The $500 million American grant under Millenium Challenge Corporation (MCC) is intended for a major electricity transmission project for domestic electricity distribution and export to India. MCC, which is an independent U.S. foreign assistance agency, provides time-limited grants for promoting economic growth and poverty reduction.
Critics in Nepal claim that the grant is not in Nepal’s interest and it encroaches on Nepal’s sovereignty. They say that the MCC Nepal Compact is a treaty and cannot be cancelled. They also say that Nepal will be beholden to India as the project requires India’s approval.
MCC Nepal Compact is not a treaty, it is a bilateral agreement. It can be cancelled by Nepal without cause with a 30-day notice.
India’s approval is not required for the entire 400 km transmission project. It’s approval is required only for border crossing at Butwal-Gorakhpur corridor. Bilateral agreement is required for linear infrastructure projects that cross international borders anywhere in the world.
Critics also claim that Nepal can easily raise the required money for this project domestically and the project can be completed by Nepal without American cooperation. Melamchi Water Supply Project took 35 years to complete, with feasibility studies and environmental impact assessment conducted in the mid-1980’s. Compare that with MCC’s 5-year project timeline within which the transmission project must be completed.
The critics also forget that bilateral and multilateral international cooperation and negotiations are what drives growth and achieves economic efficiency. No country can live in isolation, much less achieve economic growth. All major infrastructure projects in Nepal were possible with international cooperation.
The bilateral diplomatic relation between Nepal and the United States, established in 1948, is Nepal’s oldest formal bilateral relationship. It is older than the relation with India (1950) and China (1961). The U.S. has been a steady partner in Nepal’s economic growth. The MCC grant will only be another major step in furthering that relationship for Nepal’s economic growth.
Ajay Pradhan works as Senior Policy Advisor for treaty negotiations of Government of Canada and has worked as Canadian Government’s team lead for major and mega linear and non-linear infrastructure projects in western Canada. He received a master’s degree in resource economics and policy from Duke University, USA and lives in Vancouver, Canada.
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