Submission by Thomas Bell to the International Development Committee enquiry into DFID’s programme in Nepal
1. I have over ten years experience of working in Nepal; as a journalist (for the Daily Telegraph and the Economist), and latterly as a consultant on Nepali politics. I am also the author of a recent book on the social and political history of the capital, entitled Kathmandu (ISBN 9788184005783). This book contains a chapter on the poor performance of international development efforts in Nepal over the past six decades, which has attracted considerable attention among the international community in Nepal since it appeared in September. A relevant excerpt was published in the local media here: http://setopati.net/opinion/3307/Nepal's-failed-development/
2. I believe that the interest my views have attracted partly reflects the very widespread skepticism that exists in this country as to the efficacy and appropriateness of much donor aid. This skepticism is by no means limited to DFID, which may in certain respects be better than some of its counterparts, but neither by any means does it exclude DFID. Such skeptical views are commonplace among the public, and are also frequently expressed in private by the staff of donor agencies, including DFID. I offer the following points in the belief that only by recognising the deep problems in Nepal's development efforts to date can we expect better in future. These points are made partly in response to your committee’s recent hearing with the DFID minister Desmond Swayne.
The record of foreign aid and the significance of corruption in the Nepali system
3. It is of course true, and has often been remarked upon for decades, that corruption is prevalent in Nepal. However there is a big difference in understanding this as an obstacle to better governance, or as the very raison d’être of government. If one says, “Oh, too many people are hired in the government because they are someone’s cousin” this seems to be something that one can work around. If one understands that the purpose of the state in Nepal is to extract resources for the enrichment of individuals and the sustenance of political and business networks, and therefore for the maintenance of those networks in power, then this leads to rather different conclusions about the efficacy of pouring in development money in search of growth and good governance. Government in Nepal has always been and remains an essentially extractive enterprise. For example, a health ministry with 73% absenteeism among civil servants is not in fact an institution whose purpose is to provide health care, whatever it’s name. Congratulating one’s self on the strength of one’s contacts in such a ministry, and believing this will soon start paying dividends, is a version of the illusion which has characterised six decades of (for the most part) failed aid delivery.
4. If I may recommend one fairly short publication which describes this political economy it would be “Impunity and Political Accountability in Nepal” by Aditya Adhikari and Bhaskar Gautam with Surabhi Pudasaini and Bhadra Sharma, published last year by the Asia Foundation here: http://asiafoundation.org/publications/pdf/1333. This gives an essential description of the context in which aid interventions take place.
5. I believe that it is mistaken to think that the government “doesn’t understand” or “needs educating”. In fact they have been receiving similar development messages for years and are quite adept at repeating them to give encouragement to donors. Rather, the government is very successful at what it does, which is advancing the interests of its members, their clients and core constituencies at the expense of the wider population. This is shown by the fact that (despite bitter competition at the top) many senior politicians and officials have very long running and secure careers. In short, the current model is ‘sustainable’ - not withstanding failed service delivery and enduring poverty. One of the things that helps to make it sustainable is that it is in effect underwritten by the indulgence and enduring optimism of the donor community.
6. Take the example of tourism, which your committee has discussed. It is not because officials “don’t understand” its potential usefulness to others that the national airline is in chaos, or that the airport is only semi-functional, with 4 hour waits to retrieve luggage and stray dogs on the runway causing flights to abort landings. Rather, those in power have served their short-term needs by bleeding the national airline dry and treating the airport as a cash cow for the sale of offices and customs fraud. (By the way, DFID’s Great Himalayan Trail project which you discussed - worth around £2m so far, I believe, and implemented by SNV - was said by those who worked on it to be such a waste of money, with so little to show, that even they were shocked.)
7. You saw the lamentable standard of the local health posts, which DFID is supporting, on your visit. Despite aid, this has been the case for decades. Improvements in health statistics almost certainly come about primarily through urbanisation and people’s improved access to private services thanks to remittances. Similarly, one might question whether the recent very large hydro-power investments come about primarily through DFID’s support to the Investment Board, as they are understandably keen to proclaim, or largely thanks to circumstances relating to India and its relations with Nepal. I think one must be rather skeptical of the way in which credit is claimed for certain outcomes. In my experience, those familiar with almost any project or programme in the Nepali development sector commonly say (at least in private) that it falls far short of the claims which are made for it by its sponsors or implementing agencies. People sincerely praising a project of which they have knowledge - ‘off the record’ as it were - are relatively rare to meet. This includes many of DFID’s activities.
