NEPAL
DELIVERY OF RURAL DEVELOMENT SERVICES:
A COMPARATIVE ASSESSMENT OF
ALTERNATIVE INSTITUTIONAL ARRANGEMENTS
WITH A FOCUS ON THE TARAI
October, 2000
Table of Contents
Table of Contents...... i
Foreword...... ii
Acknowledgements……………………………………………………………………………………….iii
Acronyms...... iv
Summary and Conclusions………………………………………………………………………………..v
I.Introduction...... 1
A.Background...... 1
B.Objectives and Scope of the Study...... 1
C.The Nepal Tarai...... 2
II.The Conceptual Framework...... 6
A.Presentation of Conceptual Framework...... 6
B.Provision and Production...... 7
C.Polycentricity and Co-Production...... 7
D.Public vs. Private Nature of Goods and Services...... 8
- Social Capital Development...... 10
III.Study Methodology...... 11
A.Case Study Methodoloty...... 11
B.Desk Study...... 11
C.Field Visit...... 12
D.Identification of Actors and Steps in the Delivery Process...... 13
E.Efficiency Performance Evaluation...... 14
F.Process Performance Evaluation...... 15
G.Limitations of the Study...... 16
IV.Definition and Classification of Goods and Services...... 17
A.Definition of Agricultural Technology Services...... 17
B.Definition of Infrastructure Services...... 18
C.Classification of Services...... 20
V.Institutional Models...... 22
A.Generic Models...... 22
B.Agricultural Technology Models...... 23
C.Rural Infrastructure Models...... 24
VI.Summary of the Case Study Analyses...... 28
A.Overview of Cases Studies...... 28
B.Agricultural Technology Case Studies...... 28
C.Irrigation Case Studies...... 33
D.Drinking Water Supply Case Studies...... 39
E.Roads and Bridges Case Studies...... 42
F.Electricity Distribution Case Studies...... 45
G.Summary Findings...... 48
VII.Assessment of the Capacity of Institutional Actors...... 51
A.Central Government Departments/Agencies...... 51
B.Local Bodies...... 52
C.NGOs ...... 54
D.CBOs ...... 55
VIII.Recommendations...... 56
A.General Recommendations...... 56
B.Sector- Specific Recommendations...... 57
C.Specialized Sectoral or Multi-Sectoral Funds...... 64
References...... 65
Boxes:
Box 1:The Invisible Tubewells...... 36
Box 2:Bhairahawa Lumbini Groundwater Irrigation Project...... 37
Box 3:Trying to Correct the Incorrigible...... 38
Box 4:Missing Infrastructure...... 47
Box 5:Inefficient Resource Allocation...... 49
Box 6:Apportioning 'black money'...... 51
Box 7:Right-to-Information Act?...... 57
Box 8:Seed Production and Multiplication...... 60
Box 9:The need for competitive funds...... 64
Figures:
Figure 1:A Polycentric Support Structure for Development Functions...... 8
Figure 2:Types of Goods...... 9
Figure 3:Classification of Infrastructure Services...... 21
Figure 4:Classification of Agricultural Technology Services...... 21
Tables:
Table 1:List of Districts Visited by the Study Team...... 12
Table 2:Number of Cases Studied by Sector...... 28
Table 3:Efficiency Performance Ranking of Agricultural Research Models...... 29
Table 4:Process Performance Ranking of Agricultural Research Models...... 29
Table 5:Efficiency Performance Ranking of Agricultural Extension Models...... 31
Table 6:Process Performance Ranking of Agricultural Extension Models...... 31
Table 7:Efficiency Performance Ranking of Surface Irrigation Models...... 33
Table 8:Process Ranking of Surface Irrigation Models...... 34
Table 9:Efficiency Performance Ranking of Institutional Models in Shallow Tubewell...... 35
Table 10:Process Performance Ranking of Institutional Models in Shallow Tubewells...... 35
Table 11:Efficiency Performance Ranking of Drinking Water Models...... 39
Table 12:Process Performance Ranking of Drinking Water Models...... 39
Table 13:Efficiency Performance Ranking of Rural Roads Models...... 43
Table 14:Process Performance Ranking of Rural Road Models...... 43
Table 15:Efficiency Performance Ranking of Bridge Models...... 44
Table 16:Process Performance Ranking of Bridge Models...... 44
Table 17:Norms Used in LCM and AM Type Models for Roads and Bridges...... 45
Table 18:Efficiency Performance Ranking of Electricity Distribution Models...... 46
Table 19:Process Performance Ranking of Electricity Distribution Models...... 46
Table 20:Summary of the Efficiency Performance Evaluation by Sector...... 48
Table 21:Summary of the Process Performance Evaluation by Sector...... 48
Table 22:Number of NGOs in Tarai, by Regions...... 54
Table 23:Involvement of NGOs in Various Sectors...... 54
Maps:
Map 1:Map of Nepal Showing Tarai Districts and the Study Districts...... 3
Map 2:Map of Tarai Demarcating the Areas with Relatively low Social Capital...... 5
Annexes:
Annex 1:The Tarai in the Context of Nepal...... 69
Annex 2:Development Indicators and Ranking of Tarai Districts...... 70
Annex 3:Population and Man/Land Ratio in Tarai Districts...... 71
Annex 4:Average Holding Size in Tarai Districts...... 72
Annex 5:List of Peoples Contacted...... 73
Annex 6:List of the Case Studies...... 77
Annex 7:The Fund Setup...... 80
Annex 8:Comparative Evaluation of Institutional Performance...... 104
