff calculations. Korea, where wage rates are much higher. The main destinations for migrants are countries in the Figure 26. Migrant worker outflow has contracted Gulf (Kuwait, Qatar, Saudi Arabia, and the United for five consecutive years Arab Emirates), from which Nepal receives almost 70 percent of total remittances. With a lower growth in imports, the current account deficit narrowed marginally in FY2019 but remains large (Figure 27). Despite a lower trade deficit to GDP in FY2019, it still exceeded remittance inflows by a wide margin. Figure 27. The current account deficit narrowed marginally in FY2019 Sources: DoFE and World Bank staff calculations. Migrant worker outflow has contracted five years in a row and reached a 10-year low in FY2019 (Figure 26). In FY2019, 235,510 Nepalese migrant workers went abroad, significantly down from 354,958 in FY2018. This is not only the fifth year in a row that the country saw a contraction in migrant outflows, but also the biggest contraction since FY2015. The decline in FY2019 was largely in response to a ban by the Nepalese Sources: NRB and World Bank staff calculations. government on outmigration to Malaysia because of overcharging of visa processing and health and The trade deficit stood at a high of US$11.4 billion, security screening fees by outsourcing agencies. significantly more than the remittance inflows of The ban was lifted in September 2019 after both US$7.8 billion. Consequently, the current account countries agreed to implement the bilateral labor deficit remained high at 7.7 percent of GDP in agreement of October 2018. FY2019, but slightly lower than the FY2018 level of 8.2 percent. December 2019 World Bank Group 21 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure 28. The central bank’s foreign exchange The government implemented various tax reserves contracted for the first time in nine years enhancement measures in FY2019, which included (a) imposition of a 20 percent surcharge on individual earnings of more than NPR 2 million; (b) reduction in the threshold for capital gains property tax exemption; (c) an increase in the excise duty on alcohol and tobacco and luxury vehicles; (d) widening of the tax base for the VAT (the VAT is required for firms involved in liquor, cigarettes, sanitary products, electronics and construction materials in metropolitan and sub-metropolitan areas); and (e) introduction of a health risk tax on the production and import of Sources: NRB and World Bank staff calculations. cigarettes. These measures supported the buoyant Given that foreign direct investment (FDI), collection of tax revenues. external borrowings, and other financing sources remained low, foreign exchange reserves were used However, federal expenditures contracted in to finance a part of the external deficit in FY2019. FY2019, for the first time since FY2003 (Figure As a result, in July 2019, international reserves fell 30). In FY2019, government spending dropped for the first time since FY2010 to US$8 billion (6.8 by 2.7 percent (y/y) compared to growth of 33 months of imports) from a peak of US$9.5 billion percent (y/y) in FY2018. There was a decline in in July 2018 (Figure 28). both recurrent (wages and compensation and goods and services) and capital expenditures, by Fiscal Sector 20.1 percent and 12 percent, respectively. Revenue growth was robust but below target Figure 30. ...while expenditures contracted for the (Figure 29). In FY2019, revenues grew by 17.7 first time since FY2003 percent (y/y), marginally below the budgeted growth rate of 18.3 percent. The increase was driven by the income tax, the VAT, and the excise tax, all of which grew by more than 15 percent. However, trade tax collections were lower than budgeted because of the deceleration in import growth (only 85 percent of the trade-related tax revenue target was achieved). Figure 29. Revenue growth was robust but below the target... Sources: MoF and World Bank staff calculations. Capital spending declined for the first time since FY2006 as earthquake reconstruction efforts tapered off, national pride projects were further delayed, and subnational governments were unable to spend because of capacity and staffing constraints. Recurrent expenditures grew marginally, by 0.9 percent, the lowest increase in Sources: MoF and World Bank staff calculations. the past 15 years, despite the increase in fiscal December 2019 World Bank Group 22 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update transfers to local and provincial governments. In August 2019, the government formed a public expenditure review commission (PERC) that recommended reforms to the existing public expenditure and expenditure management system for effective and results-oriented spending. Figure 31. The bunching of capital spending continued in FY2019… Sources: NRB and World Bank staff calculations. Figure 32. ...as did underspending of the capital budget Sources: NRB and World Bank staff calculations. Figure 33. Underspending of the capital budget was also rampant in the provinces Sources: NRB and World Bank staff calculations. December 2019 World Bank Group 23 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update The government started implementing some of the recommendations of the PERC during Figure 34. The fiscal deficit declined significantly FY2020.10 in FY2019... The bunching of capital spending in the last quarter and underspending of the capital budget continued in FY2019 (Figures 31 and 32). Drawbacks in the procurement process and the tendency to delay initiating contracts to the latter part of the fiscal year have led to a bunching of capital spending and underspending of the budget. With 54 percent of the capital budget spent in Q4 of FY2019, there was a marginal improvement compared with Q4 of FY2018, when it was 56 percent. However, the problem of underspending the capital budget remained, with only 76 percent Sources: NRB and World Bank staff calculations. of the capital budget spent in FY2019, down from 81 percent in the previous year. These problems Figure 35. ...and as a result, public debt have persisted over the years. remained close to the FY2018 level The underspending of the budget in the prov- inces was even larger (Figure 33). In FY2019, only 51 percent of the capital budget, 59 percent of the recurrent budget, and 55 percent of the to- tal budget of provincial governments was spent (Figure 33). This was primarily because of the lack of technical capacity of existing staff and delays in the hiring of new staff at the subnational level. The latter was caused by delays in the enactment of Federal, Provincial, and Local Civil Service Acts, and in the establishment of provincial civil service commissions. Sources: NRB and World Bank staff calculations. Robust revenue growth coupled with under- spending of the budget led to a decline in the fiscal deficit (Figure 34). The fiscal deficit de- creased from 6.7 percent of GDP in FY2018 to 1.9 percent in FY2019. Consequently, public debt in FY2019 (30.1 percent of GDP) remained close to the FY2018 level (of 30.2 percent of GDP) (Figure 35). 10 The PERC report has not been made public. December 2019 World Bank Group 24 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update B. Outlook, Risks, and Challenges Outlook by construction activities, new investments in the cement and hydropower sectors, and improved GDP growth is projected to average 6.5 percent capacity utilization in the manufacturing sector, as over the medium term. On the supply side, the availability of electricity improves. growth will be driven by services, underpinned by steady remittance inflows and high tourist On the demand side, growth will continue to be arrivals. The latter will be supported by the Visit driven by private investment and government Nepal 2020 program, the completion of the consumption. Government consumption will second international airport, the construction of be supported by increased spending on salaries, big hotels, and the increase in air connectivity and on goods and services. In addition, efforts through the implementation of new/revised air aimed at building capacity at the subnational levels services agreements with countries including coupled with the implementation of performance- Australia, Cambodia, China, the United Arab based contracts is also likely to raise government of Emirates, and Vietnam. However, lower spending. While private consumption will continue agricultural growth is expected in FY2020, given to be supported by steady remittance inflows, recent delays in the monsoons coupled with higher tariffs on some consumption goods could climate-related natural disasters; the outbreak of impact private consumption growth rates in armyworms, which damaged crops in many parts FY2020. Private investment, in contrast, will be of the country; and fake paddy seeds that failed supported by the implementation of the 2019 to germinate. Industrial growth will be supported national work plan to minimize the trade deficit, the establishment of the Nepal Infrastructure December 2019 World Bank Group 25 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Table 1. Macroeconomic projections of selected key indicators 2016 2017 2018 2019 e 2020 f 2021 f Real GDP growth, at constant market prices 0.6 8.2 6.7 7.1 6.4 6.5 Private Consumption -0.7 2.6 2.5 6.5 0.9 1.5 Government Consumption -0.4 10.5 13.4 8.3 44.4 7.2 Gross Fixed Capital Investment -12.3 44.3 18.1 14.3 7.2 11.4 Exports, Goods and Services -13.7 11.3 7.8 7.9 8.4 15 Imports, Goods and Services 2.8 27.2 19 17.9 7.7 5.5 Real GDP growth, at constant factor prices 0.2 7.7 6.3 6.8 6.4 6.5 Agriculture 0.2 5.2 2.8 5 4 4 Industry -6.4 12.4 9.6 8.1 8.3 8.8 Services 2.3 8.1 7.6 7.5 7.2 7.2 Inflation (Consumer Price Index) 9.9 4.4 4.2 4.5 5 5 Current Account Balance (% of GDP) 6.2 -0.4 -8.2 -7.7 -6.8 -5.9 Fiscal Balance (% of GDP) 1.4 -3.1 -6.7 -1.9 -2.6 -3.3 Debt (% of GDP) 27.9 26.1 30.2 30.1 30.3 31.4 Primary Balance (% of GDP) 1.8 -2.7 -6.1 -1.3 -1.8 -2.5 Sources: MoF, NRB, and CBS for history and estimates. World Bank staff for forecasts. Notes: e = estimate; f = forecast. Bank11, and the establishment of a one-stop rupee. Open market operations are the main service center. More recently, the government also instrument used to conduct monetary policy. decided to set up the Investment Reform Delivery For fiscal and monetary policy coordination, the Unit under the Prime Minister’s office to advance Secretary of Finance sits on the NRB board that doing business reforms. Given the low levels of sets the monetary target (broad money growth). FDI and large investment needs, critical reforms The target is based on projected economic growth will be needed to improve the investment climate. and expected inflation. The target aims to achieve two explicit goals: price stability and external Inflation is expected to pick up slightly but sector stability. The NRB also sets the target for will remain below 5 percent during the forecast private sector credit growth in line with monetary period. Some increase in inflation is expected targets. Open market operations are conducted to from higher public sector salaries, import duties stabilize liquidity in the BFIs, and the NRB uses the on agricultural and industrial goods (to support interbank rate of BFIs as the operating target. The import substitution policies), and the removal of IRC is used to minimize the volatility of interbank VAT exemptions on some intermediate goods and rates. However, more recently, interbank rates in services. The regular supply of electricity at low Nepal have fallen below the IRC lower bound of cost and low inflation in India will, however, help 3.5 percent, while the same rates in India were anchor inflation expectations and keep inflation around 5 percent. This accommodative policy of below 5 percent over the medium term. the NRB has increased the interest rate gap with India and has put pressure on the exchange rate Reserves are expected to continue to be peg. However, the NRB, is likely to undertake adequate to maintain the peg with the Indian remedial action as it remains committed to the peg. 11 The infrastructure bank, mostly privately held, came into operation in March 2019. It will help finance large and critical infrastructure projects. December 2019 World Bank Group 26 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update The current account deficit, which decreased (d) strengthening VAT collection by providing an marginally in FY2019, is expected to narrow over incentive for partial VAT refunds when payments the medium term. The deficit is likely to moderate are made electronically or through bank cards; and to 5.9 percent of GDP by FY2021 as the one-time (e) formulating the Single Tax Code. These initiatives spending on federalism-related infrastructure and will help increase revenues to 26.4 percent of GDP post-earthquake reconstruction taper down further by FY2021. Non-tax revenues are also expected and the government starts implementing a work to increase because of higher dividends (from plan for encouraging export-oriented and import- institutions such as Nepal Telecom) and royalties substituting industries. Some increase in exports, from new hydropower projects. particularly of hydroelectricity, is anticipated in the next few years, but broader growth in exports will At the provincial and local level, efforts happen only in the longer term as structural reforms are focused on establishing the legal and start yielding results. Remittances as a share of institutional framework to support enhanced GDP are expected to stabilize at around 25 percent own-tax revenue collection. These efforts are, over the medium term. The external gap will be however, likely to yield results only over the longer financed primarily by long-term borrowing and term. In the short to medium term, reforms are also some drawdown in reserves. International reserves being undertaken to increase spending efficiencies. are likely to cover close to five months of imports by This was supported, in part, by the Programmatic FY2021. There are negligible portfolio investments Fiscal and Public Financial Management DPC in the country, and despite some expected increase series (through reforms to strengthen the Medium- in FDI, it will continue to remain low over the Term Expenditure Framework, fiscal procedures, medium term. and delegation of spending authority), and is also supported by the technical assistance from the Government expenditure is expected to Integrated Public Financial Management Reform pick up over the medium term as capacity is Project on budget execution. A Federalism Capacity strengthened and vacant posts are filled at the Needs Assessment led by the World Bank and subnational levels. Government spending as a UNDP was undertaken to assess capacity gaps in percent of GDP decreased in FY2019 primarily the transition to federalism, the results of which will because of capacity constraints and challenges in be implemented over the short to medium term. hiring new staff at the provincial and local levels. However, in the next two years (FY2020–FY2021), As provincial and local governments become government spending is likely to increase due to fully functional, the fiscal deficit is projected salary increases, higher social security spending, and to increase to 3.3 percent of GDP by FY2021. a pickup in capital investments. Transfers to the The transition to federalism is the key factor driving provincial and local governments will be sustained, the fiscal deficit. The government has started and spending is likely to increase and thereafter implementing the recommendations of Public stabilize at around 30 percent of GDP by FY2021. Expenditure Review Commission, which are aimed at improving spending efficiencies. In addition, Revenue mobilization efforts are primarily Development Partners, including the World Bank, aimed at gradually shifting away from a system dependent on import taxes. These efforts are working to improve various facets of Public include (a) broadening the tax base; (b) creating Financial Management and Public Investment an environment friendly to private investment to Management. Also, once the federalism transition promote productive industries and businesses; has ended and there is more information on unit (c) improving tax administration through the costs for service delivery at the local level, some operationalization of a vehicle and consignment spending efficiency gains can be achieved. The tracking system, a biometric registration system, fiscal deficit will be financed by a mix of domestic and an electronic payment system for all taxes; December 2019 World Bank Group 27 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update and international borrowing, and availability of could continue to affect budget execution concessional financing is expected