Foreign Aid and the making of Democracy in Nepal

Foreign Aid and the making of Democracy in Nepal Prabhash Devkota and Jan Goossenaerts This book is for sale at http://leanpub.com/foreignaidandthemakingofdemocracyinnepal This version was published on 2014-02-04 ISBN 978-9937-2-7289-6 This is a Leanpub book. Leanpub empowers authors and publishers with the Lean Publishing process. Lean Publishing is the act of publishing an in-progress ebook using lightweight tools and many iterations to get reader feedback, pivot until you have the right book and build traction once you do. ©2013 - 2014 The copyright of the papers is with Alliance for Aid Monitor Nepal and ActionAidInternational Nepal Tweet This Book! Please help Prabhash Devkota and Jan Goossenaerts by spreading the word about this book on Twitter! The suggested hashtag for this book is #nepalmaprajatantra. Find out what other people are saying about the book by clicking on this link to search for this hashtag on Twitter: https://twitter.com/search?q=#nepalmaprajatantra i Foreign Aid and the making of Democracy in Nepal Edited by: Prabhash Devkota Jan Goossenaerts Language Edited by: Melody Smith (US) Cover Photos: Alliance for Aid Monitor Nepal Editorial and production support by: Wikinetix (Belgium) Typeset at Leanpub (Canada) where electronic version is for sale Printed at: Express Colour, Kathmandu Publication initiative and printing Support by: ActionAid International Nepal, Lazimpat, Kathmandu Publisher: Alliance for Aid Monitor Nepal Third Floor, Kala Mandir Bhawan Kupondole, Lalitpur. P.O. Box 2719 Tel: +977-1-5011069 E-mail: info@aidmonitor.org.np www.aidmonitor.org.np © Copyright: 2013, Alliance for Aid Monitor Nepal and ActionAid International Nepal All rights reserved. Except for brief quotations used for purposes of review or scholarly citation, no part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from Alliance for Aid Monitor Nepal or ActionAid International Nepal. Use and dissemination of articles is encouraged; however, reproduced copies may not be used for commercial purposes. Printed in Nepal Price NRs. 350 (print, in Nepal) ISBN 978-9937-2-7288-9 (print) First Edition 2013 (2070 BS) ISBN 978-9937-2-7289-6 (e-book, published via Leanpub https://leanpub.com/) Contents Preface Prof. Dr. Keshab Raj Khadka iv Some words Bimal Kumar Phnuyal vi List of abbreviations viii Introduction xii 1 Aid and Democracy in Nepal Himalaya SJB Rana 1 2 Aid Politics and Democracy Bharat Pokharel 3 3 Challenges of Statebuilding and the Consequences of External Forces in Nepal Chandra D. Bhatta 19 4 Poverty Alleviation Status in South Asia during 1990-2015 and Options Dr Y B Thapa 35 5 Deepening Democracy at the Local Level Dwarika N. Dhungel, Mahendra Raj Sapkota and Pradyumna Prasad Regmi 43 6 Community Forestry: A Model of Grassroot Democracy - Nepal’s own Innovation and the Role of Development Aid Dr Bharat K Pokharel 73 7 External Forces and International Cooperation in the Context of current Constitutional Instability and Development in Nepal Ganesh Dutta Bhatta 87 8 Foreign Aid in Nepal’s Democracy Struggle Uddhab Pyakurel, PhD 99 9 Politics of Informal Economy in Nepal Dev Raj Dahal 107 10 Fiscal Policy Issues in Nepal Prof. Dr. Madan Kumar Dahal 115 11 Foreign Aid and Democratization in Nepal: Culture of Dependency Prof. Meena Vaidya Malla, Ph.D 129 12 Strong Legal Regime, a Necessity for Effectiveness of Foreign Aid Kashi Raj Dahal 139 13 Foreign Aid and Democracy Dr. Govind Prasad Kusum 145 14 Foreign Aid: a Hot Button Issue Prof. Dr. Sohan Kumar Karna 153 15 Does Foreign Aid cause Gross Domestic Product? Empirical Evidence Dr. Kamal Raj Dhungel 179 iii Contents 16 Donor Obligation for Public Sector Reform in Nepal Ganesh P. Adhikari, PhD and Prabhash Devkota 187 17 Civil Society as a Democracy-Building Project in Nepal Tara Dahal 199 18 Democracy and Foreign Aid – Disconnect between Democratic Aspirations and Free-Market Policy Prescriptions Meena Acharya 207 19 Aid Effectiveness and Country Ownership: Need of Democratic Governance in Nepal Vidyadhar Mallik 227 20 A Survey on the Impact of Foreign Aid on Democracy in Nepal Jan Goossenaerts, PhD and Prabhash Devkota 233 21 Contributors 245 Preface This study covering foreign aid direct investment in Nepal within the last 5 decades was conducted with an aim to bring some critical issues around aid politics and its direct link up with democracy, democracy making in Nepal, the role of foreign aid as a positive or negative catalyst of democracy, and issue based impacts on health, education, forestry amongst others. Moreover, the aim of the study was to initiate a discourse on aid governance and politics from the larger arena of Political Economy and to find the gaps in the democratizing of our institutions, the institutionalization of democracy from the family to the country system. AAMN believes that in democratic systems and governance there is the political space of the unheard, neglected and socially excluded. There are marginalized, women, Dalit, indigenous who should also enjoy the dignified life. Growing dissatisfaction with the development models the country is going through and the realization of vast gaps between haves and have nots made AAMN and its likeminded to think over the polity minutely. The likeminded of our network realized that something has to be done outright as time for it is in our forefront, the country is in transition. Nepal, has a politically federal democratic government without having any indicators of democracy. AAMN conducted a series of interactions with the likeminded about what exactly can be prescribed in this deteriorating time. AAMN published several e-bulletins that seek to promote a wider discourse on the subject. It created pressure among many stakeholders. Even the government high officials choose the sensitive topics. No one hesitated on saying that a knowledge initiative was needed as part of a wider discourse. So the network and likeminded institutions promised to address the topics within their area of work and intellectuals/think tanks became ready to write their papers, with in return a minimal remuneration for stationary. ActionAid International Nepal financed the initiative and publication; and AAMN generated a small supporting fund. The efforts of many people delivered the book that is in your hand today. AAMN wants to make sure it continues its journey. On the road we are walking and where many individuals from foreign nations also walk together with us. In the meantime we want to accept the reality that the book may not be of the standard of your choice but we say proudly that it is better than the previous one. Similarly the challenge of improvement is always there so we promise for that. In this series AAMN is publishing another book as the first one reaches your hand. All together 35 papers were contributed to our study, and if compiled in one volume that would have been bulky and not user-friendly so we decided to make part two with thematic papers. Personally AAMN expresses its sincere thanks and gratitude to the country director of ActionAid International Nepal Mr. Bimal Kumar Phnuyal whose regular suggestions and advices have enriched our study and the resulting book, similarly to Ganga Duttaa Awasthi, Dwarika Nath Dhungel, Dev Raj Dahal, and the entire team of AAMN. Jan Goossenaerts and Melody Smith, and the authors became strong pillars of our initiative. The continuous efforts of Prabhash Devkota in completing the complete task are highly recognized and AAMN expects his energetic efforts in future endeavors too. Our special thanks go to all the other unseen hands that make it happen. Many authors have conducted focus group discussions, interviews and surveys - so all the respondents and participants are deeply thanked. Overall the contribution of Mr. Birkha Pun of AAMN became instrumental to make it happen. Prof. Dr. Keshab Raj Khadka Chair-person Alliance for Aid Monitor Nepal November, 2013 Preface v Some words Has ‘development aid’ worked for a developing country like Nepal to prosper; added value towards democratization of its governing institutions; contributed to empower the marginalized sections of its population; and, enabled to stand as a responsible member of the international community in the contemporary world? These are some of the most basic and pertinent questions to be deliberated upon in the present context of ‘Aid and Development’ discourse in Nepal. Experiences across the world show that any particular ‘aid-package’ in itself cannot be termed ‘good’ or ‘bad’, unless we evaluate the impacts of those aid packages in the light of above four questions. ActionAid, internationally, has been advocating for ‘Real Aid’, which can positively respond to above key questions, with the aim of progressively reducing ‘aid dependency’ on the part of developing countries; as well as engaging with bilateral and multilateral development agencies to devise transparent, accountable and effective aid governing mechanisms both at donor and host country level. First of all, ‘development aid’ must be looked at from the perspective and spirit of ‘international cooperation’, rather than through the typical conventional lens of ‘donor-recipient’ charity attitude. The historical global level report prepared by the remarkable group of international statesmen and leaders led by Willy Brandt, the former German Chancellor, back in 1980, called “North-South: A Programme for Survival” had stated that ‘To help conquer poverty and hunger and to create a more just and a more effective international economic system, fundamental structural changes must be made in the markets in which developing countries are suppliers – of commodities, of manufacturers, of labour – and in which they are customers – for capital and technology”. The report also highlighted that such changes were also required in the mechanisms and institutions which generate and distribute international finance, investment and liquidity. It has been absolutely clear that “Aid is means, and not an end in itself”. A bad ‘aid-package’ even exacerbates the social, political and economic environment of a recipient country, at the same time giving bad experience to the resource providing agency or country. Therefore, there is a huge need for deeper deliberations on dominant models of aid mechanisms, development effectiveness of such aided projects, and their overall impacts amongst policy makers, international development partners, academics, civil society actors and social movements in the present context of Nepal. We hope that this publication will add some positive value towards that direction. The book has tried to draw and analyze the linkage of aid within various aspects of people’s lives. The policy analysis and the evidences from grounded reality have been presented coherently which will be helpful to understand the macro and micro context of aid politics. An idea behind these efforts is of course to map out the given context, contribute to deepen the discourse on aid at different levels, and to explore more progressive modalities of aid paradigms. The chapters seem to have raised pertinent questions around aid effectiveness and democracy, politics of informal economy, culture of dependency, fiscal policy issues, poverty alleviation and contextual innovations etc. I hope, this will be a useful document for social thinkers, academia, policy makers and human rights activists in understanding the pros and cons of ongoing foreign-aided development practices. We are very much thankful to expose the fact that, this is an outcome of constructive collaboration of ActionAid International Nepal (AAIN) and Alliance for Aid Monitor Nepal (AAMN) in grounding the aid discourse. AAMN has established itself as a vibrant common platform and resource organization on the aid sector. I would appreciate the efforts made by all the paper contributors who supported from equal footage in shaping articles for this book. My special gratitude goes to AAMN, especially to Mr. Prabhash Devkota and his team, and also to Dr Keshav Khadka for his guidance and leadership to AAMN. I would Some words vii also like to convey my special thanks to all AAIN colleagues, especially to Mr. Govinda Prasad Acharya and team for their regular support and engagement. Finally, I would like to remember all those who have contributed from their respective capacities to make this great achievement. Bimal Kumar Phnuyal Country Director ActionAid International Nepal November, 2013 List of Abbreviations AAA ADB AIC AMP AMMAA APTA BIMSTEC BPfA CA CAC CASU CRB CBOs CBS CEDAW CFUGs CIAA CPN-UML COFSUN CPA CSF CSOs DANIDA DANIDA/HUGOU DC DDC DDP DFID DIMC DOF DPs EC EFA EPZ ESCAP ESP EU FA FACD FAO FECOFUN FDI FSSS FY GAAP GCF GESI GDP Accra Agenda of Actions Asian Development Bank Akaike Information Criteria Aid Management Platform Agreement on Monitoring of the Management of Arms and Armed Personnel Asia-Pacific Trade Agreement Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation Beijing Platform for Action Constituent Assembly Citizen Awareness Center Constituent Assembly Support Unit Central Revenue Board Community Based Organizations Central Bureau of Statistics Committee on the Elimination of Discrimination against Women Community Forestry User Group Commission for Investigation of Abuse of Authority Communist Party of Nepal- United Marxist and Leninist Community Forestry Supporter Networks Nepal Comprehensive Peace Agreement Countercyclical Support Fund Civil Society Organizations Danish International Development Agency Danish International Development Agency/Human Rights and Good Governance Advisory Unit District Council District Development Committee District Development Plan Department for International Development Decentralization Implementation Monitoring Committee Department of Forests Development Partners European Commission Education for All Export Promotion Zones United Nations Economic and Social Commission for Asia and the Pacific Enabling State Programme European Union Foreign Aid Foreign Aid Co-ordination Division Food and Agriculture Organization of the United Nations Federation of Community Forestry Users Nepal Foreign Direct Investment Financial Sector Strategy Statement Fiscal Year Governance Accountability Action Plan Gross Capital Formation Gender Equality and Social Inclusion Policy Gross Domestic Product ix List of