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Context

• The implementation of the Millennium Challenge Corporation (MCC) program officially started in Nepal.

About MCC

• The Millennium Challenge Corporation (MCC) is a bilateral United States foreign aid agency established by the U.S. Congress in 2004.
• It provides grants to countries that have been determined to have good economic policies and potential for economic growth.
• The country qualification process is objective, involving scores provided by third parties in 20 different areas. An eligible country must apply for a grant with a specific project in mind.

Guiding Principles

MCC was authorized in 2004 with bipartisan support. Its guiding principles are:

Competitive selection:

• Before a country can become eligible to receive assistance, MCC's Board examines its performance on 20 policy indicators and selects compact-eligible countries based on policy performance.

Country-led solutions:

• MCC requires selected countries to identify their priorities for achieving sustainable economic growth and poverty reduction.
• Countries develop their MCC proposals in broad consultation within their society.
• MCC teams then work in close partnership to help countries refine a program.

Country-led implementation:

• MCC administers the Millennium Challenge Account (MCA). When a country is awarded a compact, it sets up its own local MCA accountable entity to manage and oversee all aspects of implementation.
• Monitoring of funds is rigorous and transparent, often through independent fiscal agents.

Indicators

The indicators are:

Indicator	Category	Source
Civil liberties	Ruling justly	Freedom House
Political rights	Ruling justly	Freedom House
Freedom of Information	Ruling justly	Reporters Without Borders Centre for Law and Democracy Access Now
Government effectiveness	Ruling justly	World Bank Institute
Rule of law	Ruling justly	World Bank Institute
Control of corruption	Ruling justly	World Bank Institute
Immunization rate	Investing in people	World Health Organization
Public expenditure on health	Investing in people	World Health Organization
Girls' primary education completion rate / Girls' secondary education enrolment rate	Investing in people	UNESCO
Public expenditure on primary education	Investing in people	UNESCO and national sources
Natural resource protection	Investing in people	CIESIN/Yale
Child Health	Investing in people	CIESIN/Yale
Inflation rate	Economic freedom	International Monetary Fund WEO
Trade policy	Economic freedom	The Heritage Foundation
Land rights and access Index	Economic freedom	IFAD / Doing Business World Bank
Regulatory quality	Economic freedom	World Bank Institute
Fiscal policy	Economic freedom	IMF WEO
Access to Credit	Economic freedom	Doing Business World Bank
Gender in the Economy	Economic freedom	Women, Business and the Law World Bank
Business start-up	Economic freedom	Doing Business World Bank

An eligible country must apply for a grant with a specific project in mind.

MCC in Nepal

• Nepal and MCC signed the MCC Nepal Compact on September 14, 2017, for two projects, the Electricity Transmission Project and the Road Maintenance Project, which will work to increase the reliability of electricity and lower the cost of transportation in Nepal.
• The multi-million-dollar pact was ratified by parliament on February 27, 2022.
• The five-year project aims to improve road and electricity connectivity.
• The objectives of the Pact are maintaining road quality, increasing the availability and reliability of electricity, and facilitating cross-border electricity trade between Nepal and India-helping to spur investments, accelerating economic growth, and reduce poverty.
• The program is co-funded by the US Government's Millennium Challenge Corporation (MCC) Compact grant of USD 500 million and the Government of Nepal's contribution of USD 197 million.
• The MCA- Nepal (Millennium Challenge Account-Nepal) has completed its preparatory works to reach out to the phase of former implementation of the project which has a lifespan of five years.
• The Entry into Force (EIF) of the Nepal Compact marks the fulfilment of necessary conditions and preparation to ensure the successful completion of Compact projects within a five-year timeline.

Note: Nepal was the first country in the region to qualify for the program.

Significance

• This is Grant Based Effort that focuses entirely on the improved and energized economic growth for Nepal at the time it's very critical for Nepal's economy to develop opportunities for the workforce that Nepal's young society with a brilliant future in front of it and this project is going to power that future in a powerful way.
• This will help support Nepal to better deliver critical services to its people, ease the movement of goods around the country, and open new opportunities for private investment-all to create sustainable development for the people of Nepal.
• According to MCC, strengthening the reliability of key infrastructure will put the country's economy on a firmer growth trajectory, advance stability, support regional security, and reduce poverty.

PRACTICE QUESTION Q. Which of the following indicators are not considered as an eligibility criterion while selecting a country for a grant under the Millennium Challenge Corporation (MCC) - the United States foreign aid agency? a)   Inflation Rate b)   Rule of law c)    Immunization rate d)   Land rights and access Index 1) a and b 2) b and d 3) a, b and d 4) None of the above. Answer: 4) None of the above.

https://indianexpress.com/article/world/nepals-500-mn-grant-from-us-govts-foreign-aid-agency-enters-execution-phase-8916853/