Nepal sealed a deal with the Millennium Challenge Corporation (MCC) on September 14, 2021, to mobilise a $500 million grant for the development of the energy and road transport sector. The sectors are considered the major constraints for the economic growth of the country.
Minister for Law and Federal Affairs Gyanendra Bahadur Karki, then Finance Minister, and Jonathan Nash, acting chief executive officer of the MCC, signed the pact in Washington, DC.
At that time, Nepal expected to mobilise $630 million — $500 million from MCC and $130 million from the Government of Nepal as counterpart fund — for installation of 300-km high voltage electricity transmission lines along with three substations of 400 kV and maintenance of roads with a total length of 305 km. As per the agreement, the projects needed to be implemented within five years from starting date of the project or the money would go back to the US.
The MCC had selected Nepal for a smaller threshold programme in December of 2011. The MCC and Nepal government had analysed constraints to economic growth and jointly prepared a policy improvement programme based on the results. Given Nepal’s strong performance in its MCC policy indicator scorecard through 2014, MCC’s board of directors selected Nepal as being eligible to develop a compact, a larger grant-based investment, under which the country could mobilise the US grant.
The compact programme was expected to address these constraints by investing in an Electricity Transmission Project (ETP) and a Road Maintenance Project (RMP).
At the time, ETP was expected to transform Nepal’s power sector by expanding and strengthening the high voltage electricity transmission network to support new investments in generation and allow greater cross-border electricity trade while the RMP was expected to improve the road maintenance regime in Nepal and complement existing efforts to build new roads by other parties.MCC is an independent and innovative US foreign assistance agency that is helping lead the fight against global poverty. The MCC was established by the US Congress in January 2004 with strong bipartisan support. It is an agency separate from the State Department and USAID.
Know about MCC
The MCC provides grants to the countries that have been determined to have good economic policies and potential for economic growth.
Regarding the US foreign assistance, MCC has changed the conversation on how best to deliver smart by focusing on good policies, country ownership, and results.
MCC provides time-limited grants promoting economic growth, reducing poverty, and strengthening institutions. These investments not only support stability and prosperity in partner countries but also enhance American interests. With cost-effective projects, a lean staff, and an evidence-based approach, MCC has been regarded as a good investment for the American people.
MCC forms partnerships with developing countries that are committed to good governance, economic freedom and investing in their citizens. The country qualification process is objective, involving scores provided by third parties in 17 different areas. An eligible country must apply for a grant with a specific project in mind.
MCC is a good example of smart US Government assistance in action, benefiting both developing countries and the American taxpayers through:
Competitive selection: MCC’s Board examines a country’s performance on 20 independent and transparent policy indicators and selects countries based on policy performance.
Country-led solutions: MCC requires selected countries to identify their priorities for achieving sustainable economic growth and poverty reduction. Countries develop their MCC proposals in broad consultation within their society. MCC then works in close partnership to help countries refine programs.
Country-led implementation: When a country is awarded an MCC compact, it sets up a local accountable entity to manage and oversee all aspects of implementation. Monitoring of funds is rigorous, transparent and often managed through independent fiscal agents.
Focus on results: MCC is committed to producing results and ensuring that the American people are getting a good return on their investment. MCC employs technically rigorous, systematic and transparent methods of projecting, tracking and evaluating the impacts of its programs.
MCC makes investments to develop seven sectors — agriculture, education. energy, health, land and property rights, roads and transportation infrastructure, and water, sanitation and irrigation — in the partnered countries.
The investments in the agricultural economy aim to create jobs, raise incomes, boost nutrition, and reduce poverty by financing vital infrastructure, increasing market access, and providing technical assistance to strengthen businesses from farm to consumer.
Likewise, poverty reduction and economic growth are possible when countries invest in educating their people. MCC works with partner countries to ensure that students obtain the knowledge and skills that can help them get better jobs and improve their livelihoods.
Similarly, investments in the energy sector help create self-sustaining electricity systems for businesses and households and attract private investment.
MCC puts effort to reduce illness and increase life expectancy as it recognises that a healthy population is critical for achieving sustained economic growth and poverty reduction. Likewise, investments in land and property rights are designed to contribute to poverty reduction and economic growth by establishing secure and efficient access to land and by strengthening property rights.
Safe, reliable, and cost-effective roads improve access to public services like healthcare and schools, lower the time and cost of bringing goods to market, and facilitate regional and international trade – all of which help drive growth and fight poverty. On the other hand, safe and reliable water and wastewater systems are a vital component in fulfilling MCC’s mission of reducing poverty through economic growth around the world.
Types of MCC grants:
i. Compacts— large, five-year grants for selected countries that meet MCC’s eligibility criteria
ii. Concurrent Compacts for Regional Investments—grants that promote cross-border economic integration, and increase regional trade and collaboration
iii. Threshold Programs — smaller grants focused on policy and institutional reform in selected countries that come close to passing MCC’s eligibility criteria and show a firm commitment to improving their policy performance
What is MCC achieving?
MCC projects tackle some of the most pressing challenges people face in developing countries, like supplying electricity so businesses can operate and students can study after dark; providing clean drinking water so women don’t have to walk long distances— sometimes at great personal risk — to get water for their families, and building roads so farmers can get their goods to market and children can get to school. MCC has reportedly invested more than $13 billion in compact and threshold programs worldwide that support country-led projects in areas like agriculture and irrigation, anti-corruption, education, energy and power (generation, distribution, and transmission), finance and enterprise development, health, land rights and access to land, transportation infrastructure (roads, bridges, ports)and water supply and sanitation
Guided by its founding principles, MCC’s investments have successfully delivered projects that are improving the lives of millions of people around the world.
MCC also prioritises the climate-smart investments now to counter the risks climate change poses to people around the world as climate change is a contemporary defining issue, and the countries most impacted by it are also least able to afford its consequences.
• Create jobs and expand markets
• Build a more stable world
• Promote growth through infrastructure
• Invest in the next generation
• Incentivise policy and institutional reform
• Empower women and girls
• Increase the capacity of partner governments
• Give entrepreneurs tools to succeed
• Lay the groundwork for healthy communities
MCC’s mission to reduce poverty through economic growth
MCC’s model is defined by core principles, including selectivity, country ownership, transparency, and a focus on results. These core principles ensure MCC invests in countries that are committed to good governance, economic freedom, and investing in their people. By holding ourselves and our partner countries accountable, our investments advance stability, security and prosperity both at home and abroad. And with cost-effective projects, a lean staff, and an evidence-based approach, MCC is an investment for the American people.