Abbreviations GNI GON GRP HCR HKH ICA ICOR IDA IFAD IFC IGEG IIDEA ILO IMF INGOs IPCs IPL IPFC ISN JICA LGCDP LGBs LGP LSGA LSGR MC MC MDGs MoAC MoF MoFALD MoWR MPFS MTEF NAG NC NDF NDCM NEFIN NGOs NORAD NPC NPL NRB ODA OECD-DAC OGA OPEC PD PDS PDDP PERC PMO PPP PRGF Gross National Income Government of Nepal Governance Reform Programme Head Count Ratio Hindu Kush Himalaya Investment Climate Assessment Incremental Capital Output Ratio International Development Assistance International Fund for Agricultural Development International Financial Cooperation Inter-Governmental Expert Group International Institute for Democratic and Electoral Assistance International Labour Organization International Monetary Fund International Non Governmental Organizations Integrated Planning Committees Income Poverty Line Integrated Plan Formulation Committee Interim Strategy Note Japan International Cooperation Agency Local Governance and Community Development Programme Local Governance Bodies Local Governance Programme Local Self Governance Act Local Self Governance Rule Municipal Council Management Committee Millennium Development Goals Ministry of Agriculture and Cooperatives Ministry of Finance Ministry of Federal Affairs and Local Development Ministry of Water Resources Master Plan for the Forestry Sector Medium Term Expenditure Framework Nepal Aid Group Nepali Congress Nepal Development Forum Nepal Donor Consultation Meeting Nepal Federation of Indigenous Nationalities Non Governmental Organizations Norwegian Agency for Development Cooperation National Planning Commission National Poverty Line Nepal Rastra Bank Official Development Assistance Organization for Economic Co-operation and Development- Development Assistance Committee Office of the Auditor General Organization of the Petroleum Exporting Countries Paris Declaration on Aid Effectiveness Peace and Development Strategy Participatory District Development Programme Public Expenditure Review Commission Prime Minister’s Office Public Private Partnership Poverty Reduction Growth Facility x List of Abbreviations PRSC PRSP PSC REFLECT ROSA SAARC SAB SAFTA SDC SDF SDGs SEZs SMEs SNV SWAPs TA TER TYIP TYIDP UCPN-Maoist UC UNCTAD UNDP UNESCO UNFPA UNMIN UNS UNSCR WCF VAT VCDP VDC VLCF WB WFS WHO WTO Poverty Reduction Support Credit Poverty Reduction Strategy Paper Public Service Commission Regenerated Freirean Literacy through Empowering Community Technique Rest of South Asia South Asian Association for Regional Cooperation South Asian Bank South Asian Free Trade Area Swiss Agency for Development and Cooperation SAARC Development Fund Sustainable Development Goals Special Economic Zones Small and Medium Enterprises Netherlands Development Organization Sector-Wide Approaches Technical Assistance Tax Effort Ratio Three Year Interim Plan Three Year Interim Development Plan United Communist Party of Nepal-Maoist User’s Committee United Nations Conference on Trade and Development United Nations Development Programme United Nations Educational, Scientific and Cultural Organization United Nations Population Fund United Nations Mission in Nepal United Nations Systems United Nations Security Council Resolution Ward Citizen Forum Value Added Tax Vulnerable Communities Development Programme Village Development Committee Village Level Citizen Forum World Bank World Food Summit World Health Organization World Trade Organization List of Abbreviations xi Introduction In the political and development climate that Nepal currently experiences, an in-depth analysis of the political economy of the country can make a valuable contribution. If policymakers and development planners hope to meet the expectations of the Nepalese citizens they will need to understand the problems and their causes as fully as possible. Democracy and development failures have been very common in countries that have gone through major political conflicts and governance transitions and are ethnically rich and diverse. Being land-locked also implies particular challenges as a country wishes to join the global economy. The June 2013 Nepal Democracy Survey jointly conducted by the Nepal chapter of State of Democracy in South Asia, and International Institute for Democracy and Electoral Assistance (Sweden) shows that respondents overwhelmingly (94%) approved of a system of government led by the people’s elected representatives, yet they have a certain level of frustration and disillusionment due to the expiration of the Constituent Assembly (CA) without promulgating a new constitution and due to the present state of state of affairs which is perceived as ‘undemocratic’ by 47% of the respondents. Other favorable signals from the survey include (i) the respondents’ understanding of democracy, their awareness of the major national agendas and their participation in public affairs; (ii) the perceived improvement in the condition of the excluded groups (acknowledged by 72% of the surveyed citizens) with an overwhelming majority (80–98%) of citizens surveyed listing women, Dalits, Janajatis, Madheshis and Muslims, along with people from backward regions as groups deserving preferential treatment from the government; and (iii) the attitudes towards identity, state restructuring, federalism and governance, where opinions on dividing topics show more convergence and less division than in the 2007 survey. For several reasons these favorable signals should not make donors, policy makers and the elected representatives complacent. Regarding the institutional foundations of a democratic Nepal the CA-II is likely to address the constitution drafting in a more favorable climate as also political parties are more committed to multi-party competition and accepted democratic values and norms, and as polarized opinions and expectations on solving all problems simply by restructuring the state and introducing federalism have slowly made room for a more realistic and multi-faceted agenda for discussion. On the other hand the challenge to draft a constitution amidst the various forces, democracy gaps and issues remains an enormous challenge. Only after the constitutional question has been resolved, empowered and legitimate national government and local government units can fully dedicate themselves to addressing the most important national and local problems regarding basic amenities essential to meet family needs (most important local: 81%; national: 43%) and economic issues (local: 10%; national: 32%). The June 2013 Nepal Democracy Survey shows that respondents of the survey have high expectations regarding the family needs that government should address: employment (most important for 21%; highest rate by Madheshi community: 26%; and highly educated: 25%), water (19%; senior 60+: 25%, Pahadi: 23%), roads (18%; Madheshi ethnicity: 22%; Madheshi community: 21%), education (16%; highly educated: 22%; Madheshi: 21%), electricity (13%; excluded groups: 14%) and health care (13%; highly educated: 16% and women: 14%). For delivering on these expectations, the Government of Nepal will continue to need foreign aid. And that foreign aid will have to meet effectiveness criteria to the fullest extent. Alongside having delivered many genuine contributions to Nepal’s development, many of these are also acknowledged in the papers of this volume, foreign aid has also failed in many instances, with reduced Introduction xiii effectiveness as a result. Several trends of the past decades must be reviewed by donors. Democracy and aid failures may result from a variety of interacting factors. When conducting their next aid-effectiveness review, policy makers and donors need to understand problems as fully as possible and discover the rootcauses that underlie those problems and the mechanisms that feed vicious circles draining development resources. Before introducing the themes addressed by the contributors to this volume, let us first note that foreign aid’s impact on the development of democracy in recipient countries is generally difficult to achieve. The key policy messages of (OECD Development Assistance Committee, 2011) start by stating that: “There is increasing recognition that much of this support (donors spending over $10 billion annually on governance support of which accountability is a common component)has made inaccurate assumptions about the nature of democratic and institutional transitions. This has translated into commitments to Western models and technical approaches that use blueprints, templates and best practice approaches”. Context and evidence Each paper in this volume has been written by a close observer of foreign aid and/or democracy in Nepal and makes a contribution to the in-depth understanding of a theme. Together the papers address background, evidence and recommendations via varying themes. Well aware of their area of expertise, and the piecemeal bit of evidence each can bring to the “foreign aid and democracy problem solving” mission, the contributors have avoided the “prescription before diagnosis” trap, and rather have proposed recommendations on the basis of the evidence they have presented in their papers. Using the metaphor of a puzzle, it is not surprising that these pieces do not fit together neatly. Yet, any reader of this volume, and anyone interested in a peaceful and prosperous future of Nepal may like to know which institutional decisions of the forthcoming legislature, and which foreign aid decisions by donors would best (i) reflect awareness of the integral evidence and (ii) take into consideration the integral recommendations put forward by experts and observers. To facilitate such a wish for comprehension we have made an effort to fit the pieces together as well as we could within the little time available, and indicate in which paper is which evidence and which kind of recommendations. In this introduction, for the clarity of the emerging collaborative diagnostic and prescriptive hypotheses we have separated the diagnosis-related evidence from the prescriptionrelated recommendations. After all, each paper will bring its own train of reasoning connecting both aspects. Contradictions in the evidence would indicate errors, and these should be corrected. Where recommendations diverge, decision makers and donors should further analyze the supporting evidence and the issues at hand. Even convergent recommendations should be handled with care, yet very strong arguments had better be present when putting these aside. We have ordered papers in accordance with their thematic focus or the major area of evidence they address. On the Historical and political context of foreign aid to Nepal A first set of papers address the historical and political context of foreign aid to Nepal In “Aid and Democracy in Nepal,” Himalay Shumsher J.B. Rana, a long retired senior governance and development practitioner, offers a general and succinct description of the results of multilateral and bilateral technical assistance to Nepal. He challenges the Nepalese administrators to channel foreign aid to the development of Nepal, which is sustainable and protective of the country’s deteriorating environment. Introduction xiv In “Aid Politics and Democracy,” Bharat Pokharel draws together observations and conclusions from the realms of development studies, political science, international relations and economics concerning the roles of foreign aid in politics. The author concludes that Nepal’s foreign aid policies need to be put into the perspective provided by the aid practices, both past and present, of Western industrialized nations, as well as the context of Nepal’s own domestic political forces. In “Challenges of State Building and the consequences of External forces in Nepal,” Chandra D. Bhatta explains and analyzes internal and external factors that are at the origin of a current political process that seems incapable to bridge the “sovereignty gap, the authority gap, and the legitimacy gap” in post-conflict Nepal. In “Poverty alleviation Status in South Asia during 1990-2015 and options,” Y B Thappa, a former member of the National Planning Commission of Nepal, compares the poverty trends in Nepal with those in other South Asian countries. The paper offers an assessment of the Millennium Development Goals (MDGs) and the the SAARC Development Goals (SDGs) indicators’ livelihood pillars. Then it turns to the memberstates’ approaches to economic growth and their inclusive development activities. The study concludes with some methods to augment the regional resources, products and services for achieving targets of poverty alleviation, economic growth and endowment enrichment. Democratic institutions at the local level Two papers focus on the experience with democratic institutions at the local level. This experience may offer a partial explanation for the high rates of respondents’ understanding of democracy, their awareness of the major national agendas and their participation in public affairs as observed in the 2013 Nepal Democracy Survey. In “Deepening Democracy at the local level” Dwarika Nath Dhungel, Mahendra Raj Sapkota and Pradyumna Prasad Regmi describe the working of the local governance bodies that have been very familiar for the Nepalese people for more than five decades: the Village Development Committee (VDC) in rural areas, the municipalities in urban areas, and the District Development Committee at the district level. In “Community forestry: A model of grassroot democracy - Nepal’s own innovation and the role of development aid” Bharat K Pokharel provides an analysis of Nepal’s community forestry at the grassroot level from which one can learn the concepts, processes, methods and tools related to local democracy for resource governance. The paper describes some opportunities to transform Nepali society by capitalising the best practices of community level democracy. Evaluating the contribution of foreign aid to democracy in Nepal Many of the papers in this volume provided evidence and analysis regarding the contribution of foreign aid to democracy in Nepal. As an input for a diagnostic hypothesis regarding which aspects of foreign aid need improvement in order to put in motion the virtuous circles of inclusive development and democracy in Nepal, we summarize analysis and evidence from the papers by classifying it with respect to these four “consensus” common principles: • Focus on results: public sector and development investments