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US-China relations
This Week in AsiaEconomics

Why is the US struggling to give US$500 million to Kathmandu? Ask Nepal’s China-friendly Maoists

  • Millennium Challenge Corporation grant would fund road and power projects, but sceptics see it as an attempt to rival Beijing’s growing belt-and-road clout
  • Wrangling over the issue has raised doubts about the survival of Prime Minister Sher Bahadur Deuba’s ruling coalition

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Nepali children wearing traditional clothes at Tribhuvan International Airport bid farewell to China’s President Xi Jinping after his two-day visit in 2019. Photo: EPA
Penny MacRae

Nepal’s Prime Minister Sher Bahadur Deuba is facing an uphill battle to get parliament to approve a controversial US$500 million grant from the American government to build electrical power lines and upgrade roads in the impoverished Himalayan country.

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While the infrastructure is urgently needed, the question of whether to accept the donation has become caught up in big power politics with the United States and China jostling for influence in the landlocked nation.
Some of the strongest opposition to the grant comes from Nepal’s Maoists, who have traditionally been close to Beijing, and other parties in Deuba’s coalition government. They say accepting the money could draw Nepal into the US security orbit to the detriment of China and undermine national sovereignty.

Deuba, who leads the centrist Nepali Congress, has been struggling to persuade his coalition partners to come on board with the plan, telling them late last month, “This grant is necessary for Nepal’s development. There’s nothing in it that goes against the national interest. It’s within the law of the land.”

But ceaseless wrangling over accepting the US grant has deepened Nepal’s political divisions and raised doubts about the survival of the coalition led by the veteran politician. Deuba, 75, was named to the post last July by Nepal’s Supreme Court in an attempt to end months of political upheaval.

Nepal’s Prime Minister Sher Bahadur Deuba. Photo: EPA
Nepal’s Prime Minister Sher Bahadur Deuba. Photo: EPA
The grant from the US Millennium Challenge Corporation (MCC), set up by US President George Bush in 2004 to help fight terrorism post-9/11, would be spent on constructing a 400KV electricity transmission line to carry power to the Indian border and on improving roads. Power plants are already being built that will triple the 1,400MW of electricity Nepal produces and transmission lines are required to carry it. The lines would also allow crucial load-sharing with India and be critical in meeting expanding domestic power demands.
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