‘The White Man’s Burden’ Re-incarnated in Nepal?

The misplaced MCC debate and paralyzed development governance

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I have been preparing for a series of lectures on global development and have subsequently engaged with existing and emerging debates on development and foreign aid Since the last several weeks.  I was particularly interested in the intensified debate on the Millennium Challenge Corporation (MCC) in Nepal. I was impressed by a variety of perspectives and also surprised by many polarizing opinions from the Nepali political leaders, commentators, journalists, development experts, and social media activists with little factual details and critical analysis. Most of these opinions have failed to articulate the MCC Nepal debates with the global debates in development and foreign aid. This is a serious issue because what is happening in Nepal in the form of MCC resonates with many development debates that have preceded, and there are crucial insights for the Nepali people and political leaders. As I re-read two books, viz. The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good (2006) by William Easterly, and Dead Aid: Why Aid Is Not Working and How There is Another Way for Africa (2009) by Dembisa Moyo, I find their forceful arguments relevant and insightful for Nepal at this crucial juncture of history – that foreign aid has often been counterproductive to economic development, especially when development aids are uncritically embraced by developing countries. The details and debates on the MCC in Nepal remind me of a question Easterly asked: are we talking about “Planners'', who believe in imposing top-down big plans on poor countries, or “Searchers”, who look for bottom-up solutions to specific needs, having much better chance to succeed. After some reflection and analysis, I consider that the much-hyped MCC Nepal grant can be a modern reincarnation of the infamous colonial concept of the old times and must be critically evaluated before it is either accepted or rejected.

Nepal is now buzzed with debates on the MCC. However, I am puzzled to not find many factual details quoted in these discussions. Neither do I see much articulation of the MCC issues and potentials with lessons from historical development aid initiatives in Nepal and globally. This can be seen as the whole debate unsustained, and possibly, misconceived. First and foremost, the MCC is not new for Nepal; it started about 5 years ago, in September 2017. There is now a heightened political and public discussion in Nepal because the country is amplifying the agenda of economic prosperity amidst the continuing political wrangling, while the political parties and public at large are now preparing for a series of national, provincial, and local elections. Regardless of the evidential basis of these discussions, much of the debate is circled around two contradictory perspectives (and the rest, largely failing in-between these two!). On the one hand, some commentators argue that the MCC Nepal’s proposed USD500 million is a big sum of grant money, committed to the development of critical infrastructures in Nepal such as roads and electricity. This investment marks a new chapter in the U.S.-Nepal Partnership, designed to increase the availability and reliability of electricity, lower the costs of transportation, maintain road quality, and facilitate cross-border electricity trade between Nepal and India—helping to spur investments, accelerate economic growth, increase export, expand the industry, and reduce poverty. Moreover, having a closer ally with the USA is a good thing for Nepal for economic and political reasons. A streamlined approach of the MCC in Nepal is appropriate to advance the interest of the American people in South Asia, given the problematic track record of Nepali bureaucracy, political complexity and corruption that has paralyzed many foreign aid programs in Nepal.  On the other hand, critics argue that MCC in Nepal has the wrong definition of the problems and an inappropriate approach to foreign aid. This is combined with overarching conditionalities and upward accountability that undermine the very role and responsibility of a sovereign state. The problems of inadequate electricity and roads, as identified by MCC are technical problems. The solutions identified are injecting money, employing overseas experts, attracting private investments, market deregulation and international trade liberalization. These are technical solutions. Many commentators argue that USD 500 million is not that big, given that remittances and taxes from big businesses easily surpass this money in just a few years. The fundamental problems are more about how to manage money, how to manage people, how to deal with international partners, how to foster trust, and so on. The crux of the problem is therefore social and political, not technological, or financial as embraced by the MCC.

