Identifier
Created
Classification
Origin
06KATHMANDU2167
2006-08-09 14:07:00
CONFIDENTIAL
Embassy Kathmandu
Cable title:  

NEPAL SCENESETTER FOR AUGUST 12-14 VISIT OF CODEL

Tags:  PGOV PTER NP 
pdf how-to read a cable
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INFO RUEHC/SECSTATE WASHDC IMMEDIATE 2707
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RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 2888
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RUEAIIA/CIA WASHDC PRIORITY
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RUEKJCS/SECDEF WASHDC PRIORITY
RHHMUNA/CDR USPACOM HONOLULU HI PRIORITY
C O N F I D E N T I A L KATHMANDU 002167 

SIPDIS

SIPDIS

BEIJING PLEASE PASS TO CHAIRMAN SPECTER FROM AMBASSADOR
MORIARTY

E.O. 12958: DECL: 08/09/2016
TAGS: PGOV PTER NP
SUBJECT: NEPAL SCENESETTER FOR AUGUST 12-14 VISIT OF CODEL
SPECTER


Classified By: Ambassador James F. Moriarty. Reasons 1.4 (b/d).

SUMMARY AND INTRODUCTION
------------------------

C O N F I D E N T I A L KATHMANDU 002167

SIPDIS

SIPDIS

BEIJING PLEASE PASS TO CHAIRMAN SPECTER FROM AMBASSADOR
MORIARTY

E.O. 12958: DECL: 08/09/2016
TAGS: PGOV PTER NP
SUBJECT: NEPAL SCENESETTER FOR AUGUST 12-14 VISIT OF CODEL
SPECTER


Classified By: Ambassador James F. Moriarty. Reasons 1.4 (b/d).

SUMMARY AND INTRODUCTION
--------------


1. (C) Your visit comes at a critical moment in Nepal's
history. The country is perhaps closer to establishing
lasting peace than it has been at any other time during the
10-year-old Maoist insurgency. On August 9, the Nepalese
Prime Minister GP Koirala and the Maoist leader Prachanda
signed a joint letter to UN Secretary General Kofi Annan
requesting a greatly enlarged UN role, notably including
monitoring of the Maoist combatants. Regrettably, the
central issue of decommissioning of Maoist weapons was
deferred. Meanwhile, an interim constitution is nearly
complete and an interim government with Maoist participation
is envisioned in the coming months leading to elections for a
constituent assembly perhaps as soon as April 2007. The
government continues to insist, however, that such
participation will not occur until the Maoists are separated
from their weapons. The nationwide elections would be the
first in nearly a decade. The coalition government is
struggling to deal with multiple challenges, including a
sickly Prime Minister, internal division, continued Maoist
violence, limited financial resources and a battered economy.



2. (C) Your trip will be the first in more than two years by
a Member of Congress. Your reiterating USG support for Prime
Minister Koirala and his government will help me motivate the
GON to stay the course. End Summary and Introduction.

THE SPA AND THE MAOISTS RULE THE SCENE
--------------


3. (C) The Seven-Party Alliance (SPA) and the Maoists have
dominated the political scene since King Gyanendra reinstated
Parliament on April 24. Since then, the king has largely
disappeared from the public eye. The SPA - a coalition of
political parties that opposed the King's February 2005
takeover - and the Maoists have had great difficulty
transforming the tactical alliance they formed against the
King's dictatorship in the form of a November 2005 12-point
understanding into a working system of government. While

demanding a share of power in Kathmandu, the Maoists refuse
to abandon their campaign of violence and, I believe, the
eventual goal of a one-party republic. In the meantime, the
SPA has been hard pressed to merge its diverse ideologies
into a common voice. It also suffers from an uncertainty of
leadership. Ailing Prime Minister and center-right Nepali
Congress (NC) President GP Koirala has been hospitalized
repeatedly. No other party leader in any party commands the
same nationwide standing and no plans appear to have been
made for a successor.

