Facts speak for themselves: All major parties and their top leaders were involved in the process of finalizing the MCC grant

Political leaders seem to be using the MCC grant as a bargaining tool to secure their political and personal gains. But leaders of all major parties were involved in the process of negotiations and approval of the $500 million Compact at different stages.

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Kathmandu: Leaders of Nepal’s major political parties are blaming each other regarding the endorsement, or lack thereof, of the US-funded Millennium Challenge Corporation (MCC) grant for the country. They are shifting the blame to others regarding who initiated the process of getting the grant, who was involved in the negotiation process, who approved the Compact, who added the parliamentary ratification clause to the Compact, and so on.

Facts show that the $500 MCC compact was not approved overnight. A series of negotiations and discussions took place in different stages in which the governments led by or represented by major political parties were involved. Successive governments led by Dr. Baburam Bhattarai, Khil Raj Regmi, Shushil Koirala, KP Sharma Oli, Pushpa Kamal Dahal and Sher Bahadur Deuba were involved in the process of finalizing the MCC’s Nepal Compact in different stages.

When things were in their favor, all leaders agreed on the MCC compact. When domestic politics started facing turmoil, they started to politicize the grant. Some tried to play nationalist card while some others propagated it as being against the northern neighbor China.

The truth, however, is that since the MCC process started in 2004, major political parties have supported the Compact finalization process in one way or the other. 

[RelatedCommentary | What does the Maoist Center want in MCC’s Nepal Compact?]

MCC grant process started in 2004. To be eligible for MCC grant, a country had to fulfill three criteria: investment to the people by the government getting the grant, economic liberty in the country getting the grant, and condition of the rule of law. The experts’ group formed to find out the hurdles in Nepal’s development pointed out four obstacles: electricity shortage, poor road infrastructure, policy sustenance, and employment problems. Two of these problems–electricity shortage and poor road infrastructure–were selected for redressal.

The MCC Nepal Compact is a five-year USD 500 million grant agreement signed between the Government of Nepal (GoN) and the Millennium Challenge Corporation (MCC). The Nepal Government is to invest an additional USD 130 million in the program, for a total of USD 630 million.

The Electricity Transmission Project under MCA-Nepal aims to build around 315 kilometers of double circuit high capacity 400 kV transmission lines and three new electricity substations. The project will also provide technical assistance to the Nepal government in various energy sector undertakings.

The transmission line will pass through Kathmandu, Sindhupalchowk, Nuwakot, Dhading, Makwanpur, Chitwan, Tanahun, Palpa, Nawalpur and Parasi districts.

On the other hand, the Road Maintenance Project will maintain road quality by supporting the maintenance of commercially important roads, by introducing new technologies. Upon completion, the project aims to result in significant cost and time savings in road maintenance in Nepal.

It will focus on the East-West Highway in Dang district. The section on which the new road maintenance will be piloted is Dhankhola-Lamahi section of the East-West Highway. Based on the results of the pilot, MCA-Nepal aims to complete the Lamahi to Shivakhola section. At present, the total road segment proposed for maintenance in the East-West Highway is approximately 77 km.

Dr. Baburam Bhattarai was the Prime Minister and Barshaman Pun Finance Minister in 2011 when MCC selected Nepal for a smaller threshold program. In December 2013, the government formed an experts’ group for constraint analysis. Khil Raj Regmi was the head of the council of ministers and Shankar Prasad Koirala the Finance Minister back then. Nepal finally qualified for the MCC grant in 2015 during the tenure of Prime Minister Sushil Koirala and Finance Minister Ram Sharan Mahat. In May 2017, Pushpa Kamal Dahal-led government formed a talks team to discuss the Compact with the MCC. Krishna Bahadur Mahara was the Finance Minister back then. In September 2017, Sher Bahadur Deuba-led government signed the MCC Compact. Gyanendra Bahadur Karki as Finance Minister signed the Compact on behalf of the government. In 2019, Oli cabinet endorsed a proposal to table MCC Compact at parliament for its ratification.

Here is a timeline

2004- The United States of America started MCC.

2012 – MCC selected Nepal for a smaller threshold program.   

2012 – Nepal government assigned joint secretary at Finance Ministry as the focal person to coordinate with MCC.

2013 — Govt formed experts’ group for constraint analysis.

2015 – Nepal was qualified for the MCC.

2015 – Government formed a direction committee led by the Finance Minister. Former Secretary Krishna Gyawali was appointed the national coordinator of Nepal for MCC. 

2015 – Govt decided to accept technical grant to conduct study of possible projects under MCC.

2016 – Govt signed an agreement with the MCC on technical grant to prepare the Compact’s draft.

2017 – Govt formed a talks team to discuss the Compact with the MCC.

2017 – A proposal to accept MCC Compact was  presented in the cabinet.

2017 – The govt signed the MCC Compact. 

2019 – Cabinet endorsed the proposal to table MCC Compact at parliament for its ratification.

2019 – Implementation agreement signed for implementation of projects under the MCC Compact.

Sept 3, 2021 – Nepal’s Ministry of Finance sent a letter to MCC office seeking clarifications. 

Sept 8, 2021 – MCC headquarters based in Washington responded to the letter clarifying that MCC’s Nepal Compact is not part of the Indo-Pacific Strategy, it has no component of the military alliance, the constitution of Nepal prevails over the Compact and that it does not impact Nepal’s agreements with other countries.

Sept, 2021 – PM Deuba and Maoist chair Prachanda sent a (secret) letter to the MCC expressing commitment to quick ratification of the Compact.

Sept, 2021 – MCC responded to the letter sent by Deuba and Prachanda and set February 28 as the deadline to ratify the Compact as per the request made from Nepal’s side. 

As the Maoist Center and CPN(Unified Socialist) are creating hurdles in the tabling of the Compact in parliament for its ratification, experts, as well as the political leaders, are raising voices in favor of parliamentary ratification of the US grant. 

Political leaders say that since all major political parties were involved in the MCC process they should take collective responsibility to give it parliamentary ratification. 

[RelatedInterview | ‘Neither incumbent Speaker Agni Sapkota nor his predecessor Krishna Bahadur Mahara was in favor of tabling MCC Compact for ratification’: Rajan Bhattarai, CPN-UML leader]

“Is it rational to ask questions to the American side by the party which itself was in the government while signing the deal with the MCC?,” said Prakash Sharan Mahat, the spokesperson of ruling Nepali Congress. “What message does this send to the international community and Nepal’s development partners?” 

“International relations should be handled wisely,” he said adding that Nepal should not craft its foreign policy in line with any particular parties’ ideologies, likes or dislikes. 

According to Shankar Pokharel, General Secretary of CPN (UML), those who are the signatories of the Compact should answer the questions related to the Compact. “But in our case, one contract party is seeking answers from another contract party, which is unfortunate,” he said. 

Several experts have warned of possible consequences if Nepal backtracks from the Compact it had signed with the US government entity back in 2017.