Millennium Challenge Corporation: Will it benefit Nepal and South Asia?

Foreign assistance plays a critical role in a country or region’s overall economic development. However, foreign aid distribution and management of it in the recipient country is an extremely sensitive topic in terms of utilization of it. There are more cases of failure in terms of optimal mobilization of foreign aid to meet the needs of people and achieve targeted economic growth.

Currently, one of the strategic interventions by the USA known as Millennium Challenge Corporation (MCC) has gained the attention of many people in South Asia. Millennium Challenge Corporation Initiated by US Congress in 2004, The Millennium Challenge Corporation (MCC) is an international assistance agency helping to lead the charge against world poverty which provides time limited incentives to support economic growth, poverty reduction and reinforce institutional strength. MCC establishes its alliance with developing nations that are oriented towards capitalizing on its citizens, dedicated to maintaining effective government and ensuring economic liberty to its people. MCC has invested over $13 billion in compact and threshold programs that fund country-led initiatives all over the world. The USA has been trying to steer MCC as an instrument to cement its Indo-Pacific Strategy (IPS).

MCC in Nepal The MCC Compact with Nepal was a US$ 630 million initiative, with the US contributing $500 as a grant and the Nepal government contributing $130. Nearly 80% of the project’s beneficiaries, or 23 million people, are projected to benefit. The MCC is firmed up with the plan of $500 million investment in Nepal that will boost regional energy connectivity and open up new business potentials in South Asia. The MCC compact mostly focuses on power and transportation problems since they have been projected as two of Nepal’s most critical structural bottlenecks for economic development. If the House of Representatives of Nepal ratifies the MCC Compact then Nepal will have a cushion of required financial support to develop strategically important transmission lines including a cross-border one with India. With the required transmission lines in place, the ample amount of electricity will help to bring in other investments. Furthermore, the compact would also emphasize road maintenance to promote the flow of goods and people. This comprises a fund equivalent to maintain up-to 300 kilometers of roads, as well as incentives for the government more money for regular maintenance which will directly benefit residents as they will have more choices for bringing their product to the market.