Nepal – A country caught in the “NGO-Trap”?

Nepal is a country with one of the highest amounts of registered non-government organisations (NGO’s). Currently over 47’000 NGO’s are registered with the Social Welfare Council, whereas a few hundred are actively working. Out of them we count over 200 international organisations (INGO’s). Despite this significant amount of foreign aid, Nepal still remains one of the poorest countries in South Asia. One role of the development partners is to fulfil Nepal’s commitment to achieve the Sustainable Development Goals by 2030 and ensure the implementation of the new federal structure. But it seems that only limited progress is being made.

As just mentioned, Nepal recently has transitioned from a unitary system of governance to a federal structure. This is a great achievement, which comes with many challenges though: governments at local and provincial levels are bound to face huge resource gaps while executing their tasks and responsibilities. The international development community could be crucial in plugging these gaps. But we believe, that it needs more innovative approaches and collaboration models with private sector partners to attract foreign investors on commercial terms. Grants and donations might be attractive for a while, but often enough they fail to give the right incentives for a sustainable progress.

We can see that the federal government tries to do everything to mobilize as much foreign aid as possible. Provincial governments can obtain foreign grants and assistance money from various development partners, but they are barely collaborating with private sector investors. This is exactly where we see the main problem: private investors find it difficult to realise projects in the country. The Nepalese law for foreign direct investments is inconsistent and very complicated. Paired with the widespread bureaucracy, this is a big hurdle for new funds entering the country. This is especially bad because private sector activities on commercial or blended terms often proof to be more efficient and effective than grant based investments alone. Therefore, they could have a better impact on a positive development towards the sustainable goals of the country.

But not enough with this. The projects financed with donations often compete with private investments. Of course, this makes it difficult for a profit-oriented company to be successful. Which in turn means, that the jobs created by the company might be destroyed again. The government should coordinate better between the various partners and assign roles more clearly. Stronger restrictions might be needed in the NGO sector too, not only in the private sector. In our opinion, Nepal should start focusing on small and midsize investors, offering them a more attractive investment environment. Especially the growing sector of impact investors and social entrepreneurs could be crucial to transition an NGO dominated industry to an economically more sustainable and diversified one.

But there is hope: Many new players are entering the country with interesting concepts, the new government seems to be eager to change many things into a positive direction and a lot of locals start new businesses and come up with their own ideas. Let’s hope that the country will manage to adjust its frameworks in time to give these promising developments a chance to flourish!

What do you think about this thesis? We are interested to hearing your thoughts about our observation. Please comment, like or share!

Source: nexus ch

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