MAOISTS RUNNING THE SHOW IN BIRATNAGAR AND

C O N F I D E N T I A L KATHMANDU 002997

SIPDIS

SIPDIS

E.O. 12958: DECL: 11/07/2016
TAGS: MASS PHUM PGOV NP
SUBJECT: MAOISTS RUNNING THE SHOW IN BIRATNAGAR AND
BHAIRAHAWA

REF: KATHMANDU 2763

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

Summary
--------------


1. (C) Recent visits to two towns on Nepal's southern border
with India revealed a sharp deterioration in law and order
with Maoist extortion, opportunistic violence, and
intimidation interrupting the local economies while
government security forces stood idly by. The South and
Central Asia Bureau's Director of the India, Nepal, and Sri
Lanka Office (SCA/INS) visit Biratnagar, a border town in
Nepal's eastern Morang District, while Emboffs and DATT
visited Bhairahawa, a border town in the western Rupandeh
District. Business leaders complained of increased extortion
since the April People's Movement, including illegal taxation
and extortion at border crossings in both cities. Police
presence was minimal and passive at the border in Biratnagar,
and absent at the border in Bhairahawa. Chief District
Officers and security officials also reported that Maoists
were patrolling the streets and their "People's Courts"
continued to operate. Despite the increase in extortion and
intimidation, officials in both the political and security
sectors asserted that bringing Maoists into the political
mainstream while building the capacity and morale of local
police would offer the best chance to end Maoist criminal
behavior and intimidation. End Summary.

BUSINESS AFFECTED; EVEN NGOS TARGETED
--------------


2. (C) The South and Central Asia Bureau's India, Nepal and
Sri Lanka Office Director's visit to the border town of
Biratnagar in Nepal's eastern Morang District on October 13
and Emboffs' and DATT's visit to Bhairahawa in the western
Rupandehi District on October 17 confirmed reports that
extortion was on the upswing while government presence was
declining (reftel). At visits to the American Corners in
both cities, business representatives explained how Maoist
interference impeded all business. Members of the Chamber of
Industry Morang (CIM) listed capital flight and artificial
inflation of labor wages due to Maoist labor union agitation.
In addition to threatening industries, political leaders
said Maoists extorted money from social work facilities and
NGOs. (Note: UN officials canceled the SCA/INS Director's
visit to the Bhutanese refugee camp Sanishcare due, she
believes, to security concerns surrounding an impromptu
Maoist strike. End Note.) Security officials said Maoists
were using the extorted money to purchase arms from across
the border in India, support the People's Liberation Army,
purchase property for Maoist leaders in India, and invest in
legitimate industries such as local transportation.

SITUATION WORSE THAN BEFORE APRIL CEASE-FIRE
--------------


3. (C) Maoist taxation was also affecting business more than
before the April 2006 cease-fire. Government officials in
Bhairahawa noted that Maoists had been extorting money via
telephone before the cease-fire, but now they did so in
person. The Chief District Officer (CDO) in Biratnagar
reported to the SCA/INS Director that Maoists were taxing
people at both the District Development Committee (DDC) and
the Village Development Committee (VDC) levels. In
Bhairahawa, for example, our contact noted that the Maoist
sister organization Madhesi Mukti Morcha (Terai Liberation
Front) was organizing a convention from November 1-3, and
that the Maoists had started collecting 20 million rupees
(approx USD 20,000) from the local business community and
ordering local hotels to sponsor free food and lodging for
the convention.

STONE CRUSHING COMPANY GETS SQUEEZED
--------------


4. (C) Likewise, while in Bhairahawa, Emboffs visited
Muktinath Concrete Udoyog, the largest stone crushing company
in Nepal. According to a prominent local social leader and
journalist, the factory owner paid a lump sum of 1.6 million

rupees (USD 22,000) to the Maoists in the factory's first
year. The following year, the factory paid 67 million rupees
(USD 921,000) in royalties to the DDC for collecting
boulders, gravel, and sand. The Maoists in turn demanded the
same amount as their royalty tax for collecting stones from
the river basin where the owner's business operates.
Ultimately, the owner paid the whole amount to the Maoists so
that his workers could return to work in the riverbed.

LOCAL LEADERS PUSH BACK IN BHAIRAHAWA
--------------


5. (C) However, there were examples of the business community
pushing back on Maoist extortion in October. The Federation
of Nepalese Chambers of Commerce and Industry (FNCCI)
organized a nation-wide strike to protest extortion by
Maoists on October 17, despite an appellate court interim
order to not stage the strike and the Prime Minster's promise
to meet FNCCI demands. In addition, on October 2, an Embassy
contact in Bhairahawa reported an example of local leaders
successfully challenging local Maoist supremacy. He said
that the local political leaders, in discussions with the
CDO, Army and Police, had managed to remove the Maoist
People's Liberation Army (PLA) from the Gorkha Biscuit
Factory in Bhairahawa, where they had been camping for two
weeks. After local leaders raised the issue with Maoist
leaders, Prachanda ordered the PLA to evacuate the factory as
soon as possible. The Police were deployed to the Factory as
soon as the Maoists left.

BUSINESSMEN FLEEING TO INDIA
--------------


6. (C) Business leaders informed Emboffs that many in the
business communities in both Bhairahawa and Biratnagar had
been fleeing to India to escape Maoist extortion. Party
leaders in Bhairahawa said Government of India (GOI)
officials knew Nepalis were entering India to re-start their
businesses, but also that the GOI was not in a position to
compel them to return to Nepal. Brigadier General Rawal,
Commander of the Nepal Army's 22nd Brigade, further noted to
DATT that members of the Communist Party of Nepal - Maoist
(CPN-M) in Bhairahawa were communicating well with their
Naxalite counterparts across the border.

