Indecisiveness On MCC Nepal Compact

Hira Bahadur Thapa

In today’s political debate, no issue related to Nepal’s foreign aid has become as controversial among country’s leaders as the Millennium Challenge Corporation grants. The decision to urge the donor government to provide the amount was taken by our leadership several years ago. To recall its historical background and scrutinise the rationality of delayed parliamentary ratification of the MCC Nepal Compact is the purpose of this piece. The grants agreement was signed between the duly authorised authorities of Nepal and the US on September 14, 2017 in Washington DC.

Any foreign aid-related decision of the government falls under the country’s sovereign authority. This is why whether a particular aid being provided is to be accepted or not is the sole prerogative of the government in power. Such assistance, however, has to be guided by the principle of benefit to the people, whose representative government decides on behalf of the country.

Viewed from this standpoint, it is immaterial to argue who the signatory is. The signer is not doing it in her or his individual capacity but is representing the government. In international parlance such signature obliges the governments that succeed to uphold the agreement to eschew chaos in inter-state relations. Generally, governments are expected to abide by the agreements made by their predecessors though there may be rare exceptions of withdrawal from the same citing national interests. Should the signatory government deem it necessary to pull out from the agreement, both advantages and disadvantages arising from the decision need to be weighed upon carefully.

Background
Before delving into the question of if years of indecisiveness on the part of Nepal government concerning ratification of MCC Nepal Compact is reasonable, it would be in order to explore the background that finally persuaded the Millennium Challenge Corporation, a US foreign aid agency set up in 2004, to recognise Nepal government’s adherence to the rule of law, good governance and democratic principles. The US government aid regime has some guidelines. Additionally, they have some criteria to determine whether a requesting MCC partner country meets them to qualify for the aid.

First and foremost, the recipient should be in the category of low-income countries. Their policies are too scrutinised before deciding about eligibility for MCC grants. Ever since Nepal and the US established diplomatic relations in 1947, the former has received aid from the early 1960s in rural development, among others. The Government of Nepal first approached Washington for assistance in 2006, when the country had just transitioned from armed conflict to restoration of democracy. Notwithstanding Nepal’s urgent need for foreign assistance to rebuild infrastructure, the request could not elicit favourable response from the US side showing concern for stability in the country in the immediate aftermath of a decade-long conflict.

The government of Nepal again lobbied for the aid in 2008. Its objective was to get the air for help the country build its capacity in order to deliver critical services to its people after the first democratically elected government came into power following the general election. Then the expectation was that Nepal’s request would be entertained as the country had successfully completed the peace process and a government committed to democracy and rule of law was at the helm of affairs. But disappointedly, the US government declined again explaining the lack of a democratic constitution that upheld the internationally honoured principles of rule of law and good governance.

Finally, with years of agonising negotiations among the major political parties of Nepal, a democratic constitution was promulgated in 2015 that paved the way for the country’s partnership with the MCC. Nepal’s consistent efforts to obtain the grant assistance of $500 million testify that all governments since 2008 have their own contributions to the agreement. The agreement requires Nepal government to commit an additional $130 million of its own funding - making the largest upfront country contribution in MCC’s history - a testament to Nepal’s commitment to partnership with the MCC.

Because the grant assistance was requested from our side, Nepal government presented its two topmost priority projects on electricity transmission and transport sector. Nepal’s development was constrained by low energy supply and high transport costs. Being the world’s second most potential energy producer ironically Nepal was facing long hours of load-shedding that affected daily lives of the people besides inhibiting economic prosperity.

Energy infrastructure
As hydropower projects have proliferated in recent times resulting in abundant energy production more than the country consumes especially during rainy seasons, it is imperative for Nepal to develop infrastructure like transmission lines to enable her to export extra power to India, where there is high demand of power in summer. The losses to the tune of millions of rupees incurred by our electricity authority for not being able to export the additional hydro power underscores our urgency to complete the transmission project under proposed MCC compact, which focuses on completing a segment of Nepal’s 400 KV East-West transmission line and the Nepal portion of the second cross-border line with India, totalling approximately 300 km of power lines.

Similarly, in the transportation sector, the MCC Nepal Compact includes investments that will strengthen the road maintenance regime which is particularly important to the movement of goods and people in a landlocked, mountainous country like ours. Therefore, two major infrastructure priorities of Nepal make the hallmark of MCC. In the wake of clarifications provided by the US side as per our request, there is no logic whatsoever to get the issue of sovereignty overblown and deprive Nepal of an opportunity to build her capacity through the delivery of critical services to the Nepali people, that will in the long run benefit economy, regional security and broader global community. Let sense prevail among our political masters and build consensus among them to take a prudent decision because continued indecisiveness about the MCC Nepal Compact will put our credibility as a reliable partner at stake.

(Thapa was Foreign Relations Advisor to the Prime Minister from 2008-09. thapahira17@gmail.com)