UNDP Poverty Report 2000

Focusing on Poverty Reduction through Decentralization

A novel feature of Nepal's anti-poverty efforts - now a central objective of Nepal's development planning - is the link with an ambitious programme of decentralization and local empowerment.

Close to half the people in Nepal could be considered income-poor. Official statistics for 1996 estimate that more than 40% of the population is poor, while estimates based on a poverty line of $1 a day per person put the figure at more than 50%. Poverty is greater in rural areas, especially in higher-altitude and less accessible regions and among lower castes and ethnic minorities. Measures of human poverty tend to mirror the more tra-ditional measures of income poverty.

A striking fact: income poverty in Nepal has increased since the late 1970s, mostly in rural areas. So for two decades growth has bypassed the rural poor. Advances in urban areas and their rural periphery have counteracted this trend.

What explains rural poverty? Lack of access to resources. The poor have low-productivity land, partly as a result of lack of credit and modern inputs, in turn a result of inadequate infrastructure and weak institutions. Lacking usable roads, farmers cannot obtain modern inputs or get their crops to market. Whatever services the government provides appear to be captured by better-off households because the poor are not well organized to defend their interests.

The Poverty Strategy

Poverty has been an underlying theme of all Nepal's development plans since the 1950s. The first attempt to formulate a separate plan for poverty was the Programme for the Fulfilment of Basic Needs during the Seventh Plan period, 1985 - 90, but political upheavals interrupted its implementation. With the restoration of democracy in 1991, poverty has again become a major objective of development planning. The Ninth Plan, for 1997 - 2002, singles out poverty as the sole development objective - an unusual arrangement.

The government follows a two-part strategy for poverty reduction. The first fosters broad-based growth to benefit principally the moderately poor, about 60% of all the poor. The second combines targeted programmes with social mobilization to reach the extremely poor.

The plan recognizes that mere acceleration of economic growth is not enough for effective poverty reduction - and that the composition of growth is important. Tourism and labour-intensive manufacturing are being promoted, but the main force for poverty reduction is faster growth in agriculture, which will stimulate employment in non-agricultural small and medium-scale enterprises. The plan is supporting the production of basic food staples in the plains of Terai and promoting livestock and higher-valued commercial crops in the hills and mountains.

Problems of Inequality

Greater equality in access to resources would help translate faster agricul-tural growth into less poverty, but the distribution of land ownership in the country has improved little despite decades of declared intentions. Part of the problem might be the inherently small plots, particularly in the hills and mountains, such that setting ceilings on ownership and redistributing to the land-poor cannot accomplish much.

An important source of new inequalities is the unequal access to education. The government is trying to meet the spending targets of the 20/20 Initiative for basic social services and is raising real social expenditures per person, but overall social spending remains low. More fundamental, the total budget is unusually low, with a revenue-to-GDP ratio of only 11%. Until tax revenue is raised, economic and social policies will compete for scarce government resources.

For anti-poverty activities, sectoral programmes are run by the line ministries, while most targeted programmes are run by the Ministry of Local Development. The ministry is also responsible for strengthening local institutional development, such as bolstering the district and village development committees. There is naturally some overlap between the two sets of programmes. In addition, a Social Welfare Council, affiliated with the Ministry of Women and Social Welfare, has been set up to coordinate the activities of civil society organizations.

The diversity of actors demands more attention to coordination and to strong monitoring and evaluation. But monitoring and evaluation units have yet to be set up in most ministries, and the Poverty Cell in the National Planning Commission, established to monitor all poverty programmes, lacks the capacity to do so.

Methods of Targeting

Nepal has used different methods to target the poor. One is to use an area-based programme to provide infrastructure to the more backward and isolated regions. Another is to target indigenous peoples, the oppressed and downtrodden (dalits), women and children. These pro-grammes typically are small, and the benefits tend to go to the non-poor.

A third method is to use an entry point intervention, providing a service or asset - such as credit, infrastructure or institution building. Credit-based schemes in Nepal have suffered from mistargeting, declining repayment rates, high service delivery costs and inadequate institutional capacity. They have little sustainable impact on poverty even under the best of arrangements, unless accompanied by greater prosperity in the community.

Little attention has gone to "macro-micro" linkages. There is little recognition of how national policies can affect the implementation of small-scale projects - or of how the lessons from small-scale projects can help craft better national policies. One major lesson: the more successful programmes have devoted much attention, and often much time, to institution building - to decentraliza-tion of authority, social mobilization and empowerment.

Programme for Decentralization

Centrally designed, administered and managed programmes, such as the Integrated Rural Development Programme, have little impact on poverty. By contrast, programmes implemented with the close involve-ment of beneficiaries - even when they incur more costs for delivery of services - tend to be more successful. Often these programmes rely on strong and effective local government institutions to coordinate multiple interventions.

The government has been decentralizing since the early 1980s, but only in the 1990s were these efforts married to building participatory local institutions. The real breakthrough came in the early 1990s with a multiparty system and new governance laws. Local bodies, with more authority and responsibility, have the power to collect more taxes and strengthen their administrative capacity. And substantial funds were granted to village development committees.

UNDP has supported these initiatives through the Participatory District Development Programme and the Local Governance Programme, simultaneously emphasizing social mobilization and strengthening local government. The test for these programmes lies in sustaining their achievements after the withdrawal of project funds. Will local communities continue to be empowered relative to the government bureaucracy? Will the poor continue to compete with the richer members of the community for the allocation of resources?