Kathmandu, December 31

The government has moved closer to signing a compact pact with the US government’s Millennium Challenge Corporation (MCC) as it submitted the concept paper to obtain grant with the list of projects to MCC headquarters, recently.

MCC is an independent foreign assistance agency led by the US Foreign Secretary and had selected Nepal under compact funding programme after three years of its selection for threshold programme in December 2014. Under the compact funding, the country can receive US grant of $66 million to $698 million for a five-year period based on the performance indicators set by the MCC.

The Office of the Millennium Challenge Nepal (OMCN), which has been established for identification, preparation and designing of the projects to mobilise the US government’s grant facility, recently submitted the list of a few energy and transport-related projects to the MCC headquarters. OMCN has proposed to develop Kathmandu-Tarai fast track project mobilising the US grant, according to Krishna Gyawali, MCC national coordinator. “We have proposed other road projects simultaneously as the Kathmandu-Tarai fast track project is under judicial consideration at the Supreme Court.”

OMCN has also proposed upgradation of the two road sections, namely Pakali (Sunsari)-Kakadvitta (eastern border) and Butwal-Pokhara of the Siddhartha Highway. Pakali-Kakadvitta is a 110 km-long road section of the East-West Highway. Upgradation of these two road sections has been proposed as an alternative to the Kathmandu-Tarai fast track road project.

OMCN has said that the final list of the projects will be prepared by February and detailed feasibility of the projects will be initiated once it gets approval of the MCC headquarters. “If the court’s verdict comes early, Kathmandu-Tarai fast track road can be picked,” said Gyawali, adding, “We cannot say anything more on the sub-judice case.”

Likewise, OMCN has proposed proper maintenance of two other poor quality roads Amiliya-Tulsipur-Salyan (92 km) and Silghadi-Sanfebagar (60 km). The economic return from maintenance of the roads is expected to go up significantly. One of the selection criteria for MCC-funded projects is that they should have at least 10 per cent economic rate of return. Also, environmental issues, private sectors’ involvement for project sustainability and inclusion are also considered.

Similarly, OMCN has identified that insufficient transmission corridors have been the major obstacle for power generation projects and has proposed two trunk line transmission projects. Hetauda-Galchhi/Naubise-Damauli-Butwal (250 km) and Haledi-Galchhi/Naubise (55 km) — 400kV double circuit transmission lines — have been proposed under energy sector. The total cost of these projects is expected to hover around $311 million.

In addition, OMCN has also proposed institutional reform support worth $8.6 million to the US government for development of the hydropower sector. The institutional support would be mobilised for project sustainability, technical support for power trading company and independent transmission operators.

OMCN has identified that these infrastructure projects will be supportive in stimulating the country’s economic growth. The diagnostic study conducted by MCC has identified lack of energy supply, lack of transport infrastructure, policy uncertainty and labour relations as the constraints to growth.

After selection of projects and other required works for the project implementation is completed, the country will start implementing MCC-funded projects from January 2018. Completion of the projects within five years is mandatory. MCC will have its own procurement rules to expedite the projects’ implementation and complete them within the stipulated timeframe.

“If a country is able to show good performance in implementation of the MCC-assisted projects in the first five-year cycle, there are chances it will get compact funding for the next phase as well,” according to Gyawali. Countries like Mongolia and Tanzania, among others, have been enjoying compact funding of the second five-year cycle.