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mcc: Chinese shadow looms large over Nepal delaying US-financed MCC initiative


The political gridlock in Nepal over implementation of the US-backed $500 million ‘Millennium Challenge Corporation-Nepal (MCC-Nepal)’ project could be because of China’s influence, ET has learnt.

The US and Nepal had signed an agreement for ‘MCC-Nepal’ in 2017. But even nearly five years since then, political parties in the Himalayan nation are sharply divided on whether to accept the US grant assistance under the MCC agreement or not. The matter is under consideration in the country’s House of Representatives.

Ironically, MCC is being implemented without approval of Nepal’s parliament so far.

The Communist Party of Nepal–Maoist Centre (CPN-MC) and the Communist Party of Nepal–Unified Socialist (CPN-US), which are coalition partners in the Nepali Congress, have raised strong objections to the MCC in its current form. They allege that MCC with a military component will infringe on Nepal’s sovereignty. However, the MCC offers little scope for change.

Sources told ET that China may have influenced some of Nepalese parties to reject MCC. Alluding to the alleged active role played by the Chinese envoy to Kathmandu in 2020 in Nepal’s politics to keep the Oli government afloat, they said China could be apprehensive that MCC might undermine its Belt and Road Initiative (BRI) projects in Nepal.

MCC is a grant in aid, wherein Nepal gets $500 million for infrastructural projects, as against Chinese aid which has hidden costs.

ET has learnt that the infrastructural projects envisaged under MCC are India-Nepal cross border connectivity projects, including roads and a transmission line.

The transmission line is across a location wherein Nepal has hydro-power projects and thus it would be able to export electricity to India in due course, according to people familiar with the matter. The projects would predominantly be executed by Nepali contractors and workers, thus generating local business and employment.

Rejection of MCC would tantamount to refusing a substantial amount of money at a time when Nepal’s economy is suffering due to the pandemic, rising energy prices, and recession in the Gulf and other destinations from where migrant workers contributed to the country’s exchequer, according to an expert on Nepal’s foreign policy who did not wish to be named.

As Nepal has already used some of the money under MCC for infrastructure projects, it would need to return it to the MCC and also finance these projects through the country’s exchequer. This is likely to delay the project indefinitely on account of funds and feasibility, like some past projects–Melamchi Water Project, Postal Roads, Fast Track, Airports in Pokhara/Bhairawaha and Nijgadh and Budhigandaki Hydropower Project.

Rejection of MCC might also influence the US and other development partners of Nepal to slow down their aid to the Himalayan state, experts said.

The US and its allies like the UK, EU, Israel, Japan and South Korea give preferential treatment to Nepal Army in training and in UN Peace Keeping duties, both and which may get impacted in if MCC is rejected, alleged an expert.

Compared with China, Nepalese get work permits, scholarships and even residency permits in the West and the Gulf.


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