to continue. at the provincial and local levels, impacting service delivery. Measures will be needed Risks and Challenges to strengthen planning and budgeting at the subnational levels, including the implementation One of the key risks to the outlook stems from of subnational Medium-Term Expenditure the large external deficit, which is especially Frameworks. The government recently transferred vulnerable to developments in migrant experienced senior civil servants to the provinces, receiving countries. Increased uncertainty which should help support subnational capacity. arising from the possibility of more protectionist However, it will be important to adopt a legal policies, and the prospective impact on global framework for hiring staff at the subnational level, economic growth and trade could hamper business and a capacity building program for all staff. sentiment in Malaysia and the Gulf countries (major destinations for Nepalese migrants). Underpinning the above challenges is the Malaysia recently experienced a contraction need for more and better data that support in investment. Should conditions in the major evidence-based reforms and risk mitigation remittance receiving countries deteriorate, it could efforts. This is the focus of the special section impact migration and reduce remittance inflows of this NDU, which assesses the key aspects to Nepal. A reduction in remittances could also of Nepal’s evolving data ecosystem. It seeks to impact the liquidity in the financial system. This identify priority reforms needed to meet emerging risk is mitigated, partly, by the government’s recent data needs in the federal context. The aim is to program to reduce the trade deficit. assist the government in envisioning a future data ecosystem that harnesses new technologies and Climate-related natural disasters resulting new data sources to meet the growing demand for from erratic monsoons could also adversely evidence to steer Nepal’s development progress. impact agricultural production and existing The analysis highlights the increasing potential of infrastructure and reverse the gains in poverty big data and digital transformation; identifies key reduction. Recent delays in monsoons and data gaps; and outlines measures to close these outbreaks of armyworms damaged crops in parts of gaps by establishing a governance framework for the country and could lower agricultural growth in producing, sharing, and using data and statistics. FY2020. The government has been implementing reforms to strengthen the institutional framework for improved management of climate-related disasters, which will help mitigate some of these risks. Ongoing post-earthquake reconstruction has supported industrial growth, and the new investments will be more resilient to climatic shocks. Investments in irrigation will help to better manage the variability in weather due to monsoons. These investments will support growth, helping to compensate for any negative shocks to GDP from climate-related shocks. In addition, investments in the hydropower sector will support the use of renewables. Capacity and staffing challenges persist, particularly at the subnational levels, and this December 2019 World Bank Group 28 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update C. Special Focus – Envisioning a Future Data Ecosystem in Federal Nepal C1. Data for Development in Federal the Federal Parliament in 2018, that the country’s Nepal “development, in the days to come, will be based on intensive analysis of information and data, Nepal’s historic transition to federalism has research and evidence.” created a surge in demand for more and better data (Box SF.1). One of the primary purposes Data can play a critical role in the successful implementation of federalism and accelerating of decentralization is to improve public service development progress. Governments’ core delivery. Data and evidence-based analysis beyond activities – including policy development, program heuristics and anecdotes plays a critical role in implementation, and performance monitoring – achieving and measuring results. Aspirations are all require data. The need for data is amplified as apparent, as declared by the Rt. Hon. President federalism brings the decision-making power to of Nepal, Bidhya Devi Bhandari, during her provinces and local governments. As the United address to the joint session of both Houses of Nations put it, “Data are the lifeblood of decision- December 2019 World Bank Group 29 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF.1. Nepal’s historic transition to federalism Nepal has entered a new era with the transition to federalism, after going through arguably the most turbulent three decades in its modern history. The 1990 People’s Movement put an end to the long- standing absolute monarchy and brought about democratic reforms. The nascent multiparty democracy, however, took a sour turn in 1996 and Nepal descended into a 10-year civil war that cost more than 10,000 lives. The 2006 Peace Agreement promised a constitutional democratic republic, but the drafting of a new constitution turned into a politically contested process. It was not until 2015 that the Constituency Assembly endorsed the Constitution, which restructured Nepal into a republic with federal, provincial, and local governments. The 2015 Constitution reflects the aspiration for a prosperous Nepal, an ardent desire for more inclusive social contracts, and expectations for improved delivery of public services.a The peaceful and successful completion of the elections for all three tiers of government in 2017 was a historic milestone for the new federal republic, which marks a significant devolution of political and fiscal responsibilities away from Kathmandu. Results from recent nationally representative surveys showed that 90 percent of the adult respondents participated in the 2017 election;b* 52 percent of the respondents feel Nepal is heading in the right direction; and optimism is higher among the younger generation, in rural areas, and away from Kathmandu in the four western provinces (Gandaki, Karnali, Province 5, and Sudurpaschim).c Like other new federal states, Nepal’s nascent federalism is facing challenges. Improving public service delivery is one of the main motives behind decentralization in many countries. This is because many basic services such as education, health, and water and sanitation are consumed locally and can be better delivered by bringing the provider (government) and recipients (citizens) closer together. Yet decentralization often experiences challenges in the early stages, including misaligned or overlapping functions and weak capacity and accountability of subnational governments and newly established service delivery institutions.d Evidence suggests that Nepal is experiencing similar challenges.e Sources: a. World Bank 2018a. b. Nepal Administrative Staff College 2018. c. Asia Foundation 2017; 2018. d. Ahmad et al. 2005. e. Government of Nepal 2019. Note: *This is a survey-based estimate and deviates from other estimates such as the one by EU (2018), which reports a 69 percent voter turnout. The difference is likely attributable to the number of registered voters in the EU report, which likely includes the absentee population and those who passed away. making,”12 and it is difficult to successfully leadership in subnational governance across the implement federalism without high-quality data. country. Demand for data is increasing more than ever under federalism. The 2017 election was the first subnational government election in 17 years, during which there was a vacuum in the elected 12 United Nations 2014, page 4. December 2019 World Bank Group 30 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update About 60 percent of the newly elected local leaders SDGs and its progress implementing federalism. are new to politics 13 and a renewed sense of accountability is emerging as they strive to deliver Long-term strategic planning around data on their promises to their constituencies. Many of and statistics is urgently needed to coalesce them see data as key inputs for local planning to existing activities and harness innovation. set baselines and monitor progress. The 2015 Constitution granted authorities to all three tiers of government to produce, analyze, and Locally disaggregated data are essential for disseminate data in their respective jurisdictions. local decision making. Provincial governments It is not realistic to rely on surveys to produce are compiling statistical abstracts to accompany reliable statistics for all 753 local governments. provincial budgets. As the authorizing power Censuses will be too expensive to repeat at the over revenue and budget appropriation has been frequencies soon to be demanded by the data decentralized to provincial assemblies, the need users. New sources of data and innovative data for trustworthy information about the social, use must be explored to satisfy the demand for environmental, and economic conditions in each high-frequency data and locally disaggregated data province has become evident. Public availability created by federalism. and contestability of locally disaggregated data is critical for ensuring inclusive public services and Nepal’s data ecosystem is facing a promoting transparency and accountability. This fundamental and inevitable paradigm shift. demand was exacerbated by the newly introduced Since the adoption of the Statistics Act in fiscal equalization scheme, which requires locally 1958, Nepal’s Central Bureau of Statistics disaggregated data to drive equalization grant (CBS) has been the sole custodian of official decisions and fiscal transfers from the central statistics. However, this is evolving as many public government to the subnational governments. agencies now collect and maintain administrative databases. Moreover, the emerging private However, little data exist for Nepal’s 753 local sector and provincial and local governments will governments. One pertinent example of this become increasingly active in coming years. This data scarcity is Nepal’s attempts to locally monitor paradigm shift is not unique to Nepal. National the Sustainable Development Goals (SDGs). The Statistics Offices around the world are facing the NPC committed to monitoring more than 400 local need to graduate from data producers, relying SDG indicators. Of these, the NPC has produced on traditional surveys and censuses, to data 120 provincial-level indicators using traditional integrators that exercise leadership and coordinate data collection methods such as household key actors to foster an effective and sustainable surveys, censuses, and aggregating district-level data ecosystem.14 administrative data to the provincial level. At the local government level, however, fewer than five indicators could be produced, mainly from the 2011 Population and Housing Census data. This paucity of timely and locally disaggregated data is a bottleneck for measuring progress on Nepal’s 13 World Bank 2018a. 14 Arora 2018; Cheung 2018. December 2019 World Bank Group 31 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure SF.1. Conceptual visualization of Nepal’s evolving data ecosystem Now - focussed on data production Future - balanced focus on production, sharing and use The objective of this special focus is to assist supports better production, sharing, and use of the Government of Nepal (GoN) to envision a data, including the development of new sources future data ecosystem that meets the growing and systems to meet emerging needs of data users demand for data and evidence to support in the 21st century. Nepal’s federalism transition and, ultimately, to accelerate Nepal’s development progress. The rest of the document is organized as follows. Section C2 summarizes the data Nepal’s data ecosystem will evolve around three revolution that transformed the global data key dimensions that propelled the global data landscape over the last 20 years and elaborates on revolution: data production, data sharing, and challenges and opportunities for Nepal. Section data use. The focus so far in Nepal has been on C3 describes Nepal’s emerging data ecosystem and production. Without improving data sharing and its growing complexity and potential. Section C4 data use, however, additional data production will discusses the emerging data demands propelled by not contribute much to the growth and dynamism the federalism transition. Section C5 discusses a of the ecosystem, represented by the volume of set of recommendations to meet the growing gap the cube in Figure SF.1. The value of new data between data supply and demand. can be maximized only if the data can be widely shared and used. With the transition to federalism, there will need to be more focus on the kind of C2. A data revolution is transforming the data and evidence in demand by the provincial and world local governments, businesses, potential investors, and the general public. A major shift in the data The internet and other digital technologies culture and openness towards innovations will have led to an unprecedented increase in data be necessary. This will also require establishing production during the last two decades. At the a complementary governance framework that turn of the 21st century, there was approximately December 2019 World Bank Group 32 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update the equivalent of 5 exabytes15 of information technologies such as satellite imagery. Internet available in the world. 16Approximately three- users leave digital footprints from their searches, quarters of that information were stored in non- credit card transactions, ride-sharing services, and digital formats such as film, paper, and cassette the Internet of Things (IoT), all new sources of tapes. By 2012, the same volume of information big data.24 An ever-increasing amount of data is was created every two days, 17 with less than 2 captured from tweets, emails, or text messages that percent of the newly created information in non- can be used to understand culture, social networks, digital format.18 By 2013, 90 percent of data in and human interactions.25 Administrative data existence was produced during the preceding two collected by governments are also an increasingly years.19 By 2016, 90 percent was produced in the important source of big data used for cutting-edge preceding year,20 which was also nine times as research and public policy evaluation.26 much data as the world had produced previously. Big data has many advantages over traditional Data have become cheaper, faster, and easier sample-based data. Data from satellite imagery, to collect, analyze, and share. Data storage costs for example, can be collected frequently with low have declined dramatically in the last two decades; marginal costs, on a much larger scale, and with the price of hard drive storage per gigabyte much lower granularity than sample-based survey decreased from US$1,120 in 1995 to US$0.03 in data.27 Government administrative data often 2014.21 Data have also become faster as computer have ideal panel structures with much less attrition processing power improved. For example, low- and fewer non-responses, leading to very broad, end smartphones worth US$50 today have more if not universal, coverage of the population over computing power than home computers from time.28 Although privately collected data are often the 1980s or NASA’s Apollo 11 moon landing proprietary,29 many are available free of charge, computers from 1969.22 Moreover, the cost of and in some cases, will continue to be updated sharing data is virtually zero with anyone with an regularly, unlike surveys and censuses, which internet connection, almost instantly anywhere in require previous planning and budget allocations. the world.23 Big data can benefit countries like Nepal where high-frequency and locally disaggregated data are New sources of data dominate data collection in high demand. today. In the past, surveys, censuses, and personal interviews were the dominant methods to collect Big data is pushing the boundary of data data, but now, much of the new data comes from analytics. Private sector firms use big data to so-called “big data,” or extremely large data sets improve operational efficiencies and provide collected through the internet and other digital new products and services. For example, Netflix 15 Five exabytes are equal to 5 billion gigabytes. 16 Also see references in Einav and Levin (2013) for more details. 17 McAfee and Brynjolfsson 2012. 18 Mayer-Schönberger and Cukier 2014. 19 IBM 2013. 20 IBM 2016. 21 Komorowski 2014; Malomo and Sena 2017. 22 Hollingham 2019; World Bank 2016. 23 Goldfarb and Tucker 2019. 24 World Bank 2018b. 25 Gentzkow, Kelly, and Taddy 2019. 26 Card et al. 2010. 27 Donaldson and Storeygard 2016. 28 Einav and Levin 2013. 