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China opposes US grant which threatens to bring down Nepal’s coalition government

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(TibetanReview.net, Feb22’22) – China may have failed to save the communist coalition government it had helped to form in Nepal due to the differences among the partners being insurmountable, but it still holds a formidable sway over the country through its communist parties especially in the ruling coalition. A $500-million grant project from the US to set up a 300-km high-voltage power transmission line and conduct periodic maintenance of 305 km of the country’s strategic road network is at the centre of a dispute between the country’s political parties and threatens the downfall of the new coalition government led by Nepali Congress.

China has attacked the grant project, and the Communist Party of Nepal (Maoist Centre) and the Communist Party of Nepal (Unified Socialist) – both partners in the current ruling coalition – have followed suit. Hundreds of its members and supporters protested on the streets of Kathmandu, compelling police to fire rubber bullets and tear gas.

The US Government’s Millennium Challenge Corporation (MCC), an independent bilateral foreign aid agency, has approved 37 compacts worth $13 billion for 29 countries, as of 2019. MCC signed a $500 million compact with Kathmandu in 2017. Nepal apparently had met 16 out of 20 policy parameters, becoming the first country in South Asia to qualify for the grant, noted the eurasiantimes.com Feb 22. Washington has urged Nepal to endorse the MCC-Nepal Compact by the end of this month, its latest deadline.

MCC was established by the US Congress in 2004. It provides grants to countries that have been determined to have good economic policies and potential for economic growth. The country qualification process is objective, involving scores provided by third parties in 20 different areas. An eligible country must apply for a grant with a specific project in mind.

On Feb 20, Minister of Communications and Information Technology Gyanendra Bahadur Karki tabled the MCC-Nepal Compact in Parliament amid the opposition’s obstruction of House proceedings. The two communist parties in the ruling coalition also insisted that the compact cannot be tabled in Parliament without amendments and joined the main opposition, the Communist Party of Nepal (Unified Marxist-Leninist – CPN-UML)’s chorus against the US grant.

Earlier, the previous KP Sharma Oli government was keen on ratifying the grant by a previous new deadline – Jun 30, 2020 – but failed to do so as anti-Oli factions within the party — CPN (UML) — were against it, noted theprint.in Feb 22.

What brought additional controversy and China’s attack on the grant project was a comment by David J Ranz, then-assistant secretary for South Asia at the US State Department, who said during his Nepal visit in May 2019 that MCC was a crucial part of the Indo-Pacific Strategy (IPS), as reported by The Kathmandu Post previously.

Prime Minister Deuba’s Nepali Congress maintains that the government has to abide by the pact and it doesn’t talk about the IPS, irrespective of comments from any US official.

However, some lawmakers are said to fear that clauses under the grant agreement threaten Nepal’s national interests. Washington, which has repeatedly sent top officials to Nepal over the past six months, has assured that the MCC only aims to assist Nepal’s development activities, said theprint.in report.

China also does not like the project because the American grant is expected to boost not only the US-Nepal partnership but also strengthen Indo-Nepal ties. New Delhi and Washington are part of QUAD (Quadrilateral Security Dialogue) which Beijing has dubbed the Asian NATO. The MCC is nothing more than a pact with the geopolitical purpose of targeting China, said China’s official Global Times Feb 15.

China views the MCC-Nepal compact as an instrument to push the US’ QUAD strategy aimed at challenging Beijing’s influence in the Indo-Pacific, noted the eurasiantimes.com report. During a press conference on Feb 18, its Foreign Ministry Spokesperson Wang Wenbin said on Feb 18 that Beijing opposed “coercive diplomacy.”

“China welcomes the international community to cooperate with Nepal, contribute to Nepal’s economic development and livelihood improvement, but this should be done based on Nepalese people’s willingness without political conditions,” he was quoted as saying.

A Global Times report Feb 18 said, “Critics of the pact in Nepal see it as undermining Nepal’s sovereignty, integrity and constitutional autonomy.”

Nepal, which is a signatory to China’s controversial Belt and Road Initiative (BRI), is drawing Chinese investment in sectors such as infrastructure and hydropower. Beijing is the largest foreign investor in the Himalayan nation; it has pledged US$188 million for the 2020-21 fiscal year. China has maintained this position six years in a row, China’s official Xinhua news agency has reported.

On the other hand, the US has been the largest bilateral donor to the Himalayan nation for decades and any review of its ties with Kathmandu if the grant is not ratified by Feb 28, 2022 could be big a blow to Nepal’s economy, The Kathmandu Post has noted.

Prime Minister Sher Bahadur Deuba now has just two options left – either to save his alliance or to ratify MCC, Shashanka Koirala, a senior Nepali Congress leader was quoted as saying by The Kathmandu Post.

China, which failed to save Nepal’s communist coalition government despite hectic efforts, now looks to bring down its coalition successor led by Nepali Congress.

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