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COVER STORY |
NDF-2002
PRE-CONSULTATION MEETING Ignoring geographical,
geo-strategic and cultural factors, the three-day National Development Forum 2002
Pre-Consultation Meeting ended by recommending a mantra: better coordination between
donors and the government. The gathering of politicians, civil society representatives,
former bureaucrats and donors, however, found little time to discuss the reasons behind
the endemic political instability through which Nepal's 50-year-long development process
has traversed. As long as the real issues are swept under the carpet, donors, government
officials and intellectuals will continue to debate the slow pace of development to little
avail. By KESHAB POUDEL A culture of seeking quick fixes seems to
have gripped Nepal's development debate. Government officials and donor representatives
try to find answers to complicated matters ranging from institutional building to bringing
new laws to curb corruption in short discussions. Nepalese officials usually accept the
terms and conditions proposed by the donors without giving a second thought about their
own institutional capability. Nepalese are easily convinced in every matter. When it comes
to implementation, though, they have their own way. In terms of geography, geo-strategy and
culture, Nepal has its own advantages and disadvantages. In his seminal work "Nepal:
Growth of A Nation", Ludwig F. Stiller, S.J. writes: "The Nepalese nation was
born against improbable odds. In the most difficult terrain imaginable, the Nepalese
achieved unity and then withstood the British threat to rule all South Asia. Today,
landlocked and hedged in by great powers, the Nepalese still proudly assert their
independence in the family of nations. At home their chief concern is development."
Geographically, the country is
divided in extremes. The land enfolds almost every type of terrain and climate from sub
tropical low land to Himalayan peaks. Geo-strategically the country is sandwiched between
two major Asian powers India in south and People Republic of China. "The land in
which the Nepalese have built their nation is a rugged rectangle, tip-tilted slightly to
the narrowest and balanced precariously between the great plateau of Central Asia and the
Indian subcontinent," said Stiller. In terms of culture and the religion, the
people of Nepal believe in two extreme ideologies. They revere Goddess Durga by
sacrificing goats and buffaloes and worship Lord Vishnu, Shiva and Buddha, who oppose
sacrifice, with equal ease. More importantly, the country does not have
a colonial legacy. It remained closed for centuries practicing its own indigenous systems
of governance where people used to say "Hukum ko jawaf chaina (A decree brooks no
questions). Nepal's modernization process, primarily centered on building institutions,
began following the overthrow of the 104-year-old Rana regime in 1951. Modern institutions
and practices are relatively new to the kingdom. Background of the Event
In such a hostile setting, Nepal's
development process has come to be defined by its search for funds to alleviate poverty.
According to the concept paper of the Tenth Plan, poverty is widespread. In 1999, about 38
percent of the population lived below the poverty line. The Nepal Living Standard
Survey-1996 conducted by the Central Bureau of Statistics, however, puts the incidence of
poverty at 42 percent. Large segments of the people are hardcore poor barely eking out
subsistence living on fragile, vulnerable ecosystems and large areas of the country lack
even the most basic structures, the report says. The World Bank, Ministry of Finance and
National Planning Commission organized a three-day consultation meeting ahead of the Nepal
Development Forum (NDF) to evaluate the lapses in development, failure to address the
problems of poor and under-privileged groups and other development issues. What is NDF? The NDF is a consortium of representative
governments, international financial institutions, United Nations agencies and regional
blocs to support Nepal's development activities. About 70 percent of Nepal's development
budget is financed by external assistance. The NDF provides over 80 percent of the total
foreign aid inflow.
"Although the assistance is
always tied up with Nepal's reform programs, the meeting attended by the representatives
of various countries and international agencies will help to debate the lapses in program
implementation," said prominent economist Bishwambher Pyakuryal. In the last meeting,
held in Paris nearly two years ago, Nepal requested US$2.1 billion. It received pledges
amounting to $1.25 billion. Experts complain there are lapses within
the NDF. The NDF meetings in 1996 and 2000, too, discussed similar issues and ended with a
range of recommendations. But this is the first time the public's opinion was sought at
the preparatory meeting. "This is a good beginning, which will encourage transparency
in the process of disbursing foreign aid," said Dr. Dilli Raj Khanal, a member of
parliament. "The government and donors have clearly put their constraints and
difficulties at the meeting so that program implementation will not have face flaws." Although the NDF meeting on foreign aid
policy was very crucial in the Nepalese context, only a couple of government secretaries
attended. Most of the top bureaucrats responsible for supervising and following up on
programs were absent. Donors' Point of View Donors emphasized the need to ensure proper
utilization of aid money, foster speedy development and promote good governance, among
other things. Nepalese intellectuals and experts, however, accused both the donors and the
government of failing to handle the challenges of development. The government was left
answering probing questions raised by the donors and Nepalese experts.
