वि.सं २०७८ असोज ३ आइतबार फोरेक्स युनिकोडमौसम

Ratification Imperative for  MCC Compact Agreement

Ratification Imperative for  MCC Compact Agreement

The MCC assistance from the United States of America  appears to have been originated in response to the UN general assembly’s declaration of Millennium Development Goals (MDG) in 2000 with targets to combat poverty, hunger, disease, illiteracy, environmental degradation and for gender equality and emphasis on human rights, infrastructure development and improvement in living standard. There was also an emphasis on development partnership with aid from developed countries to achieve the goals in developing countries. After  the conclusion in 2015, MDG was succeeded by the UN adoption of Sustainable Development Goals. I recall my participation representing Nepal in the UN International Conference 2002 on Development Finance in Monterrey, Mexico participated by heads of UN, World Bank, IMF, WTO and over 50 heads of state/government and 200 ministers. While addressing the conference, US President George Bush made commitment to raise US development assistance by 50 percent with additional $5 billion annually through millennium challenge accounts (MCA).

Subsequently the Millennium Challenge Corporation(MCC) was established by US Congress in 2004 as foreign aid agency for bipartisan aid to promote economic growth,  poverty reduction and strengthening institutions. MCC  provides grant to low-income and lower-middle income countries through competitive selection based on specific criteria and indicators regarding  demonstrated commitment to democratic rule, economic freedom, good governance, civil liberties, political rights, funding for education, child health and human development. As of September 2017, MCC had partnership with 46 countries around the world including Nepal after selection  from among much larger number of candidate countries.

The reality is that  diplomatic immunity covers MCC officials located in the US embassy but not to non- diplomatic  officials recruited for project execution in the field. Such diplomatic immunity  is generally provided to senior officials of other bilateral and multinational bodies with respect to acts performed by them in official capacity.

The threshold phase of MCC was approved for Nepal in 2011 at the government request which was followed up by  diagnostic study  that concluded  energy and transport sectors as binding constraints for higher economic growth for which large scale Compact assistance was required.  In 2014 MCC approved  to support Compact program with a grant between  US $300 and 700 million. MCA Nepal office was started in 2015 with national experts that conducted  detailed feasibility studies for specific projects for negotiation. The Compact agreement was signed in September 2017 with the allocation of $500 million MCC grant and $130 million domestic counterpart for the identified energy and road development projects. The energy component comprises of 400 KV  power  transmission line of 312 km length starting from northeast of Kathmandu at Lapsifedi to the west and southern side including Kathmandu-Ratmate-Damauli-Butawal, also Ratmate-Hetauda with  three major sub stations, and  cross border transmission line from Butawal to Gorakhpur of India. The transportation project includes repair and upgradation of certain portions of East-West highway.

There has been involvement of each Nepal government and political party while in power seeking MCC assistance from the beginning. But unfortunately the Compact agreement signed in September 2017 is yet to be ratified by parliament as required for every Compact aid receiving country, despite  Nepal’s  prior commitment to ratify it by September 2019.  There had been dispute against the agreement  by a section of the previous ruling Communist Party of Nepal resulting in the obstruction to its presentation for parliamentary ratification. The obstruction stems from  various false criticisms based on political prejudice, confusion, falsehoods and misinterpretation of the Compact agreement.

False Criticisms

The critics consider the MCC project as a compromise to national sovereignty misinterpreting the project agreement as US laws prevailing over Nepali laws, and calling MCC as  part of Indo Pacific  strategy  (IPS) of USA with military alliance.  Sovereignty means the supreme power of the state within the territory, with authority to govern the country  free from external control. This argument that  MCC undermines national sovereignty is totally false, as the agreement is related to purely development assistance project and its implementation without any intervention to state authority. There is no component of military or any strategic alliance as part of MCC . There is no need at all for the country to be a member of IPS.

The critics tie the MCC with the IPS pointing out a comment reportedly  made by David Ranz, an  acting deputy assistant secretary of USA state  department for South Asia during Nepal visit in 2019 indicating the US grant under MCC as part of IPS that  seems to have  a economic wellbeing objective also in addition to security and governance components. Although there is no connection between MCC and the Indo Pacific strategy, it is incorrect to conflate the MCC assistance to promote economic growth and poverty alleviation as being the same as economic wellbeing component of IPS.  The Compact agreement prohibits  the use of grant aid for security training, military related activities and  affecting environment  and maternity. The MCC program of USA was started much earlier in 2004 and Compact agreement was signed with Nepal in 2017 before IPS which was announced only in 2018. Obviously MCC that has global scope cannot be considered as a part of IPS with security component. The critics also consider MCC  as  counterweight to China’s Belt and Road Initiative. But MCC agreement does not comprise of any element opposed to any particular nation including China. China’s closest neighbor Mongolia has also benefitted from MCC Compact assistance.

The Compact assistance is the largest grant Nepal has ever signed. The need for parliamentary ratification of the agreement is to ensure legal status for the provisions of Compact agreement in case of contradiction with internal regulations. In this context there is confusion about US laws  to prevail in Nepal. It must be understood that Ministry of law in Nepal has given clearance to the agreement, as MCC guidelines, not necessarily US law, applies with respect to MCC assistance only to prevail in case of contradiction  with local regulations, as applicable in all recipient countries.

