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Nepal: In MCC, Oli sees a chance to play domestic and geopolitical games


Last year, the Millennium Challenge Corporation’s Nepal Compact became the top agenda item at the Central Committee meeting of the then Nepal Communist Party (NCP), with a majority of members voicing their opposition to endorsing the programme in its current form.

Those objecting to the United States programme under which Nepal will receive a $500 million grant were some CPN-UML leaders and a majority of the Communist Party of Nepal (Maoist Centre) leaders. The two parties had united in May 2018 to form the Nepal Communist Party (NCP).

But the Supreme Court on March 7 this year scrapped the Nepal Communist Party (NCP) and revived the UML and the Maoist Centre. With the Maoist Centre yet to withdraw the support it lent to Oli in February 2018, Oli is comfortably leading the government.

Oli’s opponents like Madhav Kumar Nepal and Jhala Nath Khanal, who had sided with Pushpa Kamal Dahal to unseat him, were forced to return to the UML after the court’s March 7 decision.

Amid the fluid political situation in Nepal, Oli has now suddenly brought up the MCC compact. After insinuating that House Speaker Agni Sapkota is to blame for the MCC not moving forward in the House on Wednesday, Oli on Saturday, at an all-party meeting, again accused the Speaker of dilly-dallying the American programme. Oli even threatened to seek an alternative to Sapkota if he fails to present the MCC to vote in Parliament by Tuesday.

Why Oli is suddenly making a push for the MCC now, however, has intrigued many.

According to analysts, Oli seems to be trying to use the American programme for his convenience in domestic politics and to reassure international power centres of his allegiance to them.

“Oli has been pushing for the endorsement of the MCC for his own gains in domestic politics by taking advantage of the geopolitical situations–the antagonistic relationships between China and the US and China and India,” said Hari Roka, a political economist. “Both India and the US have their own interests in Nepal. Oli is an old ally of India and now with the MCC endorsement, he wants to demonstrate that he is not going to antagonise the US in the context of the US-India alliance.”

Signed in September 2017 when the Nepali Congress and the Maoist Centre had a coalition government led by Congress President Sher Bahadur Deuba, the MCC Nepal Compact gradually emerged as a divisive issue in the Nepali political landscape.

Oli himself, however, has never been opposed to the American aid programme, while the Congress has always been in favour of its ratification. Oli in the past too has spoken on record that the previous House Speaker, Krishna Bahadur Mahara, did not take initiatives to move the bill forward in the House.

After Mahara was forced to resign over attempted rape allegations, Oli and Dahal, who then led the Nepal Communist Party (NCP) jointly, were engaged in an intense power struggle. Finally, Dahal had managed to have the upper hand in extracting the Speaker’s post for Sapkota.

Now with the Nepal Communist Party (NCP) scrapped and the UML and the Maoist Centre revived, Oli is trying to drive the Madhav Kumar Nepal-Jhala Nath Khanal faction into a corner. The Nepal-Khanal faction had joined hands with Dahal against Oli when the Nepal Communist Party (NCP) was intact.

Oli now suddenly finds the MCC as yet another tool he can use against the Nepal-Khanal faction.

While by putting the MCC Bill to vote in the Parliament, the prime minister wants to rein in his detractors in the party and by getting it passed, he wants to show that he does not have any intention to antagonise the United States, leaders say.

A UML leader from the Nepal faction said if the MCC is put to vote in the Parliament, it will create a dilemma for leaders opposed to Oli.

“Oli will definitely issue a whip asking the party’s Members of Parliament to vote in favour,” said Bishnu Rijal, a Central Committee member of the UML. “If we defy the whip, Oli could initiate action against us.”

According to Rijal, Oli’s plan to move the MCC for voting in the Parliament at this time is meant to put the Nepal faction under pressure.

The MCC compact doesn’t say it needs to be ratified by Nepal’s Parliament.

However, the text of the agreement says that provisions in the compact will prevail over Nepal’s existing laws in case of conflicts, which requires parliamentary ratification, according to the Nepal Treaty Act. As per the legal opinion given by the law ministry, this agreement can be endorsed with simple majority in the lower house, to give it the status of a law, according to an official of the Millenium Challenge Account, Nepal, a government body formed to implement the MCC Compact Programmes.

The MCC is an aid agency under the US government and the MCC compact is a large, five-year grant programme under which the fund is provided to the countries that pass the MCC’s eligibility criteria including democracy and transparency.

The government plans to implement two 400KV transmission line projects—Lapsephedi-Ratmate-Hetauda and Lapsephedi-Ratmate-Damauli with the funding from the MCC.

Minister for Law, Justice and Parliamentary Affairs Lilanath Shrestha last week told reporters that the government would move forward the MCC Bill in the House for its ratification.

“The prime minister has already directed us to move the MCC Bill forward and I will discuss the matter with the Speaker,” said Shrestha. “We will try our best to make it the House’s business next week.”

At Saturday’s all-party meeting, which was boycotted by the Maoist Centre and the Nepal faction as well as some Janata Samajbadi Party leaders, Oli sought support from the Congress and Janata Samajbadi for the MCC’s approval from the Parliament.