The debates tend to mask the fundamental fact that the MCC was endorsed by the U.S. Congress in January 2004 for the USA. On January 23, 2022, MCC turned 18 years old and has continued around the world until today because it is serving the USA. It was set up as a pseudo-independent bilateral foreign aid agency because of the dissatisfaction with the other aid programs, focussed on reducing poverty through economic growth. Assistance under the MCC is given to poorer countries selected through a competition, and naturally, the terms and conditions for this competition are set by the US Congress. Any country willing to receive the grant must have 10 of 20 indicators, ranging from proper business conditions for start-ups and environments conducive to child health and civil liberties to the status of political rights and funding for education. Since its inception, the MCC Board has approved 37 compacts worth $13 billion for 29 countries (as of 2019). There are several instances of the US partially or fully terminating compacts. For instance, the compacts for Madagascar and Mali were terminated fully while those in Nicaragua and Honduras were partially withdrawn. In Mali, the termination followed the late-March military coup. The MCC has become a new way for the U.S. to support stability and prosperity in partner countries but also ‘enhance American interests’, labeling the MCC as a good investment for the American people and a vehicle for ‘smart U.S. Government assistance’. When we consider the benefits and costs of MCC in Nepal, it is critical to understand that MCC is ultimately initiated and structured for the benefit of the USA. Any benefits Nepal gets are only the flow-on effects of the program. There are always costs involved.

One of the critical elements of MCC in Nepal, which is often missed in the debates, is that it has a well-crafted design of development governance, ensuring its upward accountability to the rich and powerful, that is the MCC Global. By design, MCC initiatives in Nepal intend to bypass the Nepal government. This is problematic because any sovereign country cannot just host a development program on its soil with no input or control whatsoever into project management, operations, monitoring, or governance. By design, Nepal’s government is a mere bystander, and this is difficult to accept. The governance of the Millennium Challenge Account Nepal (MCA-Nepal), which is a Government of Nepal's agency formed by a cabinet to manage the MCC initiative in Nepal, is ensured by its own rules; the project management chain of accountability links directly to the MCC Global; the hiring of its staff will be international and own its discretion, and that the Nepal government will have to make an easy passage for hiring foreign employees. Some statements which can be seen as problematic are:

· “MCA-Nepal will adopt internal rules and regulations or bylaws, in form and substance satisfactory to MCC (the “Bylaws”).”

·Article 2, “MCA-Nepal will submit its proposed Implementation Plan for review and approval by MCC before the initial Disbursement of Program Funding and at least on an annual basis thereafter. MCC will review the proposed Implementation Plan and as necessary may request MCA-Nepal to submit clarifications or adjustments. MCA-Nepal will submit an updated Implementation Plan or updated Implementation Plan Document during any quarter in which significant changes or modifications are made to a Project or to the Program, or when MCA-Nepal determines that the expected results, targets, and milestones for the specified year are not likely to be achieved; provided, however, that an updated Detailed Financial Plan will be submitted each quarter. In such instances, MCA-Nepal will submit to MCC for approval a proposed revised Implementation Plan or updated Implementation Plan Document (as applicable) on the same date as the next Periodic Report is due. MCA-Nepal will ensure that the implementation of the Program is conducted in accordance with the Implementation Plan.

·  “MCA-Nepal will develop and implement a plan, …The Audit Plan will be in form and substance satisfactory to MCC…”. Transactions Subject to MCC Approval.

· “MCA-Nepal will hire all Officers and employees through fair, competitive, and non-discriminatory procedures. Officers and employees will be hired without regard to nationality or citizenship.”

· “The Government agrees to: (A) arrange for any foreign personnel (either individual consultants or personnel of firms) providing goods, works or services under the Compact to be provided promptly with any necessary work visas and to arrange for such foreign personnel and their family to be provided promptly with entry visas; and (B) provide the foreign personnel (either individual consultants or personnel of firms) providing goods, works or services under the Compact with work permits and such other documents as shall be necessary to enable the foreign personnel to perform services and to remain in Nepal for the duration of the Compact, without the need to exit the country for any period in the interim.”

