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Nepal to reduce dependency on foreign consultants

Publication Date : 12-11-2012


The Nepal government will regulate fees for both foreign and local consultants in a bid to cut down on spiralling costs of foreign-funded projects, according to a recent Cabinet decision.

Signing a loan agreement with the Asian Development Bank for a water resource preparatory facility, a Cabinet meeting on October 4 urged the Ministry of Finance (MoF) to bring out a policy to minimise the government’s dependency on consultancy and asked it to instead channel it through the national system. Nepal’s foreign aid regime has often been criticised for paying steep consultancy fees, particularly to international consultants.

However, there is already a policy in place ensured by the Foreign Aid Division at the MoF, which attempts to minimise expenditure for consultants and foreign experts. Up to 70 per cent of project costs in some cases have been spent as consultancy fees.

A revised foreign aid policy will be of concern to the donor community but still needs to be pursued, officials said. “We expect the policy to create a level of discomfort for the donor community but we have to set a national criteria sooner or later and we expect donors to follow them,” said a senior MoF official.

“There is apprehension that a huge amount of money is being paid to consultants in foreign-funded projects. These consultants are both Nepalis and foreigners. The Cabinet instruction was to reduce the consultancy costs and make it more rational by decreasing dependency on donor-funded projects,” said a senior official at the MoF. 

An added drain on funds are the administrative costs of donor-funded projects. “We have to hire expensive consultants as this is sometimes an aid conditionality. In the aid paradigm, in our case, we need to rein in administrative and consultancy fees,” said the official.

The Cabinet has instructed the MoF to fix a ceiling on consultancy fees and to revise its foreign aid policy. However, the MoF is not sure whether the new consultancy policy will be incorporated in the revised foreign policy or come as an independent policy.

There is a large number of foreign and domestic consultants in Nepal, providing various kinds of consultancy services at many donor agencies. “If the donor agencies hire consultants from foreign countries, the expenses increase many-fold. They are paid hefty sums as consultancy fees, logistics, air fares and the like,” said the official.

Basically, "complex projects" have a component for foreign consultants. “These consultants charge higher fees when the project includes engineering and other technical sophistications,” claimed the official. Any standard practice on consultancy is yet to be institutionalised and inputs are being sought from various line ministries. “Line ministries after all have some experience on consultancy . We can only reach a conclusion upon their recommendations,” said the official.


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