Five years after signing, America-funded MCC Compact ratified by parliament

The $500 million MCC Nepal Compact had become the victim of extreme politicization. Nepali communist leaders had vehemently stood against parliamentary ratification of the Compact.

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Kathmandu: After days of high-level political meetings and discussions, the Millennium Challenge Corporation’s-Nepal Compact has finally been ratified by the House of Representatives–Nepal’s lower house–on Sunday evening.

Amid an obstruction by the main opposition CPN-UML, walkout by some of the leaders from the ruling alliance and dramatic changes in the tone by communist leaders, the Compact was passed by Parliament, concluding the parliamentary process. The compact was passed by a voice vote.

Nepal’s lower house Speaker Agni Prasad Sapkota, a radical communist, who, for a long time, was accused of obstructing the process of tabling the Compact, presented the Compact for ratification through a voice vote. 

The Nepal government had tabled the Compact in the parliament on 20 February.

While Nepali Congress, Loktantrik Samajwadi Party, and Janata Samajwadi Party voted in favor of the Compact, a few lawmakers from CPN (Maoist Center) and CPN (Unified Socialist) remained absent from the process.

[Related: MCC Nepal compact: What is in the “interpretative declaration” endorsed by Nepal’s parliament?]

Maoist Center  and Unified Socialist are the partners in the coalition government led by Sher Bahadur Deuba of Nepali Congress. 

Earlier in the day, a cabinet meeting approved a 12-point ‘interpretative declaration’. Finance Minister Janardan Sharma had presented the declaration in the parliament before the ratification process began. 

With the endorsement of the compact, the US government will provide Nepal with a grant totaling $500 million for transmission and road maintenance projects. 

With Nepal’s contribution of $130 million, the total cost of the MCC project, to be overseen and managed by the MCA-Nepal and completed within five years of the start of the implementation, stands at $630 million.

Signed by the government of Nepal with the MCC in September, 2017, the $500 million Nepal Compact had become the victim of politicization.  Nepali communist parties in particular vehemently stood against parliamentary ratification ever since the Compact was registered in the Parliament Secretariat in July, 2019 for tabling for deliberations and subsequent ratification.

[Related: Revealed: In the letter to MCC, PM Deuba and Prachanda had categorically promised to ratify Nepal Compact immediately]

As political parties continued to remain divided over whether to ratify the Compact in its current form or with amendment, the American officials in recent months had been asking the government of Nepal and the political parties to take the Compact to the logical conclusion.

Long opposed to Compact ratification, Maoist Center leader Pushpa Kamal Dahal ‘Prachanda’ was pushed to a difficult situation when the letter he had written to the MCC headquarters, signed along with Prime Minister Sher Bahadur Deuba, promising to ratify the Compact as early as possible became public early this month.

Subsequently, based on the same letter, the MCC headquarters in Washington had set the deadline for February 28 for ratification of the Compact. 

The MCC compact was tabled in the parliament on February 20 amid obstruction by the CPN-UML and clashes between police and anti-MCC protestors. 

The $500 million US grant to Nepal had become a subject of controversy after Nepal’s communist forces raised several questions connecting the project with the Indo-Pacific Strategy of the US government. They argued that the US grant is part of the military alliance of the US that is essentially meant for checking China from Nepal.  They had also said that the Compact undermines Nepal’s sovereignty and it will be above the constitution and laws of Nepal. 

[Related: No more dishonest rigmarole on the MCC grant: Let parliament decide its fate]

The Ministry of Finance–headed by Maoist leader Janardan Sharma–had written a letter to the MCC headquarters in Washington seeking clarifications on the above mentioned issues on September 3, 2021. The MCC had responded with clarifications that MCC Compact is not part of the Indo-Pacific Strategy and there is no military component attached to the grant project.

Maoist Center and Unified Socialist parties had still objected to the Compact ratification even after the clarifications offered by the MCC headquarters. 

These two parties are reported to have relented after the consensus was reached among the ruling parties to issue an ‘interpretive declaration’ on the disputed points of the Compact before ratification. 

Who helped, who tried to hinder?

Since the Compact was registered in parliament secretariat to start the ratification process, some Nepali politicians consistently stood in favor of ratification while others either opposed, became non-committal, demurred or changed their minds at the last hour.

Whether as the president of Nepali Congress or as Prime Minister, Sher Bahadur Deuba consistently advocated for Compact ratification. Actually, in the last few days he was seen to work actively to bring around opposition CPN-UML as well as coalition partners to his position.

Equally supportive in the process was Baburam Bhattarai, the leader of Janata Samajbadi Party. Bhattarai’s position on the Compact was consistent: It should be ratified by parliament and the MCC Compact should be kept above politics. He reiterated the same stand during the deliberations in parliament on Sunday. 

KP Sharma Oli, the leader of the main opposition, appeared non-committal after he was replaced by the incumbent Prime Minister Sher Bahadur Deuba in July last year. Oli, and other leaders from UML, blamed Maoist Center for stalling the Compact but fell short of assuring Deuba that they would stand by him. The Compact was registered in parliament when Oli was the prime minister. As the ratification process was underway, the UML lawmakers continued with obstruction of the House proceedings.   

Even though long opposed to the Compact, Prachanda and Madhav Nepal softened their tone and agreed for parliamentary ratification. Unified Socialist leader Jhalanath Khanal and UML leader Bhim Rawal maintained their opposition till the end. They had launched rather aggressive campaigns against the MCC Compact. 

Mahantha Thakur, who was silent about the MCC Compact for a long time, finally spoke about it and advocated for ratification.

Dev Gurung of Maoist Center, perhaps the staunchest opponent of MCC, made a radical shift in the eleventh hour and supported ratification.