Fatema Z Sumar, the Vice President of Compact Operations at the Millennium Challenge Corporation (MCC), arrived in Kathmandu on Thursday morning along with Deputy Vice President Jonathan Brooks for a four-day visit to Nepal. She is expected to hold consultations with Prime Minister Sher Bahadur Deuba, leaders of the main opposition CPN-UML and other political parties on MCC’s Nepal Compact, which has become a subject of fierce debate among political parties as well as the general public. Nepal Live Today spoke to her to discuss various aspects of the MCC Compact.
To start with, how does it feel to be in Kathmandu when people as well as the political parties are intensely discussing the MCC?
I am excited to be back in Nepal, and, more importantly, to be able to speak directly to you about how the MCC-Nepal Compact will benefit the people of Nepal. We have a great opportunity to advance our conversation on this important matter with the letter MCC received from the Ministry of Finance on behalf of members of Parliament, community leaders, and the Nepali people. It is so important to hear from you, the people who will benefit the most from an MCC grant. It is important for every Nepali to understand the purpose of MCC as a US foreign assistance agency, why we provide grants that don’t add to a nation’s debt, and how and why your government and MCC partnered to design the $500 million MCC-Nepal Compact.
Hopefully through these answers, I can provide clarity on the MCC grant and how it will positively impact nearly 23 million Nepalis.
While at MCC, and previously with the Department of State and the US Senate, I have long championed development, democracy, and sovereignty for the countries of South Asia and beyond. I have also had the good fortune to work alongside the people of Nepal since 2015, having visited your country many times to hear and learn from you while the MCC-Nepal Compact was being developed.
What was your impression of those earlier visits?
In my previous visits, I was overwhelmed by the request for, and positive support of, an MCC partnership from business and community leaders to members from every political party. Unfortunately, since my last visit, there has also been an increase of false and misleading statements about MCC. I hope through this interview and other discussions, I can provide information that is helpful to the Nepali people and dispel some of the misunderstandings that have developed. I thank each of you for continuing the open and transparent dialog that has been the foundation of MCC’s partnership with Nepal.
Let’s get back to the main issue then. The MCC has been a matter of debate in Nepal for the last few years. Can you explain what MCC is and what it is not?
MCC is an independent US government agency created to fight global poverty through economic growth. Our model is unique in that we only select countries that demonstrate commitment to good governance, economic freedom, and investing in their citizens.
A cornerstone of MCC’s model is country-led grant programs, meaning the partner country is responsible for design and implementation. Here in Nepal, this means the Millennium Challenge Account-Nepal which is responsible for implementing the projects under the grant. These grants do not come with any additional obligations. Partner countries, however, are expected to meet MCC’s high standards using innovative, transparent, and objective policies.
For almost 70 years, the United States and Nepal have built a friendship on shared values and respect. That friendship will continue regardless of MCC’s compact.
That is what MCC is. Rather that is all we do. MCC provides grants that do not add to a country’s debt and support a partner country’s efforts to reduce poverty and foster economic growth.
I have read that some believe MCC is a military alliance or that the Compact has a military component. Nothing can be further from the truth. MCC has no hidden agenda, and in fact, it is against US law for MCC funding to be used for any kind of military purpose. We have partnered with 39 countries around the world, including in South Asia, and the military has never been related to any of our programs.
In Nepal, MCC is also talked about in terms of America’s strategic interests. What could be the US interests on MCC, if at all?
Partnering with like-minded countries working to reduce poverty is part of the United States’ strategic interests. Reducing global poverty is not only morally just, but also the key to a more secure and prosperous global community. We are proud to be part of these efforts. As an independent US foreign assistance agency, MCC was founded in 2004 with a unique and singular purpose: reduce poverty in partner countries through economic growth. That is what we have done for nearly twenty years across 39 countries, and the MCC-Nepal Compact will do the same. It will build a stronger, vibrant, more economically independent Nepal.
MCC provides grants that do not add to a country’s debt and support a partner country’s efforts to reduce poverty and foster economic growth.
Common perception in Nepal is that the US is consistently pressuring the government of Nepal to get it ratified by parliament? Is it true?
It’s not true. This is one of the most important aspects of the MCC-Nepal Compact. It is the people of Nepal’s choice to accept the grant. Even though MCC and other development organizations helped throughout the three-year development process, it was the government of Nepal who ultimately identified and designed the infrastructure programs that will provide the most benefit to you.
