MCC Countdown Begins

MCC Entry Into Force (EIF) Will Be From June 30, 2020

Aug. 28, 2019, 10:35 a.m. Published in Magazine Issue: VOL 13 NO 03 ,Aug.23 –05 Sep., 2019(Bhadra 06, 2076) Online Register Number: DOI 584/074-75

At a time when Nepal is aspiring to qualify from LDC to middle income country, it requires huge investment in infrastructure sector. Launching of Millennium Challenge Compact will fulfill some of the targets of Nepal from next year in energy and road sector.

Executive Director of Millennium Challenge Account Nepal (MCA-Nepal) Khadga Bahadur Bisht said that the progress is satisfactory in fulfilling the condition set by Millennium Challenge Compact to implement projects in Nepal.

Addressing a press meet after announcement of Millennium Challenge Compact entry into force (EiF) date, Executive Director Bisht said that preparations are under way to begin the project next year.

Through the Compact, MCC committed a US $ 500 million grant and Nepal committed US $ 130 million for the Compact program. The program consists of two projects -- the Electricity Transmission Project, focused primarily on the construction of 318 km of 400kV transmission lines and three large capacity substations, and the Road Maintenance Project, focused primarily on maintenance works on up to 300 km of strategic roads

“Along with transmission line, the project will also construct three substations,” said ED Bisht. “We also help bring transparency and efficiency to the power sector by providing technical assistance to Nepal Electricity Regulatory Commission and Nepal Electricity Authority.”

The ‘Entry into Force’ (EiF) date for the implementation of the Millennium Challenge Compact, has been set for July 30, 2020. The agreement for this was signed between the Government of Nepal and the Millennium Challenge Corporation (MCC), on behalf of the US Government.

Nepal took the decision through the Ministry of Finance, after consultation with all relevant ministries and departments and the implementation agency Millennium Challenge Account Nepal (MCA-Nepal).

In a press meet, Deputy Resident Country Director Sanjay Poudyal said that there are no clauses for the extension of the project beyond five years. He said that project should complete its work within five years from start of the construction.

The Ministry of Finance representing Nepal and the MCC representing the United States of America signed a Compact agreement in September 2017. The economic constraints analysis completed prior to the design of the Compact’s projects showed lack of sufficient and reliable electricity and high cost of transportation based on low road maintenance as binding constraints to economic growth.

MCC’s implementation method requires that enough time is allotted to the project preparatory phase so that all conditions for successful project delivery are met prior to the implementation activities. Following ‘Entry into Force’, all implementation activities must be completed within five years, as there are no provisions for time extension or cost increase.

The Compact agreement sets forth the conditions that the Government must meet for the implementation phase to begin (referred to as the EIF of the Compact).

The Government of Nepal has established MCA-Nepal on 18th April 2018 under Development Board Act, 2013 as the accountable entity to implement the Compact with Millennium Challenge Corporation, USA.

Some of the key conditions to EIF include declaration of the Electricity Transmission Project as a National Pride Project, passage of legislation to create an Electricity Regulatory Commission, ratification of the Compact agreement by the Parliament.

Others include signing of a Project Implementation Agreement, completion of a plan in agreement with the Government of India for the cross-border transmission line from Butwal, Nepal to Gorakhpur, India and site Access to all project construction sites with Environmental Impact Assessment (EIA) approval and sufficient progress on land acquisition and forest clearance.

The first two conditions have already been met and there has been substantial progress made on next three conditions. The drafting and approval of the Environmental Impact Assessment and completion of proper land acquisition and forest clearance to finally obtain site access is currently progressing well.

Similarly, detailed design work, finalization of the transmission line alignment, and tendering as well as planning of the contractor selection process is progressing well so that these processes are carried out in time to allow for implementation phase to begin immediately following Entry into Force (EiF) of the Compact agreement.

MCA-Nepal, on behalf of the Nepal Government, is fully committed to completing all condition precedents prior to Entry into Force (EiF) and to implement the Compact as agreed.

MCA-Nepal has expressed sincere appreciation to Nepal and MCC for their full support to achieving this important target and requested the media, civil society and public to support the implementation of this highly important and ambitious program aimed at poverty reduction through economic growth.

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