and efforts must have a lasting impact on eradicating poverty and reducing inequality, on sustainable development, and on enhancing developing countries’ capacities, aligned with the priorities and policies of developing countries themselves. Under this heading we also pay attention to failures and to undesired effects of foreign aid. Introduction xv • Inclusive development partnerships: Openness, trust, and mutual respect and learning lie at the core of effective partnerships in support of development goals, recognising the different and complementary roles of all actors. • Ownership of development priorities by the target constituency: Partnerships for development are much more likely to succeed if they are led by the target constituency, reflecting their collective value orientations, and implementing approaches that are tailored to country-฀specific situations and needs. • Transparency and accountability to each other: Mutual accountability and accountability to the intended beneficiaries of our co-฀operation, as well as to our respective citizens, organisations, constituents and shareholders, is critical to delivering results. Transparent practices form the basis for enhanced accountability. Failures, undesired effects and results Failures In his paper “External forces and international cooperation in the context of current constitutional instability and development in Nepal” Ganesh Dutta Bhatta summarizes the history of constitutional law in Nepal before describing the failure of the Constitution assembly and a constitution drafting process in which major international interests were involved directly or indirectly. The author offers a detailed analysis of the weaknesses in the mobilization of international aid in this failed constitution drafting process. Uddhab Pyakurel in “Foreign Aid in Nepal’s Democracy Struggle” mentions that a Finance Ministry official admitted recently that there had been no progress in enforcing international aid guidelines. Though international agreements made by donors were aimed at making foreign aid more efficient, coordinated, and effective through increased donor engagement with government agencies, parliament, and civil society, the author calls it unfortunate that no one witnesses a ray of hope in Nepal. Devraj Dahal in “Politics of Informal Economy” indicates that in the context of growing youth population, declining public budget, rural push of poverty and foreign pull of opportunity, the Nepalese state often lagged in providing a supportive policy framework for their productive employment. Naturally, this population has to engage in informal sectors. Informal sector continues to grow in direct proportion to the decline of formal economy owing to the elites interest in privatization and denationalization of industries and de-regulation import laws, negative effects of the global economic crisis, protracted political instability and the democratic deficits in the country. In “Fiscal Policy Issues in Nepal,” Madan Kumar Dahal describes the fiscal situation in Nepal and compares it with that in other South Asian countries. He then addresses the major problems in Nepal’s fiscal policy including the poor implementation of revenue policies, an extremely limited tax base due to erosion in the legal based and the numerous tax shelters, huge leakages in tax collection due to a lack of transparency and simplicity in procedures; and the lack of computerized tax systems, records of property (land and building) and business transactions with the Inland Revenue Department. Undesired effects Meena Vaidya Malla in “Foreign Aid and Democratization in Nepal: Culture of Dependency” addresses the culture of economic and psychological dependency that Foreign Aid has induced in Nepal: Nepal’s historical economic dependency on foreign aid has now transcended into the social and political aspects: the political actors substantively interact with and depend more upon the donors than their domestic constituency. The donors have bypassed the state sovereignty in policy decisions in the name of engaging civil society and grassroots organizations. The dependency thus imbues governance with the values of Introduction xvi status quo and, consequently, makes it unresponsive to citizens’ concern. If this situation continues, the condition of nation and citizens are sure to worsen and political culture and behaviour to suit the present democratic polity hardly develops. Kashi Raj Dahal, in “A strong legal regime, a necessity for the effectiveness of foreign aid” first summarizes observations from international experts who are critical about the effectiveness of foreign aid in many receiving countries. The latter are often getting poorer and poorer in spite of receiving more foreign aid. This is also the situation in Nepal which has a low capacity to utilize the aid it receives. A lasting impact on eradicating poverty and reducing inequality is unlikely as political interference and corruption have severely debilitated the poverty relief efforts in Nepal. Another results-eroding factor is that donor countries and INGOs provide assistance based on their vested interest, which do not necessarily coincide with the sovereignty, integrity, national interest, and the greater welfare of the people. Results, but… Govind Prasad Kusum in “Foreign Aid and Democracy” addresses the donor communities’ role in establishing peace and restoring public properties in post conflict Nepal. He notes that the promotion of economic growth and the reduction of poverty is only partially successful due to the poor performance of the country’s bureaucracy and corruption. Sohan Kumar Karna in “Foreign Aid: a hot button issue” gives a detailed overview of the impact of foreign aid on the Nepalese economy, the magnitude and trend over the past decades of grants and loans, the evolution of foreign aid commitment and disbursement, and a sector wise composition of foreign aid. He notes that almost all the highways and communication networks, public industrial enterprises, agricultural and rural development projects, and development institutions are the result of foreign aid. In “Does Foreign Aid cause Gross Domestic Product? Empirical evidence” Kamal Raj Dhungel describes the fiscal policy trap in which poverty leads to low public investments and low public investments reinforce poverty. At the beginning, aid in the form of grants played an important role in the construction of infrastructure projects and establishment of some of the key basic industries. But foreign assistance in the form of grants has been changing over time. Grant at large is being replaced by loans as bilateral donors are gradually changing into multilateral. In this context, the author investigates the causal relationship between GDP and foreign aid in the short and long run. After the peace process started in 2006, Nepal has received more foreign aid than ever. Unfortunately the foreign aid has not been utilized in any of development activities but rather in solving political disagreements. This has led to a lack of opportunities in the country. Businesses hesitate to invest as the future is uncertain and the risk is high. The author concludes that more than anything the country needs stability. Aid that is not delivering this, as more aid implies greater economic imbalance and higher debt, is not working for Nepal. Without prosperity from economic activities it is impossible to achieve growth. Foreign aid (in its past forms) is not the answer to the growth of Nepal. Research in 2011 about the Efficiency of Development Actors in Good Governance by Ganesh P. Adhikari and Prabhash Devkota is reported about in “Donor Obligation for Public Sector Reform in Nepal.” It shows that respondents considered local authorities as the best performer and donors as the least performer in demonstrating good governance. The lowest level of donor efficiency indirectly indicates that turn-key projects executed by donor agencies are not effective in terms of good governance, particularly from the recipient’s perspective. Inclusive development partnerships Meena Vaidya Malla in “Foreign Aid and Democratization in Nepal: Culture of Dependency” laments that a large number of populations are economically, socially and politically excluded from the mainstream of Introduction xvii development. They have physically participated in political and development process but neither they are able to put their view nor are their voices heard. Periodic development plans spanning a period of six decades have failed to make a significant change in the living standard of people. Over the past decade, the inequality between rich and poor has increased considerably. Any country whose democracy is installed without acquiring economic prosperity is likely to risk falling prey to its enemies, the worst being increasing poverty and decreasing participation. Uddhab Pyakurel in “Foreign Aid in Nepal’s Democracy Struggle” indicates that in spite of Nepal being one of the most agriculture-dominated economies in Asia, the agriculture and rural sector continue to be neglected by the government. The vulnerability and rising poverty levels are worst in the more remote areas where development efforts have been ineffective or nonexistent. Owing to low productivity and the deteriorating rural economy coupled with lack of employment, Nepalese people increasingly depend on remittances from relatives working abroad. The dependency on development aid is because of the country’s inability to raise sufficient domestic revenue and because of a lack of necessary resources, especially its incapacity in harnessing its natural resources. Devraj Dahal in “Politics of Informal Economy” raises that the informal economy is the biggest employer of the Nepal’s workforce, yet it is deliberately excluded from statistical monitoring, protection and regulation by the state authorities. This exposes the informal sectors and their workforce to multidimensional vulnerabilities to the abuse of their rights, absence of entitlements, remuneration, paid leisure, maternity leave, health and safety, pension and adequate living wage for sustainable livelihood. This author writes about the “urban bias” in development policies and resource allocation of the donors, the state, employers and even labor unions as development is seen until recently as improved economic growth, not the amelioration of structural injustice through liberation, entitlements and fairer justice for individuals, communities and the state. Ownership of development priorities by the target constituency In “Community forestry: A model of grassroot democracy - Nepal’s own innovation and the role of development aid” Bharat K Pokharel recognizes that the encounter between change agents and traditional forces, social structure and feudal organisational culture tends to hinder the change process that is taking place in terms of the practice of sustainable management of forest resources, inclusive, pro-poor and gender responsive forest governance at the grassroot level. Although community forestry is a model of grassroot democracy and local governance, a foundation for the transformation of Nepali society from the bottom, it faces many challenges because it has to operate within the forestry sector, the larger government’s bureaucratic set up and within a difficult national context of unstable transitional political environment and feudal social structure. In “Deepening Democracy at the local level” Dwarika Nath Dhungel, Mahendra Raj Sapkota and Pradyumna Prasad Regmi describe the activities related to demand-strengthening and citizen empowerment, especially the marginalized sections of the society in the planning process of the LGBs, are the important components of this program. The Ward Citizen Forum (WCF) and the Citizen Awareness Center (CAC) are institutional arrangements made at the VDC and Municipality under this component. The WCF and CAC have been dealt with in the context of the planning process of the LGBs. Govind Prasad Kusum in “Foreign Aid and Democracy” raises (i) that the democratic system is too weak to handle the modalities of aid, a situation which creates comforts for corruption and fraudulence; and (ii) Aid conditionalities reduce the space for national political decision making and its proper implementation; and (iii) the ineffective monitoring system of the Government creates a congenial environment to the INGOs to play with policy lacunas. Introduction xviii In “Aid Effectiveness and Country Ownership: Need of Democratic Governance in Nepal” Vidyadhar Mallik focuses on the origin of this principle and how it has been addressed in Nepal’s foreign aid policy. Surveys conducted in the context of the monitoring of the Paris Declaration show limited progress in Nepal and highlight major challenges in aid effectiveness. The author describes the impact on development effectiveness and public financial management and corruption of the present situation in Nepal without elected institutions, and without properly working accountability structures and judiciary. Tara Dahal in “Civil Society as a Democracy-Building Project in Nepal” claims that the bulk of Nepalese civil societies bear the potential to carry out an impulse of virtuous society to democratize, civilize and reduce social, economic and political gaps across various sections of people through righteous public action. The plurality of civil society in Nepal reflects the diversity of Nepalese societies’ needs and conditions and, therefore, multi-dimensional level of action from advocacy, education, communication to relief, livelihood, rehabilitation and relationship-building measures. Yet, owing to the inability of the Nepali state to enforce security, the rule of law and protect the rights of citizens, the international donor community treats it as a fragile state and designed its aid policies accordingly. Meena Acharya in “Democracy and Foreign Aid – disconnect between democratic aspirations and free-market policy prescription” answers four questions in the context of 60 years of Nepals political history since 1951. To the question whether the volume of foreign aid changed with the system of governance in the country, the answer is that available information does not show any such connection. On the questions whether the institutional and policy packages that accompanied the aid flow were democratically discussed, their