1965-75: Early Bank lending financed mainly capital-intensive infrastructure projects, on the basic assumption that physical and financial capital were the factors limiting development, and that other forms of capital would naturally adjust. Agricultural operations tended to concentrate on maximizing land productivity through the provision of physical inputs such as fertilizer.
The first of the Bank's reports to address issues such as soil erosion and land degradation were produced in the course of agricultural sector work, mainly out of concern for agricultural productivity; some of the findings were incorporated into rural development and forestry projects. Lending on a limited scale, the Bank could not press for the improvements in resource management it had begun advocating in sector work. Nor was it Bank policy at the time to emphasize the policy context or the environmental implications of the projects undertaken.
1976-85: The Bank emerged as a major donor with a diverse portfolio that made it well placed to pursue a policy dialogue on broad resource management issues. During this decade, the Bank's own policies increasingly laid stress on the policy context for lending, on poverty, and on safeguarding the environment. Yet the design of its operations does not suggest much broadening of concern beyond the individual project level. Nor does the record suggest that the Bank forcibly argued for the changes being recommended in ESW.
1985-89: Several projects mark a significant move toward addressing resource management on a broader front: strengthening the National Planning Commission (1988), community forestry (1989), integrated watershed management planning associated with the Arun III hydroelectric dam, proposed changes in the structure of irrigation lending, and renewed emphasis on education.
The Bank's 1989 agricultural sector report made clear that fundamental problems of fragility, soil quality, and climate could no longer be ignored, and that the emphasis of Bank operations must shift away from providing physical inputs and toward education, development of institutional capital, and conservation of natural capital. This outlook, now pervasive in the Bank's ESW on Nepal, is not yet fully reflected in the Bank's lending.
The policy dialogue between the Bank and Nepal has improved as a result of the Bank's support for structural adjustment. In the course of SAL I (1986) the Bank obtained significant agreement among major donors on the priorities and conditions for institutional change. It also successfully pressed for policy changes in the budget, industry, trade, agriculture, and forestry, all of them with critical implications for resource management over the medium and long term. But much more needs to be done, as concerns the design of adjustment programs, public investment and expenditure reviews, and national environmental action plans, to incorporate natural resource management issues into plans for policy and institutional change.
Project difficulties. A high proportion of projects suffered from time and cost overruns. Almost always in these projects, the institutional apparatus has been weak and government commitment at the policy and implementation level has been inadequate.
With hindsight, the Bank underinvested in education and institutional development in Nepal. The infrastructure projects that dominated its early lending were relatively simple to implement. But even many of these began to fail for lack of institutional and human capital to manage and maintain them. Technical assistance has been used to help Nepal strengthen its development institutions and add to its human resources, but many of the TA initiatives have not been very successful either.
Bank-financed operations have been less than successful in dealing with the human and natural environment. For example, the Bank considered development in the Terai a key to Nepal's growth, but the attempt to establish settlement projects there failed, in the face of a host of problems related to environmental degradation and lack of government commitment, very high overhead costs, and unhelpful changes in the policy environment.
In preparing many of its projects the Bank tended to gloss over the difficulties in improving resource management in Nepal. Little is known about the behavior of natural and institutional systems and how they interact. Farming and forestry have minimal potential for growth. Possibilities for creating jobs outside these sectors are very limited. Bank President's reports on many of the projects reviewed imply that all uncertainties have been carefully weighed and can be managed by contingencies built into project design. But the outcomes of these projects show that more candid assessment of the obstacles, recognizing the history of constraints already encountered by the Bank and other donors, was needed.
Lack of strategic thinking. The Bank's country economic work gave little prominence to natural resource problems until quite recently. The policy dialogue with Nepal at the national and sector levels rarely addressed natural resource management issues comprehensively. Until quite recently, the choice of projects (among and within sectors) and the subjects of loan conditionality and policy dialogue show little concern with the recommendations for strategic thinking about resource management that were emerging from economic and sector work.
In Nepal, more than in many larger and more advanced borrowing countries, the Bank was a major source of ideas on resource development and management. But by not having a strategy of its own, it missed an important opportunity to create a consensus on policies or actions needed. Its reports were an important part of the development literature and were widely quoted. But those used in the policy dialogue with the government minimized the discussion of contentious issues on natural resource management. They also took little account of the findings of other donors, even though these were thoroughly documented in the Bank's country program papers.
Government agencies may not have been receptive to discussing resource management beyond the confines of projects in agriculture, forestry, hydroelectricity, water supply, and highways. For the Bank, indeed, an approach focusing on long-term goals would have called for more staff time for preparation and supervision, monitoring and evaluation, and economic and sector work, than compatible with normal coefficients for a lending program of Nepal's size ($35 million a year in the late 1970s).
Had the Bank's policy analysis and dialogue fully reflected the debates on resource degradation, resource management, institutions, and aid in Nepal, research and data collection would have focused more on the key gaps in information about the economic, social, and institutional factors affecting the environment. The vital importance of links between poverty and resource degradation would have been recognized earlier, and a larger part of the lending program would probably have been in primary and secondary education, health, and population. More sustainable use might have been made of both financial and technical assistance.
