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Why Nepal’s Big New Grant Approval Matters

March 3, 2022

Photo credit: MCC Website

BGA Senior Advisor Sujeev Shakya wrote an update on Nepal’s approval of a much-debated big grant in Nepal. The update examined the development in the context of the country’s domestic environment and its wider foreign policy.

Context

• On February 27, Nepal’s Parliament ratified the $500 million Millennium Challenge Corporation (MCC) grant for Nepal after months of intense debate.
• The grant, intended to build up Nepal’s electric grid and transportation infrastructure, was heavily contested as lawmakers and protesters expressed concerns about the MCC being tied to the United States’ broader Indo-Pacific Strategy.

Significance

• Fear of being drawn into the U.S.-China conflict, lawmakers ratified the development grant with an explanatory deceleration stating that Nepal would not join any U.S. military alliance.
• The signing of the MCC compact provides confidence to international investors and companies which were eagerly anticipating Parliament’s decision.

Implications

• The ratification will recalibrate Nepal’s relations with the United States. Many other pending foreign assistance programs through U.S. Agency for International Development will also move ahead in the wake the MCC’s ratification.
• These developments provide a good signal for U.S. companies and investors to look at Nepal, a country of 30 million people lodged between the two fastest growing economies – India and China.

BGA will continue to keep you updated on developments in Nepal as they occur. If you have any questions or comments, please contact BGA Nepal Senior Advisor Sujeev Shakya at sshakya@bowergroupasia.com.