Cornered by this barrage of
criticism, the government finally agreed to make compromises, to the extent of yielding
its constitutional right to govern the country. If slow speed of development were the only
internal challenge of governance in Nepal, the existing acts and system would have been
adequate to deal with it. In 50 years, Nepal has developed workable institutions of the
executive, judiciary and legislature and established basic institution of rural
development at the grass roots. The rural institutions are so strong that they emerged
unscathed from the political tremors of 1990 that rocked the capital. "There is ample room to improve the
situation at the implementation level," said Dr. Shankar Sharma, a member of the
National Planning Commission. "We also want full utilization of foreign aid with an
objective to reduce the level of poverty." Be it the issue of decentralization, public
expenditure management or poverty alleviation, donors demand improvements in the quality
of governance. They also press for reforms in the civil service and new laws to root out
corruption. "When the environment in government
offices is not conducive for those working there, how can one ask for good
governance," said Chief Secretary Tirtha Man Shakya, the country's seniormost
bureaucrat. "There is an urgent need for governance in our offices. In a relatively
new atmosphere, Nepalese civil servants have been working hard amid low salaries and
benefit." Against so many odds, Nepal has made some
progress in developing infrastructures. Thanks to sustained contributions from the donor
agencies and friendly countries, Nepal has made progress in such areas as roads, health,
education, judiciary, legislature, bureaucracy and local government. Had Nepal fully
utilized the opportunities and resources available, the situation would have been much
different. "Nepal invited foreign aid as an
instrument of financing development activities from the mid-1950s when it launched the
first five-year development plan (1956-1961)," said Finance Secretary Bimal Prasad
Koirala, presenting a paper on Foreign Aid Policy. "In terms of sectional
distribution, agriculture, forestry and fisheries have received the largest share of
foreign aid, followed by energy, transport, health, social development and human resources
development." However, there is a strong group of people,
led by former ministers and bureaucrats, who see the last five decades as a symbol of
failed development. Former finance minister Dr. Devendra Raj Pandey, who guided the team
formed to review donor performance and practices, has published a book starkly titled
"Failed Development". The review team, composed of economists,
development experts and media specialists, discussed development practices with
stakeholders like media professionals, former bureaucrats, politicians and member of civil
society and prepared reports. Any report is as good as the inputs it
embodies. Recommendations drawn up by ignoring vital realities of Nepal, can hardly be
expected to prescribe the correct medicine. There is a growing view that Nepal's
institutions suffer from inefficiency and incapability rather than corruption. If donors
forced the government to bring a new anti-corruption act, there is a feeling it could be
used for political purposes. Those belonging to this school of thought believe donors have
to force the government to be transparent and open. In his book "The Scandal and Shame:
Poverty and Underdevelopment", Bertrand Schenieder, a former French diplomat,
economist and sociologist, pointed out the failure of donor-driven development policies.
He portrays the World Bank as a typical case of misguidance and stressed instances of
costly disorder in United Nations agencies. "Because of wrong diagnosis, the
debate over the development model and utilization of foreign aid is often mired by an
overdose of prescriptions," said an analyst closely following the NDF process.
"On the other hand, the kind of reactions we are seeing also prove that Nepalis seem
to be very ungrateful to the donor community." The donors' report itself speaks of the
reasons behind the slow pace of development. "Destabilizing political and economic
events frequently impeded development progress in 1980s," according to USAID's
"Half-a-Century of Development: The History of US Assistance to Nepal". The
World Bank's Nepal 2000 economic update adds: "Nepal also made a major transition
from absolute monarchy to a democratic government in 1991. However, this momentum slowed
down markedly in the last five to six years, largely due to political instability. Between
1994 and early 2000, there have been nine different governments (including six
coalitions), and notwithstanding strong declarations of intent, there has been no coherent
overall drive to promote economic development." The extreme wave of opinions against
Nepal's five-decade-old development process pre-empted a much-needed debate on ways of
improving the situation. One cannot evaluate the existing process of development and
future course by ignoring Nepal's geographic and strategic compulsions and constraints.
