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Background Papers
Governance, Including Civil Service Reform and Corruption
A Paper Prepared by the Donor Community in Nepal for Purposes of the Nepal Development Forum (NDF)
April 17 - 19, 2000 (Paris)
Executive summary
The quality of governance is crucial in determining Nepal's future performance in development and poverty alleviation. Democracy must be made full and thorough. Nepal should be given credit for a number of recent achievements in governance, such as the transition to democracy in 1990 and 1991. But much more needs to be done. The paper sets out the challenges under six headings: Government capacity to provide an enabling economic environment; Government capacity to organise pro-poor policies, to raise resources and to plan and account for their use honestly; Political systems which empower poor and disadvantaged peoples to influence state policy and practice; Government capacity to guarantee the equitable and universal provision of effective basic services; Personal security in households and communities and better access to justice for poor and disadvantaged peoples; National and local systems to manage national security and to resolve differences between communities within countries before they become violent conflicts. In addition to these areas the paper highlights two other specific areas of concern: civil service reform and corruption. Corruption appears to be endemic in Nepal and is thriving in an atmosphere of difficulties in the six areas of governance described.
2 Donors have been criticised in the past for being too keen to set out blueprint solutions to governance problems. The role of donors in the future should be more that of a facilitator, helping Nepalese to come up with their own solutions. This approach places greater responsibility for good governance in the hands of the government. The development forum is an opportunity to start moving all partners towards a comprehensive long term framework for better governance.
Purpose of this paper and context
3 The Nepal Development Forum is an opportunity for Nepal and its development partners to review progress in economic and social development and to consider the scope for new development initiatives. Development priorities, policy reform and aid flows will all be subjects for discussion. Finding common ground on these topics will depend very much on the assessment of an issue which many see as central in considering Nepal's development: governance. This paper surveys the governance issues confronting Nepal . It seeks to make the link between pro-poor governance and poverty alleviation through using scarce development resources effectively. A frank and constructive discussion of effective steps for improving governance should lead to a strengthening of the partnership between Nepal and its donors.
4 Governance is important. Better governance can improve the rate of economic growth, the effectiveness of services, the safety and security of citizens, and can ensure that the benefits of these improvements go to those who most need them. The key constraint on Nepal's development over the last few decades has not been lack of financial resources; while mobilization of domestic resources has been quite low, generous foreign aid has more than made up for such financing shortfalls. However, the government has wasted a high proportion of its expenditure. Good governance is critical in maximizing the impact of the public services that the government provides and in encouraging private investment. Weak governance has many undesirable outcomes, such as corruption and weak public sector institutions which cannot carry out their basic functions. This leads to serious shortcomings in the allocation and use of resources, whether public or private, domestic or foreign.
5 Governance changed for the better in 1991 when Nepal re-introduced parliamentary democracy. This was a major and positive step for the country's political and social prospects. However, democratic elections do not automatically lead to better governance. Democratic institutions in Nepal function poorly, and the country needs to improve their performance .
6 Recent events in South Asia have shown that it is not enough simply to have a form of electoral democracy in a country. The people, including the poor, rightly expect a full and thorough democracy. Better governance needs to address the barriers to the participation of the poor and disadvantaged groups, including women, scheduled castes and ethnic minorities. For instance, literacy rates are lowest among women and scheduled castes, and affects their participation in democracy. But these groups also have a right to better economic conditions, better healthcare, better education and better livelihoods generally. If the people see that the quality of democracy is poor and does not support better public sector performance and improvement of living conditions, then the democracy may well not survive and the people will not mourn its passing.
Achievements
7 This paper will stress the need for major changes to existing governance arrangements. There is no room for complacency. However, the country has taken some very positive steps in improving governance in recent years. Examples of recent achievements would include:
- the transition to Parliamentary democracy in 1990 and 1991. Although it was accompanied by some violence and loss of life, the Janandolan was notable for the fact that the main political parties, the Nepali Congress and the communists were united. Moreover, the urban population was also united in its desire for democracy - a unity which cut across castes, classes and ethnic groupings.
- the establishment of a radically new constitution through a consultative process.
