Natural resource management in Nepal

' 9 NUMBER 24 ED Precis Operations Evaluation Department March 1992 Natural Resource Management in Nepal Nepal's economic development development of transport, commu- pursued in the context of an depends critically on natural resources nications, and a monetized overall understanding of causes that are fragile and being rapidly economy. Population growth is and effects or of a broad donor/ degraded. In Nepal, the links between 2.7 percent a year. Problems such government development strategy. poverty, economic incentives, as persistent soil erosion, high Nepal's early National Develop- institutional weaknesses in government, rates of sedimentation, increased ment Plans gave little attention to and the destruction of land, water flooding, and decline in water the environment and natural resources, and forests are more starkly quality continue to intensify, resources; most public investments visible than in countries where Pressures of population and were for roads and telecommuni- environmental damage is not, or not yet, livestock on land, migration to cations. The Bank began to so severe. A new OED study analyzes fragile areas, and the extent of address environmental problems the projects, policies, and institutional poverty are all implicated (see much later than Nepal's other reforms that have affected the box). But so too are development donors and, even then, without an management of Nepal's natural policies and projects. explicit statement of the problems. resources over 25 years (1966-89). Six forms of capital participate The literature over two de- The study finds that despite $4.5 in the development process- cades has severely criticized the billion of aid for projects affecting human, natural, institutional, way decisions were made and natural resources, Nepal still has cultural, physical, and financial, government policies formulated in worsening environmental problems Sustainable development comes Nepal, and how little international and no effective strategy to address from attaining a balance across the aid has done to bring about them. The Bank's own assistance has various forms of capital over space change. Between 1966 and 1989, done little to promote better natural and time. In Nepal, the accumula- donors committed more than $4.5 resource management except within tion of physical and financial billion (1988 dollars) in grants and the sphere of the individual projects it capital has been sought more loans to Nepal for about 800 has financed. aggressively than the acquisition projects affecting the use of Yet, as resource degradation of human and institutional capital renewable resources. But much of continues, the country's scope for or the conservation of natural this aid supported uncoordinated improving living standards capital. But as natural capital projects that duplicated or can- diminishes. Because better resource continues to deteriorate, the celled out each other's efforts. management will require not only possibilities for sustainable devel- financial investments but changes in opment diminish. policy, institutions, and individual Studies assessing natural Natfral Resource Management in behavior, environmental concerns resource degradation in Nepal Nethl", Repkrt No. HL330, March urgently need to be incorporated into appeared as early as 1959, but 1992. OEDreportsareavailable decision making at all levels. offered few suggestions for from the Internal Documents Unit managing natural resources better. anid froni Regional Inforinabon Development, environment Bilateral donors were the first to ae Ces See alsgeenewi develop programs in soil conserva- ableReulure NiaD.gemnt ian. Ninety percent of Nepal's GDP tion, land management, afforesta- A9ri.ut OE. lV?d tiko and employment comes from tion, and livestock rationalization. B989. whichlted ftM- of agriculture, yet soils are very poor. Most of these programs were quite ai agrcu te e roet The tprp ha eshr oeiean inote asedr The topographyhampfragie areas,y aonevd he etnot ofcunre Factors in Resource Nohng the pressure of population, systems of managing comn lands Degradation commentators in the 1970s warned of wth tree access to them. Villagers an impending food crisis, and aid had no incentives to protect forests. Many aspects of Nepal's resource donors responded by emphasizing use and institutional structure took a agricultural modernization. But 1980s recognized that sound forest long time to be documented and thus although farm inputs rose as a result, management would have to rely on to be featured in discussions of yields improved little because community involvement, but it possible policies and programs. extesion services, along with the contained loopholes that allowed Opinions still differ about the main distribution of seeds and fertilizer, villagers to cut trees, and did not causes of environmental degrada- were inadequate. And although affect the exercise ot the traditional tion, with some observers claiming double cropping was extended to 80 view that clearing land for agriculture that at least 70 percent of the erosion percent of the cultivated land, was a way to obtain title to it. Land- I in the hill country each year is livestock numbers were not commen- use data for 197/-84 show a net inevitable and due to natural suratelv reduced, and grazing decline in forest, shrub, and cuti- geological factors. Many analysts pressures on forest frnges increased. vated area and a net expansion of stress the role of population pres- 40 percent of the labor grasslands. sure, land use legislation, and a weak that could have been used for farming PUbliCaditurstration: The public administration. was used for tuelwood collection; as a Nepalese administration has long P%ndaton pressue AidedbN result, productivity had declined, real been weak in development planning improved health care and malaria incomes from farming had fallen, and and implementation. Problems in the control, annual population growth child nutrition had worsened period reviewed included rapid increased from 1.4 percent in the Land use legislation: When it turnover of senior decision makers, 1950s to 2.6 percent now. Rapid emerged from isolation Nepal had one low staff morale, limited career population growth increased de- of the most inequitable land tenure prospects for mid-level staff, and mands for fuelwood, timber, fodder, systems in Asia, and one that seri- uncertain job security. Decision and land for grazing and food ously hindered agrcultural efficiency. making was over-centralized and production. Forest reserves were Legislation to