COVER STORY (Spotlight Weekly)

More Rhetoric Than Substance

Despite five decades of planned development and billions of rupees' worth investment in the name of reducing poverty, the number of poor people have been increasing in Nepal. Will the poverty reduction strategy the government is working on reverse the trend ?

By BHAGIRATH YOGI

As the ruling and opposition leaders were flexing their muscles in the streets of Kathmandu over whether the prime minister should be allowed to go to his office at Singha Durbar, at least 25 families in the remote mid-western district of Rolpa were preparing to leave their village and, of course, their country, on the eve of the Nepali new year 2058 B. S.

"Whatever household property we had has already been sold for buying food and what we have is an empty house," Chandra Bahadur Oli, a resident of Rank village development committee in the Maoist-affected district told Kantipur daily.

A farmer woman : Declining productivity

Several families like Oli's leave their villages looking for seasonal job and employment at Kalapar and other parts of India each year. Declining agricultural production, dearth of employment opportunities and lack of security over the last few years have forced thousands of people out of their villages. Some of them return home with a little money to support their family or even bring back the ëunwelcome gift' of HIV/AIDS to their family members as seen in far-western district of Achham.

Poverty, social discrimination and hardships are not new for hundreds of thousands of Nepalese people. According to Nepal Living Standard Survey (NLSS) 1996, about 42 percent of the 22 million-plus people in Nepal live in poverty. But the number varies with the definition used. For example, if the people earning less than US dollar a day is taken into consideration, the incidence of poverty turns out to grip more than half of the population (53.1 percent).

Despite a five-decade long tryst with the planned development, the number of people living below the line of poverty continues to grow. According to studies, the number of poor people has increased from 5.7 million in 1976 to an estimated 9.2 million 20 years later (in 1996). Of course, there have been some achievements in the social sector such as education and health, but the plight of the majority of the Nepalese people remains unaffected even at the turn of the century.

There are wide variations of poverty in Nepal based on rural-urban divide, geography, ethnic group and occupational caste. (See: Box) It is estimated that 44 percent of the rural households and 23 percent of the urban households lie below the poverty line. Nearly 88 percent of the total population of Nepal lives in rural areas.

A village scene : Out from mainstream

More than 42 percent of the adult population cannot read or write; only less than half of the population has access to safe drinking water and the infant mortality rate is 75 per thousand in Nepal. The level of social development is low in Nepal even by South Asian standards.

A survey conducted by Nepal Rastra Bank in 1984/85 estimated the poverty incidence to be 41.4 percent. The Nepal Rural Credit Survey 1991 estimated rural poverty incidence to be 34 percent in the terai, 64 percent in the hills and 64 percent in the mountains.

The results from the comparison of 1984/85 and 1995/96 data indicate that the nationwide incidence of poverty has increased slightly, from 41.4 percent in 1984/85 to 44.6 percent in 1995/96.

Causes of Poverty

Poverty in Nepal is the product of three factors, writes Dr. Devendra Raj Panday in his book "Nepal's Failed Development (1999)." They are: (I) unsatisfactory growth in aggregate output, (ii) historical effect of unequal distribution of assets and social and economic status among different groups of citizens including the caste-related and gender-related biases, and (iii) inequities born of recent development efforts that have generated further iniquitous income and assets distribution.

Studies show that over the last three decades, Nepal's economy has been growing at an average pace of about 4 percent, which only marginally exceeds the rate of population growth of 2.37 percent. The growth rate in the agriculture sector over the same period is even smaller, less than 2.5 percent. The slower rate of agricultural growth, that contributes to more than 40 percent of GDP and absorbs over 80 percent of the labor force, is largely responsible for the existing higher poverty incidence and severity of it in the rural areas, say experts.

The non-agriculture sector, that generates 60 percent of GDP, grew by 6.5 percent in the 1990s. It has helped to reduce the incidence of urban poverty, but has not been strong enough to have a desirable effect on the rural poor.