- growing awareness and understanding of democratic political processes amongst the broader population. Three general elections have been largely seen as free and fair by impartial international observers.
- the existence of a relatively free media. Although significant parts of the media, such as Radio Nepal and Nepal TV, remain under government control, there are booming print, and growing radio, media. These media are protected by a constitutional guarantee of freedom - a guarantee which is largely honoured in practice.
- although there is a healthy debate about the actual outcome of decentralisation efforts, the country showed an intention to move towards further democratisation through passing the Local Self-Governance Act.
- macro-economic stability Recent events in the region have again demonstrated that this type of stability can be difficult to achieve in democracies which can throw up competing and potentially conflicting demands from the people, such as those for increased spending but static taxation levels.
8 This list is not intended to be exhaustive, but does show that the country has taken steps which form a sound basis for further improvements in the future.
Six areas of governance
9 This section of the paper examines the wide ranging challenges of governance within an analytical framework of six headings.
Government capacity to provide an enabling economic environment
10 Since 1991 successive governments have maintained reasonable macro?economic stability. The fiscal deficit has been kept at broadly manageable levels, although low revenues (the revenue base of roughly 11% is low even by the already low South Asian regional standards); dependency on aid inflows; and quality of public spending remain major concerns. The country has established a liberal trade regime, and financed its balance of payments without becoming overly burdened by debt.
11 But despite a reasonable macro policy environment, Nepal's growth performance (average of about 4% per annum over past 5 years) has only slightly exceeded population growth (2.4 % pa). A significant cause of weak growth performance is lack of impetus in implementing a range of structural reforms. Future economic growth scenarios range quite widely (4% to 6% per annum) depending on the Government's effectiveness in tackling in particular: stagnant and low government revenues; low quality and impact of public expenditure; problems of political interference and lack of effective supervision in the financial sector; lack of effective regulatory and legal environment for the private sector; corruption; badly performing state owned enterprises; civil service reform
12 There has been little progress to date in addressing these issues . For example, the Development Forum Paper about the Framework for Private sector development shows the slow progress made in privatisation; and anecdotal evidence suggests corruption is getting worse, not better.
13 For poor and disadvantaged groups, community-based economic organisations can be particularly important. Such groups allow small producers to act collectively in the marketplace and can help to increase production, trade and income for the poor. Legislation such as the Co-operative Act and the Forestry Act, allows these community-based groups to thrive by providing an appropriate enabling environment. However, legislation alone is not enough. It is critical to raise the awareness and capacity of the community and government officials to effectively implement provisions in the legislation.
Government capacity to organise pro-poor policies, to raise resources and to plan and account for their use honestly
14 Despite aspirations in the Ninth Plan to develop pro-poor policies, 42% of Nepalese live below the poverty line and around three quarters live within 150% of the line. Nepal has one of the most unequal societies in south Asia. Government has little capacity to implement strategic plans to meet the aspirations of the poor.
15 Motivation in government line ministries to turn stated policy aspirations into practical, implementable policies is weak. There is weak strategic leadership from the Prime Minister's Office. The National Planning Commission lacks capacity to effectively screen, monitor or evaluate projects. And there is little sense that the Government is pursuing a clear set of priorities: for example, the Ninth Plan sets out a huge agenda but ducks the hard choices which need to be made between competing priorities. Donors do not help when they pursue their own pet projects which are not in line with Government thinking.
16 All parts of government appear to be preoccupied with short term responses to immediate political pressures, including from a large number of disjointed constituencies each with their own narrow agenda.
17 Both tax policy and revenue administration need to be improved. The raising of resources by the Ministry of Finance is annually more than 10% below the already modest target. The lack of policy formulation capacity is mirrored by the haphazard nature of Budget formulation to pay for the government programme. Resource allocations are often not disbursed at the local level to the detriment particularly of the poor and disadvantaged.
18 Annually there are substantial leakages and misappropriations of monies allocated to line ministries and other government agencies. Non-budget expenditure is high, mainly due to donor funded projects,and opaque. There is virtually no accountability and miscreants are rarely, if ever, sanctioned . The recommendations of the Auditor General's reports are routinely ignored by line ministries. The country has a lack of national accounting and auditing standards.
