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The Diplomat
08-07-2025
- Business
- The Diplomat
Why the MCC's Continuation is in the Interest of Nepal — and the US
After putting MCC projects on hold in January this year, the Trump administration recently said that its projects in Nepal would go ahead. The Millennium Challenge Corporation (MCC), an American bilateral foreign aid agency, has been mired in controversy in Nepal since the get-go. It signed a $500 million compact with Nepal in September 2017. Proposed projects aimed to maintain road quality, increase the availability and reliability of electricity, and facilitate cross-border electricity trade between Nepal and India, which in turn would 'spur investments, accelerate economic growth, and reduce poverty.' As part of the deal, besides the $500 million the Americans were giving, Nepal would pitch in $197 million for the completion of the MCC projects. The projects ran into controversy after senior American officials started linking them to the Indo-Pacific Strategy (IPS), an American military construct designed to curtail China's rise. The common sentiment was that Nepal should not be a part of any military or strategic pact, especially one that harms its relations with China, the large neighbor to the north. Early in 2022, senior American officials like the MCC's then-Vice President Fatema Z. Sumar and the then-U.S. Assistant Secretary of State Donald Lu threatened Nepal's political leadership that the failure to ratify the MCC on time could lead to a 'review' of America's ties with Nepal. The compact's stipulation that future disputes in the projects would be settled in line with the compact's provisions — and not Nepal's domestic laws — also irked Nepalis. At the height of the MCC disputes in 2022, Nepali political leaders, especially senior hands in the country's largest party, the Nepali Congress, strongly backed the MCC projects, even when it was not a popular thing to do. Many left-leaning leaders, too, lent their tacit support to the compact — provided it was amended before parliamentary ratification. Eventually, a middle way was found: Nepal's parliament would ratify the compact while also passing an accompanying 'interpretative declaration.' Among other things, the declaration clarified that the compact's endorsement did not mean Nepal will be 'a part of any United States' strategy, military or security alliance including the Indo-Pacific Strategy.' And in case of disputes, the Constitution of Nepal would prevail over the compact. The ratification came at the end of 2022, and the Americans accepted the interpretative declaration, clearing the way for project implementation. Nepal's interests had been secured and the country had locked in an advantageous deal. First, the MCC projects would be built on grants, thus creating no additional liability on the Nepali state. Second, its time-bound nature would be a breath of fresh air in a country where vital infrastructure projects tend to be delayed by years or even decades. Third, as the power lines being built with American money would be used to take Nepal's excess energy to India, it would help Nepal realize its old dream of prospering through the export of its electricity. Then, Donald Trump came to power in January 2025 and declared that all American aid projects, including the MCC, had been put on hold. This created confusion in Nepal as it was unclear whether the funds for Nepal would be exempted. In fact, the common belief was that the Nepal compact was dead and buried — even though it had been signed during Trump's first term as U.S. president. Nepal's liberal-minded politicians had staked their careers and credibility to push for the compact's ratification—and now the Americans were seemingly backing out. Pulling the plug on the compact would thus have made it difficult for the Nepali political class to endorse any future American project or funding. Amid this uncertainty, in the middle of June, the U.S. Embassy in Kathmandu announced that Nepal had been exempted from budget cuts and the MCC projects were still scheduled for completion by their original August 2028 deadline. The announcement was timely. The projects' cancellation would have damaged bilateral ties and harmed Nepal's interests. The U.S. helps balance the oft-overwhelming influence of India and China, Nepal's two big (and only) neighbors, which is why the U.S. is often called Nepal's 'sky' or 'third' neighbor. When India blockaded landlocked Nepal in 2015-16, the United States consistently highlighted the resulting hardships of Nepali people, helping build international pressure on India to quickly lift the embargo. Even for the United States, reneging on the compact would have backfired. (It still could if Trump changes his mind again.) If their goal is to check China's rise in the region, it can only be done by winning the confidence of smaller countries like Nepal and helping them in their development endeavors. The lofty democratic ideals American officials like to emphasize tend to grate when not backed by such solid support. Of late, the U.S. has taken some dubious decisions like the suspension of visa interviews for Nepali students wanting to study in the U.S., and shutting down the USAID that was supporting key health initiatives in Nepal. But the continuity of the MCC projects suggests the Americans are not 'abandoning' Nepal. Even more importantly for Nepalis, the MCC's presence in Nepal undercuts the 'foreign policy myth' that the U.S. views Nepal through Indian lens.
