What will Nepal lose if the MCC is not given a parliamentary nod?

Observers point to the possibility of erosion of Nepal's credibility internationally, fallouts on ambitious bilateral projects like BRI and the likelihood of development partners hesitating to provide large development assistance to Nepal.

Mahabir Paudyal

  • Read Time 6 min.

Kathmandu: One of the main agendas for the parliament session starting today (September 8) has been tabling the proposal to endorse $ 500 million American grant assistance. The political parties, however, have shown no indication of coming to a consensus for its parliamentary ratification, without which the Millennium Challenge Corporation’s Nepal Compact, focused on electricity transmission and strategic road maintenance projects, cannot be implemented.

According to the Compact, the USD 500 million grant is meant for building the longest electricity transmission line and to maintain and repair over 100 kilometers of strategic roads. The projects were identified and selected by Nepal and the project priorities were also set by Nepal. 

According to the MCA-Nepal office, several activities have already been accomplished and as much as 5.3 billion rupees has been spent by the government of Nepal and MCC together for the implementation of the project.

Nepal’s political sphere, however, has been sharply polarized. While some politicians have consistently supported MCC, others have resorted to rumor-mongering, without, in most cases, even reading the words in the Compact. Meanwhile, YouTube channels and some online portals have been presenting sensational contents about the Compact for clickbait.

The whole nation, it seems, is divided over pro and anti-MCC camps.  Anti-MCC camp argues the MCC is against the sovereignty and national interests of Nepal. Situation is such that if you speak in favor of MCC, you will be flatly branded as a traitor, a Nepali Congress leader told me. “There is very narrow room for objective and factual discourse on MCC as interest groups have already disseminated misinformation and disinformation about the Compact,” he said.

Support and opposition

As Prime Minister Sher Bahadur Deuba is trying to garner support for MCC’s ratification, even by reaching out to the main opposition leader K P Sharma Oli, voices against its ratification have started to be heard in the streets, on the social media as well as among the political parties, including those in the government, once again.

On September 3, a group of protestors shouted slogans against the MCC in front of the American embassy in Kathmandu. The opposition is intensifying in such a way that the Ministry of Home Affairs had to issue a statement asking the people, in a roundabout way, not to speak ill of MCC.

CPN(Maoist Center), CPN (Unified Socialist) and Janata Samajbadi Party Nepal (JSPN) led by Upendra Yadav—the coalition partners of Prime Minister Deuba in the government—have also expressed reservations and do not seem to be willing to support the PM’s agenda.

Likewise, K P Oli, who used to unequivocally support the MCC and consistently advocated for its ratification and even accused the Speaker of the House of Representatives Agni Sapkota for holding the Compact in abeyance, has now made a volte-face. On Saturday, during the CPN-UML party meeting, he indicated that the CPN-UML, now in opposition, will neither support nor oppose the American project.

Deuba MCC

When Nepal signed the Compact on September 14, 2017, Gyanendra Bahadur Karki was Nepal’s Finance Minister and Sher Bahadur Deuba the Prime Minister. As such MCC is largely seen as the liability for Deuba and Karki—who are the PM and Law Minister respectively in the current cabinet.

Over the last few years, Kathmandu commentariat has given diverse angles to the MCC grant projects: It’s a part of the Indo-Pacific Strategy of the US government, it is the counter-strategy of the US to check the rise of Chinese influence in Nepal, it undermines Nepal’s national interests and sovereignty and so on.

Experts speak

So what will happen if the MCC’s Nepal Compact is not ratified by parliament? Will it end only in Nepal not getting USD 500 million and road maintenance and transmission lines projects not taking off? I talked to a couple of intellectuals to discuss the possible repercussions of the Compact not being approved.

They say the failure to implement the projects identified by none other than the Nepal government itself could set a bad precedent for the BRI projects from which Nepal expects so much to gain and set an unpleasant example for the future.