Besides, Nepal, a country with no colonial legacy where modern infrastructure was
virtually non-existent until the 1950, has had to build institutions from scratch. Following the restoration of democracy in
1990, Nepal continues to struggle to establish modern institutions. It has encouraged the
private sector to participate in economic activities and privatized well-built public
enterprises. In the name of reform, Nepal is often dismantling institutions it built over
the previous decades. Achievements in 50 years Fifty years ago, Nepal's overall scenario
defies imagination. There were virtually no roads. One had to pass through India to go
from one Nepalese town to another in the Terai. The country had an abysmally low
per-capita income and a single-digit literacy rate. "The most characteristic fact is the
total lack of a transport system in the greater part of the country," wrote Toni
Hagen, in his book "Observations on Certain Aspects of Economic and Social
Development Problems in Nepal" in 1959. "Only the Terai belt and the Kathmandu
valley have a few roads that can be used by cars. The whole of the midlands is covered by
trails. These are too bad for use even by the small mountain ponies. Bridges are non
existent. Thus, during the rainy season wide valleys are entirely cut off from the rest of
the country and the rest of the world. The writer attended the historic occasion of the
arrival of the first bullock cart in Pokhara in 1953. The cart was brought by aircraft
from Bhairahawa." According to "Half-a-Century of
Development", in 1951 the literacy rate was 2 percent. The country's 321 primary
schools had an enrollment rate of less than 1 percent (8,500 students). There were 11
secondary schools, two colleges, and 300 graduates. Nepalis had a life expectancy of 28
years, and the country had 376 km of roads and installed power capacity of 6,280. The
inauguration of Tribhuvan Rajpath in 1956 took the total road length to 624 km. In 1960,
Nepalis had a per capita income US$30. In 1952, five village development centers were set
up in Kathmandu. The development process has been slow, but
it has brought perceptible changes for Nepalis. In 1961, 55 village development centers
covered 38,000 villages. In 1961, the country had a population of 9,413,000, with six
towns comprising 10,000 people or more. There were 160 doctors, 34 hospitals, 24 heath
posts and 4,001 primary schools. Primary enrolment was 15.8 percent (182,000 students.
There were 368 secondary schools where six percent of the population of school-going age
were enrolled. Nepal had 33 college. In 1981, the total population was 15 million, with
eight percent living in urban areas. The population growth rate was 2.7 percent. The
country had 487 doctors, 73 hospitals and 53 health posts. About 46 percent of the
population were served by a healthy facility. Nepal had built 5,021 km of roads and the
literacy rate reached 21 percent. Primary school enrolment was 88 percent and secondary
school enrolment was 22 percent. Fifteen out of every 1, 000 people had access to radio. "It can be concluded that 10 or 12
percent of the population have a yearly income of fifty Indian rupees per year. A family
may thus have a net cash income of about forty Indian rupees per year from the sale of its
agricultural products only," wrote Hagen. Official figures for 1951 show Nepal
recorded exports of 14.2 million rupees and imports of 9.3 million rupees. "The bulk
of the cash income has resulted from the services of the famous Gurkhas as soldiers in the
British and Indian armies. In all, military pay to Gurkha soldiers amounts to about 14 to
18 million rupees a year," Hagen wrote. Compulsion or Vulnerability Nepal has had to postpone many projects
because of geo-strategic compulsions. The Mahendranagar-Banke portion of the East-West
Highway was delayed for more than year because of regional security sensitivities. The
Kankai multi-purpose project was delayed, while the B.P. Rajmarg linking Dhulikhel with
Bardibas started after a 35-year suspension. The United States suspended its aid to the
education sector. Despite continual efforts, Nepal has been unable to develop any major
hydroelectric project and irrigation project over the last five decade largely because of
political or security factors out of its control. In their five decades of foreign-aided
development, Nepalis also learnt skills and knowledge and imported new technologies. In
the agricultural sector, despite low production, farmers are in a position to grow a
variety of vegetables and high-yield rice, potato and wheat. Dairy farming has picked up. Bringing changes in the hill areas is
perhaps the most challenging task. As people live in scattered areas near the top of
mountains and hold land at the bottom, providing drinking water and electricity proves
very expensive. The government is not in a position to change the habitation of the rural
population. Nor can it offer basic needs to these people. In such difficult terrain, the
challenge of development needs to be defined within country-specific parameters. A
purposeful development debate cannot progress without acknowledging the fact that
geography is one of the major obstacles. The concept paper of the Tenth Plan has
shown some different pictures. Human development indicators have improved remarkably
