2 reasons Foreign aid is not effective in Nepal right now

Reason 1) Foreign aid is not a very effective means of dealing with the failure of nations around the world today. Far from it. Countries need inclusive economic and political institutions to break out of the cycle of poverty. Foreign aid can typically do little in this respect, and certainly not with the way it is now organized. Recognizing the roots of world inequality and poverty is important precisely so that we do not pin our hopes on false promises. As those roots lie in institutions, foreign aid, within the framework of given institutions in recipient nations will do little to spur sustained growth. In other words giving it to the institutions that are at fault, will not help.

Reason 2) Since development of inclusive economic and political institutions is key, using the existing flows of foreign aid at least in part to help such development would be useful. Putting conditions on aid (which is what some donors do in Nepal) is not the answer, as it requires existing rulers to make concessions which they usually don’t agree or just bypass.

Instead, we should perhaps structure foreign aid so that its use and administration brings groups and leaders otherwise excluded from power into decision-making process. Here are my few suggestions.

How about using Foreign aid to:

  1. give necessary tools -trainings to empower passionate previously apathetic youths to run independent “issue based” political grassroots campaigns?
  2. help train youth leaders outside the traditional political “syndicate” to become stronger in influencing political decision-making by showing them success stories around the world?
  3. help build incubators which provides immediate resources and mentorship to fresh entrepreneurs with a passionate team, who have been excluded from such opportunities?
  4. support grassroots entrepreneurs and citizen activists thereby empowering a broad segment of population than established exclusive elite ones who are supported today?
  5. reward any political platforms and institutions that show inclusiveness and meritocracy in action?
  6. help build leadership clubs in schools in rural Nepal where transparency and accountability are taught to young students.
  7. build leadership building academy for urban educated youths interested in politics and bureaucracy.
  8. invest in practical education. Help build Entrepreneurship clubs in every high school just like libraries.
    Add your own points…..


This summary of this article is made possible through heavily borrowing and edits based on quotes from the book “Why Nations Fail” by Daron Acemoglu and James A. Robinson. The authors hold copyright to a lot of content in this article, therefore I cannot claim any right to this article. If  you consider this stealing, I apologize in advance. I only do this because their words seem to do justice than mine. If you are copying content from here, please attribute the article to the names mentioned above properly.