KING'S SUPPORTERS HAVE LOST HOPE

C O N F I D E N T I A L SECTION 01 OF 02 KATHMANDU 001345 SIPDIS SIPDIS E.O. 12958: DECL: 07/13/2017 TAGS: PREL PGOV PTER KDEM ECON IN NP SUBJECT: KING'S SUPPORTERS HAVE LOST HOPE Classified By: Ambassador James F. Moriarty. Reasons 1.4 (b/d). Summary -------------- ¶1. (C) On July 11, Royal confidant Prabhakar SJB Rana told the Ambassador that King Gyanendra's supporters had lost all hope for the future of the monarchy. Rana said the King was aware of his extremely weak position, but he still hoped that the Government of India and the passage of time might restore the monarchy's standing. In any case, the King was holding out for the Constituent Assembly to make its decision on the fate of the monarchy and was not ready to abdicate. Rana commented on growing discontent within the Nepali Congress Party and concurred with the Ambassador that a statement in the party's election manifesto stressing the party's support of a republic might pacify the political opposition and neutralize the Maoists. Rana told the Ambassador that the business community was scared and there was massive capital flight out of the country. The King Holding On -------------- ¶2. (C) On July 11, in a farewell call with the Ambassador, royal confidant Prabhakar SJB Rana told the Ambassador that King Gyanendra's birthday celebration had been a failure with very few of the invited guest attending. (Note: Most, if not all, of the diplomatic corps, including the Ambassador, decided not to attend the birthday celebration. End Note.) Rana conceded that almost all the King's supporters had lost hope for the future of the monarchy. In the Nepali Congress, the King has lost virtually all support. The PM "feels the temper within his party" but wanted the fate of the monarchy to be decided by the Constituent Assembly (CA). However, Rana admitted that the King still thought he could wait another year and that eventually India would come to his rescue. The Ambassador and Rana agreed that the Government of India's (GOI) growing disappointment with the Maoists in no way translated into renewed support for the King and that the GOI had no plans to rescue the monarchy. Rana emphasized that the King still did not fully understand this reality. More than 70 percent of Nepalis are under the age of thirty and find little reason to support the monarchy. Rana stated that he hoped the King would not try anything foolish as it was clear the Nepal Army (NA) would not support him. Rana hoped that he would abdicate graciously. Rana conceded that taking the King out of the political equation would make things easier. UML Pressuring the Nepali Congress to Declare a Republic -------------- -------------- ¶3. (C) Rana acknowledged that there had been tremendous pressure put on the Prime Minister, the Nepali Congress (NC) Party, and the Interim Parliament to declare a republic and abolish the monarchy. The Ambassador emphasized the Maoists were likely to use this issue to cause trouble and that the Communist Party of Nepal-United Marxist Leninist (CPN-UML) would continue to push for a declaration prior to the Constituent Assembly election. Rana agreed that the NC might be able to pacify the UML and neutralize the Maoists by including a statement in support of a republic in its campaign manifesto. Rana also commented that there was growing discontent in the NC with Prime Minister Koirala's leniency with the Maoists. Rana opined that many NC members would revolt today if they could, but that they needed Koirala to continue to lead, at least, a little longer. Business Busy Disinvesting -------------- ¶4. (C) Rana shared his views on the effect of the recent political events on the business community. (Note: Prabhakar Rana and his family are major shareholders in the third largest business group in Nepal - the Soaltee Group. End Note.) Rana stated that there was massive disinvestment in the country with huge sums of money being channeled into India. He added that all business people had a contingency plan, feared for their own and their family's safety, and KATHMANDU 00001345 002 OF 002 were willing, if necessary, to write off their investments in Nepal. Rana said that the strategy of his business group, like many others, was to hold the line on new investment. For example, even though the group's tobacco company continued to grow, shareholders were unwilling to expand in the current climate. Rana noted that Himal International Power, an associated company, planned to move forward with an initial public offering in the Bhote Kosi power project of approximately 44 percent of the shares. Ambassador Semi-Optimistic -------------- ¶5. (C) The Ambassador told Rana that he was "semi-optimistic" about the future. He explained that the Maoists had two competing strategies, neither of which were likely to succeed as they were based on dubious assumptions. First, the Maoists assumed that the mainstream parties, if sufficiently pressured, would give up power, and, second, that even if the parties relinquished power, the Nepal Army (NA) would accept a Maoist seizure of sole power. The Ambassador and Rana concurred that the NA would not allow Maoist integration into the armed forces and would not voluntarily follow a Maoist-led government that came to power through force. Comment -------------- ¶6. (C) An abdication by King Gyanendra would remove one issue the Maoists and the UML have continually used to cause trouble. The news from the business sector is disturbing but not surprising. Capital flight is devastating for a developing economy like Nepal's which is in dire need of investment. The GON needs to focus on this issue and provide better law and order throughout the Nation. Investment will be critical to Nepal's future prosperity and stability. HUGINS