fitness and sustainability evaluated in the specific country context, and whether the aid packages and the policy recommendations matched the needs and aspiration of the people in the country, the answer is that until about the late 1990s, foreign aid packages were rarely contextualized to Nepal’s political or economic realities, nor did they match the needs and aspirations of the people. The answer to the question whether the economic packages introduced were discussed by the political representatives and voted by the people in Nepal is that until the late 1990’s these were not discussed or voted by the people or by their political representatives. Though the situation has started to change with MDGs, PRSP, and Aid Effectiveness Agenda, the policies and programs are still based on the assumption of the primary role of the private sector as the engine of growth, and an unsustainable model of capitalist or social democratic models, which themselves are facing multiple crises. Transparency and accountability to each other Govind Prasad Kusum in “Foreign Aid and Democracy” contrasts the external and internal, hidden, intention of donors and laments that the latter threatens the security and weakens the governments of developing countries, including Nepal. Vidyadhar Mallik conjectures that any efforts by the development partners (donors) for capacity building or supply side strengthening ultimately support and strengthen only petty interests of unaccountable bureaucrats and hand-picked politicians while fear of investments in demand side/voice mobilization with grass-root level communities constantly keep weakening the initiatives of community organizations and that of civil society. The Way forward The survey on the impact of foreign aid on democracy in Nepal by the editors of this volume was based on the contents of OECD DAC studies on the topic. The survey results show that respondents were rather supportive of the range of topics that were proposed as enablers for democratic and institutional transitions: Introduction • • • • • • • • • xix Make support to the accountability system long-term Promote citizen access to media and mobile technologies as well as citizens’ media literacy Ensure that accountability support efforts strengthen the parliament Ensuring local ownership of development aid projects Ensure that accountability support efforts complement one another Encourage links between media institutions and the rest of civil society Support independent, sustainable, and capable local media Technical assistance to political parties International elections assistance Our authors go a long way in translating these rather generic propositions into more concrete recommendations. Democratic values The below key recommendations should be considered as inputs for a prescriptive hypothesis for improving the contribution of foreign aid to democracy in Nepal. The Ward Citizen Forum (WCF) and the Citizen Awareness Center (CAC) described in Dhungel’s paper are institutional arrangements made at the VDC and Municipality that should be further strengthened in an approach to more inclusive determination of development priorities. Nearly all Nepalese people are familiar with their local governance bodies. In “Community forestry: A model of grassroot democracy - Nepal’s own innovation and the role of development aid” Bharat K Pokharel proposes the community forestry institutions as a model of grassroot democracy and local governance, a foundation for the transformation of Nepali society from the bottom. Here society has experience with the encounter between change agents and traditional forces, social structure and feudal organisational culture, and this experience has yielded champions which could support replicating the experience in other areas of the Nepalese society. Vidyadhar Mallik calls for two compacts guided by the principles of a democratically owned ‘peace and development’ strategy: • a first one between the government of Nepal and society at large represented by plethora of civil society organizations, intelligentsia, media, NGOs, local governments, community organizations like Ward Citizen Forums (WCFs) and Community Awareness Centers (CACs), PAF – COs, local peace committees, forestry user groups, irrigation user groups, school and hospital management committees, rights bodies, human rights institutions, women and children organizations and their associations/federations; and • a second one between the development partners/donors and the government of Nepal. In the present transition, development partners/donors should encourage, engage and actively support (with enough funding and capacity building) dialogues and deliberations between the government and society at large, including community based grass-root institutions: the fear of ‘demand mobilization’ should give way to more such exercise for voice and choice mobilization of communities till the elections of local and national governments are held and Nepal stabilizes with a new popular constitution. Govind Prasad Kusum calls upon political groups to work for the underpinnings of democracy in a cohesive manner. Introduction xx Institutional foundations Devraj Dahal in “Politics of Informal Economy” raises that there is a need to bridge the gap between development theory and contextual knowledge and its outcome for human development. Tara Dahal in “Civil Society as a Democracy-Building Project in Nepal” request civil society to create the favorable conditions for Nepal’s society and the state to adapt to universalistic norms and act to abolish the tradeoff between political power where leaders indulge in life-and-death-struggle and democratic values that moderate their appetites to move to extreme directions incubating the source of violence and vicious conflicts. Specifically for the constitution drafting process Ganesh Dutta Bhatta calls for a proper evaluation of all the weaknesses of the past constitution assembly and the formulation of policies and guidelines that help the foreign aid for the drafting of a future constitution become more transparent, effective and accountable. He calls for being cautious for those people and organizations that might again be active to grab the international aid and use it against the Nepal’s dream of creating a democratic constitution through elected members from the constituent assembly. In “Fiscal Policy Issues in Nepal,” Madan Kumar Dahal describes a strategy for taxation with the purpose to speed up reforms in the tax system and improve the tax administration ensuring a competitive tax structure primarily to attract FDI for sustaining a high level of economic growth, and promote indigenous investment in cooperation with private sector for reducing absolute poverty. His paper contains detailed reform recommendations. Govind Prasad Kusum advices the Government of Nepal to send skilled negotiators to foreign aid negotiations, they must take care of how far the conditionalities are compatible with the national interest. If the terms and conditions set forth by donors are against the public interest, against government policy and against national security, such aid must be rejected. The government should have a master plan on how the country can be sustained financially and economically. Involve the informal and private sector Devraj Dahal in “Politics of Informal Economy’’ calls for an inclusion of the informal sector. He conjectures that a sustainable solution of the problem of informal sector lies in the legislation of proper laws, building of participatory culture whereby societal interests prevail over private greed and gain, reinvesting of economic surplus on production process, promotion of subcontracting with intermediary and large business, strengthening of inter-sectoral linkages, legal protection and encouragement of workers to become shareholders of the business enterprise and low-cost cooperatives. Sohan Kumar Karna in “Foreign Aid: a hot button issue” emphasizes several challenges both for donors and recipients. In spite of reported huge aid inflows, there remains a large gap between the need and aid availability due to mis-targeting, emergency situations, aid diplomacy and unfair trade. Donors’ political and economic interests coupled with their disharmonising aid policies have made aid inadequate, inefficient and ineffective. But provided the recipients ensure good governance, aid has immense potentiality. Nepal’s absorptive capability should be strengthened beyond the government by involving the private sector. Ever since the government began to receive aid, the capacity to utilize the committed amount of aid productively continues to remain as a crucial problem. This shows low absorptive capacity resulted in political instability, lack of commitment of ruling authorities, bureaucratic delays and absence Introduction xxi of institutionalization of development administration, corruption and lack of proper management of development projects. Also Uddhab Pyakurel in “Foreign Aid in Nepal’s Democracy Struggle” points at the inability to utilize aid as the key obstacle in addressing people’s expectations for a better life through aid-oriented priority projects. Encouraging the private sector to handle foreign aid resources, with the government functioning as a facilitator, may bring about an increase in the efficiency of foreign aid. This would increase the efficiency of aid disbursement by reducing the tendency of aid to strengthen the government sector and curbing the government behaviour of using foreign aid to pursue socially non optimal agenda. The government should streamline its institutions, prepare personnel (both through training of its staff and through spending in the social sector to equip the population in providing skilled manpower), ensure an open environment for entrepreneurship and commit itself to maintaining a healthy economic climate. Such actions that strengthen the private sector and bolster macroeconomic management will not only pay dividends in an increased willingness of the donor countries to disburse more capital in the form of foreign aid, but also increase the effectiveness of the institutions and process that determine the efficiency of foreign aid already disbursed. Priorities and the role of foreign aid Research about the necessity of donor-support for various issues of democratic governance by Ganesh P. Adhikari and Prabhash Devkota shows a top three of strengthening local authority strengthening civil society organizations, and controlling corruption. As to the kind of donor-support that is appropriate for civil service reform in these areas, when given the options policy advice, financial support and technical assistance. More than fifty percent of respondents were in favor of each of the three kinds of donor-support for corruption control (56.9%, 57.3% and 50.2%). In the case of strengthening local authority and citizencentered service delivery, nearly 83 and 69 percent respondents respectively were in favor of financial support. Meena Vaidya Malla in “Foreign Aid and Democratization in Nepal: Culture of Dependency” concludes that aid, should, primarily be used as catalyst-sometimes to help generate other resources or gain access to them-sometimes to help create domestic capacity or manage conflicts resulting from various forms of unsustainable development. At this juncture, what is required is special focus on aid policy which creates social harmony, political stability and peace-the preconditions for democratization in Nepal. The role of donors Govind Prasad Kusum calls upon donors to take into consideration the country’s vulnerable situation, and pay greater attention to the myriad factors that contribute to and underpin transition, and even more complicated, consolidation. The country needs a huge amount of resources to achieve poverty reduction alongside democracy strengthening by investing in people’s health, education, food and infrastructure, including in rural areas as was also confirmed in the June 2013 Nepal Democracy Survey. Meena Acharya in “Democracy and Foreign Aid – disconnect between democratic aspirations and freemarket policy prescription” calls for the adoption of a more holistic economic model, which takes into account both market and non-market activities, is socially more sensitive and is based on environmentally more sustainable resource use. Further refinement of diagnostic and prescriptive hypotheses We conclude our introductory chapter with the hope that this volume will provoke further analysis in support of sound and responsive decision making and aid delivery that better meets the consensus common principles of effective aid, in Nepal and in other countries in transition. Introduction xxii This book is published both in print form in Nepal, and as an e-book via leanpub for readers around the world. We welcome our reader’s views and comments on the papers and on this introduction. These can be sent to us directly, or posted on the social media platforms. Using Spundge we will curate comments or links posted on Google+, Facebook, Twitter and other social platforms if they are tagged with #nepalmaprajatantra (Democracy in Nepal) or #nepalmabaidesiksahayog (Foreign Aid in Nepal) On the basis of those comments, and additional canvassing of the related literature and evidence we hope to review and strengthen the diagnostic hypothesis and the derived recommendations. Also we want to hear from you if you have implemented recommendations, and with what effect. Prabhash Devkota Jan Goossenaerts 1 Aid and Democracy in Nepal Himalaya SJB Rana Internationally, aid for strengthening and sustaining democracy commenced after the end of the Second World War with the Marshall Plan for the reconstruction of Europe. Establishment of the International Bank for Reconstruction and Development (later known as the World Bank), the International Monetary Fund and subsequently the Asian Development Bank followed soon after. As a complementary measure, United Nations and Specialized Agencies launched technical assistance/cooperation programmes for capacity and institution building in developing countries, later venturing into pre-investment assistance. Side by side, bilateral aid programmes like USAID were launched in many developing countries like Nepal. Foreign aid appeared in the development scenario of Nepal after the advent of democracy in February 1951. My