Nepal must not lose $500m MCC grant


03 Jan, 2020

The US government’s Millennium Challenge Corporation (MCC) has provided $500 million (approximately Rs 52 billion) in grants to Nepal for building electricity transmission lines and road. It is the biggest grant assistance the US approved for Nepal, with the latter chipping in $130 million to boost the MCC project. The MCC has offered grants to over 50 developing countries. Established in 2004 by the US congress, the MCC helps the developing nations to reduce poverty through financial aid.

MCC’s Nepal Compact mainly seeks to increase the availability of electricity and lower the cost of transportation, thereby helping the government better deliver critical services to the people, ease the movement of goods and open up new opportunities to investors.


But the assistance, which is expected to put Nepal’s economy on robust growth trajectory, has been dragged into controversy because of its association with US global strategy known as the free and open Indo-Pacific Strategy (IPS). Leaders of ruling Nepal Communist Party (NCP) have expressed their serious reservation about the motive of the MCC grants.

The argument remains that the lawmakers, who are supposed to ratify the MCC in parliament are divided over it. Some agree that it is only an economic aid aimed at building infrastructure inside the country, while others doubt that it falls under IPS which would allow the American security forces to gain easy access to the Nepali territory.

Phanindra Gautam, Joint Secretary at Ministry of Law, Justice and Parliamentary Affairs, said that all confusions regarding the MCC were raised due to the lack of proper study on it by the concerned authorities. The responsible persons should do proper research on the relevance of MCC in Nepal.

“All donors, who provide loans or grants, put forward various conditions before providing them to the nations. Similarly, MCC Nepal Compact has also certain provisions such as taking permit from India for building transmission lines in its territory and it needs to be endorsed by the parliament before starting the works here,” said Gautam.

He said that such a provision was adopted to make the project credible because of very unstable political system that Nepal had in recent past. “Once the project is endorsed by parliament, it moves smoothly even if there is a change in government.”

The grant will be spent on the Kathmandu-Hetauda- Butwal 400KV transmission line which will supply electricity generated from hydropower plants in the Budi Gandaki, Trisuli, Kali Gandaki, Marsyangdi, Koshi and Tamakoshi corridors. The rest will be used to upgrade roads and highways.

“Eighty per cent of grant will be used to build transnational hydroelectric transmission lines and the remaining 20 per cent on improving the road infrastructure. If Nepal loses this opportunity, our diplomacy with the USA will automatically be strained. Our international credibility will also be damaged and our donors will doubt the ability of government and the leaders before providing any kind of loans or aid to Nepal,” added Gautam.

While the main opposition Nepali Congress is for ratifying the MCC in the House, some prominent NCP leaders have objected to the MCC on the grounds that the US has not clarified whether or not the grant falls under the US Indo-Pacific strategy.

Foreign policy expert Geja Sharma Wagle believes that the politically motivated forces were active to obstruct the endorsement of the MCC in the parliament. “Some leaders from the ruling party are saying that MCC is part of IPS, which will allow the US military forces to be actively present in Nepal. But I think this is an unnecessary attempt to politicise the issue to make the government and the prime minister weak”, Sharma claimed.

Sharma further added that such hindrance by the members of ruling party would hamper in getting foreign aid by numerous other countries and organisations. “Nepal will lose its trustworthiness in the international market and will always be questioned by other countries before providing economic aid if it diplomatic ties with the US suffer a setback,” Sharma said.
Minister for Foreign Affairs Pradeep Gyawali and Minister for Communications and Information Technology Gokul Prasad Baskota have said that the House would approve the MCC.

A host of lawmakers said MCC was a part of IPS unveiled to counter China’s Belt and Road Initiative in Nepal. Several high profile American officials including the Indo-Pacific Commander Philip A. Davidson, Deputy Assistant Secretary Joseph Felter, and Deputy Assistant Secretary of State for South Asia David J Ranz visited Nepal last year.

Last June, a report by the American Department of Defence identified the Indo-Pacific Strategy as a military move to project American power in the Pacific and Indian Ocean and a pillar of American foreign policy in the region. Only two agreements related to the land acquisition and ratification by the parliament stands in the way of implementing of this project in Nepal. The USA has already said that the project could be dropped if the winter session of parliament failed to ratify it.

Ideological posturing

Former vice chairman of National Planning Commission, Swornim Wagle, says that the implementation of MCC hit a snag owing to the ideological posturing of ruling party leaders. “This large scale of transformative infrastructure project should be implemented to bolster Nepal’s economy. If this project is withdrawn by the USA due to our political disputes then the reliability of Nepal will be damaged,” Wagle noted.

The MCC compact states that if the project is not finished in five years, the money will go back to the US treasury. Such grants which would economically lift the face of the underdeveloped countries like Nepal should not be politicised. MCC is an opportunity and must not be let it slip through our fingers.


Pallav Bhusal

Source: The Rising Nepal