Social Protection against Global Crises in Nepal: Some

Challenges

DRAFT

A Paper to be presented at Research Meeting on Social Protection in

South Asia 18 – 19 March 2010

New Delhi

By:

Bishwa Nath TiwariProfessor

Department of EconomicsTribhuvan University

Kathmandu, Nepal

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Social Protection against Global Crises in Nepal: Some Challenges

Bishwa Nath Tiwari, Ph.D.1

1. BACKGROUND

A sustained reduction in poverty has become a formidable task because of its many ugly faces. Poverty is more than inadequate consumption, education, and health. It is also how vulnerable an individual is with risks. Living with risks is part of life for poor and excluded people, and today’s changes in financial sector, trade, technology, and climate are further increasing their risks of everyday life. Poor people are often among the most vulnerable in society because they are the most exposed to a wide range of risks. Their low income means they are less able to save and accumulate assets. That in turn restricts their ability to deal with a crisis when it strikes.

One of the reasons for higher poverty in Nepal is the higher vulnerability of people to a shock, which roots into natural and socio-economic characteristics, and level of development infrastructure. But the vulnerability dimension does not merit much attention in the past plans of Nepal, except provision of some social insurance, social assistance, and some relief support after shock.

In view of the growing importance of risks and vulnerability of poor and excluded people, this paper makes a modest attempt to study the risks that people are facing, the way they and the government are managing, future challenges against the face of declining informal mechanism and lack of adequate formal protection system. Towards this end, the paper is organised into six sections. After this, the second section introduces typology of hazards, the details of recent hazards or crises that Nepal faced and their actual or probable impact on people, especially the poor and excluded groups. Section three covers a summary of current social protection provisions of the government, with a brief prelude on the definition of social protection. This is followed with a section on public expenditure on social protection. Next to this is a discussion on the challenges against the emerging global crises, and the final section points out suggestions for making poor and vulnerable protect from global crises.

2. TYPES OF RISKS Managing risks and designing appropriate policy mix requires understanding the typology of risks and shocks to which people are vulnerable. Risks can be classified by two ways (World Bank 2000) as summarized in Table 1:

the level at which they occur (micro, meso, and macro), and the nature of event (natural, social, economic, political, environmental, etc).

Micro shocks, often referred to as idiosyncratic, affect specific individuals or households. Meso shocks strike groups of households or an entire community or village. These shocks are common (or covariant) to all households in the group. Shocks also occur at national or international level. This paper delves on risks that usually have large covariant components.

1 Dr. Tiwari is Professor at the Central Department of Economics, Tribhuvan University, Kathmandu, Nepal.

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Table 1: Types of RisksType of

RiskLevel of Risks

Idiosyncratic (Micro)

Co-VariantMeso Macro

Natural Rainfall Landslides Volcano

Earthquake Flood Drought

Social Crime

Domestic violence

Violent conflict Terrorism

Civil strife War Social upheaval

Economic Unemployment Harvest failure

Hyper Inflation Financial crisis Food crisis

Political Riot Maoist conflict

Environmental

Pollution deforestation

Global warming Climate change

Health Illness

Injury

A study conducted by WFP (2001) records a number of risks that people face. They range from health to social/political to policy-related risks (Annex 1). These risks are more localized and down to earth incidents affecting communities. However, this paper mainly focuses on three recent global crises and the Maoist conflict of Nepal. First it describes their impact and then it looks for adequacy of social protection measures before embarking on suggestions or recommendations.

2.1 Maoist Conflict and Its ImpactNepal embroiled itself from 1996 on produced a culture of violence marked by massacres, torture, disappearances, displacements, and a general terror that eclipsed faith in the state. Conflict affected human development: it denied people to live longer; it looted the basic freedom of people; it damaged property more than NRs five billion; and it halted the process of human capital formation (UNDP 2009). More than 13,347 people had been killed by the end of 2006, approximately 8 per cent of them women and about 3 per cent children. Political activists, agricultural workers and police personnel became major victims, sharing some 72 percent of the total.

Spatially, Mid-West Development Region was the most affected, however, a high variation of the number of people killed exists across districts of the region, ranging from 30 to 904 persons (Figure 1). In addition, 50,356 people were displaced, the greatest number in Mid-Western Development Region (INSEC 2005). Even after the signing of Comprehensive Peace Accord (CPA) in November 2006, another 551 people were killed in 2007 (INSEC 2008).

Overall, the conflict took its highest toll

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in rural, less developed areas and regions, such as Mid-West and Far-West Development Regions as well as excluded groups and poor population, including rural agricultural labourers – in short, the groups most vulnerable in terms of both education and material assets.

2.2 Recent Global Crises Countries have faced three consecutive global crises, popularly known as 3 F’s – fuel, food and financial, that originated during 2007 and 2008.

(i) Rising energy price: the price of petroleum products has spiralled from less than US$ 50 per barrel to around US$ 150 per barrel in Nepal in 2007/08. This is mainly due to reduced supply in global markets. However, since 2009 the price of petroleum products has decreased settling at its initial level of around US$ 50 per barrel.

(ii) Food crisis: The price of food grain increased close to 50 percent in Nepal within a year in 2008. The main reason for the price rise is both demand and supply. Globally, the production and supply of agricultural production has been sluggish since 2005 because of bad weather. On the other hand, with the increase in population the rising demand has not abated. In stead, demand for major staples has got further pressure because of their additional demand for bio-fuel production in recent years. In deed, more than 100 million tons of grains were used in 2007/08 for bio fuel production alone.

(iii) Financial crisis: After the Asian financial crisis the next round of similar crisis started in 2009, with the flawed regulatory regime and sub-prime mortgage lending. This has affected directly the developed countries and their indirect consequences the poor developing countries have been experiencing gradually but at a later stage, in terms of decreased aid, trade and technology transfer.

2.3 Impact of the Global Crisis and Lessons Learnt As mentioned above, the underlying causes of the crises are different but they are very much linked; all of them: (i) hinder the way of attaining the MDGs; (ii) affect human development; and (iii) have higher impact on the poor and excluded groups. Rising energy price increased food price, caused food crisis that has severe effect on poor. Similarly, because of the excess housing, house price decreased but it did not benefit poor and excluded groups. Instead, this has given rise to mortgage delinquency, creating bank loss and ultimately resulting into bank failure. This has caused a capital crunch, which ultimately boils down to decreased official development assistance in developing countries.

These global crises have both micro and macro effects (Table 2). Both effects have influence on the level of human development. All these effects can invite civil unrest. The lessons that we learnt from financial and food crises are given in Table 3. Most of these lessons have to do with the provision of social protections. In fact, the impact of any global crisis impedes nutrition, health and education of poor and excluded groups. This therefore requires smoothening of both income and consumption of households, and their vulnerable members. Thus, there is a need for social protection measures in place.

Nepal has already suffered from energy and food crises. The rise in petroleum prices has highly increased cost of transport in rugged terrain affecting food supply. This was further aggravated with export ban of rice from India, though of a limited period, in 2008.

