Kathmandu: The US has commended Nepal for ratifying the contentious Washington-funded USD 500 million MCC grant, saying it will result in more jobs, reliable power supply and reduced transport costs in the Himalayan nation.

The Nepali Parliament on Sunday ratified the Millennium Challenge Corporation (MCC) compact along with an Interpretive Declaration, a day ahead of the February 28 deadline set by the US, ending months of debates, protests and political polarisation in the country.

In a press statement issued on Sunday after Nepal’s House of Representatives ratified the grant, the US Embassy in Kathmandu said the decision to ratify the MCC Compact always rested with the government of Nepal as a sovereign democratic nation.

“Today’s decision by Parliament to follow through on its signed commitment and ratify the compact will mean more jobs for the Nepali people, a reliable supply of electricity, and lower transportation costs,” the embassy said.

The statement added that in the 20 years since its inception the MCC compacts have helped alleviate poverty around the world by forming partnerships with developing countries who are committed to economic freedom, investing in citizenry, and good governance – including promotion of democratic principles and fighting corruption.

“The Government of Nepal signed the MCC agreement in 2017 after determining its goals to modernise Nepal’s energy and transportation sectors with the hope of helping more than 23 million Nepalis. The Nepali government will now be able to continue to work towards implementing the five-year programme,” the statement said.

Nepal’s political parties were sharply divided on whether to accept the US grant assistance, amid fears that the MCC agreement may undermine the country’s sovereignty.

Prime Minister Sher Bahadur Deuba, who is also chief of ruling Nepali Congress, held hectic political consultations with other parties regarding the endorsement of the project from Parliament.

The ruling alliance partners including CPN-Maoist Centre led by Pushpa Kamal Dahal ‘Prachanda’ and CPN-Unified Socialist led by Madhav Kumar Nepal agreed to proceed with the deal, but with the inclusion of an Interpretative Declaration, which is meant for clearing confusion among the general public surrounding the MCC.

The US Embassy said it has always stood with Nepal through changes and supported the country with development aid, disaster response and preparedness assistance, health and education programmes and more in the last 75 years of diplomatic relations.

“The United States’ relationship with Nepal is broader than one agreement and we will continue to support the country, its democratic values and long-term economic prosperity,” the statement read.

Senior Nepali leaders said the MCC agreement should be taken forward only as a purely economic project without violating Nepal’s sovereignty and without violating Nepal’s constitution and law.

The MCC had dragged Nepal into a geopolitical game, with Beijing taking a jibe at Washington for providing a “gift” to Nepal with an ultimatum, for a second time in a week, firstly warning the US against using coercive diplomacy in Nepal.

China is wary of the US making forays into Nepal, where over the years it wielded influence among the influential Marxist parties.

Currently, the Nepali Congress is leading the ruling Coalition in Kathmandu which includes major Left parties – CPN-Maoist Centre CPN-Unified Socialist.

China, whose political influence as well as investments have grown in Nepal significantly, especially under the previous pro-Beijing Prime Minister K P Sharma Oli’s tenure, was mostly silent in recent months after Prime Minister Deuba – an advocate of diplomatic balanced foreign policy with close ties with India – took power last year.

Under the MCC compact, a 315-km double circuit 400KV transmission line will be constructed. Five segments of transmission lines to be built are – New Butwal-India Border (18km), New Butwal-New Damauli (90km), New Damauli-Ratmate (90km), Ratmate-New Hetauda (58km), and Ratmate-Lapsephedi (59km).

Once completed, these infrastructure projects are expected to provide a vital missing link for power projects of different river basins to the existing high-voltage grid in Nepal. A part of the USD 500 million will be spent on improving road projects, it said.

The 12-point Interpretive Declaration clearly mentions that being a part of the MCC compact Nepal shall not be bound to be part of the US military strategy or security alliance such as the Indo-Pacific Strategy.

It also mentions that the conduct of the MCC would be if regulated by the prevailing Laws of Nepal and MCC would not have any ownership over intellectual property and Nepal government enjoys the right to nullify the MCC compact within 30 days of issuing a notice if it violates Nepalese laws.

The MCC is a bilateral United States foreign aid agency established by the US Congress in 2004. It is an independent agency separate from the State Department and USAID.

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