Wednesday, July 5, 2006

Dr. Prakash S. Mahat, Nepal

Introduction

Nepal 's economic structure is overwhelmingly rural and economic and social transformation of rural Nepal effectively means transformation of Nepal . 10 years long conflict has devastating effect on rural Nepal . Development work has been halted. It has seen major displacement of the people never seen in the scale in the history of Nepal . Due to out displacement of working age males, mostly women, children and elderly remained in villages under shadow of violence. It has affected social and economic lives of the people in a big way.

The democratic political change brought about by people's movement has raised the expectation of the people. If peace talks between seven party alliance and Maoists heads in right direction, and there are hopeful signs, there is an urgent need to make substantial investment in rural areas that will cover the losses that country and especially rural Nepal has incurred during insurgency. Due to the institutional constrains; size of development investment may be modest in the coming fiscal year. However, immediate measures in the coming budget should complement the long run vision of social and economic transformation of rural areas.

Nepali people have also made it loud and clear that country's development and prosperity can be sought only in the democratic political framework and peace. And Nepal 's socio economic transformation and social justice is possible only by giving equal emphasis on economic growth and equity. To achieve above goals it is necessary to recognize the role of individual creativity, market mechanism, and community initiative and state where they can work best. Development history of the nations and our own experiences has provided us sufficient information to define role for each of them.

Importance of Rural Transformation for Conflict Transformation and Development

Under-development, the discontents and conflict in Nepal are mainly rural in nature. The breading ground for conflict is continuing poverty, unemployment, social discrimination and underdevelopment in the midst of rising expectation. The social and economic transformation of rural areas is central to conflict transformation and peace building since rural areas suffered the most from conflict.

Expectation Revolution: To an extent the discontent in the country may be attributed to rising expectations. The establishment of democracy in 1990 started a process of great awareness building in rural Nepal . The process of democratization and organized political activism has increased popular expectations regarding minimum level of economic prosperity and human security; and rejection of fatalism. This expectation is most pronounced among youths. When expectations were not fulfilled, ground was prepared for supporting environment for violent rebellion for some

Unemployment: The unemployment among rural youths is the most important factor contributing to insurgency. This can be ascertained from the fact that the active cadres in the Maoist insurgency consist overwhelmingly rural youth. The educational enrollment in Nepal has increased significantly in 1980s and especially in 1990s however, quality and skill contents continue to remain low. Education devoid of skills and limited absorption capacity of the economy has rendered many of the high school graduates without jobs. At the low level of skills, even those leaving the country for employment opportunities aboard are trapped in a low paying subsistence job inside, have joined insurgency

jobs while some of those who can not afford to go abroad or get job inside, have joined insurgency due to their sheer frustration, than by ideological motivation.

Rural Poverty and Backwardness Despites Achievement

Nepal achieved significant progress reflected by social, demographic, health, education, and infrastructure indicators, however, income poverty continue to remain high and disparity in income poverty is quite deep between urban and rural areas.

The poverty is far more rampant, deeper, and more severe in rural areas, worst in mountains, followed by the hills and then the Terai.

Poverty is more severe in rural areas where poverty incidence (44 percent) compared to 23 percent in urban households appears to fall below the poverty line (NLSS1996). Though poverty head count is reported to decline from 42 percent to 31 percent between 996-2004.

The poverty also varies socially. The incidence of poverty is higher among Dalits, ethnic groups such as Limbus, Tamangs, Magars, Tharus. They mostly live in rural areas.

The bottom 40 percent of the agricultural household operates only 9 percent of total agricultural areas and number of absentee ownerships is increasing. And these absentee owners are based in urban areas. The land reform measure of the government is a non-starter.

The population growth rate in Nepal , continue to remain high at 2.3 percent per annum. The growth rate in rural areas and among poorer and marginalized section is even higher. This has directly contributed to further improvisation of this group of population. Geographical disparity in income and human poverty and isolations is one of the greatest supporting environments for growth of insurgency.

The intensity of conflicts (measured by the number of deaths in each district) against HDI indices we find negative correlation between HDI and the intensity of conflict is -0.29, suggesting grievances and horizontal inequality plays a vital role in determining the intensity of the insurrection.

Despite decentralization measures, control and centralizing tendency in service delivery and governance has also contributed to lack of transparency and limiting role for people resulting misuse of resources sense of ownership.

Areas and Components of Rural Investment Plan

There is a need to prepare long-term investment plan that requires substantial amount of resources to bring about social and economic transformation leading to complete healing of the wounds created by conflicts. This year's budget and its investment plan should complements to long-term goal. However, given the transitional political difficulties, it is not feasible to make present budget too ambitious. Neither it is desirable to plan dig projects. The country is facing shortcomings in institutional arrangements for making large amount of investment in rural areas especially in the absence of local bodies.

The budget should mainly address the relief needs of the conflict- affected victims, kick start the reconstruction of damaged and lost infrastructures during conflict and take development expenditure closer to pre conflict level.

