MCC Compact Enters Implementation

The long-awaited Millennium Challenge Corporation (MCC) Nepal Compact has now entered its implementation phase. The compact has come into enforcement with its joint announcement by Minister for Finance Dr. Prakash Sharan Mahat and Vice President of the US Millennium Challenge Corporation Compact Operations Department Cameron Alford amidst a function held in Kathmandu on August 30. Six years back, the U.S. Government had inked a $500 million compact with the Government of Nepal to upgrade a certain section of the East-West Highway, increase availability and reliability of electricity and ease cross-border power trade between Nepal and India. Under this compact, a 315-km 400 kV transmission line will be constructed. 

The American support is expected to help boost investments within the country, intensify the process of economic growth and reduce poverty. The MCC Compact was supposed to start its execution on June 30, 2020. However, it could not move ahead as planned because of a prolonged deferral of its endorsement by Nepal’s parliament amidst debate whether it was part of the Indo Pacific Strategy (ISP). As part of the MCC compact, transmission lines linking Lapsiphedi of Kathmandu to Bhumahi of Nawalparasi are being built. Besides, three substations and 856 towers will also be installed. For the transmission lines and towers to be built, a total of 104 hectares of land will have to be acquired in 10 districts. A total of 30 local governments in those districts will have to coordinate with the MCC compact. In addition, in Dang district, 77-km road will be upgraded.  

Parliamentary approval

The compact had received the parliamentary approval about one and a half years back, opening door for the nation to proceed with its execution. The political parties represented in the federal parliament had reached a consensus for endorsing the compact after having discussed the matter extensively. Though the U.S. Government had tried to take the Nepali political parties and their leaders into confidence by clarifying that the compact was not part of any military component, its constant pressure on Nepal to get the support ratified by parliament instantly had created suspicions over the multi-million project. The frequent high-level visits from the U.S. to put pressure on Nepali leaders to forward the MCC compact process had made the people suspect that the compact was not in the interest of Nepal and Nepalis. 

Some political parties had stood completely against the MCC compact since the beginning as they suspected that it might carries hidden geopolitical interest. However, they changed their mentality after the U.S. officials reiterated that it was not related to any military or security plan. They clarified that it was just a grant project aimed at building up infrastructures. 

There is no denying that Nepal is in dire need of grants for infrastructure development amidst a challenging economic scenario in the wake of the prolonged COVID-19 pandemic. Nepal has also committed to contribute $197 million in support of the compact. This is the largest up-front partner country contribution in MCC’s history. The implementation of the $697-million compact for building up such infrastructures is very important. On August 30, the Millennium Challenge Account Nepal (MCA-Nepal) announced the launch of the Entry into Force (EIF), which is a key programme component. That indicates the start of a five-year period for project completion. The task of constructing power transmission lines and road improvement under the MCC Nepal Compact will have to be completed within the next five years in any way.

With insufficient supply of electricity and higher transportation costs to transport goods and people, the country has been going through extensive development challenges. The construction of power transmission lines is anticipated to be helpful for the country to export electricity to India. The southern neighbour has recently agreed to buy 10,000 MW of hydroelectricity from Nepal in the next 10 years. With this development, Nepal is sure to witness massive investments in hydropower plants. Being home to 6,000 rivers, streams and rivulets, the country holds huge hydropower potentials. Once this boundless prospect is tapped properly, this will contribute to leading the nation to the path of development and prosperity. When the use of clean and green energy sources increases, the country can significantly reduce the import of fossil fuels. This may be supportive for the country to achieve the Sustainable Development Goals (SDGs), especially those related to the utilisation of renewable sources of energy. 

In 2022, Nepal and the U.S. marked the 75th anniversary of the establishment of their diplomatic relations. The two friendly nations have come a long way in terms of getting their bilateral ties consolidated. The U.S. is the second nation to have diplomatic relations with Nepal following the United Kingdom (UK). The U.S. supports Nepal in several areas. Nepal has received more than $791 million in bilateral economic assistance since 1951. It is notable that annual bilateral U.S. economic assistance through the U.S. Agency for International Development (USAID), in recent years, has averaged $40 million. Constructing power infrastructures and improving roads under the MCC compact will be an important step towards enhancing the bilateral ties. The two nations have seen robust people-to-people ties with the promotion of bilateral trade and tourism. Although Nepal and the U.S. are not close physically, Nepal hosts a lot of American tourists annually. This directly or indirectly supports Nepal’s economy. 

Crucial matters

As the MCC compact is a landmark U.S. support, it is necessary for all the stakeholders, including development partners, consultants and construction companies to be serious about completing the project within the stipulated timeframe. The political parties should also be sensitive about this. They must stop playing dual role when it comes to the implementation of the MCC compact. Several issues related to the compact such as programme implementation agreement, recognising the transmission lines as national pride project, formation of electricity regulation commission, taking permission from India for the construction of Butwal-Gorakhpur Transmission Line were discussed during the parliamentary approval of the compact. However, other crucial matters ranging from land acquisition, site clearance and use of forests need to be addressed at the earliest in order to implement the compact successfully. 

(The author is a deputy executive editor of this daily.)