Evidence-based Policymaking in Nepal

This article was featured in Nefport 47 – Evidence-based Policy Special which was released in December 2021. 

National policies are tools that stimulate the growth and development of a country. Governments use policies to influence economies, the two primary ones being the fiscal policy – which determines the taxing and spending, and the monetary policy – which uses the control of money supply and interest rates. Liberal ideologies favor more governmental regulation of the marketplace, conservative ideologies favor fewer regulations, and libertarian ideologies favor little or no regulation of the marketplace beyond the protection of property rights and voluntary trade. Accordingly, governments develop and implement supportive policies to drive the development agenda that is mostly associated with the political ideologies of the ruling governments.

Worldwide, when a country witnesses a switch in the political ideology of the ruling party, the economic policies and systems change too. However, a regular turnover of the governments leads to the policies being merely short-lived political campaigns or agendas to maneuver the citizen’s choices, opinions, and votes rather than an evidence-based tool that drives the economic system in the long term. Nepal’s economic system has unfortunately been wheeling through such a myopic policy-making process driven by political interests limiting economic growth.

Nepal’s policy formulation process

Nepal’s policymaking process undergoes six stages – agenda building, policy analysis, committee formation, and draft preparation, draft preparation and consultation, finalization of the draft, and approval from the cabinet each of which is presented below:

1. Agenda building – Agenda building describes the process by which various factions attempt to transfer their interests to be the interests of public policymakers as “collective” and “societal”. In Nepal, agenda-building materializes through three streams:
   1. Problem stream: Proposal for solutions to an existing problem in any area from the stakeholders.
   2. Policy stream: Proposal for the need for a new policy from the stakeholders.
   3. Political stream: A proposal from policymakers.
2. Policy analysis – Policy analysis defines and outlines the goals of a proposed policy and identifies similarities and differences in expected outcomes and costs with alternative policies. Once the agenda is brought to policymakers’ attention, it is analyzed to forecast future needs based on past and present conditions. Policy outcomes can be found in a variety of different forms—tangible outputs and less-tangible outputs for which the impacts are more difficult to measure. In the case of Nepal, stakeholders’ consultations primarily drive the policy analysis process. Three primary institutions consulted in this process include:
   1. Ministry of Law, Justice, and Parliamentary Affairs – to check if the policy adheres to the constitutional provisions.
   2. National Planning Commission – to check if the policy is in line with the national development plan and agenda.
   3. Ministry of Finance – for financing the formulation and implementation of the policy.

After the analyses and consultations are consummate, the anchor ministry/line ministry drafts an approach paper for the policy grounded on the feedback and information gathered.

3. Committee formation and draft preparation – The line ministry forges a committee constituting of representatives from the line ministry and relevant ministries, representatives from the National Planning Commission, sectoral experts, representatives from relevant associations, and consumer groups, among others, to draft the policy based on the approach paper. However, since there is no penned process, the engagement with relevant stakeholders entirely depends on the interest of the line ministry. If needed, the line ministry also forms an inter-ministerial committee for policies that affect the jurisdiction of multiple ministries.
4. Draft preparation and consultation: The committee formulates the draft policy and advances it for several rounds of discussions with concerned ministries. The draft policy also is shared in various workshops, seminars, and meetings (including experts and stakeholders affected by policies) in a larger setting for feedback. The committee analyzes and incorporates the suggestions and recommendations received from this process. It then circulates the draft to relevant ministries and institutions for institutional recommendations.
5. Finalization of the draft: Based on the institutional recommendations, the draft is further modified and discussed with the relevant stakeholders for final approval. The committee hands over the final draft to the line ministry that forwards it to the cabinet for discussion.
6. Approval from cabinet: There are thematic committees in the cabinet consisting of ministers and secretaries of respective ministries that review the policies put forth for approval. Based on the analysis and recommendation of the thematic committee, the cabinet approves the policy and sends it to the president for final endorsement.

Challenges associated with the current process of policymaking

The process of policymaking, in theory, looks robust in the case of Nepal where stakeholders are consulted, and policies are analyzed for a long-term impact but in practice, the process has multiple flaws, some of which are highlighted below:

1. Manipulations in setting the agenda: While formulating policies, policymakers decide who gains and who loses with their policy actions, as well as relevant risks. Policies are formulated based on these calculations. In the case of formulating economic policies, the government agencies and the private sector are the two primary players who drive the process. In Nepal, there exists a polarized private sector with a few large business groups dominating multiple sectors and a multitude of small firms with minimal dynamism and engagement, resulting in a narrow group of large firms unduly influencing policies.
2. Weak policy analysis: Ideally, policy analysis should be based on theoretically grounded and empirically validated robust models to determine if the policy will lead to the desired result. However, in Nepal, policy analysis is very rudimentary and depends heavily on stakeholders’ consultations, which only generate opinions based on personal perception and self-interest rather than objective information on the subject matter of interest.^[1] For instance, a bill proposing the transfer of guthi land to private ownership and converting private guthis into public ones was presented in Parliament in June 2019. This enraged the public and the bill was later withdrawn. The co-chairman of the ruling party himself admitted that the sponsors presented the bill while still lacking a sufficient ex-ante impact assessment.^[2] Given that the GON cannot still conduct ex-ante impact assessments, policy failures of the kind mentioned above remain highly likely.
3. Inefficiencies in the policy drafting committee: After completing the ex-ante impact analysis phase, the line ministry forms a committee to draft the policy. This phase faces two problems:

