MCC Nepal: A Leap toward Prosperity or a Surrender of Sovereignty?

MCC must come with some amendments and the clauses must be written more clearly, respecting the sovereignty and voices of Nepal or else, the US must keep its popularity by engaging in other philanthropic activities that it has been doing for many decades. Since the US is the global center for democratic values, questions arising over the US are also the questions arising over free speech, independence and democracy that Nepalis strongly believe in.

The United States of America is undoubtedly the most powerful country in the world. It is a symbol of hope, peace and democracy for the entire world - even for the citizens of its adversaries. The US knows this fact and has spent billions of dollars through USAID, UN Agencies, The World Bank, International Monetary Fund and other similar aid agencies for the prosperity of other developing democracies. Reconstruction of the Western Europe after the Second World War through the Marshall Plan can be seen as the best result of US investment in the development of other countries. As a result, the US has been able to form powerful allies with these countries and has been able to dominate the present world and maintain its powerful status.

The US intervention in Western Europe was successful but it failed in countries like Vietnam and Afghanistan. The major reason for the failure in my opinion is the difference in culture and civilization which the US failed to understand. The US has launched the Millennium Challenge Corporation (MCC) for the development of lower income countries and plans to regain its achievement in Western Europe, but the MCC has been a source of major dispute in countries like Nepal. The agenda for development and prosperity has once again turned sour and may backfire as hatred against the US. In this article, I have tried to discuss why MCC is so debatable in Nepal and what could have been done better.

MCC is an innovative and independent US foreign aid agency that is helping the developing countries to fight against poverty through economic development which was created by the US Congress in January 2004 with strong bipartisan support. MCC forms partnerships with some of the world’s poorest countries which are committed to good governance, economic freedom and investments in their citizens. [1] The MCC Board of Directors approved the Nepal Compact Program which includes USD 500 million grants in August 2017. MCC support goes to construct about 300km 400 KV transmission lines along with three substations and maintenance of about 300 km Roads. It is expected that Nepal will be self-sufficient in electricity production, chiefly hydroelectricity, before the completion of the transmission line and Nepal can sell the surplus electricity to India. The completion of this transmission line may also bring international investment worth millions of dollars in Nepal’s hydroelectricity. MCC will provide a grant of USD 500 million and Nepal will invest USD 130 million for the $630 million project where USD 500 million will go to the energy sector and $130 million will go to the roads sector. [1]

Everything looks well and this seems to be a great grant for the development of Nepal but why are there increasing protests in Nepal against MCC and why is the government facing challenges in its ratification through parliament? The answer lies in some of the provisions of the MCC Nepal Compact. Nepal lies between two emerging superpowers India and China and has faced historically many challenges to its independence which makes Nepalis extremely conscious about their sovereign status. The MCC Nepal Compact section 7.1 has a provision that upon entry this compact will prevail over the domestic laws of Nepal and hence, it needs ratification from parliament. [2] Due to this provision, rumors were spread that this compact will prevail even over the constitution of Nepal, which MCC and the US Embassy declined. However, Nepalis worry that this is a controversial clause challenging Nepal’s sovereignty. In Section 6.8, it is clearly mentioned that the US government will bear no liability on loss, damage or even death due to the project and all the officials of MCC will be immune to any legal proceedings in Nepal. As per Section 5, the project can be terminated by both parties with a notice of 30 days.

Similarly, there are provisions in the same section that Nepal may have to repay in case the project doesn’t get completed or there is some damage after being notified from the MCC and provisions for even paying with interest in case there is some delay in the release of 130 million USD from the Nepal side. [2] However, as per section 6.8, MCC and the US government bear no such responsibility. Nepal has to risk 130 million USD if the US exits the project and may have to repay parts or full of 500 million USD if the project gets halted due to some unforeseen circumstances. [2]Like the above interpretations, there have been multiple interpretations as the MCC Nepal compact is written in sophisticated language and there is use of terms having vague meanings.

Recently, several rumors erupted as Nepal is attempting to bring the MCC Nepal Compact to parliament for discussion. There were rumors that MCC is a part of the Indo-Pacific Strategy of the US and the US Army may come to Nepal. MCC and the US Embassy have cleared this rumor. [3] Besides, the Vice-President of the MCC visited Nepal and met the prominent leaders including the Prime Minister and the leader of opposition to clear rumors and doubts over MCC which is an extremely positive step. Despite this, there have been several demonstrations pressurizing the government and political parties to withdraw from MCC. [4] Though MCC is running in around 40 countries with the above-mentioned clauses, it is a burning issue in Nepal because of its geopolitical situation. Nepal is a landlocked country and has to maintain a constant balanced relationship with its immediate neighbors India and China. MCC may appear as a competition to China, which is a well-known adversary of the US, and its Belt and Road Initiative, of which Nepal is already a part. While this initiative has its own risk of Nepal falling into a debt trap, this doesn’t need any parliamentary ratification and doesn’t prevail over the existing laws of Nepal.

The US is involved in several philanthropy projects in Nepal through the USAID and the US Embassy. Besides, thousands of Nepali students travel to the US every year to study in American universities and hundreds of thousands of the Nepali diaspora in the US are contributing to various social and economic reforms. Nepal maintains a neutral and non-aligned foreign policy and has maintained a good diplomatic relationship with the US since 1947. Nepal is a democratic country and Nepalis have fought for decades for free speech, freedom and democracy which aligns with the American values. The US must realize that every country has its own culture, history and geo-political condition and MCC may create tension between Nepal and its northern neighbor China. Nepal is not in a position to be engaged in a geopolitical conflict between the two superpowers since it has to rely a lot upon its northern neighbor due to its landlockedness.

MCC was rejected by Sri Lanka due to issues over sovereignty and it has become highly controversial in Nepal. All this shows the uniqueness of South Asian countries due to their own culture, history and geography. [5] Hence, MCC must come with some amendments and the clauses must be written more clearly, respecting the sovereignty and voices of Nepal or else, the US must keep its popularity by engaging in other philanthropic activities that it has been doing for many decades. Since the US is the global center for democratic values, questions arising over the US are also the questions arising over free speech, independence and democracy that Nepalis strongly believe in.

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