A poor household : Beaten by economics

Why? It is because "Poverty in Nepal is deep and complex, and only a concerted effort to improve public interventions while mobilizing community initiative holds hope for a reduction in poverty," said a World Bank report entitled "Poverty in Nepal: At the Turn of the Century" published in 1998. Poverty is more widespread and deeper in the more remote areas in the mid- and far-western development regions and the mountain belt. Poverty in rural Nepal is too deep and too entrenched to be rapidly or widely alleviated. Still a steady, sensitive effort at combating and reducing it can bring progress in the new century, said the report.

Poverty is generally signifies a situation when there is inadequacy of food and clothes, people have no access to education and health facilities, and they have very poor access to economic resources.

According to the Asian Development Outlook 2001 launched last week, with per capita Gross Domestic Product (GDP) of US$244, Nepal ranks among the poorest countries in Asia. Reducing the level of poverty remains the government's major development challenge. The rate of poverty has not changed significantly over the last 30 years, partly because of the high population growth rate in the country (2.4 percent in recent years). Income distribution is skewed in geographical, social and gender terms.

According to latest studies, the share of total income of the bottom 40 percent of the population decreased from 23 per cent in 1984/85 to 11 percent in 1995/96 while the share in total income of the wealthiest 10 percent of the population increased from 23 percent to 52 percent during the same period, indicating the worsening situation of the income distribution situation in Nepal. Unless this trend is reversed Nepal's poverty situation will worsen over time, say experts.

Planning for Poverty Reduction

The sixth five-year plan in 1980 clearly stated poverty reduction as one of the main goals of planned development in Nepal. The seventh plan (1985-90) formulated a separate plan with long-term perspective for poverty alleviation but was abandoned later amidst ensuing political upheavals. After the restoration of democracy in 1990, the Eighth (1992-97) and Ninth (1997-2002) plans have poverty reduction as their main objective.

The Ninth Plan has aimed at bringing down the incidence of poverty from 42 percent to 32 percent by the end of the plan period. The long-term vision is to reduce poverty incidence down to 10 percent within the next two decades. The Ninth Plan intends to reduce poverty via I) sustained and broad-based growth, development of rural infrastructure and social priority sectors, and iii) specific programs targeting the poor.

Nepal initiated the economic reform program in 1991 but even the officials now agree that it didn't have positive impact on the agriculture sector. Real GDP grew marginally by an average rate of 4.8 percent in the 1992-2000 period compared to 4.6 percent during the 1982-91 period. The 20-year-long Agriculture Perspective Plan (APP) formulated in 1995 aims at raising the annual agriculture growth rate from less than 3 percent tin the preceding two decades to 4 percent during the Ninth Plan period and to 5 percent during the next 20 years.

Two elderly people : Tough life behind

Since early 1990s, various targeted and sectoral poverty alleviation programs have been implemented in the country. Majority of these programs, which were mostly centrally planned or implemented, ignored community preferences. Poverty Alleviation Fund (PAF) is an umbrella fund, which mobilizes resources available from the government and donor communities for launching poverty reduction programs in a coordinated manner.

"We have been moving in the right direction since the opening up of the economy in the nineties," said Dr. Shanker Sharma, member of the National Planning Commission. "But we need to focus on effectiveness of the development programs, good governance and people's participation to actually reach the poor."

The government has recently prepared an Interim Poverty Reduction Strategy Paper (I/PRSP), which provides a more focused and comprehensive framework for poverty than the plan. The paper emphasizes that the government should consider the impact on poverty when it prioritizes development projects.

According to officials, the major objective of the I/PRSP is to formulate a three-year, time-bound action plan for poverty reduction in Nepal. Its major features include employment creation, macro-economic policies for supporting poverty reduction, priority in public expenditure to social sectors.

The strategies proposed by the I/PRSP include macro-economic framework, broad-based economic growth, social sector development, targeted programs and employment generation, improved public expenditure management, governance, poverty assessment and monitoring.