The debates often miss the critical point that Nepal’s government is not forced to be a bystander in the design and implementation of the MCA-Nepal programs, but also, it is required to delegate its own power to the MCC-Nepal. Essentially, the Nepal government is required to transfer its power to the MCA-Nepal to disempower itself. All these to the acceptance of the MCC Global. In effect, the Nepal government holds no power to modify, influence, or rescind any of the matters of the MCC-Nepal. The autonomy of the MCC and MCC having a power of oversight is noted in the following texts:

·  … host country ownership of the program (Vikas Samiti) but … with the MCC oversight and assistance.”

“The Government has designated MCA-Nepal, a development board, as the primary agent of the Government to implement the Program and to exercise and perform the Government’s right and responsibility to oversee, manage and implement the Program, ...”

· “The Government will ensure that (A) no decision of MCA- Nepal is modified, supplemented, unduly influenced or rescinded by any governmental authority, except by a final and non-appealable judicial decision, and (B) the authority of MCA-Nepal will not be expanded, restricted or otherwise modified, except in accordance with this Agreement and the Compact.”

·“The Government will promptly take all necessary or appropriate actions to carry out all of its obligations … and to delegate its rights and responsibilities to entities, including MCA-Nepal adequate to enable them … to oversee and manage the implementation of the Program on behalf of the Government.”

·“MCC-Nepal had the power and authority to bind the Government to the full extent of the Designated Rights and Responsibilities, and execute and deliver each agreement, certificate, or instrument contemplated by this Agreement, …”.

·   “… Nepal government must ensure that all assets and decisions are of MCC, nothing can be changed by the Nepal government without the MCC’s prior written approval.”

·   “… Government must provide the MCC with an update on all strategic road networks every year.”

Most commentators of the MCC in Nepal often do not discuss the extra-ordinary and unfair provision in the compact, in that despite Nepal’s government not having control of any of the governance activities, it is required to pay the indemnity for the work that MCA-Nepal does, as shown in:

·“If MCA-Nepal is held liable under any indemnification or other similar provision of any agreement, then the Government will pay such indemnity in full on behalf of MCA-Nepal and will not use MCC Funding or any Program Assets to satisfy such obligation. In addition, the Government will indemnify and hold harmless each member of MCA-Nepal’s Board of Directors (including each Observer), each member of any Stakeholders’ Committee and each of MCA-Nepal’s Officers and employees from any claim, loss, action, liability, cost, damage or expenses incurred by such person in the performance of its duties on behalf of MCA-Nepal …”

By design, MCC Global is supreme in the governance of MCA-Nepal. It is a one-sided agreement with no respect or recognition of the Nepali government, or worse still, monitoring the contribution of the Nepal government as everything must be to the satisfaction of the MCC.

·   “The Government may not assign, delegate or contract implementation of its rights or obligations under this Agreement without MCC’s prior written consent.”

·   “MCC may terminate this Agreement, in whole or in part, without cause by giving the Government thirty (30) days’ written notice.”

·  “MCC may immediately terminate this Agreement, in whole or in part, by written notice to MCA-Nepal and the Government if MCC determines that any event that would be a basis for termination or suspension of the Compact or MCC Funding.”

· “MCC may use or disclose any information in any Disbursement Request, report or document developed or delivered in connection with the Program: (a) to its employees, contractors, agents and representatives, (b) to any United States inspector general or the United States Government Accountability Office or otherwise for the purpose of satisfying MCC’s own reporting requirements, (c) by posting on the MCC Website for the purpose of making certain information publicly available and transparent, (d) in connection with publicizing MCC and its programs, or (e) in any other manner.

·Prior to any Disbursement of Program Funding for the transmission line from New Butwal to the Nepal-India border as part of the Transmission Lines Activity, the Government will have provided evidence, in form and substance satisfactory to MCC, that steps necessary to ensure that the construction of the transmission line between the Nepal-India border and Gorakhpur is on track to be completed on or about the Compact End Date.

