Views of a Nepali Economist

Aid Politics

by: Mukesh Khanal

Nepal's story as a foreign aid recipient started in 1947 with the United States "recognizing" Nepal as a country, and then establishing diplomatic relations in 1948. The Agreement for Technical Assistance that the two signed in January 1951 established the US as Nepal's first bilateral donor, and American aid started flowing into Nepal. Other donor nations slowly followed suit.

The start of American aid flow to Nepal had more to do with geopolitics than a sudden outpouring of benevolence from the American people. Japan's involvement in the Second World War had just ended with an unconditional surrender to the US, as a result of which Americans were now present in Asia. In the meantime, China had started to show signs of a rise in communism, which the Americans did not like. America wanted to ensure that China's neighbors did not fall prey to communism, too. Also, Chinese aggression had been building in Tibet, an independent nation since 1912. Therefore, recognizing the existence of Nepal and dangling the aid carrot got the Americans the closest vantage point to watch Chinese activities in Tibet.

American concern about Tibet was valid. Nepal-US diplomatic relation was only nine-month-old when China annexed Tibet. American interests in Chinese activities in Tibet intensified, and were at their highest during 1962-1965. During that period, American foreign aid to Nepal was also at its highest. In the 1970s and 80s, it started to dawn on everyone that Tibet was now firmly under Chinese control, and the hope of Tibet again becoming an independent nation-state vanished. Along with that disappearing hope, America's aid to Nepal also fell rapidly. Even today, after over half a century, Tibetan geopolitics continues to be a significant factor in Nepal's foreign aid narrative. While the story started with Americans interested in freeing Tibet from China's clutches, it continues today with the Chinese interested in curbing pro-Tibet activities in Nepal.

The main thrust of this long introduction is that Nepal's story as a foreign aid recipient did not arise out of need for such aid. It was forced upon us by foreign geopolitics with which we had little interest. Half a century later, the situation remains the same. However, in this period, we grew accustomed to our role as a recipient of handouts, so much so that our annual national budgets are financed with foreign aid. For a nation which likes to profess pride in an un-colonized history and sovereignty, our continued acceptance of ever increasing foreign aid is blight on our self-identity. 

Unfortunately, we no longer attempt to pull ourselves up by our bootstraps. In every national tragedy—be it the high rates of poverty or illiteracy or national disasters like the recent earthquakes—and every unbalanced annual budget, we look for handouts. As a result, only a few among us today is positive about a self-sufficient future. Our leaders keep promising to transform the country into Switzerland. But we know deep inside that a country that needs handouts to finance its budget has no hope of becoming anything close to Switzerland. Foreign aid has ruined our psyche.

Foreign aid has also turned Nepal into a lab for experiments. European states, which themselves took hundreds of years to reconcile ethnic differences and identities, funded and provided legitimacy to fringe ethnic actors and groups in Nepal after the Madhesh movement. They wished to change the ethnic dialogue in a year, a process for which they themselves took half a millennium. Some of their experiments in Nepal backfired. For example, the DFID had to distance itself from extreme ethnic actors and groups, whom it had supported in the past, when they started to undermine the peace process. Countries that are not secular themselves, and whose head of state still touch the Bible to take oath, have poured millions into lobbying for a secular Nepal.

Current dialogues taking place all across Nepal—asking for suggestions on improvements in the new constitution—clearly indicate that Nepalis overwhelmingly want the country to remain a Hindu state, yet with the freedom of religious expressions for anyone and everyone. You know, as in most western democracies. However, the countries that provide us handouts fail to realize that the decision should be ours. Instead, we have the British ambassador going around giving interviews and demanding that the new Nepali constitution grant a right to religious conversion. The ambassador fails to realize that Nepalis have always had that right. I don't know of a single instance when the Nepali state has not allowed one of its citizens to convert to another religion. I haven't read all Nepali laws. Maybe the right is not explicitly stated, which could have made the British ambassador concerned. However, not all rights are always explicitly stated. The British ambassador should know better. After all, England has no constitution, yet people's rights are protected there.

We also have the Indian ambassador asking Nepali ministers to "explain" themselves every time they make a statement on Madhesh or Madheshi leadership. We have the Chinese embassy fuming at Nepali authorities every time there is a peaceful demonstration by Tibetan refugees in Nepal. It is lost on the Chinese that Nepal is a democracy, and a democracy provides the right to peaceful demonstration to everyone—citizens and refugees—living within its boundaries. Last but not the least, we have European ambassadors holding clandestine meetings with secessionists like CK Raut despite the knowledge that he was charged of sedition.

Our failure to challenge such transgressions of foreign governments has sadly become de riguer in modern Nepal. Because doing so could hurt our ability to finance our next year's annual budget. We were doing fine as a people and a country before the Americans decided to "recognize" that we existed. Then, foreign aid was forced upon us without our asking. We didn't need it back then. Do we need it today? Is foreign aid a cure or a disease? Is foreign aid eroding our sovereignty and turning us into subservient recipients? Maybe it is time we start asking those hard questions.