Econ-ity » December 12, 2014

Daily Archives: December 12, 2014

Corruption: Itchy Palms and Foreign Aid

The Nepali Times, in its most-read column, ‘The Ass’, once hilariously remarked that we belong to a nation where most acts in the Nepali vernacular are described as ‘eating’ rather than doing; ‘mwai khanu’ (to kiss), ‘churot khanu’ (to smoke) and ‘jhapad khanu’ (to get slapped) are a few instances. One act among these has become more or less synonymous with living in Nepal; ‘ghus khanu’ (to take bribes).

Nepal is a country only too familiar with the imagery of a government official rubbing two fingers and a thumb together. An itchy palm makes for an expectant bureaucrat. It was really no surprise then that the 2014 Corruption Perception Index released by Transparency International portrayed Nepal as the third most corrupt country in Asia. Nepal stands at rank 126 out of 175 countries and has a score of 29 out of a 100. The index is calculated by including reports from the Bertelsmann Foundation, World Bank, World Economic Forum, Global Justice Project and Global Insight, who carry out surveys based on a number of elements of good governance.

In recent years, it has come to light that foreign aid in Nepal has done possibly more harm than good; with money from taxpayers abroad helping fund corruption rather than much needed programs, inclusive of hydro power and community development among others. The 2014 report from DFID on its performance overseas proves to be a ‘damning study’ which asserts that “local communities in Nepal have for more than a decade benefited from British-funded support programs which allowed them to implement their own projects for schools, bridges and other needs in a way combining democratic participation with spending procedures that limited opportunities for corruption. It was a success story for British foreign aid, which surely pointed toward an expansion of the scheme. Instead the programs have been cut by more than half, because the Nepalese central government wanted to take over the work, which will now be both more distant from those it is supposed to serve and more open to the corrupt diversion of funds”, as reported by The Guardian.

Newsreaders clucking like chickens about corruption in hydro-power projects in Nepal do little else. The recent revelation of embezzlement worth 540 million at the Chameliya Hydro power project, caused, at most, grandfathers (excuse the generalization) to swear with relish at the prospect of being able to verbally slap these corrupt officials. Money vanished in the name of purchases and salaries and wages. The amount embezzled has been nothing short of ridiculous. Does this mean its time our ‘large’ neighbors (and the rest of the world) should stop throwing bundles of money at us?

Before we get all patriotic and say no, you know that we actually need a few of these bundles. Perhaps more than a few. So we get the money but once it passes through the bureaucratic sieve, you are going to barely get enough to make a good cuppa joe. Government officials ask money for every little transaction and every piece of paperwork. Political pluralism has further deranged much needed projects and supplied the money in areas as dictated by the numerous political parties, constantly breaking up into ‘hyphens’ and ‘sans-hyphens’ as need be. In ‘Corruption, Society and Politics in Nepal’, Thomas Wills identifies political experts who conclude, that ‘as far as corruption is concerned, democracy “has helped to aggravate the situation.” This may in part be down to the sheer multiplicity of parties.’

Democracy is necessary; so is political pluralism. But when the best are among the worst, the system does little good. Foreign aid needs to be cashed better by reducing bureaucratic hurdles and the red-tape. The 2014 ‘Doing Business Report’ by the World Bank places Nepal at 108 out of 189 economies outlining the near infinite bureaucratic obstructions that one needs to go through to conduct business in Nepal. Corruption in public administration has become endemic; systematic. It needs to be questioned and challenged before foreign investors lose hope in our economy before we do.

Labisha Uprety

About Labisha Uprety

Labisha Uprety is a Research and Communications Officer at Samriddhi. She enjoys debating and likes her tea black with a little sugar.

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Three Things that Nepali public sector can learn from private sector

The public sector generally operates under a different set of rules than what the private sector is subject to. Additionally, public entities enjoy the privilege of having great discretionary powers over matters of public concern.

Nepalese public sector is infamous for its inefficiency, lack of accountability, abuse of authority and nepotism; and scores of these malpractices have resulted into ever-increasing discontent among the general public towards state machineries and their performance. These days, widespread systemic corruption, ineffective and inefficient public service delivery and significant wastage of resources are pervasive in the Nepalese public sector and these attributes have contributed to a sharp decline in faith that the general public has in public entities.

On the contrary, private sector institutions are known for delivering better-quality goods and services with high customer satisfaction. What then, distinguishes the private sector from the public sector in terms of better service-delivery and customer satisfaction? Here are three things that set them apart.

1. Delegation of Authority and Responsibility:

Two of the most frequently observed problems in public institutions are absenteeism, and delay thereafter due to lack of adequate staff that can work on his/her behalf. But in the private sector, as there is competition, they cannot afford to let the circumstances be so. The notion of competition guarantees that private institutions refrain from letting customers go and get services from a competitor, which public entities need not care about.

I want to take this opportunity to cite an example from my visit to the Supreme Court. I had to spend three working days to access a piece of information. First day, officials said that concerned staff was unavailable and there was no one to substitute him at his desk. So I returned, having accomplished nothing. The second day was more troublesome than I had expected; no staff was willing to cooperate and I was asked to visit rooms after rooms. I visited several rooms as per their direction, receiving nothing but trouble after trouble. After all that trouble, one official says “Well, the concerned person is in a meeting. Come tomorrow!” ―what an easy thing to say! Finally, the third day, I had access to what I needed from the court and it was not easy either; I had to wait for hours to get this piece of information.

2. Power of reward and punishment mechanism:

By virtue of being human, an individual’s performance is determined by the incentives one receives. In most cases, better performance is an outcome of higher incentives.

For example, an acting manager of a corporate house always gives his/her best to ensure effective human resource management by maintaining objectively verifiable monitoring and evaluation indicators, keeping good interpersonal relations and so on. But why public officers can’t act like a corporate house manager is something that makes us wonder. The answer is simple; a public officer has no incentive in performing better. The public officer will not be punished by law if he fails to guarantee that a client receives the best service. But, in case of a corporate house manager, there are monetary and non monetary incentives; salary and bonus, annual leaves, recognition in job market, and most importantly, the threat of a punishment in case he fails to deliver as per his job description.

Moreover, public entities need not worry about revenue and capital investment as they are funded by the government. These institutions truly lack incentives, which lead to poor performance.

3. Performance Evaluation:

Performance evaluation of employees carried out to assess their contribution to an organization is one of the fundamental aspects of competitive private firms. This mechanism enables managers to make decisions about the employee’s contribution to the organization and remuneration for their performance.

Performance evaluation of employee in public institutions, on the other hand, is hardly practiced despite the fact that Public Service Act 1993 prescribes performance evaluation for promotion of a public servant. It is an alien concept in the Nepalese public sector. Moreover, salary and other incentives a public servant receives, regardless of their performance, are prescribed by legal documents and this further hinders performance.

In case of a public organization, a public servant has no obligation to perform as per targets since no objective performance indicators are set by the superiors. Return on human capital investment is lower in the absence of objective performance targets which ultimately results in poor public service delivery.

Suraj Dhakal

About Suraj Dhakal

Suraj Dhakal, a student of Development Studies works with Research Department at Samriddhi, The Prosperity Foundation. Mr. Dhakal was previously associated with We Inspire Nepal (WIN), a youth led leadership and personal development organization.

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