Countries and Regions

	Table of Contents
p. 12 of 20 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture B. Infrastructure C. Social Infrastructure and Environment D. Governance Dimensions of ADB Operations F. Gender Dimensions of ADB Operations G. Private Sector Development IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Nepal : III. Sector Strategies

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D. Governance Dimensions of ADB Operations

69. A significant constraint in implementing the country strategy for Nepal is the lack of efficiency, predictability, transparency, and accountability in key government and market institutions. Capacity building for improved governance will be a critical success factor for achieving the COS's overarching goal of a sustainable reduction in poverty. Achieving the required level of capacity building will be emphasized rather than levels of assistance. Progress toward formulating and carrying out institutional strategies will be a condition for further ADB lending.

70. Working with other stakeholders, ADB will support Government efforts to implement the institutional development strategies endorsed by the 1992 Administrative Reform Commission and the Ninth Plan. Within this context, an ADTA was approved in 1999²² and has been under implementation to formulate an action plan for civil service reform, a key priority of the Government. An additional ADTA is programmed for 2000 for capacity building to prepare for a program loan in 2001, under which the action plan will be implemented. Issues to be addressed under the loan include developing an internal capability for leading reform, improving the efficiency of the civil service, reducing corruption, enhancing staff competence, and improving the performance of key ministries. Public awareness campaigns will also be developed to create a more accountable and inclusive society with broader public participation. Civil society participation in promoting more transparency, better information disclosure by the Government, and social auditing of civil service performance will be emphasized. A cluster ADTA beginning in 2001 will also be provided to support the reform program. ADB has emphasized that this operation is a cornerstone of ADB's Nepal strategy in the 1999 COS. Institutional support for fiscal decentralization, a related component of the civil service reform process, is also planned for 2003.

71. ADB will support initiatives through its projects to implement decentralization through policy and institutional measures to strengthen local administrations including village development committees and district development committees, which will plan and implement development activities to ensure ownership and better serve local needs.

72. While civil service reform will be an important element in ADB efforts to improve governance, future ADB assistance will also be linked to tangible progress toward achieving greater transparency and accountability in national procurement, bidding procedures, and customs administration to ensure compliance with ADB guidelines and policies on anticorruption²³. Improvements are needed in enforcing contracts and property rights. Allowing international accounting and auditing firms to practice in Nepal will help improve corporate governance and promote an environment more conducive to private sector participation. An ADTA is planned in 2002 to establish a government training capacity to train accountants throughout the civil service.

73. ADB through a cluster ADTA and TA loan in 2000 (see para. 60), will also support improvements in tax administration, and corporate and financial governance, including regulatory and institutional reforms aimed at encouraging increased competition and higher standards in accountancy, audit, and legal services. Training and advisory services will be provided to improve (i) enforcement in key regulatory agencies; (ii) record keeping; and (iii) interdepartmental coordination so as to increase investment efficiency, reduce investor risk, and better protect individual rights.

74. Erosion of the civil service's independence by successive administrations, reflected in the unusually high rates of professional staff turnover, is a particular concern as it affects staff morale and further weakens the institutional capabilities of the civil service, thereby directly reducing the effectiveness of ADB assistance. Progress in addressing this issue will be closely monitored by ADB. ADB support will also depend on tangible progress in the timely publication of performance and expenditure reports by government agencies and state enterprises, and in achieving greater transparency and competition in national procurement and bidding procedures based on ADB's guidelines and policies on anticorruption.

75. ADB is also currently preparing a Nepal Governance Strategy Study. The Study will look at governance challenges, issues, and prospects in Nepal, particularly in the areas of civil service reform, decentralization, accountability, institutions dealing with corruption, service delivery of line agencies, and privatization and state enterprise reform. The study will establish the priorities for future ADB programming, and would be reflected in future Country Assistance Plan (CAP) documents.

76. The Governance Strategy will take into account the support that other donors are providing for complementary and vital governance improvements. For example, UNDP's Participatory District Development Program, launched in November 1995, is helping 40 district development committees to establish information centers that will maintain data on sectoral issues, settlements, and land issues. The data will also be used to help the district development committees to improve coordination among elected bodies, sectoral agencies and communities; and to help select programs for funding. In addition, UNDP is designing a judicial strengthening program to help improve judges' technical skills, reduce the backlog of cases, and improve record-keeping and coordination of law enforcement agencies.

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