Development cooperation or other forms of assistance can also teach the local governments ways to prevent conflict during a project’s implementation to reduce the risks of potential social tensions at the local level

Our local governments (LGs) — metropolitan cities, sub-metropolitan cites, municipalities and rural municipalities — as described in the Local Governments Operation Act (2017), have some exclusive rights for self-governance in relation to local planning and implementation of socio-economic development agendas that improve community life. However, these LGs lack the requisite capacity to operate independently in a bottom-up approach as they were trained to work in a top-down approach under the unitary governance system for long. Taking the gap into serious consideration, this is the right time to utilise development cooperation, primarily ‘technical assistance’, for capacity development of our local governments to make them efficient for self-regulation in the new federal setup.

Of the total foreign aid disbursed in 2017/18, technical assistance disbursement declined to 14.4% whereas contribution of loans increased significantly to 50.5% and grant disbursement remained fairly constant at 35.1% in comparison to the previous fiscal year. In this context, our national priority should be more on technical assistance to enhance local capacity. This will help to mobilise development aid through the national budgetary system and avoid crowding out domestic resource mobilisation.

The institutional as well as human resource capacity of the LGs can be enhanced by channeling technical assistance to the local level. For example, since the LGs in Nepal are in need of improved real assets management for self-governance, the UN’s Municipal Capacity Development Programme (MCDP) for the governments of least developed countries should be directed to achieve this goal.

The project strategies consist of training local government officials for the formulation and implementation of customized asset management action plans (AMAPs) to achieve a long-term sustainable development strategy; increase dialogue among the stakeholders -- central government agencies and local government authorities -- to find the impact of existing policies; sharing lessons learned with other LDCs. Such an approach of operating the physical assets and human capital in a cost-effective manner is necessary for the LGs as they have to provide a number of services with limited financial resources.

Directing aid to build the capacities of local government could be a strong strategy to reduce aid dependency in the long-run. Aid mobilisation has been a challenge because a significant portion of the development aid (i.e., 30% in 2016) is being spent on public expenditure. So, capacity development of the local government will result in growth and efficiency in domestic resources mobilisation.

Moreover, capacity enhancement of LGs is also significant in improving the low disbursement pattern of foreign aid, which was 52 per cent of the targeted amount in 2017/18. When technical assistance is capitalised in training the LGs in project readiness, effective project management skills and assets portfolio management skills, they will be more efficient to mobilise the resources independently. And these skills are also needed for the sustainability of a foreign-aided project.

Development cooperation or other forms of assistance can also teach the LGs about ways to prevent conflict during a project’s implementation to reduce the risks of potential social tensions at the local level.

Accordingly, development aid should be directed to focus on local capacity building to improve service delivery at the local level. It can be achieved through ICT-based service delivery and employing foreign trainers/volunteers to train the LG officials. If it improves, it will ultimately help to build people’s trust and confidence in their own government.

However, channeling aid to our priorities might not be as easy as we think as donors in the past came up with their own strategic interests, such as political interest (1960s), moral obligations (1970s), structural reforms (1980s) and quantitative objective (post 2000s). Lately aid has been employed by the donors as a tool to promote global collective action, such as sustainable development, peace and climate change.

Similarly, major donor policy documents have also realised the need to focus on building the national/local capacities of the recipient countries to sustain development in the long-run. These new developments make it easier to channel aid to formulate our development strategies, which makes local capital central for sustainable development and peace.

For example, while implementing the decentralised development projects in African countries, the central government coordinated with the donor agencies, World Bank and UNCDF for capacity development of the local institutions to bring about sustainable results. More importantly, the Asian Development Bank’s project in Indonesia in 2012 largely helped the LGs in gender mainstreaming, ICT-based networking, coordination and management skills, and capacity building of the service providers.

As in the African and Indonesian decentralisation context, federal governments, which have constitutionally exclusive rights to mobilise foreign aid, or the state government, with approval of the federal government, should take the lead in channeling aid for capacity development of local governments.