REVIEW
Aid in developing Nepal
review by Jagannath
Adhikari
Foreign Aid and Politics in Nepal:
A Case Study
by Eugene Bramer Mihaly
Himal Books, Kathmandu, 2002 (second edition).
pp lx+237, ISBN 99933 43 40 4 |
It is a moot point whether Nepal consumes aid
or aid consumes Nepal. Hard research on the aid economy of
Nepal is negligible. Barring the routine claims of multilateral
and bilateral donors, and the shrewd suspicions of independent
sceptics, there is no empirically rigorous and analytically
sophisticated assessment that can furnish a conclusive answer
to a question that ought to have been answered decades ago.
So long as donor slogans remain the only source of development
wisdom, the shrewd suspicions will persist. In the meanwhile,
both believers and sceptics alike will have to be content
with the existing meagre stock of literature, including the
2002 reprint of Eugene Mihaly’s 1965 title, Foreign
Aid and Politics in Nepal.
This relative absence of detailed empirically
grounded inquiry itself merits scrutiny as an exercise in
the sociology of institutional academics. It remains one of
the most persistent and debilitating paradoxes of intellectual
activity in the country that the anthropology of Nepal is
as overdeveloped as its economy and the study of it is underdeveloped.
While Nepal’s social organism has been so intrusively
and exhaustively scrutinised, the extraordinary role of foreign
bodies in the polity and economy of the kingdom remains a
quasi-mystical trend that is left largely untouched. Perhaps
it is a sign of the overwhelming power of hard currency that
aid manages to insulate itself from systematic academic study.
It is a measure of the Kathmandu intelligentsia's
lack of interest in scrutinising the processes of aid that
it took three and a half decades between the first edition
of Foreign Aid and Politics and its second edition. In the
interim there have been few other works to complement it.
Strictly speaking, the only reason the book qualifies to be
called a second edition is the introductory chapter by the
sociologist Sudhindra Sharma, which is a broad survey of aid
flows and priorities. Contrary to the view that there is a
paucity of research on the ‘assistance’ economy,
Sharma argues, in the context of what exactly aid has achieved,
that inadequate research is not an issue.
However, his introduction itself seems to point,
in at least two instances, to a very different conclusion.
According to Sharma, it is difficult to be conclusive about
the total volume of aid Nepal receives because of the wide
variance in the estimates given by different sources. He cites
the wide discrepancy between government of Nepal’s Economic
Survey for the year 1999, which indicates total assistance
of USD 251.4 million and UNDP’s Development Cooperation
Report which estimates it at USD 416 million for the same
year. Likewise, whereas the UNDP figures show a total of 21
international NGOs (INGOs) disbursing about USD 24.1 million
in aid in 1999, the Social Welfare Council lists 96 INGOs
providing funds to the tune of USD 19.8 million in the year
2001.
In five decades of aid dependence if nobody
can tell us anything about the precise quantum of aid flows
into Nepal, other than quoting the discrepant figures offered
by various official sources, it clearly points to a dearth
of independent economic research into donor activity. Further
evidence of this dearth is to be found in the list of references
appended to the introductory chapter. The 47 entries in the
list of references may or may not exhaust the sum total of
all the material on aid in Nepal, but they presumably represent
the most relevant studies for producing an overview of aid.
Even the most cursory evaluation of this list
shows that of the 47 entries, 11 are so-called official documents.
Three of them are government reports while the remaining eight
are bilateral and multi-lateral donor documents (one each
of DFID and USAID and three each of the UNDP and World Bank).
Of the 19 monographs, including the book under review, six
are on aid in general as it applies globally and are not specific
to Nepal. The remaining 13 Nepal-specific monographs are uneven
in quality and not all of them are specifically aid-related.
Some are anthropological reflections on Nepal, while others
are sector-specific studies into which aid, as the preeminent
reality of the country, inevitably enters. Most significantly,
though aid is so inescapably an economic enterprise, very
few are on the macro-economics of the phenomenon. The remaining
17 references are either reports by various organisations
and institutions or articles in journals and edited volumes.
This partial enumeration of references, if it represents the
best and most relevant, clearly does not do adequate justice
to the totality of aid in Nepal.
So long as this absence of longitudinal and
indepth studies persists, aid in Nepal will always operate
in a climate of controversy. In fact almost all claims and
counterclaims have been controversial. Critics have generally
been very dismissive about the effectiveness of foreign aid.