Annex 9:Main Fund Set-Up Orientations...... 115
FOREWORD
In spite of five decades of development efforts supported by the international donor community, Nepal has only experienced limited economic and social progress. This is due to adverse physical constraints including the rugged terrain and severe difficulties of communications. It is also due to political instability and flawed development policies that have led in part to ineffective institutional arrangements to implement development programs. As a result, many areas of the countries, including the Tarai, have been unable to move out the vicious circle of low productivity subsistence agriculture and are trapped into poverty. Rural poverty remains a perennial problem with almost half the population currently living below poverty line.
In order to address the weaknesses of rural development, the Government prepared in 1996 the Agriculture Perspective Plan (APP), a 20 year strategic blueprint for development focused prominently on, but not limited to, agriculture development. The goal was to bring about a sweeping transformation of the rural economy while reducing poverty levels down to 14 percent by the year 2015. The experience of recent years, unfortunately, suggests that this goal is elusive. Rural producers (particularly the poorer ones) are neither given access to the required inputs, nor provided with the proper rural services. The deficiency in rural services is largely due to the failure of existing -- mostly government – controlled -- institutions. Hence the focus of the present study on Nepal’s experience with various institutional options for delivery of rural development services.
The study analyzes Nepal’s experience with various institutional options and seeks to identify those sustainable and cost-effective options that have the highest impact on growth and poverty reduction. One aspect taken into account in the analysis is the degree to which service delivery is decentralized. Hence the attention given to the recent government decentralization efforts. The study examines some 60 case studies covering agricultural technology support services (research and extension) and infrastructure services (irrigation, rural roads, water supply and rural electrification). These case studies cover twelve districts (out of 20) in all five Tarai development regions. The analysis shows that the state agency-managed service delivery system is largely inefficient and unsustainable. In contrast, the services managed by alternative institutions such as CBOs, NGOs and private sector operators have higher standards and are more cost-effective. In the latter case, evidence suggests that there is a high level of beneficiaries’ participation in project implementation and service delivery cycle. This permits a high cost sharing of both investment and O&M costs with end-users thereby creating a strong sense of ownership amongst them.
Important policy implications are derived from the above analysis. First and foremost, the study suggests the need for a changing role of the Government more aligned with changed circumstances. The Government should refrain from delivering services except if they concern public goods which non-government institutions have no incentives to handle. It should rather focus its efforts on assuming the required provisioning functions, including definition of the legislative and regulatory framework, planning and programming at national and regional level, supply of funding resources and enforcement of safeguard and associated rules. Other policy recommendations include decentralization of service delivery, reform of the subsidy policy aligned with the need to create a ‘level playing field’ amongst development actors, development of social capital particularly in the southern Tarai, and establishment of sectoral funds. These recommendations are geared to promoting polycentricity (institutional pluralism with competition amongst institutional actors) as it is proven the best strategy for efficient, transparent, and sustainable service delivery arrangements. It can be safely argued that the findings from the case studies although they are based on the circumstances prevailing in the Tarai are broadly applicable to the country as a whole.
I believe that the findings and recommendations of the present study are both vital and timely as an input for the His Majesty’s Government to reorient its current rural development strategy, especially at the time when it is embracing decentralization and community driven development. What is needed at this juncture and without delay is to implement on a pilot scale the best performing models, i.e., those providing for participation of beneficiaries at the grassroots in the context of decentralization, and ‘scale up’ implementation as quickly as the required lessons are learnt from project implementation. The World Bank is certainly ready to contributing to this task starting with the projects that it is currently funding.
