Countries and Regions

	Table of Contents
p. 16 of 20 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies 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

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V. Donor Activities and Aid Coordination

86. Nepal continues to rely heavily upon external financing. Foreign assistance financed 50 percent of the development expenditures in FY2000, and grants and foreign loans have remained around 6 percent of GDP since FY1992. Domestic resource mobilization continues to be a critical issue for which tax reforms and improvements in tax administration are being implemented.

87. Among multilateral institutions, ADB and the World Bank are the major donors in Nepal (see Appendix 3 for details). Among bilateral donors, Japan continues to be the largest. In recent years, these three have accounted for about 55 percent of total external assistance. United Nations agencies (UNDP, World Food Program, and United Nations Children's Fund) are also active in Nepal. World Bank assistance is directed to the financial sector, natural resources, energy, industry, trade, and transport. The World Bank strategy in Nepal now uses performance based lending. Their approach is similar to ADB's strategy, addressing poverty reduction by promoting broad-based economic growth that will include investments in agriculture, small-scale enterprises, and physical and social infrastructure. Japan's assistance is also targeted at poverty reduction largely through programs supporting enhanced agricultural productivity, regionally balanced income generation and infrastructure development, and expansion of social services. The other major bilateral donors are Denmark, Germany, Switzerland, the United Kingdom, and the United States. These donors provide assistance across a number of sectors, making donor coordination essential.

88. ADB closely coordinates its activities with other donor agencies to develop a common understanding in all sectors in which it operates. The APP is a model for preparing a long-term perspective plan for the agriculture sector that involves all major stakeholders, including the donor community. Similar approaches are emerging in other key sectors including education, health and power. ADB will continue to use a shared approach to improve the effectiveness of external assistance and its contribution to economic and social development. In addition to regular bimonthly meetings of the Nepal Donors Group in Kathmandu, 13 thematic/sector subgroups have been established. These also meet regularly, generally bimonthly or quarterly. ADB is an active participant in 11 of these groups and chairs the subgroups: (i) agriculture, rural development and rural water supply; and (ii) energy and power. During Country Programming Missions and project preparation and operational missions, donor meetings are held to share information on ADB's operations in the country and this is also increasingly the case with other major donors. Where practical, meetings of the thematic/sector subgroups are scheduled to coincide with important missions. The Nepal Donor Forum was held in Paris, France from 17-19 April 2000, at which the Government outlined its priority programs and discussed these with the donors, receiving broad support for the programs.

89. Collectively, the aid community is calling more regularly the Government's attention to issues of good governance and institutional reforms as immediate and crucial priorities to ensure better development performance and use of external funds. To maximize the impact of external resources, further collaboration and cooperation in economic and sector work, policy formulation, institutional analysis, and improvement are necessary. Improved collaboration will be particularly important in power development, water resource management, and the delivery of education and health services. In the FY2000 budget, the Government announced its intention to prepare a Foreign Aid Policy with the aim of improving the effectiveness of aid and strengthening its role in aid coordination. The policy objectives, presented to the Nepal Donor Forum, have received strong support from the development community. In addition, the donor community is coordinating with the Government on their shared interest in the comprehensive poverty reduction strategy being prepared in 2000.

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