Of late, the donor agencies are also coming up to assist the government in its initiative to prepare strategies for reducing the poverty. The Asian Development Bank (ADB) has also prepared a draft country strategy for poverty reduction in Nepal. It has identified constraints on the poverty reeducation efforts in Nepal including weak legal and regulatory functions, weak overall institutional capacity on the part of government, weak redistribute capacity to the government and weak implementation of the Agriculture Perspective Plan.

"If poverty incidence is to be reduced in Nepal, it will be private-sector initiative and productive activity on the part of the poor themselves, within the context of a just and civil society that must achieve this. What is missing in the poverty-reduction strategy equation in many developing countries is societal institutions that allow the poor to release themselves from their poverty. In most cases, such institutions have yet to emerge in Nepal," says the ADB strategy paper.

The World Development Report 2000/01 entitled "Attacking Poverty" published by the World Bank says that poverty amid plenty is the world's greatest challenge. To meet this challenge, the Bank has recommended action in three areas, namely promoting economic opportunities for the poor, facilitating empowerment by making state institutions more accountable and responsive to poor people, and enhancing social security.

Analysts say Nepal needs to shift from centrally planned and managed development model to a paradigm that would support and enhance self-help efforts at the local level to reduce poverty. After the restoration of democracy in 1990, the number of non-governmental organizations (NGOs) is estimated to have grown to more than 20,000. Though majority of them are concentrated in the central development region, nearly half of them are working in the community development

Similarly, there are now an estimated 20,000 community based organizations (CBOs) involved in managing community irrigation systems alone in Nepal, says a study on rural hills potentials and service delivery systems prepared by SAPPROS Nepal, a think tank, early this year. The formal forest user groups manage about one-fourth of the forests in the hills whereas a significant forest area is being managed by the informal CBOs. Besides, the communities through their own CBOs build most of the rural infrastructure works such as roads, trails, suspension bridges, and drinking water.

Even misplaced donor support has made the matter complicated rather than help reduce poverty in Nepal. Despite huge investment of almost 66 billion rupees in the irrigation sector, due to poor quality infrastructure, the impact on agricultural production is minimum, say studies "The pouring of resources alone cannot reduce poverty and cause growth as is amply demonstrated by interventions in Rapti and Karnali zones by some donors over a long period of time," said the SAPPROS report. "What is really required is improved institutional performance through people's involvement in development and with holistic intervention on the part of both donors and the government."

That is easier said than done. Amid political instability, growing corruption, rising insurgency and lack of opportunities to lead a life with dignity, people like Chandra Bahadur Oli of Rolpa will continue to flee their houses for some more time to come. But this trend must be discouraged and addressed immediately to save thousands of Nepali families from disintegrating further and mobilizing whatever assets they have in national development -- sooner than later.

Reducing Poverty: Experiences From Far and Near

China achieved poverty reduction through sustained and rapid growth and integration with the world markets. In South and South East Asia, agricultural dynamism spurred economic miracles based on manufacturing. According to a World Bank study, the Indian state of West Bengal reduced poverty at the rate of 4.2 percent per year between 1978 and 1994 under Chief Minister Jyoti Basu government. Mr. Basu introduced land reforms in the form of Operation Bargara, registering and giving permanent tenancy rights to sharecroppers. Studies say this had had a significant impact on agricultural productivity. More important was the spread of rural electrification and Green Revolution technology. The Communist leader broke the monopoly of state-owned electricity utility and invited RP Goenka's CESC as the prime supplier of electricity. Though Basu failed to industrialize his state due to his patronizing of unruly trade unions at the cost of businesses, his achievement in reducing poverty is unparalleled in India.

`We Will Start From Redefining The Role Of The Govt.'

- Dr. Shanker Sharma

Member of National Planning Commission, DR. SHANKER SHARMA, is actively involved in formulating the Poverty Reduction Strategy Paper. He spoke to SPOTLIGHT on the related issues:

Why is the government preparing the Poverty Reduction Strategy Paper? When will it be finalized?

