• Friday 10th April 2020

Participating in the MCC initiative: Relationship with China must be the overriding consideration

  • Published on: January 15, 2020

  • By Bihari Krishna Shrestha

    Lately, there has been much debate in Nepal, seemingly more in favour and some against, as to whether the country should accept the Millennium Challenge Corporation (MCC) grant of U$500 million for some vital development projects in hydropower and transport sectors. The proposed assistance to Nepal that has been developed over the years is now designed to install 300 kilometers of high voltage power lines including a cross-border transmission line between Butwal and Gorakhpur in India, and to upgrade 300 kilometers of “strategic road network” in Nepal. Clearly, the two projects do constitute much needed high value infrastructure development in Nepal.
    The project is also seen as being extraordinarily attractive, because that that big sum of money is to come to Nepal in the form of grant, and would allegedly spare Nepal, as some protagonists put it, of a possible “debt trap” for Nepal, an allegation that seems directed at China who is accused, particularly in Western and Indian media, of lending money liberally under its BRI initiative only to get the borrower fall into inescapable “debt trap”.
    However, my own experience as a former government official myself who spent many years working with a whole range of donor agencies and their big and not-so-big loans for development projects, has been that all such loans are “debt traps”, though more by default than by design, in that if one ends up misusing them, they fail to generate intended benefits and force us to pay back every cent of such debt not from the promised capital returns of the project but from our chronically meager domestic revenue that further retards our capacity to invest in national development. Such traps occur mainly due our responsible politicians and their bureaucratic subalterns indulge in siphoning off money for personal benefit. However, better governed countries to occasionally borrow money in a big way, restore the health of their economies, and manage to clear the debt on time apparently without any difficulty. There are many such instances, primarily from Europe, the recent big one being Italy who borrowed billions from the IMF and managed to pay it back just a few years later.
    The ongoing lesson for Nepal has been that, more than money, it is the corruption-free good governance conditions that remain the critical factor for Nepal’s development. But that has remained a far cry for us all along so much so that it is nearly impossible to name even one single politician for being incorruptible for sure. As things stand, most of our politicos are, in fact, village Thalus masquerading as politicians and people’s representatives, with the penchant for extraction of resources without accountability to go with it remaining intact. Then, their bhagbanda culture under which politicians in either side of the aisle in parliament get their share in such ill-gotten money–as recently reportedly happened in regard to “Wide body scandal”—make matters worse for our flailing democracy. That has been the reason why Nepal, even after more than half a century of “democracy” and “development” and billions and billions in foreign grants and loans, continues to remain “Least Developed” in the world! While there is nothing in the proposed MCC grant initiative that insulates it from the greed of our corrupt politicos, their near-overwhelmingly support for the MCC even in the face of a very severe difficulty it is likely to create with our northern neighbor, China, point possibly to such greed at work.
    Regarding the MCC itself, it has been some two decades in the making. The US Congress had established it as a free standing, bilateral foreign aid agency designed to apply “a new philosophy towards foreign aid” in 2004, and Nepal had signed the “Compact” in September 14, 2017. While the Indo- Pacific Strategy itself was devised as long ago as 2006/07 to address the challenges brought about by China’s emerging economic and strategic capabilities, the current Indo-Pacific Strategy has taken its current shape only in 2017 when President Trump announced its formulation in the Vietnam Summit. A recent (November 4, 2019) US Department of State publication titled, “A Free and Open Indo-Pacific, Advancing a Shared Vision” has laid out its objective of achieving “Free and fair reciprocal trade, open investment environments, good governance, and freedom of the seas”, and carries the picture of Nepal’s foreign minister, Pradeep Gyawali too shaking hand with his American counterpart, Michael Pompeo on page 11. The fact that MCC constitutes an integral component of the IPS has been more categorically emphasized by the US Acting Deputy Assistant Secretary for South Asia David J Ranz who said during his visit to Kathmandu in May 2019 that “Millennium Challenge Corporation Compact programme was one of the most important initiatives being implemented in Nepal under the US Indo-Pacific Strategy.” Another author, Leigh Hartman, writing in SHAREAMERICA, a site managed by Bureau of Global Affairs of the US State Department, has written in September 2019 that the US considers the IPS as “an ironclad and enduring commitment to” a region that spans from the Pacific Ocean to the Indian subcontinent. The military leaders in the U.S. Indo-Pacific Command themselves informally refer to it as stretching “from Hollywood to Bollywood”, and “As part of the initiative’s security component, the U.S. works with countries in the region on military training and maritime security.” And writing in the Diplomat (June 11, 2019) its senior editor, Ankit Panda has mentioned that the “United States expects (its) allies and partners to shoulder a fair share of the burden of responsibility to protect against common threats.”
    How do the Chinese, our invaluable neighbours, view this US initiative? Opining on the IPS Dingding Chen of Jinan University had written in the international webpage, ISPI, in 2018 that “Chinese scholars believe that the geopolitical changes brought about by China’s rise are the main reason Washington is devoting efforts to boost Indo-Pacific alliances, and the Indo-Pacific strategy is intended to hedge against China’s foreign and security policy behavior.” With IPS’s emphasis on “freedom of the seas” in particular, it has been clear from the outset that the IPS and its earlier versions were initiatives designed to counter and contain China at its own doorsteps.
    This brings us to the fundamental question of this article: Should Nepal as landlocked country between China and India and the victim of India’s recurring blockades among other sadistic torment, be participating in this regional alliance designed to challenge China? In this regard, Nepal should retrospect that while USA has been one of Nepal’s earliest friends it has been more of a fair weather friend. Even as Nepal as a landlocked nation suffered numerous constraints and restrictions of existential significance such as a series of prolonged blockades at India’s hand, America, otherwise the assertive champion of “security, prosperity, democracy, and economic development” which are considered to be the “four pillars of American diplomacy” around the world, never came to Nepal’s aid even when all these four “pillars” were being wantonly restricted by the South Asian behemoth, now itself a very important IPS-ally for the US. While the latest blockade was as recent as in 2015, for the first time in Indo-Nepal relations, India had to go through the untold humiliation of having to withdraw embargo unconditionally and in its place, roll out the red carpet for PM Oli in New Delhi. It was because China opened its welcoming doors to Nepal and promised limitless options in support of Nepal.
    As things stand, China remains the only hedge for Nepal against external interference. Therefore, Nepal must think more than twice before being allured into the IPS alliance due to the promised $500 million. Nepal must not do anything that would hurt or alienate China as our steadfast friend and neighbour to the north. While the Chinese Ambassador to Nepal recently and kindly empathized, through a statement in a local English daily, with Nepal’s acute and continuing need for foreign aid from all possible sources including the MCC, Nepal, for its part, must send a message to China about its abiding loyalty as a friend and neighbor, by staying away from the US-led regional alliance if, as indicated above, Nepal were to be asked “to shoulder a fair share of the burden of responsibility to protect against common threats”, clearly, the ones emanating from China. Thus, the overriding consideration for Nepal’s participation in the IPS-affiliated MCC initiative must be to make sure that Nepal’s relationship with China does not come under suspicion by that neighbor. Since Nepal’s earlier agreement with the US about participating in MCC had predated the conception of IPS, we must be use our own diplomatic skill to participate in the programme in such a way that it insulates this landlocked country from being party to any IPS activities that our northern neighbor might consider to be against its interest.


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