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The Missing Piece of Nepal’s MCC Debate

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The Missing Piece of Nepal’s MCC Debate

Addressing the concerns of local communities is key to Nepal’s $500 million question.

The Missing Piece of Nepal’s MCC Debate
Credit: MShades / Chris Gladis

In the ongoing debate over whether Nepal’s Parliament should endorse a $500 million grant from the U.S. Millennium Challenge Corporation (MCC), much attention has been paid to whether the grant is a part of Washington’s counter to Beijing’s Belt and Road Initiative. But one question has been glaringly absent. As the grant is primarily for transmission line projects, will the concerns of project-affected communities be addressed, given Nepal’s poor track record in this area?

Transmission line projects in Nepal have been notoriously marred by human rights abuses, delays, and grievances causing stranded assets. The failure of developers to take affected communities into account has resulted in conflicts between project developers and communities. Too often, these failures by international investors and domestic authorities alike are foreseeable and preventable.

One conflict on full display concerns the European Investment Bank (EIB)-funded 220 kV Marsyangdi Corridor, a set of transmission lines being built to transfer electricity produced near the Annapurna Conservation Area down to the Kathmandu Valley. This project has important connections to the MCC grant, which would fund transmission lines to evacuate electricity from the Marsyangdi Corridor onwards to India. Last year, the state-owned power utility – the Nepal Electricity Authority (NEA) – refused to take part in a mediation requested by communities. An effective mediation could have resolved issues early on and empowered communities to have a say in the project’s design. Instead, the conflict has now escalated. How community concerns are addressed at the Marsyangdi Corridor portends the conflicts we can expect if the MCC grant is endorsed.

While local communities living alongside the sacred Marsyangdi River welcome development in their region, they are concerned about the serious impacts of these projects. “Marsyangdi” means “raging river” in the indigenous Gurung language, yet the river is slowly dying as a result of several hydropower projects. Tensions are high, with reports of local communities clashing with Chinese construction workers at one such project during the nationwide COVID-19 lockdown.

In October 2018, affected communities filed a complaint to the EIB’s independent watchdog and mediation office in Luxembourg, called the Complaints Mechanism. They requested a mediation with the hope they could reach an agreement with the Nepali government and the EIB to resolve their concerns about the Marsyangdi Corridor. The complaint was filed by the FPIC & Rights Forum, composed of communities from Lamjung and Manang districts, including indigenous peoples, upper caste Brahmin/Chhetri people, and Dalits, coming together to assert their rights.

FPIC, which stands for free, prior, and informed consent, is an international legal standard protected under the United Nations Declaration on the Rights of Indigenous Peoples. It applies especially to indigenous peoples, allowing them to give or withhold consent to projects affecting them or their territories. FPIC is also protected under the EIB’s own social and environmental rules and the Performance Standards of the International Finance Corporation, which the MCC has committed to upholding.

The FPIC & Rights Forum’s complaint documented that project authorities have failed to consult communities about the transmission line’s various potential impacts and route alignment. The complaints are of local and national concern, but also present global impacts; they include environmental impacts arising from deforestation, loss of community resources, and disruption to wildlife; health and safety impacts, including risks of electrocution; cumulative impacts from associated hydropower projects; and economic impacts, including insufficient compensation to landowners under the right of way. This compensation problem leads to a decrease in the earning capacity of the land in addition to general land devaluation from proximity to transmission lines. In Nepal, the compensation levels stand in stark contrast to public and private projects in Europe, North America, and elsewhere, which often provide more than 100 percent of the value of land to individuals, in addition to significant community-level benefits.

In July 2019, the Complaints Mechanism released an assessment report offering to facilitate a dialogue between the parties. Regrettably, the NEA refused to take part. Local communities are profoundly disappointed and question the government’s commitment to address their concerns. They have now filed a complaint with the National Human Rights Commission, which conducted an investigation visit to Lamjung district in February 2020. The Complaints Mechanism is also conducting a compliance investigation to determine whether the EIB complied with their own environmental and social rules. Communities expect these investigations to vindicate their claims.

Rather than await the outcome of these investigations, Nepali authorities and the EIB have an opportunity to proactively engage communities in a long-awaited and legally mandated FPIC process. Rising to the Marsyangdi Corridor challenge will go a long way toward demonstrating readiness to take on the MCC one.

Anirudha Nagar is a human rights lawyer and Communities Co-Director for Accountability Counsel, which supports communities to defend their environmental and human rights. Accountability Counsel is supporting the FPIC & Rights Forum on the EIB Complaints Mechanism process through its Communities program.