The effect of financial crisis is still yet to appear. World Bank (2009B) held that Nepal, like Bangladesh and Bhutan, has been mostly insulated from the first round effects of the crisis owing to sound macroeconomic management, and underdeveloped nature of financial markets

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that are not well connected to international markets. The report forewarns that they are however vulnerable to second round effects of a global economic slowdown working through export earnings, tourism receipts, remittances and external financing for infrastructures.

Table 2: Effects of Food and Financial CrisesMacro Effects Micro EffectsMacro effect of Food Crisis

Inflation Macro-economic imbalances

Micro Effect of Financial Crisis Reduced household income – reduced

remittance Increased income inequality

Macro effect of financial crisis decrease in prices and

decrease in investment because of shortage of capital

Loss of employment Decrease in saving

Micro Effect of Food Crisis Increased hunger Increased poverty (decreased income but

increased food expenditure) Negative health impacts (poor diet, poor medical

services, poor working environment, work by vulnerable members)

Negative education impact (unaffordable, drop out of children)

Table 3: Lessons Learnt from the Global CrisesFinancial Crisis Food Crisis1. Rational investment in real state and housing 2. Sound financial regulation and strict

implementation3. Proper monitoring and supervision of bank

and other financial institutions

4. Increase buffer stock5. Invest in agriculture, esp. invest for small

farmers6. Make trade policies favourable to food security7. Design and implement social protection system

UNESCO (2009) holds that financial crisis has affected Nepal by sudden depreciation of national currency, the Nepalese rupee, vis-à-vis U.S. dollar, in 2008. This, in turn, resulted in a 25 percent growth in exports and 55 percent increase in remittances from Nepalese working abroad in 2008. However there is preliminary sign of decrease in rate of increase in the remittances recently.

2.4 Social Protection against the Global Crises

In order to address the impact of global crises, an emphasis has been given on social protection by the UN agencies in recent years (ILO and WHO 2009). Now social protection has been advanced as a new policy paradigm which gives an opportunity to attain a growth in a manner which protects poor and excluded groups. How social protection can help achieve growth differently has been illustrated by Bauer et al (2009) as follows:

(i) Consumption smoothening: during a crisis people loss jobs. As the poor people do not have saving this will affect them hardly. In such a situation social protection can help in meeting the basic needs including food needs. Thus, it will smoothen consumption that will help keep demand for goods and services in the economy constant so as to not to invite recession.

(ii) Multiplier or Keynesian effect: social protection measures provide support to poor people whose marginal propensity to consume or spend is high. Thus, it will increase demand for commodities, through multiplier effect, leading to encourage production.

(iii) Smoothen capital formation: in the absence of any social protection system, poor people can take out their children from schools or do not go for health services.

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Box 1: Risk Management Measures

Objective Strategies

Risk Reduction Informal Formal

Risk Mitigation Informal Formal

Coping with Shocks informal Formal

World Bank 2000

This means a decrease in quality of human capital, and decrease in capital formation. However, a well devised social protection system can halt this process and smoothen invest in human capital formation

(iv) Decreased dependence on foreign market: social protection measures improve income and assets of poor and excluded groups. This means an increase in demand for goods and services produced. This demand further leads to generate demand from producers and other groups, thus it reduces dependence on foreign demand.

(v) Maintain political and social stability: finally social protection could help decrease the gap between rich and poor, thus maintaining stability.

Therefore formal support from government is a must. Some social protection measures by the Nepalese government are explained in following section.

3. MANAGEMENT OF RISKS: FORMAL SOCIAL PROTECTION MECHANISM IN NEPAL

Risks are managed by both the communities (informal) and the government (formal). Risk management strategies can be classified as risk reduction and mitigation measures (action in anticipation of a shock), and coping measures (action in response to a shock). Risk reduction aims at reducing probability of shocks, risk mitigation aims at reducing impact of shocks, and coping measures aims to relieve impact of a shock after it occurs (Box 1).

For poor people, dealing successfully with the range of risks they are exposed to is often a matter of life or death. To manage risks, households and communities rely on both formal and informal strategies. Informal strategies include arrangements done within community by the community. Formal arrangements include government mechanisms. This section deals with formal mechanism. A definition on social protection is given to serve as a prelude for understanding the context and coverage of the government social protection mechanisms.

According to ADB (2001) social protection is defined as the set of policies and programs designed to reduce poverty and vulnerability by promoting efficient labor markets, diminishing people's exposure to risks, and enhancing their capacity to protect themselves against hazards and loss of income. The policies and procedures included in social protection involve five major kinds of activities: labor market policies and programs, social insurance programs, social assistance, micro and area-based schemes, and child protection.

“Social safety net” and "social security" are sometimes used as alternative terms to “social protection.”2 But as these are used by different agencies, their meanings are agency-specific

2 The Asian Development Bank Interdepartmental Working Group on Social Protection found that in describing the range of concerns with which this strategy is dealing, the term “social protection” was the more common in international usage and decided to use that term. The term “social safety net” appears to have a less precise meaning. Some people use it to mean the whole set of programs and policies discussed in this strategy, while others use it to refer only to welfare and targeted programs for the poor. On the other hand, the term "social security" is used to refer to the comprehensive mechanisms and coverage in developed countries and is less applicable to new areas such as community, micro, and area-based schemes.

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and therefore have somewhat different connotations. However, without delving much on the definitional issues this section elaborates whatever the social protections measure the government has adopted.

With the emergence of the concept of the welfare state, Nepal has been engaged in the provision of basic services including education, health, water and sanitation since the initiation of planned development efforts in Nepal in 1956. Realising that economic growth alone cannot protect the interest of poor, the government for the first time advanced a targeted programme as one of the four pillars of the tenth plan (2002/03 – 2006/07). 3 The budget allocated for targeted programmes was about 7 percent during the plan period. However, these targeted programmes lacked effective targeting. In the current (interim) plan (2007/08 – 2009/10), the government focused more on coping with the Maoist shocks than in mitigation and risk reduction.

In fact, Nepal lacks a comprehensive social protection policy and programme. There are patches of programmes under operation which can be classified into: (i) social insurance such as social and health insurance; (ii) social assistance, (iii) block grants or area transfers, and (iv) sectoral transfers. Each of them is summarised below.

3.1 Social Insurance There is no comprehensive social security system under the Nepalese Labour Law. Permanent employees are entitled to receive provident fund, gratuity and pension benefits as a part of social security under the Labour Acts and Rules. The pension is limited to government employees in civil service, police and armed forces including some public corporation. Apart from provident fund, pension or gratuity, the people working in the formal sector are also entitled to medical treatment expenses, salary during treatment, disability compensation, and compensation in case of death, housing fund, sick leaves and maternity leaves, among others.

The formal sector in Nepal is very small. In fact, civil service, army, police and teachers, who are beneficiaries of most of the provisions of social insurance, is just around half a million. The formal private sector is also small in Nepal. Most of the small organisations in private sector do not have social insurance provisions for their all staff. In fact, a large proportion of Nepalese are working in the informal sector where there is hardly any provision of social insurance.

