Millennium Challenge Corporation (MCC) in Nepal

The Millennium Challenge Corporation (MCC) is a bilateral United States foreign aid agency established by the U.S. Congress in 2004, applying a new philosophy toward foreign aid. MCC was authorized in 2004 with bipartisan support. It is an independent agency that came for a new compact for development with accountability for both rich and poor countries.

Main Principles of MCC

1. Competitive selection
2. Country-led solutions
3. Country-led implementation

MCC compacts and thresholds programs in recipient countries

MCC signs either a compact or a threshold agreement with a partner country. A compact is awarded if the country scores highly on the selection criteria indicators. If the country scores poorly but has a positive, upward trend on the selection criteria, it can still be eligible for a smaller grant, called a threshold program.

MCC in Nepal

Nepal is one of the developing countries in Asia. In the coming days, it has continued to face extensive economic development challenges caused by high transportation costs to move both goods and people as well as an inadequate supply of electricity. Decades of political transition and the devastating earthquakes of 2015 further compounded Nepal’s development challenges.

Hence, MCC’s Nepal Compact is designed to increase the availability of electricity and lower the cost of transportation in Nepal. These investments will help the Government of Nepal better deliver critical services to the people, it will ease the movement of goods around the country, and open up new opportunities for private investment.

An additional $130 million from the Government of Nepal in support of the compact − the highest up-front contribution from a partner country − enables MCC’s investment to have an even greater impact. It will increase the availability of electricity and lower transportation costs—helping to spur investments, accelerate economic growth, and reduce poverty. The Compact is based on principles of accountability, transparency and mutual prosperity.

Advantages

• MCC grant is for the construction of a high voltage 400 KV transmission line to evacuate the power.
• Construction of lines and road projects are to be done.
• Good governance, economic freedom, and investing in citizens will be high.
• It will deliver critical services to its people and open up new opportunities for private investment.
• Increase the availability of electricity and lower the cost of transportation in Nepal.
• Sustainable growth, private sector, providing the country with a much-needed boost.
• Intellectual property rights

Disadvantages

• It has become the center of a row between two fractions of the Nepal Communist Party, and stalled proceedings at the Central Committee meeting of the ruling party, raising questions about Nepal’s credibility.
• The rivalry between the US and China in Nepal.
• Nepal has accepted the clause about Parliament ratification.
• Parties are going against each other.

Facts about MCC Nepal

1. At the request of Nepal’s leaders, the U.S. government began working with Nepal in 2012 toward the development of an MCC compact.
2. Each government and every Nepali political party, when in power, has expressed a desire to conclude an MCC Compact for economic development in Nepal.
3. The MCC project is focused purely on economic development by helping to build power lines and improve roads.
4. There is NO military component to the MCC. In fact, U.S. law prohibits it.
5. Nepal does not need to “join” or “sign up” for anything in order to participate in the MCC.
6. The $500 million is a grant, with no strings attached, no interest rates, and no hidden clauses. All Nepal has to do is commit to spending the money, transparently, for the projects that have been agreed upon.
7. Nepalis proposed and decided which projects MCC will fund in Nepal based on Nepal’s own priorities.
8. MCC’s model requires Nepal to hire Nepalis to lead the implementation of the projects.
9. MCC project tenders are open, transparent, and available to everyone.
10. In Nepal, as in every country where MCC works, parliamentary ratification is required and provides transparency and an opportunity for Nepalis to understand the project.

Conflict about Parliamentary Ratification of MCC in Nepal:

MCC was signed by Nepal in September of 2017, when Nepal became the first country from South Asia to qualify for the compact meeting 16 out of 20 policy indicators. As per the agreement, the US government agreed to provide $500 million in grants while Nepal would put in $130 million for the project that prioritises energy and roadways. This is the largest grant Nepal has ever received.

MCC is supposed to be an aid for Nepal’s economic development. The questions raises, why the US would provide such a huge amount to the fellow nation without any strings attached to it for free?  Thus, the Politicians in Nepal  are divided over the Millennium Challenge Corporation’s links with the US’ Indo-Pacific Strategy and provisions that say the agreement will prevail over Nepal’s laws in case of conflicts.

Arguments have been rising over the parliamentary members and even among the people that MCC is a part of Washington’s IPS, that has the military components which seems to be aming to counter at our fellow nation China. There wasn’t much dispute over the compact until David J Ranz, assistant secretary for South Asia at the US State Department, during his Nepal visit in May,2019 said that the MCC was a crucial part of the Indo-Pacific Strategy.

According to an expert who has worked for the Millenium Challenge Account, the Nepal office of the MCC, Nepal should consider the MCC as an economic part of the IPS, but ratifying it doesn’t necessarily point out towards being a part if “military allience”.

Points that point MCC might be sucidal for Nepal:

The MILLENNIUM CHALLENGE CORPORATION

Article 7 of the agreement clearly states that if MCC gets ratified then, “the Compact, upon entry into force, will prevail over the domestic laws of Nepal.”

Article 3 suggests that “any entity established in Nepal through MCC will be referred to herein as “MCA-Nepal,” and will have the authority to act on behalf of the Government with regard to all Program activities.”

Article-3 also suggests that “the Government also designates MCA-Nepal to exercise and perform the Government’s
rights and responsibilities to oversee, manage, and implement the activities.”

Article 5-A of the MCC agreement signed with the US administration “brings in the Indian establishment unnecessarily in an agreement which is being signed in between two sovereign nations-the US and Nepal.”

While the dispute remains whether MCC is beneficial or not, what do you think, should MCC be allowed in the country?