CAREENING TOWARD DEMOCRACY
--------------


4. (C) The April pro-democracy movement and the
reinstatement of the 200-plus-member House of
Representatives, the lower house of Parliament, led to a
dizzying pace of transformation. MPs returned to the seats
they last held in 2002 and agreed to work toward constituent
assembly elections. During the following month, the House of
Representatives issued decrees that limited the powers of the
King and declared Nepal a secular state. The House also
stripped the Nepal Army of the "Royal" moniker and placed it
under civilian control. The GON and Maoists created
negotiation teams to lead the peace process dialogue. On May
26, the GON and Maoists signed a 25-point Code of Conduct to
govern each side's unilateral cease-fire.

A PEACE PROCESS ON TWO LEVELS
--------------


5. (C) The GON and Maoist negotiation teams planned
high-level "summit" meetings to work through the formal peace
process, but many decisions have sprung from informal

meetings between Maoist and SPA leaders. The two largest SPA
parties, the NC and the Communist Party of Nepal-United
Marxist Leninist (CPN-UML),the largest center-left party,
have led the way in back-room talks, much to the displeasure
of the excluded SPA members. These private negotiations led
in mid-June to an eight-point agreement that was widely
criticized by SPA members whom PM Koirala did not consult
before signing it. The document led to the creation of the
Interim Constitution Drafting Committee and the National
Monitoring Committee for the Cease-fire Code of Conduct, but
the agreement's failure to deal adequately with the question
of decommissioning Maoist arms has bedeviled the government
ever since.

ALL EYES ON ARMS MANAGEMENT
--------------


6. (C) Management of the Maoist arms, specifically
separation of the Maoist combatants from their arms, remains
the primary issue in the peace process. The joint letter to
the Secretary General signed on August 9 set forth a strong
role for the UN. In addition to requesting the UN to
continue its work monitoring human rights in Nepal (Note: the
UN's human rights office here is the largest in the world),
the letters requested that the UN also assist in monitoring
the cease-fire Code of Conduct, monitor Maoist combatants and
their weapons, monitor the Nepal Army in its barracks, and
supervise and monitor Constituent Assembly elections (which
could come by April 2007). What the letter failed to do was
indicate whether the combatants would be separated from their
arms. The modalities of that issue were deferred to an
agreement at a future date between the GON, the Maoists and
the UN. Most in the SPA agree that Maoists cannot join an
interim government until they completely disarm. What will
happen is not clear.


7. (C) Meanwhile, I continue to receive reports of Maoist
extortion, kidnappings, and other violations of the May 26
Code of Conduct. The Maoists have told their cadre to
prepare for another people's movement and some at the highest
levels have talked of an "October Revolution," indicating a
readiness to restart the war should their democratic
posturing fail. I fear that, if PM Koirala's government
holds firm and refuses to hand over power to the Maoists at
the negotiating table (and I am doing everything I can to
buck up the government),the rebels will resort to arms
again, as early as November, this time from a strengthened
position with forces positioned in the Kathmandu Valley.

ECONOMIC WOES
--------------


8. (SBU) Nepal's GDP grew a dismal 1.9 percent in FY
2005/06, while inflation increased to 8 percent annually.
Approximately USD 1 billion in foreign remittances pumped
into the economy last year increased per capita income to USD
322, a nominal growth of USD 20. The GON, sapped by the
Maoist insurgency and faced with nurturing a fledgling
democracy, lacks sufficient financial resources to kick-start
economic activity. On July 12, Finance Minister Ram Sharan
Mahat announced an ambitious USD 1.97 billion budget for FY
2006/07, which he said was aimed at institutionalizing the
democratic system and establishing peace through constituent
assembly elections. The budget included USD 325 million in
foreign grants, a 72 percent increase over the previous year.
Whether the GON will be able to implement the budget hinges
on how the peace process unfolds. Final donor commitments
for most of the foreign funds depend on the GON and Maoists
reaching an internationally accepted peace.


9. (SBU) Political turmoil and the Maoist threat have
created a hostile business environment. Many businesses and
individuals are considering transferring operations and
assets to other countries. Foreign direct investment has
decreased nearly 50 percent since 2000. Nepal is primarily a
subsistence agriculture economy, but its industrial base has
provided employment to the growing number of poor flocking to
the cities. If Nepalese businessmen flee the country instead

of trying to work within the current unstable situation, the
Nepalese economy will suffer and further hurt the poorest of
the poor.

