1. (U) Ref A requested a brief summary of recent and
notable anti-corruption efforts in Nepal by the
government, civil society and the private sector.



2. (SBU) Corruption is a serious and pervasive problem in
Nepal, and is being recognized increasingly by both donors
and government leaders as a fundamental cause of the
current Maoist insurgency. The Government of Nepal (GON)
has begun to take tentative steps to address it, but many
of its initiatives have yet to be effectively implemented.
Presently Nepal's Finance Ministry is in the process of
drafting a new anti-corruption strategy.

AG and CIAA Main Government Players


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3. (U) Under Nepal's 1990 Constitution, two governmental
bodies are charged with investigating corruption: the
Auditor General and the Commission for the Investigation
of Abuse of Authority (CIAA). Both face expanded
responsibilities and workloads without proportionate
increases in staffing or funding. For example, a recent
Act of Parliament disbanded the national police force's
special anti-corruption unit, staffed by 100 officers.
Its responsibilities were shifted to the CIAA, which had
to take on the unit's duties without an increase in staff.
The CIAA has only 35 investigating officers.

High-Level Investigation, but Still No Convictions


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--------------------------





4. (U) The CIAA's most-publicized case to date was a
bribery scandal related to the government's lease of a
passenger jet. As part of its investigation, the CIAA in
May 2001 was able to question then-Prime Minister Gijira
Prasad Koirala about his role in affair (Ref C). As a
result of the CIAA's work, the Executive Chairman of
Nepal's national airline was suspended from his post and
cases were brought against ten individuals. Appeals
continue and as yet no one has been punished. The CIAA
blames difficulties in proving white-collar crime and
unsympathetic judges for the fact that they lose nearly
all the cases they bring to court.



5. (U) In recent months Nepal's media have focused on the
CIAA's investigation into the use of falsified
documentation to secure government employment. The use of
fraudulently obtained graduation certificates and other
documents--many obtained from India--is widespread in
Nepal's bureaucracy.

Multilateral Aid


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6. (U) The Asian Development Bank (ADB) has taken the lead
in working with Nepal on anti-corruption initiatives. The
ADB works primarily through the CIAA and the Ministry of
General Administration. According to the ADB's Senior
Governance Officer, on-going anti-corruption and civil
service reform programs resulted in the passage of four
new anti-corruption acts during the last session of
Parliament (Ref B). To date, few provisions of the new
act have taken effect, however. An exception is a new
requirement that civil servants fill out asset disclosure
forms. [Note: Several government officials have
complained to us about having to fill out these forms, so
the requirement is being enforced and could have an impact
on corrupt practices. End Note.]

Bilateral Assistance


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7. (U) The Danish aid agency, DANIDA, provides support and
technical assistance to CIAA. The British development arm-
-DFID--funds a governance program with an anti-corruption
component. Currently USAID does not have specific
programs targeted against corruption.

Civil Society


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8. (U) Transparency International and Pro-Public both
conduct anti-corruption awareness campaigns in Nepal. In
addition, Pro-Public has worked closely with the CIAA to
improve its capacity.
International Pressure


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9. (U) The public statement issued after the June 19-20
meeting in London of major aid donors to Nepal welcomed
the expressed commitment of the Government of Nepal to
address, inter alia, the problem of corruption. Although
much remains to be done to reduce corruption, the GON is
under growing pressure by the international community to
implement reforms to increase transparency,
accountability, and the rule of law.
MALINOWSKI