It’s time to go for endorsement, effective implementation of MCC: Prof. Dr. Pyakuryal


December 26, 2019


It’s time to go for endorsement, effective implementation of MCC: Prof. Dr. Pyakuryal
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It is said that Nepal applied for Millennium Challenge Corporation (MCC) and after going through various processes managed to bag 500 million dollar project. Now, the main opposition party the Nepali Congress (NC) is insisting to go for instant ratification while the ruling Nepal Communist Party (NCP) seems to be sharply divided on the issue.

In such a situation, the public deserves the information about what actually MCC is, and whether the opposing voices are worth consideration.

Basically, in the country where the foundations of development, whether that is related with energy generation or the infrastructure building of bigger projects, or addressing the basic needs of Nepali of the country by accelerating the economy, the grants or assistance, are based on the fulfillment of such parameters or indicators of the overall trend of development in the country, only the country that meets the donor’s criteria and can assure the donor the domestic needs in short term or long term, can bag such grants. It’s not provided in whims under anyone’s influence.

For example, in the energy sector, as the documents we have received, show US$ per 2.96 billion years has been the gap. In other words, 2.96 billion US$ is our gap in the energy sector until 2020. Similarly, we have to make the investment in the infrastructure sector for the 8-12% growth of the gross domestic product.

The World Bank estimation made a few years back has shown that from 2011 to 2020, Nepal should make 12-18 billion dollars investment in the infrastructure sector every year provided it wants to go with SDGs.

Is Nepal capable to make such an investment on its own? World Bank’s report shows that we have, so far, hardly made up for 10-15% of the required investment. UNESCAP’s reports show that in order to attain SDGs, it’s essential. Around 50% of the countries of the world have said they are incapable of taking it ahead on their own.  Here, Nepal’s gap is already identified, and we comprehend that Nepal lacks the capacity to meet that gap. In this scenario, MCC grant can be a great relief to our economy.

Asian Development Bank (ADB) had conducted a research ‘Nepal’s growth diagnostic study’. I was also involved in the study carried out in 2009. We had imitated the Tree Model to prepare the report.

The model was the latest development of the Harvard university economists of the time. Along with the ADB people, there were some local consultants from Nepal as well. In 2014, the Ministry of Finance itself conducted a study entitled ‘Growth Diagnostic Study’ which then listed the binding constraints of the economic growth of Nepal.

They also mentioned the agriculture sector, energy harness, infrastructure development which we had been telling time and again before.

The US government has consented a grant of a 500-million dollar project under the Millennium Challenge Corporation (MCC). In the due process of discussion of MCC, many experts came to Nepal. The talks were held at different levels on different occasions.

In Nepal, since 2004, we even heard several missions talking about MCC. Since its establishment, the Secretary of the State is the chair of MCC. The program is brought this way.

So far as I know MCC, globally, has signed 37 grant agreements, known as compacts, with 29 countries. Not all  countries which apply for it get selected. When the countries fail to keep their words, they are removed from MCC. There are various criteria for the selection.

The practices and the MCC documents show that MCC is mainly targeting poor but well-governed states with good prospects for poverty reduction through economic growth.

Then comes the question, should it be endorsed by the federal parliament?

In this regard, there are some issues to be considered. We should have gone through the compact in detail while the floor was open for discussion. There were various rounds of meetings, some meant to be discussed on the provisions mentioned in the document itself. We should have raised our reservation, if any, prior to signing the agreement.

If we look at the trend of agreement, there are some ‘negative lists’ included in the bilateral trade, for example, in some of the goods and supplies related with security and environment neither is the external party allowed to be involved in it nor such goods we produce are imported from us.

In this MCC package, which Nepal has agreed to receive contentedly, we have made the commitment to contribute 130 million-dollar and take its ownership. Initially, Nepal had applied for the grant. The grant bears nearly 26% of the total grant the government receives. At the time of agreement, we should have been able to say for the grants like the one provided by MCC, as per our constitutional provision, we need not endorse it from parliament as the cabinet decision suffices here.

While going through it we found that, while in the first phase, prior to making agreement we should not have made the commitment of endorsing it from the parliament of Nepal. When Institute for Strategic and Socio-Economic Research (ISSR) had arranged for the brainstorming in MCC, in September 2019, Randy Berry, the US Ambassador to Nepal had presented a paper.

Some queries raised there were answered by the audience. I had also asked if the provision related to ratification from the parliament was the special provision made in Nepal’s case or it was a common practice. He had responded that every country which wanted the program have endorsed it from parliament and it is not the special condition for Nepal.

Now, there are two things to consider: First, all countries which accept MCC grant should endorse the compact from parliament, had we told that it is not the case to be taken to the parliament endorsement, things could have been different; if all such grants are to be chosen from the parliament, what is a cabinet for?  We should have told that the ministers in the cabinet are also the representatives elected by the people. We did not do it.

Next thing is, if we look at the agreement, under the section ‘Entry into Force’ 7.1, it has mentioned two clauses: “The government will proceed in a timely manner to complete all of its domestic requirement for this Compact to enter into force.”

Next clause says, “The parties understand that this Compact, upon entry into force, will prevail over the domestic laws of Nepal,” which means provided Nepal enters this compact, Nepal’s existing domestic laws shall be superseded. Any agreement that is likely to supersede the existing laws has to, naturally, go to the authority above the cabinet i.e. in Nepal’s case, the federal parliament. Instead of mentioning our line of argument, if any, at the first phase, making a fuss now is useless and not much rational. After all, Nepal is not the only country to endorse it through parliament.

Besides, we have traveled a lot in the direction, another key concern related to the consent of the Indian government is already addressed. There to instead of wondering was it good to bring India in the pact, we should have bothered what will happen if India does not agree in it. Luckily, on 15, Oct. Nepal-India energy Joint Steering Committee (JSC) signed an agreement demonstrating Indian consent; actually, the consent we needed to make transmission line in Indian territory is already provided by the agreement.

Obviously, seeking consent from the stakeholder country while designing a project to make a transmission line is quite natural. It is a precautionary move, which can put off possible objections that, otherwise, could lead to future dispute. Fortunately, it’s already resolved.

Some people are found linking MCC with Indo-Pacific Strategy (IPS) put forward by the US government.  MCC is nearly two decades old now when IPS was initiated in 2018. The US authority, whom we have to consider the key stakeholder, has come to clarify it saying MCC and IPS are different. MCC is not a military strategy, it’s merely a policy.

So, I think without making a fuss about it, it’s time to go for endorsement and effective implementation of it.

(Based on the conversation with Prof. Dr. Bishwambher Pyakuryal, Chairman of Institute for Strategic and Socio-Economic Research)

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