• • Bureaucratic shuffle– In Nepal, authorities frequently transfer bureaucrats due to conflicts of interest with political leadership. As a result, the activities of the drafting committee get stalled as bureaucrats are moved to another position, and the next bureaucrat has to be informed about the policy agenda, the stakeholders, and the analyses that were conducted. This unnecessarily lengthens the policy formulation process.
  • Unclear roles of committee members– The line ministry that forms the drafting committee often simply assigns a coordinator and leaves the roles of the other members of the committee with unclear boundaries. This reduces the committee’s operational efficiency as personalities may exert undue influence and not be tempered by a clear boundary of roles.

4. Rent-seeking in policy discussion and modification: Once the first draft is ready, the sponsoring line ministry forwards the policy to various ministries and institutions for review and feedback. With the prevalence of conflicts associated with institutional rivalries, such as inter-ministry conflicts and inter-office conflicts within a ministry, the time and costs sharply increase at this stage of the policy formulation process. It is also at this phase when different interest groups engage in aggressive bargaining horse-trading to advance their interests.
5. Collusion in approval: The thematic committees in the cabinet review the draft that is finalized by the policy drafting committee, following consultations and after addressing feedback from the review process. At this phase, the political actors play a significant role in advancing their interests in the final draft of the policy. It is common for the final policy that is approved by the cabinet to diverge from the one drafted by the sponsoring line ministry.

Using an evidence-based approach to strengthening policymaking in Nepal

While the demand for evidence-based policymaking is weak in Nepal, some level of awareness is developing among the citizens and policymakers as a result of more skilled manpower entering the private and public sectors as well as multiple development programs directed to bolster data-driven policymaking in Nepal. The application of an evidence-based approach will help the Nepali policymaking process in the following ways:

1. Targeted approach for deliverables: A data-driven approach can identify and suggest targeted interventions to have the desired impact on policy and make it more output-based.
2. Better informed decisions: An evidence-based approach helps to perform scenario analysis on various fronts so that the decision-maker can analyze the situation better and make informed decisions.
3. Strengthened reporting and compliance processes: Having proper reporting measures in place improves the policy cycle whereby the policymaker can understand the impact caused by the policy and make the desired amendments accordingly.

Areas to work on

To shift the current policy-making process into an evidence-based approach, some of the areas that can be worked upon are as follows:

1. Addressing the data availability gap: The paucity of data has been a critical hurdle for most countries worldwide, especially in the least developed countries and developing countries. In Nepal, the system of keeping physical records of data has been in practice but the complexity of data retrieval and the accessibility hampers the process of data availability. Hence, digitizing the process of data collection with standard methods is essential for the quality assurance of data.
2. Harmonizing the data collection methods and processes: The data collection processes and formats must be harmonized across the agencies to avoid duplication of the data collection and increase consistency in the data quality. For this, the use of updated digital technologies and software is much needed. This will also improve the monitoring, evaluation, and analytics of the data.
3. Staffing: The use of digital mechanisms to feed data means that the human resource in charge of keeping records must bear the required skill sets. Hence such capabilities must be built among the resource pool and complemented by routine supervision, capacity building, constant evaluation, and a feedback loop mechanism.
4. Increasing the role of CBS: The primary agency for keeping records of national-level data is the Central Bureau of Statistics (CBS). Apart from this, multiple organizations keep records of relevant data in their preferred format. Hence, these functions can be consolidated by making CBS the centralized center for data collection and monitoring. To make this happen, the capacity and resources of CBS need to be enhanced tremendously.

Some content of this article are excerpts from a study conducted by Nepal Economic Forum on Nepal’s Private Sector Engagement Assessment, 2020.

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^[1] Gelal, M. R. (2015). Reimagining Public Policy in Nepal. Nepal Administrative Staff College Discussion Series. Kathmandu.

^[2] Paudel, R. K. (2019). Dahal Admits Lack of Preparations Led to Controversy Over Guthi and Media Bills. Kathmandu: The Kathmandu Post. Retrieved from https://kathmandupost.com/national/2019/06/13/dahal-admits-lack-of-preparations-led-to-controversy-over-guthi-and-media-bills.