Political systems which empower poor and disadvantaged peoples to influence state policy and practice.
19 Nepal restored multi-party democracy in 1991, but the values of democracy have yet to take root in the country. Elites dominate political life, both in political parties and through the bureaucracy. Very few elected representatives are women; very few are from lower castes; and very few are from the marginalised ethnic groups.
20 The people's representatives, including MPs, are far from fully aware of their role, obligations and responsibilities. Members of the legislature lack experience and knowledge of parliamentary fundamentals and have inadequate support services to advance the interests of their constituents.
21 There is no freedom of information act, but the constitution guarantees freedom of speech, assembly, association and movement, and these are freedoms widely enjoyed by all sections of society. However, the poor and disadvantaged have little practical opportunity to voice their views and lack organisational skills to pursue their own interests. They lack access to information about services to which they have a right, and Nepal's very low literacy levels, even by regional standards, makes information dissemination more difficult.
22 The media, though largely free, is still dominated by pro-government bias in the important areas of radio and TV, and is not well linked to the interests of the poor.
23 Political parties are dominated by leading personalities who seem to spend more time battling with each other rather than offering the electorate clear programme choices in their manifestos and other pronouncements. They do not seem to represent the interests of the poor. However, the Election Commission has succeeded in helping the country to have generally free and fair elections.
24 The number of active national and local civil society organisations (CSOs) has increased sharply since 1991. These organisations can enhance the accountability of the state and serve to better articulate the concerns and recommendations of their members. While many CSOs have matured, others are not transparent or effective. Moreover, the links between them are weak, and the legislative environment and links to government could be better. The creation and strengthening of regional and national level federations of different types of CSOs is needed to build capacity and facilitate links with national government. While HMGN is committed to the concept of civil society it is important to translate this commitment into changes in the legislation, rules and regulations governing CSOs.
25 Despite constitutional safeguards human rights, including issues such as women's rights and bonded labour, are not supported with the necessary legislation.
Government capacity to guarantee the equitable and universal provision of effective basic services
26 The Ninth Plan stresses equity in the provision of basic services. However, currently there are wide disparities in the provision of health, education and safe drinking water - which is unavailable to 41% of the population. Partnerships between government, the private sector and civil society are advocated but there is a reluctance on the part of government to devolve responsibilities. NGO involvement proliferates but NGOs have little accountability.
Civil Service Reform in Nepal
The civil service of Nepal was originally established for land administration, collection of land revenue, maintenance of law and order, and dispensation of justice. The criticisms of the 1992 Administrative Reform Commission report remain true today: the civil service is politicized, inefficient and ineffective. The decision making process is riddled with too many layers, there is a lack of accountability and authority is not properly delegated. Civil service reform (CSR) is needed to enable the service to operate efficiently and effectively in a changing environment and to become instrumental in implementing HMG's development objectives.
Key Issues in Civil Service Reform
The role of government. The Nepal civil service is not large. But it has a very wide mandate, covering a broad range of responsibilities in society and the economy. The service is ill-equipped to undertake this wide role. The role should be re-assessed, and some functions left entirely to the private sector, civil society or local bodies. Other functions should be subcontracted. The government's role should shift from direct intervention towards supervision and regulation. The debate should not therefore focus on retrenchment but on re-orientation and retraining.
Affordability. Pay scales are far too low. HMG's current vision of CSR cannot solve this problem. Nepal will need to increase its domestic revenue to pay for a higher pay bill.
Political Will. There appears to be a fairly broad understanding that CSR is needed. But different groups have different views on what it will mean in practice. There is unwarranted and unspoken expectation that cutting the service by 25 percent will solve most problems, including the pay scale issue. There is also a lack of clear leadership, which would make reform difficult in practice. Another related problem concerns political interference in the civil service, for example the practice of politicians getting involved in the details of staff appointments.
Time Frame. CSR will require many years to develop and implement properly. It is not a once-and-for-all exercise.