active involvement in the governance of Nepal has been mainly in the financial sector as the first Finance Secretary and the first Governor of the Nepal Rastra Bank (Central Bank) for altogether some ten years in the 1950s. Then, for some twenty-four years I worked in the development sector of the United Nations in numerous capacities including Resident Representative of the United Nations Development Programme in three countries. I retired from UN service in 1986, some twenty-seven years back. I regard myself as a date expired development practitioner. As such, my short piece on the subject will be of a general nature unlike scholastic articles focusing on different facets of aid in Nepal contributed by eminent authors. In my view Nepal’s non-alignment policy and international relations did not influence Nepali politics and infrastructure development, as foreign aid was received both from the First World and Second World countries. Sir Ivor Jennings then mainly drafted the constitution promulgated and accepted by all democratic political parties. The Westminster Model recommended by him was in many respects similar to the model enshrined in the constitution of India. As far as I know the Government of India was consulted, but there was no pressure from the South on the salient features of the King Mahendra Constitution. Multilateral and bilateral technical assistance to Nepal have greatly contributed to laying an appropriate foundation for and improving the governance in Nepal in tune with democracy. During the last six decades, hundreds of Nepalese administrators and technicians have participated in observation and training programmes in developed countries. Due credit has not been given by the development rapporteurs to the notable result that Nepalese administrators and technicians are now capable to conceive, plan and implement projects and programs and deliver good governance to people as well as their counterparts in the neighboring countries. Concurrently, grants and concessional loans from multilateral development banks and friendly countries for infrastructure and other projects during sixty years have immensely facilitated the growth of the country’s economy. Initially, quite a few factories were assembled and some arterial highways were constructed under the aegis of the Russian, Chinese, Swiss and Indian bilateral aid at a notably low cost. Then followed numerous projects in the power, telecom, industry and other sectors funded by the World Bank, ADB, Japanese, German and other bilateral aid. The cost of implementing these projects tended to be high not only due to the comparatively high remuneration and payments made to the foreign consultants and contractors but also to the Nepalese commission agents – a new breed that emerged and has been growing and thriving. The latter development is one dark spot in the annals of aid to Nepal. Indian-Chinese relations have moved from adversarial to negotiating mode. USA, as the number one donor, promoting democracy in order to contain communism, delivered massive aid to Nepal from the Aid and Democracy in Nepal 2 fifties to mid-seventies in various sectors. Their interest in Nepal then flagged and revived as a component of countering terrorism. The USSR delivered sizable aid to Nepal in the fifties and sixties following the state visit of King Mahendra, as counterpart to aid from USA. However, the USSR was unable to continue matching aid from USA in the years that followed. After the re-instatement of multi-party democracy in Nepal, aid to the social sector from INGOs has remarkably increased. Their role in highlighting the need of greater equity and inclusiveness in the Nepalese society is welcome. However, there are complaints that their unbridled activities have promoted ethnic divisions and unrest in Nepalese society. As such, their role should be monitored by the Government in the interest of national amity. For decades, foreign aid focused on infrastructure development, augmenting agricultural and industrial production and capacity and institution building. Of late, protection of environment has appeared as one of the main concerns. It is high time that the sociological impact should also be taken into consideration. I do not agree with commentates tended to regard aid as evil. Foreign aid became donor driven to some extent and unwittingly fostered a new breed of commission agents, not to speak of the lordly living style of aid officials, both foreign and national. If the recipient government has well defined national priorities and manages to channel aid to such priorities foreign aid can make a yeoman’s contribution to socio-economic development of the country. Certainly, most countries can survive without foreign aid like North Korea. But socio-economic growth will be accelerated with judicious utilization of foreign aid. In conclusion I would say that foreign aid makes significant contribution to the socio-economic development of a country where development programmes are clearly chalked out and aid is channeled to such programmes. The challenge to our administrators is to channel foreign aid to development of Nepal, which is sustainable and protective of our deteriorating environment. Aid and Democracy in Nepal 3 2 Politics of Informal Economy in Nepal Dev Raj Dahal 2.1 Introduction Informal economy has become a source of income for economically active poor many developing countries and Nepal. Informal economy involves those economic transactions that are not fully accounted, protected and regulated by the state authorities. This deliberate exclusion exposes informal sectors and their workforce to multidimensional vulnerabilities to the abuse of their rights, absence of entitlement, remuneration, paid leisure, maternity leave, health and safety, pension and adequate living wage for sustainable livelihood though this sector is the biggest employer of the nation’s workforce. The laborcapital ties in informal sector, except in the cases of those run by family members, are beleaguered by one-way dependency of workers and decision-making by the owner of capital and enterprise. For migrant Nepalese working abroad in informal labor market, they have to rely on the goodwill of their employers and are not entitled to many of universal labor rights. Those working as servants and slaves are in the heartbreaking perils expecting better hope only in the next life. Informal sector in Nepal is huge and this space is mostly preoccupied by those at the bottom of development statistics—poor women, wage workers, dispossessed and those who stand between the capital and the labor. In the context of growing youth population, declining public budget, rural push of poverty and foreign pull of opportunity, the Nepalese state often lagged in providing a supportive policy framework for their productive employment. Naturally, this population has to engage in informal sectors. Informal sector continues to grow in direct proportion to the decline of formal economy owing to the elites interest in privatization and denationalization of 34 industries and de-regulation import laws, negative effects of global economic crisis, protracted political instability and democratic deficits in the country. New technology has marginalized the real and formal economy by expanding the space of flexible and highly specialized symbolic economy with the growth of financial capitalism, banking business, service and technological sector production from craft-oriented specialization to computer service. Its decentralized nature fits well with the diverse needs of Nepalese people strewn in diverse topography and resource location having the resiliency to withstand the challenges of globalization. But, one can clearly see the “urban bias” in development policies and resource allocation of the donors, the state, employers and even labor unions as development is seen until recently improved economic growth, not amelioration of structural injustice through liberation, entitlements and fairer justice[1] for individuals, communities and the state. There is a need to bridge the gap between development theory and contextual knowledge and its outcome for human development. This paper poses fundamental questions about informal economy and narrates the characteristics of informal economy, upcoming challenges for this sector, status of Nepal’s informal sector, exigency of people-centered development and draws a short conclusion. 2.2 Fundamental Questions The crucial questions are: How to provide property rights to the poor in an informal economy and expand labor market opportunities at home so that they become equal stakeholders of democracy, human rights Politics of Informal Economy in Nepal 5 and good governance? Is minimum wage sufficient to guarantee the basic rights of workers for their essential human needs and freedoms? Under the condition of liberalization and globalization where the roles of state have been downsized how can the government address the workers’ demand for social accountabilities in the vast informal sector? Does the private sector seem willing to undertake this responsibility? How to establish a complementarity of interest between informal and formal economies and workers and build solidarity through policy measures, concrete programs and collective action? What are the essential legal and practical measures to transcend local customary rules for the creation of efficient market for informal sector progress? Is there a possibility for small-scale informal sector entrepreneurs and workers to become joint enterprise holders able to compete in a competitive neighborhood and global economy? How far workers’ collective experience of neglect by the government helps them to act rationally in terms of maximizing profits and redeploying economic surplus for expanding the scale of political economy? 2.3 Characteristics Informal economy is too diverse to compress into a single definition. In Nepal, it may be described as small-scale, decentralized, indigenous, agricultural sector, self-employed in artisan activities, street selling and causal and part-time works. Some informal economic sectors are owned by families and engaged in non-market networks of diversified production of public goods nourishing the livelihoods of a bulk of poor and ensuring their social and financial security. Skills and apprenticeships in such enterprises are provided by families themselves. For them, the scope of citizenship, access to and identification with the state is far-off. Other micro enterprises, employing less than ten persons, use local pools of knowledge, management, resources, workers, technology and market access and are considered economically very efficient in production, supply, pricing and appropriation of profits. By economizing the limited capital, their operations are near perfect competition, which helps to keep prices down so that poor people can afford to buy goods and services in the market. The gradual shutting down of over 30 state-run industries in Nepal can be attributed to excessive rent-seeking, mismanagement, financial losses, bloated political bureaucracy, dislocation of politics and inflexibility of leadership in attitude change regarding the attainment of common good through suitable economic policies. The fatal attraction of post- 1990 governments to neo-liberal policies further created a disjunction between local development discourse and global imperatives that inescapably pushed Nepalese economy to informal sector growth. It has, therefore, stifled the prospect for a substitute for developing a low-cost way of creating employment. The innocent optimism of new republic has given way to sordid exhaustion of national economic strength. Exchange of political power for money strained the possibility for the investment in the modernization of informal sectors. The post-republic order corresponds to a state of nature where the struggle of informal sector workers for dignity continues to contest the utility of hegemonic discourse for the upliftment of the poor. Informal sector does not mean that it is often backward based on what Karl Marx called “petty commodity trade” of independent producers (1972: 82) or modernization theorists dubbed “anti-development” due to its traditional method of production (Muenkner and Walter, 1996: 87). Development expert Goran Hyden calls informal sector an “economy of affection” (1983:15) because of its proximity to family, community and neighborhood, pro-poor, labor -intensive and environment-friendly nature. Lord Buddha long ago and Karl Marx later, referred to an economy based on the “need of society” than on the insatiable greed of individuals which has become a base of discourse of E. F. Schumacher in defense of “small is beautiful” (1999:5). An attentive society requires caring of the environment and the people. In a rapidly changing consumer markets, there is greater incentives on the flexibility, adaptability and innovation that only informal sector and small scale industries can provide. Referring to the enormous cost of human civilization incurred by capital-intensive and techno-centric development, Jeffrey Sachs said that Politics of Informal Economy in Nepal 6 creation of “mindful society” requires adopting the golden mean and going back to the ethics underlined by Gautam Buddha, Aristotle and Immanuel Kant who had advocated non-violent, ecologically and humanely sustainable economic policies. Informal economy can contribute better if the state provides sound policy framework to upgrade its technology, information, raw materials and market access for products and overcome three-fold deficit of its macro-economy—public budget, foreign trade and internal and external debt. A harmonious life cannot be possible without addressing these deficits and striking a balance between material and ethical basis of liberty and representative public order. Economic survival of democracy also requires a strong middle class who not only pays tax for social welfare benefits for the poor but also mediates the interest of society and allows reformist politics in the context of power shift. 