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Governance and Institutional Risks and Challenges in Nepal

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Governance and Institutional Risks and Challenges in Nepal GOVERNANCE AND INSTITUTIONAL RISKS AND CHALLENGES IN NEPAL Rachana Shrestha DECEMBER 2019 ASIAN DEVELOPMENT BANK GOVERNANCE AND INSTITUTIONAL RISKS AND CHALLENGES IN NEPAL Rachana Shrestha DECEMBER 2019 ASIAN DEVELOPMENT BANK Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) © 2019 Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines Tel +63 2 8632 4444; Fax +63 2 8636 2444 www.adb.org Some rights reserved. Published in 2019. ISBN 978-92-9261-834-6 (print), 978-92-9261-835-3 (electronic) Publication Stock No. TCS190551 DOI: http://dx.doi.org/10.22617/TCS190551 The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/licenses/by/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of this license. For attribution, translations, adaptations, and permissions, please read the provisions and terms of use at https://www.adb.org/terms-use#openaccess. This CC license does not apply to non-ADB copyright materials in this publication. If the material is attributed to another source, please contact the copyright owner or publisher of that source for permission to reproduce it. ADB cannot be held liable for any claims that arise as a result of your use of the material. Please contact [email protected] if you have questions or comments with respect to content, or if you wish to obtain copyright permission for your intended use that does not fall within these terms, or for permission to use the ADB logo. Corrigenda to ADB publications may be found at http://www.adb.org/publications/corrigenda. Note: In this publication, “$” refers to United States dollars. Cover design by Francis Manio. Printed on recycled paper Contents TABLES AND FIGURE -------------------------------------------------------------------------- v ABBREViatioNS ----------------------------------------------------------------------------- vi EXECUTIVE SUmmary ---------------------------------------------------------------------- viii I. INtrodUCTION -------------------------------------------------------------------------1 II. COUNtry OVERVIEW --------------------------------------------------------------------2 A. Historical, Political, and Economic Context ................................................................................................. 2 B. Governance and Institutional Arrangements .............................................................................................. 4 C. Country Development Strategies ..................................................................................................................... 9 III. ASSESSMENT OF COUNtry Systems ---------------------------------------------------10 A. Institutional Arrangements in the Federal Structure ..............................................................................10 B. Public Finance Management ............................................................................................................................12 C. Procurement ...........................................................................................................................................................23 D. Corruption ...............................................................................................................................................................28 IV. Use OF COUNtry Systems -------------------------------------------------------------33 V. GOVERNANCE AND INstitUTIONAL CHALLENGES AND RISKS IN Sectors -----------36 A. Agriculture and Natural Resources Sector .................................................................................................36 B. Education .................................................................................................................................................................40 C. Energy ........................................................................................................................................................................46 D. Transport ..................................................................................................................................................................53 E. Water and Other Urban Infrastructure and Services Sector ..............................................................58 APPENDIXES 1 List of Persons Met During the Consultation Meetings .........................................................................65 2 Overview of Country Governance Surveys ................................................................................................69 3 Donor Mapping Federalization Support ......................................................................................................81 iii iv Contents 4 ADB Sectors, Subsectors, and Government of Nepal Alignments with Ministries Allocated with Specific Business Covering Those Sectors and Subsectors as per the Government of Nepal Business Rules ..........................................................................................................91 5 Summary of Rights and Responsibilities of Various Levels of Government ...................................96 6 Scope of Local Government Responsibilities and ADB Sectors and Subsectors ........................98 7 ADB Sectors and Assigned Government Ministries in Provinces ......................................................99 8 Summary of Public Expenditure and Financial Accountability Secretariat 2015 Assessment in Nepal ........................................................................................................................................100 9 Summary of Subnational Public Expenditure and Financial Accountability Secretariat 2015 Findings ..............................................................................................................................102 REFERENCES ------------------------------------------------------------------------------- 110 Tables and Figure TABLES 1 Government Institutions and Their Functions .................................................6 2 Summary of Public Expenditure and Financial Accountability Ratings in 2008 and 2015 .......13 3 Public Finance Management Legal Framework ...............................................14 4 Donor-Funded Reform Programs and Projects in PFM ........................................20 5 Summary of Country/Sector Procurement Assessment, Nepal (2016). 25 6 Nepal PEFA Ratings for Public Procurement ..................................................25 7 Worldwide Governance Indicators, Nepal (2006, 2011, and 2016) .............................30 8 ADB Nepal Portfolio (Sector Loans and Grants) ..............................................33 9 Responsible Ministries (Federal) for Agriculture and Natural Resources Subsectors ...........37 10 Functional Assignments Under Federal Context in the Education Sector. .40 11 Functional Assignments in the Energy Sector .................................................47 12 Energy Sector Budget versus Expenditure Capital. .49 13 Energy Sector Net Virement .................................................................49 14 Responsibilities of Government Agencies ....................................................54 15 Progress Status of National Pride Projects ....................................................54 16 Institutional Framework in Urban and Water Sector in the Federal Context ...................59 A2.1 The Economist Intelligence Unit’s Index of Democracy .......................................70 A2.2 Transparency International Corruption Perception Index .....................................71 A2.3 Fund for Peace Fragile States Index ...........................................................72 A2.4 The Heritage Foundation Index of Economic Freedom .......................................73 A2.5 Bertelsmann Transformation Index 2008–2018 ...............................................74 A2.6 World Justice Project Rule of Law Index ......................................................75 A2.7 Freedom of the World Report 2008–2018 ....................................................76 A2.8 Reporters Without Borders World Press Freedom Index ......................................77 A2.9 The World Bank IDA Resource Allocation Index ..............................................78 A2.10 ADB Country Performance Assessment ......................................................79 A3.1 Donor Mapping Federalization Support ......................................................81 A3.2 Pipeline Projects .............................................................................87 A9.1 Portfolio of ADB Projects in Nepal ..........................................................105
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