They point to the fact that even though Nepal has received,
between 1950-2001, foreign aid totaling slightly over USD
5 billion, the country’s development indicators are
abysmally poor not only in relation to the quantum of money
but also in comparison with other countries. In 2001, Nepal,
ranked 129 on the UNDP’s Human Development Index, was
33rd from the bottom in a list of 162 countries. In 2002 Nepal’s
position had slipped to 31 from the bottom in a list of 173
countries.
Criticisms of aid-driven development have gone
beyond just questioning the developmental efficiency of donor
activity. They go so far as to posit rather more malign attributes
to the aid establishment than just its inherent tendency towards
the dissipation of funds. It is, for instance, often argued
that aid has stifled the domestic capacity for capital formation
and resource mobilisation, that it has promoted institutional
corruption and organisational cronyism in the civil, political
and administrative spheres and accentuated economic disparities
in society.
Moreover, aid, like globalisation, is deemed
to be responsible for promoting external control and strangulating
local enterprises through purchase of donor country products
as part of the conditionality. Attention has also been drawn
to the fact that the loan component of foreign aid has increased
over time and part of it at least is wasted in unproductive
expenditure. This increases the burden on the national exchequer
and hence on poor people as there is a proportionate decline
in allocations for welfare programmes reduced as increasing
proportions of the annual budget is diverted to debt servicing.
Clearly, though aid remains an under-researched
area, it provokes a degree of debate among the intelligentsia.
For this reason, the reissue of Mihaly’s book is timely,
not only for the discussion it can provoke, but also for situating
it in a comparative historical perspective, particularly where
the politics of aid is concerned. Mihaly analyses aid and
the factors affecting its magnitude, nature and flows from
various countries between the 1950s and the mid-1960s and
concludes that it failed to achieve the development goals
visualised then.
The issues raised in the course of the book
are pertinent even today. His analysis of the political and
administrative culture that impeded development then may well
hold true in contemporary Nepal. Mihaly also argues that the
assumptions underlying US aid were not relevant to Nepal’s
context, which led to the failure of development initiatives.
One major assumption at that time was that if popular expectations
of material prosperity were not fulfilled, social unrest and
communism would follow.
To the contrary, Mihaly found Nepalis had no
rising expectations as most of them were too preoccupied with
meeting their most basic needs of survival. This point is
important since in contemporary discussion it is customary
to attribute the rise of the Maoist movement to thwarted expectations.
In other words the argument that propelled funding in the
1960s has resurfaced four decades later. Mihaly debunked the
argument then. It remains to be seen if the disciplines which
involve field research, notably sociology and anthropology,
will set out to verify the contemporary validity of this hypothesis.
By far the most interesting aspect of the book in terms of
its current relevance is the author’s analysis of domestic
politics as it related to the dynamics of aid. Thus, while
the East-West Highway provided the infrastructural basis for
unifying Nepal and expanded economic opportunities, Mihaly
suggests that it was primarily intended by King Mahendra to
facilitate the repression of political movements seeking participation
in a democratic polity. He argues that donor countries silently
acquiesced in the suppression of parliamentary democracy for
fear of giving communism a fillip.
Mihaly also explores the nature of the complex
aid relationship between India and Nepal in the context of
India’s overbearing attitude and Nepal’s excessively
sensitive reaction. In this context he cites the absurd case
of the Indian government assisting in the construction of
the Tribhuvan Highway, and the Nepali officialdom launching
a quixotic project to construct Kanti Rajpath, across more
or less the same territory that the former covered. This provides
not only an insight into the prickly nature of equations between
the two countries but also the squandering of resources that
resulted from it. But while he explores these nuances of internal
impediments Mihaly has relatively fewer criticisms of donors
and foreign project technicians involved in developing Nepal.
Of course Mihaly’s perspective is not
the final word on the question and this is quite clear from
Sudhindra Sharma’s critical introduction, in which he
departs from Mihaly’s conclusions on two significant
counts. Sharma joins issue with him on the question of rising
expectations and argues that the Maoist insurgency is a product
of escalating expectations that were not fulfilled. That is
for the present a matter of opinion and until established
by empirical research must remain a speculative hypothesis.
The other point on which Sharma departs from
Mihaly’s argument is on the question of Nepal’s
institutional and political readiness to handle aid efficiently.
Sharma believes that the circumstances of today’s Nepal
are very different from what it was 40 years ago. Therefore
Nepal is today in a position to utilise aid effectively. This
is a matter of conjecture since there is little in the institutional
environment that inspires such confidence. The fact that such
divergent arguments have been voiced through the medium of
this book bodes well for the state of the public sphere, and
for that reason may inspire the kind of independent research
that will make up for the very noticeable lack of fundamental
studies on the macroeconomics of aid in Nepal.
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