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FROM KATHMANDU TO PARIS
A summary of discussions in preparation for the Nepal Development Forum
Kathmandu, March 13-15, 2000
Discussions on Governance and Decentralization
March 13, 2000
The moderator (Dr. Jagadish C. Pokharel, Hon. Member, National Planning Commission) started off by noting how important it was for the participants to respond seriously to the two key issues for the day. The way Nepal addresses them today and in the future will significantly influence the level of assistance donors are prepared to provide. The moderator came back to this theme during the discussion and ended the meeting with it.
Governance
- While some participants raised questions about several details of the governance paper, no one questioned the basic message that poor governance, especially endemic corruption, is a very serious problem that hampers development in Nepal.
- As the Norwegian representative put it very clearly, donors would like to know whether the Government basically agrees with this assessment, and if so how it plans to address it. If it does not agree, then the Government needs to explain that assessment which is contrary to the widely held perception.
- Some promoted the notion that because Nepal is a young democracy, it should be treated like a 10-year old. It should not be expected to achieve much so quickly, and it needs to be encouraged more on what it has achieved. However, donors were generally skeptical of such an analogy, pointing out the leaders of Nepal are as sophisticated as leaders of other countries.
- There was a clear recognition that the onus was on the Government to come up with solutions to the corruption problem. Donors are not about to, nor was it appropriate for them to, offer prescriptions for solving it.
Decentralization
- There was a broadly shared sense that successful decentralization required supporting institutional and social changes, which are not happening in many cases. But, there are examples of success. More needs to be done to learn from such successes and apply the lessons systematically to make decentralization an effective means of achieving poverty reduction as well as good governance.
- Like with fight against corruption, there is a need for Nepal to find its own way to successful decentralization. Because this depends so much on the cultural, social, and economic conditions of the country, experiences of other countries can only show how various decentralized could systems work, not how to get there.
Summary
- The moderator concluded the meeting by noting that donors have already helped by defining the problems broadly. Now the Government must face up to them and come up with credible responses.
Discussion on Economic Management, including Private Sector Development and Financial Sector Reform
March 14, 2000
Consultation Process
- There was a healthy dialogue between civil society representatives and HMG representatives on two process issues.
- While appreciating the importance of this meeting, which is the first of the kind in Nepal, civil society representatives asked why they were discussing donor prepared papers rather than Government prepared papers. To which the latter responded that at this stage donor papers and comments form civil society were being sought as input into the Government papers which are being refined. But, those papers will be put to consultations before NDF in Paris.
- There was also a strong agreement that the Government must now be in the driver's seat in defining and implementing the development strategy, not donors. Nonetheless, input from donors are helpful to HMG, not as the conditions donors impose, but as technical expertise to inform HMG thinking.
Selectivity and Simplicity
- Despite some significant economic reform over the last decade or so, there was a recognition that on one hand there remained a daunting agenda of reform that is necessary to achieve HMG's overarching objective of poverty reduction, and that on the other the track record of implementation of reform had been poor. Therefore, Dr. Shankar Sharma, Hon. Member, National Planning Commission emphasized the critical importance of distilling out of the number of suggestions on the table a list of simple, sharply-prioritized, and implementable reform actions. Failing to do so would undermine the credibility of HMG's assertion that it is breaking from the business as usual and prepared to take more sustained reform actions.
- In this regard, the donor paper as well as many participants emphasized good governance and decentralization (as discussed on Monday), financial sector reform, Civil Service Reform and public expenditure reform, and the environment for private sector development. Participants also noted the special importance of agriculture.
- In particular, the precarious state of RBB and NBL was highlighted. No one challenged the basic notion that these two banks are in serious financial difficulties and failing to address it now is likely to lead to even greater problems in the future. If HMG were to be suddenly forced to deal with the losses of RBB and NBL, the monetary and fiscal fall-out of such an action is likely to be severe. Therefore, there was a broadly shared view that reform of RBB and NBL is urgent and important.
Political Commitment
- Many reform plans have been drawn up but not implemented well. Commitment by HMG to reform the financial sector and public expenditure management remains unmet. The Agricultural Prospective Plan and the Ninth Plan are more recent victims. Most blamed the lack of political commitment for poor reform record. Donors noted that the HMG representatives in the meeting need to convey to political leaders the strong message from this meeting.
- Given the political reality (continued uncertainty, weak commitment, and strong interference in administrative matters), a possible means to sustain reform efforts and improve development impact may be to "institutionalize" development process.
Discussion on the Role of Civil Society
Wednesday, March 15
Paradigm Shift
- In presenting the paper, Dr. Bimal Koirala, Special Secretary, Ministry of Finance, emphasized that HMG recognized the important role that civil society organizations (CSOs) plays in development of Nepal and expressed HMG's wish to strengthen the complementary relationship with them.
- Participants form civil society welcomed the recognition HMG is giving to CSOs and appreciated this first opportunity to exchange views with HMG.
Reservations and Tensions
- While acknowledging the positive contributions made by some CSOs, HMG also expressed concerns about other CSOs with political or other non-developmental goals. HMG was also concerned that transparency and accountability were lacking in many CSOs, especially in regard to the sources and uses of financial resources.
- While appreciating the changing attitude of HMG, the participants from civil society noted that it is still unclear what HMG expects from CSOs. They also expressed concerns about the tendency of HMG to control CSO activities and cumbersome procedures for registration and related requirements. In relation to forestry user groups, one warned that the kind of control discussed by the cabinet recently could kill the effectiveness of the very successful FUGs. They stressed monitoring by HMG and self regulation by CSOs.
- There was much discussion on the concept of the CSO, but no agreed definition emerged.
- It was noted that the apparent ambivalence between CSOs and HMG was normal. The key is to have a process to improve the complementary relationship.
Donor Perspective
- Donors noted the special role CSOs could play in setting examples of good governance and effective and inclusive decentralization. CSOs should articulate in what way they can maximize their contribution to development that would complement HMG programs.
- Donors also noted that the Government needs to clarify how it want to involve CSOs in poverty reduction and develop an effective way to work with them.
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