Nepal House sits for crucial MCC vote

As Nepal’s Parliament finally sits on Wednesday to try to ratify a controversial and long-delayed American infrastructure project, parties opposed to the $500 million scheme are determined to block it.

[UPDATE: After the Maoist parliamentary party decided on Wednesday morning to vote against the MCC, the scheduled session of the House has been postponed. Maoist leader Pushpa Kamal Dahal met Prime Minister Deuba to explain the move. If the Moaists vote against the ratification, it would effectively mean the collapse of the current coalition government.]  

Despite Prime Minister Sher Bahadur Deuba having said at a parliamentary party meeting of his Nepali Congress on Tuesday that the Millennium Challenge Corporation (MCC) would be tabled when the Lower House convenes. 

Deuba also spoke with Speaker Sapkota regarding the compact on Tuesday. Sapkota, an ally of the Maoist Centre’s Pushpa Kamal Dahal, has postponed parliament meetings multiple times ostensibly to prevent discussions about the grant in the House from moving forward.

Dispute over the MCC within the five-party alliance has in recent times threatened to dismantle the fragile five-party governing coalition. Prime Minister Deuba’s NC, whose 2017 coalition government concluded the agreement in Washington DC to upgrade Nepal’s electricity grid and highways, has been in support of getting the project ratified.

However, Madhav Kumar Nepal and his breakaway NCP (Unified Socialists) and Pushpa Kamal Dahal, whose Maoist Centre was part of Deuba’s coalition when he signed the agreement in 2017, have been vehemently opposed to the project.

Last week, details emerged about a letter Dahal co-signed with Deuba in September 2021 asking the MCC for more time to build a consensus within the current coalition for the project. 

Deuba’s predecessor KP Sharma Oli had backed the project while he was in office. However, the UML has not made its position on the MCC public after UML became the opposition party. Mahanta Thakur’s Loktantrik Samajwadi Party, which recently split from the JSP, has supported the project. 

The Prime Minister was optimistic that the compact once tabled on Wednesday would be ratified by Parliament. This comes hot on the heels of Sunday’s filing of an impeachment motion against Chief Justice Cholendra Shumsher Rana MPs by the NC, MC, and Unified Socialists.

Rana is unlikely to be removed, however, because the coalition cannot muster a necessary two-thirds majority in the House. But he will be automatically suspended, and this is being used as a bargaining chip in order to mollify Communist members of the coalition to get the MCC ratified. 

Justice Rana’s impeachment would increase the chances of House Speaker Sapkota escaping unscathed from a war crimes charge, and would guarantee that 14 Unified Socialist MPs retain their seats. Former prime minister K P Oli of the UML had been blocking House proceedings after Speaker Sapkota refused to expel them. 

It remains to be seen if Parliament will pass the project when it convenes on Wednesday. The US has given a final deadline of 28 February for ratification. Several fringe left parties have called for street protests on Wednesday, and security is expected to be tight in Kathmandu.

Whether the MCC is approved by Parliament or not, its repercussions will not only be felt in Nepal’s pre-election domestic politics but also on the country’s bilateral relationships, especially with the United States and China.

In late 2021, high-ranking MCC officials including MCC vice-president Fatema Z Sumar came to Nepal to meet with Nepal’s top leadership following a written response to concerns raised by Nepal’s Finance Ministry regarding the grant. 

US Assistant Secretary of State Donald Lu called Deuba, Dahal and Oli separately last Thursday reportedly to remind them of the consequences on bilateral relations of a failure to ratify by the deadline. 

In May 2017, Nepal signed a framework agreement with China on its Belt Road Initiative (BRI) infrastructure development strategy. At the time, the Americans stated that Chinese investment in Nepal must not only serve the interests of China, and pointed out that Nepal could be a victim of China’s ‘debt-trap diplomacy’.

In the past year, Beijing has been actively lobbying against the MCC. Controversy over the project was one of the factors that ultimately led to the split in the Nepal Communist Party as well as the UML last year. 

Nepal is increasingly squeezed in a geopolitical tug-o-war between the US and China. But experts say that Nepal needs both the MCC and BRI and its foreign policy strategy should reflect this delicate geopolitical balance. They say that going ahead with one project should not deprive Nepal of the other. 

“It is in Nepal’s best interest to implement both the American MCC and Chinese BRI projects based on our national needs,” says diplomatic affairs expert Geja Sharma Wagle.

Nepal has historically had to walk the diplomatic tightrope in trying to balance relations with China, India, and the US, maintaining individual ties with global and regional powers through wars, crises and border disputes. 

But geopolitics is so polarised, and Nepal’s fractious rulers are so prone to acting as proxies to outside powers that the country cannot seem to maintain that balance.

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