Hari Prasad Shrestha
Nepal entered in a critical stage of foreign relations after granting unexceptional strategic leverage to the US and China as it has already approved Belt and Road Initiatives (BRI) of China. And now, after five years of ambiguity, its House of Representatives (HoR) ratified a much debated and controversial compact between Government of Nepal and the US Millennium Challenge Corporation (MCC). Nepal, a yam between two boulders, fell into a trap of big powers games. Both superpowers are well familiar with the strategic importance of Nepal.
On 20th February 2022, the government of Nepal presented MCC, a half-billion-dollar aid grant from the United States for approval in parliament, triggering a fresh round of violent clashes between protesters and police outside the legislature. After thorough discussion in the House of Representatives on 27 Feb 2022 HoR ratified the MCC Nepal Compact by including Interpretive Declarations. Besides original agreements, the interpretive declarations are:
(a) Nepal shall not adhere to any strategic, military or security alliance of the US, Indo-Pacific Strategy included, by being a party to the MCC pact. (b) Nepal will not comply with United States’ laws and policies – present or future – for purposes other than those related to the funding.
(c)Nepal, through the document, has declared that activities corresponding to MCA Nepal (Millennium Challenge Account Nepal Development Board) will be regulated by laws of the country and the compact, pursuant to Section 3.2 (b). (d) Furthermore, Nepal and not MCC will enjoy ownership of or rights over intellectual property of programs created under the compact, with reference to Section 3.2 (1) of the agreement.
(e) Likewise, pursuant to Section 3.5, Implementation Letters shall be implemented within the compact’s scope. (f)Nepal declared that audits of all MCA-Nepal related activities and funds of MCA-Nepal would be conducted by the Office of the Auditor-General as per prevailing laws of Nepal – wrt Section 3.8(a). (g) The right to terminate the compact/funding following a 30-day written prior notice, should its activities violate Nepal’s existing laws, will be reserved by Nepal – wrt Section 5.1 (a).
(h)The interpretive declaration postulates that compact-provisions that survive after the expiration, suspension or termination of agreement will be relevant to outstanding fund-use including evaluation of the projects, audits, tax-settlement – wrt Section 5.5. (I) Additionally, the Constitution of Nepal shall prevail over the compact and the implementation of projects under the Compact will correspond with existing laws of the land, in accordance with the compact – wrt Section 7.1.
(j) Nepal government will own the Electricity Transmission Project including all movable and immovable assets, associated lands included – wrt Section 8.1. (k) Finally, the declaration states that Nepal understands the responses in the MCC letter received on September 8, 2021, will support interpretation and implementation of the compact.
As Nepal has already accepted China’s BRI and it would have been problematic if it does not accept the MCC and some observers indicated possibility of deterioration in Nepal’s credibility internationally, adverse action on large bilateral projects and hesitation of development partners to provide large development assistance to Nepal.
Prior to MCC ratification, Nepal suffered a lot from internal and external pressures and literal scuffle between the US and China were also subject of disquietude for it.
According to media reports, Nepal experienced some sort of pressures from the US and at the same time, China had an impression that it was blamed by the US for inciting commotion in Kathmandu Street against MCC. And the reaction of Chinese authorities, by supporting anti-MCC forces, were also no different from the US pressure.
As per reports, US Assistant Secretary of State Donald Lu had raised the issue during his separate telephonic conversation with Prime Minister Sher Bahadur Deuba and other ruling leaders.
It is said that Lu warned that “if Nepali political leadership failed to endorse the MCC compact grant within the stipulated deadline of February 28, the US would be forced to review its ties with Nepal”.
Countering it, Chinese Foreign Ministry Spokesperson Wang Wenbin said China opposes “coercive diplomacy,” during a press conference, commenting on news that the US urged Nepal to endorse the Millennium Challenge Corporation (MCC) by February 28.
At the same time, the US embassy in Nepal has rejected reports suggesting America is threatening Nepal to ratify the proposed grant assistance under the Millennium Challenge Corporation (MCC).