29 See Section C3 for data philanthropy and private sector data. December 2019 World Bank Group 33 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update and Amazon are famous for applying predictive of support. modeling, which uses transaction data to recommend what products customers might want Another example is the application of geospatial to purchase next. The use of big data is not limited data to estimate inequality of access across to tech companies. Target, a U.S.-based retailer, Nepal.40 . Because simple linear distances between developed an algorithm to analyze consumer origin and destination poorly describe travel time purchases to identify pregnant women and promote in rural Nepal, it is more appropriate to quantify maternity and baby care products.30 The United accessibility by expected travel times. Figure SF.2 Parcel Service (UPS), an American multinational summarizes the population shares by estimated delivery and supply chain management firm, uses travel time to nearest hospital at the national geocoded location tracking data to analyze delivery and province levels, and at local governments in delay patterns. This helped UPS save 3 million Karnali. This study underscores the advantage gallons of fuel in 2011.31 of geospatial data that can produce locally disaggregated estimates to solve locally specific Big data analytics are increasingly relevant development challenges. to development.32 They can provide hard-to- measure information to policy makers on pressing Digital transformation and data deluge are development issues such as small area estimation redefining the way people access and use data. of poverty across multiple countries,33 income Prior to the advent of digital technologies and and inequality changes,34 air pollution and its the internet, even the wealthiest segment of the impact on infant mortality,35 climate change and population in the developed world had a limited agricultural productivity,36 real-time price index volume of information, such as own collection of changes using online price data,37 and the spread books, newspapers, radio, television, and libraries. of epidemics by analyzing internet search records Only a generation later, with the expansion of and social media data.38 internet coverage and the pervasive dissemination of digital devices, nearly everyone on Earth will There are early examples of big data being have at their fingertips virtually all the information used in Nepal. Perhaps the most widely cited that exists, automatically translated into his or her example is the work by Flowminder, a Swedish language of choice.41 Those who access data can nonprofit organization, that analyzed call detail also contribute to the ever-increasing stock of records (CRD) data to understand the movement data. Digital transformation connects people with of people shortly after Nepal’s 2015 Gorkha data and information more closely than ever. earthquakes. 39 The Flowminder study, using data from mobile phone users, provided critical Citizen-generated data (CGD) is one such information about displaced populations in need example. Digital transformation is allowing people 30 Although this was controversial. See Duhigg (2012) for more details. 31 Mayer-Schönberger and Cukier 2014. 32 Although big data are not suitable for drawing causal inferences. See Mayer-Schönberger and Cukier 2014. 33 Jean et al. 2016; 2019. 34 Piketty and Saez 2003. 35 Jayachandran 2009. 36 Costinot, Donaldson and Smith 2016. 37 Cavallo and Rigobon 2016. 38 Schmidt 2019. 39 Wilson et al. 2016. 40 Banick and Kawasoe 2019. 41 McAfee and Brynjolfsson 2017. December 2019 World Bank Group 34 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure SF.2. Inequality of access in Nepal -Travel time to nearest hospital Panel A. National and provincial: Results demonstrate significant variations in accessibility challenges across the country; approximately 20 percent of Nepalese need to travel at least two hours to a nearest hospital, while more than 80 percent do in Karnali Province Panel B. Local governments within Karnali Province: Results show that there is tremendous heterogeneity in accessibility in local governments within Karnali Source: World Bank staff using data from Banick and Kawasoe (2019). December 2019 World Bank Group 35 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update and organizations to generate and directly monitor that are otherwise unattainable to accelerate data.42 This CGD can contribute to development digital transformation by developing new business by fostering participatory government, informing opportunities and solutions to development project performance, enhancing government challenges.47 Digital transformation will not accountability, and complementing or contributing fulfill its potential without data, and the power to official government statistics. For example, of data cannot be fully realized without a digitally in Beijing, CGD was used to build air quality connected society. sensors on kites to produce timely, accurate data on the city’s air quality.43 During the 2015 Nepal The utmost priority for Nepal is to reduce earthquake, OpenStreetMap was leveraged to geographic disparities in digital access. A collaboratively produce maps of disaster-affected survey of 115 local governments showed that areas. By allowing local actors to share their many Gaunpalika and Nagarpalika 48 offices lack knowledge with remote mappers, better and more internet access or electricity via the national grid accurate maps were produced, which led to better or generators (Figure SF.4). Only about 50 percent emergency responses and resource allocation. of male and 25 percent of female Nepalese use 44 Likewise, Statistics Canada successfully used the internet, with significant regional variations, OpenStreetMap to crowdsource housing statistics according to the 2016 Demographic and to complement its existing data sets.45 Health Survey. It is critical that the government, businesses, and citizens in Nepal have access to Globally, there are strong positive correlations reliable electricity, the internet, and digital devices among economic development, innovation, to realize the benefits of digitization and the data and digital adoption (Figure SF.3). Nepal has a revolution. relatively high digital adoption index and a modest global innovation index relative to the countries For Nepal to fully harness the benefits of the with a similar level of economic development data revolution, the focus must be on its people. measured by gross national income per capita, Policy makers, civil servants, entrepreneurs, and yet lags behind many middle-income countries, citizens must be digitally connected and equipped which it aspires to be. To unleash the potential of with the skills that meet the demands of an digital technologies that drive economic growth, increasingly data-driven world. They must be the Government of Nepal adopted its first Digital empowered enough to create a data ecosystem in Framework in 2018. 46 which the growing volume of data generated from digital transformation is freely exchanged and fully Digital transformation and data revolution used by the government, businesses, journalists, must go hand in hand. It was the advent and citizens to maximize the potential of the data of digital technologies and the expansion of revolution. internet coverage that triggered the data deluge. Advancement in computing power made it An inevitable paradigm shift is upon us in possible to analyze big data. More and more data the way we think about data in Nepal. Data are generated through digital transformation, and evolve in an ecosystem, an environment in which the data are in turn used to produce new insights a wide range of actors produce, use, and exchange 42 DataShift 2015. 43 Maly 2012. 44 Poiani, dos S. Rocha, and Degrossi 2016. 45 Lämmerhirt et al. 2018. 46 Government of Nepal 2018. 47 McAfee and Brynjolfsson 2017. 48 Gaunpalika is a rural municipality and Nagarpalika is an urban municipality. December 2019 World Bank Group 36 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure SF.3. Nepal in global perspective: Digital adoption indexa and global innovation indexb Note: The size of the bubble represents countries’ population from World Development Indicators.c All data as of 2016. Sources: a World Bank 2016. b Cornell INSEAD WIPO 2019 c World Bank 2019 Figure SF.4. Internet and electricity access for local governments Source: World Bank staff based on Government of Nepal (2019). December 2019 World Bank Group 37 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF.2. Differentiating between a data ecosystem and a national statistical system The national statistical system (NSS) is “the ensemble of statistical organizations and units within a country that jointly collect, process and disseminate official statistics on behalf of national government.”a The NSS is a concept that centered around official statistics, and its scope is explicitly limited geographically by national boundaries. In contrast, a data ecosystem is a much broader concept. As discussed in Section B, a data ecosystem can be defined as an environment in which a wide range of actors produce, use, and exchange data and data analytics across sectors and national boundaries.b A data ecosystem differs from the NSS in that it can be transboundary. Many of the emerging sources of data such as satellite imagery data are not limited by national boarders, which presents a remarkable advantage over surveys and censuses that are by design limited in the context of a given country. A data ecosystem also goes beyond official statistics. With the exponential increase in data supply in recent years, data-driven decisions are applicable for a wide array of social and economic phenomena that goes far beyond the realm of official statistics. For example, advanced data analytics by private firms to cultivate new business opportunities and develop new products are the main driving force of the rapidly growing data ecosystem globally, though are not considered part of official statistics. In a country context such as Nepal, the NSS is a subset of the data ecosystem. We argue that the NSS makes up the foundation of the country’s data ecosystem. A data ecosystem without a strong core may expand with the data deluge, but the power of data to drive policy actions in such a precarious ecosystem could be limited without a clearly defined legal and institutional framework to produce, share, and use data and data analytics. Source: a. Government of Nepal 2017 (p.1). b. Schmidt 2019. data and data analytics across sectors and national of the data ecosystem to propel the economy and boundaries.49 A data ecosystem involves society forward. significantly more than official statistics and encompasses foundational databases such as civil C3. Nepal’s growing data ecosystem registration, business registration, and land records. It consists of more than government actors, such The National Statistical System and the as the private sector which leads innovations in Central Bureau of Statistics are at the core advanced data analytics, as discussed above. of Nepal’s data ecosystem (Box SF.2). Many line ministries and specialized agencies maintain Envisioning a future data ecosystem in Nepal administrative databases. Provincial and local is essential at this critical juncture, as the governments are emerging as key players, with historic transition to federalism has created a surge the enactment of the 2015 Constitution. The in demand for more and better data. Inaction will ecosystem also includes other stakeholders such leave Nepal behind in the global data revolution as development partners (bilateral and multilateral and jeopardize the government’s goals for organizations and international NGOs), private building a prosperous Nepal. Timely and visionary sector firms, and citizens. leadership will enable Nepal to unlock the value 49 OECD 2015. December 2019 World Bank Group 38 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF.3. First and second amendment of the Statistical Act Box SF.3. First and second amendment of the Statistical Act First amendment (1958) Penalty for deliberately holding or refusing to supply the information wanted by CBS Penalty for collecting or publishing data without CBS notice. Second amendment (1974) The second amendment mandated that any other institutions or individuals, national or foreign, public or private, desiring “to collect any details, information or statistics of any economic matters for professional purpose” needs to obtain permission from the Bureau. The collected information then should be authenticated by the CBS. It further barred the sharing of data with any foreign national or institutions or international institution without permission of the CBS. Amendments through judicial reform are not highlighted in this box. Established under the Statistical Act 1958, CBS institutional knowledge and experience and is in has long been regarded as the sole custodian the best position to exploit the economies of scale of official statistics for the Government of for nationwide statistical activities. Nepal in the NSS, and an operational arm of the NPC. Sections 3 and 4 of the Statistics Act While the CBS continues to have core 2015 grant the CBS the “Power to require the functions in the NSS, it is no longer the sole production of details” and the “Power to give government authority collecting and analyzing direction to collect statistics,” that is, the authority data. As in many other countries, public agencies to collect and interpret statistics. In addition, in Nepal maintain administrative data, which are several amendments have granted the CBS the generated from the operation of public agencies power to collect, consolidate, and disseminate such as registrations, transactions, recordkeeping, national statistics in the country (Box SF.3). and service delivery. Administrative records are governed by regulations, and their management More than 60 years after the original Statistics and maintenance are entrusted to a public Act, the CBS continues to play a critical administration body with operational guidelines. role in Nepal’s national statistical system. For instance, the Ministry of Education, Science For example, the recently completed National and Technology (MoEST) maintains the education Economic Census 2018 is a historical landmark, management information system (eMIS), and the as it is the first such census in Nepal (Box SF.4). ministry produces biannual flash reports that The CBS is also preparing for the next round summarize statistics generated by the eMIS. The of the Population and Housing Census in 2021. Ministry of Health and Population produces That census presents an opportunity to bring health statistics from the health management a fresh set of benchmark data for all three tiers information system. Many other public agencies of government. The NPC issued Census Order also produce numerous other types of statistics 2076 to establish provincial census coordination from administrative databases. committees and census offices across the country. These core statistical activities must continue to An assessment of the major administrative be executed by the federal government as it has databases conducted for this report shed light December 2019 World Bank Group 39 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF.4. Nepal’s first ever national economic census The Central Bureau of Statistics conducted its first National Economic Census from April to June 2018, with support from the Japan International Cooperation Agency (JICA). An economic census is the complete enumeration of all commercial establishments and their key attributes within geographic boundaries of a country at a particular time. Prior to this, there was no comprehensive information on all commercial establishments in Nepal except for sectoral censuses, such as the 2008 Manufacturing Sector Census. National Economic Census results released on July 1, 2019, revealed that there were 923,356 establishments in Nepal of which about 43 percent came into existence only after April 2015. There were about 460,000 “non-registered” establishments, accounting for 49.9 percent of the total number of establishments. The wholesale and retail trade and motor vehicle repair industry were the industry with the largest number of establishments (498,069). This was followed by the accommodation and food services industry (130,540), and manufacturing (104,058). Single-unit establishments accounted for more than 97 percent of the total. The economic census is a major source of statistics on economic activities in the country. The complete list of commercial establishments could serve as a frame for future sample surveys such as enterprise surveys and, more importantly, can be used as the foundation for the development of a statistical business register to generate a range of economic and business statistics. The successful completion of the national economic census is indeed a major milestone for statistical development in Nepal. Source: Government of Nepal 2019 on a non-trivial amount of overlapping data ministries and departments. This is partly due collection across the existing databases and within to the lack of a legal framework for integration the NSS. For instance, at least seven government with data from other sources. The administrative departments in their administrative system register databases are usually under the jurisdiction of and collect individual-level details.50 A least 11 different verticals of ministries, and they have departments capture information at the local level little interaction with other databases and registers. in their system.51 Company-level information is Data sharing across organizational boundaries available in at least six government departments is rare, and when it happens, the requestor must (Figure SF.5).52 overcome extensive bureaucratic hurdles. There are also significant technical constraints such as a The Government of Nepal holds a lot of data, lack of common standards (Box SF.5). The lack but the system is siloed. Government data of coordination across government agencies can systems in Nepal are highly compartmentalized lead to a duplication of effort, which can affect and mostly inaccessible to users from other citizens, who must provide the same information 50 The national ID and vital registration system captures: name, date of birth, citizenship number, and so forth. The Department of Transport registration system captures: name of the license holder, citizenship, and birthdate, in addition to other information. The Land revenue information management system captures: beneficiary name, citizenship number, and some information already captured by other vertical registries. 