According to Chandra Dev Bhatta, scholar of political economy of international relations, political parties in Nepal made MCC so controversial that the positive points about it have simply been forgotten.  “The opposition to MCC has reached down to the people’s level. It is no longer limited to the political level,” he said. At the same time, argues Bhatta, the Americans have presented themselves in such a way they appear bent on getting it ratified through parliament. “They seem to have made it a prestige issue,” he added. “The best thing to do in this situation would be to discuss in good faith, with the goal of finding the solution. The problem is the merits of the MCC projects were not discussed and the positive side was not brought out.”

Chandra Dev Bhatta

What if MCC is not ratified by parliament? “Our relations with America are likely to suffer a setback if that happens,” he said. According to him, Nepal has reached a slippery slope on MCC. “If parliament endorses it, it will set a precedent for big bilateral projects to require parliament’s approval.   If they fail to ratify it, it might create an impression among the development partners that Nepal is not among the countries to be put in priority for development assistance.”

Rejection of MCC will not end the story there, Bhatta further argues. “Then a group or a force will emerge which will stand against China’s Belt and Road Initiative.  In the process, not only MCC but also BRI will suffer.”

That’s only one of the matters to worry about. “Our political parties are divided as MCC supporters and BRI supporters. BRI supporters do not tend to support MCC. MCC supporters do not tend to support the BRI,” he elaborated.

According to him, Nepali leadership never cared to look into the merits of MCC and BRI and then decide what we need from BRI and what we need from MCC and stand firm on decisions.  “We have not yet really looked into the pros and cons of these projects from the broader national interest perspectives.”

Nepal’s major political actors, from Baburam Bhattarai to Pushpa Kamal Dahal to Sher Bahadur Deuba to K P Sharma Oli, have somehow owned up MCC in principle. They did not reject MCC when they were in power.

“The tragedy is our political parties don’t seem to understand the values of the contract and the obligations they need to abide by once the contracts are signed,” said Prashant Singh, a development activist, who has also closely watched the development around MCC. “When you sign the contract and yet do not fulfill the obligations set forth in the contract, you lose credibility. You will be seen as an unreliable party.”

So what actually made MCC such a controversial matter? “The MCC conundrum is the result of the sheer incompetence of Nepali actors to handle the big projects,” said Singh. “Meanwhile, some American officials also made rather immature statements about the MCC which created doubts and confusions among the Nepali public. This should have been avoided.”

According to him, if Nepal cannot push the Compact, the question will be raised as to if we are not to take it forward, why did we sign the contract in the first place?

Prashant Singh

Singh foresees the repercussions if Nepal fails to ratify the Compact. “First, high-level officials in Washington DC will be irritated because they might make opinions based on what they are briefed instead of considering the real situation on the ground in Nepal.” Then American officials might reach the conclusion that Nepali politicians and officials are not able to handle the big projects, large amounts of development assistance or grants. “They will then reach a conclusion that Nepal is no more to be prioritized for big grants and that all that it deserves is petty assistance.”

According to him, the fallout will not be limited to this. “It will help build negative opinions about Nepal not only in the US but in major capitals of the major powers and Nepal’s long-term bilateral and multilateral development partners,” he said. “It will send the message that Nepal cannot handle or deal with significant resources. And there will be little chances of Nepal getting significant grants. We will be seen as an incompetent nation to handle the big grants.”

Singh argues that as a country lying between two Asian rivals—China and India—it is important for Nepal to maintain good relations also with the US to balance India and China. “Nepali political actors do not seem to understand this reality or they simply do not care,” he said.

He, however, also mentions that the fears and worries the people have expressed through various media platforms about the MCC should also be addressed somehow.

While controversies about the MCC in Nepal have resurfaced,  Fatema Z Sumar, the vice-president of the Department of Compact Operations at the Millennium Challenge Corporation, is visiting Nepal. During the visit, she is expected to meet and hold consultations with PM Deuba, main opposition leaders and senior officials reportedly to help create a positive environment for its parliamentary ratification.

For sure, the parliament session this time around is going to draw the attention not only of the Nepalis but also those watching Nepal’s MCC conundrum from Washington, Beijing and other capitals.