The preliminary findings of the Research on Evaluating Development Effectiveness of Aid for Trade (AFT) were disseminated among stakeholders in Kathmandu on 2 May 2011. The event was jointly organized by SAWTEE and the International Center for Trade and Sustainable Development (ICTSD), Geneva.
Dr. Posh Raj Pandey, Executive Chairman, SAWTEE, gave the initial remarks, followed by Mr. Christophe Bellmann, Programme Director, ICTSD. Ratnakar Adhikari, General Secretary, SAWTEE, presented the main findings of the study. Mr. Chandra Ghimire, Joint Secretary, Ministry of Commerce and Supplies (MoCS), Dr. Hemant Kumar Dabadi, Director General, Federation of Nepalese Chamber of Commerce and Industry, and Mr. Philipp Kruschel, Team Leader, Support Nepal’s WTO Accession project of GIZ, shared their views on the study. Mr. Prithivi Raj Ligal, former Vice Chairman of National Planning Commission and Mr. Purushottam Ojha, Secretary, MoCS, delivered their remarks on the study and the event.
AFT initiative is still a top-down approach with Geneva- and Paris-based organizations having their own monitoring system, which lacks inputs from relevant stakeholders, said Dr. Pandey. To access the ground reality from the perspective of AFT recipients at the national level, an independent analysis was needed from country experts. With this objective in mind, ICTSD and SAWTEE launched a research project in six countries, including Nepal. “The findings of this study will hopefully be useful during the third review of AFT to be held later this year,” said Bellmann.
Research findings
Before presenting research findings, Mr. Adhikari cautioned the audience that the study had its limitation and any interpretation of the results should be done by keeping them in mind. The study features both qualitative and quantitative methodology from primary as well as secondary sources. The period 2002-2005 is defined as the base period and 2006-2009 as the recent period.
- Nepal received US$292.33 million and US$173.55 million as AFT commitment and disbursement, respectively, in 2009. In 2002-2005, the figures were US$169.68 million and US$127.85 million, respectively.
- There is a huge gap between AFT commitment and disbursement. Almost 49 percent of the respondents in a survey thought that there has been wide variation between disbursement and commitment. Data show that the ratio of disbursement to commitment decreased from 0.98 to 0.59 during the two periods.
- There is additionality in AFT commitment, but not in AFT disbursement between the base and recent periods. Due to data limitation, the same cannot be verified from national sources.
- AFT disbursement in investment projects, technical cooperation and other areas decreased over the two periods. However, sector program aid disbursement increased.
- Almost 62 percent of the respondents in a survey opined that sustainability aspect has not been taken care of by the government. Similarly, 49 percent opined that donors have also not done so.
- Almost 49 percent of the respondents felt that government has not mainstreamed trade in the national development strategy at the substantive level. Similarly, 64 percent of the respondents felt that donors have also failed to do so.
- With regard to donor alignment and coordination of projects, a majority of the respondents felt that alignment and coordination are not taking place to satisfactory levels.
- At the macro level, regression analysis showed that without controlling for other influencing factors, a one percentage increase in AFT disbursement (with a lag of one year) over the period 1995-2009 is associated with exports growth by 0.224 percent. Furthermore, when controlled for factors such as real world demand, real effective exchange rate, and political risk, a one percentage increase in AFT disbursement (with a lag of one year) is associated with exports growth by 0.117 percent.
- A case study the Enhancing Nepal\'s Trade-Related Capacity (ENTReC) project showed that out of the five criteria for project intervention, performance on just one of them (explore areas of future promises of Nepal’s trade-related economic growth) has been satisfactory or fully achieved. The objectives on interventions such as increasing competitiveness of Nepali exports, creating a more empowered and engaged private sector, and enhancing the rigor of analysis underpinning Nepali trade policy have been partially achieved. There as very limited achievement in fostering human development-friendly investment climate.
- Coherence between climate financing and AFT initiatives has been limited but opportunities to exploit them exist. Regarding South-South cooperation pertaining to AFT, most of the funding flowing from Southern donors has come to the sectors considered under AFT. But, almost 34 percent of the respondents felt that this funding is not in line with Nepal’s trade and development priorities.
- Grant component of AFT is higher than loan. Moreover, proportionally grant has increased and loan has decreased over the two periods.
(Please see the attached presentation for more details.)
Comments on the study
- Mr. Ojha recommended reviewing previous aid that was aimed at supporting trade capacity of Nepal. He argued that it would be more insightful if a review of trade-related assistance since the 1980s is incorporated in the existing report. He hoped that the research findings would be useful during the AFT review meeting to be held soon.
- Mr. Ghimire suggested backing up critical assertions with more data. Furthermore, he argued that it would be helpful to present the reasons behind the survey responses presented in charts. He asserted that the very issues of mainstreaming trade is not clearly understood and conceived by the stakeholders.
- Dr. Dabadi shared his opinion on behalf of the private sector. While technical assistance have been helpful in reducing the cost of doing business when compared to two decades ago, the competitiveness level vis-à-vis other countries is horrible, he argued. He remarked that even though everyone realizes that hardware is more important, the stakeholders seem to be focusing more on software. He suggested including in the report the assessment of the impact of AFT on private sector.
- Mr. Kruschel disagreed with the argument that the top-down approach is not working. He was of the view that linkages at different levels on both the ends (donors and recipients) can enhance AFT effectiveness. Furthermore, he suggested backing up strong assertions about too much money flowing into consultancy services by data and evidence. Mr. Krushcel also pointed out that duplication of efforts is hard to avoid, but donors are trying to coordinate better. This has produced some good results and this should at least be acknowledged, he said.
- Mr. Ligal suggested revisiting the regression analysis and interpreting the results in the context of declining exports. Meanwhile, Mr. Adhikari responded that the positive result relationship between AFT disbursement and exports might have been due to high exports during the late 1990s, which might have offset the decline in the recent period.
The project was launched in Kathmandu on 18 January 2011. The project is part of a global project initiated by SAWTEE and ICTSD, in collaboration with several other organizations, in six countries in Africa, Asia and Latin America/Caribbean.
Background Note
Programme Schedule
Presentation