51 Local level here does not imply local governments. It means the local-level information or address of the locality stored in the system. For instance, Inland Revenue Departments have information about the local address of the individual or company; the Department of Survey and Land Revenue office captures land information in addition to the core information captured for the respective department. 52 The office of company registrar captures the company-level information, which is also captured by the inland revenue department, and by the Department of Roads through the bidder information system. The Department of Education has information captured at the school (institute) level. December 2019 World Bank Group 40 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure SF.5. Overview of administrative databases in Nepal53 Source: World Bank staff based on a review of guidelines and documents (including Health Management Information System guidelines, the Department of Education Management Information System [MIS] Manual, Office of Company Registrar; the online business registration manual and SAMARTHA MIS guidelines; Inland Revenue Department, Taxpayers Portal; and Department of Passport (application form). The sizes of the tiles are indicative of the number of relevant indicators maintained in respective databases. 53 The figure is for demonstration and does not capture all available administrative database and its information in Nepal. December 2019 World Bank Group 41 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update to each agency with whom they interact. It also three tiers of government various responsibilities leads to information gaps as each department has around data and statistics beyond data collection. only one piece of the picture. It can lead to a lack The unbundling report of the Constitution56 of authoritative estimates and an erosion of trust lists almost 50 responsibilities directly or indirectly in government data and statistics. related to data. These include but are not limited to data collection and management, coordination, The 2015 Constitution and federalism capacity development, quality assurance, and transition significantly expanded the scope protection of statistics.57 A proper coordination of Nepal’s NSS and data ecosystem. The mechanism is extremely important to minimize Constitution of Nepal allows all three layers duplicative efforts as most of these are concurrent of government (federal, provincial, and local), functions across tiers, and data and statistics are under both exclusive and concurrent power, to cross-cutting by nature. autonomously enact their laws, formulate policies, and create programs related to statistics (see Federalism poses a complex challenge rooted Schedule 5, 6 and 8; and part 4 of the Unbundling in an intrinsic opportunity to redesign the data Report 2017).54 governance architecture. There is immense scope to metamorphose the current statistical All provincial and local governments will system into a robust statistical architecture that join the ranks of data producers and users encompasses all three tiers of government to in Nepal’s data ecosystem as they need quality strengthen coordination, avoid duplication, and data to generate robust evidence for provincial maximize the value of data produced by public and local planning. The potential number of agencies. The “transition to federalism is the government officials who need to use data in public fundamental change in the whole DNA of the sector decision-making is not merely doubling or country.”58 The data governance should be tripling. It is expanding potentially hundred-fold. institutionalized in such a way that data coming The Ministry of Federal Affairs and General from different sources would “complement” rather Administration issued guidelines for creating than “compete” with each other and abide the profiles of socioeconomic and demographic “cooperation,” “coexisting,” and “coordination” indicators by the local governments. A survey of principle enshrined in the Constitution of Nepal. 115 local governments showed that approximately 60 percent of the local governments interviewed Private sector firms play two key roles in had already completed the profiling exercise.55 In today’s growing data ecosystem: by leading addition, some provincial governments intend to innovations in advanced data analytics and by conduct surveys or censuses on their own, and becoming data philanthropists. When private many local governments have already mobilized sector entities share their “private data assets their own resources to hire private firms to to serve the public good,” they engage in data conduct household surveys or even a Population philanthropy. Today’s private sector, especially Census in their localities. those using digital technologies, are gathering and producing large sets of data. Companies can help Intergovernmental coordination becomes improve their public standing, inspire innovation, increasingly important to support Nepal’s and increase their customer base by sharing their data ecosystem. The Constitution assigned all 54 “Unbundling/Detailing of List of Exclusive and Concurrent Powers of the Federation, the State (Province) and the Local Level Provisioned in the Schedule 5, 6, 7, 8, 9 of the Constitution of Nepal,” Government of Nepal, 2017. 55 Government of Nepal 2019. 56 “Unbundling/Detailing of List of Exclusive and Concurrent Powers of the Federation, the State (Province) and the Local Level Provisioned in the Schedule 5, 6, 7, 8, 9 of the Constitution of Nepal,” Government of Nepal, Kathmandu, Nepal, 2017. 57 Although not explicitly stated under data and statistics, provincial and local governments are constitutional entities, and as such, are primarily responsible for their own capacity development. 58 New Business Age 2019. December 2019 World Bank Group 42 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure SF.6. Constitutional responsibility around data and statistics Source: World Bank staff based on the report “Unbundling/Detailing of List of Exclusive and Concurrent Powers of the Federation, the Province and the Local Level Provisioned in the Schedule 5, 6, 7, 8, 9 of the Constitution of Nepal,” Government of Nepal, Kathmandu, Nepal, 2017. data, which can be critical inputs to tackling with Flowminder, a Swedish nonprofit company, public policy challenges.59 to create a map of population movements. Near real-time and locally disaggregated measurement Data philanthropy and private sector data of population movements after natural disasters could make significant contributions to provided critical information about displaced Nepal’s data ecosystem. Data philanthropy as populations, who are often vulnerable and in such remains a new concept to many private firms need of support.60 in Nepal, and it takes pioneering champions and incremental changes for this to be part of data An emerging group of private firms and culture in Nepal. However, the aforementioned nonprofit organizations are working to example of big data and private sector data enhance the production, supply, and use application in Nepal is initiated by Ncell, one of data in Nepal.61 A growing collaborative of the major private mobile network operators of government agencies, for-profit initiatives, in Nepal. In the aftermath of the devastating civil society organizations, and think tanks is earthquakes in 2015, Ncell shared its aggregate contributing to a nascent yet emerging open data and anonymized call detailed record (CDR) data community in Nepal. For example, Kathmandu 59 Mckeever, Greene, and Tatian 2018. 60 Wilson et al. 2016. 61 Dennison and Rana 2017. December 2019 World Bank Group 43 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF.5. Challenges of data merging under federalism The 2015 Constitution created three tiers of government, including the 753 local governments with new geographic demarcations. Multiple government agencies have published administrative coding of newly established government units, including but not limited the Central Bureau of Statistics, the Survey Department, and the High-Level Commission for Information and Technology (HLCIT) codes. All three coding schemes have pros and cons, with notable inconsistencies across the coding schemes. For example, the number of total geographic areas coded is not consistent. The CBS coding scheme is perhaps the clearest of all, following the standard coding convention. However, it assigns coding to local government units only, while the other two assign coding to protected areas such as national parks and wildlife reserves. As depicted in Figure SF.7, of the 753 local governments, only about 500 local government units use the same spelling convention. This poses significant challenges to data users, both inside and outside the government. For instance, in order to merge two data sets at the local level, one with CBS coding and the other with HLCIT coding, only 537 local governments have the same spelling, leaving the users to manually match more than 200 local units. This is time-consuming and prone to mistakes, leading users to resort to inconsistent and ad- hoc solutions. One practical solution would be to create a master data set that includes an exhaustive list of all geographic units as well as all coding schemes officially recognized by the government. Such a data set, which must be coordinated by a public authority such as CBS, should be made widely available to data producers and user groups, and would be a practical first step toward data integration. Figure SF.7. Local level names -Difference and Overlaps December 2019 World Bank Group 44 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Living Labs, a civic technology company, in partnership with the NPC and the Central Bureau of Statistics, has created an interactive data portal and published post-earthquake reconstruction census data for open access. A group of young open data enthusiasts at Open Knowledge Nepal, a local chapter of Open Knowledge, have launched Open Data Nepal62 by scraping and curating Government of Nepal data in a machine-readable format, making it easier for the public to find and use data. As of this writing, users can access over 700 indicators from more than 40 government agencies from Open Data Nepal. Nepalese citizens are also playing an increasingly important role in the growing data ecosystem of Nepal. They are actively engaged in generating data for monitoring changes in their environment and improving safety and government accountability. For example, during the 2018 monsoon, SmartPhones4Water (S4W) Nepal partnered with 154 citizen scientists to generate 6,656 precipitation measurements in Nepal with low-cost (less than US$1) S4W gauges constructed from repurposed soda bottles, concrete, and rulers. An ex-post quality assessment review determined that this project had helped fill the precipitation data gaps in the country and signified the potential of citizen- generated data in other data-scarce regions. 63 Another example where a CGD partnership has been integral is Nepal Monitor, a protection and conflict prevention initiative that allows citizens to share human rights and security-related incidents through a website-based platform.64 Integrating CGD on public perceptions with objective government data directly supports participatory government and helps improve programs by addressing the real needs of the people. In rural Nepal, bridging information gaps precipitated a more accurate flow of information that translated into better decisions. 62 Open Knowledge Nepal, n.d. 63 Davids et al. 2019. 64 Nepal Monitor, n.d. December 2019 World Bank Group 45 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure SF.8. Development partner support to the Government of Nepal on data and statistics Source: World Bank staff visualization based on Data for Development in Nepal 2018. 65 Note: Development partners might also have supported local organizations to work with government agencies. 65 Data for Devtelopment in Nepal. 2018. December 2019 World Bank Group 46 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure SF.9. List of available surveys in Nepal since 2010 Source: World Bank staff calculations. Note: Size of the bubbles represents sample sizes of the surveys. Colors indicate primary funding source. Development partners play a significant the nationally representative surveys in Nepal supporting role in Nepal’s data ecosystem. are supported by development partners.67 But There are at least 14 multilateral and bilateral development partner interventions are not limited agencies providing support to more than 25 to large-scale, nationally representative surveys public agencies in Nepal in the area of data and and censuses. A World Bank analysis revealed that statistics (Figure SF.8), according to the analysis there have been at least 200 surveys conducted in conducted by the Asia Foundation and the Nepal since 2010, and at least 75 percent of them Development Initiatives. 66The types of support were funded by development partners (Figure they provide ranges from financial and technical SF.9). While these surveys come in different support to CBS for surveys and censuses to a forms with different objectives, geographic range of technical assistance programs. coverage, sample size, and questionnaire design, a quick analysis of these surveys reveals important Data collection through surveys and censuses trends. The overwhelming majority of these is one area to which development partners surveys are not archived in the international have provided intensive support. Most of databases of household surveys.68 About 80 66 Data for Development in Nepal. 2018. 67 For example, the ILO supports Labor Force Surveys; UNICEF supports Multiple Indicators Cluster Surveys; USAID supports Demographic and Health Surveys; the World Bank supports Nepal Living Standard Surveys; and the United Nations Population Fund (UNFPA) supports Population and Housing Censuses. Most recently, JICA supported the National Economic Census 2018. 