The World Bank recently approved a soft loan of US$120 million for the government’s Youth Employment Transformation Initiative (YETI) Project. The five-year project aims to benefit 100,000 youths, of which around 60 per cent are women. Of the fund that the Washington, DC-based multilateral lender has agreed to provide, more than half, or around $67 million, is going towards a component called ‘improving labour market outcomes for the vulnerable’. Under this component, the WB is supporting the controversial Prime Minister Employment Programme, which drew widespread criticism last fiscal as the money was haphazardly distributed among supporters of the ruling party. Rupak D Sharma of The Himalayan Times met Faris Hadad-Zervos, the World Bank country manager for Nepal, to discuss whether the YETI Project would actually help create productive job opportunities for Nepalis or support the government’s distributive and populist programme. Excerpts:

YETI Project is separate from the Prime Minister Employment Programme. So it is important not to conflate these two programmes

What is the Youth Employment Transformation Initiative (YETI) Project all about?

Growth, shared prosperity and poverty reduction are prerequisites for sustained development of Nepal. Nepal has set a vision of ‘Prosperous Nepal, Happy Nepalis’, which can only be realised if the country has an ecosystem that can create sustainable job opportunities. So, Nepal needs to have sustainable demand for jobs and sustainable supply of labour. If you look at the WB’s work in Nepal, our focus is on infrastructure and investment climate. One key part of this narrative is having a cadre of well-trained and productive workers, especially young men and women, who can contribute productively to the economy. This is why the YETI Project is very important as it focuses on improving employment services and labour market outcomes. The project also aims to ease Nepal’s transition to the federal system. The project will empower and equip 753 local levels with the ability to identify job opportunities, raise youths’ access to jobs, find out those who need the training, create database on labour market and monitor the progress. Some of the components of the project will help strengthen 753 employment service centres at the local level, which will not only provide job seekers with pathways to employment but find sustainable ways to build capacity so that those youths can self-employ themselves. The project will also build a robust and sustainable employment information system that will continuously track challenges of the labour market, identify solutions, assess progress and manage employment data. So, the whole programme is about building systems and architecture and ensuring transparency.

YETI Project is particularly focusing on strengthening employment service centres in 753 local levels. In a country where jobs are in short supply, how will these centres, which work as a matchmaker between employers and employees, work effectively?

Nepal’s sustainable development storyline requires not just one intervention but a series of interventions. To address current employment challenges, Nepal needs to provide a predictable investment ecosystem for the private sector to thrive. Nepal also needs to build a system that enables the private sector to easily hire well-trained and productive workers. That system should also help workers to easily find jobs based on quality information about employment opportunities and required skills. So, on the demand side of labour, Nepal needs to have a proper investment ecosystem. Nepal needs to quadruple its investment in infrastructure to achieve the middle-income country status and meet the Sustainable Development Goals by 2030. For that, Nepal needs to have a system that not only relies on public finance and financing from the WB, the Asian Development Bank and other development partners, but the private sector as well. However, focus should not be entirely on big infrastructure investment. Nepal needs to attract smaller investments of, say, $300,000 to $500,000, to promote SME (small and medium enterprises) culture. This will also encourage Nepalis, who have gone abroad, to return to the country with a start-up idea. These Nepalis will only return if there is friendly environment in the country. So, this is crucial. Eventually, if interventions made on the demand side of labour produce positive results, Nepal will still need adequate supply of labour to cater to the needs of employers. This is where YETI Project comes in, as it will help bring in more people into the labour market.

How transparent would this system be in terms of providing employment opportunities, as corrupt practices, such as patronage and use of influence to secure jobs, are embedded in Nepali society?

The YETI Project is fundamentally a project about systems, transparency and rigour in identification and selection of jobs, maintaining database of the labour market, monitoring progress and placement of youths. So, the whole project is basically a systems project. That’s why the bulk of the project is focused on creating an employment information system and building capacity of 753 employment service centres. These service centres will bring the project closer to the community, which will help identify people who needs jobs, life skills and on-the-job training. So, the whole idea here is about transparency and sustainability.

But the YETI Project document itself says fiduciary risk would be ‘substantial’ while implementing this programme. How is the WB planning to minimise this risk?

