Controversy Around $500Mn MCC grant to Nepal
- Nepal’s House of Representatives has ratified 500 million US Dollar grant assistance-Millennium Challenge Corporation (MCC) pact along with the “interpretative declaration”.
What is Millenium Challenge Corporation?
- 2004: MCC was founded as a US foreign aid agency that acts in accordance with governments that have demonstrated a commitment to good governance, economic freedom, and citizen investment.
- Vision: an organisation that would follow Paris Declaration on Aid Effectiveness’ key principles.
- MCC works with countries that have been identified as being eligible for assistance to develop programmes that are based on MCC’s purpose of decreasing poverty via economic growth.
- Results framework: based on fourth and fifth principles of Paris Declaration, Results and Mutual Accountability.
- Provides framework for applying agency’s rigorous methods for projecting, tracking, and evaluating the effects of its programmes.
- MCC uses this framework to address basic questions about aid effectiveness.
Investments made by MCC
- Compact and threshold programmes are the two types of programmes in which MCC invests.
- Compacts: large, five-year grants implemented by accountable entity established by each partner nation.
- Thresholds: smaller funds focusing on policy and institutional transformation in selected countries implemented by MCC.
The background of the project
- MCC’s partnership with Nepal began in 2011, when Nepal requested assistance.
- Nepal was granted smaller threshold grant, and later in 2014, for a larger compact.
- September 2017 : MCC-Nepal compact was signed, with US committing $500 million and Nepal committing $130 million.
- Nepal is expected to generate electricity infrastructure with 400kVA transmission lines through MCC project
- It will be used to distribute power both domestically and to India.
- MCC’s implementation could boost Nepalese economy by increasing employment possibilities and increasing per capita income.
Issues with the project
- If agreement is not passed by Parliament, power producers are likely to lose Rs. 142 billion every year.
- As a result, Nepal PM trying to get it passed in Parliament as soon as possible, even if it means splitting coalition government.
- If he fails to get it through Parliament, there is a possible risk of losing his international credibility.
America vs China: Objections around MCC
- MCC agreement has created political divide in Nepal.
- Compact has been criticised in Nepal as endangering country’s sovereignty, integrity, and constitutional autonomy.
- There are claims that it supersedes national charter and shall prevail over Nepal’s domestic laws.
- MCC’s inclusion in Indo-Pacific Strategy (IPS) is considered problematic for Nepal, as majority of country’s political class views US strategy as anti-China.
India’s role in the ongoing political crisis in Nepal
- Few claim that electricity generated by MCC will be only for export to India and will not be for local public.
- As a result, it will not benefit local economy directly.
- Nepal’s hydroelectric generation potential is huge, with over 6,000 large and small rivers.
- However, through a series of barrages and dams, India has control over majority of Nepal’s major rivers.
- Nationalists in Himalayan country have strongly objected to this.
- Nepal, where India is still perceived as meddling big brother, its goal of strengthening India’s military capabilities through this agreement to counter China’s was questioned.