Aid allocation to fragile States: observations from Nepal

by Jörg Frieden (1),SDC Country Director Nepal

1. Nepal: a fragile State in an violent civil conflict

This note summarizes observations and experiences made in a fragile State that has been the theatre of a low intensity but bloody civil war for the last 8 years. The causes of the Nepali conflict have been studied at length and there is a general consensus among scholars that serious shortcomings of governance during the short period of democratic rule (1991 - 2002) allowed structural discriminations and historical grievances to evolve into a violent conflict. In this sense, State fragility was one of the immediatec auses of the civil war. At the same time, over the last years, he t violent political conflict has weakened the State and has made it even more fragile. In particular, democratically elected bodies were dismantled, at the central as well as at the local level. At present, the State is unable to provide essential services - law and order, education, health, infrastructure - in large parts of the country, in particular in the rural areas where the majority of the poor Nepali still live. Under these circumstances, Nepal has ceased to be a country in development, as the conflict undermines the sustainable achievement of economic and social progresses. Only the remittances of large scale migration and the still generous contributions of development banks and bilateral donors keep the country afloat.

2. Main issues

a) A challenging question is at the core of the strategic debate on the role of aid in Nepal: can the violent conflict be mitigated and progressively solved through development and development work, or is the solution of the political conflict a precondition for the resumption of sustainable development and the effective implementation of a poverty reduction programme? Donors and financial institutions are split on this question, IMF and the development banks adopting the first approach, the majority of the bilateral donors leaning toward the second, more political view. It must be stressed that this debate is not of academic nature, as objectives, volumes, modalities and coordination of aid flows are shaped by the analysis of the conflict and by the choice of its possible solutions.

b) To be able to operate effectively, to continue to reach the rural populations and provide security to development staff, aid agencies operations must reflect their impartialty in the political conflict. In particular, bilateral agencies must support activities and finance investments in areas that are controlled by government as well as in regions that are under strong insurgents influence. This necessity collides with the privileged relations that donors maintain with the host State as well as with the nurturing of institutions and the many capacity building initiatives that are part of traditional development programmes. Yet, contacts and de facto collaboration with the rebel movement are unavoidable in order to remain engaged: willingly or unwillingly, hi t s provides legitimacy and also resources to the insurgents.

c) The open conflict has increased the distress of the poor living in rural areas and has created new vulnerable groups. In many regions, it has empowered women. Traditional coping mechanism and social structures continue however to function: emergency approaches would therefore do more harm then good. Relief, defense of human rights and conflict mitigation must therefore come from a development work mindful at the same time of short term needs and long ter m challenges.

d) Through aid resources and development work, the international community can contribute to conflict transformation. For this to be possible, cooperation strategies, programmes and projects must however be thought out and managed in a conflict sensitive way. This is more easily said than done: although do no harm languages and conflict impact analysis are now widespread, their impact on the daily aid business remains limited, as the majority of development work continue to be conceived and implemented "around the conflict".

3. SDC approach

a) At the programme level, SDC has put the conflict at the core of its strategy and its approaches. Development work is now at the service of conflict transformation. The specific nature of the political conflictha s been accepted, with the recognition that every development activity must take into account its potential manipulation by the parties in the conflict as well as its potential influence on their behavior and on their willingness to enter into a c onstructive dialogue with the political foe. Projects and activities that are relevant for the mitigation of the social conflicts, through delivery of direct benefits to poor and discriminated households or through a strong involvement of women in decision making have been identified and furthered. The development initiatives that are chosen with these conflict related objectives in mind must however continue to make sense in a long term perspective and be coherent with the poverty reduction strategy prepared and adopted by the government in better times. In this sense, SDC continues to contribute to the formulation of sensible sector policies, although their full implementation is hampered by the political conflict and by the dismantling of local governments that has resulted from the latter.

b) At the project level, het first concern is to ensure security to staff and beneficiaries. Project workers are now prepared to deal with Human Rights abuses. Staff recruitments and management style take into account the ethnic and the cast related diversity of the population involved and ensure inclusion of discriminated groups. The strengthened role of women, but also their increased vulnerability and workload, are recognized in planning and executing activities. Key moment of the projects cycle are conducted in a conflict sensitive way, by the introduction of specific analytical tools (conflict mapping, do no harm lenses, den i tification of potential connectors at the political as well as at the social level). These approaches have forced SDC to reduce the dominance of rigid logical frameworks in planning and monitoring, to increase flexibility in the choice of leading activities and to introduce specific conflict mitigation and conflict transformation measures in the yearly plans of operations.

4. SDC experiences

a) Development work is subject to pressures and manipulation by the parties in conflict. Official agencies as well as NGOs can better resist these negative influences if they formulate together common operational guidelines. Widely disseminated, these define in a binding and credible way the values, the principles, the working modalities and the im partialities of the development work. They are consistently communicated to the parties in conflict and constitute a basis for the management of crisis and tensions that regularly arise in the field.

b) Staff, especially locally recruited colleagues, are often reluctant to provide full information about the difficulties created by the conflict to the development work. They tend to operate "around the conflict", as they fear for their jobs, their future and are afraid that the beneficiaries could be abandoned. Conflict sensitive development programme management is therefore possible only if the commitment of donors to stay engaged in the country is clearly and credibly communicated to the people involved by persons occupying the highest management positions.

c) Official partners, at the central and at the local level, are understandably reticent to admit the extension of the State failure and the influence of the rebel movement on development and development work. Yet, only if the legitimate authorities admit the reality of their limited capacity to control the events in many rural areas it is possible to introduce the required changes in programme and project designs, in order to keep or to make them effective in het conflict.

d) These difficulties notwithstanding, conflict sensitive programme management has the potential to improve the quality of development work. The high requirements set by the insurgents to poverty focus and efficient delivery have forced agencies, including SDC, to rely more on community ownership and (women) initiatives. Governance issues of immediate concern to the poorest - like the prompt payment of unskilled workers by public agents - receive more attention and are more likely to be addressed. In order to escape political pressure and partisan manipulation, development work has become more transparent and more accountable to communities. Exclusion mechanisms are identified and corrected. True, these improvements in reaching social objectives require additional investment of time and resources.

5. Questions and recommendations

a) Aid flows finance indirectly and involuntarily the conflict and its continuation. The generous budgetary support provided "to sustain reforms" and avoid the collapse of the economy contribute to maintain an unsustainable level of military expenditures on the government side and nourishes de facto the illusion that sooner or later a military solution will be found. On their side, the rebel benefit directly and indirectly - especially through taxation of individuals working in and for donors funded projects - from the development activities deployed in the countryside. Also these transfers are likely to extend the duration of the conflict. In such a context it is compelling to analyze volume and composition of aid flows from a macroeconomic, do no harm perspective and to formulate a donors strategy explicitly aiming at the promotion of dialogue and peace.

b) World Bank and ADB provide approximately two third of the aid committed to Nepal (although implementation problems typical of a fragile State reduce the net transfers emanating from these sources to a smaller fraction of the total). Now, by their nature and nstitutional setting, project financed by the development banks are fully owned only by onei party to the conflict and are managed following ingrained administrative rules. There is an urgent need to adjust lending strategy and large project design to the reality of a fragile state in conflict, including strong components of conflict sensitive programme management (for instance through compulsory public planning and auditing sessions at the local level) as well as appropriate training and advice for the public servants that are in charge of these large operations.


(1) This article reflects the experiences as well as the opinion of the author and does not bind SDC in any way.