The procurement  and manpower appointment for the project  are  based on open competitive  bidding to ensure greater efficiency and timely project completion. With respect to assistance projects from other development partners also like  World Bank and ADB,  procurement and other implementation guidelines  are defined which do not often conform with domestic regulations. The procurement guideline based on global competitive bidding under MCC project is uniquely favorable compared to most other bilateral grant assistance that limits the procurement from the donor country.

There has been involvement of each Nepal government and political party while in power seeking MCC assistance from the beginning. But unfortunately the Compact agreement signed in September 2017 is yet to be ratified by parliament as required for every Compact aid receiving country, despite  Nepal’s  prior commitment to ratify it by September 2019.  There had been dispute against the agreement  by a section of the previous ruling Communist Party of Nepal resulting in the obstruction to its presentation for parliamentary ratification.

There are also other false criticisms  of the agreement  in relation to the need for Indian approval to a project component, project management by MCA, audit authority and  intellectual property right about the project, ownership and control of the power transmission line and land, and other issues.

The objection on the need for Indian approval for a project component  is not justified.  The Indian support is needed only for the use of 120 km Indian territory starting from the Nepal-India border to install cross border transmission line from Butawal to Gorakhpur. which will facilitate    large scale  export of power to India being  generated  in Nepali river corridors. This will encourage public and private investment in major clean energy power projects.

There is also confusion about  MCA Nepal   that is responsible for project management. The critics interpret it as under MCC management without any control from the Nepal government. The agreement has clearly mentioned about government’s principal responsibility for overseeing and management of the program. To that end, the government has formed  MCA-Nepal under Bikas Samiti Act, with board of directors chaired by Finance Secretary and memberships comprised of officials from other relevant ministries and national institutions.  The MCA is empowered to oversee, manage and implement  the project and related activities  on behalf of the government. While MCA recruits manpower with open competitive bidding including foreign nationals for the project as per the agreement, the appointment of senior MCA staff is the government responsibility.

The critics consider the intellectual property right of the project as monopolized by MCC. But Nepal has the intellectual property right relating to project implementation based on project monitoring of design, procurement, construction and other related issues. There is no need to give intellectual property right to MCC on the use of Nepali  contribution of $ 130 million, while there is no restriction to Nepal in providing the right with regard to the use of COMPACT grant. The report based on project monitoring and evaluation with intellectual property implications  can be made open through website.

There is also confusion about audit authority with respect to the project.  Nepal’s Auditor General has the right for periodic auditing with respect to funds contributed by both  Nepal government and MCC grant. In addition, the government can also permit auditing on the use of MCC grant to be conducted by an independent auditor approved by MCC and named on the list of local auditors approved by the auditor general or a US certified accounting firm selected in accordance with MCC guidelines.  The critics  also think of MCC control of transmission line and the used land until uncertain period  which is untrue. These assets are under government ownership and control during project implementation and afterwards.

While the agreement contains provision  permitting  either side to withdraw from the project with prior notice of 30 days, the critics think the withdrawal right limited to MCC side only. Exchange of letters will be required for any change in project scope. They also think MCC can unilaterally amend the agreement which is not correct. Amendment to MCC agreement is possible with written agreement. There is also allegation  of  diplomatic immunity to MCC staff for any harm in course of project implementation. The reality is that  diplomatic immunity covers MCC officials located in the US embassy but not to non- diplomatic  officials recruited for project execution in the field. Such diplomatic immunity  is generally provided to senior officials of other bilateral and multinational bodies with respect to acts performed by them in official capacity.

Conclusion

The MCC Compact assistance  represents purely an economic development  project of Nepal to accelerate  economic growth and  reduce poverty with sustainable development by addressing infrastructural constraints particularly in energy and transport sectors. The project will increase the supply of electricity and lower transportation costs thereby  promoting higher investment, employment opportunities, revenue and economic growth. The construction of high voltage power transmission line covering  major part of the master plan to evacuate power generation by various major projects will  enable power distribution and large scale  export trade.

There has been involvement  of  each government  in the past  to receive MCC assistance in the process of threshold stage and compact agreement . The MCC projects were chosen by Nepal government itself after detailed studies. The approval by USA based on competitive selection was in recognition of Nepal’s democratic rule, civil rights, economic freedom, anti corruption and governance laws and human investment.  In the pure economic interest of the country there is the need at present to avoid further unnecessary delay for  parliamentary ratification of  the agreement.

The COMPACT agreement was signed in 2017 by a coalition government led by Nepali Congress with NCP-Maoist partnership, which was  almost like the present  government. There is an expectation of  parliamentary ratification of the agreement soon, as the opposition party NCP-UML is also supportive to the agreement. There is not any aspect in the Compact  agreement that undermines our constitution, foreign policy, autonomy and national interest. Given the criticisms against the agreement based on prejudice,confusion and misinterpretation, clarification can be sought from relevant authorities on any aspect.

पहिलेको भन्दा अहिलेको संविधान प्रगतिशिल छ : मुख्यमन्त्री शाही

‘संविधान पुनरावलोकन गर्ने समय आयो’-विज्ञहरु

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