8. I think Nepal’s experience of development aid is now too long, and too consistently disappointing, for it to reasonable to readily believe that while most of what happened in the past didn’t work well enough, the latest iteration of these schemes is somehow markedly different. Little of what is being done now is without precedent in the past, and there is little reason to think that more foreign aid will bring the change that is sought. The hopes of international policy makers are repeatedly reposed in renewed recognition of the ‘problem of corruption’, for example, and mechanisms such as user groups and local committees - which are not new and have repeatedly failed to bring accountability, due to the nature of power in these communities. On the contrary, such local committees are often packed by political appointees for the purpose of capturing resources. Nepal is not poor and badly governed for want of foreign aid money, technical advice or government ‘capacity building’.
9. Nepal is poor because of public corruption of the sorts described above, and the ‘mafia’-like behaviour of politically backed cartels and other similarly exploitative, value destroying and anti-competitive practices in the private sector. For example, transport cartels raise costs and also pollute Kathmandu with filthy exhausts, despite the law, with impunity. Cartels and ‘syndicates’ also exist in other key sectors including drinking water supply, food wholesale and energy supply. Of particular long term concern are the widely reported and politically backed ‘mafias’ corrupting the education system, for example through the licensing of sub-standard medical schools. Another particularly egregious area in which such practices exist is in the ‘manpower industry’ - sending migrant labourers abroad. Often this is extremely exploitative, but enjoys powerful political backing. Given that the migrants’ remittances are the backbone of the economy (contributing around 25pc of GDP), and also the principal reason for recent gains in poverty reduction in Nepal, supporting reform of this sector to protect workers and help them earn more, while investing their earnings to better long term benefit, should be a big issue for DFID.
Rather than focusing on ‘fragility’, it should be recognized that Nepal is trapped in a ‘sub-optimal equilibrium’
10. At the heart of these issues - in so far as they relate to the development sector - are two sets of incentives, which go against what I believe is generally taken to be the desirable logic of policy making.
11. On the one hand, development agencies wish to increase their budgets (DFID’s recently doubled in Nepal, and others’ are also rising). Thus, at a time of weak governance during the current political ‘transition’, aid has significantly increased even as the capacity to spend it effectively does not exist. It is well known that the government has long failed to spend its full development budget every year. (Only around three quarters of the development budget [capital as opposed to recurrent expenditure] has been spent in recent years, up from about half a decade ago.) Much government spending is routinely deferred to the very end of the financial year, in what is widely understood to be a strategy to escape scrutiny. Nevertheless, development aid continues to increase. The development agencies themselves also typically have large sums remaining at the end of each year (DFID being a case in point), which they then scramble to spend before next year’s (increased) budget arrives. Their need is to disburse their funds, and they are therefore widely recognised in Nepal to be reluctant to withdraw from corrupt or underperforming projects and programmes.
12. I think the ICAI is absolutely right to say that DFID does not appear to have a fully developed strategy for dealing with the fact of corruption as it exists, and that it is reluctant to take action in cases where it comes to light, partly so as not to upset its relationships (and therefore, presumably, its ability to disburse more money). For example, DFID refused to acknowledge corruption in the use of local development block grants until I exposed it in the Economist a few years ago (http://www.economist.com/blogs/banyan/2011/05/aid-and-corruption-nepal). However the ICAI was quite wrong to suggest that petty bribery is the main way in which corruption harms to poor. As I hope is clear from what I have written, it is grand corruption which robs the poor of services and livelihoods, and indeed of hope for their future.
