Controversy surrounding MCC-Nepal

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March 22, 2021

For more than a year or so there has been a lot of confusion, misunderstanding, misperception and opposition on the MCC-funded project in Nepal. Having the privilege of working as a Team Leader for a MCC-funded project in Lesotho in Africa for five and half years, I thought it was high time to clarify the real facts about it.

The MCC (Millennium Challenge Corporation) is a bilateral independent US foreign aid agency, established by the Congress in 2004, and is separate from the State Department and USAID.

One criterion for the grant’s eligibility is to have good economic policies and potential for economic growth. Its theme is poverty alleviation through economic growth.

The arduous qualification process involves scores provided by third parties in 17 different areas, such as fiscal policies, level of corruption and rule of law.

More than 50 nations have received the grants for infrastructure development in the form of Compacts or thresholds programmes.

Nepal has received a grant of US$ 500 million from the MCC and has contributed $130 million for the Compact programme.

This $630 million programme envisages to increase the availability and reliability of electricity, maintain road quality and facilitate power trade between Nepal and the region to assist in investments and accelerate economic growth.

The Electricity Transmission Project (ETP) and the Road Maintenance Project (RMP) are two major projects under this programme, which was to start on June 30, 2020 and completed in five years.

However, non-fulfillment of several pre-conditions like the ratification of the Compact agreement by the Parliament, signing of the project implementation agreement and the completion of a plan with the Indian government for the cross-border transmission line from Butwal to Gorakhpur has delayed the starting date of the programme.

To implement the project in Nepal a legal entity called Millennium Challenge Account-Nepal (MCA-Nepal) has been formed and is governed by an Executive Board, chaired by the Secretary of the Ministry of Finance.

The execution of the project is made transparent and responsive with the involvement of the private sector and civil society.

One of the unique features of MCC is that the consultants and contractors are not required from the US, and are selected through international bidding processes.

Any asset (physical or intellectual) remains the property of the country after the completion of the projects.

There has been much opposition of this project in the media and in the streets from various sectors, citing it does not serve the national interest and integrity.

Rumours also abound that the project’s execution will bring in the US military to Nepal.

The fact is that this is a truly apolitical infrastructure development programme, which has been implemented in more than 50 countries, and no traces of US military presence have been observed.

Likewise some have cited that the rules of the US need to be followed during the implementation of the programme, which is not true. When there is dispute during contract execution, the resolution lies with the rules of the recipient country.

These clauses are explicitly mentioned in the contract documents.

The development budget of Nepal comprises mostly of loans from aid agencies, which have vested interest in ensuring that their share of the pie (loan) is not comprised and are of the view that MCC is encroaching their territory.

The opponents of MCC have been swayed by these and are arguing against it just for the sake of argument.

It is also deplorable that elite sections of our society are opposing it.

The country missed an opportunity to implement the Arun Hydro-power project several decades ago after strong opposition from so-called environmentalists.

Today everyone is repenting the delay. Let us keep our fingers crossed that such a national blunder will not repeat for this project. This is a huge grant, which does not need to be paid back.

Another example that cannot be followed is that of Sri Lanka, where the grant assistance of $480 million from the MCC has been discontinued following massive opposition from the politicians.

Many countries like Georgia and Ghana have implemented the first Compact of the MCC and have signed the second Compact.

Some have even completed the implementation of two Compacts. We must learn to strike the iron while it is hot and take advantage of such golden opportunities.

With COVID-19 many donor countries like the US and others have suffered economically. Such free development funds may not be available for the years to come.

MCC focusses on issues of environment, health and safety, human trafficking, resettlement, transmission of diseases like AIDS, grievances of the public, just and fair compensation of lost livelihoods during the execution of the projects so that the programme does not affect the people and area adversely as objections can be raised by US taxpayers.

It can even suspend the programme if these pro-people requirements are not met.

In addition to that, MCC is also extremely strict on timely completion of the programme and gives the recipient five years to complete without any time extension.

In addition to that, MCA-Nepal executes the projects and is accountable to the government and the people of Nepal.

MCC does monitor the progress and procedures, and due diligence is followed during project execution to ensure transparency.

Last but not the least, the projects, particularly the transmission lines, are of our national interest for earning hydro-dollars by exporting electricity to India.

Dinesh Malla
Source: THT