Post 2015: Global Action for an Inclusive and Sustainable Future

conflict assessment, which also delved into the
relationship between donors, aid and conflict.
this was presented as a governance case study at
the oEcD (Segal, 2008).
this Sca stated that oDa was based on false
premises, pointing out that the persistence of
poverty in nepal was not due to a lack of capacity
within the state administration, but to the exclusive
nature of the political settlement. the study also
indicated that building state capacity to deliver
basic services would essentially entrench an unjust,
repressive and exploitative political settlement:
“…whilst poverty and social exclusion were critically
tied up with the causes of conflict, the actions and
behaviour of the elite-dominated Government,
bureaucracy and aid donors were intrinsically part
of the problem…. Critically, donor aid, according to
the report, was based on a false premise, stipulating
that: (i) the persistence of poverty was due to a lack
of capacity within the administration and, (ii) the
way to address this was by building state capacity to
deliver basic services and meet human needs, and
by stimulating demand among poorer populations.”
(Segal, 2008)
moreover, it argued for a drastic overhaul of donor
strategies. although this study was conducted by
DFID alone, by the time of another coup by the
ruling monarch in 2005, most donors, including
the Eu, were redesigning their aid approaches to
support gradual structural change. more coherent
and coordinated donor efforts to support a more
inclusive political peace process and democratic
institutions seem to have contributed to laying the
‘groundwork for shifts in the political settlement’,
mediated through national actors, initiatives and
movements (Elgin-cossart et al., 2012: 48). this
also implied that donors distanced themselves
from the ruling elite, which still veered towards
using military power to solve the conflict. the
change in donor response, to which the DFID
study contributed, illustrates the value of a
robust, independent diagnosis that focuses less
on the formal outlook of political and economic
institutions, but rather on how they function.
a new political settlement emerged after the
signing of the comprehensive peace agreement in
2006. this is the most inclusive political settlement
in nepal’s history, yet it remains unstable as the
uprising in 2007 illustrated. there has only been
a gradual expansion of horizontal inclusivity,
with broader political representation based on a
wider ethnic, caste, regional, religious and gender
base. Yet the process of renegotiating the political
system did not meaningfully transform the vertical
relationship between state and society. as a result
newly empowered leaders have been criticised for
replicating a political system that relies on patron–
client relationships and corrupt infusions of cash.
the twice-delayed constituent assembly elections
were held in april 2008 and saw the maoists voted
in as the largest party. charged with writing the
country’s new constitution, but failing to do so, the
assembly was dissolved in may 2012, mainly over
the question of federalism and whether the country
should be divided along ethnic lines. a meaningful
political alternative remains elusive.
1.2 Role and importance of international links
Development finance and investment
External assistance has played a substantial role in
meeting nepal’s development spending. total oDa
as a share of total actual expenditure was 25.4% in
1990/91 and 19.2% in 2009/10, and as a share of
total development expenditure, 37.5% and 55.2%
respectively. In terms of the share of total grants
disbursed, the European commission’s share was
only 1.1% in 2009/10. 159 at present, 90% of European
commission support to nepal’s government takes
159 Source: case study authors’ calculation using various issues of Source books. See ‘aid and Finance’ section of the case study.
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