Poverty reduction is a major agenda both for the government and donors. In the Interim Poverty Reduction Strategy Paper (I/PRSP) we are identifying areas on which to focus on, prioritize, allocation of budget and the role of donors etc. We are almost at the final stage and it will be submitted to the board meeting of the International Monetary Fund (IMF) in June this year after our cabinet approves it.

What were the shortcomings in the previous programs that targeted at poverty alleviation?

The policies we have adopted and direction we have taken since the early nineties is not wrong. The main shortcoming was that we did not prioritize programs in the poverty related areas and the resources were thinly spread. At the same time, there was no clarity on the job to be done by the government and other actors. So, we want to start from redefining the role of the government so as to focus on prioritizing the poverty related programs. Earlier, we gave more focus on providing inputs, now we will be focusing on monitoring the output. We will be regularly monitoring the progress made toward alleviating poverty in every five years. In between, we will conduct studies, surveys and mapping etc.

So, how will the new strategy be implemented?

Some components of the strategy are being introduced right from this fiscal year and the PRSP will be implemented from the next year's annual budget. As the time frame of the PRSP will be three years and that of the Tenth Plan five years, we are planning to merge both of them. It will be more clear than the Ninth Plan and there will be detailed programs for each area.

Why is it that poverty could not be reduced over so many years?

First, the growth rate of agriculture in the 1990s has been 2.5 percent on an average. Second, we could not enforce the concept of public resource management in the poverty related areas. Third, the monitoring of the poverty targeted programs was very weak. To sum up, such programs did not reach to the hard-core poor and the waste of resources was quite high.

What will be the role of the government now?

At present, the government is making huge investment in the hydropower, communications etc. Once the private sector is encouraged to invest in these areas, the government will have more resources at its disposal to invest in the poverty related programs. The government will function with the objective of attaining the high pro-poor growth.

Will there be more focus on generating employment opportunities?

We need to expand labor intensive employment opportunities targeting the pro-poor economic growth. Under the targeted programs, self employment needs to be focused. Similarly, there will be programs to provide value added training to those who want to go abroad to work as laborers. We have launched micro enterprises development programs in 10 districts with a view that all of the trainees be absorbed in the market.

How important is political stability?

Political stability is essential to effectively implement poverty related programs. At the same time, the ownership of such programs should be taken by concerned ministries which is quite weak right now. n

' Civil and social order are fundamental for sustainable poverty reduction'

DR. RICHARD VOKES

One of the leading donors of Nepal, the Asian Development Bank is currently working on preparing its country strategy for Poverty Reduction Strategy in Nepal. Of late, the ADB has given top emphasis on reducing poverty among its developing member countries. Resident Representative of the Manila-based Bank in Kathmandu, DR. RICHARD VOKES is actively engaged in these areas for quite some time now. He found some time to speak to SPOTLIGHT early this week on the related issues. Excerpts:

How do you see the current state of poverty in Nepal?

The response to this question should be seen in the context of Nepalís current situation with respect to poverty, summarized as follows:

First, while the country's current overall level of poverty incidence is 42 percent, this aggregate statistic hides wide disparities in poverty incidence, intensity, and severity that appear when comparisons are made on the basis of geographic region, rural vs. urban areas, gender, caste, or ethnicity. Second, relative to the overall population, women, lower-caste groups, marginalized ethnic minorities, and some groups of landless persons face poverty that is particularly resistant to 'traditional' poverty-reduction interventions, since it is driven by social exclusion reinforced by long-standing custom. Third, poverty in Nepal is intimately intertwined with lack of access to the very resources necessary for escaping it---as reflected in Nepal's current low ranking with regard to human development indicators, even when other South Asian countries are used as comparators.

Fourth, ADB's Poverty Assessment recently completed for Nepal suggests that poverty incidence, intensity and severity have not improved over the past quarter century.

What are the areas of focus in ADB's poverty reduction strategy?

