Nepali Times
Baffling donors


The Nepal Development Forum (NDF) meeting scheduled for 12-14 May in Kathmandu has been overshadowed by political wrangling over the army. The meeting that used to be held every two years is taking place after five years. And it may still be cancelled at the last minute if donors decide not to participate because of continued political volatility.

As it is, this NDF is geared up to focus more on Nepal's political than economic development. As a pre-requisite to support, donors want a commitment from the Maoist government on its respect for democracy, an open market and right to private property. UNMIN's role, army integration and impunity also figure as conditions for aid.

The government is going ahead with the preparations of the meeting where a consortium of 40 of Nepal's donors will sit and discuss development assistance. The NDF this year has been tagged 'Peace and Socio-Economic Transformation: A Basis for New Nepal' and besides donors, six specially invited import-export banks, mainly from India and China, will also be attending.

Four main policy papers will constitute the basis for deliberations. The first is Nepal's national development strategy for the transitional period rather clandestinely put together by Finance Minister Baburam Bhattarai's small group of trusted aides. Second is a paper on the economic restructuring package for achieving economic transformation in the short term and creating policy bases for state restructuring in the long run.

The third policy paper looks at 'revising' foreign aid policy to 'increase understanding between the government and donors'. The effectiveness of aid and Nepal's absorption capacity for it will be discussed. The fourth is a trade and investment policy that aims to develop Nepal as a preferred destination for foreign direct investment, and aspires to replace foreign aid by foreign trade, encourage investment, both foreign and domestic, mainly under public-private-partnership.

All these issues are not new, and merely rearrange old priorities under different categories. The Maoist-led government which also holds the finance ministry has already infuriated donors by breaking the tradition and not involving them in pre-consultative preparatory meetings. Minister Bhattarai's public remarks labeling them, particularly Bretton Woods institutions, as agents of global imperialism has appalled many of them.

This time, the donors, including the World Bank that coordinated with all other donors, co-hosted and co-chaired the last NDF, will only be asked to support the policies and programs put forth by the government. Further, Minister Bhattarai has predicted that Nepal will not need foreign assistance from 2025 onwards because by then the economy will be self-reliant. The ground reality doesn't support such optimism. To bring down our dependence on foreign assistance of about 47 per cent at present to 5 per cent in 15 years, we must achieve an annual GDP growth rate of at least 11 per cent throughout. For this, the non-agricultural sector should up to 19 per cent, which requires at least 9,000 MW of power supply and environment conducive to rapid industrialisation. It is impossible for all these miracles to transpire in 15 years, which is the normal gestation period of a medium-scale power project.

The donor community is clueless as to what is prompting Bhattarai to make such impossible claims. In one of her NDF-related public remarks, World Bank country director Susan Goldmark warned the government diplomatically to refrain from over-statements. Bhattarai himself may have realised by now that you can't ridicule donors and still ask for donations for controversial projects like his youth self-employment scheme.

For budgetary support, the minister should have first included it as a budgeted program incorporating public accountability. This is one reason the program hangs in limbo.This NDF is taking place in the midst of global financial meltdown, and this will have significant bearing on the scale of donor commitment for the near future. Back home, the Maoists' name itself is still anathema to many in the international community.

The economic policies of the Maoist-led government, announced in bits and pieces, are conceptually vague and at times contradictory. Minister Bhattarai should be first trying to win the confidence of Nepal's development partners. His harsh tone and isolationist methods, even in the run up to the NDF, have made the donor community not only apprehensive but perplexed and exasperated.

Again, the real question is whether we need to be so reclusive about our aid policy, especially when the country is in such a precarious transition. And why pick on donors, as if they alone were to blame for our under-development?

(11 JAN 2013 - 17 JAN 2013)