Sultan Hafeez Rahman, Country Director of the Asian Development Bank's Nepal Resident Mission, spoke to Nepali Times about lending in the past year and the Bank's engagement in future.
Nepali Times: What is the level of ADB's assistance to Nepal at present and has it changed in the last year? 
KIRAN PANDAY
Sultan Hafeez Rahman: ADB's country strategy and program approved in 2004 proposed an annual assistance program of upto $100 million per year for 2005-2007. However, as you know, there was no new lending to Nepal in 2005. The actual level of assistance in 2006 will depend on whether it can be provided effectively and safely in the prevailing security and political environment. It is also critical for the government to keep the reform programs on track and do much more to engage with Nepal's development partners and convince them that it is serious about reforms and development. ADB will continue to consult with other development partners of Nepal on future assistance programs.
Careful assessment of the impacts of our assistance on the ground, which involved extensive travel by our own staff, including myself, to project sites in many parts of the country and reports from local communities and NGOs undertaken every quarter of last year, plus detailed specific assessments conducted ahead of initiating ADB-funded projects suggest that the bulk of our project activities were being implemented effectively and with safety for all stakeholders. Of course, the conflict causes major disruptions in implementation in many cases; however, these problems in most cases do not persist for long periods and do not affect all project activities simultaneously. These assessments also reminded us of how desperately poor and vulnerable rural and remote areas of Nepal were and how much development assistance meant to the poor and to the country. Let me also stress that being able to continue assistance in the present environment is not enough. Nepal needs peace and stability to be able to seriously commit itself to development and achieving the millennium development goals.
We hear that bilateral and multilateral donors are divided over providing assistance to Nepal?
As far as I am aware, Nepal's development partners-all of them-share similar concerns. The political and security situation in Nepal has implications for development assistance and its effectiveness. Given the complexity of the situation, there is, not unexpectedly, a lot of discussion among the donors on how best to remain engaged in Nepal. We value this discussion very much and feel donors basically share the same concerns. At this hour of crisis for Nepal, donors are fully seized of their role--this is my impression.
How come the ADB didn't make any new commitment in Nepal in 2005?
We have 23 ongoing projects spread throughout the country. First we needed to assess the impacts of the escalation in the conflict on the projects assisted by ADB very carefully. Secondly, five loans approved by ADB in 2003 and 2004, which were pending implementation, needed to be initiated on the ground and we had to assess how well these could be implemented in the prevailing conditions. Third and very importantly we were mindful of the serious concerns expressed by the international community about peace, democracy and human rights in Nepal. Fourth, given the country's situation it was imperative that we adopt a cautious approach. It could not be business as usual. Although we made no new commitments in 2005, we did permit two of the five pending loans approved in 2003 and 2004 to be initiated in 2005 and provided three new technical assistance.
How do you see the country's economic performance?
Nepal's economy has been seriously affected by the conflict. Overall GDP growth has dropped sharply from 5 percent in the 1990s to just over 2 percent in the past three years. This means that Nepal is barely growing in per capita terms. The GDP of Asian countries, which have successfully transformed their economies, grew 4-5% per year in per capita terms. The adverse impact of the conflict on education is another very serious consequence. It could take decades to recover from such a loss even after peace is restored. The loss of livelihoods, shelter and personal security-all basic human entitlements-are stark effects of a conflict no one seems to want.
The downside risks of Nepal's economy are rising and hence the short-term economic outlook is not encouraging. Macroeconomic stability is still holding but it is essential for this also to yield strong growth and poverty reduction. Nepal has tremendous potential to develop into a prosperous country and, in my view, become the first middle-income country in South Asia. But it does not have the luxury of time. Every crisis-in Nepal's case a truly tragic one-also presents opportunities, which must be seized for the well being of the people and country.
Has there been any progress on the Melamchi project?
We remain concerned about this in view of Melamchi's importance. We are assessing the situation and expect more clarity on this in the next review meeting of the project's donors.
There are serious concerns about corruption in Nepal. How concerned is the ADB?
ADB has a very stringent anticorruption policy and other policies to deal with such concerns. ADB affirms a zero tolerance policy when credible evidence of fraud and corruption exists among ADB-financed projects or its staff. ADB's Anticorruption Policy requires all ADB-financed activity, including all ADB staff, adhere to the highest financial and ethical standards. Whenever, there are reports/complaints of irregularities, ADB's independent Integrity Division investigates the matter.
It is also part of our routine work in the resident mission to keep track of such concerns and report these to relevant authorities in the Bank. You can be assured that we also follow news on corruption and irregularities reported in your paper as well and take necessary action. Information about such concerns can also be sent directly by individuals to ADB. ADB's President has reiterated the institution's total commitment to root out corruption from ADB-funded projects and/or among its staff. I might point out that ADB's swift and well-acclaimed investigation of alleged irregularities in the Melamchi project last year should have demonstrated our seriousness in combating corruption. On the institutional side, we are providing assistance to strengthen Nepal's anticorruption institutions.