Management and Motivation. The low morale in the service is often attributed to low pay. While low pay is undoubtedly a major factor, much else should be done to improve the situation, mainly through taking a number of basic management measures. These would include: clear job descriptions for departments, units and individuals; clear delineation of responsibilities; improved flows of information; improved career planning; and the introduction of performance monitoring and evaluation. These measures will involve a dramatic change in culture which can only be achieved over a number of years, through intensive change management and training.
27 Both the Government and donors should be alert to the political dimension of service delivery and the need to give a voice to poor and disadvantaged people. They should develop approaches which meet technical objectives in ways which reflect best practice in local approaches to organisation and management. But perhaps the key issue in service delivery in Nepal is civil service reform (CSR). CSR itself can achieve important objectives. However, its effect on improved public services would be enhanced by also addressing the closely related issues of public expenditure management, and the introduction of output or performance based budgeting. CSR is covered in the box below.
Personal security in households and communities and better access to justice for poor and disadvantaged peoples.
28 The police force is poorly qualified and trained to deal with the problems of security which the poor face. There are widespread reports of police brutality. The ratio of persons killed in police custody to the total population is one of the highest in south Asia. There is political interference in the day to day running of the police.
29 Experiments are being tried in community policing - so that the police become less of a "force" and more of a "service" - and separate units for crime involving women and children. Some initial results are encouraging but these need to be extended across more districts in the country.
30 Access to legal services is a major problem for the poor and disadvantaged, especially women and dalits. Information about the formal justice system is poor, and there is insufficient legal aid available. Court management is poor. Basic court facilities hardly exist in many districts, qualified legal staff are in short supply, government and political interference is rife (so that, again, the separation of powers in the constitution is not upheld in practice), and judges and courts are alleged to be involved in corruption.
31 Prisoners are held in poor, overcrowded conditions and prison acts as little more than a means of getting criminals out of society for a while - there is no rehabilitative element. Nevertheless, Nepal has one of the lowest serious crime (murder, armed robbery) rates in the region.
32 The poor have little land security: they are often unfairly evicted, harassed, subjected to false accusations of crime, or have their land appropriated by higher caste groups.
33 Although Nepal has signed up to all the major international human rights conventions there has not been sufficient legislative follow-through. There is substantial discrimination against minorities and women. Despite human rights organisations playing an important monitoring role, they lack a strategic approach. Political affiliation of such groups is also a weakness. The Human Rights Commission has been set up in principle but has yet to be given a meaningful form: its role, function and resources all need to be carefully considered.
34 In some areas the country has done well in setting up the necessary human rights legislation. An example is the anti-human trafficking legislation of 1964 and 1986. Although the legislation could be improved perhaps the key issue is the poor implementation of those laws that do exist. A decreasing number of cases are investigated annually, with only 107 investigations in 1996/7. And of 150 cases investigated in 1994/5 only 39 got as far as the courts. Court cases are handled very insensitively: they are held in open session which can force victims to be publicly humiliated; and the victims receive no protection. As a result victims often: change their statement; refuse to testify in court; or fail to appear in court at all.
National and local systems to manage national security and to resolve differences between communities within countries before they become violent conflicts.
35 The so-called "Maoists" have been conducting an armed insurgency directed against the civil powers in Nepal since 1996. The origins of the Maoist movement lie in poverty and the alienation of the people from a government that misappropriates resources and fails to address their needs. The insurgency is focused in particular in the rural areas of mid-Western Nepal, though the violence has been expanding to the Central and Eastern Regions in recent months.
36 Two years ago the government believed that 6 of the 75 districts of Nepal were affected by Maoist violence. The government now qualifies 17 of the districts as "affected" and 14 as "very affected". As at mid-March 2000 1,339 people had been killed because of the conflict, including: 958 suspected Maoists; 153 police; and 228 civilians. The poor have suffered disproportionately from the conflict.
Corruption - a symptom of bad governance
When the six areas described in the text do not function well then corruption is likely to thrive. It has markedly negative effects on investment and on economic growth. It can infiltrate every aspect of governance. Poor people suffer disproportionately from its effects. And it discredits and reduces the efficacy of development policies.
