Last year, in a move portrayed as a step toward increased country ownership, Nepal introduced a new aid policy that aims to minimize fragmentation of assistance from donors. High dispersion of aid, after all, leads to increased project transaction costs and less effective management of projects, according to the Organization for Economic Cooperation and Development.
Not everyone welcomed the policy. Nepal’s local nongovernmental organizations, whose funding usually comes from foreign donors, opposed the government’s supposed solution to aid fragmentation.
Meanwhile, some see the policy as a rather insufficient attempt at managing aid. George Varughese, the Asia Foundation’s country representative for Nepal, told Devex that such a policy will work “if the government is capable of directing donors to needy sectors in a way that is least politicized and most effective.”
But years of political infighting in Nepal, and the government’s lack of effectiveness in channeling the aid it absorbs toward the sectors that need it most could make the goal of minimizing aid fragmentation extremely challenging.
“In a context where the Nepali state has become increasingly incapable and where politics has been distorting almost every government action, such a policy is not likely to achieve its objectives,” Varughese said.
In its latest development cooperation report, which was for fiscal 2013-14 and was released weeks before the April 25 earthquake put the country on the headlines, Nepal assessed its donors’ aid portfolios using the Herfindahl-Hirschman index. The index, which is commonly used to measure market concentration, was in Nepal’s case used to determine the aid fragmentation within donor projects. A score of 1 in the Herfindahl-Hirschman index translates to a perfectly “unfragmented” portfolio, while zero points to a portfolio that is totally fragmented.
Emerging donors have relatively little fragmentation in their aid portfolios, at least based on Nepal’s own assessment. For example, among Nepal’s top donors, India has the least fragmented portfolio. China, which Devex has found to have doubled its aid to Nepal in just four years, is a 0.54 on the index. Both India and China rank higher than Nepal’s largest donors.
In the aftermath of two devastating earthquakes, Kathmandu seems to be applying the same policy against aid fragmentation to the assistance it receives for post-earthquake relief and reconstruction. A visit to Nepal’s Ministry of Finance site redirects to a page with a link to the Prime Minister’s Disaster Relief Fund, which the Nepalese government said is an effort to reduce duplication of efforts. Still, some observers, including an anonymous U.N. official interviewed by IRIN, are wary about the decision to reroute aid to the fund and see it as a sign of aid politicization.
Varughese pointed out that while the uproar over the decision is “unfortunate,” the move to direct funds straight to the Disaster Relief Fund, although well-intentioned, was poorly timed and communicated, “and probably unnecessary.”
“The Nepal government’s intention was to rein in opportunistic individuals and organizations who may take advantage of the generosity of people around the world to make money,” he said. “While such cases do occur, they are not widespread, and the Nepal government could have managed such inflows of funds without causing controversy.”
The Disaster Relief Fund was put in place to hasten the flow of funds needed for relief efforts, but it is not the only legitimate channel through which aid can be delivered in Nepal. According to Varughese, there is no bar on donating to groups already operating in the country.
“Relief agencies that have yet to register in Nepal and that don’t have bank accounts have been asked to contribute to the Disaster Relief Fund to speed up the transfer of incoming donations, but it is not an obligation,” Andie Long, senior communications officer for Mercy Corps, which claims to have helped nearly 44,000 people since the first earthquake, told Devex. “We've heard of relief agencies without a strong network in country vetting local partners and depositing funds in their bank accounts instead.”
For Steve MacAndrew, head of operations at the International Federation of Red Cross and Red Crescent Societies, coordination — with other aid agencies, with the government and with suppliers from mostly developing countries — is needed “to provide the greatest amount of assistance to people over the vast area affected.”
Keeping operations as cost-effective as possible is part of this effort.
“Tarpaulins and tools like shovels and hammers used for rebuilding are sourced from China, for example, while pots and pans for kitchen sets come from India, plastic water containers from Germany, mosquito nets from Vietnam and tents and blankets come from Pakistan,” MacAndrew told Devex.
Still, the Nepal government has room to expand public participation in the framing, design and delivery of disaster management and relief, according to Varughese.
“Those who are on the ground delivering aid should be supported and not hindered; the source of support can be the government, donors or local communities,” he said. “The support must be facilitated and coordinated for medium and long-term durability but must not be corralled by those in government.”