Nepal’s MCC Debate Reflects Flaws in Its Decision-Making

The debate over the aid project is not about its contents but about American intentions, the integrity of Nepali leaders, and domestic cost-benefit analysis.

On February 16, Nepal saw thousands of people gather across several cities to protest against the country joining the Millennium Challenge Compact (MCC), a $500 million American grant project. Nepal and the United States signed an agreement in 2017 that would see Nepal use the funds for construction of hydroelectricity transmission lines and upgrading of highways.

The agreement, which has met with fierce opposition, is yet to be ratified by Parliament. The recent protests put off, yet again, Parliament’s ratification of the agreement.

The Compact has divided the nation as few issues have. Local elections are due in two months, but debate over the MCC has overshadowed all other issues. It could lead to the collapse of the ruling Nepali Congress-led coalition.

What the MCC is or entails for Nepal do not seem to matter to those opposing it, as it has become a political and emotional issue. Opposition to the MCC appears to stem from Nepali distrust of the Americans, questions over the integrity of Nepali leaders, and domestic political cost-benefit analysis.

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That said, the nature of the debate on the MCC provides deep insights into Nepali foreign policymaking (or policymaking in general).

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First, the opposition to the MCC is a broader reflection of Nepali skepticism of the U.S., a topic explained in detail by Biswas Baral for The Diplomat. Nepal’s politics has been dominated by center-left forces for the most part since World War II. That was codified in Nepal’s 2015 constitution, which commits Nepal to socialism based on democratic norms. In the training of the cadres and public pronouncements, the Communist parties, which are a major force in Nepal since the 1990s, often refer to the U.S. as an imperialist power.

Skepticism toward the U.S. is also bolstered by the fact that U.S. intervention in many developing countries has not ended well for the target states. Therefore, there is a perception among many in Nepal that greater American engagement will lead to further instability.

Second, the MCC debate highlights the need for clear communication of policies to voters. A major reason behind the current debacle concerning the MCC is disinformation. The letter written on September 29 last year by Prime Minister Sher Bahadur Deuba and Nepal Communist Party (Maoist Center) Chairman Pushpa Kamal Dahal, also know by his nom-de-guerre “Prachanda,” identifies the need to “better inform party members” and “disseminate accurate information to dispel misunderstandings and apprehension” publicly. The lack of communication indicates that those in power either did not trust the public to have a mature conversation or felt that it would not be accepted by the public.

The Americans have not helped their cause either. Some U.S. officials have said that the MCC is a part of the Indo-Pacific Strategy. Critics of the deal have picked up on such statements to argue that the U.S. will place its military in Nepal under the MCC.

Third, the narrative regarding the MCC has almost exclusively focused on what U.S. intentions are. This can be read clearly by the kind of questions that the Ministry of Finance sent to the MCC for clarification. Of the nine questions asked, most related to U.S. intentions. For instance, questions interrogate the basis of U.S claims that its “support under MCC is selfless” or that its interest in Nepal is “not prioritized under military strategy” or Nepal’s strategic location.

These questions reflect the ministry’s thoughts and mirror the public debate. The focus has never been on if or how Nepal can manage the aid in a way that invites minimal U.S. influence.

It is safer to assume that even grants come with strings attached. The relentless focus on the U.S. intentions can be a result of the inferiority complex that Nepali decision-makers have. Some discount the agency of Nepal and argue that the superpower will get what it wants; therefore, it is better to focus on their intentions. Others believe that Nepali institutions are very weak; therefore, Nepalis cannot trust their own institutions to allay fears of American meddling, and hence need to seek assurance from the U.S. itself.

Fourth, and an extension to the third point, the debate shows the lack of faith party leaders have in the Parliament. Since the Communist Party of Nepal-Maoist (now, Communist Party of Nepal-Maoist Center) came into the political mainstream, all major decisions have been made by the party chiefs of a handful of major parties, with the Parliament rubber stamping the decision. Even in the case of the MCC, shuttle meetings continue between the chiefs of coalition partners and the main opposition. The MCC has not been tabled in the Parliament, the sovereign body elected by the people.

Finally, the debate reflects Nepal’s propensity to view every issue from a geopolitical lens. Unsurprisingly, China might have used Nepali skepticism of the U.S. to amplify opposition to the MCC given that China is wary of increasing U.S. engagement in Nepal, its soft underbelly.

However, development does not have to be seen as a geopolitical issue. Economic growth and development are Nepal’s need of the hour. Strengthening Nepal’s capacity and power internally in the long term is critical to reducing external influence. No country has remained poor and increased its autonomy in global affairs. Again, the U.S. might have only worsened the situation when its Assistant Secretary of State Donald Lu threatened that Nepal-U.S. relations would be reviewed if Nepal fails to ratify the MCC (which the U.S. denies).

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The MCC might have strategic implications, but let’s not forget that Nepal signed onto China’s Belt and Road Initiative (BRI), which too has strategic implications, despite Indian and American pressure on Kathmandu to refrain from doing so. It was because Nepalis identified the immediate need for diversifying connectivity that Nepal signed on to BRI.

It is yet unclear if or when the MCC will be ratified. It has sucked the oxygen disproportionately out of other much-needed national debates, and the divisive topic could still shatter the coalition government. The Nepali people are exhausted and united in hoping for a closure to the MCC issue one way or the other.

The debacle of the MCC will end one day in success or failure. If history is any guide, Nepal will not learn any lesson from it and policymaking will continue to be dogged by the same issues stated above.