68 Only about 10 percent of the surveys are archived in the International Household Survey Network (IHSN), and only 7 percent in the World Bank’s Microdata library, two of the most well-known repositories of survey data in the world. December 2019 World Bank Group 47 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update percent of the survey data we identified are sectors. As such, the GoN needs to think about not available for public access.69 There is no synergies among these new players and new data mechanism to systematically capture these surveys sources and plan accordingly to lead, collaborate, in Nepal. This makes it extremely difficult to find and coordinate data production and management. information about existing surveys. In such an Amidst all of this, one question remains: Is this environment, researchers or funding agencies in growing data ecosystem meeting the emerging need of data may choose to conduct their own data needs in the new era of federalism? survey simply because they do not know similar surveys already exist. Even in cases where a new C4. Emerging data needs in the era of survey is warranted, there is little opportunity to federalism learn from past surveys to improve data quality. This is another example of data existing in silos. Successful implementation of federalism There is an urgent need for coordination among hinges on nurturing an effective data development partners as they are the major ecosystem. The devolution of resources funding sources of these surveys. and responsibilities to provincial and local governments allow locally elected leaders to put The reality of development partner forward locally specific plans to meet the needs involvement is likely much more complex. of their constituencies. Citizens will soon become Many sectoral projects supported by development more aware of the potential of the global data partners typically have a component to improve revolution and demand more evidence-based administrative data management and management policy decisions. Investors will demand timely information systems that are not captured in the and high-quality data to assess business potential analysis above. Some development partners have in Nepal. In the era of federalism, there is an already started supporting provincial and local emerging need for locally disaggregated data in governments, and this trend is likely to increase in both the public and private sector; a paucity of the coming years. With the adoption of the digital accurate, reliable, and complete data can be a Nepal framework, many sectoral interventions will major deterrent for Nepal to maximizing finance adopt digital technologies through which more data for development. will be generated. As such, development partner support to the GoN will have bigger implications A dearth of data, especially at the subnational for the development of Nepal’s data ecosystem level, is already surfacing as a challenge and beyond production of official statistics. for many prominent federal initiatives. For instance, the GoN has launched the National With Nepal’s growing data ecosystem, a Data Profile,70 which is an open data platform greater volume of data will be generated. maintained by the CBS to compile and disseminate While the CBS has been at the core of the National data from all relevant sectors across all three tiers Statistical System in producing data and statistics, of government. The National Data Profile is a going forward, provincial and local governments clear manifestation of the federal government’s will also be an integral part of the growing data growing recognition of the data needs propelled ecosystem and produce data as the federalism by the federalism transition. This data platform, if transition fully unfolds. As the global wave of populated with relevant and timely indicators, could big data and citizen-generated data reaches serve as a model for data sharing and exchange Nepal, more unstructured data will be generated across government institutions. However, there compared to core data produced by the CBS in all are teething problems. It is not easy to access and 69 Or there are no clear instructions on how to access the data available online. 70 Government of Nepal, n.d. December 2019 World Bank Group 48 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF.6. Data needs for Fiscal Equalization Grants Intergovernmental fiscal transfers are an important component of fiscal federalism in Nepal. The Constitution of Nepal has made several provisions for equitable distribution of resources among the federal, provincial, and local level. The National Natural Resources and Fiscal Commission (NNRFC) is charged with recommending the amount of fiscal transfers to the provinces and local entities based on the following criteria as per the NNRFC Act of 2017: • Human development index such as education, health, and drinking water in province and at local level • Status of balanced development of province and local level • Socioeconomic and any other forms of discrimination/disparity existing in province and at the local level • Services to be delivered by the provincial and local level • Status and capacity of revenue collection of province and local level • Expenditure needs of the province and local level. To operationalize the above-mentioned criteria, the NNRFC adopted the following indexes on which to base recommendations of revenue sharing and fiscal equalization in the FY2019 budget: Human Development Index, Human Poverty Index, Infrastructure Index, Socio-economic Discrimination Index/Disparity Index, and the Underdevelopment Index. integrate data from various sources and harmonize compiled pre-federalism (Box SF.6). Given the them in a common format. Another challenge is dearth of timely and locally disaggregated data, to set standards and ensure the quality of the data data validation, consistency, and transparency will submitted by subnational government units where be key to securing public trust and confidence in human resources may be limited. At the time of the system. Openness about sources, methods, writing, the Profile could only draw on its 2011 and outcomes is a must.Localization of SDG calls Population and Housing Census data to populate for more and better data; however, subnational the Profile. data are glaringly lacking. The SDG monitoring framework outlined in the SDGs’ baseline report Fiscal equalization policies achieved through by the NPC commits to the concept of “no one intergovernmental fiscal transfers from the left behind” that necessitates “the availability of central government to the new provinces and high-quality, timely and reliable data.”71 As such, local governments are also being affected the NSS has a herculean task of producing reliable, by the lack of locally disaggregated data. consistent, and comparable statistics for at least The purpose of the fiscal transfers is to offset 420 SDG indicators for the SDG monitoring. A differences in revenue raising capacity and public rapid assessment by the World Bank team reveals expenditure needs in different jurisdictions. that at the province level 292 indicators (70 The federal budget of FY2018 was the first to percent) cannot be measured due to lack of data allocate fiscal equalization grants. The scheme is (Figure SF.10).72 The paucity of data for SDGs 12 heavily data-driven but so far mostly relies on data and 13 is of great concern as they are at the core 71 Government of Nepal, 2016. 72 In particular, data availability does not bode well for goals relating to zero hunger (SDG 2), quality education (SDG 4), clean water and sanitation (SDG 6), reduced inequalities (SDG 10), sustainable cities and communities (SDG 11), responsible consumption and production (SDG 12), life on land (SDG 15), and peace and justice (SDG 16). December 2019 World Bank Group 49 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update of the sustainable development agenda, but less than 12 percent of the indicators can be measured. Figure SF.10. Province-level SDG data gaps Sources: National Planning Commission 2016;  National Planning Commission-World Bank subnational estimates. Survey data are the most common sources of SDG these issues. indicators at the provincial level. Seventy-seven indicators use survey data, whereas 39 indicators Averages and other consolidated indicators come from administrative sources and seven from derived from national surveys are of national the Population and Housing Census. However, the relevance only, as many of these indicators do not total count of indicators decreases substantially necessarily answer questions raised, explicitly or when estimates with a considerable margin of implicitly, by local policy makers and development errors are excluded. For instance, when we use stakeholders. 73 The challenges for effective policy relative standard errors of 20 percent (Figure interventions at the subnational level will only SF. 11). Provinces such as Gandaki, Karnali, worsen as fewer data are available to understand and Sudurpaschim are more prone to inaccurate varying living conditions across local governments. survey-based estimates due to comparatively small sample sizes and the lack of explicit stratification by provinces in surveys conducted prior to the 2015 Constitution. Future surveys must address 73 PARIS21 2016. December 2019 World Bank Group 50 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure SF.11. Number of SDG indicators (relative standard errors less than 20 percent) Source: World Bank staff calculations. Disaster risk management is another area by volunteer organizations.74 Absent up-to-date desperately in need of better data. Nepal is population and building registers, the GoN had highly vulnerable to a range of natural hazards, to design and conduct a house-by-house damage particularly earthquakes, flood, drought, and assessment and eligibility survey in affected districts. landslides. During and in the immediate aftermath A census was conducted in the 11 most affected of a disaster, first responders must be briefed and districts and a sample survey was conducted in deployed, resources and supplies brought into the another 20 districts. The initial data collection disaster zone, and victims evacuated. Maps of road was not completed until May 2016,75 more than a networks, bridges, and other critical infrastructure, year after the earthquake, which may have delayed as well as household rosters, must be up-to-date support for victims. Investments in foundational and accessible for emergency response efforts to databases such as a civil register, a building register, be effective. and geographic information systems will not only improve government administration and planning The need for reliable data extends beyond on a day-to-day basis, but also help the country the immediate emergency response. prepare for future disasters and build resilience. Reconstruction and recovery efforts require data to identify victims and to verify and assess Provincial and local governments face losses. The devastating 2015 Gorkha earthquakes data challenges distinct from the federal revealed critical information gaps that affected government. Traditional statistical activities do both the emergency response and post-disaster not fully serve the growing data demands of the reconstruction. In the immediate aftermath, subnational governments. Decennial population post-quake maps were urgently needed by relief censuses are often outdated, and sample-based agencies, some of which had to be crowdsourced surveys are unable to generate reliable estimates 74 McMurren, et al. 2017. 75 Government of Nepal. 2017. December 2019 World Bank Group 51 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF.7. Deliberative decision making in rural municipalities of Nepal With the goal of building a practice of “deliberative” local governance, the International Institute for Democracy and Electoral Assistance (International IDEA) launched the Coherence Programme in 2017. The program mobilizes young graduates to help elected local government officials understand the federal system and their roles in fostering evidence-based and inclusive decision making. To date, the program has been piloted in six rural municipalities in Humla, Salyan, and West Rukum. In rural municipalities like Adanchuli and Chankheli, the Coherence mentors helped local governments with data collection, analysis, and visualization to support decision making. One of the Coherence mentors recalls a finding from his data visualization – an uneven student-teacher ratio across schools within a small area in Chankheli – that allowed his team to make recommendations on the municipality’s budget allocation in education for the following year. A collaboration between the World Bank and the Coherence program occurred when the World Bank presented accessibility maps by Banick and Kawasoe (2019) (Figure SF.2.). The Coherence team thought the maps were useful but too advanced, highlighting policy makers’ limited capacity. Adapting its approach, the World Bank team trained the Coherence mentors to collect Global Positioning System (GPS) points and related information on public services (for example, ward offices, schools, and clinics) using SW Maps, a free Android app. With this data, the World Bank team in Kathmandu prepared simple reference maps of each municipality’s public service facilities, road network, and ward boundaries (Figure SF.12). Although basic, these maps were popular among the local government officials and have generated interest in the more detailed accessibility maps the World Bank team originally presented (Figure SF.13). for local governments. Data demands vary across indicators to set baselines. the country. For instance, Karnali province, due to its challenging topography and limited accessibility, The way data are communicated must be intends to establish a Geographic Information carefully customized to local contexts because System lab to gather more geospatial data and the capacity to understand data is extremely build capacity to use them for policy planning diverse. In some of the rural municipalities in purposes. Gandaki province needs more tourism Karnali province, for example, locally elected data, with its capital city Pokhara being one of the officials were not well exposed to data and statistics, most popular tourist destinations in the country. yet they do demonstrate good understanding of the information when presented in a visually Data demands by local governments are even appealing manner (Box SF.7). This underscores more diverse, as are the local development the importance of a demand-driven approach to challenges and priorities. Metropolitan cities cater to the diverse demands and capacities of the like Kathmandu and Lalitpur would need data local municipalities. for urban planning, much like other metropolitan cities in other countries. They would benefit from Nepal’s private sector would also benefit real-time traffic data, for example, to understand immensely from increased availability and traffic congestion patters. Some municipalities proper use of data. Many Nepalese businesses may need, for example, highly disaggregated recognize the value of data for various purposes geospatial data layers to create flood hazard maps such as market research and new product to alert residents in areas prone to flooding during development, but practical challenges exist for the monsoon season. Many others are likely in them to integrate data analytics into operations. need of basic demographic and socioeconomic Many remain unaware of government data that December 2019 World Bank Group 52 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure SF.12. Basic reference map developed using QGIS for Chaurjahari Figure SF.13. Chaurjahari accessibility map from Banick and Kawasoe (2019) December 2019 World Bank Group 53 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF.8. Use and need of data in Nepal’s financial sector The World Bank conducted an explorational learning exercise to understand how the financial sector – commercial, development, financial, microfinance banks, and fintech – uses data for business decisions. Thirteen CEOs, CFOs, CTOs, and others in leadership positions of select financial institutions were interviewed. When asked to what extent their organization uses data in everyday operations, the majority (67 percent) of the respondents said that data were “extensively” used. When it comes to government data, however, more than 80 percent of the financial institutions interviewed make no or limited use of government data. The most significant barriers to using government data were concerns over its timeliness, reliability, and quality. Numerous institutions have asked the GoN for locally disaggregated demographic and economic data such as age, gender, per capita income, and tax revenue. Such data would help private firms improve their decision making, such as where to open new branches and how to attract clients, but most of such data are not readily available. “We don’t have access to data which would allow us to assess the condition of the banking sector or reasonably predict what will happen next week or month in the sector,” said one of the executives. Rather than using government data, financial institutions sometimes use their own surveys to conduct a cost-benefit analysis of opening a new branch. The majority of leaders (75 percent) also acknowledge that there is a need for significant investment in capacity building of their own staff within the next two to three years. Few financial institutions had an in-house analytics department or an operational data reporting framework. The most significant barrier to financial institutions using internal data is a lack of technical skills (70 percent). Outside of descriptive statistics and financial reporting, financial institutions struggle to turn the raw data they collect into actionable information and visual narratives for management to use. is publicly available and cite the need for capacity Private sector development is one of the key strengthening to make sense of data.76 Even if priority areas for Nepal’s development goals they exist, lack of timely and reliable government to reach middle-income status by 2030.77 Data data is impacting the private sector’s ability to are imperative for private sector development. grow. Many ministries publish reports with data From a government policy perspective, data are on their websites. However, the data they publish needed on the business cycle, profitability, and are rarely available in a disaggregated and machine- business demographics. The CBS conducted its readable format and are generally not timely or are first National Economic Census in 2018. It is immaterial. Leaders in the private sector say they an important source of information about the are not effectively able to make decisions about structure of the Nepalese business sector and is product development, investment, or marketing used as an input in the compilation of national due to lack of data. They also recognize limitations accounts. Economic Census data can be the basis in their own firms’ ability to use internal data and of a statistical business register when combined government data (Box SF.8). with administrative data sets such as the Office 76 FACTS Research and Analytics. 