There is genuine interest among some public intellectuals in Nepal to further clarify a few of the provisions of the compact signed by the Millennium Challenge Corporation (MCC) and the Ministry of Finance. There has been some outrageous speculation about the agreement that seems to have captured the Nepali imagination.
While due diligence over MCC’s engagements in Nepal started in 2012, it only became a conspicuously contentious issue within the ruling Nepal Communist Party (NCP) in late 2019. Some of the central arguments against the MCC are based on groundless assumptions at best, and outright lies at worst.
As a result, there has been a surge of viral YouTube videos, newspaper op-eds and social media posts which fail to take basic facts available in the public domain into account. This is an attempt to set the facts straight.
Knowing what’s good for Nepal, Editorial
Myth #1 Against Nepal’s sovereignty
When loss of sovereignty is raised as an issue, what it actually means in practical terms for Nepal often goes conveniently unexplained. Over the last 15 years, MCC has signed 47 compacts (agreements) and 32 threshold programs in 49 countries. There are only 78 low and lower-middle income countries, a crucial eligibility criterion for MCC funding. Several countries that availed of MCC support have now graduated to upper-middle income category. But did the 49 countries representing well over half the population of the developing world compromise their sovereignty by engaging with the MCC? Paranoia in Nepal sometimes mimicks the isolationism of North Korea.
In contrast, a more prosperous Nepal actually translates into a more sovereign Nepal. Domestic electrification and earnings from hydropower exports would actually make Nepal healthier and wealthier, and give it more maneuvering space during negotiations in the future.
But the leaders’ reaction to the MCC exposes their lack of faith in Nepal’s sovereignty. Some of them claim that if Nepal follows through on the MCC, it will lose favor with China. Nepal is portrayed as utterly helpless to the whims of global power politics — especially when China, India and the US are concerned. If leaders truly believe in sovereignty, they would pursue choices that suit Nepal’s national interests, which means being less poor through self-reliance in energy.
Own goal, Kunda Dixit
Myth #2: American military presence
Graphic images circulating on social media of American soldiers manhandling civilians is the most outrageous anti-MCC messaging. This has actually caught the imagination of a segment of Nepalis, polarizing opinion. But the fake information was never countered. The MCC’s own Act in the US as well as Article 2.7 of the compact with Nepal explicitly forbid MCC funds being used for military, police or militia activities. Further, any serious observer of geopolitics pertaining to China and India knows that neither would allow a third country to establish a military base in Nepal. Mongolia, similarly sandwiched between two powers, China and Russia, has benefited from MCC grants twice, without any hint of US military engagement.
Myth#3: Why ask India?
Anti-India rhetoric is the best ticket to popularity for any politicians in Nepal. It would be illogical for any government in Nepal to not take New Delhi into confidence before embarking on construction of a cross-border transmission line that goes through Indian territory. It would be absurd for Nepal to build a transmission line up the border with India with no guarantee of it connecting to the Indian grid to sell surplus energy. Indian assent was sought, and received, only for this segment, not the entire compact.
Nepal now has to balance not just India and China, but also the West, Bhairaja Panday
Myth #4: Nepal can do it itself
Some experts casually suggest that Nepal could self-fund the transmission lines, and does not need MCC help. Pinning one’s hope on a Nepali state that failed to even procure medical equipment worth $10 million for the COVID-19 emergency is unrealistic. Our state is venal and incompetent. Nepal also has multiple, additional needs. The $500 million that Nepal would have to spend on the transmission line could be used for health and education. In 2020-2021, the federal government expects to raise only Rs890 billion in revenue whereas its recurrent expenditure bill is nearly Rs950 billion. Forget capital spending, we will need to borrow even to cover salaries, allowances, grant transfers, and social protection payments.
And look at the utterly disappointing performance on large projects like Melamchi, Kathmandu-Tarai Expressway, fast track of the Nepali state, even on lesser ambitious infrastructural undertakings including transmission lines.
If Nepal is vying to achieve middle-income status by 2030, it has to bolster its energy security. MCC promises to help Nepal achieve that within the next 5-7 years. Nepal is the third-poorest country in Asia. Existing infrastructure projects take a decade or more to complete from conception to completion. The Melamchi Drinking Water Project, funded by a loan from ADB, has taken more than 20 years and is still not finished.
There is not a single large-scale project infrastructure project in Nepal that has ever been built on time and on budget. The MCC’s insistence that the projects need to be completed within five years, or else the money is repatriated, is an unprecedented disciplining device. It be argued that this specific consideration is for our own good.
Nepal in 2030, Sanghamitra Subba
Historian Yuval Noah Harari writes, ‘Some fake news last forever.’ Even if the MCC is ratified by Parliament, many Nepalis who believe the nationalistic misinformation will feel disillusioned. Some will still refrain from changing their hard-held positions despite evidence to the contrary.
How the public discourse around MCC unfolds raises questions about the maturity and credibility of Nepali society. Are we, too, in post-truth politics where emotions trump facts? While it is a mark of vibrant democracies to air and debate dissent and discontent, we must move to healthier ways to resolve differences. Cool reasoning has to prevail over incendiary rhetoric.
Thirty-three months after signing a solemn international treaty, if Nepal’s ruling Communist Party feels it no longer needs international help for problems, it can make that call. A more prudent approach would be to seek assurances in an ‘explanatory note’ on a few clauses that have aroused passion. For example, MCC has already shared an aide memoire in 2017 that the compact will never be above Nepal’s Constitution.
The current toxic political environment is jeopardising Nepal’s standing in the world for reckless intra-party posturing. Can we even expect fair discussions over MCC if it is tabled in the Federal Parliament? Who should we expect the arbiter of facts to be when leaders themselves are propagating misinformation?
Read also: Why there is no foreign investment in Nepal, Nepali Times
Nirnaya Bhatta is a scholar at the Lee Kuan Yew School of Public Policy, National University of Singapore. These are his personal views.