A peep into Pandora’s box

Is Foreign AID Working?

Authors: Bishwambher Pyakuryal, Dadhi

Adhikari, Dipendra

Purush Dhakal

Mandala Book Point

Pages: 118

Price: Rs 550


Economists Milton Friedman and William Easterly believed foreign aid did more harm than good to the poor countries by expanding their bureaucracy, bringing bad governance and promoting elites. Well… they were not completely off the mark. The effectiveness of foreign aid depends upon the absorptive capacity of each country. In a country with poor absorptive capacity and shoddy legal framework, more money simply means more corruption, with the rich getting richer and poor even poorer.

Is foreign aid working in Nepal? Although the triumvirate of authors of Is Foreign AID Working refrain from giving a clear-cut response, the implied answer is: yes. But their endorsement comes with a caveat.

In the authors’ view, there is no denying that Nepal needs external assistance for the development of her critical infrastructure and to realise her ultimate goal of poverty eradication. But while foreign aid has played an important role in Nepal’s overall development, the authors believe so much more could have been achieved with better coordination between donors and recipient and with a robust foreign aid mechanism in place in Nepal.

With the country lacking a clear vision on foreign assistance, it was customary for Nepal’s foreign policy honchos to accept loans and grants on an ad hoc basis. It mattered not whether the deals benefited Nepal or the donors themselves who imposed such conditionalities that the bulk of the funds would, in one way or the other, be re-routed back to their native countries.

It should also be borne in mind that the rich countries have always used foreign aid to further their strategic interests. Otherwise, why would the industrialised world give more in Official ‘Development’ Assistance to rich, militarised countries than to their poorer, less militarised counterparts?

Hence, the authors suggest, the aid receiving countries should see to it that any kind of foreign assistance, preferably grants, are directed at fulfilling their actual needs rather than aid conditionalities of donors. For this, there should be extensive preparations prior to aid negotiations and clear criteria should be set for acceptance of external assistance at the outset.

The authors are for small, locally-developed and sustainable projects. This in turn calls for effective decentralisation of not only government machinery but granting real decision-making power to the grassroots level.

International aid regime, at the end of the day, survives on bi- and multi-lateral give-and-take. Who gets what, and in the process, gains how much, is entirely up to the individual players. Alas! As in every other game, there has to be a loser.