3.2 Social Assistance Programme Old Age Allowance: started as early as in 1994, a monthly stipend of NRs 100 was given to all citizens of 75 years and above. Two changes were made in 2008: (i) an increase in stipend to NRs 500, and (ii) a decrease in age limit to 70 years in general, and 60 years for Dalits and the residents of Karnali, the remote region of Nepal. As a result of these changes, the number of beneficiaries has more than doubled from 360,733 in 2007/08 to 643,441 in 2008/09, with a four-fold increase in budget (MOF 2009, and World Bank 2009A).

Widow’s allowance: widows aged above 60 years who have no income source were provided with NRs 150 per month. In 2008, the amount was increased to NRs 500, and definition of beneficiaries has been expanded to cover all single women above the age of 60 years. These

3 The four pillars of the 10th plan were: (i) high and broad- based growth; (ii) social sector development including infrastructure development; (iii) targeted programmes and social inclusion; and (iv) good governance.

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Table 4: Individuals received various social assistance/grants (FY 2008/09)

Target Group Number (person)

Senior Citizens (above 70 yrs) 545,556

Senior Citizens Karnali (above 60 yrs)

16,065

Senior Citizens Dalit (above 60 yrs) 81,820

Single Women (above 60 yrs) 296,221

Indigenous people nearing danger of extinction

16,122

Total 956,784

Source: MOF 2009

changes have almost doubled the number of beneficiaries from about 250,000 to about 500,000, with a 5.5-fold increase in budget (World Bank 2009A).

Allowance for disable people: This is provided to about 7,000 disabled people. Fully handicapped and disabled are provided NRs 1,000 per month, while partially handicapped/disabled are provided NRs 300 per month (MoF, 2008). This cash transfer is conditional on the Nepali citizenship and disability criteria of the Government.

Allowance for Endangered ethnic groups: The government started to provide assistance to Raute and Kusunda castes, among others, whose population is around 1,000 since 2008/09. The total budget allocation for the social assistance scheme amounted to about 0.14 per cent of GDP until 2006/07 but with recent changes, it has increased to nearly 0.7 per cent of GDP, a five-fold increase (MOF 2008).

3.3 Block Grants to Local BodiesWith the objective of developing infrastructures for improving service delivery, a block grant is given to local bodies such as District Development Committee (DDC) and Village Development Committees (VDC) to support local governance and community development. The districts are allocated grants based on different indicators including population, area and level of human development. DDC and VDCs have to provide matching funds; and communities are expected to contribute generally labour and sometimes cash to the project which they want to undertake.

3.4 Sectoral Social Transfer Schemes

3.4.1 Education-related transfersScholarships are the most significant education-related transfer. Under the programme, following transfers are made to students or their families:

A monthly stipend of NRs 350 is given to 50 per cent of girls in primary school, especially those belonging to poor households or excluded groups.

A monthly stipend of NRs 350 to Dalit students in primary schools

Both of these scholarship schemes are a conditional cash transfer. They are based on the condition of students’ regular attendance to schools.

3.4.2 Health-related transfersMaternity Cost Reimbursement Scheme: Under this scheme, women coming for delivery receive NRs 1,000 for normal delivery and up to NRs 5,000 for delivery requiring surgery (MOHP 2007).

Mid-day Meal Programme and Girls Incentive Programmes: The government has initiated the midday meal programme for 170,000 students and edible oil for 50,000 students in 16

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Box 2: Poverty Alleviation FundIn Bikram Sambat 2060 (2003 AD), the government enacted (through ordinance first) Poverty Alleviation Fund as an independent institution to implement poverty reduction programs. It works through national NGOs and local community organizations. World Bank is the main funding agency for PAF. Till fiscal year 2008/9 PAF has spent a total of Rs. 540 million of which 93.9% was spent on programs. it has mobilized 10549 community organizations which are implementing 10346 income generating and 2,029 community infrastructure projects. It has benefited over 388,179 poor households. For 2009/10 it has allocated Rs.2, 723 million to benefit 150000 households.

Source: PAF 2009 records

districts with food shortages, low access to education, and low girls’ enrolment (NPC 2009). The programme is implemented locally using local products for feeding the students.

3.4.3 Employment-related transfersFood for Work Programme: More than NRs 26 billion was allocated for public work schemes towards improving rural infrastructure and generating employment opportunities for the poor in 2008/09(MOF 2008). The food-for-work programmes are self-targeted since only the poor are likely to work in these types of programme. Although leakages have been reported, most of the food-for-work programmes have adopted a social auditing system to improve transparency and reduce leakages.

Employment Guarantee Programme: Under the one-family-one-employment programme, unemployed or people with annual income insufficient to feed the family for more than three months (especially from remote areas) are going to get jobs yielding NRs 180 to NRs 350 per day (NPC 2009). The programme intends to cover 55,000 households in Karnali Region at an estimated cost of NRs 41.64 million. The 2008/09 budget allocated for the employment of 270,000 people for 100 days (NPC 2009).

Poverty Alleviation Fund: As of 2008/09, the PAF programme covered 25 districts with a budgetary allocation of about NRs 3 billion Box 2). Impact evaluation of six districts under the PAF programme indicates that the programme has been effective in targeting the poor and alleviating levels of rural poverty (NPC 2009). However, a rapid expansion of the PAF programme to all districts without increasing institutional capacity adequately may seriously compromise the programme’s effectiveness.

3.4.4 Child benefitUnder the Child Protection Grant, introduced by government since 2009/10, children aged less than five years (up to two children per family) from poor families, Dalit families and families in Karnali Zone is being provided NRs 200 per month per child from mid-October 2009 with a view to improving their nutritional status. The total budget allocated for this scheme is NRs 720 million and is expected to improve nutrition levels of about 400,000 children (MOF 2009).

3.4.5 Emergency social protection transfersAllowance to Disaster Affected People: It is estimated that about 50,000 persons are affected by natural disasters every year (NPC Undated). No systematic programmes for protection of such victims exist, although the Prime Minister’s Disaster Relief Fund provides some assistance to victims through the Office of District Administration. These activities are carried out on an ad hoc basis.

Allowance for Conflict Affected People: The government has allocated NRs 1.5 billion in the 2008/09 budget for subsistence allowances to families of martyrs and handicapped as a result of conflict and compensation to conflict-affected people (MOF 2008). In addition, the

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government with donor support is providing subsistence allowances to the ex-combatants. The total social security budget amounts to NRs 23 billion.

4. PUBLIC EXPENDITURE

4.1 Sectoral Shares of Total ExpenditureIn the post-conflict period, new opportunities for socio-economic transformation have emerged. Security spending has been reduced, and there has been a gradual shift to the social sector. Social sector spending currently receives the highest share of government spending, accounting for 34 per cent in 2006/07—a steady increase over the years (MOF, various dates). The largest share of social sector spending goes to education, at about 17 per cent of total government expenditure (see Annex 2).

Social sector spending accounted for more than 30 per cent of total government expenditure, even during the conflict (MOF, various dates). It declined marginally from 31 per cent in 2003/04 to 29 per cent in 2004/05, but still remained higher than all other sectors (MOF, various dates), demonstrating that social sector spending has been a priority over the years, particularly since 2000.