All World Bank projects must adhere to international good practices, in terms of fiduciary aspects and safeguards. That to us is a heavy line drawn in the sand. We are very conservative on this and we cannot compromise on it. The YETI Project is being executed by 753 local governments, which are very nascent and where execution mechanisms still do not exist. Furthermore, this is the first time Nepal is implementing a programme aimed at creating pathways to sustainable employment. Also, the Ministry of Labour, Employment and Social Security, the main project implementing agency, is working with WB procurement procedures for the first time. So, naturally, risks are expected to be substantial. But the project will strengthen fiduciary management capacity both at central and local levels by training procurement and financial management staff, and hiring skilled personnel.

The project also aims to support the controversial Prime Minister Employment Programme, which grossly misused taxpayers’ money last fiscal year. Is the WB in support of that distributive programme?

I want to be very clear on this. We are supporting new process, systems and methodologies to ensure there is adequate rigour and transparency in identification and selection of beneficiaries so that the programme can be sustainable. This project will make sure beneficiaries’ selection process is transparent and data-driven. It will also ensure that the beneficiaries are provided with adequate training and life skills so that they can sustainably gain access to employment opportunities. So, this project is all about institution building and new systems. The hope is that these new systems and these new processes will also benefit the Prime Minister Employment Programme.

Are you saying fund transfers under the PM Employment Programme will not be made through the World Bank’s loan?

Under the YETI Project, the temporary employment programme (the PM Employment Programme) would be wrapped around new systems, new setups and new institutions at the local level. So, the temporary employment programme will follow the new methodologies of the YETI.

Will the wages that beneficiaries of the PM Employment Programme receive go through the funding pool made available to the YETI Project?

Yes, they will go through this project. The project, being executed by the Ministry of Labour, Employment and Social Security, contains a series of procedures on identification and selection of beneficiaries, training, capacity building and sustainability, which have been agreed upon by the WB, the Nepal government and the MoLESS, and they are consistent with global good practices. We are grateful to the Nepal government because it has asked us to set up these new systems that ensure transparency, which, we expect, moving forward, would also be used by the PM Employment Programme.

In February, the World Bank had said it would not provide unemployment cash benefits to beneficiaries of the PM Employment Programme. Why the change in strategy?

This is not a change in strategy. The objective of this is to set up a new architecture, which builds on transparency, sustainability and reliance on local governments. This is a new architecture. Anything financed under the YETI, including the temporary employment programme, must go through this system.

Does this mean the PM’sEmployment Programme would undergo radical reforms this year?

It is up to the government to take a decision on this matter. What I can tell you is that the current government had asked us to help create a new system. We are hopeful this new system will be very beneficial in the future for the Prime Minister Employment Programme as well.

Is the World Bank supporting the distributive employment programme to please the government with which it needs to work very closely? If that is the case, aren’t development partners such as the WB helping the government become unnecessarily strong or powerful?

YETI Project is separate from the Prime Minister Employment Programme. So it is important not to conflate these two programmes. I’d like to make a very bold claim here. Yes, we are here to please someone and that is the people of Nepal. Our main clients are, and have always been, 30 million Nepali citizens and the governments that they duly elect.

Lastly, YETI Project seems to have overlooked the problem of labour productivity in Nepal, which is one of the lowest in South Asia. Labour productivity is a big issue and it cannot be addressed by a single project. What is your take on this?

Labour productivity is actually a human capital issue. And human capital is all about quality health, education and nutrition. Our studies show that one additional year of quality schooling in Nepal can raise an individual’s earnings by eight to 10 per cent. Undernutrition in Nepal, on the other hand, reduces learning potential and productivity, and can reduce GDP by as much as 11 per cent. Also, investing in psychosocial stimulation during a child’s early years — ideally the first three years — can raise his or her adult income by up to 25 per cent. Nepal needs to look into these human capital issues as early as possible. We’ve seen that many Nepalis reach less than half of their productivity potential when they become adults because of quality health, education and nutrition issues. So, Nepal should not wait to address these issues when someone becomes employable or a young adult, but at an earlier stage to raise the productivity of future generations. But what is also important for Nepal is to focus on investment climate. YETI Project won’t be successful in the absence of demand for labour. And demand for labour can only come from an ecosystem that is investor-friendly, including for foreign investors. The flow of foreign direct investment may have been increasing in Nepal. But Nepal should not only look at the amount of money that is coming in. It should also look at payback period of these investments. If investors are looking at 20- or 30-year payback period, then they will think of picking and training their staff in such a way to build their productive capacity. But the conditions for long-term investments are predictability of regulations and rules, their effective enforcement and implementation, and a very positive ecosystem.