reduce the size of large coordination weak. Many senior reportedly halved between 1950 and farms, control rents, and improve officials reputedly knew little about 1980, and risk being completely security of tenure is said to have been rural Nepal. An attempt during the exhausted by year 2000. As soil ineffectual. Many tenants became 197LK to strengthen decentralization erosion accelerated, sol fertility landless laborers, not landowners. through the pancilat system (village declined, village water supplies were As to public land, the Private level organizations) merely reinforced disrupted, and agricultural produc- Forest Nationalization Act of 1957 is the power of local elites. To promote tion decreased, reservoirs were silted blamed tor much of Nepal's detoresta- efficient equitable growth through I up by the sediment brought down by tion and the cycle of resource destruc- sustainable use of natural resources rivers, water courses became unstable, tion that followed. Intended to ensure will require institutional reform at the and the increased run-off during the proper management and conservation national level monsoon season caused catastrophic of forests, it could not be enforced, flooding in the plains, and in practice replaced traditional Proliferating projects and conflict- through the provision of physical 19 76-85: The Bank emerged as ing advice drained the inputs such as fertilizer, a major donor with a diverse government's managerial, techni- The first of the Bank's reports to portfolio that made it we placed cal, and financial resources. address issues such as soil erosion to pursue a policy dialogue on Donors noted Nepal's limited and land degradation were pro- broad resource management absorptive capacity but went on duced in the course of agricultural issues. During this decade, the providing aid. sector work, mainly out of concern Bank's own policies increasingly for agricultural productivity; some laid stress on the policy context for The Bank's role of the findings were incorporated lending, on poverty, and on into rural development and forestry safeguarding the environment. 1965-75: Early Bank lending projects. Lending on a limited scale, Yet the design of its operations financed mainly capital-intensive the Bank could not press for the does not suggest much broadening infrastructure projects, on the improvements in resource manage- of concern beyond the individual basic assumption that physical ment it had begun advocating in project level. Nor does the record and financial capital were the sector work. Nor was it Bank policy suggest that the Bank forcibly factors limiting development, and at the time to emphasize the policy argued for the changes being that other forms of capital would context or the environmental recommended in ESW. naturally adjust. Agricultural implications of the projects 1985-89: Several projects mark operations tended to concentrate undertaken. a significant move toward address- on maximizing land productivity ing resource management on a March 1992 broader front: strengthening the Scope of Study How were management prob- National Planning Commission lems conceived, how were concepts (1988), community forestry (1989), The study reviews Bank and strategies evolved, and what integrated watershed manage- macroeconomic and sector work, the recommendations were made to ment planning associated with literature, and documentation and solve problems? the Arun III hydroelectric dam, other assistance provided by the 0 What did other donors do? proposed changes in the structure Nepalese government, the Bank, and 0 How was the Bank's thinking of irrigation lending, and re- other donors, to address the follow- applied in operations, sector work, newed emphasis on education. ing questions: macroeconomic strategy, and support The Bank's 1989 agricultural 0 How are Nepal's various forms for institutional reform? sector report made clear that of capital used? What were the major findings fundamental problems of fragil- 0 How do income-earing and lessons? Did they help the ity, soil quality, and climate could activities affect the management of Government to develop more no longer be ignored, and that the natural resources? emphasis of Bank operations * How aware were the Bank and efece stratioas must shift away from providing others of Nepal's resource manage- physical inputs and toward ment problems? education, development of institutional capital, and conser- With hindsight, the Bank these sectors are very limited. vation of natural capital. This underinvested in education and Bank President's reports on many outlook, now pervasive in the institutional development in of the projects reviewed imply that Bank's ESW on Nepal, is not yet Nepal. The infrastructure projects all uncertainties have been care- fully reflected in the Bank's that dominated its early lending fully weighed and can be managed lending. were relatively simple to imple- by contingencies built into project The policy dialogue between ment. But even many of these design. But the outcomes of these the Bank and Nepal has improved began to fail for lack of institu- projects show that more candid as a result of the Bank's support tional and human capital to assessment of the obstacles, for structural adjustment. In the manage and maintain them. recognizing the history of con- course of SAL 1 (1986) the Bank Technical assistance has been used straints already encountered by obtained significant agreement to help Nepal strengthen its the Bank and other donors, was among major donors on the development institutions and add needed. priorities and conditions for to its human resources, but many institutional change. It also of the TA initiatives have not been Lack of strategic thinking successfully pressed for policy very successful either. changes in the budget, industry, Bank-financed operations have The Bank's country economic trade, agriculture, and forestry, all been less than successful in dealing work gave little prominence to of them with critical implications with the human and natural natural resource problems until for resource management over the environment. For example, the quite recently. The policy dialogue medium and long term. But Bank considered development in with Nepal at the national and much more needs to be done, as the Terai a key to Nepal's growth, sector levels rarely addressed concerns the design of adjustment but the attempt to establish natural resource management programs, public investment and settlement projects there failed, in issues comprehensively. Until expenditure reviews, and national the face