2019. 77 World Bank 2018a. December 2019 World Bank Group 54 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF.9. Data needs to improve ease of doing business Nepal ranks 94th of 190 countries in the World Bank’s Ease of Doing Business 2020 report.a The country improved significantly in access to credit information and expanding credit information coverage. However, the report highlighted as bottlenecks the lack of an electronic immovable property database for checking encumbrances (liens, mortgages, restrictions, and so forth), and the lack of an electronic database for recording boundaries, checking plans, and accessing cadastral information (geographic information system). In addition, the information recorded by the immovable property registration agency and the cadastral or mapping agency are kept in separate, unlinked databases, which assigns a lower score on the reliability of infrastructure index (Figure SF.14). The report also noted the lack of a national database to verify the accuracy of identity documents. Source: a. World Bank 2020. of Company Registrar and Inland Revenue also established connectivity with the Customs Department. Unlike census or survey data that Department, which provides them with PAN only provide a snapshot of the country at a point details to generate the export-import, or EXIM, in time, such a register can be updated frequently code. This greatly reduces the compliance burden when properly integrated with administrative on firms and reduces red tape and could also have data sources and become a dynamic database to major benefits for statistics and research, if shared produce up-to-date business statistics. more widely. Integration of enterprise data can produce Nepal needs a set of common, foundational, high-quality economic and business statistics. national databases on people, places, and In some areas, Nepal has started implementing business to form the backbone of the new data streamlined procedures for company and tax ecosystem, with links to sectoral management registration. The two main administrative data information systems. A national ID scheme sources for company data in Nepal are the Office embedded in a strengthened Civil Registration of Company Registrar (OCR) and the Inland System could be the foundation for an integrated Revenue Department (IRD). An integration system of data on people. Similarly, on the business initiative between the OCR and IRD has enabled side, a statistical business register that combines the OCR to issue permanent account numbers data from the National Economic Census and (PANs) for tax registration purposes at the time administrative data sets from the Company of company registration, and the IRD to retrieve Registrar and Inland Revenue Department could information about noncompliant or inactive be a starting point, with the potential of evolving companies from the OCR database. In the past, into a powerful information tool for industrial when new companies registered with the OCR, policy and private sector development (Box SF.9). many waited up to a year to apply for the tax Finally, the usefulness of these core registers of identification number or a PAN. Others never people and businesses would be further amplified applied for or received a PAN and therefore never if they could be linked to a land and property paid taxes. Government has adopted the same register (Cadaster) via a national address database. enterprise service system to integrate the tax and NRB systems. Further work is ongoing in FY2020r Integration of data on individuals, households, to integrate the land revenue management system and businesses holds vast potential for with the same enterprise service system as well governance, service delivery, policy making, as the Institute of Chartered Accountants of and statistics. As the suite of services offered Nepal to facilitate data sharing. The IRD has by the public sector grows, the need for a December 2019 World Bank Group 55 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure SF.14. Reliability of infrastructure index and format of records at immovable property registry Source: a. World Bank 2020. comprehensive picture of government-to-citizens with feedback data from beneficiaries. (G2C), government-to-business (G2B), and government to government (G2G) relationships Nepal’s efforts to strengthen the Civil is becoming increasingly important, not only Registration System in combination with the for Nepal, but for governments everywhere. introduction of a single National ID could Business intelligence and compliance processes, be the foundation for an integrated system of sometimes referred to as “know your customer” data on people and households. Nepal’s current in the private sector, are crucial for also managing civil registration system originated in the late public service delivery, particularly as government- 1970s. Each municipality is designated as a local citizen engagements become more complex and registrar responsible for recording vital events multifaceted, comprising a multitude of schemes when residents come forward to report an event. managed by disparate departments and agencies. The main outputs from the system are birth, death, Furthermore, there is an increasing demand on marriage, and divorce certificates. Registration is governments to track resources from the stage voluntary, but certificates are required to access of budget appropriation through execution certain services, for example, birth certificates to outputs and outcomes. This again requires for school enrollments, and marriage and death integration of financial data across appropriating certificates of a spouse to receive survivor benefits. and implementing arms of governments combined Hitherto, registration and recordkeeping has largely December 2019 World Bank Group 56 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update been paper-based and decentralized with no back- agencies must be able to identify eligible end central registry and absent a unique ID for beneficiaries and ensure benefits reach them, while identity verification and deduplication of records. excluding ineligible individuals. Integration and the The ongoing introduction of a unique National sharing of data among government departments ID in Nepal and the advent of digital technology is imperative for the overall effectiveness of the and secure database systems have created new social protection system. Another example would opportunities to make government more effective be the integration of school records by matching and more responsive to citizen needs. student IDs to the National ID and CR system, which can allow better provision of services to A unique National ID, which is universally individuals in remote areas, and for monitoring used for government-citizen interaction, school attendance. The World Bank is supporting is instrumental for data integration. The the Government of Nepal in strengthening the Government of Nepal manages a multitude of Civil Registration and national ID system and service delivery and social protection schemes. selected social protection schemes (Box SF.10). Common to the effectiveness of all schemes is that administrators can easily and reliably verify Enhanced data integration opportunities at people’s identity and integrate data across different the individual, household, and enterprise level registers and databases. This is particularly the case would be a boon to Nepal’s data ecosystem. for social protection schemes, where government An integrated system consisting of interoperable Box SF.10. The Strengthening Systems for Social Protection and Civil Registration (SSSPCR) Project Since 2016, the Government of Nepal, with the support of the World Bank, has been implementing a project to strengthen systems for civil registration and certain social protection schemes. In 2019, following the merger of the Department of Civil Registration and National ID Management Center under the Ministry of Home Affairs, the project was restructured to also include support for the rollout of the new national ID system. While the stated objective of the project is to strengthen social protection schemes, there are many additional benefits to a comprehensive, regularly updated civil registration system in combination with a national ID system for verification of individual identity. These include: • Documentation to secure recognition of legal identity, family relationships, nationality and ensuing rights, including inheritance • Facilitating access to essential services, such as health, education, and social welfare • Documentation needed for formal employment, exercising electoral rights, transferring property, and opening bank accounts • Crisis recovery and prevention of statelessness after natural disasters • Statistics on population dynamics, health, and inequities in service delivery on a continuous basis for the country and for local administrative subdivisions. December 2019 World Bank Group 57 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF.11. “Statistics Norway – An institution that counts” a In Norway, the civil registration of vital events was started by the church in the 17th century. Today, civil registration has evolved into a comprehensive, high-quality administrative system with more than 400 variables in the statistical database, of which the Central Population Register (CPR) alone captures at least 75. The most prominent feature of present-day Statistics Norway is that the Statistics Act 1989 gives the institution unlimited “access” to administrative registers as it can “impose obligation to provide information” (see Chapter 1, 1-2),* which has greatly reduced response burden and cost. The census in 2011 was estimated to cost US$0.5 per person, which is almost 80 times cheaper in per capita terms than the U.S. Census in 2010. In Norway, the last traditional census was carried out more than five decades ago. Since then, the only recent population and housing census was in 2001, which was to assign the dwellings unique addresses and upgrade the national register for property and buildings. The Norwegian census system consists of a set of registers on individuals that are linked to the Central Population Register through unique ID numbers and addresses, as shown in Figure SF.15. Figure SF. 15. The Norwegian register-based statistics system Sources: Statistics Norway. 2004, Andersen and Utne. 2016 Note: *Norway has a new statistics act that will be fully operational in 2020. December 2019 World Bank Group 58 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure SF. 16. Schematic representation of an integrated statistical system national registers and administrative data Integration of national development plans, systems have great potential for official statistics budgets, and socioeconomic outcomes production. Some countries have successfully will improve policy, planning, and introduced register-based statistical models and accountability. Countries need systems that mixed-mode methods that enable the merger allow the government and citizens to link revenue of traditional surveys with administrative data collection and allocation of resources with policy to produce powerful new insights at higher objectives, and with performance in achieving frequency, increased granularity, and reduced cost. those objectives (Box SF.12). Government The statistical systems of the Nordic countries, Finance Statistics (GFS) is a specialized Denmark, Finland, Norway, and Sweden are good macroeconomic statistical framework designed examples of primarily register-based statistical to support such fiscal analysis, and in turn, fiscal systems supplemented by household and policy.78 GFS allows the detailed breakdown enterprise surveys (Box SF.11). Other countries use administrative data or other non-statistical of government expenditure to priority areas sources of data as substitutes for all or some of the such as education and health. Some countries variables directly collected from surveys, resulting have gone a step further and integrated SDGs in greater efficiencies and reduced response directly into national policy, planning, and burden. Figure SF.16 represents a stylized model budgeting processes, for example, Kenya79 and of an integrated statistical system. Sri Lanka.80 These efforts to strengthen the links among fiscal policy, planning, budgeting, and socioeconomic outcomes involve integrating 78 International Monetary Fund. 2014. 79 Government of Kenya. 2017. 80 Government of Sri Lanka. 2018. December 2019 World Bank Group 59 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF.12. Methods of data integration a Data integration is the process of combining data from one or more sources to create new and enhanced information to drive government operations, business development, and citizen engagement. There are several ways data integration can occur. The most common is data matching, whereby records from administrative registers are linked with other administrative records or survey data through a common identifier. An example of this would be linking demographic information from a national population register or civil registry to a specialized management information system, for example, for education, by using a national ID or other unique identifier. Matching can also be done at a higher level of aggregation, for example, at the household, company, or community level. Integration of georeferenced statistical data or non-statistical data is a very common form of data integration, often done through specialized Geographic Information Systems (GISs). Data pooling is another commonly used method of integrating data. Data pooling is done by appending two or more sets of records of similar types of units, for example, a data set of large enterprises with one containing small and medium-sized enterprises. a UNECE. 2017 macro-fiscal data with socioeconomic outputs in 2018 was NPR 0.49 billion, a mere NPR 0.08 and outcome aggregates. Different departments billion higher than that allocated almost eight years will have different pieces of this puzzle. In ago, without accounting for inflation.81 In fact, Nepal, this would require close cooperation at the allocation decreased from 0.13 percent of the the central level among primarily the Ministry total fiscal budget in 2010 to 0.06 percent in 2018 of Finance, the National Natural Resources (Figure SF.17). This does not include support from and Fiscal Commission, the National Planning development partners.82 Commission, and the Central Bureau of Statistics, and at the provincial level with A cross-country comparison of staffing of planning and statistical authorities. The National the National Statistics Offices indicates that Data Profile could be a useful tool for such data Nepal’s Central Bureau of Statistics (CBS) is integration and dissemination. indeed understaffed, especially in light of the increased expectations of the CBS (Figure SF.18). Amid emerging data needs across the Compared to countries with a similar population spectrum of the data ecosystem, further size, such as Malaysia, the CBS has about one-fifth attention is warranted to whether the financial the staff. Many countries with a similar level of resources allocated to the statistical functions National Statistics Office staffing typically have is sufficient. The budget allocated to statistics much smaller populations, such as Cambodia and 81 Includes budget funds to the CBS, district offices, the economic statistics development program, the social statistics development program, and planning and the human resources development program. 