TIBETAN AND BHUTANESE REFUGEES
--------------


10. (C) Nepal hosts two refugee populations of note, Tibetan
and Bhutanese. Two Tibetan refugee populations concern us:
Tibetans transiting to India and resident Tibetans (some of
whom may be resettled in the United States). With
considerable pressure from the Embassy, the GON recently
began to issue exit permits to transiting Tibetans, allowing
them to leave Nepal and travel safely to India. The USG is
currently funding an expansion of the Tibetan Relocation
Center located in Kathmandu to make it possible to provide
shelter to transiting Tibetans as they wait for processing by
UNHCR here in Kathmandu.


11. (C) Over 100,000 Bhutanese refugees have been living in
seven camps in southeastern Nepal since the early 1990s, when
the Royal Government of Bhutan (RGOB) pushed ethnic Nepalese
to leave Bhutan. We continue to discuss with the GON and
international actors options for a durable solution to the
Bhutanese refugee issue, including repatriation, local
integration, or resettlement of Bhutanese refugees. The GON
recently agreed to allow UNHCR to conduct a re-registration
of the camps, a necessary step to lay the foundation for
future solutions. We have been pushing the GON to allow
resettlement of 16 "vulnerable cases" (young refugees at
particular risk in the camps, including minor girls who have
been raped) to the United States and Canada. We are hopeful
that these 16 refugees will be allowed to leave soon.

USAID'S STRATEGIC OBJECTIVES
--------------


12. (C) The U.S. Government through USAID has been one of
the principal foreign donors to Nepal since the 1950s. This
assistance has given us considerable credibility with the
Nepalese people. USAID's program in Nepal has an overall
level of approximately USD 45 million for FY 2006, including
the USAID mission programs, new activities by the Office of
Transition Initiatives (OTI),and a regional Office of
Foreign Disaster Assistance (OFDA) program. Approximately
USD 40 million will finance USAID's three strategic
objectives for Nepal: enhance stability and security,
strengthen governance and protect human rights, and build
capacity of critical institutions. The lion's share of the
program budget goes to enhancing stability and security,
including components to support the peace process, achieve
equitable access to quality basic education, mitigate
conflict and aid victims of conflict, protect and increase
the assets and livelihood of the poor, and reduce the
transmission and impact of HIV/AIDS with its potentially
destabilizing effects. To strengthen governance and protect
human rights, USAID supports activities to reduce trafficking
in persons, strengthen civil society and democratic political
parties, and support UN and GON efforts to protect human
rights. USD 13 million has been allotted to improve
institutions, including the agencies and local networks that
address child survival, health, and nutrition; maternal care;
family planning; anti-corruption reforms; and the justice
sector. I am particularly proud of the work OTI is doing to
get support to crucial areas of the peace process quickly and
efficiently. Lastly, USAID/Nepal hosts a regional OFDA that
has, over the past year alone, responded to the tsunami, the
Pakistan earthquake, and even seconded staff for the Katrina
response.

MILITARY AND SECURITY ASSISTANCE
--------------


13. (C) Although much smaller in size, our military and
security assistance has played an important role in
contributing to stability in Nepal. My Mission and I are
very aware of the importance of protecting human rights and
share the consensus on Capitol Hill on the issue of military

assistance. The GON is also currently very sensitive to the
perception that U.S. assistance in this area might jeopardize
the peace process. With that in mind, I believe that it is
still possible and, in my view, crucial that we continue to
provide non-lethal assistance to the Nepal Army and police
forces. Ensuring law and order is one of the fundamental
demands placed on any government. I look forward to
discussing these issues with you in more detail on your
arrival.

CONCLUSION
--------------


14. (U) Let me add in conclusion, how delighted I am that
you and the rest of your delegation, including Mrs. Specter,
will be coming to Kathmandu. We look forward to welcoming
you to Nepal and trust you will find your time here well
spent.
MORIARTY