NEPAL

Developing Capacities for Effective Aid Management and Coordination (DCEAMC) project supports to improve coordination between the ministries and the National Planning Commission for aid management and setting up a database as a single point of information on aid.

Background

Foreign aid is very important to Nepal and especially now to support the peace process and the country’s recovery from ten years of violent conflict. Aid has made a large contribution to Nepal’s development progress and to it being on track to meet most of the Millennium Development Goals. The $514 million of official development assistance received in 2006 financed 81% of 2007/08 capital expenditure and 26.5% of all government expenditure.

Nepal is a signatory to the Paris Declaration on Aid Effectiveness, 2005. Together with its donors, Nepal has committed to the five Paris principles for more cost-effective aid that makes a greater impact in line with developing countries’ priorities. Nepal was an active participant in the follow-up Accra High Level Forum on Aid Effectiveness (September 2008), where it presented the results of a survey on aid effectiveness in the country.

The survey ranked Nepal as either ‘moderate’ or ‘low’ in achieving the principles with the following main shortcomings:

• Only 23% of aid was harmonised being channelled through common arrangments or procedures.
• Only 15% of technical assistance, which accounts for a third of aid, was coordinated with country programmes in 2007.
• 32% of aid bypassed national financial management systems whilst 56% bypassed Government procurement systems in 2007.
• Systems for monitoring the planned and actual results of domestic and externally funded investments were generally poor.

About the Project

UNDP  launched a new round of support in 2009 in the form of Developing Capacities for Effective Aid Management and Coordination project (2009-2012) , in partnership with the Ministry of Finance, to strengthen the Government’s aid management and coordination system. The Developing Capacities for Effective Aid Management and Coordination project helps localise the Paris Principles to make official development assistance produce more results. It will assist the Government to implement the recommendations of the 2007 and 2010 surveys and help  establish the mechanisms for involving all main stakeholders in more effectively managing aid.

Previous UNDP support (including the Strengthening Aid Management and National Execution project — 2003–2006) was geared to improving the capacity of the Ministry of Finance to manage and coordinate aid. One of the main lessons learned has been the need to not only work with the Ministry of Finance but also with the other ministries and with the National Planning Commission that are involved in managing and disbursing aid, and also with the donors.

National aid management platform— The scattered information across the systems of different government agencies on aid receipts, budgets, expenditure and impacts has been a major constraint to more effective aid in Nepal. The project has helped overcome this constraint by assisting the Government to set up an online database as a central source of information on aid- an initiative being undertaken in many developing countries in line with the Paris Declaration's call for more transparent and coordinated aid. The project has helped customise a standard software package that enabled Nepal's Aid Management Platform to be installed in the Foreign Aid Coordination Division (FACD) of the Ministry of Finance in April 2010.

Skills for aid management- Self assessments in 2010 identified the capacity building needs of four of the main ministries (finance, health, education and local development) plus the National Planning Commission that are responsible for managing much of Nepal's foreign aid. These assessments provided the basis for a project supported programme to build the aid managment and coordination capacities of 147 officials from these ministries.they have been trained on results-based management, sector-wide approaches (SWAps), negotiation skills, aid effectiveness, and meeting management.

Coordination mechanism- The project has supported revamping of the Nepal Portfolio Performance Review (NPPR) mechanism- a forum for discussions between government and donors. The revised NPPR will be launched soon. It will now allow all donors to participate in the review process that will include new components on key sectoral development results, mutual accountability and aid effectiveness alongside the existing components on government management systems.

 Monitoring implementation of the Paris declaration - UNDP and the Asian Development Bank supported the 2010 evaluation by the government and its development partners of the usefulness of the Paris Declaration. The project also supported the Ministry of Finance to carry out the second (2010) survey on the implementation of the Paris Declaration principles in Nepal- looking at the 12 key indicators of aid effectiveness. This survey found that mixed progress has been made from 2007 with more harmonised aid, more coordinated technical assistance and improved monitoring but with more aid and procurement bypassing government systems. The results of this exercises were informative for the fourth high level forum on aid effectiveness in Busan, Korea in November 2011.

 

The 5 principles of the Paris Declaration
 

• Ownership of development strategies and initiatives by developing countries.
• Alignment with donors lining their aid up along with developing countries' national development strategies and national systems.
• Harmonisation, with donors better coordinating their aid programmes including by pooling aid.
• Managing for results, with developing countries and donors consistently measuring impact.
• Mutual accountability, with donors and developing countries accounting more transparently to each other and to their citizens on the use of aid funds.

 Project focus in 2012

• Extend access to the Aid Management Platform to all ministries receiving official development assistance and give civil society and the general public access to the information.
• Extend the capacity development work to other ministries that receive large amounts of foreign aid.
• Support the Ministry of Finance to monitor the recently agreed aid effectiveness targets as part of the NPPR, to lead dialogue with donors on achieving these targets and to finalise Nepal's new foreign aid policy.

Project Details

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