The MCC Compact will benefit NepalWhile Nepal needs to strike a strategic balance, ratifying the Compact will only further its development ambitions.
Nepal agreed to sign the United States’ Millennium Challenge Corporation (MCC) Nepal Compact in 2017. Under the Compact, the US will be providing $500 million in assistance that will help increase the availability of electricity and lower the cost of transportation in Nepal. These investments will help the Government of Nepal better ‘deliver critical services to its people, and open up new opportunities for private investment.’ The aid is bound to provide economic and social benefits to Nepal.
But some ruling party leaders have been expressing reservations, saying the US programme is part of the United States’ broader strategy, the Indo-Pacific Strategy, which they view as Washington’s attempt to counter Beijing and its Belt and Road Initiative. The controversy, which became apparent during the ruling Nepal Communist Party’s weeklong Standing Committee meeting that concluded on Sunday, however, is unwarranted—especially after Nepal has agreed on the investments to be made, and what now remains is for the MCC to be ratified by Parliament.
The MCC did not pass during the previous House session owing to the reluctance of Krishna Bahadur Mahara, who was the House Speaker until early October. The leaders of the Nepal Communist Party, including Bhim Rawal and Dev Gurung, have been asking the government to clarify whether or not the MCC is a part of the Indo-Pacific Strategy. The Indo-Pacific Strategy is a strategic document prepared by the US Department of Defense outlining Washington’s priorities in the region, while the MCC is aid that the US government doles out to selected developing countries after they meet strict criteria. But it must be understood that although the MCC can be thought to be a part of the larger Indo-Pacific Strategy, ratifying the MCC does not mean Nepal has sided with the US at the cost of upsetting China and thereby disrupting the regional balance.
The US is Nepal’s largest donor, and ratifying the MCC will only offer Nepal economic and social benefits. Although the situation has improved from the past, Nepal has still been punching below its weight when it comes to capitalising on its hydroelectric potential. The country’s economic development has been affected for long by chronic electricity shortages.
At present, Nepal’s highest-capacity cross-border transmission line is charged at 220kV, which cannot relay more than 800MW. Should the MCC be ratified, Nepal will then be able to have a transmission line that can be charged at 400kV. This makes new investments to address the inadequate supply of electricity critical to achieving sustainable growth wherein large energy projects will bring in billions of dollars from the private sector, providing the country with a much-needed boost.
But to reap them, the political leadership needs to exhibit clarity to avoid internal contradiction. The US and China are competing for their influence in Nepal. Given that, it is up to Nepal to not succumb to any side and display maturity while maintaining diplomatic relations.
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