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European Commission

MEMO

Brussels, 17 October 2014

EU development cooperation with Nepal

Main development challenges of the country

Nepal is working to overcome the legacy of the decade-long civil war which ended in 2006. A key challenge for Nepal is to overcome protracted political instability and consolidate its democratic institutions, including through the adoption of a constitution. Nepal is a Least Developed Country (LDC). High levels of inequalities persist, as certain communities are marginalised or discriminated on the basis of caste, ethnicity or gender.

The economy has grown by 4.2% over the past five years. Agriculture is the mainstay of the economy. Tourism, hydropower and remittances are also important. The EU is a main trading partner, accounting for over 12% of Nepal's exports. In 2012, Nepal's exports to the EU amounted to €79 million while imports from the EU reached €103 million. As a Least Developed Country, Nepal benefits from the “Everything But Arms Regulation” and therefore all of Nepal's exports enter the EU market duty free.

The EU supports Nepal's peace and transition process through political dialogue, public diplomacy, election organisation and observation, engagement with civil society and development cooperation.

Main objectives of the EU – Nepal development cooperation 2014-2020

Nepal is dependent on external aid (25% of the Budget), with aid disbursements highly contingent upon political developments in the country and the government's absorption capacity.

The EU - Nepal cooperation programme for the time period 2014-2020 (known as the Multiannual Indicative Programme (MIP)) amounts for a total of €360 million. It has been aligned with the priorities of the Government’s National Development Plan and takes into account that Nepal has been selected as one of the "EU Resilience Flagship Countries" which should lead to more effective EU collaboration, bringing together humanitarian assistance, long-term development cooperation and political engagement.

The following have been chosen as priority sectors following consultations with the Nepalese Government and other development partners:

  1. Sustainable Rural Development – to stimulate the sustainable development of Nepal's rural areas by transforming agriculture from a sector largely based on low-value and subsistence production to a competitive, sustainable, and inclusive agriculture that brings economic growth, improved access, improved livelihoods, and food and nutrition security, whilst reducing vulnerability to climate change and natural disasters.

  2. Education – to contribute to equitable access to and completion of quality school education for girls and boys and the provision of literacy and livelihood opportunities for adults, boosting individual, family and wider social and economic development

  1. Democracy and decentralisation – to continue supporting elections (three elections envisaged during next five years - national, provincial and local), to more generally support the decentralisation process and reduce corruption at national and local level.

In addition, Nepal can benefit from the Asia Regional MIP, specifically regarding Aid for Trade cooperation (€15 million), Aid to Uprooted People (Burmese refugees, €2 million), the Asia Investment Facility (blending), South Asian Association for Regional Cooperation (SAARC) regional integration (around €25 million) as well as SWITCH-Asia, a grants programme funded through the DCI that promotes sustainable consumption and production among consumers, small and medium-sized enterprises and Asian policy-makers in 15 Asian countries, and the thematic programmes and instruments such as Non-state actors and local authorities in development (NSA/LA) (€2-3 million per year), European Instrument for Democracy and Human Rights (EIDHR) (€600 000 per year) and Global Public Goods and Challenges.

Ongoing EU – Nepal development cooperation

The majority of resources allocated to Nepal are channelled through bilateral co-operation which is ruled by the Development Co-operation Instrument (DCI). The majority of the on-going projects were launched under the previous programming period from 2007-2013.

The total budget for the period 2007 to 2013 amounted to €114 million. The three main sectors of cooperation included: 1. education - support for School Sector Reform Programme; 2. stability and peace building - support to stability and peace building public finance management and support to the electoral cycle; 3. trade facilitation and economic capacity building programme.

Education

Education has been one of the key components of the EU's financial assistance, representing approximately 60% of the budget foreseen in the cooperation programme 2007-2013. EU is providing support to the School Sector Reform Programme (SSRP), which is a comprehensive program of the Government of Nepal addressing entire school system in the country. The program aims to increase access to and improve quality of basic education (grades 1-8), especially for children from marginalized groups.

The total amount allocated for 2011-2013 was €33.5 million, which continues to implement the SSRP up to July 2015. The SSRP is a successful plan which has already now provided the following achievements in its five years of implementation time, including:

  1. The net enrolment rate for basic education (grade 1-8) has increased from 83.2% to 87.5%;

  2. The completion rate of basic education has increased from 52.7% to 60.8%;

  3. The percentage of four year olds enrolled in Early Childhood Development has gone up from 66.2% to 73.7%;

  4. The number of out of school children is estimated to have fallen from 800,000 to 445,204;

  5. Enrolments in secondary education (grade 9-12) are also increasing but are capped by infrastructure constraints.

Stability and peace building

Nepal has been a country in transition since 2006, when the country's armed conflict ended with the signing between the belligerent parties of the Comprehensive Peace Accord (CPA). The protracted "People's War" lasted for a decade and claimed over 15,000 lives and displaced 100,000-150,000 people across the country.

The Government of Nepal worked with Development Partners to establish the Nepal Peace Trust Fund (NPTF) in January 2007, an internationally unique joint government donor funding mechanism created to work as a coordinating body for peace related initiatives.

The EU has supported the peace process through budget support and technical assistance to NPTF, support to the Election Commission of Nepal in organising the national elections for Constituent Assembly in 2013, as well as through a number of grant projects with civil society organisations and multilateral agencies financed by the European Instrument for Democracy and Human rights (EIDHR).

Some major achievements in the peace process since the signing of the CPA are:

  1. The integration of former Maoist combatants in the Nepal Army and the payments to those returning to civilian life seem to have been largely successful (although the integration into the army was also limited);

  2. Two successful elections to the Constituent Assembly that benefited from high voter turn-out and, to different degrees, were generally considered to be free and fair to give the new government a democratic mandate.

Examples of other tangible results and impact of the EU development cooperation

As the Nepal Millennium Development Goals (MDGs) Progress Report 2013 points out, Nepalese Government is committed to achieving the MDGs. Nepal is on track and is likely to achieve most of its MDG targets, despite the prolonged political instability. The targets for poverty reduction, maternal mortality, and boys and girls enrolment in primary education are either achieved or likely to be achieved. Even in areas where Nepal is lagging behind, particularly in sanitation, it has already taken action to mobilize adequate resources to expedite progress by 2015.

Nepal has made significant progress in reducing the proportion of people whose income is less than a dollar a day. The rate was 33.5% in 1990, and it dropped to 16.4% in 2013. Similarly, the proportion of the population below the national poverty line was 42% in 1990, and reduced to 23.8% in 2013. The Government of Nepal has a target of reducing this rate to 18% by 2015-2016.

In regard to the health sector, the life expectancy at birth was 54 in 1990, and reached 69.1 years in 2011. Similarly, there are encouraging improvements in child mortality, school enrolment and literacy rate over the years. The prevalence of underweight children aged 6-59 months was 57% in 1990 and reduced to 28.8% in 2011, respectively. The literacy rate of 15-24 year olds was 49.6% in 1990, and reached 88.6% in 2011.

For more information

IP/14/1169: EU increases development support to Nepal and Bhutan

Website of the European Commissioner for Development Andris Piebalgs:

http://ec.europa.eu/commission_2010-2014/piebalgs/index_en.htm

Website of the EU cooperation with Nepal:

https://ec.europa.eu/europeaid/countries/nepal_en


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