I have been closely following the development of the USD 60 Million climate-loan offered to Nepal funded by “the World Bank, Asian Development Bank, and the International Finance Corporation.” It is quite difficult to keep up as the proposed program is not readily available, and as reported by the BBC, the involved agencies have not been very cooperative. Nabin Singh Khadka of the BBC has done excellent reporting (Climate Injustice?, The Penny Drops, Double Talk) on the issue and his reports have primarily been my news source. His new piece discusses the WWF’s role in this issue and conflicting mission between the parent organization and its Kathmandu branch. There are many interesting facts and statements that are presented in the article. The following one from a WWF source caught my attention.
“The entire concept of climate financing is changing, it is no more just about demanding grants and opposing loans,” said the WWF official. “There are now talks about development through such funds, even the former prime minister supported it. So the question we asked was why can we not make use of this opportunity?” The official continued, “We can certainly demand that the use of the loan be transparent—that there has to be clarity on the plan and who gets the money. And above all, this money is said to be for the productive sector and not for adaptation; we have always said no to adaptation loans in line with our policy.”
First of all—just because there are talks about a certain process does not mean that we need to accept it as-is. These new concepts and buzz words are created everyday in business schools in the West. The political leaders need to understand that there are long-run consequences of their actions, especially when it comes to borrowing large sums of money for projects that do not contribute to the income of the nation. For example, I would borrow money to finance my education if the education increases my future income; a restaurant would take out a loan to buy a new stove as it is an investment that will increase future output and income; a firm would invest in new technology/ production line if it is expected to raise profit. Now, one would (should) hesitate to take out a loan to install a home-theatre with Bose speakers, especially while living in a housing project. But, what if I did not have to pay the loan amount? What if I could enjoy and move on while the burden of paying it back would fall on someone else?
Which brings me to my second point, what weight should the former prime minister supporting a loan have? My answer—minimal! The country is in a state of political chaos, a temporary prime-minister seems to stay in office longer than an actual one, and it seems to require a secret pact to become a prime minister. So, yes, the answer is minimal. Is it that difficult to see the reason as to why the present government officials want to take this loan? Common! (Refer back to the example above if you are still unsure).
Third, it is laudable that the WWF source pledges to “demand that the use of the loan be transparent,” however, these are just platitudes. Try digging through the Nepali bureaucracy to find the flow of money and personnel, and you will soon find out how transparent the process really is.
Fourth, if the money is going to be used for the productive sector, I would like to know what the productive sectors are. If we are talking about development activities that are related to climate change or have been perceived as being affected by it, then we are already receiving enough money. A 2007 OECD report claims that “official aid flows (ODA and Other Official Flows) across all donors into six developing countries indicates that a significant portion of this aid is directed at activities potentially affected by climate risks, including climate change.” The report puts the Nepal figure at USD 200 million. So the money is already there, it just needs to be adjusted to account for climate risk. The OECD report suggests, and I agree, that current development activities “need to address such risks as part of existing development strategies, plans, and projects.” No new money is needed, just new thinking!
Fifth, it is clear that “Climate Finance” is the new buzz word and related programs were even discussed at length in Copenhagen. However, involving the traditional international financing agencies in this type of program not only raises questions about the motives behind these programs but also discredits any potential local “good” that might come out of some activities covered under proposed paradigm (which I have not been able to find yet!). Arunabha Ghosh of Woodrow Wilson School, Princeton University and Ngaire Woods, Professor, University of Oxford discuss this in their analysis of the issue in Chapter 16 of their book on Climate Finance. One of their arguments is that trusted agencies are needed for such program to work especially given the “long history of mistrust between the North and South”—they write “Trusted institutions for decision-making and disbursement of finance are essential, and the Bretton Woods institutions may not be the answer.” Good luck finding one.
Finally, I come back to the ethical issue. I do not understand why Nepal, a poor country with about 0.1 metric ton of CO2 emission per capita, has to borrow money to address this global concern. Data proves that Nepal’s carbon footprint is nonexistent, but the financial footprint of this loan will be real for the next generation of Nepalese, long after the present politicians move on…
“The entire concept of climate financing is changing, it is no more just about demanding grants and opposing loans,” said the WWF official. “There are now talks about development through such funds, even the former prime minister supported it. So the question we asked was why can we not make use of this opportunity?” The official continued, “We can certainly demand that the use of the loan be transparent—that there has to be clarity on the plan and who gets the money. And above all, this money is said to be for the productive sector and not for adaptation; we have always said no to adaptation loans in line with our policy.”
First of all—just because there are talks about a certain process does not mean that we need to accept it as-is. These new concepts and buzz words are created everyday in business schools in the West. The political leaders need to understand that there are long-run consequences of their actions, especially when it comes to borrowing large sums of money for projects that do not contribute to the income of the nation. For example, I would borrow money to finance my education if the education increases my future income; a restaurant would take out a loan to buy a new stove as it is an investment that will increase future output and income; a firm would invest in new technology/ production line if it is expected to raise profit. Now, one would (should) hesitate to take out a loan to install a home-theatre with Bose speakers, especially while living in a housing project. But, what if I did not have to pay the loan amount? What if I could enjoy and move on while the burden of paying it back would fall on someone else?
Which brings me to my second point, what weight should the former prime minister supporting a loan have? My answer—minimal! The country is in a state of political chaos, a temporary prime-minister seems to stay in office longer than an actual one, and it seems to require a secret pact to become a prime minister. So, yes, the answer is minimal. Is it that difficult to see the reason as to why the present government officials want to take this loan? Common! (Refer back to the example above if you are still unsure).
Third, it is laudable that the WWF source pledges to “demand that the use of the loan be transparent,” however, these are just platitudes. Try digging through the Nepali bureaucracy to find the flow of money and personnel, and you will soon find out how transparent the process really is.
Fourth, if the money is going to be used for the productive sector, I would like to know what the productive sectors are. If we are talking about development activities that are related to climate change or have been perceived as being affected by it, then we are already receiving enough money. A 2007 OECD report claims that “official aid flows (ODA and Other Official Flows) across all donors into six developing countries indicates that a significant portion of this aid is directed at activities potentially affected by climate risks, including climate change.” The report puts the Nepal figure at USD 200 million. So the money is already there, it just needs to be adjusted to account for climate risk. The OECD report suggests, and I agree, that current development activities “need to address such risks as part of existing development strategies, plans, and projects.” No new money is needed, just new thinking!
Fifth, it is clear that “Climate Finance” is the new buzz word and related programs were even discussed at length in Copenhagen. However, involving the traditional international financing agencies in this type of program not only raises questions about the motives behind these programs but also discredits any potential local “good” that might come out of some activities covered under proposed paradigm (which I have not been able to find yet!). Arunabha Ghosh of Woodrow Wilson School, Princeton University and Ngaire Woods, Professor, University of Oxford discuss this in their analysis of the issue in Chapter 16 of their book on Climate Finance. One of their arguments is that trusted agencies are needed for such program to work especially given the “long history of mistrust between the North and South”—they write “Trusted institutions for decision-making and disbursement of finance are essential, and the Bretton Woods institutions may not be the answer.” Good luck finding one.
Finally, I come back to the ethical issue. I do not understand why Nepal, a poor country with about 0.1 metric ton of CO2 emission per capita, has to borrow money to address this global concern. Data proves that Nepal’s carbon footprint is nonexistent, but the financial footprint of this loan will be real for the next generation of Nepalese, long after the present politicians move on…
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