of a host of problems quite recently, the choice of environmental action plans, to related to environmental degrada- projects (among and within incorporate natural resource tion and lack of government sectors) and the subjects of loan management issues into plans for commitment, very high overhead conditionality and policy dialogue policy and institutional change. costs, and unhelpful changes in the show little concern with the policy environment, recommendations for strategic Project difficulties In preparing many of its thinking about resource manage- projects the Bank tended to gloss ment that were emerging from A high proportion of projects over the difficulties in improving economic and sector work. suffered from time and cost resource management in Nepal. In Nepal, more than in many overruns. Almost always in these Little is known about the behavior larger and more advanced borrow- projects, the institutional appara- of natural and institutional sys- ing countries, the Bank was a tus has been weak and govern- tems and how they interact, major source of ideas on resource ment commitment at the policy Farming and forestry have mini- development and management. and implementation level has mal potential for growth. Possi- But by not having a strategy of its been inadequate. bilities for creating jobs outside own, it missed an important OED Pricis opportunity to create a consensus Looking ahead 0 Help the Governent prepare a on policies or actions needed. Its Consultative Group Meeting for the reports were an important part of Nepal's decisions on develop- agricultural/rural sector to seek a the development literature and ment policy and economic man- consensus among government were widely quoted. But those agement at all levels urgently need agencies, donors, and concerned used in the policy dialogue with to take more systematic account of NGOs, on what can be done, who the government minimized the environmental concerns. Tradi- will do it, and how. discussion of contentious issues on tional economic assumptions * Require more careful analysis of natural resource management. about the sources of growth or the effects of macroeconomic They also took little account of the comparative advantage, which instruments, including those being findings of other donors, even often shape donors' perceptions of supported by structural adjustment though these were thoroughly the most critical needs and the lending, on natural resource use. documented in the Bank's country most suitable instruments for * Encourage the modification of program papers. addressing them, need to be Nepal's national accounting system Government agencies may not modified to incorporate more to reflect changes in natural resource have been receptive to discussing realistic notions of opportunity allocation and use. At present, it resource management beyond the cost and economic prices. Calcula- does not and thus gives a false sense confines of projects in agriculture, tions of economic prices must take of progress for the economy. forestry, hydroelectricity, water account of the external effects of * Assess proposed public invest- supply, and highways. For the the proposed interventions over ments and expenditure allocations Bank, indeed, an approach focus- space and time-over and above not only on their own merits but also ing on long-term goals would have the traditional method of calculat- from the broader perspective of the called for more staff time for ing marginal costs. Resource whole portfolio, tracing how its preparation and supervision, degradation problems should be a components affect one another. Also monitoring and evaluation, and central concern in the design of assess these proposals from the point economic and sector work, than both macroeconomic and sectoral of view of their contribution to the compatible with normal coeffi- policies. Here the Bank could sustainability of Nepal's deve- cients for a lending program of make a major contribution. lopment. Nepal's size ($35 million a year in For the Bank, financing * Consolidate efforts already the late 1970s). projects without regard to an underway to formulate Had the Bank's policy analysis overall strategy is not an effective macroeconomic and sectoral adjust- and dialogue fully reflected the way to press for the changes in ment policies that are mutually debates on resource degradation, government policy, institutions, consistent. At present, resource management, institutions, and individual behavior that are macroeconomic policies (concerned and aid in Nepal, research and required for better resource mainly with growth) and sector data collection would have fo- management in Nepal. Program policies (focusing more on sustain- cused more on the key gaps in lending has a potentially bigger able development) are often con- information about the economic, impact on the way sectors are ceived separately, increasing the risk social, and institutional factors managed and on policies and that they will contradict each other. affecting the environment. The regulations that affect economic * Consider new lending instru- vital importance of links between incentives. The expectation of an ments to accommodate a resource poverty and resource degradation extended structural adjustment management program that yields its would have been recognized period (10-20 years) provides a main results only over a long period. earlier, and a larger part of the context for the Bank and other Without a significant change in this lending program would probably donors to work with the govern- regard, the tendency will remain to have been in primary and second- ment to produce a national strat- allocate scarce resources to amelio- ary education, health, and popula- egy for resource management in rate short-term problems-as a tion. More sustainable use might which project lending and policy result, attempts to bring about have been made of both financial change can reinforce one another. sustainable development will fail. and technical assistance. To this end the Bank should: OED Prcis is designed to help inform Bank managers and staff of new evaluation findings and recommendations for the Bank's current and future work programs. It is produced by the Operations Evaluation Department of the World Bank for distribution to the Bank's executive directors and staff. The views here are those of the Operations Evaluation staff and should not be attributed to the World Bank or its affiliated organizations. Please address comments or enquiries to the managing editor, Rachel Weaving, T7-015, World Bank, ext. 31719. March 1992