Nepal | April 22, 2019

Nepal passes criteria to be re-selected for compact programme of US govt’s MCC

Himalayan News Service

Kathmandu, November 4

It has become certain that Nepal will be reselected for the US government’s Millennium Challenge Corporation (MCC) compact funding programme for next year as the country has passed all the required indicators for next year’s scorecard that was released today. The scorecard is a key component in the agency’s annual competitive selection process that determines which countries will receive MCC development funds.

Similar to its score last year, Nepal has passed 16 out of 20 indicators. While the country’s performance in ‘Government Effectiveness’ indicator slipped, it improved in the ‘Regulatory Quality’ indicator.

“Decline in ‘Government Effectiveness’ indicator means that the government’s service delivery capacity has worsened as compared to the previous years,” said Himesh Dhungel, MCC country director to Nepal.

As per the scorecard released today, the country failed to meet four of the criteria — government effectiveness, trade policy, gender in economy and access to the credit. Though the country failed to garner above 50 per cent marks to pass the aforesaid four indicators, the country performed better in two indicators — gender in economy and access to credit — with 43 per cent and 50 per cent marks, respectively.

“Countries that score high in scorecard are considered to be competent to obtain the compact funding because the MCC seeks better returns from every single dollar of grant it provides,” according to Dhungel.

Basically, the grant amount that a country obtains after signing the compact funding programme will depend on the opportunity to reduce poverty and competition among countries selected for grant based on the scorecards. US congress is the final authority to review the funds proposed by MCC board for the countries selected under compact eligibility criteria.

This year, out of the 82 countries that MCC created scorecards for, 33 countries passed and the countries with good scores will have higher chances of getting more grants from MCC.

“MCC’s competitive selection process is a data-driven, transparent method for determining where the agency would invest its development dollars,” Dhungel asserted.

The MCC board of directors selected Nepal as eligible to develop a compact programme for the first time in December of 2014 and again re-selected the country in 2015.

MCC’s board of directors will still need to re-select Nepal for potential funding based on its scorecard performance and relevant supplementary information. After the MCC board meeting, which is scheduled to be held in December this year, takes a decision on re-selection of the country for compact funding, Nepal would need to sign compact agreement with MCC, abiding by all the conditions set by the corporation and the projects proposed under MCC would mandatorily need to be completed within five years from the date of project implementation.

“MCC can also suspend or terminate the agreement if a country fails to pass at least half of the indicators out of the total 20. Also, a country needs to absolutely pass two of the indicators — political rights or civil rights and control of corruption — for the entire five years of project implementation period after the compact agreement is signed,” as per Dhungel.

The country has been preparing to obtain MCC grant for critical transmission line projects for distribution of electricity to the load centres from generation points and in transportation sector.

On September 26, this year, MCC announced the launch of feasibility studies of various power sector projects proposed by the Office of the Millennium Challenge Nepal (OMCN), a Nepal government entity which coordinates development of the MCC programme. These feasibility studies will be completed in January 2017, along with the evaluation of proposed road transport and off-grid electricity projects.

MCC plans to submit the proposed investment programme to its board for approval by September of 2017. Thereafter, the government needs to form Millennium Challenge Account for the implementation of the projects and MCC will have separate procurement and fiscal agents. The bill of the contractor will be paid directly from the independent fiscal agent of MCC. This means MCC grant will be spent directly on quarterly basis and not through the government’s treasury, as per Dhungel.

“In case the cost of selected projects exceeds available funding, the office of MCC in Nepal will coordinate with other development partners to bridge the resource gap.”

A version of this article appears in print on November 05, 2016 of The Himalayan Times.

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