MAJOR ACHIEVEMENTS OF AMERICAN ASSISTANCE TO NEPAL

UNCLAS SECTION 01 OF 03 KATHMANDU 000025

SIPDIS

STATE FOR SA/INS
LONDON FOR POL/REIDEL
DEPARTMENT PASS TO USAID-DCHA/OFDA

E.O. 12958: N/A
TAGS: EAID PGOV PTER NP
SUBJECT: MAJOR ACHIEVEMENTS OF AMERICAN ASSISTANCE TO NEPAL
OVER 50 YEARS: PROTECTING THAT LEGACY


Summary
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1. Nepal emerged from its feudal isolation in the 1950s with
virtually no modern economic infrastructure and little
intellectual capital. Development, while still very uneven,
has improved the lives of many Nepalis, whose number has
tripled in the past half century. The US Government, as one
of the country's leading donors, has achieved an impressive
list of accomplishments in assisting Nepal's development.
Although the Maoists orignally capitalized on popular
frustrations with the pace of development, they are now a
main cause of lagging indicators. Continued US assistance is
essential to protect these achievements and strengthen the
capacity of the Government of Nepal to address the political,
administrative, and developmental causes of the insurgency.
End Summary.

Out of the Mountains and Jungles . . .
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2. In February 1951, King Tribhuvan opened Nepal's borders
and invited international assistance. Responding aid
agencies and charitable organizations found a nation with a
highly centralized government, focused on law and order and
taxation; a subsistence, agrarian economy, dominated by large
landowners adverse to change; and a near total lack of
physical infrastructure, including roads, telecommunications,
hospitals, and schools. The Government of Nepal (GON),
moreover, had no programs in place to address the human
development needs of the Nepali people. Government
bureaucrats were incapable of formulating and directing
policies to transform Nepal's economy and improve basic
social services.


3. In 1951, Nepal's literacy rate was 2 percent. The country
of 8 million had only 300 college graduates. Infant
mortality stood at 255 per 1,000 live births, and life
expectancy was a short 28 years. Electricity served only an
elite few in the Kathmandu Valley, and even this limited
capacity was subject to frequent brown-outs and generator
breakdowns. Throughout the country, 92 to 96 percent of the
population worked in agriculture. A 1961 census found only 6
cities of 10,000 or more people and 10 towns of 5,000 to
10,000 people. It is estimated that Nepal had no more than
400 kilometers of roads, of which a mere 4 to 5 kilometers
were paved.

. . . Into Internet Cafes and Five-Star Hotels
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4. Nepal, on the cusp of 2003, has lept into the internet age
in the span of two generations. Large cities boast internet
cafes, five-star hotel accommodations, and services on par
with the developed world. Rural areas are still largely
reliant on rain-fed agriculture, but some now supplement
their incomes with light industries powered by electricity.
Government services have been made available at the village
and district level, and local governments have been given
greater authority and fiscal responsibility. The nation has
produced a class of technocrats, now numbering 10,0000, which
are better able to plan for and respond to long-term
development needs. The same crop of educated Nepalis has
organized an estimated 25,000 non-governmental organizations
addressing a wide range of social, economic, and educational
issues.


5. The statistics on Nepal's development show impressive
progress. Nepal has built 25,689 public schools and 8,547
private schools, sufficient to provide 88 percent of
households with access to primary schools within half an hour
of travel. Adult literacy has risen to 62 percent for men
and 28 percent for women, with 12,000 Bachelor of Arts
degrees awarded per year. Before the destruction of medical
facilities by Maoist terrorists, 45 percent of Nepali
households had access to basic health facilities. Infant
mortality has dropped to 64 per 1,000 live births with life
expectancy doubling since the 1950s. The segment of the
population that continues to work in agriculture has dropped
to 78 percent, and the Kingdom attained self-sufficiency in
food in the mid-1990s. These gains are more astounding in
the face of a population that tripled in fifty years to 24
million.


6. In addition to improvements in social statistics, Nepal
has made significant gains in infrastructure: 69 percent of
households live within one hour of a motorable road;
telephone services connect 250,000 households, and rapid
cellular deployment in 2003 will connect another 80,000
throughout the Terai; electricity serves 18% of the
population with sufficient surplus to allow export to
neighboring countries; and nearly every district headquarters
boasts a hospital. Civic and political awareness have also
burgeoned with the dramatic increase in media sources.
Nepal's public is now served by 22 radio stations (from its
first station established in 1951),three national television
stations, and 1,750 newspapers (including 12 broadsheets).