MAOIST CUSTOMS FACILITIES
--------------


7. (C) At the Sunadel border crossing just south of
Bhairahawa, officials told DATT and Emboffs that Maoists were
patrolling the border crossings and collecting money as
people crossed from India to Nepal. Emboffs saw no police
presence when they visited the border crossing. In
Biratnagar Superintendent of Police (SP) Bhandari claimed
that Maoists were seen on October 13 preparing to open a
parallel customs office near the Jogbeni market (where most
low-level smuggling occurred). He added that the Maoists
were planning to collect customs revenue at 50 percent less
than Government of Nepal (GON) rates. Customs officials,
however, denied that Maoists had entered customs facilities
or were interfering with operations, and claimed Maoists
were only planning to collect money from smugglers at the
parallel customs office, thus not depriving GON Customs of
revenue. They conceded, however, that the Armed Police Force
assigned to the border were merely observing and not
interfering in any Maoist activities.

PASSIVE SECURITY PERSONNEL
--------------


8. (C) According to local political and security leaders,
Police and Nepal Army officials in both towns had remained
inactive in the face of increased Maoist criminal behavior
and illegal activity. SP Bhandari, who was frustrated by the
continued lack of orders from Kathmandu to check Maoist
lawlessness, said a Maoist cadre had taken control of two
abandoned police stations in Morang District since the week
of October 9. He also reported that, on October 13, Maoists
had taken over a third abandoned station near the Sanischare
Bhutanese refugee camp, where they openly proclaimed their
intent to begin patrolling and resolving disputes. Officials

at the National Human Rights Commission (NHRC) in Biratnagar
relayed an instance to the SCA/INS Director where, upon
learning an arrested suspect was a Maoist, Maoists gave him
back his weapon, seized cash, and sent him on his way.
Driving through Butwal, a major crossroads city of 80,000, 25
km north of Bhairahawa, our contact described the area as
"completely under Maoist control." Emboffs observed a few
police check points where police were largely inactive and
completely unarmed.


9. (C) Local officials reported that Maoists had also set up
mobile parallel courts in each of the two towns. The Nepali
National Human Rights Commission (NHRC) confirmed to SCA/INS
Office Director that "People's Courts" were active in Morang
District.

PARTY WORKERS INTIMIDATED
--------------


10. (C) Political leaders in Bhairahawa also lamented to
Emboffs that people were too scared to join political parties
or take part in party activities because of Maoist
intimidation. Brigadier Rawal mentioned that the Maoists
were working to bring several unions and minority groups,
such as women, farmers, Dalits, and even Muslims, into their
expanding united front, through propaganda that instilled in
them a feeling of power. Strategically, he reported, Maoists
were making great strides in the political arena. Although
the officials in both towns stated that abductions and
killings had decreased since the People's Movement in April,
they said the Maoists' scare tactics were still successful in
preventing political work by the democratic parties.

THE WAY FORWARD: MAOIST INTEGRATION THE ANSWER
-------------- -


11. (C) Leaders in both Bhairahawa and Biratnagar claimed
that Maoist integration into the GON would put an end to
Maoist criminal behavior. The Acting CDO in Biratnagar
stated a peace deal "had to" be struck. He opined hopefully
that Maoists would behave after joining the GON because they
would be obliged to abide by GON rules and regulations and
would be held accountable by the Nepali population.
Similarly, the General Secretary of the Communist Party Nepal
- United Marxist Leninist (CPN-UML) in Bhairahawa said things
would be "easier" if the Maoists joined the mainstream, while
the local Nepali Congress leader noted that criminals within
the Maoists might not be easily controlled even if the CPN-M
joined the government.

... BUT THE POLICE NEED HELP
--------------


12. (C) Nepal Army Brigadier Rawal, however, recognized that
many of the Maoists were young men with guns behaving like
criminals. He stressed that the Nepal Police and the Armed
Police Force need reinforcement, morale building, and orders
from above. While praising Prime Minister (PM) Koirala for
not giving in to the Maoists and noting that the PM would
fight if necessary, Rawal said he did not understand why the
GON refused to publicly declare there could only be one state
in Nepal, not two. Until then, he explained, the police
would not be capable of enforcing law and order.

AND PROBLEMS WILL LINGER
--------------


13. (C) Rawal also expressed concern that even if the Maoists
separated from their arms, they could still maintain the
small, homemade weapons (socket bombs, knives, etc.) that
they used most often to terrorize people. He further worried
that holding Constituent Assembly elections in June 2007
would be too early, as there were still a lot of issues to be
worked out and the potential for Maoist intimidation would be
high. On the question of Maoist integration in the armed
forces, he explained that the majority of the PLA were
indoctrinated by communist dogma and had a very low level of
education. According to Rawal, integration would take a long
time.

COMMENT

--------------


14. (C) If the Maoists come in the government, the political
and security officials in both Biratnagar and Bhairahawa
remain optimistic that the GON will hold them accountable for
their actions. However, local officials' passivity and
Maoist pressure in both the west and the east, highlight, in
our view, the critical need for the GON to provide
instructions and support law and order in the border areas.
Local political and security officials can sometimes succeed
in correcting Maoist abuses, as the Gorkha Factory case
demonstrated, but that case is far from the norm. We have no
clear signals from the GON that, if a peace accord is
struck, it will be less worried about disrupting the peace
and thus more willing to re-deploy security forces
aggressively within the Valley and beyond. Even if Kathmandu
does give orders to restore law and order, it is questionable
whether local officials will feel confident enough in their
mandate to give police and administrative leaders the go
ahead. Post will continue to encourage officials both in
Kathmandu and at the local level to embolden police and
administrative leaders to enforce law and order.


15. (U) This cable has been cleared by SCA/INS Director
Marcia Bernicat.
MORIARTY