4.2 Expenditure on Basic Social ServicesSpending on basic social services directly targets the poor, including children and women, and accounts for more than 70 per cent of total social sector spending (MOF, various dates). It includes primary healthcare (including family planning, preventive and basic curative care), basic education (including preschool, primary, literacy, and life skills), water supply and sanitation for rural and semi-urban areas, and nutrition support (micronutrients).

4.3 Public Expenditure on Social ProtectionThe government has spent at current price a total of NRs. 283.4 billon and on average NRs. 56.68 billion annually on directly poverty reducing programs during past 5 year period. Besides, NGOs and INGOs have also been spending on average 100 billion annually on programs directly and indirectly contributing to poverty reduction. This has played important role in bringing poverty level down even during the post conflict transition stage of the country. The resources mobilized through social mobilization and the saving credit programs at the community level has also played significant role.

Expenditure on social protection programmes has gradually increased, especially in the last two years, both as a percentage of national budget and of GDP (Figure 2).The budgetary allocation for social protection programmes in 2009/10 is about eight per cent of the total budget, although this is still low compared to many other developing countries

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Table 5: Expenditure on Social Protection Programmes, 2002/03)

Component %

Labour market programme 6.3

Social insurance programme 47.5

Social assistance programme 7.1

Micro/area wide programme 33.6

Child protection 5.6

Total 100.0

Source: Sharma 2005Table 6: Impact of SP Expenditure on the Income of Poor, 2002/03Variable ValueTotal SP Expenditure on the Poor (NRs’000)

3,908,414

Poor Population (‘000) 9,000

SP Expenditure/Poor Person (NRs/person)

434

Poverty Line Income Per Capita (annual) (NRs/person)*

6,400

Per Capita SP Expenditure As % of Poverty Line Income

6.80%

Percent of Poor Receiving SP Assistance

26%

Per Capita SP Expenditure As % of Income of Poor Beneficiaries

28%

Source: ADB 2004

(UNICEF/ROSA 2009). Of the five components of social protection as defined by ADB, the share of social insurance is as high as 48 percent (Table 5). This is followed by micro or area-wide programme with a share of about 34 percent in 2002/03 (Sharma 2005).

ADB (2004) also investigated into the impact of social protection programmes by analysing the total expenditure on such programmes and their relation with other aggregates. This is given in Table 6. The study estimated that NRs 3,908.4 million was spent on 9 million poor in 2002/03. This yields a per capita expenditure of NRs 434 which is 6.8 percent of the poverty line.

The study points that the social protection covers more than a quarter of the poor and its share in the total income is 28 percent, which is a significant proportion by any count (Table 6). The issues related to coverage, targeting, financing and other challenges are dealt further in the following section.

5. CHALLENGES FOR MANAGING GLOBAL RISKSAgainst the canvass of the preceding sections, this section advances some key challenges on the management of risks in general and global risks in particular. The section first advances that indigenous practices of communities are either withering away or at constant, owing to the other formal interventions and/or lack of government support. However, the formal interventions on the social protection are also half way. This has created a bizarre situation, wherein it is the poor and excluded groups who are the most sufferers. It is against this backdrop some of the challenges are put below.

5.1 Informal Mechanism: Responses to Risks by Households and Communities

5.1.1 Reduced Risk Reduction MeasuresThe 2008 experience of export ban by the countries during the time of food crisis provides a lesson that a country has to have enough production or stock of its own for meeting food risk. Nepal has turned a food deficit country since the early 1990s, and hardly maintains a stock of feeding its whole population even for a month. Against this backdrop, it is necessary that the country produce enough so as to meet its domestic demand. A sustained increase in food production requires increase in irrigation facility to fight against drought, and control of floods during monsoon. In fact, flood has been on the rise in recent years, damaging paddy, the main staple of country.

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Box 3: Farmer Managed Irrigation System in Nepal

Nepal is known for its tradition of farmer managed irrigation systems (FMIS). Nepalese farmers are collectively engaged in irrigated agricultural development as an enterprise since time immemorial. There are thousands of FMIS in the country. These FMIS provide irrigation services to 70 percent of the country's total irrigated area of about one million ha. Despite the country's national FMIS heritage, there are no dedicated institutional means to recognize the FMIS that have been surviving in the face of all sort of social, organizational, economic, technical and environmental challenges. No self-initiated and systemic institutional support exists to facilitate these FMIS to develop their comparative capacity vis-à-vis the challenges.

http://www.cmsnepal.org/fmis/index.html

Towards this end, some informal risk reduction mechanisms adopted by Nepalese communities include farmer managed irrigation systems (FMIS), construction of embankments, and dams and dikes. Despite the fact that FMIS are more equitable and more sustainable and perform better than agency managed irrigation system they have not received proper attention from the government (Box 3).

Risks of covariant type such as floods require an agreement between different settlements or communities which is difficult to come by unless there is an institutional mechanism. In recent years, most of the settlements of some Terai districts are flooded during monsoon; but neither communities are able to manage them on their own, nor has the government made much initiative.

Apart from the lack of irrigation and/flood control measures, the global trend of growth of monoculture has also been making peasants of developing countries vulnerable to food crisis. Monoculture is a result of economy of scale and specialization. However, such an agriculture practice is not sustainable. Therefore, the government of Nepal has been implementing some crop diversification projects, but the trend of diversification has mixed results:

there is some diversification between the cereals and vegetable/horticulture but within cereals there is less diversification

The reason is also because of change in food habit and demand of people. Crops like millet and barley good for health has not been increasing to the desired extent (Figure 3).

The improvement of infrastructures and services improves the capacity of people to fight against a crisis. However, people of remote hills and mountains are still devoid of such basic services like education, health, agriculture and veterinary. With the increase in awareness, people have increased their demand for such services, but there are following mismatches:

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(i) There is inadequate supply of manpower and medicines;(ii) The inconvenient location of service centres or schools. At times location of the

services is inconvenient because hill and mountain communities move to a different place during the time of cultivation, and thus they cannot use the services.

(iii) Remoteness: the mountain communities do not effectively use agricultural and veterinary service centres, as they are far and lack transportation facilities.

In fact, the last more than one and half decade of political turmoil has resulted in sluggish development of infrastructure and services, especially in remotes areas. As a result, there is supply problem. For example, there is a gross shortage of electricity, mainly due to the fact that no major hydel project has been constructed in the last one decade. It is really shocking that a country which is second in the row of hydro power potential has now more than 12 hours daily load shedding in its capital!

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5.1.2 Reduced Risk Mitigation Measures

Risk mitigation aims at reducing the impact of shocks. Households mitigate risks through (i) diversification, and (ii) insurance. Some diversification strategies commonly adopted by the communities are working as casual labourers, selling forest-based products and diversifying occupations, etc (Annex 3).

Mitigating Risks through DiversificationDiversification of income reduces the vulnerability to risks. But there is less diversification of income sources of poor. The number of income sources for poor are very few, mostly limited to the human labour used either on their small plots of land if they are lucky enough to own a tiny piece; otherwise they have to earn on other’s land working as labourers or as tenants. Past studies reveal that poor has somewhat more diversified source of income in hills than Terai parts of country. In Terai the only activities the poor can undertake are agricultural or casual labourer other than those coming from their own agricultural and livestock operation, whereas those of the hills apart from these have other sources such as selling woods, herbs and Khoriya (shifting-type cultivation). However, with the globalisation, and labour division and specialisation, the number of income sources of poor people is further decreasing.

