Identifier
Created
Classification
Origin
02KATHMANDU2066
2002-10-30 10:16:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Kathmandu
Cable title:  

NEPAL: NEW FINANCE MINISTER OUTLINES PRIORITIES

Tags:  ECON ETRD PGOV GON 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 KATHMANDU 002066 

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ECON ETRD PGOV GON
SUBJECT: NEPAL: NEW FINANCE MINISTER OUTLINES PRIORITIES


UNCLAS SECTION 01 OF 02 KATHMANDU 002066

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ECON ETRD PGOV GON
SUBJECT: NEPAL: NEW FINANCE MINISTER OUTLINES PRIORITIES



1. (U) This cable contains business-sensitive information and
should be handled accordingly.

--------------
Summary
--------------


2. (SBU) Summary. On October 25, the Ambassador and USAID
Director met with Nepal's newly appointed Finance Minister.
The Finance Minister articulated the immediate priorities of
his Ministry and highlighted the broader mandate of the
interim government to deliver services and hold elections. He
expressed eager support for USAID's first Conflict Mitigation
Program project, the completion of a rural road in the western
hills through quick-dispersing payments for local labor. The
Finance Minister also requested assistance from the USG on
providing breathing space to Nepal's textile exporters leading
up to the elimination of the Multi-Fiber Agreement. End
Summary.

--------------
Establishing Priorities
--------------


3. (U) the Ambassador, accompanied by USAID Director, Joanne
Hale and ECONOFF, met with Badri Prasad Shrestha, the newly
appointed Finance Minster, on October 25. The Finance Minister
explained that the primary goals of the interim cabinet are to
deliver effective government services, establish peace, and
hold elections. The Finance Minister explained the need to
support these efforts with an appropriate economic package
that efficiently delivers such services as sanitation, medical
care, security, and development.


4. (SBU) The Finance Minister is developing a reform package
to present to the cabinet and the people that will address
three priorities: fiscal balance, anti-corruption, and
privatization and administrative reform. As described, many of
the specifics of these priorities mutually support one
another. The package should meet his goal of accelerated
implementation and meet conditions set by the Asian
Development Bank, the World Bank, and the International
Monetary Fund. He plans to unveil this package along with his
assessment of the economy.


5. (SBU) The Finance Minister identified a few specific items
of action: strengthening the Nepal Rastra Bank (central bank)
to provide it greater autonomy, and the immediate shedding of
half a dozen public enterprises through privatization or
closure of non-performing enterprises. While he sees these
items as important components of his priorities, no further

details were provided.

--------------
Security and Donor Assistance
--------------


6. (SBU) The Ambassador welcomed the priorities of the Finance
Minister and offered the assistance of the USG to help
accomplish them. As a first step, the Ambassador offered a
briefing on the security assistance to be provided by the USG
in order to coordinate it with the budget requests made by the
Nepali security forces. The Finance Minister expressed
appreciation for the offer and explained that U.S. assistance,
by meeting a significant portion of Nepal's urgent security
needs, would help to free up funding for the development
portions of the budget--which he termed as negligible this
year.


7. (U) The USAID Director took the opportunity to press the
Finance Minister for the quick approval of the first project
under USAID's Conflict Mitigation Program, the Gulmi Road--a
15.7 km road project linking 21 Village Development Committees
in the northern reaches of Gulmi, from Indergauda to Chhaldi
River, in Nepal's mid-Western hills. The effort completes a
project initiated by the EU and represents the first USAID
effort with funding from DFID, the British development agency.
The Finance Minister was encouraged by the low-technology/high-
employment approach, which will employ 600 people, roughly 20
percent of whom will be women. He hoped that other donors
could duplicate this effort across the country. He instructed
Joint Secretary for Foreign Aid, Madhiv Ghimire, to process
the letter of implementation as soon as possible to facilitate
this effort.

--------------
Commerce and Trade
--------------


8. (SBU) The Ambassador raised several commercial issues with
the Finance Minister regarding some of the difficulties U.S.
businesses are experiencing in Nepal. He highlighted the
difficulties of the private Bhote Koshi/Panda Energy project
regarding duty waivers for replacement parts and the extra-
contractual deductions taken on payments for energy delivered.
He also raised the delay in processing the duty assessment of
the Lotus Energy REVA electric cars (product of a Indian-
American joint venture in Hyderabad) that have been held in
customs for eight months. Finally, the Ambassador expressed
the need to continue infrastructure investment to meet the
needs of a growing population, tying it to the timely
completion of the rural telephone project, in which STM
Wireless of California is the major supplier. The requests of
the Ambassador were welcomed by the Finance Minister, who
stated that he would look into them as part of fostering
cooperation between the U.S. and Nepal.


9. (SBU) In a similar vein, the Finance Minister requested
assistance from the U.S. in providing breathing space through
duty free access (similar to AGOA) for textile products until
expiration of the Multi-Fiber Agreement in 2005. The breathing
space will allow the industry to restructure in order to be
more competitive. The Finance Minister discussed the creation
of a lobby in Washington to argue the merits of Nepal's case.
One of the arguments he offered includes the side-benefits of
women's empowerment, education opportunities, and family
planning activities that take place in the garment industry,
due to the concentration there of women.
MALINOWSKI