After a few commercial setbacks, the real Chinese game unfolds for these countries in the form of an unavoidable debt trap. This trap subsequently dictates future international dealings by the trapped countries including financing from sources other than China. To counter competing financing from its adversaries, China deploys several means including misinformation campaigns and manipulation of local politicians in the target countries.

The problems being faced by Millennium Challenge Corporation (MCC) in Nepal serve as an ideal case study for understanding how China stabs its competitors’ development proposals for smaller and needy countries. 

The MCC is a US Foreign Assistance Agency that aims to fight poverty. Till now, it has partnered with 30 countries to implement projects worth around $13 billion. Nepal had signed the MCC agreement in 2017. With a budget of $630 million (America’s $500 million contribution and Nepal’s $130 million), the MCC Nepal Compact consists of two projects: a 300-km 400 kilovolt electricity transmission line and upgrading 100-km east-west highway. 

Through the transmission line, Nepal would be able to export electricity to India from its hydro-power projects. The projects would predominantly be executed by Nepali contractors and workers, thus generating local business and employment.  

Despite being a well meaning and focused program, MCC has failed to take off in Nepal as it is yet to be ratified by the country’s Parliament. Nepal’s ever-bickering politicians have further muddled the issue with a group bent on opposing all constituents of the program. Ironically, some members of this group fail to acknowledge the clearly visible problems in the projects pushed by China under its Belt and Road Initiative. 

 

Former Finance Minister and Nepali Congress leader Ram Sharan Mahat on Feb 15 asserted that the MCC is in the interest of Nepal and it needs to be endorsed at the earliest. 

 

 

Noting that the program has wrongly been made a sponsored propaganda citing it as anti-national; he underlined the need to cut through the misconception against the project. Nepal’s Leftist political parties however continue to oppose the pact alleging it to be aimed at countering China.

 

The US has now urged Nepal to ratify the program by February 28 failing which Washington could review its ties with Kathmandu. US Assistant Secretary of State Donald Lu warned on Feb 10 that “it would consider China’s interest behind Nepal’s failure to ratify the compact.”

As the deadline nears, Nepal faces several risks associated with turning down the MCC offer. Rejection of it 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 countries from where migrant workers remit money to Nepal. Since Nepal has already used some of the MCC funds, it would need to return it while arranging its own finances.

 

Rejection of MCC might also influence other development partners of Nepal to slow down on their aid. The allies of US including UK, EU, Israel, Japan and South Korea may reduce their footprints in the country, thus causing a huge amount of developmental loss. Further, these countries provide preferential treatment to Nepal Army in training and in UN Peacekeeping duties, both and which may get impacted if MCC is rejected.

 

The failure to ratify MCC may also hurt the prospects of Nepali workers in the US and its allies in the long run. The overseas workers would be affected in terms of employment, permanent residency and education opportunities in the mentioned countries. At present, they enjoy many types of visas including diversity (by USA), higher education visa (by USA, Canada, Japan, Taiwan, Singapore, UK, EU, and Australia) and migrant labour visa (Arabia, Qatar, UAE, Kuwait, Malaysia). China on the other hand, hardly provides any residency, employment or education opportunities to the Nepalese youth. The youth will thus be worst affected if Nepal fails to see through Chinese designs and rejects MCC in its blind faith.