We want to see parliament ratify MCC at the earliest
Nepal and the United States signed the Millennium Challenge Corporation (MCC) agreement in 2017 to develop a 400KV cross-country transmission line and upgrade a section of road. Attempts to endorse the $500 million grant agreement through parliament-- a key condition for its implementation-- failed to materialize due to sharp differences among the lawmakers of the ruling NCP. There are still no signs that the agreement would be endorsed by the parliament anytime soon. Many in Nepal have described the visit of US Secretary of State Michael Pompeo to the tiny island nation of the Maldives, but not Nepal, during his trip to South Asia, as a sign of the already deteriorating US-Nepal relations, mainly due to failure of Kathmandu to implement the MCC agreement. A section of people have even suggested that Nepal could face punitive actions from the US if the agreement is not implemented. With Joe Biden set to assume the presidency on January 20, some say the US policy toward Nepal vis-a-vis MCC will see some changes. Against this backdrop, Republica’s Kosh Raj Koirala talked to Jonathan Brooks, Deputy Vice-President for European, Asian, Pacific and Latin American Programs in MCC’s Department of Compact Operations.
Intentional disinformation about the MCC has led to widespread and misinformed criticism of some technical clauses of the compact.
MCC’s support is always grant-based. In Nepal, MCC will invest $500 million that the Government of Nepal will not need to pay back
Host country ownership is a core MCC principle. MCC’s approach to country ownership is based on the idea that development investments are more effective and sustainable when they reflect countries’ own priorities and strengthen governments’ accountability to their citizens.
We have many great success stories and even more beneficiary stories that can be found on MCC’s blog.
Will there be any changes in the US policy toward Nepal vis-à-vis MCC in the Biden administration?
MCC’s engagement with Nepal will remain consistent. Since its founding in 2004, MCC has operated through the transition of multiple US presidential administrations. Throughout these changes in administration, MCC’s mission and singular focus -- to reduce poverty through economic growth -- has remained consistent. MCC will continue to engage with Nepal and other countries based on the agency’s country-led, transparent, and accountable approach to foreign assistance.
Ratification of the MCC agreement through parliament has been put on hold for a long time due to intra party differences within the ruling Nepal Communist Party (NCP). How long can the US wait for Nepal to endorse the agreement?
Parliamentary ratification remains a key condition precedent to entry into force. The Ministry of Law and Justice confirmed, through a legal opinion, that ratification is appropriate, and should be completed at the earliest. The ongoing domestic political situation and widespread disinformation about the compact have caused delays to ratification and other project preparation activities, and are delaying the compact’s benefits to the people of Nepal. The government will need to demonstrate strong public support for the compact and the MCC partnership because the availability of MCC grant funding is not open-ended.
How is the US assessing the opposition to and controversies surrounding the MCC?
False information surrounding the compact has been pronounced and unfortunate in Nepal. MCC certainly welcomes fact-based discussions as a part of the aid transparency for which we have been widely recognized as a global leader among development organizations. As is the process with all MCC programs, the compact projects were selected based on a joint analysis conducted by the Government of Nepal and MCC and were identified by Nepal to be critical to the economic growth of the country. True to MCC’s value of host country ownership, Nepal proposed the projects to MCC, after collaborating on a constraint to growth analysis and conducting extensive consultations with the private sector, civil society, and other government stakeholders. To design the compact projects and negotiate the terms of the compact prior to signing, MCC worked with all major political parties and their successive governments throughout compact development from 2012 to 2017. Through this process, MCC garnered support from the leadership of all major political parties. However, intentional disinformation about the compact has led to widespread and misinformed criticism of some technical clauses of the compact.
A section of analysts in Nepal argue that the decision of Secretary of State Michael Pompeo to visit a small island nation like the Maldives, but not Nepal during his recent trip to South Asia shows the US does not value Nepal much. This has also been interpreted as the testimony to how the US continues to see Nepal through New Delhi's lens. Have the Nepal-US relations been affected due to delay in endorsement of the MCC agreement?
The United States and Nepal have enjoyed a close and positive relationship for 73 years. That will continue to benefit both nations for years to come. As for the Secretary of State’s travel itinerary, we would refer you to the Department of State.
What happens to MCC if Nepal fails to ratify this on time? Some in Nepal argue that the US could take some punitive actions like sanctions against Nepal.
Rumors of sanctions and punitive actions are false. The real and gravest consequence of the delay is the denying of economic opportunity to an estimated 23 million Nepalis through a program designed to be led and implemented by Nepal.
MCC and the Government of Nepal jointly designed the program and have signed it. The ratification of the compact rests with Nepal, as the next step for implementation to commence.
Many in Nepal see the MCC projects as a counter-response to China's BRI. How are the MCC projects different from the BRI projects?
There is no connection between the MCC and the BRI. MCC was founded in 2004 and has been working in partnership with the Government of Nepal since 2012, prior to the BRI. Moreover, the projects of the Nepal compact were selected based on the constraint to economic growth in Nepal, and follow a process that is unique to MCC.
First, MCC’s support is always grant-based. In Nepal, MCC will invest $500 million that the Government of Nepal will not need to pay back – as long as the grant funding is used in accordance with the Compact agreement.