Hans M. Rothenbuhler
Country Director for Nepal
World Bank
Acknowledgements
The present study was commissioned by the World Bank to a Nepali NGO, SAPPROS (Support Activities to Poor Producers of Nepal). The SAPPROS team who carried out the study comprised the following professionals: Shree Krishna Upadhyay (Team Leader/Institutional Expert), Dr. Govind P. Koirala (Economist), P. P. Adhikari (Rural Energy Specialist), Hare Ram Shrestha (Rural Roads Specialist), Devendra B. Bajracharya (Irrigation Expert), Rajesh Bhattarai (Drinking Water Specialist), and Khadga J. Gurung (Agriculture Specialist). The Team was supported by Khop Narayan Shrestha, Badri Raman Sharma, Bimal Khatiwada, Ms. Pramita Bista (Khadka), Bidya Nath Bhattarai, and Jagadish Babu Tiwari. The logistical support was provided by Narendra Bahadur KC, and the secretarial work performed by Rabi Thapa and Raj Kumar Rupakheti. The entire SAPPROS team is to be commended for preparing the draft of this study particularly as regards the depth of the field work they conducted, their subsequent analysis of the data and drafting of the report, and their continuous readiness and availability for participating in consultations and discussions all along the study with the various authorities and stakeholders.
The World Bank staff core team headed by Jean-Claude Balcet (Task Team Leader, SASRD) comprised the following Bank staff members: Philippe Dongier (INFWS), Navin Rai (SASSD), Sugandha Shrestha (SASRD/SACNP) and Andrea Ryan (SASIN). This core team worked closely with SAPPROS all along the study. It provided SAPPROS technical and analytical guidance as well as editing support. It dealt with the organization of the various fora for discussion including three national seminars (February and June 1999, and June 2000). Other Bank staff members were closely associated to the core team both in the Bank Field Office and at Headquarters: Hans Rothenbuhler (Country Director for Nepal), Jeeva Perumalpillai-Essex (SASRD Team Leader for Nepal), Ohn Myint (SASRD), Robert Epworth (SASRD), Ram Chandra Mishra (SASRD/SACNP), Tashi Tenzing (SASIN/SACNP), Shyam Ranjitkar (SASRD/SACNP), Surendra Joshi (SASIN/SACNP), Guang Shen (SASIN), and Tjaarda Storm Van Leeuwen (SASEG). Prof. Christopher Garforth (Consultant, The University of Reading), as well as Anthony Willett (Technical Assistant MASDAR/AREP), provided support for the agricultural research and extension part of the study. The Peer Reviewers were Robert Thompson (Director RDV), Lynn Bennett (SASSD), Gotz Schreiber (ECARD) as well as Dr. Mohan Man Sainju (Institute of Integrated Development Studies-IIDS, Kathmandu).
Heartfelt thanks go to all the officials and professionals contacted during the preparation of this report. Amongst these are first and foremost the members of the Review Committee at the National Planning Commission (NPC) who assumed responsibility for the study review process under the guidance of Honorable Prithvi Raj Ligal, Vice-Chairman of NPC: Hari Shanker Tripathi (Member NPC/Head of the Review Committee), Jagdish Pokherel (Member NPC) and Shankar Sharma (Member NPC) and Champak Pokharel. Hari Upadhayaya (Consultant-CEAPRED) who provided technical support for the review process is also to be thanked. Heartfelt thanks go as well to the officials of the following ministries and agencies who devoted precious time to react to the study team questions and give precious feedback: Ministry of Agriculture, Ministry of Local Development (DOLIDAR), Ministry of Water Resources, Nepal Agricultural Research Council (NARC), and Agriculture Development Bank of Nepal (ADBN).
A special debt of gratitude is owed to Dr. Mohan Man Sainju (IIDS) and to Dr. Yam Radav (Winrock International) for their valuable feedback on the various drafts of the report. Dr. Sainju, both personally and as an official Peer Reviewer for the study, was an inspiration all along the study preparation process.
Thanks go to the members of the donor community who reacted to early drafts of the report and were instrumental in organizing the June 1999 National Seminar: Richard Vokes (ADB), Henning Kracher (UNDP), Peter Rhode (GTZ), Sam Bickesteth (DIFID) and Winston Rudder (FAO).
Finally, the greatest debt of gratitude is owed to the farmers, producers and community leaders who were interviewed and consulted at grassroots level. They provided the wealth of information on which the findings of this report are based. This information has increased tremendously the knowledge base and understanding of the process of delivery of rural development services in the Tarai. It is hoped that, when they are applied, the recommendations of this study which are rooted on stakeholders’ perceptions and knowledge will go a long to empower them and in turn help raise the level of services provided to them and hence improve their well-being.
