Foreign aid : How to make it more effective

A senior economist from a multilateral donor agency has recently exhorted Nepal to achieve “a swift political transformation along with strengthened administrative and governance tools as well as accountable political policy systems for a firm future economic growth, “Economy must get its priority” (THT, Sept 15). While this sentence-long prescription speaks volumes about the ills that have hobbled Nepal for decades, it nevertheless comes across as an addition to the unbroken chain of such donor admonitions. What is disheartening is that despite the inefficacy of such sustained prompting, donors have refused to look for alternatives even as the country slides steadily downhill, now approaching the status of a failed state.

While bilateral grants are received and forgotten without much concern for whether their pro-people objectives have been achieved, development loans are worse, because ever larger chunks of limited domestic revenue are being gobbled up in servicing the increasingly overwhelming debt burden.

For the politicians and bureaucrats, however, donor money is easy money, particularly in view of the fact that debt forgiveness is a hip international agenda. This is a source of many distortions in country’s political economy. For instance, no major aid project is without a scandal. But for donor officials, making aid money flow is good business as it assures the continuation of lucrative jobs and increases their chance of upward mobility.

While billions in grants and loans have been received and spent in Nepal, it was the remittance money, not foreign aid, that for the first time brought about significant drop in our poverty ratio. While donor agencies big and small cannot be faulted for not framing their “country development strategies”, the fact that they have failed to deliver does not seem to have bothered them. There has been no discernible search for more effective strategies.

Nepal, however, is not without success stories of her own, as the community forestry programme aptly illustrates. The World Bank and the FAO had funded the programme, which was being implemented through Village Panchayats since 1978. It was not until 1988 when user groups — a concept based on a 1969 ethnographic study of a centuries old irrigation system in a Jumla village by the then Royal Nepal Academy — were legally empowered to manage their own forests that a turnaround was achieved. In about a decade, the desertification alarm much sounded in 70s and 80s became history. Good governance is the distinguishing feature of user groups; all members participate in decision-making, which makes management transparent and leadership accountable. VDCs, DDCs, NGOs and other government agencies can contribute significantly to promote such governance conditions all across the country. Unfortunately, donors have failed to look closely at the critical variables in such success stories. A major paradox has been that the donor officials, most of whom happen to be insufficiently knowledgeable about Nepal’s long and highly diverse development experience, are the ones who exercise decisive power in allocating aid money. Besides, most donor agencies now run their own development programmes, obviously on behalf of the government, but with the national authorities acting as second fiddle. While some of these agencies even hire obliging evaluators to have their programme assessed favourably, the donor officials can also easily pass the buck of failure to their government counterparts, even as the latter are kept in good humour through occasional transfer of material favours.

The Partnership Commitments of the 2005 Paris Declaration on Aid Effectiveness requires partner countries to exercise effective leadership over their development policies and strategies. Historically, the donor countries took over the reins of development projects in Nepal after government agencies consistently failed to deliver mainly due to corruption and lack of professionalism. Much of this is again aided and abetted by their political bosses who have to amass wealth while in power to buy votes during elections. Umpteen amendments to the civil service rules have failed to improve the situation and for Nepalis, the choice is now between the devil and the deep blue sea.

Given the successes of projects like community forestry, donors must realise that there is a third way to ensure the success of foreign aid-funded projects in Nepal, one that is based on empowering the primary stakeholders themselves. With such devolution, Nepal, which is mostly rural, can enjoy sustained development and growth on all fronts — health and nutrition, education, income and employment — and in the course of time, the masses will themselves be demanding accountable governance from their leaders. Any other way will be seen as an unspoken collusion between aid givers and takers, both of whom have one attribute in common: vested interest. Shrestha is a development anthropologist