Nepal's donors who fund non-governmental groups took a week to study the government's new Code of Conduct for NGOs and on Wednesday finally gave their message to the government: withdraw it, or else.

Minister of Women, Children and Social Welfare Durga Shrestha fired back a salvo soon after, warning NGOs to follow the code, or else. Both sides are now set for a major confrontation that could have far-reaching impact on Nepal's rural development and service delivery.

"We want it to be withdrawn and the issue to be revisited because the process through which this so-called Code of Conduct has been prepared, was not a voluntary participatory process of the people directly concerned, that is the essence of our concern," said UN Resident Coordinator Mathhew Kahane who signed a letter to the ministry on behalf of 13 donors. The donors are holding another meeting coordinated by DfID in London on Friday.

Government officials denied that donors had not been consulted. "We sat with them, we corresponded with them and we have included all their suggestions in the document," Sharad Sharma, Member Secretary of the Social Welfare Council, told us.

The fundamental difference between the government and donors seems to be over the very definition of the term "non-governmental organisations". The government believes NGOs are purely for social work and its staff are voluntary. Minister for Women, Children and Social Welfare Durga Shrestha said Wednesday, "Since the job of the social organisations is to serve society, they should have no problem with this code of conduct. Only those who mint money through such organisations are opposing it."

NGOs and their donors define the area of work as being outside the government's ambit and not just limited to social development, but includes human rights, democracy and social activism.

The other difference is over funding itself. The Code of Conduct prohibits NGOs from receiving funds that are part of official foreign aid to Nepal from donors.
The Association of INGOs in Nepal (AIN) has said it will have tough time if the Code of Conduct is implemented. "One of the reasons why we have problem with this code of conduct is that INGOs cannot directly implement programmes; they can do so only through local NGOs but the new code of conduct stops us from doing so," said AIN's president Shibesh Chandra Regmi.

Most bilateral donors currently channel funds earmarked to Nepal to both the government and NGOs.

"The issue of how donors would disagree with the government on the use of funds including employing non-government organisation as implementing partner is a wide one which we deal with normal development discussion," Kahane said.

On 20 September, US Ambassador to Nepal James F Moriarty had written to the Social Welfare Council citing reservations on the provision. 'As one of the primary bilateral donors active in Nepal, the United States is deeply concerned that a proposed code might attempt to limit or control the NGOs' ability to receive funds from donors,' the note said.

He even went on to remind that the Strategic Objective Grant Agreements between Nepal and the US confirm that the USAID acts through international and local NGOs. '.any code of conduct for NGOs (should) not undercut the relationships between the US agencies and the NGOs as set out in the grant agreements to which Nepal is a party,' Moriarty added.

But donors and the NGOs they fund have been criticised for lack of transparency. Says former Auditor General Bishnu Bahadur KC: "The government does not know what comes in through them and how it is spent."

The donors don't say it implicitly, but they interpret the new rule and its timing as part of an effort to curtail civil rights and silence the voice of NGOs, especially those working on human rights. Indeed, the last clause of the four-page Code has a mandatory condition that NGOs function in line with the government's policy and under its mechanism.

Arjun Karki of the NGO Federation doesn't mince his words: "This code of conduct has been introduced to launch crackdown on the civil society movement that has gained momentum in the country." Karki and the Association of INGOs in Nepal also argue that the Code of Conduct can't be legally binding.

Kahane seems to agree: "A Code of Conduct is normally drawn up by those people or institutions that wish to abide and guided by it in a voluntary participatory fashion, Codes of Conduct are not drawn up by another party and then simply promulgated with or without consultation."

The UN Human Rights Commission's Nepal office chief, Ian Martin, had sent a separate response to the draft reminding that it was not for the government to prepare the code of conduct. NGOs working in the field say security forces have been apprehensive of the access they have to rural areas.

Some donors had a tacit agreement with previous governments to work in Maoist affected areas with community organisations, and the Code of Conduct would put a stop to such projects.

The Defense Ministry some three months ago had sent a letter to the Social Welfare Council asking it to make NGOs transparent and committed to needy people. "It was only a coincidence that the code of conduct came out few months after we sent the letter," said the ministry's spokesman Bhupendra Poudel.

"The Code of Conduct is confusing and vague"
Shibesh Chandra Regmi, president of Association of INGOs in Nepal believes that the Code of Conduct will obstruct development. In an interview with Nepali Times, he explains why.

Nepali Times: What's wrong with the government wanting to regulate money coming in through NGOs?
Shibesh Chandra Regmi: Despite the rhetoric about massive consultation as claimed by the Social Welfare Council (SWC) in the preparation of the Code of Conduct there have been protests against it from the international community, various agencies of the UN, donors, civil society, I/NGOs, international community, etc. The Code is confusing and vague, clauses can be interpreted in many different ways. It is not clear whether it is for NGOs or INGOs or both. INGOs can't directly implement programs, they can do so only through local NGOs. But the new rules stops us from doing so. NGOs cannot receive any funds without prior approval of the SWC, even INGOs can't select local partners without consulting the local administration, they cannot assess and report the abuses of human rights no matter from which side. We are not saying that NGOs should be left without any legal framework. What we say is that the Code of Conduct should be seen as a moral document and not a legal one. There already exist many legal instruments in this country on the basis of which action can be taken against any social organisations that do not comply with them.

Are INGOs angry because the new Code prohibits them from using donor funds earmarked for the government?
No. But we are also unhappy on this restriction imposed on NGOs' access to bilateral funds. The reality is that while there are many INGOs that have got their own funding mechanisms which means they bring their resources from outside Nepal, there are many that rely on donors' funds within the country. In any case, who are we to decide about it? Shouldn't the donors have their say about who they should be partnering with?

How about the criticism that INGOs have been using foreign aid meant for Nepalis?

It will be very unfair to criticise the INGOs for this since they only give resources but do not carry back any resources from here. If you had known how hard they work to mobilise the resources nationally and internationally for the poor and excluded people of this country you would not ask this question. Unlike many other aid and grants, the money that INGOs bring is completely non-political, it is simply for development and humanitarian assistance.

As far as the streamlining of the work of social organisations, improving coordination in their work for more sustained results, avoiding duplication, ensuring that programmes reach out to the poorest of the poor are concerned, we all are positive towards it. We clearly see a need for it.

Why should donors and INGOs have problem working through a government mechanism?
Neither donors nor INGOs have any problem working with the government. In fact, because the government has got the largest network in the country as it has a very strong physical presence all the way from village and ward to the national levels, we need to make the best use of this structure. There are many programs that donors and INGOs have been implementing in partnership with government and many sections of the civil society. But again there are so many other factors that one has to look at: the bureaucracy, commitment, transparency, clarity in vision, governance, political stability, legitimacy, urgency, accountability.