US bid to give US$500 million to Nepal sparks protests, war of words between Washington, Beijing

American funds could create job growth in Nepal, which has been hammered economically by the pandemic

Beijing says the Millennium Challenge Corporation pact’s purpose is to target China, while protesters call it a sell-out of national sovereignty

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The flags of China and the US are printed on paper in this illustration taken January 27, 2022. Photo: Reuters

Published: 9:00pm, 22 Feb 2022Updated: 9:15pm, 22 Feb 2022

After repeated delays, a controversial US aid grant to provide US$500 million in vitally needed infrastructure funds to Nepal has been introduced in the country’s parliament for approval. Washington has imposed an end of February deadline for lawmakers in Kathmandu to ratify the Millennium Challenge Corporation (MCC) pact.

But the quickly approaching deadline is not the only thing that could scupper the agreement, as the US-China rivalry and domestic disagreement are threatening to sink the deal signed in 2017.

“The current political calculus is not very conducive,” said Santosh Sharma Poudel, co-founder of the Nepal Institute for Policy Research.

02:19

Nepal police fire tear gas to disperse pro-Beijing protest over US$500m aid grant from the US

Fresh protests erupted Sunday in the capital of Kathmandu after the grant was tabled with police firing tear gas to disperse demonstrators who called the pact a sell-out of national sovereignty. Their views echo that of Maoist politicians in Nepal who have traditionally been pro-Beijing.

The discord over the grant has polarised politics in the impoverished state squeezed between India and China, and threatens the survival of the coalition led by Prime Minister Sher Bahadur Deuba of the centrist National Congress. It has also sparked a US-Sino war-of-words. Beijing will “definitely be wary of increasing American influence in its soft belly,” said Poudel.

The US, Nepal’s biggest bilateral donor, has warned if Kathmandu rejects the grant, it will “review relations” with the aid-dependent nation. A State Department spokesperson also said on February 14 that Nepal could “lose bilateral and multilateral aid as well as foreign direct investment.” Furthermore, the spokeperson accused China of spearheading a “sophisticated disinformation campaign”.

A map from 2019 showing a proposed rail line to Nepal from China. The landlocked country is sandwiched between India and China. Map: SCMP

In response, Chinese Foreign Ministry spokesperson Wang Wenbin said on February 18 in a report carried by the state-run Global Times daily that Beijing opposes any form of “coercive diplomacy” and painted the MCC grant as “nothing more than a pact with the geopolitical purpose of targeting China.”

US bid to give US$500 million to Nepal sparks protests, war of words between Washington, Beijing

American funds could create job growth in Nepal, which has been hammered economically by the pandemic Beijing says the Millennium Challenge Corporation pact’s purpose is to target China, while protesters call it a sell-out of national sovereignty

American funds could create job growth in Nepal, which has been hammered economically by the pandemic

Beijing says the Millennium Challenge Corporation pact’s purpose is to target China, while protesters call it a sell-out of national sovereignty