2.4 Upcoming Challenges The raw materials were basic fuels of agriculture-dominated society. Energy was the vital element of industrial revolution. And, information technology remains the motor of post-industrial development. In the industrial society, the state mediated the interest of the capital and the labor and managed production, exchange and distribution, international trade, commerce and communication. The most significant effect of information revolution is the globalization of capital, resource and energy-intensive political economy which is highly inflationary in nature. Ironically, the impacts of inflation in the life of poor are less calculated by mainstream economists. For the least developed countries like Nepal, unable to compete in the competitive market, this globalization process is undermining the historical “social contract” between the capital and the labor, inverted the historical convergence between the state, economy and citizenship and generated more poverty, unemployment and inequality. The government - shephered free market advertised by conformist intellectuals, media and private business empires and mainstream politicians has eroded the power of Nepali state to formulate and implement appropriate policies, laws and rights, weakened national economies and societies, the support base of the vulnerable population and the political capacity of trade union movement to compete for the “dignity of work” through the promotion of labor rights, citizenship rights and human rights embedded in the Interim Constitution 2007. The corporate global world’s demands for “labor market flexibility,” aiming to reduce minimum wage and workers’ protection, is at conflict with the workers on welfare measures, science over climate change and environmental issues and art over the commercialization of spiritual and human life. It is recklessly commodifying nature, labor, education, health and culture. (Stiglitz, 2006: 17; Galbraith, 2006:23). As a result, all goods and services are reduced to their monetary values and made them to respond the code of price. Many of the demands are generated by men of inner circle of power without face through media advertisements. To check this trend, “the market forces require a stronger counterweight from an effective state” (Bofinger, 1999:3). Only then a system of inclusive politics beefed up by democratic redistribution of power and wealth can overcome the darker instincts of life, restore the balance of society and contributes to social justice and peace. But for Nepal linked to regional and global market there is a Catch-22 situation: brining social justice to markets requires the regulation of business institutions but the nexus of businessbureaucracy-political elites often escape democratic constraints on their wealth and political power. Newly digitized symbolic economy has created a new social stratification producing multi-class workers, self-employed and dispossessed without solving the old division between capital and labor and altering the nature of wealth production, exchange and distribution. There is a neo-liberal “paradigm shift” first, in the nature of economy from real to symbolic and in the mode of wealth creation—production, circulation, distribution and investment within the country. Second, it has opened better labor market opportunities abroad under foreign rule than at home. It has provided global mobility of Nepal’s labor force in tune of over 3 million, emigration of 300,000 annually out of 450,000 youth force who annually enter into job market. Third, due to heavy jobs layoffs following closure of state industries, majority of labor force are forced to shift from organized to informal sector to satisfy their livelihoods. It is their Politics of Informal Economy in Nepal 7 remittance which has become lifeblood of Nepal’s development. But the migration of youth has also reduced the level of productivity of agriculture turning 3.5 million people food insecure and converting the nation from the net exporter of food grains to gross importer. Suddenly, small-scale entrepreneurs in Nepal are exposed to national and international competition with the effect of losing safety valve in deregulated and denationalized system of laws and corroded the source of income for the poor. Still, Nepalese economy is sputtering and is producing more losers of economic game. The employer’s recourse to flexible employment contracts has further lowered job security for the workers, undermined their positions and their unions in free collective bargaining restraining the rationalist program of reforming labor market relations and perverting the country’s historical traditions of golden mean in ethical business practices governed by shuva lav. The expansion of social rights and the conception of social welfare state based on the fulfillment of human rights, core labor standards and social security have been well up beyond the capacity of the Nepali state to attain them. Especially, for women, artisan caste (Dalits), marginalized and geographically isolated people, only the informal sector continues to contribute to their food security in rural areas. It also provides job security in the marginal cash economy of urban areas and safety valve for the disaffected young population that make up the majority of the nations’ population. The role of national level unions is great in solidarity building, policy mediation and human development. Unfortunately, they are also seen unable to cope with the problem of workers’ layoff, deteriorating working condition, declining job market, growth of child labor, forced labor, denial of rights to workers, poor health and safety provisions and even appropriation of social security and social protection money by local government officials. Informal sector is socially embedded, favorable to the production of “economic commons.” This shows that economy is not an isolated system where private sectors can free ride beyond corporate accountability— evasion of tax, bank defaulting, capital flight and building links to criminal source of money. This amoral trend will eventually minimize the resources for productive investment and intensify hunger, deadly disease, famine and resource conflicts (Dahal, 2011:45). Survival of informal sector economy rests on its own internal dynamics of human development and the environment which provides skills, raw materials, technology and markets. It is deeply rooted in local, national, regional and global power relations. In an informal economy, social aspect of transactions (kinship, language, localism and other affinity) provides necessary backward (agriculture) and forward (trade) linkages of the economy, garners broader forms of social capital and creates social safeguard for development that is fairly just, redistributive and sustainable. But, in Nepal, the government’s orientation to revenue rather than production-oriented development has weakened the linkage of informal with formal sector and undermined economic basis of the state to promote collective welfare. Owing to the slow entry of trade unions into informal, agricultural and smallscale entrepreneurs’ sectors existing at the unorganized realm, informal sector remains outside the sphere of “collective bargaining” in the domain of profit maximization, co-determination of policy that affects them and peaceful collective action. Democracy has given the informal sector workers political power whose conscious exercise can become attendant for their economic empowerment and reconciliation between the capital and the labor. 2.5 Nepal’s Informal Sector Workers Informal sector in Nepal is defined as having family enterprise, unregistered or a registered company with 10 workers at work. In this informal sector, a trade union federation can be organized with 500 or more workers engaged in the same nature of work. In the case of self-employed workers and agricultural workers they were granted the right to unionize under an amended Act 1999. The association of 5000 agricultural workers, covering at least 20 districts and with a minimum of 100 members in each of the district is entitled to constitute a national federation in agricultural sector. Politics of Informal Economy in Nepal 8 Nepal Living Standards Survey 2010-11 reveals the condition of Nepalese workers’ engagement in varied activities where 73.9 percent of workers are in agriculture and forestry sector followed by manufacturing 6.6 percent, wholesale, retail and trade 5.9 percent, construction 3.1 percent and rest of others are in mining and quarry, hotel and restaurants, transport and storage, financial intermediaries, real estate and renting, public administration and defense, education, health and social work and private and community works. Over 30 percent of its economically active population is totally unemployed. Nepal’s society, economy and politics are predominantly informal: society because of the predominance of “unwritten transcript” of society on the life of workers; economy because of vast unorganized sector living in subsistence economy, low production base, poor tax ratio, huge contribution of remittance, low human development and vicious poverty and structural injustice reinforcing multidimensional conflicts; and politics because of personalized dominance of leaders over the impersonal public institutions of the state and polity. When political leaders are comfortable with weak institutions and fear the development of depersonalized institutions, rules and processes of the state, it is hard to address the root causes of the poverty, create joint development projects between perpetrators and victims of conflict and generate sufficient political will in the democratic transition towards a constitutional state, democratic polity, transformational leadership and legal-rational legitimacy for governance springing from bottom up. Out of population of 27 million about 90 per cent of the Nepalese work in the informal economic sector. Total workforce is 11.77 million. In organized sector 1.99m workers are employed while in informal sector the number is 9.78million. The average monthly minimum wage for workers is US $ 87.32 which is barely enough even for a small family given average annual inflation rate of 12 percent. Daily wage for industrial worker is $3.25 while for agricultural workers it is yet to be decided. The annual per capital income of $645 puts Nepal in the bracket of least developed country. Informal sector’s contribution to national economy is more than 50 percent. Poor working conditions, gender discrimination, lack of social protection, low productivity, hazardous work, non-recognition of work done, poor income, long working hours, unsafe working environment, meager benefits, no leave or holidays, inadequate social security benefits, and poor unionization to protect the rights of workers are the basic features of informal sector in Nepal. These challenges pose problem in unionizing the informal sector. Violent conflicts have further affected this sector causing the alienation youth force from its social roots and, consequently, depriving the society of its dynamic, critical masses of social and cultural transformation. New social movements have, therefore, precisely taken anti-institutional turn. Low level of literacy, lack of modern skills for bulk of work force, poor nutrition and health facilities contribute to their low productivity. Investment in social sectors is, therefore, absolutely essential to improve the productivity of workforce. Likewise, high population growth relative to economic growth has increased demands for social services and basic infrastructures facilities while the quality and coverage of health services up to the village levels are grossly insufficient. Why did this happen? Obviously, problems were not seen through the eyes of people and policies were not conceptualized to attune to local needs and conditions. If economy does not work for the people, it will generate a dynamic tension between policy discourse, state institutions and social classes and politics ultimately loses its legitimacy to defend public and national interest. Social deprivation remains very high in the country despite some improvement in health care, regular immunization campaign against communicable diseases, literacy and quantitative growth of education. Majority of people in both urban and rural areas are still without safe drinking water and sanitation and face rising pollution where polluters don’t pay. The costs have to be subsidized by the general society. Welfare outcome of the social expenditure of the government is highly skewed because of urban bias in planning and development. The working environment, medical facilities and conditions of work are so poor that they also militate against the protection and security of informal sector workers. Irresolution of root causes of violent conflict has decreased economic activities, reduced the value of workers and even flexibalized the working environment incubating the ruggedness of life. Without social competence Politics of Informal Economy in Nepal 9 economic efficiency cannot be achieved. Legal property rights do not exist for the poor in Nepal despite the constitutional recognition of the fact that sovereign power lies with the people. Political stasis at the top level of leadership defies the possibility to create self-governing polity at the grassroots level favorable for the modernization of informal sector economy. 