The first of the Bank's reports to address issues such as soil erosion and land degradation were produced in the course of agricultural sector work, mainly out of concern for agricultural productivity; some of the findings were incorporated into rural development and forestry projects. Lending on a limited scale, the Bank could not press for the improvements in resource management it had begun advocating in sector work. Nor was it Bank policy at the time to emphasize the policy context or the environmental implications of the projects undertaken.
1976-85: The Bank emerged as a major donor with a diverse portfolio that made it well placed to pursue a policy dialogue on broad resource management issues. During this decade, the Bank's own policies increasingly laid stress on the policy context for lending, on poverty, and on safeguarding the environment. Yet the design of its operations does not suggest much broadening of concern beyond the individual project level. Nor does the record suggest that the Bank forcibly argued for the changes being recommended in ESW.
1985-89: Several projects mark a significant move toward addressing resource management on a broader front: strengthening the National Planning Commission (1988), community forestry (1989), integrated watershed management planning associated with the Arun III hydroelectric dam, proposed changes in the structure of irrigation lending, and renewed emphasis on education.
The Bank's 1989 agricultural sector report made clear that fundamental problems of fragility, soil quality, and climate could no longer be ignored, and that the emphasis of Bank operations must shift away from providing physical inputs and toward education, development of institutional capital, and conservation of natural capital. This outlook, now pervasive in the Bank's ESW on Nepal, is not yet fully reflected in the Bank's lending.
The policy dialogue between the Bank and Nepal has improved as a result of the Bank's support for structural adjustment. In the course of SAL I (1986) the Bank obtained significant agreement among major donors on the priorities and conditions for institutional change. It also successfully pressed for policy changes in the budget, industry, trade, agriculture, and forestry, all of them with critical implications for resource management over the medium and long term. But much more needs to be done, as concerns the design of adjustment programs, public investment and expenditure reviews, and national environmental action plans, to incorporate natural resource management issues into plans for policy and institutional change.
Project difficulties. A high proportion of projects suffered from time and cost overruns. Almost always in these projects, the institutional apparatus has been weak and government commitment at the policy and implementation level has been inadequate.
With hindsight, the Bank underinvested in education and institutional development in Nepal. The infrastructure projects that dominated its early lending were relatively simple to implement. But even many of these began to fail for lack of institutional and human capital to manage and maintain them. Technical assistance has been used to help Nepal strengthen its development institutions and add to its human resources, but many of the TA initiatives have not been very successful either.
Bank-financed operations have been less than successful in dealing with the human and natural environment. For example, the Bank considered development in the Terai a key to Nepal's growth, but the attempt to establish settlement projects there failed, in the face of a host of problems related to environmental degradation and lack of government commitment, very high overhead costs, and unhelpful changes in the policy environment.
In preparing many of its projects the Bank tended to gloss over the difficulties in improving resource management in Nepal. Little is known about the behavior of natural and institutional systems and how they interact. Farming and forestry have minimal potential for growth. Possibilities for creating jobs outside these sectors are very limited. Bank President's reports on many of the projects reviewed imply that all uncertainties have been carefully weighed and can be managed by contingencies built into project design. But the outcomes of these projects show that more candid assessment of the obstacles, recognizing the history of constraints already encountered by the Bank and other donors, was needed.
Lack of strategic thinking. The Bank's country economic work gave little prominence to natural resource problems until quite recently. The policy dialogue with Nepal at the national and sector levels rarely addressed natural resource management issues comprehensively. Until quite recently, the choice of projects (among and within sectors) and the subjects of loan conditionality and policy dialogue show little concern with the recommendations for strategic thinking about resource management that were emerging from economic and sector work.
In Nepal, more than in many larger and more advanced borrowing countries, the Bank was a major source of ideas on resource development and management. But by not having a strategy of its own, it missed an important opportunity to create a consensus on policies or actions needed. Its reports were an important part of the development literature and were widely quoted. But those used in the policy dialogue with the government minimized the discussion of contentious issues on natural resource management. They also took little account of the findings of other donors, even though these were thoroughly documented in the Bank's country program papers.
Government agencies may not have been receptive to discussing resource management beyond the confines of projects in agriculture, forestry, hydroelectricity, water supply, and highways. For the Bank, indeed, an approach focusing on long-term goals would have called for more staff time for preparation and supervision, monitoring and evaluation, and economic and sector work, than compatible with normal coefficients for a lending program of Nepal's size ($35 million a year in the late 1970s).
Had the Bank's policy analysis and dialogue fully reflected the debates on resource degradation, resource management, institutions, and aid in Nepal, research and data collection would have focused more on the key gaps in information about the economic, social, and institutional factors affecting the environment. The vital importance of links between poverty and resource degradation would have been recognized earlier, and a larger part of the lending program would probably have been in primary and secondary education, health, and population. More sustainable use might have been made of both financial and technical assistance.
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