When negotiating the final terms of the Compact in 2017, MCC and your government agreed the grant program would require parliamentary ratification. MCC will honor those terms, and the wishes of your elected representatives. But we are excited to move this process forward and begin implementation. We are excited because we know what a profound impact it will have on so many of you.
We are hopeful that the exchange of official letters between MCC and the Ministry of Finance allows ratification to happen during the remainder of this parliamentary session.
With ratification now more than two years past the agreed-upon timeline, there is no better time to act than now. It is in your hands. The Government of Nepal must decide whether to move forward or not. For almost 70 years, the United States and Nepal have built a friendship on shared values and respect. That friendship will continue regardless of MCC’s compact.
What if the Compact is not endorsed by parliament?
Prior to signing the compact, both the Governments of Nepal and the United States agreed to parliamentary ratification as a critical action for the success of the compact. Ratification is required for the compact to have the status of an international agreement.
All MCC compacts with partner countries are international agreements. During compact development, MCC asks each partner government what their country’s domestic law requires in order for the Compact to have the status of an international agreement, which helps ensure it will avoid any specific conflicts with domestic law. For Nepal, the government, through Nepal’s Ministry of Law, Justice and Parliamentary Affairs, concluded that, under Nepali law, parliamentary ratification is required for the compact to be such an international agreement.
Quite simply, parliamentary ratification is the next step for the Compact to move forward. We know that the Government of Nepal has asked us some questions requiring clarifications on this process, and we have provided answers. We are hopeful that this exchange of official letters allows ratification to happen during the remainder of this parliamentary session.
MCC discontinued the proposed grant to Sri Lanka due to lack of partner country engagement. MCC has experienced something very different with our Nepali partners.
Is there a chance for extending the deadline for MCC implementation in Nepal?
Truthfully, we are already more than two years past the ratification timeline negotiated between MCC and the Government of Nepal. Now is the time to act. The delay is more than just administrative, it is a delay in the benefits to the Nepali people. This is why it is important for Parliament to move forward now or decide that Nepalis no longer need an MCC grant to foster economic growth.
Sri Lanka is often cited as the example of the country rejecting the MCC. What actually happened in Sri Lanka?
MCC discontinued the proposed grant to Sri Lanka due to a lack of partner country engagement. Partner countries are expected to provide focused involvement in grant development, launch, and implementation to ensure successful results. Country ownership, transparency and accountability are fundamental to MCC’s development model. MCC has experienced something very different with our Nepali partners.
Since 2012, the Government of Nepal and MCC have worked together to develop, negotiate, and sign a compact program that its officials publicly support, including during my visit this week. This was not the case in Sri Lanka. However, the end of the Sri Lanka Compact did not mean the end of our partnership. We remain friends and the United States will continue to work alongside Sri Lanka both in response to Covid-19 and to recuperate its economy.
Finally, in what way is the MCC grant different from the past development assistance provided by the US to Nepal?
As part of the many ways the United States provides foreign assistance, MCC’s model is unique among development agencies. As I mentioned previously, our sole mission is to reduce poverty through economic growth. We do so through compacts with select partner countries that are 100 percent grant-funded. Meaning, MCC grants are not loans and do not require repayment.
Our sole mission is to reduce poverty through economic growth. We do so through compacts with select partner countries that are 100 percent grant funded.
Notably, MCC’s model has a principle of country ownership. This means partner countries, including Nepal, exercise ownership over compact investments, lead project teams, and are accountable to domestic stakeholders for making decisions and achieving results. More specifically, this means that in Nepal the projects in the compact are projects that the Government of Nepal identified and prioritized. The Electricity Transmission Project in the compact, for example, comes directly from the Nepal Electricity Authority’s Transmission System Master Plan and has been designated a Project of National Pride.
Finally, MCC has a strong focus on data, transparency, and results. MCC employs technically rigorous, systematic, and transparent methods of projecting, tracking, and evaluating the impacts of its programs. This is our value to countries we partner with. For 17 years across 39 partner programs, MCC has remained committed to objectively evaluating our projects and learning from those evaluations. We also seek out independent organizations to assess our grant programs, sharing both what has worked and what has not worked so our efforts may improve the global development community.