11. Meanwhile, the government knows very well that development money will continue to flow regardless of the enduring failure to deliver results. The period of increased aid revenues during the peace process has coincided with a large increase in perceived corruption, as measured by Transparency International. Enduring corruption and the failure to deliver domestic growth undermines democracy, ensures continuing under-development, forces workers to go abroad and contributes to episodic political crises by excluding the majority from access to power and resources. However, remittances and the reliable supply of aid help to make this stagnation sustainable and, beneath the crises, in a sense relatively stable. Nepal is trapped in this situation, and aid programmes which don’t deliver genuine reform contribute to sustaining it. ‘Genuine reform’ would mean undermining business cartels and syndicates, for example, and tackling the politically backed ‘mafias’ which seek to profit though the corruption of the (private as well as public) health and education systems.
12. It’s important to note that the strong expectation that aid will continue at current levels means that donors have relatively little ability to influence the government to do things that they may not wish to do. It frequently appears that the government will play along with the donors’ agenda provided that it comes at no real cost to the status-quo. When the status-quo is threatened by a perceived ‘international agenda’ (eg for the ‘social inclusion’ of ‘marginalised groups’) the government reacts strongly against that, as DFID experienced in 2012. The agencies (DFID being a case in point) then retreat, so as not to upset their relationships.
13. I think that funding NGOs as an alternative to working through the government is in fact no alternative. Many NGOs are also corrupt. Clearly the country needs a better government, which should be supported. In practice this may be something of a moot point, however, since many NGOs are controlled by the same or similar people and sections of society as hold sway in politics and public administration.
Supporting change
14. To help Nepal escape this trap development agencies including DFID need to change the incentives created by the aid economy. It should be recognised that an underperforming programme or project has not merely failed to deliver its stated objective, it has also paid for something else with that money (usually the empowerment and enrichment of corrupt people, deeper inequality, weakened public accountability, loss of faith in the system, etc). Rather than simply throwing money at the wall in the hope that some of it will stick, less aid might actually be more beneficial - if a much higher proportion of it constituted really good programmes and projects. In areas that are underperforming I believe DFID and others should be much more willing to withdraw, and to say clearly and publicly why they are doing so. Evidence of corruption should be given to the police, and that should be publicised (this never happens now). Where appropriate, people should be fired (again, this is startlingly rare). Above all, there should be strong demands to deliver measurable progress in uprooting the cartels, ‘syndicates’ and ‘mafias’ which seek to profit by further undermining the dysfunctional health and education sectors, which exploit migrant workers, increase transport costs, and so on.
15. In conclusion, the problem is political: there should be strong, public, transparent, discomforting pressure for reform. This would go against powerful and deeply entrenched political interests, but if DFID is not attracting opposition from such quarters it probably isn’t supporting real change. This implies a fundamentally different manner of working for agencies such as DFID, which measure their success by the scale of their disbursements and attempt to avoid riling the government. Ever more free money - with the usual bromides about how it will work this time - is the very opposite of what Nepal needs. The willingness to spend less money, if properly explained, and especially if coordinated with other donors, could actually increase DFID’s political leverage (and public credibility) in Nepal. Public credibility would especially be increased if action were taken to clean up the very well funded but underperforming wider development industry - a powerful vested interest in itself - where it is widely perceived that corruption is rife and incomes are not justified by performance (see paragraphs 7 and 8 above). Implementing such as approach would require courage and determination, and a stronger ability to analyse and manage the country’s social and political situation than is currently in evidence.
The scandal in public education
16. On the matter of areas in which multilateral organisations supported by DFID are working but where things are not going well, I would point especially to education (funded by the EU and others). The rate of failure here - only 13% of government school students who enrolled ten years earlier left school with a basic qualification (the School Leaving Certificate) in 2014 - is an unconscionable scandal condemning a generation of children to a life of futility. There is profound corruption in the public education sector, as exposed on a weekly basis in the newspapers and well known to all for many years. Donors must be seen to publicly and transparently take responsibility and take action where they are mired in such a mess. If their sense of embarrassment and bureaucratic expediency is given sway, how can it be expected that the Government of Nepal will behave differently?
I hope you find some interest in these ideas. There are of course many better qualified than me to advance this kind of analysis, or other similar analyses. I believe such views are quite common now. For example, only today this article appeared in The Kathmandu Post: http://www.ekantipur.com/2015/03/18/opinion/democracy-in-crisis/402953.html
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