during the last decade, but the current situation is still characterized by low levels of
social development. The infant mortality ratio is still high. Similarly, adult literacy
rate is about 52 percent and net primary school enrolment is about 71 percent. The level
of social development in Nepal is low even by South Asian standards. Lower level of social development and
differences in human development indices among different geographical regions and
socio-economic groups have had a severe impact on the existing inequalities in the
country. "Of course, we were unable to achieve
set objectives, but I see changes thanks to the support of donors," said Finance
Minister Dr. Ram Sharan Mahat. "The existing trend shows that there is no reason to
be pessimist." Insurgencies Nepal continues to face one violent
insurgency after another. The experience of the last five decades shows that economic
disparities are not the single factor behind an insurgency. Ever since the overthrow of
the Rana regime, Nepal has seen four major insurgencies and a couple of small ones. The
ongoing Maoist violence is the major one in terms of loss of human life, resources and
infrastructures. If the Maoist violence had not erupted, the
country would have spent a lot of money in development. Even in such a hostile atmosphere,
Nepal held three national elections and two local elections in the last 12 years. Because
of the Maoist insurgency, development activities in most of the remote areas are at a
standstill. If this situation continues, the country will have to suffer a lot. Over the past three decades, international
donors have been the main financiers of development in Nepal. Because of donors' sustained
initiatives, Nepal has seen significant progress in literacy, infant mortality rates,
access to safe drinking water, road and power, among other areas. At this point in history, the government
has been struggling to maintain its institutional identity. There is a vacuum of
leadership in most institutions. The executive has been facing challenges from the
institutions. Although Nepal has a fully democratic constitution, which envisages strong
pillars of governance, institutions are defining their own roles. Violating the principle
of separation of powers, parliamentary committees are giving orders to the government.
Parliamentary committees set up with a specific mandate are dealing with national issues. A parliamentary committee consisting of two
dozen members is making efforts to control the government elected by the majority of the
House of Representatives. The judiciary, on the other hand, is unable to take appropriate
decision on many issues. All this has raised new questions of credibility. Because of ignorance about their roles and
authority, state institutions are in a battle to prove their supremacy. "There is a
collective view among various stakeholders that there is a need for renewed and more
focussed approach in the development efforts in Nepal, and a more widely owned, inclusive,
implementation of national priorities," the Norwegian ambassador said in her paper. There is a strong feeling that donors are
not transparent and their reporting and accountability mechanisms are mainly focused on
their headquarters' requirements, rarely on the need to inform and also be accountable to
Nepali public. The legacy of the Rana regime was a static,
highly centralized government administration whose functions were primarily confined to
maintaining law and order and collecting taxes, a subsistence economy overwhelmingly
dependent on agriculture and controlled by large landowners preoccupied with maintaining the status quo, and a
near-total lack of physical infrastructure, including roads, telecommunications, hospitals
and schools. Nepal's development problems were not a
matter of reconstruction but formulating the basic structure of a pre-industrial economy:
Increased food production, elimination of disease, education for all, roads and land
reform. The development programs are frequently
paralyzed by political turmoil within the government. As Hugh Wood (University of Oregon
educator under contract to USOM, 1954-1958) pointed out in 1987, "The existing
administrative system of Nepal was not geared for economic development activities." Nepal is heavily dependent on donor
assistance because of the extent of poverty, few internal resources, huge needs and the
low level of national and local revenues. Cultural and religious factors are responsible
for slow utilization of the foreign aid. Nepalese behavior is very much influenced by
religion, which teaches them to follow two extreme ends. Nepalese can easily jump from one
extreme to another. As a feudalism-based society, there is a clear distinction between
people in power and those outside. The individuals are in the process of
developing democratic culture. Few seem to defer to the rule of law as soon as they feel
they are powerful enough to violate it. Everybody wants to run institutions through
decree. In such a situation, public faith in the rule of law is eroding. Individual behavior seems to be motivated
by money or power. "Nepalis demand foreign aid to raise their voice against foreign
aid and in support of the poor," said a political analyst on condition of anonymity.
