Aid rarely aids agriculture in Nepal

A combination of rampant corruption, wayward planning, donor interest and an utter disregard for intended beneficiaries has delayed Nepal’s multilateral development projects, and wasted scarce resources. 

Infrastructure projects, poverty alleviation schemes, initiatives to improve education have all been leaking billions of rupees over the last two decades, and budgets are continuously disbursed despite huge costs over-runs and little progress. 

Middlemen, consultants, contractors, extortion and excessive employee benefits have diverted much of the money meant to uplift Nepal’s most under-served regions and people living there.

The World Bank funneled Rs5.1 billion into the Project for Agriculture Commercialisation and Trade (PACT) was designed to improve the farming business and raise rural income. Instead, much of the budget was spent lining the pockets of middlemen and ‘fake farmers’, the World Bank’s own investigation found. The Bank has sent a letter to the government urging legal action against the perpetrators who siphoned off the money.

Equally notorious is the Asian Development Bank (ADB)-funded High Mountain Agribusiness and Livelihood Improvement Project (Himali) with a budget of Rs2.62 billion. 

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Like PACT, Himali required farmers to submit written proposals to get access resources, when much of Nepal’s farming population is illiterate. As a result, proposal-writing rackets sprang up and fraudulent ‘farmers’ took away most of the money. Farmers who were genuinely in need were not even aware of the aid offer.

“Projects in Nepal have been designed with the interest of donor disbursement quota in mind,” explains former secretary of the Ministry of Agriculture Suroj Pokhrel, “they do not take into account the government’s delivery capacity and the reality on the ground.”

The School Sector Reform Plan (SSRP) funded by a consortium of donors spent a mind-boggling Rs3 trillion from 2009 to 2015, but most of it went to building facilities, with little attention to improving the quality of instruction. Without learning lessons from it, the government is now working with another donor-funded follow up: the School Sector Development Plan (SSDP).

“Development assistance to Nepal will never benefit the target group if it does not take into account their fundamental needs,” says public policy analyst Suryaraj Acharya. “The prime motivation for development funds has been in the donors’ interest rather than the overall development framework of the country.”  

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Foreign assisted projects are also conditional on hiring expensive consultants for tasks that Nepalis with much more extensive local experience already have. The ADB and World Bank-funded agriculture projects spend up to a quarter of their entire budgets on consultants, a report has shown, with others spending even more. 

“Project costs are massively inflated by consultant fees, so there is very little trickling down to the target beneficiaries,” Pokhrel alleges. 

For example, the ADB-funded Melamchi Drinking Water project has spent a quarter of its budget on consultants, yet it remains incomplete two decades after work began. Bridge construction on the Mugling-Narayangad expressway also remains incomplete, even after spending Rs400 million on consultants. 

To be sure, official corruption that borders on extortion within the Nepal government machinery is also to blame for the high costs and delays. But analysts say donors often get off the hook for their refusal to look at consultant fees driving up costs.

Much of the leakage is also due to administrative costs and inefficiencies within the Nepal government. Billions are spent on employee benefits, bonuses and expenses, but the projects get the green light from donors nevertheless.

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Agriculture and livestock development has been a key area of aid for the World Bank, ADB and IFAD (International Fund for Agriculture Development). The Ministry of Agriculture has got help from them for the past decade to work on a dozen projects of which eight have been completed.

Of those still ongoing, the Livestock Sector Innovation Project that is funded partly with a $80 million loan from the World Bank. Although agriculture is a vital sector of the economy, even the Agriculture Ministry’s own evaluation has shown that all the resources poured into increasing production have not yielded expected results. Better off people with political connections in the districts have benefited more than the really needy farmers.

The World Bank has supported Nepal’s Poverty Alleviation Fund for the past 15 years, but a third of its budget was spent on administrative work, and the whereabouts of the remaining remains unknown. Some critics say much more poverty would have been alleviated if the cash was just doled out to the poorest Nepalis.

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Another World Bank funded Rs5.17 billion project to improve food production and nutrition in the western mountains was also found to have benefited only a third of the farmers it was intended for. Documents obtained by Nepali Times show that 47% of the total budget for the 6-year Agriculture and Food Security Project was spent on administrators, consultants, and travel.  ­­

Not only did the project not help subsistence farmers increase production, most of the money got siphoned off by well-connected locals. It spent Rs 1.4 billion was spent just on training and workshops. Towards the end of the project, employees spent Rs20 million just on junkets to Vietnam, Korea and Australia. The report also show outright stealing from the procurement budget.

In its own report, the World Bank declared PACT as a ‘moderately unsatisfactory’ project, which might have been a polite way of saying it did not deliver the goods. But no action has been taken on its conclusions. Vice-President of the World Bank’s Multilateral Investment Guarantee Agency Ethiopis Tafera concluded that there had been irregularities in the project’s financial records, but there has been no follow-up.

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Pokhrel says the only way out of Nepal’s donor dependency syndrome is to set up an Agriculture Projects Bank where Nepal’s aid agencies can pool their aid. However, he says donors have opposed the plan. He adds that donors try to replicate development models that have worked elsewhere, but they have not been successful in Nepal because the conditions here are different.

Acharya is even more critical. He says Nepal has to break out of the habit of accepting aid for activities that the country is capable of carrying out itself. He does not agree with the oft-repeated excuse that projects failed due to poor implementation and not wrong policies. He says it is faulty policy itself that leads to poor implementation.

Acharya supports the bilateral assistance models adopted by China, South Korea and Japan during their early phases of development. They required donor countries to help out in projects the governments themselves formulated as per their own long-term development strategies.    

A former employee of the Finance Ministry’s Foreign Aid Coordination Department says: “In my whole career I have not seen a single foreign-funded project that has been completed in time, or has provided promised benefits.”