After failing to get the Millennium Challenge Compact (MCC) ratified at parliament, the government has informed theUnited States that the agreement has been currently ‘put on hold’. It was, however, strange to see the government writing a missive to the donor country about its inability to get it through the legislature after the expiry of the deadline to ratify the agreement on June 30.

With the fate of the MCC Compact becoming uncertain, it will be very difficult to create a national consensus in terms of implementing the agreement. The intra-party wrangling in the ruling Nepal Communist Party (NCP) has affected parliamentary endorsement and implementation of foreign assistance programmes like MCC Compact which carries huge importance for Nepal.

The USD 500 million (Rs 51 billion) MCC grant has aimed at bringing big improvements in Nepal’s energy and transport infrastructures with the planned construction of 300 kms of transmission lines, three power sub-stations, and upgradation and maintenance of 300 kms of roads, thereby creating employment opportunities to nearly 23 million Nepalis boosting the economic growth prospects significantly. Now, with the delay, Nepal is likely to witness a negative impact on its development projects.

It took several years for Nepal to reach the MCC Compact agreement with the United States in 2017. So, by stepping back from the pact Nepal will send a negative message internationally. It will jeopardise any foreign assistance in the future as donor countries and agencies will view Nepal as unreliable. At a time when the Covid-19 pandemic has inflicted massive economic damages, foreign grants have become important to continue developmental works. Similarly, it could make borrowing money from international agencies difficult as they will see Nepal as a country which did not even accept assistance like the MCC grant. Furthermore, it will also impact foreign direct investment (FDI) as there will be questions related to reliability of policies and security of investments in the country.

It needs to be noted that MCC has been regarded as one of the most transparent aid programmes in the world. The Publish What You Fund (PWYF), a UK-based global aid transparency campaign, has ranked MCC first among programmes run by United States federal agencies and seventh in the world for aid transparency. The United States government has also reiterated that the grant comes with no strings attached and hidden clauses, and the recipient country just needs to commit to spending the money transparently.

There are no such provisions in the agreement that would compromise Nepal’s sovereignty. Looking closely at the countries that have implemented MCC it is clear that the bilateral agreement poses no risk to the independence of the governments in terms of taking decisions. It is quite baffling to see some quarters of the political leadership vehemently opposing MCC accusing it to be a neo colonial initiative without analysing the benefits of the agreement. The sharp polarisation in the political sphere has also divided society which is another aspect to be concerned about. It is worrisome that MCC will be the latest victim of the nationalistic fervor. Past instances have clearly shown how unrealistic interpretations and rhetoric of the political leaders have obstructed the development of projects in hydropower and the price paid by the country.

Therefore, Nepal as a signatory of the bilateral pact, needs to tread with caution to handle the issues related to MCC. As the United States has already said that the availability of the grant is not open-ended, the ball is in the political leadership’s court to utilise the opportunities for the country’s economic development.

Madan Lamsal
madanlamsal@gmail.com