Nepali Times

Debate about the efficacy of foreign aid in Nepal is as old as foreign aid itself, but often talk about effectiveness of aid doesn’t go beyond a blame game between aid agencies and the government.

Lately, this debate has become more complicated because of the assertiveness shown by the Ministry of Foreign Affairs, the National Planning Commission (NPC), and the Finance Ministry about where aid should go and a new scrutiny of NGOs and INGOs which operate here.

The government wants aid to focus on infrastructure, health, and education and less on human rights, democracy, inclusion, and constitution writing.

Donors have also come under criticism from politicians, civil society, and the media for stoking ethnic tensions by pushing identity-based federalism. Donors, meanwhile, are increasingly bypassing the government to work directly with non-state actors and local delivery agencies. They say they need to do this because the lack of general and local elections has hurt accountability and oversight.

Then there are the usual problems of aid duplication and mismanagement. After the Paris Declaration of 2005, there was hope that ODA to Nepal would be more efficiently managed, but critics say, not much has changed.

“The National Planning Commission is the last to know when projects have already been signed. We are not consulted from the proposal phase on,” complains NPC foreign aid department director, Rabi Sainju.

The NPC’s role has now been restricted to coordinating with individual donors on specific issues, rather than as an institution dealing with aid management. Officials want the Ministry of Finance and NPC to phase out project-based implementation and increase the proportion of aid channelled ‘in cash’ through the national budget.

The problem, however, is that coordination among line ministries is weak and donor financing is done in an ad hoc manner. But old habits die hard and aid agencies also do less to enhance national capacity by being project-driven and focusing on delivering basic services themselves.

Krishna Khanal, professor of political science at Tribhuvan University, says aid agencies haven’t taken much of an initiative in capacity-building of national institutions. He faults the government with weak coordination and creating unnecessary obstacles in implementation, especially by line ministries. “There is a need to improve on local autonomy, but that doesn’t mean donors should be in the business of delivery,” Khanal told Nepali Times.

DDC and VDC offices are still functional, albeit without elected councils and they use the same community networks as the aid agencies while implementing projects in remote villages. “There are rules of engagement for donor agencies and they should stick to it by not implementing their projects directly in the villages,” says Gopal Yogi, senior vice president of the NGO Federation.

For donors, however, the most visible weakness in delivery is the lack of strong local governance in the absence of local elections. There also is no Parliamentary Accounts Committee and the CIAA and the Auditor General’s office have been headless, so there is no oversight at all.

Swiss Ambassador Thomas Gass, who heads the donor group in the Nepal Peace Trust Fund, says: “As long as development cooperation is needed, we also have to assess on a case-by-case basis the implementation capacity of the state agency we plan to work with and how effective it is in the field.”

But he added that the state is not the only provider of services in any country and non-governmental organisations can complement the government’s work as a partner and watchdog to ensure accountability.

“At the moment, there is a vacuum at the local level in terms of local elected bodies and there is no clear direction,” says Dominic O’Neill, head of DFID Nepal program, which is increasing its aid level to GBP 100 million this year. Donors believe that there should be a more accountable interim body and structure at the village and district council level until local elections are held.

There is a clear hesitation among donors to hand over implementation to the government due to political instability, disinterest of politicians in poverty alleviation issues, and the lack of accountability at the local level.