Department for International Development's work in Nepal

Nepal remains one of the world’s poorest countries, but has great economic potential if the barriers to its development such as political instability and corruption, can be overcome.

The Minister of Finance of the Government of Nepal (GoN) told us that he would like DFID to make roads and major power schemes an even greater priority; these are vital for Nepal and DFID should press the World Bank and the Asian Development Bank to increase their investments in these sectors. We broadly support DFID’s current bilateral portfolio, but DFID must ensure that its programmes are in line with the priorities of GoN and that it is aware of the political implications of its work.

Given the threats to Nepal from climate change and earthquakes, we welcome DFID’s focus on these issues. DFID has useful programmes in disaster reduction, but DFID’s work is on too small a scale. We recommend DFID engage with the GoN in urban planning, including transport planning, areas where UK has considerable expertise. If necessary, DFID Nepal should employ an additional adviser.

We commend DFID for providing technical support for the Investment Board of Nepal (IBN) when no other donors were willing to do so. Nepal is planning to construct two major hydro-electric schemes which will help address the country’s chronic power shortages. If traditional political problems are overcome and these schemes are successful, the Nepalese economy could be transformed and DFID could begin to develop an exit strategy, perhaps within five years of their successful completion.

Nepal has huge potential to benefit from tourism and the jobs it brings. We welcome DFID’s support for this industry and recommend it expands this area of its work.

Nepal suffers from poor governance. DFID has in the past provided significant funds for Elections but not for Parliament. We support DFID’s decision to drop support for national elections; other donors can fund them. We recommend DFID provide support for Parliament as soon as national elections are held, focusing on support for women MPs and committees. We recommend DFID support local elections, through its existing local government programmes if possible, not least because the absence of local elections is seen as a source of corruption.

Corruption is endemic in Nepal. We welcome ICAI’s decision to make Nepal a case study in its Anti-corruption Inquiry. DFID Nepal has responded robustly to ICAI’s report, criticising its methodology; ICAI has defended its general conclusions. We do not see the use of local NGOs in place of the state as a panacea; in corrupt societies NGOs can also be corrupt. If Nepal is to become less corrupt, improvements in governance and a change of culture have to be made to state institutions. We recommend that DFID continue to work through state institutions, but ensure funding is linked to improvements in performance.

DFID’s large budget in Nepal can only be justified if there are such improvements, and should be reduced if effective action to combat corruption is not pursued vigorously by the GoN.