·  “MCA-Nepal will ensure to MCC’s satisfaction that the Government Contribution is fully and timely incorporated in the Implementation Plan Documents.

One of the major contentions of the debates is on one important element, that is, the MCA-Nepal compact focuses on enhancing connectivity to India, while ignoring China, which is demonstrated by:

·  “… Facilitating cross-border electricity transmission to India … Construction of approximately 300 kilometers of high voltage power lines, equivalent to one-third the length of Nepal, including a link to the Indian border to facilitate electricity trade.

·   “… Technical assistance to improve electricity governance”

It is a vital geopolitical issue because it involves Nepal’s critical neighbors, India, and China. Linked with this is the question of whether the MCC is linked with the US Indo-Pacific Strategy, especially the provisions that the agreement will prevail over Nepal’s laws in case of conflicts. There was not much dispute over the compact until David Ranz, from the US State Department, during his Nepal visit said that the MCC was a crucial part of the Indo-Pacific Strategy. Many political leaders strongly stood against the parliamentary ratification of the compact, arguing that the MCC is part of Washington’s Indo-Pacific Strategy, which has military components that are aimed at countering China, a friendly and critical neighbor of Nepal. They have opposed the compact’s requirement of House approval, as the compact says that it would prevail over Nepal’s existing laws in case of conflicts. Moyo's book, Winner Take All: China's Race for Resources and What It Means for the World (2012) argued that China is already well on the way to gaining the upper hand in world economic dominance. In this context, Nepal, both being an immediate neighbor and already receiving significant development grants and loans from China, cannot afford to make China feel sidelined by signing the MCA-Nepal compact without serious consultation with and advice from China: the issue that might not make the MCC hierarchy and India not overly happy, but something this is in the best interest of Nepal.

Despite such problematic provisions in the compact, Nepal has already half-celebrated the fact of being the first country in South Asia to qualify for the compact after it met 16 out of the 20 policy indicators. Then joint-secretary, Baikuntha Aryal, and acting chief executive officer of the MCC,  Jonathan Nash, in September 2017 signed an agreement in Washington. The US government agreed to provide USD500 million in grants while Nepal would put in $130 million for the project that prioritizes energy and roadways. This is the largest grant Nepal has ever received. Then Finance Minister Yubaraj Khatiwada registered the compact at the federal parliament for ratification. However, it was never presented before the House for approval. It is noteworthy that the MCC compact does not note that it needs to be ratified by Nepal’s parliament. However, the text of the agreement says that provisions in the compact will prevail over Nepal’s existing laws in case of conflicts, which requires parliamentary ratification. In this context, the MCC is the first grant agreement that requires parliamentary approval. As the grant assistance under the MCC must be approved by the US Congress, the United States government looks for the same level of endorsement from receiving countries. Most countries ratify the MCC compact through their parliament, although their agreements do not say the provisions in the compact would prevail over the domestic laws in case of contraction. There are critical lessons for Nepal from the global experiences. It certainly seems possible for Nepal to engage in the discussion with the MCC and explain modifications in the compact. The real question for the Nepali government is who the competent people are who can do this work, ensuring a positive relationship with the MCC partners and China.

