From UPSC perspective, the following things are important :
Prelims level : MCC
Mains level : Chinese influence in Nepal
Nepal’s House of Representatives has ratified 500 million US Dollar grant assistance-Millennium Challenge Corporation (MCC) pact along with the “interpretative declaration”.
What is Millenium Challenge Corporation?
- The MCC was founded in 2004 as a US foreign aid agency that acts in accordance with governments that have demonstrated a commitment to good governance, economic freedom, and citizen investment.
- It was envisioned as an organisation that would follow the Paris Declaration on Aid Effectiveness’ key principles.
- MCC works with countries that have been identified as being eligible for assistance to develop programmes that are based on MCC’s purpose of decreasing poverty via economic growth.
- MCC’s results framework, which is based on the fourth and fifth principles of the Paris Declaration, Results and Mutual Accountability.
- It provides a framework for applying the agency’s rigorous methods for projecting, tracking, and evaluating the effects of its programmes.
- MCC uses this framework to address basic questions about aid effectiveness.
Investments made by MCC
- Compact and threshold programmes are the two types of programmes in which MCC invests.
- Compacts are large, five-year grants implemented by an accountable entity established by each partner nation.
- Thresholds are smaller funds focusing on policy and institutional transformation in selected countries implemented by MCC.
The background of the project
- MCC’s partnership with Nepal began in 2011, when the country requested assistance.
- MCC first chose Nepal for a smaller threshold grant, and subsequently in December 2014, for a larger compact.
- Three years later, in September 2017, the MCC-Nepal compact was signed, with the US committing $500 million and Nepal committing $130 million.
- Nepal is expected to generate an electricity infrastructure with 400kVA transmission lines through the MCC project, which will be used to distribute power both domestically and to India.
- Furthermore, the MCC’s implementation could boost the Nepalese economy by increasing employment possibilities and increasing per capita income.
Issues with the project
- It is estimated that if the agreement is not passed by Parliament, the power producers in the country are likely to lose a staggering Rs. 142 billion every year.
- As a result, PM Sher Bahadur Deuba is striving to get the MCC passed in Parliament as soon as possible, even if it means splitting the coalition government.
- In addition, if he fails to get it through Parliament, there is a possible risk of losing his international credibility.
America vs China: Objections around MCC
- The MCC agreement has created a political divide in Nepal.
- The compact has been criticised in Nepal as endangering the country’s sovereignty, integrity, and constitutional autonomy.
- The claim that the MCC agreement supersedes the national charter and shall prevail over Nepal’s domestic laws.
- Many have interpreted this to suggest that the compact replaces the constitution, compromising Nepal’s sovereignty.
- The MCC’s inclusion in the Indo-Pacific Strategy (IPS) is considered problematic for Nepal, as the majority of the country’s political class views the US strategy as anti-China.
India’s role in the ongoing political crisis in Nepal
- Few claim that the electricity generated by MCC will be only for export to India and will not be for the local public.
- As a result, it will not benefit the local economy directly.
- Nepal’s hydroelectric generation potential is huge, with over 6,000 large and small rivers.
- However, through a series of barrages and dams, India has control over the majority of Nepal’s major rivers.
- Nationalists in the Himalayan country have strongly objected to this.
- In Nepal, where India is still perceived as a meddling big brother, its goal of strengthening India’s military capabilities through this agreement to counter China’s was questioned.