South China Morning Post
03-06-2025
- Business
- South China Morning Post
US steps up contest with China in Africa by focusing on ambassadors' business deals
The US State Department has introduced performance metrics for American ambassadors in Africa to evaluate them based on the number of business deals they make as part of the US government's new 'trade, not aid' approach. Within its first 100 days, President Donald Trump's second administration secured 33 deals worth US$6 billion across the continent, announced Troy Fitrell, senior US official for the Bureau of African Affairs, at the launch of the bureau in mid-May. The US' new commercial diplomacy strategy 'focuses our efforts on the countries where US companies want to do business and where the data shows we ought to do business', Fitrell said on May 15. Meanwhile, Trump has not only overhauled USAID – whose activities helped fight diseases such as HIV/Aids, tuberculosis and malaria in Africa – and suspended foreign aid, but has also imposed trade tariffs. The administration has moved to dismantle the Millennium Challenge Corporation, which has invested more than US$10 billion in 24 African countries since 2004. 16:09 How China is reshaping its economic ties with Africa How China is reshaping its economic ties with Africa Trump also planned to host the next US-Africa Leaders Summit later this year. When the US hosted a similar summit in 2022, former US president Joe Biden pledged to invest US$55 billion in Africa over three years.
Yahoo
21-05-2025
- Business
- Yahoo
Analysis: The challenge with Trump's ‘trade, not aid' African strategy
Last week US Ambassador Troy Fitrell, the State Department's top Africa official, unveiled what appears to be the Trump administration's Africa policy — a 'Commercial Diplomacy' strategy that emphasizes 'trade, not aid.' The strategy posits that lagging trade stems from the US historically prioritizing aid over commerce. While some African leaders may welcome this pivot — seeing Africa as a commercial partner, not a recipient of handouts — the strategy faces serious challenges in both conception and execution. Fitrell proposed six key actions with 'commercial diplomacy' as its core focus. US ambassadors in Africa will now be evaluated on how effectively they advocate for American businesses and close deals. There is one drawback, however: This plan offers nothing for the development of deal flow. The Trump administration has suspended the US Trade and Development Agency, which once de-risked early stage investments. The new strategy purports to work with African governments to promote market reforms. Governments across the continent will embrace any partnerships to improve the investment climate. They will, however, do well to push for a partnership that is mutually beneficial. Fitrell's speech, as delivered, is skewed toward facilitating American business, not fostering mutual prosperity or supporting African enterprises. In a year where the African Growth and Opportunity Act (AGOA) is due to expire, it is not mentioned once. By contrast, the term 'export' appears four times in the speech — always referring to US exports to Africa — suggesting a largely one-way trade vision. For a continent starved for infrastructure, governments will embrace the Trump administration's stated intent to focus on such projects. They'll also be keen on an increase in so-called commercial diplomacy trips. However, with US government agencies like the Millennium Challenge Corporation now effectively defunct and American construction firms largely absent from the continent, it's unclear who will deliver the proposed infrastructure and how the administration will ensure that these trips are not simply symbolic. The plan proposes linking US exporters and capital to Africa and reforms to US trade promotion and financing tools. If realized, these reforms could address the deal flow. Overall, the Trump administration's new plans for Africa face a dilemma, as they conflict with simultaneous efforts to shrink the federal government. In Washington, where 'personnel is policy,' this creates a challenge for execution. Many African leaders will recognize similarities between this proposed approach and China's model of economic engagement. The US is converging with China on how to engage Africa, but without the tools that underpin China's success, such as state-owned enterprises from construction and railway firms to banks and insurance companies. The new approach assumes that the US private sector can compete without equivalent support, which is highly optimistic. The US no longer offers unique capital access, and it has unilaterally diminished its soft power tools. The strategy currently makes no clear offer to African countries that are also being courted by Asia, Europe, and the Gulf. There's no mention of increased access to US markets, no new financing mechanisms, and no talk of value addition to the much desired 'critical minerals.' African governments must now offer a counterproposal that centers around a clear value proposition for this partnership.