It is no wonder why most debates on the MCC in Nepal are fundamentally misplaced as not many debates exist on the misconceptions of the external ‘experts’ who have ill-defined the problems by ignoring local needs, culture, rights and contributions. The problems and solutions identified and imposed by the ‘experts’ are sponsored by the USA, ignoring or undervaluing the inputs from Nepali experts and the community. This reminds me of Easterly’s argument in his book; The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor (Basic Books, 2014). As Easterly analyzed, the broader shortcoming of this development thinking is the failure to recognize the importance of the rights and values of the locals. Development, as the MCA-Nepal sees it, is narrowly focused on material well-being. Development "experts" champion technical solutions such as roads and electricity, believing they will end poverty. Nepal has a myriad of systemic dysfunctions, each with its own ecological, economic, and social dimensions without simple cause or solution. The problem cannot be merely attributed to financial and infrastructural shortcomings These technical solutions by “experts” fail to address the core of the problem. The lack of individual rights and recognition, including political and economic ones, prevents the local peoples from implementing bottom-up, emerging solutions to development problems, and from defending their interests from upward and imposing institutions like MCC global. As Redcliff (2005) argues, development needs are defined in different cultures, and that the development approach of the MCA-Nepal, seems to be an approach, what Giddings et al (2002) argues “almost anything that anyone wants so that beneath its covers lies a multitude of sins”. The first step, as Easterly argues, is to at least open a debate, a discussion about why the rights and recognition of the Nepali local matter. There is a serious need for developing critical knowledge and skills for a deeper understanding of why and how local voices and indigenous knowledge are important but are persistently ignored or misconceived, and how to approach a more effective dialogue between the powerful global actors and rightful local people as a basis for transforming development and foreign aid. Clearly, MCA-Nepal has come at a crucial juncture of Nepal’s development history and is undoubtedly important; state accountability and sovereignty are now a prerequisite for all future development.

The western ‘experts’ imposing development solutions to the ‘east’ is not new. This practice has an origin in the interest of expanding capitalism with the implementation of the Bretton Woods System of the 1940s which has now persisted through the globalization movement of the 1990s. The problem is that the development governance has been paralyzed by the technocentric view of development taken by the MCC, seeing development as reliant upon economic growth and capital accumulation with complete substitutability of factors of production (human-made capital for natural capital) and arguing technological fixes can mitigate resource extraction and environmental impacts. The MCC optimists have confidence that the existing capitalist social, economic, political, and ideological structures/institutions can deliver growth and alleviate poverty. However, skeptics argue that we must change our economic system, our political structures, and our ways of thinking to realize inclusive development in a socially diverse and politically vibrant country like Nepal. The problem of the ‘west’ cannot and must not continue in the form of imposition. There are alternative ways to think about development governance. One way is where the local contexts are carefully considered, indigenous knowledge and contributions valued, and political complexities and social relations recognized. Of course, the problematic governance is not going to change overnight. But we can still see the light at the end of the tunnel. Local champions must be nurtured and mobilized by the political leadership of Nepal to bring about these changes. Of course, these champions are there or emerging, and they can build on the debates of the MCC to date. After all, it’s not all doom and gloom. The debate over the MCC in Nepal has increased awareness of the pitfalls and potentials of foreign aid in Nepal. It has also shown that Nepal can attract powerhouse economies, like the USA, to have global agreements and resource commitments. This lively debate is the evidence that public engagement, even if opinionated and uncritical to a large extent, is increasing at all policy-making processes (global, national, and local). There is clearly an increasing individual consciousness which can be a good foundation to identify competent local champions for change for inclusive, less dependent development. Moreover, some people have now been asking: whether MCC is beneficial for Nepal at all? I think this question misses the point. I think MCC or the like is an opportunity and is something we should work towards and make it work in our favor, not against it. We live in a world that is massively globalized and we must live with, not live against the capitalistic political economy if we wish to realize economic prosperity to address everyday concerns of the people. And even if MCC is not penetrable or influenceable in a country like Nepal in the short run– it is in the interest of justice, state sovereignty and freedom that we all strive for and never give up to the wealthy and powerful. Our rights and dignity are still worth striving for!