Acronyms
AAFMIS / Agency Assisted Farmer Managed Irrigation SystemADB / Asian Development Bank
ADB/N / Agricultural Development Bank of Nepal
Agro-Vets / Agriculture and Veterinary Services
AIC / Agriculture Inputs Corporation
AM / Agency Model
APP / Agriculture Perspective Plan
AREP / Agricultural Research and Extension Project
BLGIP / Bhairahawa-Lumbili Groundwater Irrigation Project
CBO / Community Based Organization
CDO / Chief District Officer
CEAPRED / Center for Agricultural Policy, Research, Extension and Development
CWSS / Community Water Supply and Sanitation
DANIDA / Danish International Development Agency
DCP / Command Area Development Project
DDC / District Development Committee
DDT / Di-chloro Di-hexa Tetrachloride
DFID / Department for International Development (UK)
DOI / Department of Irrigation
DLS / Department of Livestock Services
DOLIDAR / Department of Local Infrastructure Development and Agriculture Road
DWSS / Department of Water Supply and Sewerage
FUG / Forestry Users Group
HARP / Hill Agricultural Research Project
HH / Household
HMG/N / His Majesty's Government of Nepal
ICIMOD / International Center for Integrated Mountain Development
IFAD / International Fund for Agriculture Development
INGO / International Non Governmental Organization
JMIS / Joint Managed Irrigation System
LCM / Local Bodies/CBO Model
LCM-D / Local Bodies/CBO Model with Direct Influence of Donor Management Model
LGP / Local Governance Program
LI-BIRD / Local Initiatives for Biodiversity Research and Development
M&E / Monitoring and Evaluation
MHPP / Ministry of Housing and Physical Planning
MLD / Ministry of Local Development
MOF / Ministry of Finance
NARC / National Agriculture Research Council
NCM / NGO/CBO Model
NEA / Nepal Electricity Authority
NGO / Non Governmental Organization
NM / NGO Model
NPC / National Planning Commission
NZIDP / Narayani Zone Irrigation Development Project
O&M / Operation and Maintenance
PDDP / Participatory District Development Program
PM / Private Sector Model
RWSSFDB / Rural Water Supply and Sanitation Fund Development Board
SEAN / Seed Entrepreneurs Association of Nepal
SFCL / Small Farmer Cooperative Limited
SFDP / Small Farmer Development Program
SIF / Sectoral Investment Fund
SMIP / Sunsari Morang Irrigation Project
SNV / Netherlands Development Agency
UG / Users Group
UNDP / United Nations Development Program
USAID / United States Agency for International Development
VDC / Village Development Committee
WFP / World Food Program
WUC / Water Users Committee
WUG / Water User Group
Summary and Conclusions
- Objective and Scope of the Study. The study examines recent experience with various institutional arrangements for delivery of rural development services in the Tarai and makes recommendations for the future development of cost-effective service delivery in the context of the ongoing process of decentralization. The services studied have traditionally been both funded and delivered by central government agencies. More recently, alternative arrangements have been introduced, mostly on a small and local scale, and it is timely to review this experience and learn from it. The services studied are: agricultural technology services (research and extension), irrigation (surface and groundwater), drinking water, rural roads and bridges, and rural electric power distribution.
- The Nepal Tarai. The focus on the Tarai is consistent with the Agriculture Perspective Plan’s view that the region is a potential area for agriculture-led economic growth. APP identifies access to basic infrastructure as a constraint to growth. The Tarai is not homogenous. Population density and intensity of cultivation increases from west to east; levels of social capital are higher in the north than the south. These differences have implications for the types of investments and services that are required for development.
- Conceptual framework. The framework of the study is based on four sets of concepts drawn from institutional and rural development theory:
- the distinction between provisioning – decisions about what goods and services will be made available to a community, including decisions on the allocation of public funds, and production – the creation and delivery of the goods and services. Actions on both fronts need to be taken based on the subsidiarity principle, i.e., the closer to beneficiaries, the better the decision-making process
- polycentricity – pluralism in the delivery of services, which creates competition on the supply side, and gives users choice on the demand side, and co-production – the participation of both government and other partners in the production of services
- the distinction between private goods – which exhibit high excludability and high rivalry and are therefore likely to be supplied at appropriate levels by the private sector unless there are significant market distortions, and public goods – which are low on both parameters and are therefore unlikely to be supplied by the private sector because no profit can be secured from doing so.