A UML Standing Committee member said Oli knows very well how Nepal’s domestic politics collides with geopolitics and now by making a pitch for the MCC suddenly, he is trying to curry favour with power centres.

Oli who once was never tired of ratcheting up anti-India rhetoric has now made peace with New Delhi.

Insiders and analysts say Oli is well aware of the fact that the US-India backing, more than China, is crucial for his politics.

“He cannot afford to antagonise the United States and India,” said the UML leader. “In the past, despite being a pro-MCC leader, Oli was not able to make a push for the American programme because he was facing a huge opposition within the then Nepal Communist Party (NCP).”

Those opposed to the MCC see it as Washington’s bid to expand its influence in the region and counter China’s Belt and Road Initiative. The MCC opposers even say the MCC is part of the United States’ Indo-Pacific Strategy and thus the compact’s parliamentary ratification would drag Nepal into a military alliance with America.

Besides some politicians, including Bhim Rawal, a key leader in the Nepal-Khanal faction, there are some voices in society also that object to the MCC.

So divisive the American programme became last year that a public sentiment against it started to build and it now has reached the grassroots level too, largely due to massive discussions on social media and YouTube comments.

“There is still a chance that street protests might erupt against the MCC as it has been heavily politicised,” said an official at the Millenium Challenge Account, a government body formed to implement the projects under the MCC, on condition of anonymity because he feared getting dragged into controversy.

According to the official, Oli may have been making a push for the early ratification of the project, but whether he will indeed do so will depend on whether he could make political gains out of this.

After strong voices within the then Nepal Communist Party (NCP) against the MCC, the party last year had constituted a three-member task force led by senior leader Khanal to study the US programme and make recommendations.

The task force had recommended that it found that some provisions needed to be revisited.

“We studied the provisions of the MCC thoroughly and found some serious issues which need corrections,” Khanal, the convener of the task force, told the Post after submitting the report to the party leadership. “This agreement cannot be implemented without correcting those provisions.”

Rawal, a strong critic of the MCC who was a member of the task force, told the Post last week that his opposition to the American programme continues to be there.

“Despite our recommendations, no changes have been made to some of the provisions, which we find problematic,” said Rawal. “If the MCC is ratified through the House, it will be a great disservice to the nation.”

The MCC, technically, should have been endorsed by the Parliament by September 2019. Later, the Nepal government and the MCC had set a new deadline of June 20, 2020 for the parliamentary ratification.

Following the intense debate over the MCC in the then Nepal Communist Party (NCP), media and civil society, the US Embassy in Kathmandu in January last year issued “top 10 facts” on the programme, stressing that there “is no military component to the MCC.”

“In fact, US law prohibits it,” said the embassy.

The embassy said that the $500 million is a grant, with no strings attached, no interest rates, and no hidden clauses.

“Nepal does not need to ‘join’ or ‘sign up’ for anything in order to participate in the MCC,” said the embassy. “All Nepal has to do is commit to spend the money, transparently, for the projects that have been agreed upon.”

But that did not seem to be assuring to the detractors in Nepal.

A day before the June 30, 2020 deadline, the US Embassy in a statement said that delaying the MCC’s ratification is delaying the benefits of more jobs and increased economic growth for nearly 23 million Nepalis.

Stating that availability of the funding under the Millennium Challenge Corporation Compact Programme is not open-ended and whether to accept the grant under the programme is Nepal’s choice, the embassy said that tangible, near-term steps in Nepal are necessary to ensure the continued viability of the programme.

A UML Standing Committee member said that Oli knows well how to use geopolitical factors in his favor.

“For quite a while, Oli has been making attempts to appease India and the US,” the member told the Post requesting anonymity. “Now he can use the MCC against his opponents in the party as well as to curry favour with the US.”

Oli returned to power in February 2018 riding on his nationalistic plank which had built during his earlier stint by standing against the Indian blockade. He signed a slew of agreements with Beijing in an attempt to end Nepal’s near-complete dependendence on India, earning praises.

With Chinese interest to expand its influence in the region, and also in Nepal, growing, Beijing invested in bringing the two big communist forces–Oli’s UML and Dahal’s Maoist Centre–together.

However, infighting started to grow in the Nepal Communist Party (NCP). Beijing could not save it from splitting. As the Dahal-Nepal faction continued to push Oli into a corner, he was left with no option than to mend fences with India with which Nepal’s relations had gone from bad to worse over border issues.

The Indian rapprochement then came in the form of a visit by Samanta Kumar Goel to Kathmandu in the third week of October last year. What exactly Oli and Goel discussed was never made public, but their meeting opened the door for more high level exchanges from the south.

Now that Oli finds himself comfortable with Delhi, he is trying to demonstrate his allegiance to Washington, analysts say.

“India does not have any reservations over US presence in Nepal and its neighbourhood. So I think Oli is not pushing for MCC’s endorsement just for the sake of cornering the Nepal faction,” said Roka, the political economist who also writes on contemporary political issues in the Post’s sister paper Kantipur. “He clearly seems to be using the MCC for geopolitical as well as domestic political reasons. The MCC, however, can be a good ammunition for him against his opponents.”