The hypothesis is that aid agencies, and the money they distribute, distort incentives. Donor money relatively empowers the already-rich and already-powerful at the expense of those it purports to work for, that is the poor and the powerless.

Indirect evidence for this hypothesis comes from the profile of the people who work directly for aid agencies, or work indirectly for them through their own NGOs and foundations they have created to attract donor money. Overwhelmingly, the aid agencies and NGOs are primarily run by urban, propertied elites in the name of the rural poor and marginalised.

For the sake of contrast, it is easier to divide the two into distinct profiles. Let’s call the urban, propertied person Vikas, a child of the development enthusiasts absorbed by the development industry. Vikas lives in Kathmandu, went to a private school whose monthly fee is greater than the annual per capita income of an average Nepali. He speaks English and listens to Western music.  Perhaps he went abroad for higher education, so he is aware of the cultural norms in the West. Politically, he has imbued the values of liberalism and developmentalism. Economically, he believes in neo-liberalism. Nothing works as effectively as the free market to properly allocate resources.

The second exhibit, let’s call her Anju, lives in a village. Her family, low-caste farmers, couldn’t afford private school education. She went to a public school in Sunsari, so she’s not very good with English. Her accent is cringe-inducing, both to Vikas and the donor representatives. After finishing high school, she came to Kathmandu for higher education and has a Master’s degree in sociology.

One day, Vikas and Anju see an advertisement in the Mountain Times. A donor-funded NGO is looking for an entry-level job. Minimum qualifications necessary: Master’s degree. Both meet it, start dreaming of dollars, and apply for the job.

It’s easy to speculate who will get the job. Over time, Vikas resigns from the NGO and starts working for the donor agency itself. He gets married to a girl who is also richly-educated like him. Together they earn dollars, saving a fixed percent of it, until there is enough to buy property. They send their children to expensive private schools where they study together with the children of other rich, propertied parents. When they grow up, the cycle repeats.

What does Anju do? Spurned by the development industry, she aspires for a government job. She studies day and night for two years for the Public Service Commission examination.  This option is something Vikas would never consider, although he says he is committed to public service. But a government job, paid in lowly Nepali rupees, simply doesn’t pay as well as an I/NGO job. It just doesn’t have the right incentives.

Curiously enough, Vikas’ job at the donor agency is focussed on a field called “good governance”. He has written a copious amount on how terrible Nepal’s government really is when it comes to managing money. There are no grounds to trust it.  “In order to maintain donor confidence in the use of national system to disburse, the government of Nepal needs to provide greater confidence that they are tackling major obstacles,” he writes for a report, “The [country x], along with other development partners in Nepal, would welcome further progress on public financial management and anti-corruption reforms.”

Anju reads this on the UK aid agency Dfid’s report the ‘Nepal Portfolio Performance Review 2013. It seems to her that Dfid is extremely concerned about the state of governance in Nepal. She knows that Dfid, as one of the country’s largest donors, commits a lot of money for Nepal’s development—roughly amounting to about 100 million pounds sterling a year. As she looks into the composition of Dfid’s portfolio, it surprises her that despite all the talk of good governance, for 2011/12, Dfid has provided a grand total of zero pounds out of the 68 million pounds committed under the heading “Governance and Security”.  The largest chunk, 33 million pounds had been committed to a “Dfid appointed service provider—GRM International”. The rest had been committed to the World Bank, UNICEF, the UN and consultants.

Wanting to learn more about how Dfid spends its money, she goes home and googles the aid agency.  A headline from the Telegraph screams “Revealed: taxpayer-funded aid consultants on six figures a year.” The journalist says that “the Department for International Development is directly handing individual ‘aid consultants’ up to £223,000 a year each.” She also sees that the agency’s head in Nepal has spent 32,000 pounds renovating a Nepali palace that once belonged to a Rana Maharaja and has now been turned into a residence for the agency’s chief development worker.

That doesn’t seem very accountable, Anju thinks, and ponders—does Dfid even have the moral authority to lecture Nepal’s government on corruption and accountability? Could it be that corruption and nepotism are more of a problem for donor agencies and their pet NGOs than the government? After all, even if weak, there is a mechanism, the CIAA, to look into the government’s corruption. But who investigates corruption related to NGOs and their donors?

Things start to become a little clearer in Anju’s head. She begins to figure out why it is that the Vikases and those working for donor agencies can afford the best houses for rent in Kathmandu, send their children to the best private schools and why it is that a few restaurants she goes to, frequented by the darlings of the aid industry, serve Nepali clients only after the white clients. It seems to her that there are two Nepals. One belongs to those Nepalis who eke out a living in a country with a poor government doing little to help. Another belongs to the donor darlings—dollar-earning, English-speaking, and keen to paint a distorted picture of society and the government—all in the name of helping the poor and the marginalised.

The train of thought in Anju’s head takes another turn. In the evening, she asks herself: does Nepal even need Dfid? Or is it Dfid that needs Nepal? 

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This article was originally published in The Kathmandu Post. Cover photo: Frank R. Vincent / World Bank. Licenced under Creative Commons.