Furthermore, Chinese Foreign Ministry Spokesperson Hua Chunying said China opposes “coercive diplomacy” and will support the Nepalese people to choose their own development path as always, during a press conference. Hua made the remarks responding to the controversy that the US urged Nepal to endorse the Millennium Challenge Corporation (MCC) by February 28.
How could a “gift” be sent by an ultimatum? How could people accept such a “gift”? Is it a “gift or a Pandora’s box? Is it afraid that just as the old Nepali saying goes, it looks delicious, but it’s actually a meat tough to chew, Hua said.
In response to the media queries about the views appeared in various media on the Millennium Challenge Compact assistance to Nepal, the Official Spokesperson of the Ministry of Foreign Affairs stated:
“Nepal has always been pursuing an independent, balanced, and non-aligned foreign policy. In pursuant to this policy, as a sovereign country, Nepal has accepted and utilized development assistance as per her national requirement and priority. Development assistance has played an important role in the building of infrastructures and development in Nepal. The Government of Nepal remains grateful to our neighbors and those friends with whom Nepal has traditionally been enjoying strong partnership and cooperation as well as regional and multilateral development partners, including the United Nations for their continued support to the socio-economic development of Nepal. Decision to accept development assistance is taken by Nepal in terms of our national interest and priority. The sovereign parliament of Nepal alone decides what development assistance is needed in the best interest of Nepal and Nepali people. We sincerely hope for continued goodwill of our friends.”
It is well known to all that the relation between the US and China is full of strains and complications. There is no doubt that currently Biden’s policy towards China contrasts with Trump’s sometimes-hawkish approach, he would keep China in check by strengthening ties with U.S. allies. As China’s growing economic and military power has been big challenges for both India and the US, India is playing a lead role under US Indo-Pacific Strategy in the South Asia region to encircle China.
Obama’s strategy of “returning to the Asia Pacific,” shifting a focus which had been on Europe for 200 years, to Asia, the strategy was later rephrased as a “strategic pivot” and finally a “rebalancing”. Behind the US adjusting its global strategy to return to the Asia-Pacific is the rise of China. However, looking back, the “rebalance to Asia-Pacific” strategy cannot be called a success. It not only failed to contain the rise of China but also deepened China’s strategic mistrust of the US, which is against its interests.
Millennium Challenge Corporation’s Nepal Compact is a compact between the US Millennium Challenge Corporation (MCC) and the government of Nepal. The agreement was signed in Washington DC in September 2017; then Finance Minister of Nepal, Gyanendra Bahadur Karki, and then US deputy Secretary of State, John J. Sullivan, were present. MCC would provide $500 Million to be used for building transmission lines and for maintenance of highways; Nepal would contribute $130 Million to the projects.
The projects will complete within five years. The Electricity Transmission Project intends to build 318km long 400KV transmission line with three high-capacity sub-stations, to more efficiently transfer power. The Hetauda–Damauli–Butwal transmi
The Road Maintenance Project is intended to improve the maintenance of about 300 km. of the East–West Highway will be improved and maintained. Millennium Challenge Account–Nepal is the government agency in charge of managing the compact in Nepal. Its executive board is chaired by the Secretary of the Finance Ministry.
The reasons behind delay in endorsement from the Nepal HoR, was that both Nepalese and the US authorities were also responsible, somehow by making compact controversial with their statements. Moreover, Nepal’s major political parties signed and accepted the MCC when they were in government and now their irresponsible character and policy instability played big role to make it more complex, such behaviors could have damaged the remains of Nepal’s foreign policy and credibility of nation internationally. It would have been better; they should have discussed with all political parties by receiving their consensus before signing the compact!
Thee compact became controversial in Nepal after then Deputy Assistant Secretary of State for South Asia David J. Ranz said that the MCC compact was a vital part of America’s Indo-Pacific Strategy. And, the Millennium Challenge Corporation is not a grant was confirmed by US Ambassador Randy Berry in a TV interview,” he said “If it were an investment, they would ask for a return or profit or dividend. Why should Nepal take such investment at the price of antagonizing China?”