Mitigating Risks through InsuranceHouseholds also mitigate risks through insurance, including self-insurance, informal insurance, and formal insurance - though market-based formal insurance plays a minor role for poor people.

Self-Insurance MechanismsHouseholds insure themselves by accumulating assets in good times and drawing on them in bad times. There is limited insurance market in rural areas of Nepal; therefore poor people have to rely on self-insurance or other informal insurance. The magnitude of self-insurance depends on their level of income, proportion of income spent on food vis a vis non-food items, and a host of other factors.

The vulnerable groups in Nepal spend more than two-thirds of total expenditure on food items during normal year.4 There is little variation in the proportion of food expenditure by

4 The Food Security and Vulnerability Profile (FSVP) survey of WFP (2001) investigated into the proportion of the total expenditure spent on food and non-food items by 192 vulnerable groups in 65 communities of 19 survey districts of Nepal, and found on the average that they spend more than two-thirds of their income.

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Table 7: Estimated cost of basic SP versus actual expenditures (as % of GDP)

Country Cost of basic SP package

Actual expenditure in 2004

Bangladesh 6.1 6.3

India 3.9 4.0

Nepal 7.0 2.3

Pakistan 3.8 1.6

Vietnam 4.4 4.1

Source: Bauer et al 2004

region and sub-regions. The proportion hovers around 70 percent in most district, and increases further during an abnormal year (WFP 2001). This hints that poor people are less insured as they have less diversified income sources and expenditure pattern.

Informal Insurance MechanismsHouseholds also use group-based mechanisms of informal risk sharing that rely on social capital of groups of households. Typically, informal insurance involves a mutual support network of members of a community sharing similar characteristics in terms of ethnicity, relatives, friends or similar occupations. For example, there are traditional systems of Parma, Dhikuri, Bheja and many others in Nepal which are used to help community members through exchange of labour and through the share of mutual funds generated from group members. However, the traditional systems of networks are disappearing in Nepal, and more formal sets of groups are formed under different interventions by Government Organisations (GOs) and Non-Government Organisation (NGOs). Some of these groups are organised not only to implement and sustain the activities implemented by an organisation, but also to collect funds or undertake saving and credit operations. These networks are effective only against shocks common to some members but not all. Thus, in case of crisis, these networks could not help much unless a community has different types of networks and organisations.

There are some formal insurance markets. But they are still limited to urban parts and only in some occupations. There is lack of crop insurance. Government has started insurance of cattle but within a period of more than a decade, only 50,000 cattle are registered for the services. This needs further investigation. 5.1.3 Coping with Shocks

There are limited coping measures adopted by poor and food insecure people. They revolve around the use or sale of human labour, animal and some other household assets, and forest-based products. The social capital and the informal insurance mechanisms are on a decreasing trend. In order to cope with natural shocks, GOs, NGOs and some benevolent organisations provides food and clothes.

There is lack of a detailed government plan and strategies as to how to reduce and mitigate risks and cope with shocks. 5.2 Limited and Scattered Coverage of Formal Social Protection Mechanism

The coverage of social protection measures is still limited in Nepal. Bauer et al (2004) estimated the cost of a package of basic social protection and the actual expenditure required for five countries. These estimates in relation to respective country’s GDP are given in Table 7. This shows that the cost of basic package in Nepal is 7 percent of GDP but Nepal spent only 2.3 percent of the GDP in 2004. Bangladesh and India is better placed than other countries, and at the worst end, lies the case of Nepal.

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The review by the World Bank (2009A) found that the coverage of scholarship schemes was 19 per cent for girls and 12 per cent for Dalits. This is just one case. This suggests that Nepal still has to go a long way to protect the poor and vulnerable.

Moreover, the ongoing social protection measures are scattered throughout different sectors. Except for scheme such as pensions for the elderly, its coverage mostly is limited. The private sector has not yet come forward much. The government has mandated public and private sectors to undertake corporate social responsibility. Accordingly, the private sector could become an important partner for social protection programmes. Most of the large private sector organizations in the formal sector have some forms of social protection programmes for their workers.

5.3 Inefficient TargetingThere are some studies which point that the government’s targeted programmes have not been effective to target the poor and disadvantaged groups of population (Tiwari 2004 and 2004/05). Recently, World Bank (2009A) conducted an assessment of social assistance programmes. It estimated about 75 per cent of elderly allowance was being used by non-poor households, and 72 per cent of widow’s allowance was going to non-poor single women. The study further estimated that NRs 3.5 billion could have been saved in 2008/09 if the scheme had been targeted only to poor, elderly and single women. This calls for better targeting of social assistance schemes.

The poor targeting goes beyond the social assistant programmes. It is more pervasive in the education related transfers as well. The same review by the World Bank (2009A) found the following:

more than 50 per cent of those receiving scholarships were from better-off households (top three wealth quintiles),

64 per cent of Dalits receiving scholarships came from poorer households (bottom two wealth quintiles), and

Dalit scholarship scheme is targeted more effectively than the girls’ scholarship scheme.

Other studies have indicated that students do not receive the stated amount since the scholarship is distributed to all students in the school rather than just those who are eligible.

Generally, targeted programmes are formulated using blanket approach without proper diagnosis of the reasons of poverty in Nepal, and many of them are supply driven rather than demand driven. Recognizing limited effectiveness of targeted programmes in the past, the first PRSP has adopted some new approaches, including: (i) merging programmes of similar in nature, (ii) adopting a population and poverty-based resource allocation formula for grant allocation to districts, and (iii) establishing Poverty Alleviation Fund as an umbrella organization for targeted programmes. Moreover, the government has shown commitment to addressing the inclusion agenda at the political level (Tiwari 2004/05).

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5.4 Limited Fiscal Space

Table 7 hints that Nepal has to increase its allocation to social protection. But the challenge is how to meet the need for increased resources. In view of the decreased foreign assistance during economic and financial crises, whether a fiscal space is there in the poor countries like Nepal which could finance the social protection measures? This can be evaluated by studying following indicators as suggested by Bauer (2009):

Revenue generation or extent of resource mobilised in the country Expenditure management Amount of official development assistance Proportion of budget deficit

Revenue GenerationOECD countries have reached at 35% of GDP. Thus, it is difficult them to further increase tax rate or base and increase revenue. However, there is such fiscal space in poor countries like Nepal where revenue generation is just 12% of GDP. The government has taken several measures to raise revenue collection in recent years, and it has been increasing gradually. After a vigorous attempt in 2009 when the government was led by the Maoist, the revenue increased to 13% of the GDP. The experience of 2009 shows that the government can increase the amount of revenue through increasing tax base and number of tax payers rather than tax rate. However, the government has to ensure an efficient use of tax payer’s contribution for encouraging them to pay.

Expenditure Management

The other way to apportion larger resources to social protection could be through public expenditure management (Tiwari 2006). It involves:

Inter-sectoral allocation Priority allocation of the budget Intra-sectoral allocation.

