The World Bank is to provide Nepal with a grant of US$370 million for an unspecified period

of years. Praful Patel, vice-president of the bank for South Asia, has urged Nepal to come up with what it wants. But the aid is not without strings attached — Nepal will have to make its labour law ‘more flexible’, among other things. The bank’s board is expected to approve the aid package in Washington DC in about a month. The aid will go into irrigation, education, poverty reduction, and road expansion. Nepal, a least developed country, has been put on the bank’s ‘priority list’ for aid, alongside the poorest African countries. Donors have been holding out the carrot of more aid on condition of holding the ‘free and fair’ constituent assembly (CA) election. It is also noteworthy here that several former major recipient countries no longer depend on the bank’s money.

Foreign aid, particularly grants, are welcome in a country that has so many basic competing needs but few resources to meet them on its own. This becomes all the more important as Nepal is in transition from the interim period to a more stable order of politics and other things. Almost any aid package coming from multilateral agencies, such as the WB, comes with strings attached. This is unfair. The one in question is no exception. Flexibility in labour law has often been another way of saying that hiring and firing of workers, for instance, should be made much easier for employers. Indeed, the labour law, like any other law, should address contemporary needs. ‘Liberal’ labour law is advocated in the name of attracting more investment, promoting growth and generating employment. But it should have its proper limits, so that the legitimate interests of all parties — workers, management and society — may be protected.

But inflows of aid cannot automatically guarantee that the target population and the society at large will benefit significantly. So much multilateral and bilateral aid has poured into the country over the past several decades, but, as is generally agreed, much of it has drained into the sands. It has often been alleged with considerable justification that an important part of foreign aid has gone into non-essential seminars, research projects, expensive travel, consultancy services, particularly of foreigners, and back into the countries of origin, and last but not the least, into corruption. The cost-effectiveness and impact of foreign aid is something that needs a thorough and impartial analysis. Nepali finance ministers since the Panchayat days have boasted the inflow of foreign aid as a major achievement of the regime they represented. In a way, it has made their task easier, as the national budget so heavily reflects the donors’ emphasis or diktat in Nepal’s policies, programmes and projects. But the ultimate test of any foreign aid is whether it can make a real difference to the people’s lives, and at a reasonable cost. It is unfortunate that Nepal’s donors have hardly ever made proper utilisation of aid and crackdown on corruption their conditions.