At the same time, there was valid reasons for Nepal to be scared with as the US had a history of using Nepalese soil against China.
Dalai Lama, after he flew away to India, was strengthening his military, they were called Khampa, were terrorizing people in Nepal and trying to assault China from entering through Nepal borders.
Kathmandu-based American mission also provided weaponry and financial assistance to Khampas to foment terrorist activities against the Chinese army in Tibet. After strong protest from China in 1974 and under a pact between Nepal and China, Nepal Army disarmed and killed many of the Khampa leaders in a conflict.
Another factor, which was a matter of concern – India and the United States signed a basic exchange and cooperation agreement for geospatial cooperation, a major defense pact for the exchange of classified geospatial intelligence between their armed forces amid India’s growing tensions with China. It will permit the U.S. armed forces to provide advanced navigational aids and avionics and share geospatial intelligence to India that will help boost the accuracy of the Indian military’s automated hardware systems and weapons such as drones, cruise missiles, and ballistic missiles.
A big section of Nepali people and political parties were against endorsement of MCC. No political parties and political leaders except Nepali Congress were openly in favor of the compact, while many leaders in other parties were seen playing dual cards, based on their political profit and losses before its endorsement from the parliament.
Divisions were high in Nepal over this compact. The opponents of the MCC argue that the aid from the United States is to limit Chinese influence in the region and consider a part of the US Indo-Pacific Strategy (IPS). However, its supporters completely disagree with such saying that the compact has no such words or intentions.
Before tabling MCC in the parliament, government of Nepal felt necessary to clear all the controversies and concerns raised by Nepali political parties and the people as well. As MCC has refused to made amendments to its compact once signed with the government. However, it answered all the queries of Government of Nepal through exchange of different letters.
Nepal Minister of Finance Janardan Sharma on Sep 3, 2021, wrote a letter to MCC Washington DC requesting clarification on different controversial issues in the compact and on Sep 8, 2021, on behalf of MCC headquarter Fatema Z. Sumar, replied by a letter about the queries of the finance minister.
Moreover, on September 29, 2021, a letter jointly signed by Prime Minister Sher Bahadur Deuba and Former Prime Minister Pushpa Kamal Dahal had promised to “jointly request the speaker of the House of Representatives to plan for the tabling of the compact for the ratification as soon as possible.”
Likewise, they had also stated that they would “discuss the clarifications received from the MCC with all the coalition partners to better inform our party members” and “use government of Nepal resources to communicate publicly with the Nepali people and state the government’s support for implementing the compact and to dispel misunderstandings and apprehensions about the compact.”
Responding it, Acting Chief Executive Officer of MCC Mahmoud Bah wrote a letter to Prime Minister Sher Bahadur Deuba and his coalition partner CPN-Maoist Centre Chair Pushpa Kamal Dahal on February 3,2022 that the MCC meeting of March 2022 would decide whether to provide additional time to Nepal to ratify the compact or lose $500 million MCC grant if it failed to endorse the deal by February 28.
Being a neighbor of India and China, the small landlocked Himalayan country, Nepal’s strategic importance is on rise not only for the neighbors but also for the US. Nepal and the US have excellent relations despite some traditional divergences – especially on the Tibet matter.
Apart from BRI and MCC, Nepal is receiving external assistance in considerable amounts. No country in the world has been well developed only through bilateral and multilateral external assistances. Role of internal players, well organized resources and stability are more important than the externalities. External assistance are means not end.
In current changed global and regional power plays, Nepal is not able to be aligned with only one superpower. External assistances have now become more political and strategic commodities rather than earlier economic one. As the US through MCC and China through BRI have stepped up their strong presence, there are high possibilities of both risks and opportunities for Nepal. Its result depends on Nepal’s diplomatic capabilities and policy stability. If it handles both the countries in balanced manner, it will bring a lot of opportunities for Nepal to transpire of vicious circle of poverty and instability. On the contrary and if handles in status quo manner, and fail to balance the world powers, it could likely to be perpetual playground for great-power contestation.
Source: The Diplomat