Inter-Sectoral Allocation of BudgetIt has mentioned in the previous section that the social sectors commands one third of the budget (Annex 2). While increasing budget to the social sector in general is desirable, the decreased allocation to the budget in agriculture from 16% in the early 1990s to 7% in recent years is not desirable. It is because agriculture is still the mainstay of poor people. In fact, about four-fifths of poor in Nepal are agriculture labourers and/or small farm operators (CBS 2005). In view of this there is not much that can be done for increasing the allocation to social sector. Now there is need for intra-sectoral allocation efficiency.

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Intra-sectoral or Priority Allocation of the budgetThe National Planning Commission of Government of Nepal has classified programmes and projects into three categories (P1, P2 and P3) of all the sectors based on eight criteria.5 The P1 project is the project with the highest priority, and therefore their funding is ensured. The other projects are funded only after funding P1 projects. This section just concentrates on the allocation of education sector.

Table 8 shows that the budget allocation to P1 programmes has increased, whereas those of the P2 and P3 have decreased over the period 2002 – 2006. In particular, allocation to P3 programmes decreased from about 12 percent in 2001/02 to about 2 percent in 2005/06. Similarly, in respect of P2 programmes, the allocation decreased from about three-fourth to just 22 percent. As a result, the allocation to the P1 programmes has increased from 14 percent to 76 percent during 2001/02 – 2005/06 (Table 8).

Table 8: Budget Allocation and Expenditure for Different Types of Priority Programmes2001/02 – 2005/06 (NRs Thousand)

  2001-02 2002-03 2003-04 2004-05 2005-06

Priority Allocation

Actual Expdt.

Allocation

Actual Expdt.

Allocation Actual Expdt.

Allocation

Expdt. (Revised Estimate)

Allocation

P1 129,239 104,038 73,145 149,410 360,200 416,558 4,736,013 2,759,721 5,339,737

Percent 14.3 15.2 10.1 23.8 26.4 35.0 75.2 69.9 75.7

P2 667,395 501,064 590,831 431,847 805,406 552,529 1,421,856 1,046,487 1,582,816

Percent 74.1 73.3 81.5 68.7 59.1 46.5 22.6 26.5 22.4

P3 104,219 78,207 61,228 47,379 198,013 220,030 141,104 144,666 135,725

Percent 11.6 11.4 8.4 7.5 14.5 18.5 2.2 3.7 1.9

TOTAL 900,853 683,309 725,204 628,636 1,363,619 1,189,117 6,298,973 3,950,874 7,058,278

Percent 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0Source: MOF, Red Books (various issues)

Despite the fact that allocation to priority projects has improved over the period it is not necessary that such an allocation is pro-poor. In view of this, the budget allocation has been classified on the basis of how pro-poor and pro-gender it is, and analysed in following subsections.

Pro-poor AllocationTable 9 indicates that allocation of development budget to most pro-poor programmes and activities increased initially from 61 percent in 2001/02 to 78 percent in the following year; however, it again decreased and stabilized at 62 percent in 2005/06. On the whole, the analysis depicts that education sector budget allocation has not moved significantly towards pro-poor budgeting.

5 These criteria has been recently revised and brought to seven. They are: contribution to national goal of poverty reduction (20 points), contribution to sectoral goals (10), contribution to regional balance (10) role of government (10), participation (20), project status (15), and certainty of funding (10 points).

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Table 9: Pro-poor Allocation and Expenditure, 2001/02 – 2005/06 (NRs Thousand)

 Pro-Poor Category

2001-02 2002-03 2003-04 2004-05 2005-06

Allocation

Actual Expdt.

Allocation

Actual Expdt.

Allocation

Actual Expdt.

Allocation

Expdt. (Revised Estimate)

Allocation

1 547,554

379,260

568,686

360,579

785,606

556,667 3,780,644

2,581,628

4,389,007

 Percent 60.8 55.5 78.4 57.4 57.6 46.8 60.0 65.3 62.2

2 291,799

258,469

131,768

257,156

545,463

580,587

2,485,779

1,329,748

2,657,771

 Percent 32.4 37.8 18.2 40.9 40.0 48.8 39.5 33.7 37.7

3 61,500

45,580

24,750

10,901

32,550

51,863

32,550

39,498

11,500

 Percent 6.8 6.7 3.4 1.7 2.4 4.4 0.5 1.0 0.2

 Total 900,853

683,309

725,204

628,636

1,363,619

1,189,117

6,298,973

3,950,874

7,058,278

 Percent 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0Source: MOF, Red Books (various issues)

Gender Auditing Although it is not consistent, the allocation to the first category of pro-gender education programmes is more consistently increasing, and the share of the least pro-gender education programmes is decreasing and is insignificant. In view of this, it can be said that budget are allocated is in favour of gender relations with the years.

Overall, there seems some scope for the enhanced expenditure management and releasing some resources to the social protection programmes and project.

Official Development AssistanceThe ODA to the developing countries has increased consistently since the adoption of the United Nations Millennium Declaration barring a slight decline in 2007. The total net aid flows from DAC members in 2008 were equivalent to only 0.30 per cent of their combined gross national income (GNI) which falls short off their 0.7 commitments for attaining the MDGs.

A substantial proportion of development expenditure of Nepal has been financed through the foreign aid. The flow of foreign assistance, inclusive of all bilateral and multilateral loans, grants and technical assistance, during 2001/02 to 2007/08 ranged between 3 to 4 percent of GDP and has shown increasing trends except in 2005/06. The share of foreign assistance in total government expenditure as well as development expenditure was highest in 2004/05 and started declining marginally afterwards. It implies that government has been successful to mobilize domestic resources to meet some of the government expenditures (Table 10).

Table 10: Role of Foreign Aid Description 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

Share in GDP (per cent) 3.13 3.23 3.52 4.01 3.37 3.55 3.58

Share in total government expenditure (per cent)

17.96 18.91 21.14 23.07 19.88 19.35 18.16

Share in development expenditure (per cent)

58.07 71.06 81.89 86.53 74.45 65.08 54.75

Source: MoF, Economic Survey (various issues)

However, the gap between aid commitments by development partners and actual realization of aid remains to be wide and has been further widened in recent past. In 2007/08 less than 60 percent of the committed aid was disbursed and the gap was more prominent in case of

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multilateral aid than bilateral one (Table 11). The gaps between commitment and disbursement could be explained partly by the difference in government’s and donor’s fiscal year and inadequate capacity on public financial management of the government, but more importantly significant aid funds do not actually come through the government’s budget such as payments to the consultants, purchase of donor home country goods and services. Donor put compliance requirements for disbursement and donors has increasing tendency towards retaining direct funding to meet their own agenda and to safeguard aid money (MoF 2008).

Table 11: Foreign Aid: Commitments vs. Disbursement (in percent)Descriptions 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

Total Aid 43.29 36.77 79.67 62.01 105.34 69.83 59.57

Multilateral Aid 65.65 20.94 63.81 85.23 233.17 48.91 52.92

Bilateral Aid 31.51 65.60 109.60 43.49 51.90 92.66 77.88

Source: MoF, Economic Survey (various issues)

On the whole, it can be gleaned that there is some hope for getting more foreign grants in, if the discrepancy between commitments and disbursement is addressed.