ADB's strategy for poverty reduction will be consistent with the Government's Interim Poverty Reduction Strategy, and will lead to a Partnership Agreement for Poverty Reduction between the Government and ADB. The strategy aims at (i) reducing the incidence of poverty, (ii) reducing the degree of social exclusion facing women and disadvantaged groups; and (iii) reducing disparities in income over time. ADB's approach to sustainable poverty reduction in Nepal is through (i) broad-based and pro-poor economic growth, (ii) improvements in basic social services for human development, and (iii) good governance. All of this requires that Nepal develop effective institutions. Unfortunately, at the moment, many institutions in Nepal lack efficiency, predictability, transparency, and accountability--- all which are critical to their effectiveness.

With respect to the sectors in which ADB will apply its strategy, they are agriculture, irrigation, roads, power, finance, education, water supply and sanitation, and environmental improvement.

What are the main hurdles to alleviating poverty in Nepal?

Among the main hurdles to alleviating poverty in Nepal, and perhaps a reason for the slow progress in this area, despite considerable donor support, are (i) the lack of supportive enabling environment for pro-poor economic growth, (ii) weak redistributive capacity on the part of Government; (iii) weak institutional capacity of the Government; (iii) inequality of access to the resources necessary to fully participate in the development process owing to social exclusion on the basis of gender, ethnicity, caste, and religion; and (iii) slow overall economic growth in the face of relatively rapid population growth.

Conditions to support broad-based economic growth include appropriate legal and regulatory functions to ensure a stable, predictable environment for private-sector initiative and to discourage rent-seeking behavior. In the context of Nepal, legal and regulatory functions need to be strengthened for various poverty-reducing reforms, policies, and programs to achieve their intended impact.

Weak redistributive capacity refers in part to the Government's (i) inability to prioritize expenditures to key social sectors, and among projects ---- so as to maximize development impact on poverty; and (ii) low internal revenue generation --- suggesting the importance of tax reform and its effective implementation. Weak institutional capacity of the Government has contributed to inefficient use of both donor and Government resources for development.

Key to poverty reduction in Nepal are Government programs and policies that assist poor households to raise their income levels, which in turn requires increasing poor households' access to critical resources including economic resources (such as land and capital), human development resources (such as education and health), and social resources (such as political influence).

In rural areas of Nepal dependent on subsistence agriculture, improvements in agricultural productivity and output growth may rely more on the provision of physical and social infrastructure (e.g., basic health services, educational facilities, safe drinking water, irrigation facilities, microcredit, and roads). This suggests poverty-reduction interventions that increase access to basic services necessary for increasing agricultural productivity, or programs directly targeting the most disadvantaged groups among the rural poor, may be more effective in reducing poverty incidence.

Finally, if poverty is to be reduced in Nepal, private-sector initiative and productive activity on the part of the poor themselves, within the context of a just and civil society, are critical. There simply is not enough money in Government coffers or donor-agency budgets for income transfers to achieve this goal. A main hurdle, therefore, is societal institutions that allow the poor to release themselves from their poverty.

Will the deterioration of law and order affect the poverty reduction programs in the country?

Yes. Civil and social order are fundamental for effective development efforts and sustainable poverty reduction, as violence targeted at Government and local communities hinders delivery of basic services and operations of businesses in these mostly poorer parts of the country.

Is ADB satisfied with the manner in which its programs are being implemented in Nepal?

The performance of ADB's portfolio of loan projects/programs in Nepal has improved over the last 4-5 years. Overall, the performance can be said to be satisfactory. Contract awards and disbursement performance has improved. The problem of frequent transfers of project staff is now much less of a problem that it was a few years ago. However, the sustainability of projects after the period of major funding has ended remains a concern. We are also concerned about the poor quality of civil works in a number of projects. This is particularly a problem for civil works in more remote areas and points to the need for better project management and monitoring of implementation performance both by the Executing Agencies and other relevant HMG/N agencies, such as the National Planning Commission (NPC). There is also a need for stronger monitoring by HMG/N of the impact of projects so that, where necessary, adjustment can be made to the project design, scope and implementation, to ensure that projects do achieve their intended benefits.