Corruption thrives: when systems for public accountability are weak; when there are big differences between public and private sector pay; and where there is impunity for the corrupt because the police and judiciary are themselves corrupt. Nepal provides just this type of suitable environment.
It appears to be endemic in Nepal.Apart from line ministries corrupt practices are also prevalent within public and private sector enterprises. Corruption is also a major concern in the judicial system. There is widespread belief that politicians and bureaucrats alike are heavily involved in corruption but people feel powerless to do anything about it.
There are two main approaches to tackling corruption. It can best be prevented by addressing its root cause - poor governance. That is, by tackling the agenda provided by the six headings of the paper. In particular a prevention strategy should tackle the two key areas highlighted above: lack of public accountability and transparency; and big differences between public and private sector pay.
It can best be repressed by increasing the probability of being caught and punished. Detection needs to be better and justice swifter. Substantial changes in both laws and regulations are required to combat corruption. The Commission for Investigation of the Abuse of Authority fails to prosecute successfully any corruption cases. The Supreme Court has also not handled a single successful prosecution. The investigation and reporting of corruption cases by the media needs to be better. Parliamentary oversight of standards and conduct should be made more effective - for example by adopting a code of conduct for parliamentarians. Parliamentary Committees should scrutinise government performance and provide accurate and timely reports on government expenditure and reporting.
37 The government uses the Nepal Police to deal with the situation. Most observers agree that the Police are ill-equipped to cope with the conflict. They are poorly trained and poorly paid and are prey to surprise attack. The Police are accused of extra-judicial killings, engineering "disappearances" of suspects and torture. The Maoists kill police, local politicians and civilians, threaten violence and kidnap. People are displaced from their homes and villages and commercial and development activities are adversely affected.
38 The Maoist conflict is the most visible threat to democratic order.. The Government's response has focused on trying to repress the insurgency. This largely single track policy is not working, and instead the Government should increase its use of other approaches, such as negotiations to achieve reconciliation and on increasing development efforts in the regions affected.
Future indicators of good governance
39 Progress made in tackling the areas of governance described above should be measured transparently. All stakeholders - not just Government and donors but also civil society and the poor themselves - should be able to judge progress being made against certain key indicators.
40 This means that the indicators of pro-poor governance should also be developed jointly by all key stakeholders. HMGN could initiate a process by which stakeholders can agree indicators, as well as ways to measure them transparently.
Tackling the issues
41 This paper does not aim to set out detailed prescriptions: that is the responsibility of the Nepalese people, and in particular the responsibility of HMGN. Donors have been criticised in the past, perhaps rightly, for being too keen to set out blueprint solutions. It is perhaps more appropriate for donors to play a role of facilitating Nepalese to come up with their own solutions, and then supporting sound solutions proposed. This approach places a greater burden of responsibility for good governance in the hands of government.
42 However donors themselves are partly responsible for the current state of affairs. Through their assistance they have made it possible for the government to continue poor governance practices. In addition, donors' own procedures and practices have at times contributed to governance problems (e.g., lack of coordination in donor assistance, leading to competition rather than cooperation in dialogue with government and in the selection of projects; overtaxing Nepal's limited administrative capacity through such uncoordinated assistance; distortion of the incentive system through project implementation arrangements which rely heavily on outside technical assistance and functioning outside normal administrative structures; lack of transparency in use of donor funds). Donors are now starting to address such issues but much more remains to be done.
43 The Ninth Plan commits the Government to the governance agenda, aiming "to make the public management clean, lean, transparent, economical, competitive, job-oriented, capable, productive, service-oriented and accountable; to make public resource management proper and effective; and, to encourage the concept of legitimate system[s] of governance and civil society". The Government, as well as other key stakeholders, need urgently to tackle the issues raised in this paper. The donors hope that the Government will set out the concrete steps needed to begin progress in the areas highlighted, and look forward to substantive discussion of them at the 2000 Development Forum. The Forum is an opportunity to start moving towards a comprehensive long term framework for improved governance in Nepal - one within which all partners can work to address pro-poor development in Nepal.
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