The rural recovery, reconstruction and rehabilitation/reconstruction should be major objectives of rural investment plan in the immediate level.

The reconstruction of lost Infrastructures: According to local development ministry estimation, close to 1500 VDC buildings have been partially or completely destroyed during insurgency. The damages have been done to rural bridges, schools, communication installations district level governmental offices and police posts and private properties.

Reintegration and livelihood support: Another area needing support is reintegration of the displaced affected by conflict. It includes support for the families of deceased and for the wounded. At the same time displaced may need livelihood support to rebuild their lives, support for the children's education and support for skill training. Reintegration of the Maoists armed cadres may requires substantial cost.

Rural recovery and development: Investment in Infrastructure and human resource Development

Nepal needs huge investment in rural recovery and development especially in the context of conflict. It is desirable to depart from traditional approach to planning and devise conflict transformation special five year investment plan. Such Plan should address the root cause of the conflict and investment in the areas that will help to overcome the conflict to led country to high growth path.

Intensify investment in rural infrastructure such as roads, Airports, Irrigation and Power: The support for community run infrastructure development programs such as small irrigation systems, labor-intensive green agricultural roads; and alternative energy development programs are highly desirable.

Give highest priority to roads for quick income generation and employment: The conflict is also high in the areas that are isolated and not connected by roads. The infrastructure development especially roads in the hill Nepal will play critical to the fulfillment of market driven broad based growth in rural areas. Without roads, commercialization of agriculture based on high value crops is not possible. The development of market centers has also been impeded in the absence of roads.

Tourism: Development of tourism is also impeded in the absence of road and air transportation. There are pocket of areas where, development of tourism is high, the level of insurgency is low or almost absent The Airport up-gradation and development of potential tourist destination should also get priority.

Clean and green energy: big and small: There is an urgent need to start at least one big hydro­power project to meet the energy demand in the country. 9t will also generate economic activities and employment generation in the rural areas. There is need to develop national consensus to tap hydro power to its full potential through private sector participation n.

The rural energy development based on community controlled, holistic approach adopted by Rural Energy Development Program (REDP) funded by UNDP has successfully operated even in high conflict zones. Similarly solar power and bio-gas development has potential to transform rural Nepal . The scopes of alternative energy need to be expanded.

Vigorously adopt land reform measures: Land is the most important and livelihood sustaining asset for Nepal where subsistence agriculture is the mainstay of livelihood for overwhelming majority of the people. While, inequality in land holdings persists, it is mainly concentrated in Terai. The land can be obtained from absentee owners, people holding lands above fixed ceiling and land reclamation from public lands. The support can be provided for compensation package, land consolidation and reclamation and development, and redistribution efforts.

Education and health: Expand and Upgrade health and Education facilities to make it accessible to poor and backward social groups and geographical regions.

Skill and Vocational Training: One of the major root causes of conflict in Nepal is unemployment among educated and half educated youths. Unless programs are designed with special focus on youth, conflict in Nepal will continue to manifest in one form or other. This restless group may not be the most deprived and poverty stricken, they are the one who has biggest potential for fermenting conflict. To cater to the skill needs of the youth, start several technical and vocational schools in rural areas.

Provide targeted support for rehabilitation of schools and health posts serving marginalized communities and up-gradation of district hospitals. Support for incentive package families to raise demand of girls, Dalits and marginalized children to enroll in schools. The investment in increasing access and quality education and health is crucial for inclusive social development. The community owned schools and health centers is a policy shift in a right direction. However, what is needed is more support for demand creation from the poorest section. Similarly support is urgently needed to upgrade district government hospitals and up-gradation of health posts. The support for basic health, family planning and maternal health and services is urgently required to improve the health of women for reduction in fertility rate. The targeted support for girls and disadvantaged children to raise demand for enrollment in schools through incentive packages to their parents should be considered as critical areas of support. This kind of support is more useful to bring disadvantaged children in schools. The support for the midday meal has shown to increase enrollment and retention.

Approaches for Effective Implementation of Rural Investment Plan

State investment through local participation: in the absence of substantial development of infrastructure in rural Nepal , market driven initiative will continue to remain low. Therefore state has major role to play especially in creating social and physical infrastructures. With the development of these infrastructures, environment will be created for more private sector activism. Even the more productive economic activities at the household level will be continue to remain constrained due to low access to market in the absence of infrastructure development. However, given the inefficient nature of state run activities, it is desirable to channel and invest state resources through community groups, local bodies, non-governmental agencies and private sectors. These agencies can play major role in service delivery as well as development activities in rural areas.

Devolution of rights to lower structures: The top down approach to rural development has not worked in the past and will not work in the future. It has to be decentralized, demand driven, community participatory and labor intensive. There is a need for clear delineation of powers and decision-making between centers, DDCs and VDCs. The investment programs should be easily monitored. All the development programs need to be mainstreamed to ensure participation of all social and economic strata of the population. At the same time some programs need to be especially designed to target socially and economically backward groups and regions. The investment though devolved structures will help spur development activities in rural areas. In the new constitution, substantial power should be devolved to devolved structures.

