NGOs may be depriving a society of progress by attracting the best talent and skewing the market against entrepreneurs.

Aid constitutes 10% of Nepal’s GDP and organisations surviving on aid are omnipresent in Nepal. Yet Nepal remains one of the poorest and least-developed countries in the world, and things don’t seem to be getting any better. Though I have yet to decide my stance on this issue, the following are two reasons why NGOs may not be good for Nepal’s development:

1) NGOs use up the best professional talent in Nepal. This idea is borrowed from “Unleashing Nepal” by Sujeev Shakya. With their higher-than-average salaries (funded from abroad) and the potential for employees to travel/live abroad, the best Nepali graduates find NGOs a very attractive employment opportunity, preventing the private sector from hiring much-needed talent. Now, this in itself would not be a problem (after all, the objective of development work is to help Nepal), but for the fact that much of the work involves research and report writing, foregoing direct development work. Having worked in a consulting firm, and having seen some of these reports that contained very little of what could be implemented in the field, I firmly believe that while research is important, it is often given more credence than it deserves. And so, the time and talent of the best people in Nepal is sunk into pleasing aid givers.

The time and talent of the best people in Nepal is sunk into pleasing aid givers.

2) NGOs skew the market against entrepreneurs, particularly social entrepreneurs. To illustrate this point, I will use a personal example: A few weeks back, I was thinking about starting a publishing company for regional language books in print and electronic. I thought that this was a latent market, with good distribution being a key factor for success. The primary objective was to promote reading under a for-profit model. As I was doing my preliminary market study, I had a conversation with someone who is working in an INGO that is involved in creating e-books. Since his organisation has the same objective that I plan to have with mine, albeit under a for-profit model, I thought a conversation with him might be useful, perhaps might even lead to a collaboration. The conversation went something like this:

Me: Hey, what do you think about my idea of publishing books in Nepali?

Him: It’s a good idea! But you will have to compete with the free content out there, including ours.

Me: (Thinking about how to compete with free) That’s a problem, but maybe we can then focus on print since the costs of printing and distribution might be too high for an NGO.

Him: Sure.

Me: Do you think that we could buy some of the content that you develop and print and distribute it? (Note that this would also imply additional funds for his NGO).

Him: No, you will not be able to do that because the content will be published under a Creative Commons license and you will not be able to make money off that content.

Me: How about we collaborate on the content, we do a print run, and under an agreement, then transfer the electronic rights over to your NGO? (This would be win-win for both of us, I thought).

Him: We can’t do that either because we are donor-funded and profit activities are not allowed under our model.

I did not go into the technicalities of Creative Commons licensing, but the above conversation put me in doubt about the viability of my business model, particularly if there is alternate free content available. Again, one might think that this shouldn’t be a problem for the objective of promoting reading, but then an NGO will always have to depend on unsustainable external funding to continue its activities.

This post was originally published in V.E.N.T. in September 2010.