“Remittances Have Transformed Not Only The Urban But Rural Areas As Well”
SULTAN HAFEEZ RAHMAN
Asian Development Bank’s country director to Nepal SULTAN HAFEEZ RAHMAN has been in Nepal for about two years. Rahman addressed press at the year-end interaction to review ADB’s overall activities in Nepal. Excerpts:
ADB’s Activities
ADB’s support for Nepal’s reform and poverty reduction agenda will continue in view of widespread poverty and vulnerability in the country. However, we will remain very cautious going forward to ensure that our assistance is delivered effectively and safely. ADB will continue to work close partnership with all development partners of Nepal. Despite a difficult political and security situation, ADB has intensified its monitoring and assessments of portfolio performance. Contract award ratio, disbursement ratio and net resources transfer are the key measures to gauge portfolio performance. The decline in these indicators over the past five years has been reversed due to our results oriented approach. Political instability, frequent changes of government and resulting transfer of senior government officials and project staff, and slow decision making in the government were the key factors contributing to poor portfolio performance. ADB’s assessments show that impacts of the security situation on project implementation are less than these factors. Weak institutional capacity of executing and implementing agencies and a slowdown in decision making, especially on procurement and policy reforms are major constraints to achieving better development results.
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ADB is dedicated to reducing poverty in the Asia Pacific region through pro-poor sustainable economic growth, social development and good governance. Established in 1966, it is owned by 64 members with 46 from the region. In 2004, it approved loans and technical assistance worth US$ 5.3 billion and US$196 million respectively.
On overall economic situation
This year’s economic outlook has somehow deteriorated as agriculture has not performed well. It might be due to late monsoon and untimely rain. We don’t have total assessment yet. But its impact will be on overall GDP growth. We are also concerned about the manufacturing sector as it continues to suffer. Though the tourism industry rebounded somewhat, it is not in line with what was expected. We feel that the overall GDP growth will be going to be somewhat better than the last year. If there is some recovery in second agricultural and development expenditure picks up - as they normally do during the second half (of current fiscal year 2005/2006), then we feel that perhaps the growth would be about 3 percent. But not more than that. The inflation, as you know, has significantly increased. Purchasing power in all areas will be affected. The policy makers of Nepal should be very mindful about this.
On Remittances
We think that this is something that is sustainable and very important resources for Nepal’s development. It has in a very significant way transformed not only the urban but rural areas as well. The construction activities we have seen throughout this last four or five years have sustained growth. Strong growth in construction activities is very broad based. It is a very positive sign. It (remittances) will play very significant role in Nepal not only maintaining the macro-economic situation in Nepal at very difficult time when small shocks could have destabilized the economy but also contributing to poverty alleviation. The reason we feel that it will be sustained is that due to the conflict a lot of people want to leave the country. It is not a happy story from their point of views. The other side of this is that there will be direct growth of remittances. My sense is that apart from supply side factor, global economy will continue to recover from growth in the US economy; Japanese economy is rebounding and so are a lot of economies around the world. Southeast Asia continues to grow and South Asia will have higher growth. As Indian economy continues to grow, it will have direct link with the Nepalese economy. It will have significant impacts for the remittances to continue to grow.
On Melamchi
The integrity division of the bank had launched an investigation to look at whether our anti-corruption laws have been violated, whether our procurement guidelines have been violated, or whether the provisions of loan agreement is violated. We were encouraged that we had absolutely no problem. Since the case of Melamchi is in court, it will be sub judice in the apex court. Therefore, I am unable to comment. It is completely inappropriate to comment on the legal side of Melamchi. We have to wait for the Supreme Court to come out with its ruling. Then, we will have to see how to move on the ruling of the court. We have never suspended assistance to the project. I want to make it absolutely clear what has happened is that essentially we had to wait initially because there was a case and investigation to be completed. After the completion of investigation, the Norwegian partner withdrew from funding the Melamchi project. There are some concerns about other funding as well. In this situation, ADB has to review our part of guidelines. When there is a funding gap of this magnitude, we have to go back and review to see whether this project can continue to be implemented or not as effectively as we have agreed and intended. This process is still on going as it is very complex process. We have to wait for the technical people along with the donors as there are seven donors involved.
On Aid Policy Post February 1
As a multilateral development organization, we remain focused on poverty reduction packages. We remain focused on our mandate to Nepal, which is to try to alleviate the poverty in the country, to try to help economic growth, to try to help generate employment and raise the living standard of the people. This basic policy has not changed.
On ADB Projects
As you probably know that last year we had approved almost US$120 million worth of assistance and that assistance is still coming on stream. All of that assistance is fully effective. So our concern has been to take a lot of efforts into building right kinds of processes and capacities. This is something that has not been completed but we have made major progress. We hope that the situation will permit us in 2006 having put all these process and system in place. We remain very conscious on conflict. Whatever projects we take, we have to undertake conflict assessment. We have to see that the outcome will be there and we have to make sure that we have been addressing the conflict as we should. We have to be in touch with the other donor partners of Nepal. Only then, we can move together.
On MDGs
There are international pressures at work as they do not pertain only to Nepal but to all developing countries. Following the millennium summit in 2000, international community has held some very high level meetings in Rome and other places. The successive high-level forums have been held in Paris essentially urging that the effectiveness of development assistance must improve. The international community reiterates itself to the achievement of the MDGs and that the international communities wish much greater harmonization between the development partners and between the governments and development partners. There should not be duplication in procedures of assistance and institutions that we are to use. We are trying to become much more efficient in the way we process and implement the assistance package.
Effect of Ceasefire
Ceasefire has definitely help the implementation of our projects in Nepal. It also helps to improve the international environment as well. But most importantly, ADB has doubled its development aid to Nepal this year and the ceasefire has contributed greatly to that. Therefore, around 44 million dollars were made available this year. The government can continue to show the performance especially at the local level. Ceasefire creates conducive environment to the development agencies to implement the programs. Any continuity of this ceasefire is something that is going to benefit Nepalese development efforts.
On Governance Reform
Our governance reform program was launched with an aim that the government has to take certain reform actions to be able to have access to the resources we have been providing. This program has been out of track and it is behind schedule by more than two years now. This governance program is focused on the civil service helping to create more effective and efficient bureaucracy. The reason behind its focus on civil service is that we felt civil service needed to be efficient to better utilize our assistance.