In the absence of a clear recognition of these ground realities, hardly any forum on
Nepal's development can be expected to produce a purposeful agenda. ‘We Need To Rethink Our Approach To Aid' — BISHWOMBER PYAKURYAL Professor BISHWOMBER
PYAKURYAL is one of the well known economists of Nepal. A former chairman of Nepal
Industrial Development Corporation, Pyakuryal spoke to SPOTLIGHT on various issues related
to the Nepal Development Forum (NDF). Excerpts: How do you view the NDF meet?
There are several issues that need to
be properly addressed, especially when only 32.9 percent of the amount committed by the
donors in Paris in 2000 was actually disbursed. For instance, what were the
conditionalities? Secondly, was this because the donors just did not honour their
commitments. If they did not, there must be some reasons. We need answers. Thirdly, what
were the alternative sources of funding to address the budget deficit. When we fail to get
up to 60 percent of the commitment, we have to have alternatives. After the termination of
the Arun III project, there was a big problem in the hydro-power sector. The government
was not in a position to bring out alternatives measures and country has suffered for a
long time. What lessons should Nepal and the
donor community learn in determining future assistance programs? During the last Nepal Development Forum
meeting in 2000, Nepal demanded 2.1 billion US dollars. Only 1.25 billion dollars was
committed. Nobody knows what has actually been disbursed. It is not that donors do not
want to support Nepal. But we have to keep in mind our own capabilities. Nepal has one of
the lowest aid productivity rates in South Asia. Aid utilization remains low. Nepal agreed
in Paris to increase resource mobilization and improve aid effectiveness through
institutional and policy reforms. This is the reason why an overwhelming majority of
donors endorsed Nepal's reform program. Agriculture, human resources development
(education, health and drinking water), physical infrastructure and tourism are accepted
as the four priority areas. If some changes are made, there needs to be some
justification. This time a medium-term expenditure exercise was done in different sectors.
The country has made a three-year projection on how much resources are available and how
much resources would be collected. Isn't revenue generation the main
problem? Revenue generation was almost 18 percent of
GDP in the first six months of this fiscal year, and now it is just 12 percent. So our
regular expenditure has exceeded government revenue. The economy is in turmoil. The recent
exercise was noteworthy. But the thing is that even after such an exercise, priority
reforms needs justification. We did not see tourism in the recent exercise. In the
national budget, the development budget was cut down by nearly 20 percent. Short-term
resource management should not be based on long-term goal. When the United States suffered
the September 11 terrorism attack, there was a loss of confidence among US consumer. To
increase spending, some additional money was injected to the economy. In a crisis-prone
economy, the trend is to reduce taxes and offer incentives to those on the lower economic
strata for short-term and medium-term benefit. But our government tried to bring all
people in the tax net. We can achieve our economic goals by reducing taxes. By doing so,
we can gain in the longer term. The government should be always conscious about bringing
public expenditure under control and boosting private-sector consumption. If things are
not balanced properly, nothing substantial can happen to the economy. How can a resource-strapped economy
cut taxes? Tax cuts are a means of injecting
additional money into the economy. If demand increases, there will be greater investment.
That means there will be a revenue surplus. We have totally forgotten this part of the
story. The recent mid-term expenditure exercise had a short-term vision. There is no
question what it will do in medium and long term. The eight focused priority programs
included micro-economy and financial restructuring, private sector development, financial
reform, decentralization, civil service reform, aid effectiveness and the role of civil
society. If you further divide these into actions on the ground, you can find 93
reforms to be achieved at three different levels. There are very few long-term initiatives
under the eight priority programs. It is high time for us to evaluate our program. What
has restricted the government from achieving its targets. On what basis we can say to
donors that they have to meet our increased resources requirements? We are talking about
rolling plan, multiple budgetary framework, poverty reduction strategy paper. We are
formulating the tenth plan. The tenth plan's strategy focuses on five years, whereas the
paper presented at the NDF meeting talked about three years. How should the government reorient
its policies? Nepal has to evolve programs over the
short, medium and long terms. The paper presented at the NDF meeting should be linked to
Second UN Forum for Least Developed Countries for 10 years. Nepal was not successful in
complying with those conditions. After making commitments in international fora, we tend
to change priority areas. Sometimes we don't try to link those priority programs
accepted and presented in international forums. The time has now really come to evaluate
the aid priority program. |
Send your feedback to the
editor: spotligh@mos.com.np |