2.6 Exigency of People-Driven Development With the microfinance revolution and other positive efforts, attitude towards informal economy is slowly changing. There is recognition that these economic activities can become an entry point for fulfilling basic needs and freedom. It is expected to promote social and economic development and initiate silent social transformation of Nepali villages in line with gender, social and inter-generational equality. Ethical desire to lead good lives for oneself justifies a moral reason for concerns to others (Dworkin, 2011:1) where the role of state is vital. Nepali state is under “an obligation to provide all its citizens with equal opportunities in life, and to grant equal access to public goods—education and culture, health and natural resources, internal and external security” (Thierse, 2009:11). Sustainable solution of the problem of informal sector lies in the legislation of proper laws, building of participatory culture whereby societal interests prevail over private greed and gain, reinvesting of economic surplus on production process, promotion of subcontracting with intermediary and large business, strengthening of inter-sectoral linkages, legal protection and encouragement of workers to become shareholders of the business enterprise and low-cost cooperatives. Informal sector economy has to respond to the legitimate aspirations of workers constituted as citizens and human beings and cluster around networks with like-minded enterprises for production, supplies and market services so that it can achieve financial stability, economies of scale and social support. Due to its closeness to society and local self-governance institutions, it can evenly distribute employment benefits to the people. But, the local self-government has the responsibility to offer training, financing and other services to this sector so that it can increase its productive functions. Only productive jobs can ensure them the necessary conditions of freedom, equity and dignity. Election of local bodies can reduce official corruption on the distribution of social security and social protection measures and implement citizen charter. Civil society, NGOs and private sectors can add the resources of modernization into their efforts to upscale the scale of political economy of informal sectors. The diversity of Nepal’s demography and topography offers various resources which can be synchronized and utilized through decentralized, laborintensive and eco-sensitive policies. 2.7 Conclusion Informal sector economy of Nepal holds tremendous potential to guarantee livelihood, mitigate poverty, reduce inequality and provide sustainable basis of democratic development if the state and private capital provide technology, resources, information and market access for its products. Implementation of the ILO Declaration on Fundamental Principles and Rights at Work has made important contribution to the new architecture of social and economic development. The ILO Convention N0 189 on Decent Work for Domestic Workers has yet to enter into effect. On this architecture extension of social security schemes, implementation of laws on fair wages and incomes and development of mechanisms by which workers in the informal economy can possibly be provided access to and control over productive assets and resources. The new solidarity of informal sector should be built on a system of global rule, designed around a single fundamental human right—the right to what Hannah Arendt calls “human condition” (Ree, 2006: 28). The role of state in redistributive justice is essential as market does not show equal concern to all (Dworkin, 2009: 470) citizens while civil society groups are relativized by their plural mandates. The challenge is Politics of Informal Economy in Nepal 10 to find ways to ensure the voice of workers in income generating activities through the constructive engagement of community with the state policy makers and increase livelihoods and small-scale business enterprises. The cohesiveness of unions counts a lot to exert pressure for policy reforms, organization, solidarity, communication and collective action on behalf of its members and the society at large. Other issues are: implementation of minimum wage in all sectors, inter-movement solidarity of unions, contribution-based social security, reform in labor market, management of foreign jobs, elimination of child labor practices, rights-oriented campaign, collective bargaining, etc (Bhattarai, 2011: 51-55). It is also important to attract the attention of national policy makers on the plight of informal sector workers– Kamaiyas, child laborers, Dalits, dispossessed, domestic servants, conflict-victim groups and define a viable strategy of formulating an integrated approach to peace building. There is a need to make “taxation more progressive in order to offset the economic forces increasing inequality” (Stiglitz, 2006:20). The coordination of the roles of various social partners working to foster “decent work” in the informal sector of Nepal equally presupposes the expansion of the sphere of social and gender justice through equality of opportunity and right-based and procedural distribution of resources through laws that guarantees their livelihoods and freedoms. There is no hope of peaceful progress of Nepal if economy is divorced from democratic principles and profit is placed before good life of ordinary people. The morality of public interest provides suitable “framework condition” for the good life of all people-formal and informal ones and overcome the instinctive leadership desire for selfish ends with almost negative democratic outcome. Modernization of informal sectors is expected to alter structural conditions for the emancipation of Nepali people and transforming them into citizenship with equal rights and equal responsibilities. References Bhattarai, Purnachandra,2012. Trade Union Campaign and Labor Management, Workers News (Nepali), Special Issues, GEFONT. Bofinger, Peter, 1999. “What Future Role for the State?” International Policy Analysis, FES, Berlin. Dahal, Dev Raj, 2010. “Shaping Tomorrow’s Economy: Challenges and Choices for Nepal,” Vikas, Vol. 31. No. 1. Dworkin, Ronald, 2011. “What is Good Life?,” The New York Review of Books, February 10. Dworkin, Ronald, 2009. “Justice for Hedgehogs,” Boston University Law Review, Vol. 90. Galbraith, James K. 2006. “Taming Predatory Capitalism,” The Nation, April 17. Hyden, Goran, 1983. No Shortcuts to Progress: African Development Management in Perspective, Berkeley: University of California Press. Lakoff, George, and Mark Johnson, 1999. Philosophy in the Flesh. The Embodied Mind and Its Challenges to Western Thought, New York: Basic Books. Marx, Karl, 1972. “Forms of Private Property,” ed. Frederic L. Binder, Karl Marx: The Essential Writings, New York: Harper Torchbooks. Muenkner, Hans-H. and Thomas Walter, 1996. “The Informal Sector: A Source of Income for the Poor,” eds. Ezzeldin Bakhit and others, Attacking the Roots of Poverty, Marburg: Marburg Consult for Self-Help Promotion, Germany. Ree, Jonathan, 2006. “In Her Mind’s Eye,” The Nation, January 30. Sachs, Jeffrey D. 2011. The Price of Civilization: Reawakening American Virtue and Prosperity, USA: Random House. Politics of Informal Economy in Nepal 11 Schumacher, E. F. 1999. Small is Beautiful: Economics As If People Mattered, Dublin: Hartley and Marks Publishers. Stiglitz, Joseph E. 2006. “A Progressive Response to Globalization,” The Nation, April 17. Thierse, Wolfgang, 1999. “What Future Role for the State?” International Policy Analysis, FES, Berlin. [1] A fair justice is relative to any number of models: “equality of distribution (one person, one object), equality of opportunity, procedural distribution, rights-based fairness, need-based fairness, scalar distribution, equal distribution of responsibility, equal distribution of power, etc (Lakoff and Johnson, 1999:297). Politics of Informal Economy in Nepal 12 3 Contributors Meena Acharya Dr. Meena Acharya is a well-known Economist, Feminist Scholar, Researcher and writer. With a varied experience of working in various government and non-government positions, currently she is the general secretary of Tanka Prasad Acharya Memorial Foundation, established in 1994. Her academic contributions to highlighting the broader socio-economic aspects of the Nepal’s economic development efforts, including its impact on the poor and women have been significant. She has multiple publications to her credit that have made a difference in the ways of analyzing socio-political development in Nepal. Starting in 1966 with the Research Department of Nepal Rastra Bank, the Central Bank of the country, she had risen to the post of Chief Economic Advisor by the time she took leave to work with the World Bank in 1980, on special invitation. After she left the Bank in 1991 she has been working with various NGOs, including the Institute for Integrated Development Studies where she occupied the position of Executive Director. During all these years she has been working for women on the side. Ganesh Adhikari Ganesh Adhikari, PhD, an Associate Professor of the Pubic Administration Campus, Tribhuvan University, conducted his dissertation on The Politics of Foreign Aid and Governance Reform in Nepal. He has been writing on policy analysis of foreign aid and governance reforms in Nepal. He has published many research papers and articles in journals from Nepal and abroad. He can be contacted at: gp.adhikari@gmail.com¹ Chandra D. Bhatta Chandra D. Bhatta is a Political Scientist trained at the Birmingham University and London School of Economics and Political Science, UK. He has held Research Fellowship at the George Warren Brown School of Social Work and at the Washington University in St. Louis, USA. His area of expertise includes, among others, civil society, state-building, religion in international affairs, and South Asian politics. He has published book/articles in these areas in the reputed internal journals. Ganesh Datta Bhatta Ganesh Datta Bhatta is an Associate Professor of Constitutional Law at the Nepal Law Campus, Faculty of Law, Tribhuvan University, Nepal. His research interests include: constitutional law, human rights, legal reform, governance and democratization process. Bhatta who has published articles in different journals and newspapers mainly in the area of constitutional and contemporary issues, has co-edited two books (Nepali) on the area of judicial reform published by Nepal Constitution Foundation. He is actively associated with different organizations and associations mainly working in the areas of constitution, human rights and democracy in Nepal. ¹mailto:gp.adhikari@gmail.com Contributors 14 Dev Raj Dahal Dev Raj Dahal is head of the Nepal Office of the Friedrich-Ebert-Stiftung (FES) and writes on small states, civil society, governance and development. He has worked at the Center for Nepal and Asian Studies (CNAS) and at the Central Department of Political Science, Tribhuvan University as a Reader. He can be contacted at: devraj.dahal@fesnepal.org² Kashi Raj Dahal Kashi Raj Dahal, a senior constitutional and media law expert is a former secretary of the Government of Nepal. He has made significant contributions in a wide array of subjects such as constitutional law and assembly, human rights, press and criminal jurisprudence, media and law and Right to Information. He was a coordinator of High-Level Administrative Reform Commission constituted by the Government of Nepal. He has published many papers and articles in different national and international journals. He can be reached through: krdahal@hotmail.com³ Madan Kumar Dahal Prof. Madan Kumar Dahal, an economist, a scholar and educationist has “cherished the goal, vision and mission to build Nepal a strong economic nation-state through active participation of the people ensuring a high quality of life to each individual and household within given timeframe”. Prof. Dahal has authored, co-authored and edited 15 books on economics and related areas, published at home and abroad especially from Nepal, India, and Japan. He holds a PhD degree in Economics from University of Bombay, India in 1983. Currently, Professor Dahal is Chairman at Mega Bank Nepal Ltd., Kathmandu. In addition, he is also attached to a number of organizations, which include: as member, the Revenue Advisory Board at the Ministry of Finance (MOF/GON); as treasurer, the Nepal Nagarik Manch (Civil Society Forum), Kathmandu; and as Immediate Past President, the Nepal Economic Association, Kathmandu. Tara Dahal Tara Dahal, a DAAD scholar received an MA from Otto-von-Guericke University, Magdeburg, Germany. She has taught at the Department of Conflict, Peace and Development Studies of Tribuvan University, Kathmandu, Nepal. She has also served at the Institute of Foreign Affairs and has published a number of articles on gender, governance, peace and conflict. Besides, she has published three poem anthologies entitled Tsunami, Mother’s Tree and Springs of Life. Currently, Ms. Dahal is a PhD student at the Willy Brandt School of Public Policy. Her research title is “Post Conflict Peace Process in Nepal: The Role of National and Transnational Civil Society Actors”. She writes frequently on civil society, transit state, women’s issues, peace, conflict resolution, and related subjects. Prabhash Devkota Prabhash Devkota, after receiving the Degree of M. A. in Economics in Rural Development from Tribhuvan University (TU), Kathmandu in 2006 has become an astute observer of foreign aid politics and governance in Nepal. He has been continuously engaged in various academic and professional activities with assignments of a lecturer, researcher, social activist, trainer, expert on aid politics, and editor and ²mailto:devraj.dahal@fesnepal.org ³mailto:krdahal@hotmail.com Contributors 15 so on. His experiences include a wide spectrum of specialization ranging from rural development, aid politics and governance, media, culture, sociology and anthropology, and capacity development with proven credibility. He has demonstrated his leadership and management skills by establishing the Alliance for Aid Monitor Nepal and in a four years time-frame converted it as one of the leading organizations working around the issues of aid and development effectiveness in Nepal along with strong collaborations and engagement with regional and global organizations and networking around the issues of development effectiveness. The publication entitled “Changing Paradigms of Aid Effectiveness in Nepal” edited by Prabhash Devkota and published by Alliance for Aid Monitor Nepal was a milestone contribution to the sector. Dwarika N. Dhungel Dwarika N. Dhungel, PhD, a member of the Nepalese Administrative Service (Retired) was the former Executive Director (2001-2006) and Senior Researcher, Social Sciences (2006-2011) at the Institute for Integrated Development Studies (IIDS), a Kathmandu based think tank institute. During his nearly three decades (1968-1998) of association with the Nepalese academic institution and administrative set up, he held various positions, including the position of the Secretary to a number of ministries, the Ministries of Land Reforms and Management, General Administration and Water Resources. He has written numerous articles and books on Nepalese Governance and Administrative systems. His co-edited book on The Nepal India Water Resources Relationship: Challenges was published by Springer Sciences & Business Media B.V. Netherlands in 2009. Dr. Dhungel was awarded the SPURS Fellowship at the