USTDA IDENTIFIES PROFITABLE TRANSPORTATION PROJECTS

UNCLAS KATHMANDU 002733

SIPDIS

SIPDIS

DEPT FOR SA/INS, EB
PLEASE PASS TO USTDA - CARL KRESS

E.O. 12958: N/A
TAGS: ECON EAID EFIN ETRD ELTN EAIR PGOV NP
SUBJECT: USTDA IDENTIFIES PROFITABLE TRANSPORTATION PROJECTS


SUMMARY
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1. (SBU) In separate meetings during her recent mission to
Nepal, U.S. Trade and Development Agency (USTDA) contractor
Judy Chang found that U.S. companies may have a competitive
advantage in transportation projects in Nepal dealing with
cargo rail development, the upgrading of airports, and
intermodal logistics expertise. His Majesty's Government of
Nepal (HMGN) officials flagged other possible transportation
projects, for which funding had not yet been identified.
Chang discussed plans for a South Asian regional
transportation conference that will bring together private
U.S. transportation companies and public/private sector
individuals from the seven SAARC countries and Afghanistan,
tentatively scheduled to be held in Mumbai in March 2006.
END SUMMARY.

PROFITABLE PROJECTS IDENTIFIED
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2. (SBU) In meetings with HMGN and private sector
transportation officials, Chang identified three project
areas where she thought U.S. companies could have a
competitive advantage.

Cargo Rail
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3. (SBU) Chang noted that the U.S. had a strong cargo rail
industry, which could potentially be interested in Nepal's
future rail projects. Tanuk Lal Yadav, Joint Secretary for
the Ministry of Works and Physical Planning, noted that in
the last fiscal budget HMGN announced plans for a north-south
(Birgunj-Kodari) rail link for which HMGN was seeking private
funding. Bhagwati Kumar Kafle, Joint Secretary of the
National Planning Commission, commented that under current
laws 100 percent foreign ownership was allowed in the
transportation sector. Yadav described an additional plan
for an east-west rail link that would follow Nepal's existing
southern east-west highway. He said HMGN's budget suggested
the east-west rail line could be funded through a Build,
Operate, Transfer (BOT) scheme. (Note: In a BOT scheme,
private industry would build and operate the rail line, and
eventually, after recuperating costs and profiting from the
venture, transfer operations over to HMGN. End Note.) Other
than the BOT suggestion, HMGN had specified no funding or
time frame for either project.

Airport Upgrades
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4. (SBU) Chang assessed that U.S. companies could have a
competitive advantage in some future projects to upgrade
Nepal's airports. Rajesh Raj Dali, Director General, Civil
Aviation Authority of Nepal (CAAN),discussed CAAN's long
term desires to upgrade Nepal's major regional airports so
that they would be capable of handling short regional
international flights of up to four hours operated with
Boeing 737 or 757 type aircraft. Costs for the projects
varied from USD 5 million to USD 50 million; he said HMGN
envisioned building a new airport for the regional center of
Pokhara, which would cost approximately USD 50 million; a
runway extension project in Bhairahawa would cost
approximately USD 5 million. There was also a USD 17 million
project for unspecified upgrades at Tribhuvan International
Airport in Kathmandu. Dali noted that CAAN would need
funding to undertake the projects. (Note: Dali stressed that
he preferred money from donors go directly to CAAN as HMGN
required an initial take of 10.25 percent of the donated
funds. He expressed some interest in the BOT scheme but said
current HMGN policy did not make BOT an attractive option.
End Note.)

Intermodal Logistics
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5. (SBU) Chang noted that U.S. companies have expertise in
intermodal logistics, which could benefit Nepal in dealing
with domestic and bi-lateral issues such as security and
liability of shipments. (Note: Intermodal logistics is the
shipment of cargo involving more than one mode of
transportation during a single, seamless journey. Nepal, as
a landlocked state, normally imports and exports its products
using trucks and trains to and from Indian ports. End Note.)
Mr. Surya Bahadur Manandhar, Executive Director of the Nepal
Intermodal Transport Development Board, explained that there
were not smooth and coordinated transitions between the modes
of transportation needed for Nepal's imports and exports. He
added that HMGN was considering approval of a Multiple
Transport Act, which would address liability issues. Rajan
Sharma, General Secretary of the Nepal Freight Forwarders
Association commented that issues of security and liability
of shipments hampered efforts to use a shipping route through
Nepal's eastern border into India, over a narrow strip of
India, and down to the Bangladeshi port of Chittagong.
Numerous officials lamented that shipment of cargo was a
difficult issue for their poor, landlocked country, and
stressed that they would welcome any assistance in improving
their current systems.


6. (SBU) Chang commented that the improvement of management
at the ports in Calcutta and Haldia, India, could be one
profitable project for U.S. companies that would also benefit
Nepal. Vishnu Das Dangol, General Manager of the Trade,
Transit & Warehouse Company in Nepal, added that funding for
additional forklifts and stackers was needed for the two
ports to make more efficient use of their existing facilities.

HMGN's OTHER FUTURE TRANSPORTATION WISHES
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7. (SBU) HMGN officials noted other future transportation
projects that are planned, but have no funding. These
include plans for eight north-south roads, aimed at helping
Nepal become a major Chino-Indo trade transit link; a new,
more direct highway connecting Birgunj and Kathmandu to
replace the present circuitous route; a container freight
station warehouse in Kathmandu for the loading and unloading
of goods shipped by truck (a facility that currently does not
exist); and a new international airport located somewhere in
the lowland Terai region to make it possible for larger cargo
flights to take off with full loads without having to worry
about the weight and altitude issues that exist at the
current international airport. Chang commented that U.S.
companies would not be competitive in building roads or the
freight station warehouse, but could be for a new
international airport.

USTDA REGIONAL TRANSPORTATION CONFERENCE
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8. (SBU) After attending numerous meetings with public and
private transportation officials, Chang was to recommend
potential participants for the regional transportation
conference in a report to USTDA. The conference is
tentatively scheduled for March 2006 in Mumbai. The goal of
the conference is to facilitate business for U.S.
transportation companies by bringing them together with
government and key public sector individuals from the seven
SAARC countries and Afghanistan. Chang agreed with the
suggestion of members of the Nepal-U.S. Chamber of Commerce
that a delegation of public and private sector individuals,
headed by the Foreign Minister, would make an effective group
of representatives for Nepal.
MILLARD