July 12, 2020

Nepal Should Get Rid of Sino-Indian Paranoia and Accept the US MCC Aid

By Vikash Kumar

The US has offered, under its MCC grant, 500 million US $ aid to Nepal which is reluctant to accept it due to Chinese concerns. Nepal should get rid of Sino-India paranoia and accept this aid. It should relinquish geopolitical adventures and its engagement with nations other than India and China will be a step further in the assertion of the country’s strategic autonomy. Nepal’s sovereign decision should be precipitated by its own concern for national interest and not of any third party’s imagined interest collision with it.


Among diverse political turbulences being seen in Nepal, one which is being less talked about is Nepal’s indecisiveness over US aid amounting to 500 million USD under Millennium Challenge Corporation (MCC). While the government is inclined to accept it – Finance Minister Yubaraj Khatiwada incorporated this in the new budget before its parliamentary endorsement – the grant is facing opposition, inter alia, from within the Nepali Communist Party (NCP).

The opponents are forwarding the arguments that accepting it may damage blossoming ties with China. There may be strong element of truthfulness, prima facie, in this argument but this advocacy is shorn of any understanding of Nepal’s national interest.

Nepal is sandwiched between two Asian Giants sharing great ambitions for future whose geo-political interests are colliding as they try to sell off their versions of worldview. Nepal is, of late, becoming hotbed for this bilateral competition. History is evidence to the fact that any great power rivalry has resulted unbearable consequences for playgrounds – where big power competes for their interests in other nations. Middle east and Afghanistan are two evergreen examples.

The obsession with fear of China’s reaction over a sovereign decision, essentially economic in nature, speaks volume about the intrusion of that country in Nepalese political landscape. Discussions in Nepalese media platforms and among policy makers are revolving more upon the US Indo-Pacific Agenda versus China’s Belt and Road Initiative, which should, in no way, be Nepal’s immediate priority. Surprisingly, absent in the discussions are cost-benefit ratio of these projects. A perusal of the MCC aid and geopolitical events of recent past shows that the cost-benefit scale skews in favour of economic advantage to the country.

Firstly, the MCC aid is a grant not a loan. Thus, it comes with benefit sans any obligation. There are no legal or political conditions attached to it and thus a claim that Nepal’s sovereignty will be promised by accepting the aid is wholly fallacious.

Secondly, these projects relate to ‘Electricity Transmission’ and ‘Road Maintenance’. As per MCC, the electricity projects include, inter alia, laying of 300 km of high voltage power lines, equivalent to one-third the length of Nepal; the addition of a second cross-border transmission line to facilitate greater electricity trade with India; and activities to improve sector governance to increase private investment. The road projects chiefly concerns maintaining ‘key roads’ admeasuring a length of 300 km which are vital for movement of goods and people. An aid amounting to nearly 1.5 % of GDP must not be rejected for imaginary fear of the Dragon.

Thirdly, China must not be expected to react negatively just because of the fact that the aid is coming from a rival nation. If it is not so, India should have acted in similar imaginary way in 2017 when Nepal became a party in BRI, an initiative India rejects as it passes though Pakistan Occupied Kashmir! Also, the sensitivity of India’s concern which relates to geopolitical issue is graver than that of China’s as it concerns an economic project.

Concerns relating to issue of provisions of MCC may be alleviated by having recourse to negotiation with US over it. For example, Nepal can negotiate that in place of US law it will be provisions of international law which will apply and there would be an independent international tribunal to settle any disputes, whatsoever arises pertaining to the project.

In past, we have seen Nepal’s compulsion as it has accepted the fate to play between India and China, letting itself more vulnerable to whims and caprices of these two countries. US aid under MCC is a golden opportunity for Nepal to look beyond India and China and seek greater engagement with other powers to derive economic benefit and relinquish meaningless geo-political adventures.

The best example in south Asia following ‘strategic autonomy’ is India which followed a non-aligned policy, although shaky one, throughout the cold war which enabled it to get benefits from both the superpower blocs and wrath of none. Now, of course, there has been a shift in strategic alignment of India – it is undertaking appropriate diplomatic manoeuvring – as China’s claim of peaceful rise seems rather flimsy in view of perennial projection of hard power against its neighbours and US under Donald Trump is more unstable now. The occasion has not come, till now, for Nepal to take any sides.

Economic cooperation should not be halted due to a geo-political competition wherein Nepal does not have any significant stakes. Nepal must catapult the entanglement of Sino-Indian paranoia and assert its strategic autonomy. Not only US, Nepal should seek greater engagement with other powers too. Rather than out rightly rejecting the MCC aid, it must undertake a negotiation to ward off its concerns relating to sovereignty. The message should go to both Asian giants that Nepal could not be taken for granted as it will follow a multi-aligned approach in contradiction to its hitherto Sino-Indian balancing approach. This will ensure more diplomatic leverage and clout to Nepal vis-à-vis India and China.

About the Author

SIMILAR POSTS

Monim Benaissa

The Grand Ethiopian Renaissance Dam (GERD), formerly known as the Millennium Dam, is under construction in the Benishangul-Gumuz region of Ethiopia, on the Blue Nile River, which is located about…

Read more

Tim Hildebrandt

Until recently, the economic crisis that followed the financial crisis from 2009 onwards was described as a/the “great recession” (Morroni 2018). Even though the situation is currently very volatile, the…

Read more

Tennyson Dearing

The Pacific Islands region has long been strategically important. Today, the region’s proximity to Australia and to maritime trade routes, and its historical role as an outpost for European and…

Read more