Massachusetts Institute of Technology, USA, and holds a PhD from Nagpur University, India. He was also a Visiting Scholar at the Workshop on Political Theory and Policy Analysis, Indiana University, Bloomington Campus, Indiana, USA. E-mail: ddhungel@hotmail.com⁴ Kamal Raj Dhungel Dr. Kamal Raj Dhungel, a Professor of Economics in Tribhuvan University, Nepal, did his MA thesis on An Analysis of Chinese Aid in Nepal in 1981. He remained advisor to the National Planning Comission, Nepal at 1997/98. He has got extensive research experience on diverse subjects like agriculture and economic growth, energy, water, environment and hydropower development, and regional energy cooperation. His research articles are published in several international and national journals including more than 200 articles published in national dailies of Nepal. He can be contacted at: bpceda@gmail.com⁵ Jan Goossenaerts Jan Goossenaerts, PhD is a social entrepreneur and business and architecture consultant specialized in the analysis and (re-)design of multi-level socio-technical systems. He has an extensive experience with requirements engineering, systems modeling, simulation, ICT and enterprise architecture. His current focus is on applying social media solutions for enhancing citizens’ participation in public affairs and for livelihood-centric communications (Actor Atlas and social capital wikis). Jan holds degrees in mathematics (MSc (1982) and PhD (1991)), computer science (M. Sc., 1985) and philosophy (Certificate, 1980), all from the Catholic University of Leuven in Belgium. He has held visiting researcher positions ⁴mailto:ddhungel@hotmail.com ⁵mailto:bpceda@gmail.com Contributors 16 at The University of Tokyo (as a recipient of the EU Science and Technology Fellowship in Japan), the UNU International Institute of Software Technology in Macau, and Yokohama National University, and a teaching position at the Eindhoven University of Technology (1995-2008). Jan has edited several books on information infrastructure in manufacturing systems and published in a number of journals including Computers in Industry, Information & Management, Production Planning and Control and International Journal of e-Collaboration. E-mail: info@wikinetix.com⁶ Google+: google.com/+JanGoossenaerts Sohan Kumar Karna Dr Sohan Kumar Karna is a Professor of Economics at the Central Department of Economics, Tribhuvan University, Kathmandu. He has been teaching Economics for the past 28 years, and has made significant contributions in the areas of developmental economics, globalization and economic reforms and economics of agriculture development in Nepal. His expert opinion and critique on key economic events and governmental policies are sought after by prominent publications in Nepal. Dr Karna has presented and participated in numerous national and international seminars, and accepted visiting lecturer offers at many universities, including St Cloud State University, MN. As an experienced researcher, Dr Karna has nearly 100 publications to his credit related to researches, reports, books, and articles. In 2010, he was awarded Ambassador for Peace by the Universal Peace Federation (UPF) and Interreligious and International Federation for World Peace (IIF-WP). Govinda Prasad Kusum Dr. Govinda Prasad Kusum is currently working as an Adjunct Professor at Kathmandu School of Law after his retirement in 2011 from the government service as a Secretary. He entered in the government service in 1979/1980 and rendered the best of his service life to the people holding different capacities and several positions in various Ministries of the Government of Nepal. Dr. Kusum received his PhD in Conflict Management from Tribhuvan University. His background includes, serving as a Secretary in the Ministry of Home Affairs for three years, Ministry of General Administration for nine months, Office of the Prime Minister and Council of Ministers for six months. Similarly seven years’ work experience in the Ministry of Industry, Commerce and Supplies as a Joint Secretary, three years’ diplomatic service as a Consul General in West Bengal, India, seven years’ experience as a Local Development Officer in remote districts of Nepal such as Humla, Baglung, Rukum and Ramecchap are some of the major responsibilities that he accomplished successfully. Dr. Kusum is also a co-author of three management related books and dozens of research articles published in English and Nepali journals, magazines and news papers go on his credit. He can be reached through: gpkusum@gmail.com⁷ Meena Vaidya Malla Dr. Meena Vaidya Malla, a well-known academician, is a Professor of Political Science, Tribhuvan University, Nepal. She has more than 30 years of teaching experience. She has published a number of research articles on political culture, socialization, women’s right and empowerment. She has presented a number of seminar papers on national security, democracy, conflict and women’s land rights in national ⁶mailto:info@wikinetix.com ⁷mailto:gpkusum@gmail.com Contributors 17 and international conferences. She has served as a member of the high level task force on the issues of martyrs constituted under the Home Ministry of Nepal in 2010. She is one of the members of the subject committee of Political Science, Faculty of Humanities and Social Sciences, TU. She is the vice chairperson of Academic Research and Development Study (ARDEC-Nepal), an NGO, committed to resuscitate the role of academia to the comprehensive development of Nepal. She is working as a gender course advisor in the Department of Conflict, Peace and Development Studies, Tribhuvan University, in collaboration with the University of Life Sciences, Norway, University of Ruhana, Matara, Sri Lanka and Eastern University, Batticaloa, Sri Lanka. She has been awarded the Mahendra Vidya Bhusan class 1 medal of Nepal. She is the author of Political Socialization of Women in Nepal(2011) and Building political Culture of Nepal(2013) both with Adroit Publishers New Delhi. Vidyadhar Mallik Vidyadhar Mallik, a retired bureacrat and former secretary for various ministries including the Ministry of Finance, has served as Honororay Advisor to the President of Nepal. Since March 2013 he is the Minister of Health and Population of the Government of Nepal. He acted as a Vice Chairperson for the Poverty Alleviation Fund for 2010/11. He is interested in Governance, Peace and Development, Conflict sensitive approaches to development, community driven development, decentralization at various levels and in different forms and in relation with peace and conflict, inclusive growth and poverty alleviation, public finance and tax reforms, aid effectiveness and development finance, education and health sector finance. Bharat Pokharel Bharat Pokharel, an Associate Professor of Economics in Tribhuvan University, Nepal was an Executive Director of the Center for Economic Development and Administration (CEDA) from 2008 to 2011. As an economist, he was an advisory member of the high-level budget preparation committee formed by the Government of Nepal, Ministry of Finance for the preparation of the first republic budget 2008-09. He was a member of BIMSTEK, Economic Policy Network-II (Ministry of Finance, Government of Nepal), the Nepal Business Forum (Ministry of Industries, Government of Nepal), and a Senate Member of Tribhuvan Univesity. He has authored numerous books and more than hundred and fifty articles published in Nepali and English. He has expertise on macroeconomics, political economy, research methodology and history of economic thought. He can be contacted at: bpceda@gmail.com⁸ Bharat K Pokharel Dr. Bharat Pokharel is working with HELVETAS Swiss Intercooperation Nepal as Deputy Country Director. He holds a PhD degree from the School of Development Studies, University of East Anglia UK in 1998 and has more than 27 years of working experience in Nepal’s forestry sector. He has written dozens of articles on community forestry, forest governance and livelihood issues. Uddhab Pd. Pyakurel Uddhab Pd. Pyakurel, PhD from Jawaharlal Nehru University, New Delhi, is teaching Political Sociology at the School of Arts, Kathmandu University, Nepal. Also, he is associated with various democracy forums i.e., South Asian Dialogues on Ecological Democracy (SADED), Vasudhaiva Kutumbakam (VK), and ⁸mailto:bpceda@gmail.com Contributors 18 the Network Institute for Global Democratisation (NIGD). He often contributes articles to journals and local newspapers on poverty, people’s participation, social inclusion/exclusion, state restructuring, microcredit, gender, conflict, identity, democracy, election, Indo-Nepal relations and other socio-political issues. In addition, he is the author of a book Maoist Movement in Nepal: A Sociological Perspective (New Delhi: Adroit Publishers, 2007), and co-author of, amongst others, State of Conflict and Democratic Movement in Nepal (New Delhi: Vij Books, 2013), Dalit Representation in National Politics of Nepal (Lalitpur: NNDSWO, 2012). Himalay Shumsher J.B. Rana Himalay Shumsher J.B. Rana, born in 1928, obtained a MA in Economics. As the first Secretary of the Ministry of Finance he organized the Ministry in 1951. He became the founding Governor of the country’s central bank, Nepal Rastra Bank and as Governor successfully initiated the introduction of the Nepalese currency throughout the Kingdom and successfully implemented free convertibility of the Nepalese currency into the Indian currency at a stabilized rate of exchange. In 1960 and in 1991 he was an active member of the Nepalese Delegation negotiating the Treaty of Trade and Transit with India. Before retiring from UN Service in 1986, he had served in Sri Lanka and Afghanistan (as Deputy Resident Representative of UNDP), Burma (as Resident Representative of UNDP and Director of the UN Information Centre; 1972-77), Indonesia (as Resident Representative of UNDP, UNFPA and WFP; 1977-81) and in Pakistan (as Resident Representative of UNDP, UNFPA and WFP; 1981-86). Post retirement he has been Chairman of the Himalayan Bank Ltd. and of the Nirdhan Utthan Bank Ltd. and President of the Nepal Citizen’s Forum. He can be reached through: himalya@hbl.com.np⁹ Pradyumna Prasad Regmi Mr. Pradyumna Prasad Regmi is a retired government officer. He is currently involved as a research associate in conducting studies relating to social sciences. So far, he has contributed in various research studies including on local governance and decentralization, transparency and good governance. Mahendra Raj Sapkota Mr. Mahendra Raj Sapkota is a career researcher. His academic qualification is MSc in Agricultural Economics from Kasetsart University of Thailand in 1989 with a scholarship of Winrock International. He has also a Degree in Economics from Tribhuvan University of Nepal in 1979. He has been continuously involved in carrying out research studies for more than 30 years. During this period, he has prepared various research study proposals and conducted research studies in different areas either independently or through research institutes for diverse national and international agencies. Recently, he has completed some important studies relating to local governance and decentralization, monitoring and evaluation, peoples’ perception about current country’s affairs, transparency and good governance. Y B Thapa Dr. Y B Thapa is presently Poverty Alleviation Specialist in the South Asian Association for Regional Co-operation (SAARC) Secretariat in Kathmandu under the partnership programme of SAARC and UNDP/Asia Pacific Regional Centren in Bangkok. Earlier he served as Member of the National Planning ⁹mailto:himalya@hbl.com.np Contributors 19 Commission of Nepal. Dr Thapa is also President of the Nepal Agricultural Economics Society and Chief Editor of the Nepalese Journal of Agricultural Economics, and the Renaissance Message. He has several research papers published in the areas of economic policy, and science and technology. He holds a PhD in economics from Tribhuvan University with specialization on India-China Trade under WTO and its impact on the Nepalese Economy, and M Sc in agricultural economics with specialization on econometrics and finance form Punjab Agricultural University, India. Presently, he is studying sociology with specialization in diaspora and transitional communities under the Indira Gandhi National Open University, and law with specialization on international law under the Nepal Law Campus. Alliance for Aid Monitor Nepal (AAMN) KalaMandir Bhawan, Third Floor, Kupondole, Lalitpur, Nepal P.O.Box No.: 2719 I Tel: +977-1-5011069 www.aidmonitor.org.np Email: info@aidmonitor.org.np Blogs at: Just Aid-http://aidmonitor.org.np/blog/ Alliance for Aid Monitor Nepal (AAMN) is a public forum towards bringing voices, perspectives and critical discussions on the issues related to foreign AID in Nepal. Nepal is no exception to AID realities. However, AID, which in a way intends to influence the future of every citizen, has been an issue of debate of certain government, political and intellectual elite. It has not been able to be a part of public debate in Nepal. At a time when the country is marching towards transformative politics, it is high time to ensure that citizens have rights to access information about aid and that they have their say on aid politics. With an aim to engage and initiate a discourse on aid within people’s politics, this forum aims to open up a creative and critical space. Connecting Global to local on Governance, Democracy and Aid Issues in Nepal by Engaging Academia, Media, Professionals, Researchers, Campaigners, Community People and Development workers. A Think Tank and Research Base ActionAid International Nepal is an anti-poverty, human rights-based organisation established in 1982.We are an associate member of the ActionAid International federation, and we aspire to become a full affiliate at the beginning of this strategy period. ActionAid International is active in over 45+ countries across Asia, Africa, the Americas and Europe, with international secretariat in Johannesburg, South Africa. We have worked in partnership with more than 250 civil society organisations, social justice movements and people’s organisations in 42 districts to fight against poverty and injustice. - ISBN 978-9937-2-7288-9 (print) ISBN 978-9937-2-7289-6 (e-book, published via Leanpub https://leanpub.com/) 21