Secondly, MCC is very selective and only works with the best-governed countries in their respective income category because good governance is foundational to economic growth. MCC transparently identifies such countries through a yearly public score card with 20 indicators that measure a country’s policy performance in economic freedom, rule of law, and investing in people. In 2014, when Nepal was selected for the compact, it passed 14 indicators, and today it passes 15.
Third, MCC works alongside the partner country to identify, develop, and implement projects that will reduce poverty and spur economic growth. For example, the compact’s Electricity Transmission Project and the Roads Maintenance Project were selected based on joint consultation between MCC and the Government of Nepal for their ability to address the constraints to economic growth in Nepal.
Finally, because MCC is committed to transparency, we make our compacts publicly available. MCC has been at the forefront of promoting transparency in international development. Among its accomplishments, MCC ranked #1 among US government agencies and #7 amongst nearly 50 organizations in Publish What You Fund’s 2020 Aid Transparency Index.
There are reports of Sri Lanka's reluctance to implement the MCC. There are also reports coming in from China that MCC isn't beneficial to host countries. How do you respond to such understanding?
It is unfortunate that a baseless and deliberate disinformation campaign targeted at MCC has led to a widespread misunderstanding of our work. The MCC model is successful because we work in close coordination with partner countries, support partner country ownership, and only select projects that are necessary to address the binding constraints to economic growth. The notion that MCC is not beneficial to host countries is extremely flawed. In fact, based on the success of the MCC’s model, every country that has been eligible for a second compact has requested it. The MCC has worked with 14 countries on second compacts.
The situation in Sri Lanka is unique. MCC developed the grant in close coordination with the former government. However, during the run up to the 2019 presidential elections, the grant was used as a political target by the then-opposition to spread disinformation about the former government and the US government’s intentions. The new government has not substantively engaged the US government on the grant and to date has not demonstrated the country ownership that is necessary to enable compact success. Just like in Nepal, partnering with MCC to pursue the country’s economic development priorities is the government’s decision, but the availability of MCC grant funding is not open-ended.
Why is host country ownership important to MCC?
A starting point for MCC grants is that MCC’s partner countries should exercise ownership over the compact. Host country ownership is a core MCC principle. MCC’s approach to country ownership is based on the idea that development investments are more effective and sustainable when they reflect countries’ own priorities and strengthen governments’ accountability to their citizens. Country ownership is embodied in all of MCC’s partnerships. In close consultation with citizens and civil society, partner countries exercise the values of host country ownership by championing the projects, leading project coordination, implementing MCC-funded programs, and being accountable to domestic stakeholders for making decisions and achieving results.
Which are some of the MCC’s greatest successes?
Since its founding, MCC has invested over $13.5 billion in threshold and compact programs in nearly 50 countries that have provided economic benefits to millions of people. As a result, we have many great success stories and even more beneficiary stories that can be found on MCC’s blog.
The $140 million Georgia Compact II closed in 2019 and will equip more than 1.7 million Georgians with better education and training over the long-run, increasing workforce capacity in fields critical for economic growth. Through this compact, 91 public schools were fully rehabilitated benefiting approximately 40,000 Georgian schoolchildren. In addition, 18,000 teachers, 2,000 principals and 2,100 school-based professional development facilitators nationwide were trained in instructional and management skills -- representing nearly every public secondary school Science, Technology, Engineering, Math (STEM), and English teacher and school principal in the country. The compact also developed 51 Technical and Vocational Education and Training (TVET) programs at 10 education institutions. Finally, the compact introduced internationally accredited bachelor’s degrees to three Georgian public universities and funded the rehabilitation and construction of modern lab and classroom facilities. This was Georgia’s second compact and built on the success of Georgia’s 2005 Compact with MCC, which rehabilitated 220 kilometers of major sections of highway that connect the capital, Tbilisi, to an under-served agricultural corridor in the country’s southwest, improved energy and water security, and supported small and medium enterprise development in the agriculture and tourism sectors.
Côte d’Ivoire is another great example of country partnership. In 2013, soon after coming into office, President Ouattara established an office specifically focused on passing the MCC scorecard, because at the time Cote d’Ivoire passed only 4 of the 20 indicators on the scorecard and was not eligible for an MCC compact. With concerted effort, in two short years Cote d’Ivoire passed 10 of the 20 scorecard indicators and became compact eligible. In 2017, MCC signed a $524.7 million compact with the Government of Cote d’Ivoire to support the country’s efforts to address key binding constraints to economic growth through investments in the education and transportation sectors.
What is the state of MCC investment in the Asia-Pacific Region?
MCC has invested nearly $3 billion in 11 countries in Asia and the Asia-Pacific, several of which are second compact countries. In 2006, MCC signed its first compact in Asia with the Government of Vanuatu and its first threshold programs with the governments of Indonesia and the Philippines. Then a year later, in 2007, it signed a compact with the Government of Mongolia.
MCC has continued to work in the Asia-Pacific, developing second compacts in Mongolia and Indonesia, a new compact in Timor-Leste, and a threshold program in the Solomon Islands. In 2017, MCC signed the first compact in South Asia with the Government of Nepal.