To be or not to be, that is a question and the current theme of the Millenium Challenge Corporation (MCC) Compact’s future in Nepal. Rumors, misinformation, and skepticism have marred the ratification of the MCC compact document that was signed in September 2017. MCC is a U.S.Foreign Assistance agency formed in January 2004 which resides under the US Department of State (DOS). Since the inception of MCC,it has awarded more than $13 billion in time-based development grants to 51 countries in agriculture and irrigation, anti-corruption, education, energy and power, finance and enterprise development, health, land rights and access to land, transportation infrastructure, and water supply and distribution. One of the implementation grants, Compact is a five-year larger grants program that is awarded after MCC has undergone multiple steps of assessment based on their eligibility criteria. Once a low-income and lower income country is identified as a candidate country, it must be approved by United States Congress. Since the development fund is provided by the American people, the selection of the candidate country and the details of the development funds are made public for 90 days in the federal registrar. A scorecard is then developed and published subject to the country selection criteria and methodology and availability of foreign assistance funds. Once the MCC Board of Directors approves the final selection of the country for assistance and based on the agreement of the selected country, the appropriate grant document is signed. The scorecard for Nepal in 2017 shows trade policy, gender in economics, assess to credit, and government effectiveness at 50 or less percentage which establishes the fact that Nepal certainly requires donor support in Economic and Finance development assistance. The data is derived from various independent international ad multi-national sources such as World Bank, IFC,WHO,Brookings,etc.
MCC and the Government of Nepal signed the compact agreement in 2017 contingent upon ratification by the Nepal parliament. Per Section 2.2 of the compact, it covers financial and procurement activities, administrative support activities, monitoring and evaluation activities, feasibility, design and other projects preparatory studies and actives, and other compact activities as approved by MCC. Since then, the MCC compact has been a political hotbed and multiple sources of speculation in Nepal. The ruling communist party and then President were at odds regarding the compact. First, it was viewed as part of the US Indo pacific strategy and above Nepal’s constitution, which MCC has clarified in writing, however; it did not persuade the government of Nepal and the effort was futile. Another speculation was US Army and/or Defense will be stationed in Nepal once the compact is in its full force since it will take precedent over local laws. First, MCC does not have any purview of the Department of Defense. Furthermore, deploying a defense team to a sovereign is not the objective of compact goal or development funds as approved by US congress unless it is to provide defense aid. Secondly, there is no such precedent in other MCC countries. Section 6.4 of the signed agreement on MCC’s website, specifies that the agreement is an international agreement and will be governed by international laws. As such, it will neither be governed by US laws nor the laws of Nepal. The compact is no different than any other bilateral or donor fund agreement. Other countries have successfully implemented the MCC programs including another land-locked country, Mongolia.
Since 2017,Nepal has continuously changed hands with the multiple ruling political parties while inflation is substantially increased, and GDP has declined in the country. It is also speculated that the ruling communist party philosophically aligned themselves with China and the deadlock in the parliament for the compact may have been caused by their political maneuvering. Additionally, Nepal has signed a Belt and Road Initiative (BRI) loan agreement with China in 2017 to operate railways from China to the northern part of Nepal and build highways. Unlike MCC compact document, the signed BRI agreement is not in the public domain and thus, it cannot be dissected. BRI has been in controversy as a debt trap by various other countries as such loan agreements generally are concession contracts under which the revenue from the road taxes and tolls will be used to offset the loan amount over a period. While the country has functioning roads and transportation, it may not be able to collect revenue from it. It does not seem logical that Nepal accepts a loan from China or any other country but not a grant from a US development agency. Moreover, this situation is shedding light on the dysfunctional aspect Nepal government’s decision-making process and the government is losing international credibility on this matter. Hence, the Nepal government should make this a priority and act in good faith instead of making it a “hot potato” or “political soccer”. Given the current protests in Nepal, the government should raise public awareness within the Nepali public about the intent of the compact and how it will potentially bring development results to the country since the majority of the public appears to be disillusioned about MCC’s core objectives and its intended development .
Priyanka Nepal Thakuri
freelance contributor /Contracting Professional USA.
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