The U.S. Government’s Millennium Challenge Corporation (MCC) Board of Directors this week approved a $500 million compact with Nepal, MCC’s first compact in South Asia. The Government of Nepal has committed to contributing an additional $130 million to support MCC’s investment. Pending Congressional review, the compact is expected to be signed by both governments in September.
“I am pleased to announce the Millennium Challenge Corporation Board of Directors’ approval of the Nepal Compact,” Acting MCC CEO Jonathan Nash said. “This compact with Nepal focuses on the power and transportation sectors to improve regional connectivity, spur private investment, drive growth, and reduce poverty. The contribution of an additional $130 million from the Government of Nepal, which is the single largest up-front country contribution in MCC’s history, enables our investment to have an even greater impact.”
The program has been in development since MCC’s Board selected Nepal in December 2014 as eligible to develop a compact – MCC’s larger grant program – in recognition of the country’s efforts to establish rule of law and democratic institutions and its strong performance on MCC’s policy scorecard. The country ratified a new constitution in September 2015 and held the first two phases of local elections earlier this year for the first time in 20 years, with the third and final phase of elections planned for September. This is the first compact to be approved by MCC’s Board of Directors under the Trump Administration.
The compact includes two projects. The Electricity Transmission Project is designed to transform Nepal’s power sector by expanding and strengthening the high voltage electricity transmission network to support new investments in generation. The project includes the construction of approximately 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 electricity trade with India; and activities to improve sector governance to promote private investment. The Road Maintenance Project is designed to improve the maintenance regime in Nepal and will complement existing efforts by others to build new roads.
With nearly half of the country living on less than three dollars a day, Nepal is one of the poorest countries in Asia. It continues to face extensive economic development challenges caused by decades of political transition, poor labor relations, high transportation costs, and an inadequate supply of electricity. The devastating earthquakes of 2015 further compounded Nepal’s development challenges.
MCC’s time-limited grant investments promote economic growth and help people lift themselves out of poverty, creating more stable, secure countries with new business opportunities. New procurement and business opportunities associated with the Nepal Compact will be announced in the coming months