The analysis of the MCC debates in Nepal demonstrates that the MCC in Nepal is trying to reincarnate what Easterly argued in his famous book, The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. This instructs all Nepali people and well-wishers of Nepal to carefully rethink about the meaning of foreign aid for the country and people. The MCC compact in Nepal, with all its do-good missions, is ultimately a modern reincarnation of the infamous colonial conceit of yore. As it is proposed, the MCC is typical of, what Easterly argued, “planners”, who believe in imposing top-down big plans on poor countries like Nepal. Nepal has now come to a situation where either the Nepal government and parliament must either reject the compact and move on without further delay or work with the MCC to modify it and make it as best as it can be for the Nepali people. The ‘reject’ option, while still open and can be done, is not a great option for Nepal going forward because the MCC can be an opportunity for Nepal, as demonstrated by many countries who have embraced MCC, and it is offered by the USA that has a global influence. There are also risks in rejecting it – something Nepal cannot afford at this time. The second option is to ‘accept’ it with modifications, and this is a better option, provided that the modifications are negotiated in good faith and in the interest of the Nepali people. It is important to understand that the MCC compact being presented should not be accepted as it is. It gives sweeping powers to the MCC Global, while once accepted, the Nepal government is bypassed in the governance of MCA-Nepal. The consequences of accepting it without any modification can be risky for various political, economic, and social reasons. After all, Nepal does not want to replicate what Moyo characterized in her book, Dead Aid, where government-to-government foreign aid has harmed Africa by fostering dependency, encouraging corruption and ultimately perpetuating poor governance and poverty. After so much has happened over the years and throughout history, Nepal cannot afford to be a country that perpetuates the cycle of poverty and hinders economic growth through the implementation of the MCC imposed by others.

Nepal should consider accepting the MCC with appropriate modifications. In so doing, the first and foremost, the Nepali political leaders must work out at least five critical tasks:

1)      develop a team of highly competent developers and international relations experts of Nepali heritage to lead the work,

2)      the team undertakes a detailed analysis and develops precise details of what modifications are required and why in consultation with political parties and the public,

3)      the team develops a set of principles of negotiation with the MCC, China and other stakeholders, 3) the team engages diplomatically with China in shaping these modifications and principles ahead of discussing with the MCC officials,

4)      the team engages with the MCC in a series of meetings to bring about the modifications required, and

5)      the team recommends the government to consider endorsing the modified MCC compact through consensus, where possible by the House.

To start with the process, political leaders in Nepal must recognize that negotiation with the MCC officials and China must be evidence-based, not just based on sentiment, emotions, and opinions. This necessitates a team of highly competent and respected development scholars, academics, and experts from within Nepal and overseas. This team must be given a specific Terms of Reference (ToR) together with sufficient power and resources to undertake the task of articulating modifications and engaging with stakeholders. The modifications required must include some of the fundamental aspects of the MCC, including curtailing the powers of the MCC Global and making the MCA-Nepal activities ultimately accountable to the government of Nepal. This is a massive task and this must be done with due care and explained well with the support of robust evidence. The principles of negotiation must include a range of matters, including a commitment to a fair and transparent dialogue, accountability, equality, respect, and recognition. A delicate and diplomatic task during this process is to engage with China and get their inputs along the way, making it clear that Nepal definitively wants to make the MCC work for Nepal, without going against any interest of China. Having China on board during this process is vital to ameliorating many and unseen after-effects that might emerge later. Clearly, Nepal must stand up to the neo-colonial aid culture today by carefully analyzing the MCC as it is proposed and providing alternatives using evidence and experts sponsored by Nepal, not by the USA; this is what is called in the west as ‘playing by the rules of the game’ and Nepal must do this for its benefits. The door of negotiation must be kept open by Nepal, for both the USA and China. The MCC can be an opportunity and truly transformative for Nepal if it is done right. But it must be recognized that it can also go horribly wrong, with long-term adverse effects to Nepal and creating a bad legacy for some political leaders, or even, ending the political career of some Nepali politicians. What is vital here is to recognize that Nepal and Nepali people are the centre of what development is done in Nepal today or in the future, and that respect to and sovereignty of the Nepal state is non-negotiable.

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