Nepali Times
There is willingness at the top, and at the grassroots. something in between doesn’t work"

Norwegian ambassador to Nepal, Ingrid Ofstad speaks to Nepali Times on the slow pace of development, Norwegian investments in Nepal and on the peace talks.

It's been two and a half years since Norway opened its embassy in Nepal. How have things gone?
What is special about Nepal-Norway cooperation is that it started with people- to-people collaboration, between NGOs and continued as private sector partnership like the Khimti hydropower plant. All this happened before aid came in. It is aid building on the peoples' relationship and private investment and not the other way round, which is usually the case. The reason for establishing the embassy was to strengthen government to government relationship and to widen the cooperation. We came with the interest to collaborate in the social sector. Our support was channelled to education because it was where the government took a more active role.

How effective has the support been?
It's too early to judge, but things aren't moving as fast as we would like. You don't see substantial changes when it comes to primary education in this country. There is a strong move towards decentralisation, which I think is the key. But what is missing is the local ownership of schools, the relationship between the school and the local community.

Do you see some positive signs?
I see positive signs. Because one of the problems with aid is that donors are also not giving the government the right backing, and are taking too much more control themselves. For the government to be responsible we have to be responsible as well. The education project (Basic and Primary Education Project) shows that it is possible for the government to take on that responsibility if it is given the chance. We are all concerned about results, and if results are not coming it is difficult to continue supporting the program.

You are also getting involved in supporting privatisation.
DfID (the British Department for International Development) has been supporting the privatisation project. But it has not been very successful. So we have come in as partner for the second phase. The government, DfID and the government of Norway want it to be different than what it is now.
There are people who want privatisation at the top government level, but there there are many that are against privatisation, and these forces are very strong. Privatisation itself is not a goal, the aim is to get industry running more efficiently. The government subsidises the companies and there are huge losses for the country. Privatisation is a heavy political issue and it has to be resolved politically and by the involved partners. You have to get a consensus from parliament.

Does the saga of the BPC's (Butwal Power Company) hold any lessons?
It is very tragic it has taken such a long time. Neither the Norwegian, nor English investors are so interested anymore. I just hope they will finalise it and not go for a new round of bidding. There is nothing to be gained from that. It you want to privatise you have to make the private sector feel welcome, if they don't feel welcome they go somewhere else, to another country. One can question the political will when it takes such a long time. Norway is a small country and it does not put political pressure. But that does not mean a company with Norwegian link can be rejected twice, without being given a fair chance.

Is linking Norwegian investment with aid projects a strategy, or did it just happen?
It is extremely important that Nepal gets out of donor dependency, Nepal cannot keep on with receiving donor funds for a very long time. It is a part of Norwegian policy to finance some projects now financed with development money through commercial investments especially in large infrastructures. For the social sectors, it is the government's responsibility.

Are there security issues mainly relating to the Maoist insurgency?
I am not sure about what role conflict plays in this. It is a bit difficult to say because there are areas of conflict in the world where we have private investments. But it may be more important for the poverty reduction work in the country. The conflict is not de-linked from private investment, but it is also important to see how conducive government policy is towards the private sector-how bureaucratic and corrupt it is in handling investments. The security situation is a part of that, but our investments are of a long term nature and only in hydropower. Security may be an issue for other industries.

How has your experience with Khimti been, especially with the debate for changing power purchase arrangements?
Khimti was the first large private investment in Nepal and it is always difficult to be the first one, both for the company and for the government. It was quite hard to get the systems moving and to put the things in place. It was also more costly because it was the first project. There was an extra risk to it, it was an investment in a fairly remote area and it is possible to make upcoming investments cheaper. It is very difficult to renegotiate a PPA (Power Purchase Agreement). Because this is the first major project, everybody is looking at what happens, to see if you can trust the government.

It there possibility of more Norwegian investment in hydro?
I think there is. The same company has a license for Khimti-II. But future projects would depend on if it is possible to sell power, either locally or to India. No company will invest if it cannot sell.

What is delaying the Melamchi water supply project?
The difficult part is not technical, the issue is about how you manage it and the price of water in Kathmandu Valley. It is not fair for Nepalis if the government puts too much money into water supply for the people of Kathmandu. The government should not fall into a populist trap, but ensure that people who are able to start paying for water. Unfortunately the project is expensive, it should be done in the cheapest way, which is why we are putting grant money into it. I hope the pricing will be such that also poor people have access to the water, the distribution system should also be improved.

Where do you see Norway's aid programme going in the next 5-10 years?
Nepal will probably remain a priority country. There is a lot to be done when it comes to poverty alleviation, but there is willingness at the top and certainly there is willingness at the grassroots. There is something in between that doesn't work. But Nepal needs development money because there are some things that cannot be done with private capital alone. It is difficult to see from outside what is actually the main problem, some of it may be structural. Some people benefit from the structures remaining in place.

It has become fashionable to question democracy and blame it for everything that is not happening. Do you also share this cynicism?
It is not very constructive to be cynical. Democracy in Nepal is still very young, very fragile and to build multiparty democracy takes time. People that are involved have not been involved too long, not used to being transparent and accountable. Eleven years is a very short time, and the problems are deep rooted-the ethnic, gender, caste issues, etc, it takes much longer to change them. It is more constructive to be supporting the forces of change, and show a willingness to change than to be cynical. What is even more difficult for Nepal is that you have very deep-rooted traditions, parts of the country are very remote while some are very modern.

How do you assess the government's peace talks with the Maoists?
I would like to be very optimistic. It is very positive that at least they say they like to solve the issue in a non-violent way. It will take a long time to get the conflict resolved. They may not agree on a lot of issues, but it is possible to continue disagreeing in a non-violent way. It is quite cowardly to take up violence.

(11 JAN 2013 - 17 JAN 2013)