NEPAL: AMBASSADOR'S MEETING WITH PRIME MINISTER

C O N F I D E N T I A L SECTION 01 OF 02 KATHMANDU 001358

SIPDIS

DEPT FOR SA/INS, SA/RA
LONDON FOR POL/GURNEY, NSC FOR MILLARD

E.O. 12958: DECL: 07/18/2013
TAGS: PGOV PREL ECON PTER NP
SUBJECT: NEPAL: AMBASSADOR'S MEETING WITH PRIME MINISTER
THAPA

REF: KATHMANDU 1138

Classified By: Ambassador Michael E. Malinowski for Reasons 1.5 (b,d).


1. (C) Summary. In a meeting with Prime Minister Surya
Bahadur Thapa on July 16, the Ambassador, accompanied by the
ambassadors of the UK, India, Germany and France and leaders
of their respective bilateral chambers of commerce, discussed
their intention to issue a joint statement condemning growing
extortion demands by Maoists. The Prime Minister expressed
gratitude for the ambassadors' active involvement and
welcomed issuance of the joint statement. He said he was
aware of escalating Maoist extortion, had voiced this concern
to the Maoists during informal talks, but had to balance his
government's commitment to law enforcement with its interests
in maintaining a peace dialogue. Thapa also offered
reassurance to international companies in Nepal and pledged
to protect their interests. The draft joint statement has
been approved by the chambers and ambassadors, except the
Indians, who wish to obtain New Delhi's approval before
joining the collective effort. End Summary.


2. (C) On July 16 Ambassador Malinowski called on Prime
Minister Surya Bahadur Thapa with other members of the
"Industrial Security Group," a collective comprised of the
ambassadors of the US, UK, India, Germany and France and
their respective bilateral chambers of commerce. Chaired by
the British ambassador, the group was created several years
ago to share information and work collectively on the threat
that the Maoist insurgency posed to international businesses
in Nepal. The meeting was requested by the ISG to raise with
the Prime Minister the Group's proposed release of a joint
statement condemning the recent drastic increase in extortion
by the Maoists against foreign and foreign-connected
businesses. Our Embassy originally had raised the initiative
with the ISG and provided the draft joint statement.


3. (C) British Ambassador Bloomfield opened the meeting with
a quick overview of the activities and goals of the
Industrial Security Group. He proceeded to voice serious
concern over the impact that the insurgency continued to have
on businesses despite the cease-fire, and expressed the
Group's desire to be helpful. Ambassador Bloomfield stressed
that the Maoists were breaking systematically the "code of
conduct" agreed to by both sides as the basis of the current
cease-fire. He reiterated Britain's support for the peace
process and cease-fire, but expressed concern over the
"dramatic rise" in Maoist exactions. Ambassador Malinowski
added that the extortion activities by the Maoists hurt the
very "fabric of life" in Nepal, affecting not only the
businesses and the economy, but also humanitarian and
development groups, schools, NGOs and everyday people.


4. (C) German Ambassador Rudiger Lemp expressed concern that
international businessmen these days are wary of investing in
Nepal because of continued violence throughout the country.
He warned the Prime Minister that "capital is mobile,"
businesses are risk-adverse and, therefore, foreign
businesses operating in Nepal may decide to leave the
country.


5. (C) French Ambassador Claude Ambrosini added that,
although there were relatively few French joint business
ventures in Nepal, he supported the joint statement fully.


6. (C) Indian Ambassador Shyan Saran agreed in full with
these statements and pledged the Indian government's support
for GON efforts to end extortion. He said that India has
many joint ventures in Nepal and a vested interest in seeing
companies protected. Saran questioned the Prime Minister on
what the diplomatic community should tell their businessmen
to do when confronted by Maoists and what measures were being
taken to protect them. In response, Prime Minister Thapa
pledged to protect the companies, but no specific plan of
action was discussed.


7. (C) Representatives of the chambers of commerce spoke
bitterly about the "enormous and unrealistic amounts" of
money that the Maoists were demanding from major businesses.
Managers are threatened with beatings, kidnappings, and
murders if they do not comply. In addition to extortion, the
Maoists are now penetrating the labor unions and pressing
them to demand untenable pay increases as populist measures.
Apart from the ethical dilemma that these demands pose, they
are a serious drain on business morale and threaten to drive
many companies out of business. Discussions of leading
businessmen with Maoist leaders like Mahara indicate that the
latter see the US and the Royal Nepal Army as their principal
enemies. US interests, the chambers believe, may be under
particular pressure. The Maoists have made it clear that if
they decide to break off talks and go back to war, their
violence will be even worse than before.


8. (C) The Ambassadors presented to the Prime Minister a
draft of the ISG joint statement condemning Maoist extortion.
The Ambassador stressed that joint action, rather than
unilateral action, would be much more effective in pressuring
the Maoists to stop extorting from foreign businesses.


9. (C) The Prime Minister thanked everyone for their concern.
He said the GON was aware of the extortion attempts and had
increased its vigilance. Extortion, he said, is a violation
not only of Nepali law but also of the code of conduct and
may challenge the viability of the state. When government
negotiators had voiced their concern to the Maoists during
informal talks, the Maoists have justified the collections as
"donations." The Prime Minister asserted that the Maoists
are in need of money to finance their return to warfare.
While he emphasized several times the need to keep the code
of conduct intact, the Prime Minister said the main goal of
the GON was two-fold: to keep the peace process moving
forward while preserving law and order. The Prime Minister
disclosed that a high-level Maoist in Kathmandu, holding a
large sum of money, had been arrested on extortion charges
and would be prosecuted according to the law. He welcomed
the idea of a joint statement and said it would have a
positive impact. The Prime Minister reassured the group that
the Government of Nepal was committed to protecting foreign
business interests. He approved a suggestion from a chamber
leader that a 24/7 command center be created in the Home
Ministry to coordinate information on extortion attempts and
oversee appropriate responses.


10. (C) Comment. The general consensus at the meeting was
that Maoist extortion demands are showing no sign of abating
despite the prohibition of such activity under the cease-fire
code of conduct. Extortion demands are targeting companies,
individuals and associations, and the amounts demanded have
increased immensely. It is clear to this Embassy, and all
the other members of the Industrial Security Group, that the
GON leadership feels constrained in reacting decisively to
combat this escalating criminal activity by its concern that
it not provide the Maoists with an excuse for breaking off
the peace talks. All the ambassadors in the ISG are prepared
to endorse the joint statement against the extortion except
for the Indian, who wants to obtain New Delhi's approval.
Ambassador Saran has said he is hopeful that his government
will agree to sign as well. Post expects a response from the
Indians soon, but is prepared to issue the statement with
other ISG members should the Indian government not approve.
The Prime Minister obviously is grateful for the diplomatic
community's firm public stand. End Comment.
MALINOWSKI