Despite the increase in Nepal's revenue collection in the last few years, the country still has a long gap to fill in terms of investment in the development sector. At a time when the government's annual expenditure is inadequate to fund education, health and other social sectors, the European Union, by providing 360 million Euro for the coming seven years, has shown that friends in need are friends indeed.

Due to the lack of budget, school building construction  and renovation had completely stopped and many other health related activities came in for a severe setback following the decision by the Global Health Fund to suspend its contribution in the health sector.

As Nepal has been facing a severe crisis in the fund management over the past few months following the decision of the World Bank and the Asian Development Bank to stop giving concessional loans and grants to Nepal, EU's decision has given the nation a much-needed sigh of relief.

During the first such top level EU delegation's visit to Kathmandu, European Commissioner for Development, Andris Piebalgs, joined hands with Finance Minister Dr. Ram Sharan Mahat to officially launch the new EU-Nepal Cooperation Program 2014-2020.

With an envelope of €360 million (about NPR 44.8 billion) for 2014-2020, the strategy aims to boost rural development and job creation, foster quality education and strengthen democratic governance.

"Nepal has come a long way and it is very impressive that the Nepalese people managed a peaceful democratic transition after a decade of internal conflict. At this crucial point of transition, at the stage of giving itself a new Constitution, Nepal's democracy needs to show that it delivers for the people's development. To support this process, and also as a sign of enhancing relations, the EU will triple the aid it gives to Nepal," said Commissioner Piebalgs after the launching ceremony at the Ministry of Finance.

Finance minister Dr. Ram Sharan Mahat also expressed satisfaction over the support. "Despite the difficulties Nepal faced in bringing about significant progress in different sectors, the poverty level that stood at 49 percent in the early nineties has come down to 23.8 percent and, with determination and persistence, Nepal can overcome the challenges ahead to further expand opportunities, with well paid jobs and better livelihoods for people in the country," said Dr. Mahat.

"EU is Nepal's biggest contributor in the social and economic development of Nepal," Dr. Mahat said adding, "Nepal is keen to jointly implement concrete actions with its European friends."

EU Cooperation in Nepal

According to a press release by the European Union,  the EU and the EU Member States are the largest providers of official development assistance (ODA) in Nepal. For the last three decades, the EU has been supporting the people of Nepal on a range of key development issues such as education and health, stability and peace building and addressing climate change, food security and natural disasters.  EU also helps in protecting human rights in Nepal, because the way the most vulnerable are treated is the real benchmark for genuine and inclusive development.

Trade and tourism are important drivers of economic development and job creation.  The EU is Nepal's second biggest export market (13% share) and Nepal enjoys preferential access ('Everything but arms scheme' which allows duty free entry to European markets for nearly all Nepalese products) to this biggest market in the world. As such, 1 out of 5 tourists visiting Nepal in 2012 was a European and it could become many more.

The new EU Nepal Cooperation programme, the so-called Multi-Annual Indicative Programme (MIP) was adopted in the autumn of 2014. It is aligned with the National Development Strategies of Nepal and the funds will triple to €360 million as compared to 2007-2013.

The MIP identifies three focal sectors. Out of total Euro 360 million, the assistance supports sustainable Rural Development with Euro 146million or 40.5%, Education with Euro 136 million or 43.8% and Strengthening democracy and decentralization with Euro 74 million and support measures with Euro 3.6 million.

According to a press release issued by the Delegation of the European Union to Nepal, for sustainable rural development, the focus will be on agricultural productivity and value addition, job creation, market access infrastructure and nutrition. The first project will be the Partnership for enhanced Nutrition in Nepal: Support by the EU and UNICEF (€22.6 million EU contribution).  Nepal has received international acknowledgement and recognition in the Scaling up Nutrition (SUN) movement.

On education, the aim is to improve basic education, in particular, regarding quality, livelihood skills and equity for the vulnerable and disadvantaged. The EU will also support technical and vocational training linking it to the Nepali job market.

Democracy and decentralization as focus areas will allow support for governance and more generally the decentralization process. The EU will also stay engaged with Nepal's Public Finance Management reform efforts at national and local levels.

“In addition, Nepal can benefit from the Asia Regional Cooperation, specifically regarding Aid for Trade cooperation, Aid to Uprooted People, the EU funded Asia Investment Facility and SAARC regional integration as well as a number of initiatives through calls for proposals reaching out to Civil Society such as the European Instrument for Democracy and Human Rights (EIDHR) and the Non State Actor/Local Authorities (NSA/LA) Initiative,” said a joint press release.  

“Government of Nepal has expressed its sincere appreciation to the EU for the keen interest and continued support in the socio-economic development of Nepal.”

This agreement was signed when Nepal's recently published development cooperation policy discouraged Nepal's development partners as it was reportedly announced without consultations with them.