Saturday, 2 December, 2023

MCC In The Soup

Uttam Maharjan

The Millennium Challenge Corporation (MCC) compact, an aid package of the United States of America (USA) designed to help poor countries in infrastructure development and poverty alleviation, has faced difficulties in being implemented in Nepal since the taskforce headed by the ruling party Nepal Communist Party (NCP) leader Jhalanath Khanal submitted its report to Prime Minister KP Sharma Oli and co-chair Pushpa Kamal Dahal Prachanda. The taskforce comprising former Prime Minister Khanal, Minister for Foreign Affairs Pradeep Gyawali and leader Bhim Rawal had to be formed to study the MCC compact amid widespread controversy and criticisms besetting it.

Unusual findings
The taskforce did make some unusual findings after 20-day of research. One of the prominent findings is that the MCC compact has a clause according to which the New York laws will be applicable to the dispute or any other matter regarding the projects run under the MCC. This is a grave matter, which transgresses the sovereignty of the country, forcing it to keep itself under the jackboots of the USA. The team has also come up with other findings which are deleterious to the country. That there are some sub-compacts, hidden or otherwise, within the main compact that are against the national interests of the country is not a small deal.
The MCC compact was signed between the Government of Nepal and the US government in September 2017 during the premiership of Nepali Congress leader Sher Bahadur Deuba. When the compact was signed, there was no hullabaloo and most people were also unaware of it.
The MCC compact is a bilateral aid package of the USA for Nepal, wherein the USA will provide the country with a grant of US$ 500 million and the country will bear an amount of US$ 130 million. This amount will be spent on developing road networks and transmission lines. All was going on well in the right direction when some officials from the USA said that the MCC compact was tied up with the Indo-Pacific Strategy, indicating that the compact would involve the country in the US military alliance designed to encircle China. Being a member state of the Non-Aligned Movement, Nepal cannot enter into any such alliance with any other country.
As controversy over the MCC compact flared up, the American embassy had to make it clear, inter alia, that the compact was not part of the Indo-Pacific Strategy and that the compact did not carry any military component. The clarification shows that there is no harm in accepting the compact.
Chairman of the taskforce Khanal has questioned how the Nepali Congress government signed the MCC compact. The question is very pertinent but it may be noted that Prime Minister Oli had said even before the report of the taskforce was out that as soon as the House Speaker submitted the compact to Parliament, it would be endorsed. This shows that the Prime Minister is determined on endorsing the compact under any circumstances. He did not deem it necessary to wait for the report. If so, why was the taskforce formed in the first place?
The taskforce has recommended that the MCC compact should not be implemented in its present form. Some contentious clauses like that relating to the application of the New York laws must be amended before endorsing the compact. But the USA is not in favour of any amendment at this juncture. The USA reasons that as the compact was already signed and is awaiting endorsement by the parliament, it cannot be amended. However, the majority of parliamentarians, including those of the ruling party, are unanimous in endorsing the compact after making amendments to contentious or undesirable clauses in the compact.
In the recent past, some US officials associated with the MCC compact also visited the country and held talks with the leaders and staffers of the MCA-Nepal, the organisation set up to implement, monitor and supervise the projects under the MCC. Such visits were taken by some as pressure by the USA on the government to endorse the compact.

Clash of interest
Now, there is a clash of interest between Nepal and the USA. So the USA has said that as the MCC compact cannot be amended, the country can let go of it. Thus, the country can quit the compact. It may, however, be kept in mind that the USA is an important development partner for the country as the latter has received magnanimous aid from the former. So it needs to be mulled over whether rejection of the compact may affect the 'aid relations' between the two countries. At the same time, it will not be prudent to accept any aid that may harm the country's sovereignty, independence and territorial integrity.
The MCC compact should have been thoroughly discussed and deliberated upon among the leaders, experts and other stakeholders before signing it in 2017. As per the report of the taskforce, the compact seems to have been signed on an ad-hoc basis by the government without going into details about its contents. Although the compact was signed by the Nepali Congress government, the NCP government is equally eager to endorse it at any cost. Now, the government has found it heavy going to endorse the compact as it is inasmuch as even most leaders of the ruling NCP are not in favour of endorsing the US grant in its current form. So it behoves the government to take pragmatic decisions before accepting it.

(Former banker, Maharjan has been regularly writing on contemporary issues for this daily since 2000. He can be reached at