Business Insider
27-04-2025
- Business
- Business Insider
Malawi's $350 million infrastructure deal collapses as U.S. shuts down funding agency
The Malawian government has announced the collapse of its $350 million Transport and Land Compact following the shutdown of the Millennium Challenge Corporation (MCC), a U.S agency funding critical road projects in the country. Malawian government announces collapse of $350 million Transport and Land Compact due to shutdown of MCC MCC, US foreign aid agency, winding down operations due to federal directive from Trump administration to reduce spending Closure of MCC raises concerns about strategic influence and balance of power for global competitors like China The MCC, a U.S. foreign aid agency, is in the process of winding down its operations, leading to the collapse of Malawi's $350 million Transport and Land Compact, with only a few other projects globally continuing until their completion. The move reflects the Trump administration's efforts to reduce federal spending, citing concerns that taxpayer funds are being wasted on overseas development projects. The US Embassy in Lilongwe, the capital city of Malawi, announced the shutdown through Public Affairs Officer Grant Phillip, attributing the decision to a federal directive in an emailed response. Malawi's Minister of Transport, Jacob Hara, said he confirmed the report after the Millennium Challenge Corporation (MCC) canceled contracts for ongoing road projects, blaming the situation on the abrupt US policy change. The Minister said ' The shutdown has affected the current funding as the MCC has communicated to us that they have now cancelled the contracts. We didn't know about the shutdown in advance. MCA kept our hopes high that the MCC could survive the funding chop ' He also noted that the government hadn't included the projects in the 2025-26 National Budget, requiring them to start over in search of new financing. About The MCC Established in 2004 by President George W. Bush, the Millennium Challenge Corporation (MCC) is a US foreign aid agency fighting global poverty through investments in countries with strong economic policies & governance. The Agency currently manages over $5.4 billion in active grants across 20 developing nations, funding major infrastructure, education, and energy projects. It partners with countries meeting strict governance and anti-corruption standards. However, countries like Côte d'Ivoire, Mongolia, Senegal, Mozambique, Nepal, and Belize now face uncertainty, with ongoing projects at risk of termination.
Iraqi News
24-04-2025
- Business
- Iraqi News
Trump kills US agency funding Africa infrastructure
Washington – President Donald Trump's administration on Wednesday ordered the closure of a US agency that invested billions in African and other developing countries' infrastructure in return for good governance, effectively ceding ground to China. The Millennium Challenge Corporation (MCC) will immediately exit projects around the world, from building roads to modernizing electricity grids, likely leaving the works under construction unless other partners step in. An MCC executive at a staff meeting on Wednesday told staff that 'we are coming to an orderly close' with all programs to be discontinued, according to an employee who was present. The meeting came after a staff-wide memo, seen by AFP, informed that billionaire Elon Musk's Department of Government Efficiency was imposing a 'significant reduction' at MCC and laid out practicalities for the majority of staff who will lose jobs. Founded in 2004 under former president George W. Bush with bipartisan support, MCC signs contracts for US investment in developing countries that meet standards on economic transparency and good governance. MCC has since invested $17 billion with numerous prominent projects underway. Just in October, Zambian President Hakainde Hichilema — who has consolidated democracy at home — vowed to keep upholding 'shared values' with the United States as he signed a half-billion-dollar agreement to improve roads, irrigation and electricity. Trump has made clear he has limited interest in sub-Saharan Africa and that he opposes development aid, which he sees as not directly benefiting the United States, earlier shuttering the US Agency for International Development, a much larger government body. The MCC employee, speaking on condition of anonymity to avoid retribution, said the organization differed significantly from USAID. 'We're not doing humanitarian assistance. We're not doing social justice. We're very much building up an environment for private-sector investment in foreign economies,' she told AFP. 'This is a very different thing, something that actually does put America first,' she said. 'It's interesting, if we're worried about China's influence in the world, that we would shutter MCC, which builds large-scale infrastructure that counters China's influence.' – Area of competition with China – Infrastructure projects — roads, hospitals and other buildings — have been a signature selling point for China, which the United States sees as its primary adversary. Chinese President Xi Jinping in September vowed another $51 billion of investment in Africa over the next three years. The United States under former president Joe Biden acknowledged it cannot keep up with such high-profile, state-led spending but argued it can offer a more sustainable model. MCC will inform countries on Friday that compacts will be terminated within 40 days, the staffer said. After negotiations with Musk's team, MCC was allowed extensions in four countries — Ivory Coast, Mongolia, Nepal and Senegal. In Nepal, Mongolia and Senegal, the MCC will have up to three months, with hopes of making construction sites safe. The goal is 'so someone is not going to fall into a pit or something,' the employee said. 'Whether or not we'll be successful, I don't know.' MCC was granted slightly longer in Ivory Coast where the project, which includes support for integrating major road arteries, is nearing completion. The Nepal project was sealed in 2022 despite street protests against it by leftists in Kathmandu. The $500 million grant in China's small Himalayan neighbor aims to improve roads and increase cross-border electricity trading with US-friendly India. In Senegal, a $600 million initiative — $550 million from MCC and $50 million from the Senegalese government — has included ramping up electricity outside urban areas. Elizabeth Hoffman, executive director for North America at ONE, the anti-poverty group co-founded by Bono, voiced alarm at the shutdown. 'MCC brings an innovative and entrepreneurial approach to development assistance that holds governments accountable and effectively counters malign foreign influences like China,' she said. MCC and Trump administration did not immediately comment on the cuts, which were first reported by development specialist site Devex.
