MCC row rocks Nepal’s ruling coalition

Fatema Z Sumar, vice president of the US Millennium Challenge Corporation (MCC), parachuted into Kathmandu on Thursday amidst a firestorm of protest against the project that threatens to divide Nepal’s coalition government.

Together with her deputy Jonathan Brooks, Sumar over the next four days will be meeting Nepal’s top politicians who are for and against the $500 million grant project designed to upgrade Nepal’s electricity grid and highways. 

The visit follows Sumar’s written response to concerns raised by Nepal’s Finance Ministry on 3 September regarding the grant. 

The main objective of the MCC is a 315km transmission line between Hetauda-Damauli-Butwal, important for the distribution of the 3,000MW of electricity that will be added to Nepal’s national grid in the next three years. 

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The discourse surrounding the MCC has been influenced by geopolitical rivalries between India and China on the one hand and between the US and China on the other, with Nepal’s political parties weaponising the project to undermine each other.

Indeed, support for the MCC by K P Oli was one of the issues raised by the five-party alliance that led to his ouster in July, after which Deuba took over as prime minister.

Two months later, Deuba is yet to complete government formation,  and support and opposition to the MCC is now threatening to undermine his governing alliance. The MCC is such a political hot potato that it was not even listed in the coalition’s common minimum program last month despite Prime Minister Deuba being for it.

However, critics including his main coalition partner Pushpa Kamal Dahal of the Maoists and Madhav Kumar Nepal of the Communist Party of Nepal (United Socialist) view the project as part of America’s Indo-Pacific Strategy, and superseding Nepal’s Constitution.

Sumar’s letter attempted to assuage both of these concerns, saying that the MCC is neither a part of America’s Indo-Pacific Strategy, nor is it not above Nepal’s Constitution. However, the response added that the points previously agreed upon would not be subject to amendments, which did little to quell the growing protest, including street demonstrations. 

The delegation led by Vice President Samar met with opposition leader K P Sharma Oli on Thursday afternoon to discuss the project, and is also set to meet with Prime Minister Sher Bahadur Deuba, Finance Minister Janardan Sharma and Energy Minister Pampha Bhusal (both Maoists).

The MCC compact has clauses requiring that it be ratified by Nepal’s Parliament, and that the project be completed five years after the work officially commences. Nepal had committed to ratifying the MCC in Parliament by September 2019, but the process has been deadlocked by the feud in the ruling Communist Party of Nepal while Oli was prime minister.

Lok Raj Baral, Nepal’s former ambassador to India, says that there has been unnecessary over-politicisation of the issue that has harmed Nepal’s international credibility.

"The opposition to the MCC seems to have been led by those in power who were also trying to stop the Arun III hydropower project," says Baral. “That the opinions of individual leaders dominate the discourse over official party decisions speaks to the selfishness of Nepal’s political leadership.”

Former Prime Minister Oli backed the MCC after he took over from Deuba in 2017, but his main party rival Pushpa Kamal Dahal and dissidents from his own UML used provisions in the MCC that they saw as being anti-national against Oli. 

Now, with Deuba being Prime Minister once again, the debate surrounding the MCC is likely to put a strain on his ruling coalition, made up of Dahal’s Maoist Centre and Madhav Kumar Nepal’s breakaway CPN (United Socialist) which are opposed to the project.

On the other hand, the Nepali Congress and another coalition partner Janata Samajbadi Party (JSP)  seem open to ratifying the agreement in Parliament, but they do not have enough numbers in the House for it to be successful. Deuba has been sending feelers to the opposition UML to see if it will back the ratification in Parliament. 

For his part, Pushpa Kamal Dahal has been saying that the MCC is a conspiracy to break the ruling alliance. However, experts see Dahal’s position on the MCC as being inconsistent and opportunistic. He went along with the project, and then weaponised it during his power struggle with Oli.

"It should not come as a surprise to anyone if the ruling coalition collapses because of the MCC,” says political analyst Punaranjan Acharya, who adds that it is not Prime Minister’s Deuba’s intention to go against the agreement, but  that of the “so-called” communist parties in Deuba’s alliance. 

"The prime minister has tried to be transparent regarding the matter,” says Acharya. “The problem is with the double-dealing leaders of the coalition partners.”

Former speaker Krishna Bahadur Mahara, who resigned from his position in 2019 following allegations of rape, said last year in a statement that he had been falsely accused for opposing the MCC. His successor Agni Prasad Sapkota has also blocked the MCC Compact for discussion on the House floor.

Rastriya Janamorcha Party Chairman Chitra Bahadur KC, who is a member of Deuba’s coalition, says that the MCC will not be allowed to reach Parliament, and will not be ratified in the event it is presented before the House. 

“We continue to oppose the MCC, which is not even included in the coalition’s Common Minimum Program,” says KC.

Constitutional expert Bipin Adhikari says it would be ironic if the MCC is not allowed to be presented before the people’s representatives in the House because of the political self-interest of the Speaker and other powerful political leaders.

Other analysts insist that the political process surrounding the MCC should be moved forward in a way that the project is ratified in the House without breaking the coalition and without the party whip being applied.

Read also: Putting the MCC in context, Jeevan R Sharma and David Seddon