Nepali Times

There is a cynical view that overseas development aid is a mechanism for taking money from poor tax payers in rich countries and giving it to the rich in poor countries who don’t pay taxes. Like all aphorisms, there is a grain of truth there. But it is also true that a substantial chunk of foreign aid is still recycled back to the donor country in tied-aid contracts, consultants or overheads.

Despite being a darling of the donors and after six decades of foreign aid, Nepal is still near the bottom of the heap in the least developed country category. Foreign aid makes up less than six per cent of GDP and more than half the development expenditure. Although it has helped Nepal make dramatic progress in basic health and education, foreign aid hasn’t helped GDP growth much as donors pulled out of infrastructure in the past decade.

To be sure, foreign aid is a convenient scapegoat to cover up domestic deficiencies. Successive rulers in Kathmandu have been reluctant to admit their share of the blame for the failure of governance and the inability to set our own political house in order. You can’t keep blaming the squalour in your living room on neighbours who share your housing colony.

In the past 15 years, many donors shifted from grants and loans for infrastructure to support poverty-reduction, basic services, democracy, human rights and conflict resolution. Even the World Bank, for instance, pulled out completely from hydropower after the Arun III debacle in 1994.

After the dissolution of the last Constituent Assembly there has been a surprising new assertiveness at the Foreign Ministry, the Ministry of Finance and the National Planning Commission (NPC) about aid priorities. UNDP’s five-year strategic document was delayed last year because it contained terms like ‘exclusion’ and ‘structural discrimination’ that the government found objectionable. Donors have been told bluntly that Nepal would now like aid to concentrate on ‘hard’ sectors like hydropower, roads and irrigation and not on ‘soft’ areas like human rights and inclusion.

Officials say they want development partners to work with it on its own priorities and not unilaterally. The government also wants aid to go through its budget mechanism rather than be disbursed directly to NGOs and INGOs. Officials say they are trying to finally assert the country’s sovereign right about where outsiders can spend money.

Even so, it is clear that the shift is partly a backlash from a conservative political and bureaucratic class against donor support for inclusion and social justice issues. In the corridors of powers, officials privately blame donors for funding political activists and NGOs which support ethnicity-based federalism in the new constitution.

While it is understandable that a sovereign state would want to exercise some control over overseas assistance, Nepal’s governance failure, its inability to meet development expenditure, and the neglect of women, children and marginalised groups means that in practical terms donors will continue to have asymmetric say on where their tax-payer’s money goes.

Nepal’s development partners are frustrated with the lack of progress on the constitution, and are understandably worried that the new statute will not adequately address exclusion and discrimination. Multilateral creditors have also publicly voiced concern about the government’s inability to spend money, and of the corruption when it does. Bilateral donors are dismayed at the lack of accountability, especially at the grassroots level, due to the lack of local elections.

Some donors seem to be needlessly on the defensive when it comes to supporting non-governmental actors working on democracy, human rights and transitional justice. This is not the way to respond to the intolerant streak we detect in the state apparatus since the last elections. It will reverse the gains that have been made in the past seven years in pushing for social justice and an open society.

Read also:

Black day ANURAG ACHARYA

The politics of foreign aid SUNIR PANDEY

Foreign aid or first aid? KHADGA SINGH

Rules of engagement NARESH NEWAR