Block grant to VDCs: Until legally constituted or elected local bodies are formed, there is institutional problem in spending resources at the VDC level. However, it is possible to institute all party committee that will guide village secretary to prepare investment plan for the VDC until legally constituted village committees are formed. The investment in the programs such as village roads, irrigation, drinking water etc can be implemented through users committee with the technical support from district development office. The all-party committee will monitor activities.

Rural development investment through DDCs: Government has already instructed DDC offices to invite local party representatives to shape district development activities, its investment modalities and monitoring of development activities. The all Parties committees will provide necessary guidelines for the district level government officials to launch district level programs. The district level roads, small irrigation projects, and other development activities can take place through DDCs. The DDCs initiated programs should also use user committees to implement those programs.

Investment through line ministries: There are several national level programs tied to donor support operational in rural areas. However, work progress on several of these programs has slowed down due to conflict environment. This has to be speeded up. And it is possible to increase level of investment on these ongoing projects. Especially, acceleration of work in the road project, irrigation and power related projects would generate income and employment in rural areas. Expand the scope of community participation in built in those programs.

Rural Cooperatives: Encourage rural credit cooperatives for catering to cheaper and easier sources of credit. Encourage marketing cooperatives for agriculture/horticulture and Livestock products.

Investment through Poverty Alleviation Fund (PAF): Accelerate the investment through PAF.

Declare special priority zones: Declare backward zones as priority development zones. These zones such as Karnali zone on the basis of low human development indicators should be given high priority and higher level of per capita development investment.

NDVS: Expand the scope of National Development Volunteers Service (NDVS). Especially

engage the newly graduate doctors and engineers in the delivery of services and development work.

Declare special production zones: Identify areas based on their agricultural production potential especially high value produce and declare production areas for identified products. Based on the specific production characteristics, devise plan to support their production potential

Others

Review/merge or eliminate programs that may have failed to show results.

. •Increase the ceiling of money that can be used through Users group in larger construction work.

•Stop centralized procurements for local consumption and service delivery.

•Institutionalize Community management of public schools with assured support from the state.

•Increased support to schools run in the areas inhibited and run by marginalized groups.

•Increase the need based scholarships to poor, children from marginalized groups and girls • Expand Midday meals with priority given to poorer areas. Introduce midday meal schemes to all districts of Karnali Zones. Introduce midday meal to identified poor and conflict affected areas.

•Institutionalize local bodies run health centers with assured support from the state.

•Make Community approach to development as central strategy to rural development. Make inclusion of all social croups mandatory in the community/User group formation.

•Make mainstreaming and targeted investment for backward areas and groups as corner stone of transformation strategy.

•Review and change rules that stifle implementation through local bodies and communities

Cost and Sources of Funding

The cost due to conflict is substantial and country requires substantial amount of resources for some years to come. Until country achieve sustainable growth path, country is continue to remain dependent on foreign assistance especially to overcome substantial loss to the economy due to conflict.

The cost for reconstruction and rehabilitation: It is estimated that about 60 thousands families are completely displaced by conflicts. The numbers partially displaced are much higher. Even if we confine modest support of Rs 10000 per family to begin their lives back to their homes completely displaced by conflict it will cost about Rs 600 million.

For the reconstruction fully and partially damaged VDCs and DDCs, it may cost about another Rs 1000 million. Even if 50 percent is mobilized at the local level, it will still cost government Rs 500 million.

Another Rs 1000 million is estimated to reconstruct bridges and other lost infrastructures.

Development investment through DDCs and VDCs: If government raise grant amount to VDCs to Rs 10 lakhs from current level of Rs 5 iakhs. Total amount will be Rs 4000 million. Similarly it is feasible to raises grant to district form this years Rs 1000 million to Rs 2000 million.

Other Investment: In the new environment, the disbursement to other national and district level programs can be substantially raised. Similarly some additional resource is required to implement some of the programs suggested above.

Source of funding: The support for increased funding should come from domestic sources, budgetary and support from the donors.

Lessons to be learned from Past Successes and Failures

The major success of the twelve years of democracy is successful experimentation in community approach to development. The democratic environment has provided groundwork for successful application of community initiatives to development. The community approach to development has successfully applied in forest conservation, micro hydro development, and also in construction of roads, drinking water etc. The community approach to school and health management has been started. Though bureaucratic and teachers resistance to this approach has slowed down the progress.

Looking into failures, quality of education continued to remain poor for the public schools, medical services to rural areas continued to remain poor. The central bureaucratic control over the decision-making has continued to limit the local initiative to development. Another major failure of past development efforts is its failure to manage expectation, generate employment opportunities in the rural areas and poor delivery of services from governmental service delivery mechanism. There is much work to be done to bring backward groups and regions to mainstream of governance structure and development.

Draft Outline Presented at the Conference on "Peace Democracy and Development" organized by ADB and Economic Association of Nepal in Kathmandu , June 30 2006 . Text courtesy: ADB Nepal Office. Thanks ADB and the author-ed.