82 There exists considerable off-budget support for planning and statistics for improving periodicity and quality of data. As of 2019, there are eight off-budget projects for strengthening planning and statistics. The areas covered include economic, social, and disaster recovery, and most are designed to improve the periodicity and quality of data needed to monitor progress on development indicators. The highest contribution comes from the Evidence for Development (E4D) Programme funded by the UK Department for International Development (DFID) in the amount of US$18 million. This allocation is more than half of the total off-budget commitments for planning and statistics. December 2019 World Bank Group 60 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Jamaica. Every CBS staff member in Nepal serves data demands under the federalism transition at least twice as many people as in high-income creates an increasing data gap. All three tiers countries, without accounting for the likely gap of government and the private sector demand in technical capacity. The fact that about half of timely and locally disaggregated data. The types CBS positions are not statisticians adds to the of data in need and capacity to digest data-driven above argument. The CBS and 33 district statistics insights differ significantly across the country. The offices (SO) together have 532 staff, of which need to grow the capacity to use data is echoed 51 percent are related to statistics. At the CBS across the spectrum of the data ecosystem, as is alone, almost 61 percent (90 posts) are related to a the need to carefully customize the way data are statistical group (Figure SF.19). communicated. What are the practical steps Nepal needs to take to develop a data ecosystem that Nepal’s data ecosystem already holds a lot meets the growing thirst for data and knowledge? of data, and it is growing. Yet the surge in Figure SF.17. Statistical budget and its share in the total fiscal budget Source: Ministry of Finance (budget speeches, and Red Book years 2009-18). December 2019 World Bank Group 61 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Figure SF.18. Staffing of National Statistics Offices Source: World Development Indicators and various country-level sources. Note: Population data as of 2017. Size of the bubbles represents gross national income per capita in 2017. Detailed country-level records are available upon request Figure SF. 19. Number of posts in CBS and statistical offices in the districts Source: CBS official website (https://cbs.gov.np/organizational-structure/). December 2019 World Bank Group 62 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update C5. The way forward Making the most of existing data The global data revolution was propelled by Every effort should be made to continue successful three mutually reinforcing factors: the ability to implementation of core statistical activities. The collect and store data digitally, the ability to share National Economic Census 2018 was a major and integrate data cheaply and instantaneously accomplishment for Nepal. The 2021 Population through the internet, and the ability to analyze large and Housing Census offers an extremely important volumes of data owing to the vast improvements opportunity for Nepal to establish statistical in computer processing power.83 We argue that benchmarks for the central, provincial, and local the future of Nepal’s data ecosystem evolves governments. It also enables the government to around three analogous dimensions that spurred build a statistical platform for data integration the global data revolution: data production, data and for program monitoring and evaluation. The sharing, and data use, all of which must be built main statistical censuses will need to be reinforced upon a strong data governance structure (Figure to remain authoritative data sources and to serve SF.1. ). the purposes of subnational jurisdictions to avoid parallel data collection. The long-term vision is of a data ecosystem that can fulfill the demand for reliable data Develop a long-term data production schedule from users inside and outside of government. for national censuses and surveys. Such a schedule Figure SF.1 is a conceptual representation of would help avoid bunching of large-scale data Nepal’s data ecosystem today and in the future that production activities as observed in recent years. builds on the three dimensions. Most of the focus The government should use it to plan ahead of thus far has been on data production. Without time and to strategically align donor support to improving data sharing and data use, however, ensure that these core activities cater to the data additional data production will not contribute needs of the country over the long run. This is much to the vitality of the ecosystem, represented one area where development partner coordination by the volume of the cube. The value of new data is critical. Provinces and local governments are can be maximized only if the data can be widely planning to conduct or already are conducting shared and used by many. surveys and censuses on their own. In the short run, it is important to develop guidelines for Realizing this vision will be a long journey. subnational data collection in order to minimize Strategic planning and investments under strong duplication and to maximize comparability of leadership are of the utmost importance. Given otherwise disparate data production efforts. the cross-cutting nature of data, much deeper A modernized data dissemination policy will boost coordination will be needed across government data use. While privately collected data are often agencies, the private sector, civil society, media, proprietary, data collected through public funds academia, and development partners. We organize should be a public good. Data are not considered our recommendations around two broad themes: a public good unless no one is excluded from (1) making the most of existing data, which accessing them. In Nepal today, data products are focuses on short-term priorities; and (2) creating disseminated in an ad-hoc manner. Development an enabling environment to nurture the data partners contribute to literally hundreds of surveys ecosystem, which mainly consists of long-term but few of them are available for public access reforms. Table SF.1 summarizes key reform areas online. There is no clear overview of existing data and recommendations. products. In such an environment, those in need 83 McAfee and Brynjolfsson 2017. December 2019 World Bank Group 63 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Reform Key recommendations Themes Data Production • Continue to focus on core statistical products (censuses and national surveys) • Introduce geo-tagging in all relevant surveys, censuses and administrative registers Make the most of the existing data • Develop a long-term calendar of censuses and priority surveys, reflecting user feedback • Establish a data producer-user network to reflect user feedback in data production Data Sharing • Develop a comprehensive data dissemination policy and open government strategy • Promote data sharing in machine-readable formats Leadership and long-term vision • Invest more and further develop national data profile as a model for improved data sharing and exchange Data Use • Cultivate demand for data use by government agencies, private firms, academic institutions, and the general public • Promote innovations in data use that explore new sources of data such as geospatial data, citizen-generated data, and private sector data Data Governance • Establish a new data governance structure conducive for federal Nepal Create an enabling environment that clarifies leadership and coordination roles across the three tiers of government • Update the Statistics Act and follow through on recommendations in the National Strategy for the Development of Statistics Data Sharing • Develop a long-term vision for enhanced data integration • Develop an enabling legal and institutional framework conducive to active data exchanges across public agencies • Develop a set of common, foundational registers on people, places, and business Data Use • Invest more in staffing and capacity development for data and statistics. December 2019 World Bank Group 64 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update of data may choose to conduct their own survey is that none of the data sets is currently available simply because they do not know similar surveys for download online, although the platform is already exist. The short-term priority, therefore, is equipped with such functionality. Some survey data to develop a more open and transparent approach are only accessible at external websites maintained to data access and dissemination. by development partner organizations. This is a missed opportunity for the GoN to accurately Small immediate changes will drastically measure demand for their survey products. improve data accessibility. In addition to a modernized data dissemination policy, several There is an opportunity for the GoN to adopt immediate steps can be taken to improve data an Open Government Data Action Plan. The accessibility. First, all data appendixes in statistical National Information Commission (NIC) abstracts and reports that utilize data collected has drafted a National Open Government through public funds should be made available in Data Strategy and Action Plan to better meet a machine-readable format. This will immediately the needs of citizens and enable innovation and boost data usability and reduce the chances of data civic participation (DRAFT OGD Action Plan, misuse as users will no longer have to manually NIC 2016). A cross-country analysis demonstrates “scrape” data from PDF files. To the extent a positive correlation between data accessibility possible, methodological notes and programs to as measured by the Open Data Barometer and replicate the results should also be made available. research output and quality.85 The recently Transparency around how statistics are generated approved National Strategy for the Development is essential for building and maintaining trust. of Statistics mentions open data but provides no Second, access to anonymized microdata from details. As one of the largest producers of data, the sample household surveys free-of-charge should GoN has an instrumental role to play in improving be a standard. The revenue from sales of microdata data sharing within government agencies and with is marginal compared to the value of the data sets the general public. to society. Today the practice of charging for data limits use.84 However, it is crucial that the privacy National Data Profile will significantly benefit of respondents and confidentiality are ensured. from improved data sharing. A robust data Trust is the main currency of national statistical governance structure will enable data sharing agencies and must be protected. across government institutions and facilitate enhanced data integration that can connect data on This is not a matter of technical issues. people, businesses, and places, and produce timely The CBS maintains a National Data Archive, a and locally disaggregated data. A modernized repository of surveys and censuses conducted data sharing policy would allow National Data by the government. This platform is compatible Profile to feature more data and make them more with international databases of household surveys accessible. As more data users realize the value of and censuses and can be an excellent model for National Data Profile, a positive feedback loop other countries to follow. The problem, however, will emerge between data producers and users to 84 For example, Multiple Indicators Clusters Survey and Demographic Health Survey data are available for download free of charge online, while other survey data are available for a nominal fee. The NPC has disseminated the microdata from the post-earthquake reconstruction census free of charge, but for other census and survey data such as the Population Census, users must pay a nominal fee to access anonymized public user files. More importantly, there is no mechanism for accessing data online. 85 Chuah and Loayza 2017. December 2019 World Bank Group 65 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update further improve the profiles. Further developing pathways for private data to flow for public good. National Data Profile by organizing existing In developing pathways, the government must win administrative datasets by local governments could the trust of the data provider. Elements that forge be a great starting point to demonstrate the value of an effective partnership include ensuring privacy data integration. and security, minimizing transaction costs, and mitigating reputational risks. Big data can improve A culture of effective data use must be developed. many aspects of citizens’ lives and their relationships In most cases, data are only used for descriptive with governments and businesses.86 Businesses are statistics. The need for capacity building for data already using big data to improve sales and profit collection, sharing, and use is echoed across all three margins.87 Governments can also improve their tiers of government and across the spectrum of the productivity by leveraging big data (Box SF.13).88 data ecosystem. Data visualization is one area where positive impacts can be expected immediately. For Creating an enabling environment to nurture example, the capacity of local governments varies the data ecosystem significantly, but even very basic data visualization can assist them in identifying problems and devising A core data governance architecture is a critical solution when key messages are clearly visualized prerequisite for a functional data ecosystem. (Box SF.6). The Government of Nepal has adopted the The Constitution aims to introduce a bottom- National Strategy for the Development of Statistics up, modern, collaborative, inclusive public as a strategic platform for improving the NSS. administration system for which data driven decisions It is imperative for the government to follow are indispensable. Provincial and local officials and through on the recommendations and establish an their counterparts in civil society need to be exposed implementation mechanism based on an agreed to the importance of data-driven analysis and policy roadmap. The Statistics Act needs to be updated making and implementation. Without conspicuous urgently. A draft is now being considered. The draft efforts to narrow this capacity gap, it is not possible changes should be considered carefully and include to fulfill the promise of “leaving no one behind.” the best practices that have been adopted around the world. An explicit consultation mechanism should be At the other end of the spectrum, Nepal can established so that the private sector and the public promote innovations in data use that explore can provide their views. The eventual adoption of a new sources of data such as geospatial data, new Statistics Act is critical for the establishment of remote sensing data, private sector data, and citizen- a sound national statistical system that makes up the generated data. New data sources must be sought core of the overall data ecosystem under the new out as not all data demands will be satisfied in the federalism. near future. To maximize the value of citizen- generated data, governments should reaffirm The new federal structure must have a revamped citizens’ rights to produce data, and experiment statistical infrastructure at the core of the NSS. to determine when the quality of CDG is “fit for The CBS has continued to operate its 33 branch purpose,” proactively communicate how people can offices to support its data-collection efforts. These provide data, and expand past efforts to open more 33 branch offices do not have a formal mandate government data. To maximize the value of data to support provincial or local governments. The produced by the private sector, governments should Constitution has made provisions for a statistical partner with one or two data providers to develop or data office to be established in each province 86 Executive Office of the President, “Big Data : Seizing Opportunities, Executive Office of the President.” 87 World Bank 2018. 