Deficit Financing

The total amount of fiscal deficit increased from NRs 24.2 billion in 2000/01 to NRs 33.4 billion in 2007/08. Fiscal deficit, the result of imbalance between expenditure and non-debt resources, is being financed through foreign loan, domestic borrowing and cash balance. Of the fiscal deficit of NRs.33.4 billion in FY2006/07, NRs.9.0 billion (26.9%t) was financed through foreign loan, NRs.20.5 billion (61.4%) through domestic borrowing and remaining NRs.3.9 billion (11.7%) through the change in cash reserves.

The fiscal deficit ranges from 2.9 percent of GDP in 2003/04 to 5.5 percent in 2000/01. The ratio of fiscal deficit to GDP initially decreased reaching at 2.9 percent in 2003/04 and then it increases continuously (Figure 5). Bauer (2009) suggest that the fiscal deficit should be within three percent of GDP. In view of this the current fiscal deficit is slightly higher. Therefore, this gives little chance to increase the resources from deficit financing.

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6. CONCLUSION AND RECOMMENDATIONS

Now the world has realised that spending on social protection is an investment that promotes human development, the end of development. Moreover, social protection is based on rights-based approach. Despite this fact, Nepal lacks a comprehensive social protection mechanism. The past efforts include scattered targeted programmes which in fact fail to target. Moreover, the government has given more emphasis to coping after shocks rather than on risk reduction and mitigation. Therefore, it is suggested that a consolidated risk reduction and mitigation plan be prepared and implemented, with the support and coordination among its development partners.

On the way to financing the social protection there are challenges given the dampening effects of financial crisis in developed countries. However, as assessment of fiscal space indicates that there is some scope for the government to increase the resources to social protection through increased revenue generation and expenditure management. What is needed is a strong political will which is lacking at the moment. The political parties have to rise over their own interest and those of the parties, and put their hands together for the development of the country.

Against the above backdrop some of the recommendations advanced for government, donors and communities are as follows:

6.1 Short and medium Term Recommendations

Government Social protection measures are scattered. Therefore, the government should consider

consolidating various social protection measures to implement a comprehensive social protection programme. Towards this direction, development of a social protection system that benefits all poor and excluded households would be an effective way to address poverty.

A comprehensive review of existing social protection measures, their effectiveness and impact should be carried out to inform future policies and programmes. Social protection policies that focus on reducing the vulnerabilities of poor from remote regions will contribute to alleviating poverty.

Government should undertake a comprehensive cost assessment of the social protection covering poor, disadvantaged and excluded groups such as Dalits, poor Janajatis and Muslims, and increase the resource allocation with increased revenue generation, intra-sectoral expenditure management, among others.

The social protection measures must be targeted efficiently so that the allocated resources can cover those for which resources are allocated. This requires developing a monitoring system to constantly monitor performance of the programmes.

Government should dialogue with private sector to extend the measures to employees in small enterprises. Schemes for workers in the informal sector, one of the most vulnerable groups, should also be initiated. Trade unions can play an important role in this regard.

Government should maintain macroeconomic stability as well price stability, so that any financial and food crisis could not affect much.

Government has to encourage indigenous practices and diversify food crops.

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Donors Nepal’s development partners support the social protection system of the government.

As social protection is a joint initiatives of the UN agencies, all the UN agencies should work as “One UN” and pool their resources to support the government to implement its consolidated social protections measures.

International community should fully honour the commitments made at Monterrey and other international forums regarding total ODA and should strive to increase ODA to the commitment levels. Moreover, they have to comply with their commitments. In this context, achieving the targets contained in the Brussels Programme of Action would go a long way for meeting MDGs targets in the least developed countries. In addition, increased flow of ODA would work as a counter-cyclical measure in the time of economic crisis.

Following the Paris Declaration on Aid Effectiveness, the donors and the Government of Nepal need to increase their efforts to improve the quality of the aid effectiveness. In this context, donors should channelize the resources in a harmonized manner.

Private Sector and Communities

Private sector should implement social protection mechanism following the policy measures of government.

Communities should continue indigenous practices of risk management.

6.2 Long Term Recommendation

From a long run point of view, apart from comprehensive social protection under operation, there is need for following sets of policies for sustained reduction in poverty through reducing vulnerability:

(i) pro-poor agriculture growth, (ii) provision of decent employment opportunities,(iii) improvement of infrastructures and institutions, and(iv) price stability.

This requires an increase in the investment in agriculture sector, and support to crop diversification, including support to the communities in adopting their indigenous practises including farmers managed irrigation system.

Capacity of government as well as communities for managing a risk depends on the level of infrastructures and services in the country. Keeping this in mind, the government has to gradually increase the allocation to infrastructure and superstructure development including the development of road and hydro power which can also generate large amount of decent employment. Given the paucity of resources, it has to attract private sector investment and foreign direct investment in the development. All this can happen when there is peace in the country and stability in the economy.

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REFERENCES

Asian Development Bank. ADB. 2001. Social Protection Strategy. Asian Development Bank, Manila.

_______. 2004. Nepal Social Protection Study. Asian Development Bank, Manila.

Bauer, Armin et al. 2009. Global Crisis and Fiscal Space for Social Protection. A paper prepared for 3rd China-ASEAN Forum on Social Development and Poverty Reduction,

4th ASEAN+3 High-Level Seminar on Poverty Reduction, and Asia-wide Regional Meeting on The Impact of the Global Economic slowdown on Poverty and Sustainable Development in Asia and the Pacific. Asian Development Bank. December 2009.

Central Bureau of Statistics (CBS). 2005. Poverty Trends in Nepal (1995-96 and 2003-04, Central Bureau of Statistics, Kathmandu, Nepal.

Informal Sector Service Centre (INSEC) Nepal. 2005. Human Rights Year Book. INSEC, Kathmandu, Nepal

_______.2008. Human Rights Year Book. INSEC, Kathmandu, Nepal

International Labour Organisation (ILO) and World Health Organisation (WHO). 2009. The Social Protection Floor: Joint Crisis Initiatives of the UN Chief Executive Board of coordination on the Social Protection Floor. Geneva, October 2009.

Ministry of Finance (MOF). 2008. Budget Speech of 2008/09. Ministry of Finance, Kathmandu.

_______ 2009. Budget Speech of F.Y. 2009/10. Ministry of Finance, Kathmandu, Nepal.

_______ Details of Expenditure Estimates (Red Book). Ministry of Finance, Kathmandu. (various issues from 2001).

Ministry of Health and Population (MOHP). 2007. The Maternity Incentive Scheme in Nepal: Increasing Demand and Equity. Ministry of Health and Population, Kathmandu.

National Planning Commission (NPC).2002. The Tenth Plan 2002–07. National Planning Commission, Kathmandu.

