With an MA in International Development Economics from Australian National University, Head of International Economic Cooperation Coordination Division (IECCD) at Ministry of Finance Madhu Kumar Marasini has spent almost 17 years in the ministry in various positions. He served as the advisor to the Director at the World Bank. Joint secretary Marasini, who also holds a degree in public finance from Kennedy School of Harvard University, has extensive knowledge of foreign aid. As Nepal is finalizing its Foreign Aid Strategy, Marasini spoke to New Spotlight on related issues; Excerpts:

What is the state of new foreign aid policy?

The policy is in the final stage. Following massive consultations with various ministries at the secretary level and with other foreign stakeholders, we have finalized the policy and have already sent it to the cabinet for approval. We have held a consultation meeting and discussed the draft with local level donors at a meeting. We held several rounds of discussion with major development partners. Besides that we have also shared the document with the representatives of local NGOs and INGOs. The draft is now under consideration of the cabinet secretariat.

At a time when foreign aid is diverting to African continent, don't you think the minimum ceiling proposed in the foreign aid policy will divert resources coming to Nepal to other parts of the world?

The new foreign aid policy proposes two kinds of ceiling. There is a ceiling for loan and grants. We have proposed a minimum 10 million dollars for concessional loan and 20 million dollars in other loans. So far as loan is concerned, every country has the right to say how much money it can acquire as loan. However, many people express concern over the ceiling in the grant amount.

Why do we need foreign aid?

As we have been complaining about the aid effectiveness, the questions have arisen what should be done to make aid effective then? We have been publishing Development Cooperation Report for the last two years. According to the recently published report, there are 508 projects with operation cost of Rs.900 million. If we calculate the per-project cost, it will be about Rs. 2 million per project. To run the project cost of 2 million rupees, you need to have administrative set up including the staff and vehicles. What should be the output of such projects? To increase the aid effectiveness, it is not only our concern but the concern of tax payers of donor countries. Tax payers of donor countries also want to see tangible work conducted through their money.  We are not discouraging the foreign aid but want to have qualitative and tangible aid. Thus, Aid effectiveness is the concern of us all.

At a time when the MDG assessment report 2013 also reveals that there is a still huge deficit of budget for social sector, the proposed foreign aid policy reportedly stresses foreign aid in infrastructure sector. Don’t you think the conditionality imposed by the policy will be likely to reduce flow of money in the social sector as well?

There are rumors if the government is completely shifting its priority from the social sector. There are a lot of confusions about investment in infrastructure and social sector. Of course, our priority is in infrastructure, the government continues - to support the social sector as well. One of the targets of new foreign aid policy is to mobilize foreign aid to provide necessary support to sustain the achievement made in MDGs and to generate resources for 2015 development agenda and to support sustainable development goals. We have made it clear that we want loan in infrastructure only. However, we want to use grant money in top priority sectors like education, health, drinking water, sanitation and rural development and human development. We have seen some of our social indicators are better than even some of the countries in the region. For instance, our average life expectancy, school enrolment, infant mortality and literacy is higher than some of the countries in the region. However, the same is not with the per capita income.

Do you see any reflection of social development in per capita growth?

There is no significant reflection of social development in per capita growth. The recently conducted Asian Development Bank's report revealed that Nepal and Afghanistan are likely to remain LDC countries in South Asia even by 2020. To qualify from the LDC to developing countries, Nepal needs huge investment due to deficit in power sector, road connectivity, railways and others. During the 12 years long People's War and current prolonged transition, we are unable to start mega projects. The government focuses its attention on social sector. The upsurge of the community involvement is the result of the investment made by the government in the sector. Despite the vacuum of local bodies, we have made a lot of progress through the mobilization of community. We have been sending the resources in rural areas. It does not mean that the state can remain idle. The time has come to launch some mega projects in power, road and other infrastructure sectors. We have huge gap in infrastructure, growth and trade. Our policy is evidence based and made on the ground of critical assessment of these sectors. It is a need based and priority based document. We have clearly mentioned that we want loan for the infrastructures project and grant for other social sectors. As the news was not disseminated properly, confusions arose.

As the country is in the process of writing a new federal constitution, how can the document address the agenda of federal structures and local bodies?

The document has not spoken anything about the structures of the province because they are not clear as yet. It is the global trend that foreign aid and foreign policy falls under the jurisdiction of central government. I don't think there will appear any confusion in this regard in the future.

This is not a hard document and cannot be amended. There is a clause to do a periodical review on the basis of needs of donors and recipients. We can preview the documents as demanded by the country.

How do you look at the comments that the foreign aid policy was prepared without consultation with donors?

This is a long process. Ministry of Finance has been doing homework for the last five years. We have consulted for a number of time with Nepal's development partners and incorporated their views in the report.  I understand the rationale of the complaints of some donors who were recently posted in Nepal. Even I have organized a couple of meeting and presented the papers before the donors. Just a couple of week ago I received some suggestions from donors in the last draft.

Is there any difference in their suggestions now?

I have not found any fundamental differences on the suggestions. They raised the issue of interpretation of the policy and implementation of the projects. One of the beauties of this draft making is that we share the draft of each stage to our development partners. Even I shared the final draft with development partners to gain their trust. Normally, we don't share the draft sent to the cabinet. However, I shared the draft because they are the stakeholders. There is nothing to hide.

It is reported that there is even a provision in the document to bar employees to take part in the knowledge sharing seminars, training and workshop. How do you explain that?

In the name of projects, there is a trend to purchase lavish cars and vehicles and take people in foreign tours. We want to rationalize these kinds of things. If the project is run by a simple car, why do they need lavish vehicles? Similarly, there must be justifications for foreign tour and workshop. Our aim is not to discourage the training for civil servants.

What is your concern then?

Our concern is the utility of trainings. We are open for training for knowledge transfer and technology transfer. We have proposed the single window system to rationalize such training and workshop. If somebody wants to visit a foreign country, they have to take approval from our offices. This is not a bad practice at all. We welcome the foreign trainings but there should not be a foreign junket. After announcement of the new foreign policy, there will be one window policy for foreign aid. One can get all necessary information from International Economic Cooperation Coordination Division of Ministry of Finance. Our motive is to stop misuse.

What would be the state of NGOs and INGOs?

There is rumor that the proposed foreign aid policy intends to control the NGOs and INGOs. This is completely wrong. They will continue to work under Social Welfare Council and launch the project with the approval of facilitation committee under the Ministry of Women, Children and Social Welfare. It will continue to be there to facilitate and approve the project. Those who mobilize the direct fund they have to report us. However, what we want is to establish accountability. As all of us know, there are concerns that some NGOs and INGOs are working to destroy social harmony. In this context, we want a record of where the money comes from and where it goes. They have to report us in a transparent manner. We want the report of those INGOs and NGOs which use the donor's money. However, nobody needs to present it to us if they acquire the money through bidding for the implementation of the project. After the collection of the report, we will release the report through our website.

How do your plan the countries which singed umbrella agreement with government of Nepal?

We respect the umbrella agreement. Our foreign aid policy respects this. The government of Nepal has signed the umbrella agreement with few countries. As of legal interpretation, bilateral agreement will prevail in case of foreign aid.