Kathmandu: On August 29, one day before the MMC Nepal Compact reached the entry into force, the United States Embassy in Kathmandu said in no uncertain terms that the Millennium Challenge Corporation (MCC)–the US foreign assistance agency that provided 500 million dollar grant to Nepal–has received the interpretive declaration and that the US agrees with the interpretive declaration.
“MCC acknowledged receipt of the interpretative declaration last year,” said the embassy. “We agree with the interpretative declaration and consider it to be consistent with our understanding of the terms of the compact, including the prevalence of the Constitution of Nepal over the MCC Nepal Compact.”
The interpretive declaration is an addendum Nepal proposed as an amendment to certain clauses of the MCC Compact before the Compact was ratified by Nepal’s parliament in February, 2022.
The declaration avers, among other things, that by being a party to the Compact, Nepal shall not be a part of any United States’ strategic, military or security alliance including the Indo-Pacific Strategy, that the Constitution of Nepal shall prevail over the Compact and other associated agreements and that Nepal shall own and fully enjoy all the intellectual property created under the Compact program.
How and why of declaration
Political parties in power at the time–Nepali Congress, Maoist Center and CPN (Unified Socialist)–agreed on the words of declaration after much deliberation. The US side was sending one after another reminder to Nepal to give Nepal Compact parliamentary ratification by February 28, 2022 but the political parties–Maoist Center and Unified Socialist in particular–pressed for amendment on ‘controversial’ clauses. While some communist forces were outright against the Compact–even launching demonstrations and protests across the country–others looked either confused or non-committal. The Maoist Center–a coalition partner of Sher Bahadur Deuba government at the time–was a more vociferous opponent of ratification without amendment.
Then there was an open objection from the Chinese–who viewed the MCC as part of the Indo-Pacific Strategy or as a counterbalance to China’s Belt and Road Initiative (BRI). The US and China openly engaged in a war of words on MCC in Nepal.
Against this background, some well-meaning minds started to work on the idea that could potentially obviate the geopolitical misgivings the Compact was perceived to have. Then they crafted and forwarded the interpretive declaration to the ruling parties. This is how the interpretive declaration–to which all parties in the government gave a stamp of approval–was born. Without it, the Compact would probably not have been ratified by parliament.
Back then, however, it was thought of as a face-saving tactic of Nepali Congress, whose president Sher Bahadur Deuba was the prime minister, to woo Maoist Center which was consistently opposing the MCC Compact saying that it was a part of Indo-Pacific Strategy of the US and a tool of the US government to checkmate China in Nepal.
However, the document, which brought ruling political actors together to implement the $500 million grant project, was/is interpreted differently by different political actors. While the Maoist Center owned up the declaration, some other leaders, in a rather jeering gesture to Maoists, called it a document of the Maoist Center to appease China, which had shown open displeasure over Compact ratification. Many others interpreted the declaration as a face-saving document, not recognized by the MCC, not recognized by the United States and, thus, of no value.
Dr Minendra Rijal, the Nepali Congress lawmaker, said that the declaration amounts to nothing and it only provides an excuse to the communist leaders to hold on to power. “The interpretive declaration does not amend the Compact. And the US does not need to decide whether to accept it or not,” he was reported as saying. “This is only meant for giving face-saving to the communist leaders.” Similarly, Bal Krishna Khand, who was the Home Minister at the time, commented on the interpretive declaration in a rather mocking tone. Khand said “there is nothing in the interpretive declaration which is not there in the Compact.”
Other Congress leaders like Gagan Thapa, however, attached immense importance to the interpretive declaration. Speaking in parliament during the deliberations on MCC Compact and interpretive declaration on February 27, Thapa, the General Secretary of Nepali Congress, had said if MCC does not accept the interpretive declaration, the Compact won’t move forward.
After ratification, Nepal wrote to the MCC informing that the Compact has been endorsed by Nepal parliament along with interpretive declaration and MCC responded acknowledging the receipt of the letter along the interpretive declaration though this was not brought to the public knowledge back then–probably the reason why some of the communist leaders in Nepal kept saying that MCC has not endorsed the interpretive declaration.
Prime Minister Pushpa Kamal Dahal Prachanda raised this matter on August 29–the day MCC Vice President of Compact Operations Cameron Alford was to arrive in Kathmandu to officially kickstart the implementation of the MCC project. If the interpretative declaration is not made part of the MCC Compact document, the PM said, they would start the street protests. He also said that he would raise the matter with Alford.
Incidentally, the embassy in Kathmandu issued a clarification that the US agrees to the interpretive declaration the same day. It is not known whether Dahal, or any of his ministers, actually spoke to Alford about this matter.
The same day the US embassy also said the following: “The U.S. government is excited by the progress of the Nepal-led MCC Compact–made possible by continuous support from broader stakeholders, successive governments, and political parties over the duration of MCC’s work in Nepal.” “We are committed to partnering with MCA-Nepal to ensure the successful implementation of the Compact. Everyone involved is diligently working together to achieve the Compact’s goals on time,” the embassy said.
One day later, on August 30, the Nepal government and the MCC exchanged the letter on the Entry into Force (EIF) of the Nepal Compact, paving the way for successful completion of Compact projects within a five-year timeline.
Will it help?
Whether the interpretive declaration will really help in the implementation phase of MCC projects will probably be clear in the days to come as the implementation process has already started. But those who follow the issue closely say that the acceptance of the document by the US side is meaningful. It indicates two important messages, said Chandra Dev Bhatta, who is a Kathmandu-based scholar of political economy of international relations. “This shows that Americans are really serious, committed and determined to push the MCC projects to completion within the stipulated five years’ time,” Bhatta further said. According to Bhatta this also indicates the understanding of the US side about Nepal’s geopolitical sensitivity as well as its internal political dynamics. “It also shows that Americans are aware of Nepal’s internal political dynamics and its geopolitical sensitivity,” he said. “The global superpower seems to have realized the possible consequences it would have on Nepal if Nepal fails to strike a fine balance amidst the fleeting geopolitical tug of war between the US and China.”
Binoj Basnyat, geopolitical and security analyst who has been an ardent supporter of the MCC Compact since the beginning, called the statement by the US embassy a positive response to countering misinformation and disinformation floating in Nepal about the MCC. “The US sees MCC as a means to help Nepal achieve prosperity and happiness. The outcomes of the compact will be observed in a few years when people will start to feel comfort while the nation will benefit from prosperity,” he said.
For me, the acceptance of the interpretive declaration by the US side (unless it backtracks) is important for two more reasons.
The interpretive declaration on MCC Compact can also serve as a reference for Nepal to untangle the discord in case any project with geopolitical strings attached has to be moved forward.
First, the non-communist forces in Nepal have been using interpretive declaration as a tool to shame the communist forces. Perhaps to project them as being more loyal to the US than their communist colleagues, non-communist leaders kept saying that the interpretive declaration is meaningless (the truth is nearly every political leader in Nepal, except the radicalists, wants to cultivate the best relations with the US). In this context, the US side seems to be saying it is not a meaningless document.
Second, it might set a wrong precedent to make a similar declaration for every single big project funded by India, the US and China in the future but it can also serve as a reference for Nepal to untangle the discord in case any project with geopolitical strings attached (perceived or real) has to be moved forward with a political consensus.
Will the interpretive declaration really benefit Nepal and the MCC project? Proof of the pudding is in the eating, says an English idiom.