MAOISTS MAY FORCE COCA-COLA FROM NEPAL

UNCLAS SECTION 01 OF 02 KATHMANDU 000138

SIPDIS

SENSITIVE

STATE FOR SA/INS, S/CT, DS/IP/SA, AND DS/OSAC
LONDON FOR POL/EREIDEL
TREASURY FOR OFAC/NEWCOMB

E.O. 12958: N/A
TAGS: PTER PINS ASEC CASC NP
SUBJECT: MAOISTS MAY FORCE COCA-COLA FROM NEPAL

REF: 2002 KATHMANDU 2440


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

Summary
=======


2. (SBU) On January 22, Embassy officers met with Security
Managers for Coca-Cola, who are in Nepal to assess the risk
posed to its plants, distributors, and retailers after a
Maoist extortion request. The representatives also met with
the Government of Nepal (GoN) to determine if any additional
security assistance would be forthcoming. Given the Maoists'
persistence and the GoN's apparent inability to guarantee
security for all of Coca-Cola operations, the company is
reviewing the possibility of closing operations in Nepal.
Should Coca-Cola withdraw from Nepal, the country will lose
its third largest taxpayer, a valuable employer, and its most
visible American commercial presence. End summary.

Assessing Risks with Few Alternatives
=====================================


3. (SBU) On January 22, Embassy officers met with Mr. Gordon
Sjue and Mr. Arthur Eberhart, Security Managers for The
Coca-Cola Company. Coca-Cola is concerned with the threat
posed to its local operations (including 2 bottling plants,
63 distributors, and 38,000 retail locations) by the
company's refusal to meet a Maoist extortion request of USD
38,000 (reftel). Over the course of the insurgency, the two
bottling plants have been bombed three times, and three
distributors have been scared away from carrying Coca-Cola
products due to direct Maoist threats. The representatives
believe that in view of the attacks Coca-Cola interests have
already undergone, its continued presence in Nepal is at
significant risk that may force closure of operations. The
representatives will deliver a security risk assessment and
recommendations to their regional headquarters in Bangkok and
corporate headquarters in Atlanta.


4. (SBU) The Coca-Cola representatives assured the Embassy
that they have no intention of paying the Maoists and
reported that they had presented a counter-offer to the
insurgents of financing development projects, such as potable
water facilities and mobile vision clinics, near their
bottling plants. Coca-Cola worked with the Village
Development Committees and representatives of the Maoists
over the summer of 2002 to develop these proposals. However,
the Maoists have now refused to accept any alternatives and
demand cash payment.

GoN May Mourn the Loss, But Offers No Additional Help
============================================= ========


5. (SBU) Sjue, Eberhart, and the RSO also met with Major
General Katwal, Co-coordinator for the National Security
Secretariat, to assess the Government of Nepal's (GoN)

SIPDIS
ability to provide additional security for Coca-Cola's
distributors and retailers. In a frank discussion, MG Katwal
stated that he could not offer protection beyond that already
provided at the two bottling plants. He was encouraged that
Coca-Cola had decided not to meet the Maoists' extortion
demands and had countered with development projects.
However, he agreed with Coca-Cola's representatives and the
RSO that the Maoists were more likely interested in cash at
the moment, probably to fund arms purchases. When confronted
with the possibility that Coca-Cola may have to close, MG
Katwal reflected that its closure would be felt by the GoN
and may have negative implications for other multinational
corporations. While concerned, he did not offer additional
GoN support to ensure Coca-Cola's continued operation.

Comment
=======


6. (SBU) The loss of Coca-Cola will have a significant impact
on Nepal's economy. The company has 500 direct-hire
employees, with significant indirect employment through its
distributors and retailers; serves as Nepal's third largest
taxpayer; and represents the second largest American
investment in Nepal. The push for cash rather than projects
that uplift the Nepali people is yet another demonstration of
the Maoists' moral bankruptcy. With Coca-Cola's bottling
plants relatively secure, the Maoists appear to be shifting
tactics and threatening Nepali distributors and
retailers--threats that already have achieved some success.
Little reliable security can be provided for such a large and
geographically dispersed corporate operation. As retailers
and distributors are not dependent solely on Coca-Cola, they
are likely to drop its products in the face of repeated
Maoist threats, despite significant revenue losses. The
Embassy will remain in consultation with Coca-Cola management
on the outcome of their risk assessment and a possible public
relations strategy for responding to the Maoist threat.
MALINOWSKI