_______.2007. Three-Year Interim Plan 2007–10. National Planning Commission, Kathmandu.

_______2009. Annual Programme of F.Y. 2009/10. National Planning Commission, Kathmandu.

South Asian Association of Regional Cooperation (SAARC) . 2009. Social Protection in South Asia: the SAARC Social Charter at its 5th Anniversary. Inputs for Discussion, Kathmandu, SAARC Secretariat, Kathmandu. 19 July 2009.

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Tiwari, Bishwa Nath. 2004. “An Appraisal of Poverty Reduction Strategy in Nepal,” in Dahal, M.K. (ed), Nepalese Economy: Towards Building a Strong Economic Nation-State, Central Department of Economics, Tribhuvan University, Nepal, and New H.B. Enterprises, 2004.

_______.2004/05. “An Assessment of Targeted Programmes in Nepal”. Rajaswa, Year 25, Volume 3, December – January 2004/05, PP. 168 – 181.

_______. 2006. Readings in the Millennium Development Goals. Central Department of Economics, Tribhuvan University, Kathmandu, Nepal.

United Nations Development Programme (UNDP).2006. Human Development Report 2005, United Nations Development Programme, New York.

UNDP/Nepal. 2009. State Transformation and Human Development. United Nations Development Programme, Kathmandu, Nepal.

United Nations Educational, Scientific and Cultural Organisation (UNESCO). 2009. Early Impact Assessment of Global Financial Crisis on Education Financing: Country Case Study.

UNESCO/ Management of Social Transformations Programme (MOST) and Indian Council of Social Science Research (ICSSR). 2010. Research Meeting on Social Protection Policies in South Asia: Concept Note. ICSSR, Nee Delhi. 18 – 19 March 2010.

United Nations Children Fund and World Food Programme (UNICEF/WFP). 2008. Survey and Focus Group Discussions on Use of Cash Transfer. UNICEF/WFP, Kathmandu.

United Nations Children Fund/Regional Office South Asia (UNICEF/ROSA) .2009. Social Protection in South Asia: A Review. United Nations Children’s Fund, Regional Office for South Asia, Kathmandu, Nepal.

World Food Programme (WFP).2001. Nepal Food Security and Vulnerability Profile 2000, World Food Programme, Kathmandu, Nepal.

World Bank. 2000. World Development Report 2000/01: Attacking Poverty. Oxford University Press.

_______ 2008. Migration and Development Brief 8. Migration and Remittances Team, Development Prospects Group, the World Bank, UNESCO Institutes for Statistics. Montreal, Canada.

_______ . 2009A. Targeting Systems for Safety Nets in Nepal: A Review (Draft). The World Bank, Washington D.C. (Major findings shared as a power point presentation on April 15, 2009 in Kathmandu).World Bank, DFID and ADB, 2006. Nepal Resilience amidst Conflict: An Assessment of Poverty in Nepal, 1995–96 and 2003–04. World Bank, DFID and ADB, Kathmandu.

_______. 2009B. Impact of Global Fiancial Crisis on South Asia. World Bank Group, South Asia Region. 17 Feb 2009.

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Annex 1A Typology Hazards by Region, Nepal, 2000

Natural Hazards

Human diseases Animal diseases Plant diseases

Other

Mountain

Hailstorm Snowfall Drought Flood Earthqua

ke Excessiv

e rainfall Change

in the course of river

Diarrhoea Measles Cholera Smallpox Dysentery Eye infection Epidemic Nerve

diseases

Epidemic Bhyagute Rog (Haemorrhagic

septicaemia) Charchare (black

quarter) Padake (anthrax) Khoret (foot & mouth

disease) Khari Diarrhoea Rabies Ranikhet (Newcastle)

in chicken Scabies/mange

Insect attack

Locust Patero

insect (Gandhi bug)

Male in grass

Use of urea fertiliser No access to Patan

lekh (hill) Bridge construction in

Jumla airport Community forestry Use of Improved seed Cadastral survey Land reform Price rise of NFC

food grains in Humla

Hill

Drought Hailstorm Earthqua

ke Flood Storm Excessiv

e rainfall

Cholera Dysentery Diarrhoea Measles Smallpox Respiratory

disease Kalazar

Boil on upper palate

Epidemic Bhyagute Rog

(haemorrhagic septicaemia)

Khari Diarrhoea Namle (liver flue) Kharane Lohumute

(babesioosis)

Padake insect (plant hopper)

Locust Dhaduwa

(blight) Maize

disease

Increase in Tax Fire Community forestry Announcement of dry

zone Termination of

Panchayat system Distribution of land

holding certificate Deforestation Resettlement Crop damage by

porcupine

Terai

Flood River

cutting Storm Hailstorm Excessiv

e rainfall

Diarrhoea Cholera Measles Kalazar Encephalitis

Stomach upset

Epidemic Khoret (foot and

mouth disease) Khoero/alopecia Bhyagute

Rog((haemorrhagic septicaemia)

Padake (anthrax)

Insect attack

wheat disease

Ginger decay

Robbery Snake bite Crop damage by

animals (Spotted deer/antelope, elephant)

Fire Land reform

Source WFP 2001.

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Annex 2Share of social sector in total spending (percentage)

1984/85 1994/95 1999/00 2001/02 2003/04 2004/05 2005/06 2006/07General administration 4.7 4.3 4.2 5.5 4.9 5 4.0 5.4Police 3.4 4.1 4.9 7.5 7.1 7.3 7.3 6.3Defence 6 5.1 5.3 7.3 9.5 10 10.2 8.3Social services 22.8 27.3 31.3 31.1 31.2 29.7 32.6 34.0

a) Education 9.6 13 14.1 16.3 16.1 16 17.3 16.2b) Health 4.7 3.8 5.2 4.8 4.4 4.9 5.2 5.5c) Drinking water and sanitation

2.5 2.8 3.7 2.2 2.7 2.2 2.5 3.0

d) Local development

4.9 6.2 6.3 5.2 5.8 6 5.1 5.7

e) Other social services

1.1 1.4 2.1 2.5 2.2 0.5 2.6 2.1

Economic services 45.5 35.7 31.5 24.2 20.8 17.3 21.81 19.7Principal & interest payment

8.1 15.6 15.1 15.2 19 19.7 18.4 12.5

Miscellaneous 9.5 7.9 7.6 9.1 7.4 10.9 4.3 6.1Total 100 100 100 100 100 100 100 100

Source: MOF, various dates.

Annex 3Informal Mechanisms for Managing Risks as Reported

by the Communities of Nepal

Objective Informal MechanismsRisks Mitigation

Working as a casual labourerPurchase and sale of food grains and animalsCollection and sale of forest and other nature-based productsShare croppingChange in occupation or diversification of occupationOther Petty trading activities

Coping with Shocks

Short-term StrategiesEating less preferred foodLimiting portion sizeCollection and sale of forest-based productsSale of livestock and drawing down seed reservesBorrowing food or moneyIn-kind gift from friends and relativesMaternal bufferingSkipping mealsDrawing down seed reservesCollection of wild foodsWage labourWorking demeaning or illegal jobsSale of used items, andBegging

Long-term StrategiesWorking as contract labourMigrationSale of draft powerMortgage and sale of land and other propertiesReliance on communitySale of land and house

Source: WFP 2001

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