Significant American Contribution
--------------


7. The USG has been one of the largest, most consistent
donors in Nepal. The US helped the GON write its first
regular budget in 1952. The US Operation Mission (later
USAID) and the Peace Corps have addressed the underlying
factors of poverty, enhancing education, good governance,
agriculture, and health care. Among the outstanding
contributions of USAID-Nepal are the following:
-- nearly eliminating malaria from the Terai, which is now
the home of half of Nepal's population and source of 65
percent of Nepal's foodgrains;
-- reducing the fertility rate by 20 percent since 1991;
-- expanding access to child health programs;
-- providing Vitamin A supplements to 3.5 million children,
thereby saving 50,000 young lives a year;
-- assisting in raising the literacy rate from 2 percent in
1951 to 57 percent today;
-- providing technical and academic training to about 5,785
Nepalis, from 1952 to 2002;
-- diversifying and commercializing agriculture, reducing
malnutrition; and
-- attracting over $300 million in private investment in
hydropower, which has brought electricity to 18% of the
population.
Current programs focus on tackling the poverty, weak delivery
of social services, and poor governance that abetted the
insurgency.

Poor Governance has Delayed Progress
--------------


8. Nepal's giant developmental leap from near stagnation in
1951 unfortunately has not kept pace with the development
pace of its regional neighbors and the expectations of the
Nepali people. Much of the blame falls upon slow advances in
governance and the difficult topography of Nepal. On
December 9, the United Nations Development Program (UNDP)
praised Nepal's 2001 Human Development Report for identifying
the challenges in meeting the country's Millennium
Development Goals. (The UN's Millenium Development Goals
establish targets for specific indicators of development to
be met over a fifteen year period.) The report recognizes
the progress made in improving the human condition in Nepal
and challenges the government to reduce the misuse of public
resources by increasing transparency and accountability.


9. On December 19, the World Bank completed a review of its
Country Assistance Strategy and found that Nepal had made
significant strides in governmental reform--specifically, the
hiring of new management for the two large government-owned
banks and significant progress in corruption arrests and
investigations. The Bank elevated Nepal's lending profile
from "low case" to "base case" with the condition that the
GON continue its drive to improve governance and financial
sector reform. The World Bank's Country Director stated, "It
is obvious that there are serious security concerns and
political uncertainty, but when one looks past them, one sees
an impressive record of reforms sustained by successive
governments over the last year or so." Looking past
day-to-day security and political crises, the Bank credits
the valuable work accomplished in Nepal over the last year.

Nepal's Maoists: A Symptom and Cause of Lagging Development
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10. Frustration with the pace and distribution of development
underlie Nepal's Maoist insurgency, whose bases of support
are found in the most isolated and poorest parts of the
country. The Maoists originally based their call for
revolution on the glaring inequities in Nepal's society that
development aid had not succeeded in redressing. Over the
past two years, savage violence has cost the Maoists their
early image as socially conscious "Robin Hoods". With
systematic attacks on infrastructure and health services,
seizure of private food supplies, impressment drives
targeting children, and extortion, they increasingly appear
to be ruthless opportunists with little concern for the
long-term consequences of their actions. Definitive
statistics measuring the effects of the Maoists' destruction
and intimidation will not be available for some time.
However, the Maoists have destroyed 700 schools (affecting
over 100,000 children),505 post offices, 14 bridges, and
nearly half of all local government offices (including 1,529
Village Development Committee offices and significantly
damaged 14 health posts adjoining those offices). The
growing toll of the insurgency is scaring away donor projects
in needy conflict areas, delaying private sector investment,
and dampening demand for Nepal's manufactured goods. Reports
of bombings, arson, and extortion have dealt a body blow to
Nepal's important tourism industry, with arrivals falling to
216,000 in 2002 from their high of 400,000 in 2000.

Comment
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11. Despite fifty years of growth, Nepal still does not have
the resources to finance its own development. The Government
of Nepaql still counts on donor countries and international
non-governmental organizations to fund improvements in basic
social infrastructure and poverty alleviation. The US
Government's contributions since 1951 have played a major
role in preventing a disastrous collision between Nepal's
limited resources and expanding population. The current
insurgency is, in part, a manifestation of increased popular
awareness and rising expectations. The cumulative results of
US and other outside assistance could be swept away by a
rising tide of Maoist violence, if traditional donors do not
maintain their support during the current security crisis. If
anything, the Government of Nepal needs more--not
less--assistance to re-establish the administrative
infastructure being destroyed by the Maoists.
MALINOWSKI