Dr . Balmukunda Regmi

Nepal has seen much debate regarding her participation in the Millennium Challenge Corporation (MCC), a US foreign aid agency, and China’s Belt and Road Initiative (BRI). Participation in BRI is relatively smooth, as there are no conditions for the implementation of BRI projects. Nor did it require the approval by parliament of recipient nation. Though Nepal had sought the MCC grant for the infrastructure development of transmission lines and road, both the national priority areas, the country has been divided whether or not to accept the MCC. Given that no voice against the MCC was raised in early days, that the governments under five prime ministers had sought to get the grant, and that the MCC projects are already underway, the split in Nepalis’ views, especially among the leaders and lawmakers of the ruling Nepal Communist Party (NCP) has brought Nepal not only embarrassment but also exposed it to the risk of losing international confidence regarding our commitment to good governance, treaties, policies and transparency.
Concepts
Chinese President Xi Jinping had first floated the concepts Silk Road Economic Belt and the 21st Century Maritime Silk Road during his visits to Kazakhstan and Indonesia in 2013. The BRI upholds the principles of extensive consultation, joint contribution, and shared benefits. In 2018, President Xi called for advancing the initiative with a shift from making high-level plans to intensive and meticulous implementation, so as to realise high-quality development, bring benefits to local people, and build a global community of shared future.
In 2004, the US Congress created the MCC with strong bipartisan support. MCC is changing the conversation on how best to deliver smart US foreign assistance by focusing on good policies, country ownership, and results. MCC forms partnerships with some of the world’s poorest countries, but only those committed to good governance, rule of law, civil liberties, political rights, freedom of information, control of corruption, economic freedom and investments in their citizens. There are two primary types of MCC grants: compacts and threshold programmes. Compacts are large, five-year grants for countries that pass MCC’s eligibility criteria. Threshold Programmess are smaller grants awarded to countries that come close to passing these criteria and are firmly committed to improving their policy performance. Currently, MCC has signed 37 compacts worth more than $12 billion with different countries. The grants support agriculture and irrigation, transportation (roads, bridges, ports), water supply and sanitation, access to health, finance and enterprise development, among others.
The then Sushil Koirala-led government made a commitment to join the BIR one year after China launched it. Pushpa Kamal Dahal Prachanda-led government had signed an MoU on joining the BRI in 2017. The MoU envisions mutually beneficial cooperation between Nepal and China on the economy, environment, technology, and culture. Major areas of cooperation are policy exchanges, financial integration as well as infrastructure, trade, and people-to-people connectivity.
A joint communique released during President Bidya Devi Bhandari’s participation in the second Belt and Road summit in April, 2019 stresses building the Nepal-China Trans-Himalayan Multi-dimensional Connectivity Network, including the Nepal-China cross-border railway. In October same year, Xi Jinping stated that Nepal and China are strategic partners. Under BRI, Nepal agreed to work on $ 2.75 billion trans-Himalayan connectivity network for the construction road/tunnel from Kerung to Kathmandu and also for conducting a feasibility study for the construction of railway line. China pledged to extend the Lhasa-Shigatse railway up to Kerung and further to Kathmandu and other parts of the country.
Four of the 20 agreements have strong security components that aim at developing greater engagements between the security agencies of the two countries, particularly among the police forces, intelligence outfits, border management organisations and the law enforcement authorities. Whether the projects to be implemented under the BRI framework run under Nepali rules and regulations or will be limited by Chinese terms and conditions is unclear. Nepal seems less interested in the projects coming through the loans.
Our cooperation with MCC began in 2012 when Prime Minister Dr Baburam Bhattarai and Minister for Finance Barsha Man Pun were informed about the progress made in the sector, leading to the nomination of the head of Foreign Aid Coordination Department as Information Officer to coordinate with MCC. After going through negotiations by governments under Khila Raj Regmi, Sushil Koirala, KP Sharma Oli, Pushpa Kamal Dahal Prachanda, and Sher Bahadur Deuba, Nepal finally signed the MCC Nepal Compact in 2017. Nepal is receiving $500 million US grant with Nepal adding to $130 million to the bilateral fund.
Regarding MCC, the Chinese ambassador to Nepal Hou Yanqi said, “We noticed from the media that political parties, government and parliament are now discussing about ratification of MCC. Beijing welcomes any economic assistance that Nepal accepts by standing on its own feet”.
US stand is expressed by Acting Deputy Assistant Secretary of State for South Asia David J Ranz, “Our approach to the Indo-Pacific is not about imposing our agenda on other countries or asking them to side with us rather than other neighbours. The United States is not asking Nepal to be “for” the United States or “against” any other country.” While both the US and China have strategic views, none has opposed our cooperation with the BRI or MCC.
Nepalis are suspicious of powerful countries. We perceive threats everywhere. We are afraid of Chinese “debt trap” that the BRI can create and US “occupation” that it may reinforce through the MCC. There are players camouflaged as “nationalists” whose job is either to support or oppose the US or Chinese interests. They invent “conspiracy theories” to create confusions and conflicts. The others buy their stories and help them amplify.
Under the BRI, Nepal does not get free aid. But we can select the projects as per our needs. We can reject the idea of any kind of loan. MCC is an economic aid to Nepal. If executed properly, the MCC helps in the development of infrastructure in Nepal, and it will leave no conflicts after the projects complete in 2025.

Nepal’s position
Nepal should commit to non-alignment foreign policy, welcome economic assistance coming through both MCC and BRI and safeguard national interests with focus on transparency and accountability. It is wise for us to take grants and Foreign Direct Investment and allow investments only in priority areas so that it will promote productivity, environment, employment, sustainable development and social harmony.

(Regmi is a professor at Tribhuvan University and a researcher at Charhar Institute, China)