88 Manyika et al., “Big Data: The next Frontier for Innovation, Competition, and Productivity.” December 2019 World Bank Group 66 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF. 13. Governments across the world are launching big data projects In 2013, the UK government adopted an Information Economy Strategy* and launched a plan to seize the opportunity provided by big data, by building “a skilled workforce, and data-confident citizens.”a The Office of National Statistics in the UK has also created a Big Data Research Center to understand how big data might impact its “statistical processes and outputs.” In the United States, the government launched the Big Data Research and Development Initiative in 2012 to “derive the greatest benefits” from big data. The U.S. government is using big data for numerous purposes including to “assess risks to the financial stability” of the country,b and to advance its understanding of health and disease.c In 2018, the Government of the Netherlands published its strategy to prepare for digitization, including taking advantage of big data. The government has also launched Commit2Data, “a long-term national research and innovation” program to increase “cross-sectoral cooperation on big data issues.” Statistics Netherlands has established the Center for Big Data Statistics to facilitate “collaboration in the field of big data.” To further create an environment to take full advantage of data, the government published its vision on data sharing among businesses.d The Australian Government in 2013 launched its Big Data Strategy to “to enhance data analytic capability of agencies in support of improved service delivery and the development of better policies” and invest in skills development of its citizens to thrive in data-driven world.e In India, the planning commission published its “Strategy for New India @ 75,” which recommends the use of “tertiary big data collected by private third parties” for evidence-based policymaking.f Source: a. Government of the United Kingdom 2013. b. National Science and Technology Council. 2016. c. Bourne, et al. 2015. d. Government of the Netherlands. 2018, 2019 e. Government of Australia. 2013. f. NITI Aayog 2018 to provide leadership for local government by a main CBS branch office with sub-offices statistical operations and to meet data needs of the located in local governments. In this option, the provincial and local government planners. This provincial branch office would functionally report has yet to materialize, however. These units would to the CBS headquarters but implement statistical address the provincial and local government data activities for both CBS and the local governments. needs. The establishment of such units should This is akin to the Malaysia or Thailand model. be implemented as soon as possible to enhance The advantage of this system would be strong the functioning of the provincial and local central coordination that would ensure a coherent governments. national statistical system. The disadvantage could be that the system would be more oriented Several models could be considered for towards national statistics and not as responsive to the new multitier statistical governance provincial and local government needs. architecture. One is to reorganize CBS’s branch offices and align them with current provincial Another option would leave the CBS structure boundaries. Each province could be supported intact to continue to deal with national statistics, December 2019 World Bank Group 67 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update and not burden the CBS with subnational Moreover, the fragmentation of data production statistical activities. Instead, Provincial Data must be addressed with a structure that facilitates Offices would be established to manage the coordination across the three tiers of government, data needs of the provinces, as provided for by and with development partners. the Constitution. Local government data offices Equally important is measuring the would correspondingly be established that would trustworthiness of the institutions that report to the Provincial Data Office. produce the data. Assessing the quality of the institution that produces the data also There could be two variants to this option. The requires a multidimensional perspective. How first could be that the Provincial Data Office would be the apex entity for each province data-producing institutions are regulated and without explicit coordination mechanism across empowered is the final ingredient to ensure trust the provinces. This governance structure is akin to and confidence in data. Legislation that articulates other large countries such as China, Indonesia, and institutional roles and responsibilities is vital. the Philippines where each province has its own External and internal advisory committees may statistical or data department. This model would provide the governance structure necessary for make the system highly responsive to provincial the institution to be effective. and local data needs, but the absence of a central coordinator would risk creating a disconnect Data integration is imperative for a cohesive between national and sub-national statistics. The federated data ecosystem. However, it requires a second variant takes the view that at the initial long-term vision as it needs significant investment stage, it is important to provide national leadership in many different areas. As described in more in building capabilities and establishing supporting detail below, there must be legal provisions and infrastructure for the provinces and local an institutional framework that allow active data governments. Under this variant, a national data sharing across government agencies. Foundational office could be considered which would facilitate databases of people, businesses, and places must the establishment of the provincial data offices be established and continuously updated. Unique and help with coordination. For this model to identifiers must be developed for these databases work, CBS and the national data office would need to be integrated. All data contributors must agree to coordinate very closely on statistical standards on common standards and definitions and commit and definitions, quality control frameworks, etc. to implementing them. This requires strong leadership and coordination beyond the traditional Exercise leadership in coordination, quality statistical system. This is an opportunity for Nepal assurance, and setting standards. Data will to leapfrog as many middle-income countries not exercise its value unless it is trusted, and struggle to overcome these challenges. trust comes from quality assurance. A lack of confidence in government data limits the ability of Data integration requires an enabling legal governments and society to take decisions based framework and supporting institutional on evidence. At its core, data must be relevant to arrangements. Policies and procedures on data decision making. But producing the relevant data exchange and integration across government is insufficient to instill confidence in its users. departments with provisions for data privacy must be developed and encoded in legislation There must be trust in the data itself, as well as as required. In Nepal, there are at least 15 acts/ trust in the institutions that produce the data. bills that grant different verticals or layers of December 2019 World Bank Group 68 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update Box SF. 14. Data sharing among government agencies as a first step to data integration Government agencies possess tremendous amounts of data generated through regulatory activities. Accessing such administrative data has always been difficult. Government agencies are often hesitant to share the data under their control. Current concerns about the privacy of personal information has created new barriers to the sharing of data across agencies. The National Statistical Offices (NSOs) are probably the most successful government agencies in their ability to access data across the government. This is due to the legal provisions mandated in the Statistics Act under which NSOs operate. The provisions cover both the legal authority to access government information and the confidentiality guarantee. This is due to the recognition that for the NSOs to do the job of compiling social and economic indicators, they need to have access to all kinds of data. Data integration is a key part of the production process of NSOs, and it forms the basis for all national statistical work. There are many international examples of such data accessibility provisions in Statistics Acts. In Singapore, the Statistics Act (2017) allows the Chief of Statistics to direct “any public agency to furnish or supply to him any particulars or information in the possession of the public agency.” In areas where there is specific legislation to protect the release of data, such as income tax data, appropriate exemptions are made in the legislation to make the release possible. In Canada, Section 13 of the Statistics Act makes similar provisions for the Chief Statistician to access government data. Sections 24 through 29 of the act provide for access to specified types of information, namely those related to income tax, excise tax, imports and exports, and criminal statistics. Similar legislation exists in Australia, New Zealand, and the Nordic countries. There have been no reported abuses of such privileged access to government data. It has now been accepted that data sharing with NSOs as the integrator has generated great advantages and is considered a best practice internationally. government the authority to collect the data or debated: draft bills entitled, “A Bill to Provide maintain the secrecy of the information (Box for Information Technology,” and “A Bill Made SF.14). 89 to Provide for Provisions Relating to National ID and Civil Registration,” as well as the work in A government-wide data policy comprising progress Statistics Act. These bills, when enacted, ownership, standards, and protocols for data need to provide the legal framework to enable data creation and sharing might require review integration. and amendment of existing laws. Three important pieces of legislation are currently being Data integration must build on a solid 89 For instance, the authority to produce voter data resides with the Election commission (see Section 11 Other work and authority), while the NRB under the aegis of the NRB Act 2002 (see Section 12 Flow of public information), produces monetary statistics. The Ministry of Home Affairs is responsible for civil registration and the collection of vital statistics. The tourism policy, for instance, envisions collecting tourist arrival data (including those from India via land transport). The Disaster Risk Management (Act) has a separate provision under “right and duties” that empowers the National Reconstruction Authority to collect, analyze, store, and disseminate information and data related to disasters. December 2019 World Bank Group 69 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update technical foundation. The CBS, as the national systems, and for overseeing the collection, storage, statistical authority, plays an important role management, quality, and protection of data. A as the custodian of statistical standards and common objective of most CDOs is to create definitions and national data quality frameworks. value to a business or organization using data- Harmonization of standards and definitions is a powered business intelligence tools. prerequisite for system interoperability and data integration. The GoN through the CBS should Invest more resources – financial and human – review and adapt the main statistical classifications to build capacity and grow the data ecosystem. used in statistical production and disseminate them The need for capacity building for data collection, to statistical units at the national and subnational sharing, and use is echoed across all three tiers level. As the custodian of statistical terms and of the government and across the spectrum of definitions, the CBS also has a role to play in the the data ecosystem. Meeting the growing data design of base registers to ensure that these can demands such as the fiscal federalism and National also serve statistical purposes. The process of Data Profile needs significant financial and human data integration should also shed lights on areas resource support to cover the bottom line. National needing improvements in existing administrative statistical agencies have limited opportunities for databases. generating revenue, and given the public good nature of their product, sufficient public funding Unique identifiers are necessary for linking via national and subnational budgets is needed. data on people, businesses, and places. The strong push for digitization of the Civil Registry The transition to federalism is a testament to and implementation of a national ID should be Nepal’s desire to accelerate its development expanded to other base registers like the Company progress to achieve a series of ambitious goals. Register and the Cadaster. Together, these three Nepal aspires to be a prosperous middle-income registers could form the nexus of an integrated, country by 2030, and committed to achieving a register-based data system with the potential range of aspirational development goals including to vastly increase the efficiency of government the Sustainable Development Goals. Goals cannot operations. As a positive side effect, it would also be achieved without monitoring progress, and boost Nepal’s data ecosystem by providing data progress cannot be monitored without high-quality to answer fundamental questions about Nepal’s data. To translate aspirations into actions, there is society and economy. A quick-win would be to an emerging thirst for more data and knowledge to introduce geo-tagging of basic infrastructure design effective policies to accelerate development and service delivery facilities such as schools and progress by all three tiers of government. health clinics. Nepal’s data ecosystem needs long-term Some countries have appointed a Chief Data strategic direction to modernize itself and Officer (CDO) to oversee government data improve data sharing and data use. As systems to supplement the Chief Statistician, mentioned, Nepal already has a lot of data to start who oversees the national statistical system. its own data revolution, but they exist in silos. Experience from other countries has shown In a way, Nepal’s data ecosystem today is like a that strong central leadership is needed to society at the dawn of the digital transformation make interdepartmental and intergovernmental in which many have a computer, but no internet. cooperation work. The position of the CDO The volume of information exchange would be has been created in national and subnational severely limited in such a constrained environment. governments and even in larger cities and The culture of data use will not grow unless there enterprises with complex and sprawling data is an active exchange of data that encourages data- systems. CDOs are usually responsible for driven innovations. A positive feedback loop must designing and implementing data strategies and be created, whereby improved data sharing leads December 2019 World Bank Group 70 Envisioning a Future Data Ecosystem in Federal Nepal Nepal Development Update to enhanced data use, which in turn can reveal data gaps and quality issues to improve data production. For all this to happen, there must be a robust data governance architecture that clearly defines the roles and responsibilities of key actors. The future data ecosystem must be responsive to the data needs of all levels of government, and of the private sector, academia, and society more broadly. Decisive steps have already been taken by the government, but more is needed. A cultural shift in the perception and use of data for decision making is equally important. More and better data will foster more demand. Even in the age of artificial intelligence, it will remain a distinctive advantage of humans to ask the right questions.90 Data itself have no value, no matter how big they may be. Data must be used to measure things we care about and generate knowledge that inspires change. Data must drive actions on results that count.91 This requires visionary leadership to push through the necessary reforms to create an enabling legal and institutional environment for the data ecosystem to thrive and contribute to Nepal’s development. 90 McAfee and Brynjolfsson 2017. 91 Copeland 2015. 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Washington, DC: World Bank December 2019 World Bank Group 78 The World Bank Group Nepal Country Office, PO Box: 798 Yak and Yeti Hotel Complex Durbar Marg, Kathmandu, Nepal Tel: 4236000, Fax: 4225112 www.worldbank.org/np Email: infonepal@worldbank.org www.facebook.com/WorldBankNepal