We can extend concessional lending by 70pc after 2017

JUN 28

Asian Development Bank (ADB) President Takehiko Nakao was recently in Nepal to participate in the International Conference on Nepal’s Reconstruction (ICNR) organised by the government to seek support from the international community to rebuild the nation after the April 25 earthquake. Nakao was one of the high-level officials taking part in the event, where he announced $600 million in financial support to Nepal. Prithvi Man Shrestha of The Kathmandu Post talked to Nakao about the support and the donors’ concerns about funds utilisation. Excerpts:

You have just announced $600 million in support to Nepal. How will the assistance be utilised in Nepal’s reconstruction?

Of the total amount, $200 million in concessional loan (approved by the ADB board) will go to school rebuilding primarily, and building of some bridges and roads. Many schools were heavily devastated by the earthquake. You are lucky it was Saturday, public holiday. Otherwise, the situation would be much more tragic. We are going to help build earthquake resilient schools based on build-back-better concept and another thing we want to do is educate the people on quake preparedness.

As far as additional commitments are concerned, another $30 million of credit will be given to the Nepal government as budgetary support and an additional $20 million in grant will also go to the school sector. Remaining $350 million is reallocation from existing programmes to be used in reconstruction.

Both the government and the donors raised the issues of transparency and accountability during the IRNR. How will you ensure the money you have pledged will be properly utilised?

We should help the government manage its funds well. As far as project loans of $200 million and another $350 million to be extended by the ADB are concerned, we have high standard of procurement and safeguard policy, and we are applying those standards to combat corruption. For managing the government’s funds properly, we are also providing capacity building support to the government. I am sure we can work together with the government to ensure transparency and accountability. I also mentioned the importance of fiduciary management to Minister (Ram Sharan) Mahat during a meeting with him.

There are a number of issues the donors have been raising for better public finance management such as frequent transfer of government staffers from the project and the issues of transparency and accountability. There is a belief that the donors are not convinced with the government’s efforts so far. Do you have any specific suggestion to the government ?

It is not that the donors are not convinced with the government’s efforts on the issues of transparency, accountability and governance. We have a system to fix them right and we are starting to abide by it. I think, the government is also committed on the issue of good governance.

The Post-Disaster Needs Assessment (PDNA) is largely for reconstruction of damaged infrastructure by the earthquake. But, we want new types of villages and cities developed in a planned manner. If we need further assistance for this purpose, can the ADB extend additional support to Nepal, given Nepal aims to graduate to a developing country from a least developed one?

We have been providing support to Nepal for many years. In response to the government’s strategy and political stability they are achieving, we would like to increase the lending to Nepal.

We have the support of $200 million to Nepal for some years after the earthquake for now.

But we can extend our concessional lending by 70 percent after 2017.

The Prime Minister and the Finance Minister tried to assure the donors the government would ensure transparency and accountability in the Reconstruction Authority by engaging the civil society and the donors. How convinced are you with the government’s assurance?

Civil society and the international partners have important role to play to ensure that transparency and accountability is maintained. We are also committed to work with them. But as long as engaging the CSOs (civil society organisations) for transparency, it is the government’s job.

As per the Reconstruction Authority-related ordinance, the Prime Minister is also the head of the authority and he is also the head of the advisory body to the authority which means he is advising himself. Do you have any advice to the government such as Parliamentary supervision of the body?

I don’t have specific suggestion on the matter. Generally speaking, the authority has been formed due to urgency of rebuilding and it is important a strong team will support the Prime Minister. Of course, supervision of the body is important. There should be an opportunity for non-government organisations and the media to get information and check the work of the authority. But sometime too many layers of supervisory and oversight mechanisms result in delay in work. There should be quick action by the authority and its work should be reviewed by media, CSOs and the Parliament.

CSOs worldwide are calling for a waiver of loans to Nepal after the earthquake. Do you consider this?

It is the option we usually don’t consider. As far as Nepal is concerned, the IMF and the World Bank conduct debt sustainability analysis whether Nepal has the repayment capacity. We believe even after the earthquake, Nepal has that repayment capacity.

The China-led Asian Infrastructure Investment Bank (AIIB) is becoming operational soon. Do you consider it as ADB’s competitor?

I met Jin Liqun, the secretary general of the AIIB, in Baku (Azerbaijan) during ADB’s annual general meeting. We both agreed during the meeting on the importance of infrastructure investment and safeguard measures.

We have also agreed to collaborate and co-finance projects. For Nepal, the presence of AIIB means more resources availability because you can get combined resources from both ADB and AIIB. There can be co-financing in certain projects from the two institutions. So it should be an opportunity for Nepal.

Will the presence of AIIB encourage the ADB to aggressively increase its financial assistance?

Even before the AIIB was proposed, we had started thinking about increasing our operations. We are planning to increase lending by generally 50 to 70 percent for a country.

Combining with AIIB, it will be even larger. In the context of Nepal, one strength of the ADB is it has a lot of experience and knowledge on post-disaster situation. We also have a residence mission here.

We can collaborate with AIIB with our own strength of long history, experience and expertise.

Source: The Kathmandu Post