NEPAL: BOUCHER STRESSES U.S. INTEREST IN

C O N F I D E N T I A L SECTION 01 OF 04 KATHMANDU 000129

SIPDIS

E.O. 12958: DECL: 02/19/2019
TAGS: PREL PGOV PTER EAID ENVR ENRG EINV ETRD MARR
PREF, PHUM, UN, IN, BT, CH, NP
SUBJECT: NEPAL: BOUCHER STRESSES U.S. INTEREST IN
DEMOCRACY, DEVELOPMENT AND END TO VIOLENCE

REF: 08 KATHMANDU 1297

Classified By: Ambassador Nancy J. Powell. Reasons 1.4 (b/d)

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


1. (C) During his February 11-12 visit to Kathmandu,
Assistant Secretary Richard Boucher emphasized to members of
the Government of Nepal that the United States was interested
in strengthening Nepal's democracy, in promoting the
country's economic development and in seeing an end to
violence. Prime Minister Pushpa Dahal was emphatic that the
United Communist Party of Nepal - Maoist is committed to
multi-party democracy and confident his coalition government
will serve out its term. He promised Boucher a statement
soon renouncing terrorism and immediate action on past
terrorist incidents involving the U.S. Embassy. Dahal and
the other ministers expect that the constitution will be
drafted by the 2010 deadline, although devising a federal
state will be difficult. The Assistant Secretary urged the
Maoist Party to work in consensus with the other parties,
including in completing the peace process through the
rehabilitation and integration of Maoist combatants. Boucher
affirmed that the Obama Administration intended to continue
its assistance to, and engagement with, Nepal.

Prime Minister: Confident About Government, Constitution
-------------- --------------


2. (C) On February 11, Prime Minister Pushpa Dahal insisted
to visiting Assistant Secretary for South and Central Asian
Affairs Richard Boucher that the United Communist Party of
Nepal - Maoist is committed to multiparty democracy and human
rights. The Maoists have no intention of seizing power.
Dahal said he was not worried other parties would bring down
his government; is coalition will serve out its two-year
term. His goal is to reach political consensus on major
issues, including with the opposition Nepali Congress. The
Prime Minister said 40 teams of Constituent Assembly members
were about to travel around the country seeking input in
drafting Nepal's new constitution. Dahal predicted the main
debate in the CA would be over the question of federalism,
but that the Assembly will meet its May 2010 deadline.

Peace Process Moving, Development Needed
--------------


3. (C) The Maoist Party chief noted that the Special
Committee on integration and rehabilitation of Maoist
combatants, which he was chairing, was scheduled to have its
third meeting later the same day. He hoped the Special
Committee would complete its work by the time the UN Mission
in Nepal's term ended in July 2009. Dahal opined that some
People's Liberation Army units should be integrated into the
Nepal Army, not just as individuals, but he added that the
details will have to be discussed. The Maoists will be
flexible. The Prime Minister urged the United States to
provide a massive increase in aid, what Maoist Finance
Minister Baburam Bhattarai called in the same meeting a "mini
Marshall Plan." The Prime Minister argued that, given the
state of the country after a decade of civil war and the
large number of unemployed youth, only a big increase in aid
could ensure the current peace would be sustainable. The two
Maoist Ministers pushed for more U.S. investment. Dahal
pointed out the cabinet was in the process of establishing an
investment board, which he will head, to approve and expedite
mega investment projects -- in hydropower, for
example.

Boucher: Lifting of Terrorist Tags, Press Freedom
-------------- --------------


4. (C) The Assistant Secretary welcomed the strong public
statement that the Prime Minister had issued in December
condemning the terrorist attacks in Mumbai. Boucher asked

KATHMANDU 00000129 002 OF 004


if the Prime Minister would make a broader statement
renouncing terrorism in all its forms. Before the United
States could take the Maoists off the Terrorist Exclusion
List and the Specially Designated Global Terrorist List and
have normal relations with the party, the Maoist Party would
also have to acknowledge responsibility for the killing of
the two Embassy guards -- to the families and the public,
perhaps to the National Human Rights Commission or the future
Truth and Reconciliation Commission. In addition, the United
States continues to look closely at the Maoists' attitude
toward violence. The United States wishes to see the Young
Communist League (YCL) demobilized as a paramilitary
organization as promised and was concerned that the Maoists'
use of violence was coming up again. Prime Minister Dahal
said he could issue a general statement soon. He reiterated
that the killing of the guards had not been pursuant to
Central Committee policy, and noted that a senior party
leader had already provided a detailed explanation of the
killing to the U.S. Embassy (reftel). The Maoist chief hoped
any remaining questions could be cleared up within "a few
days." It would be no problem to acknowledge responsibility
to the family. The Prime Minister stated that incidents of
violence by the League had "very much decreased." The
process of demobilizing the League had started: they had
already vacated some industrial estates. Boucher highlighted
press freedom as another U.S. concern. Dahal conceded that
some Maoist cadres had been involved in "wrong activities,"
and cited the example of the attack by Maoist labor leaders
on Himal Media. Dahal said he had intervened to ensure the
culprits were handed over to the police. The Maoist Party
chief also admitted that Maoist cadres participated as
individuals in the killing of a woman journalist (Uma Singh)
in the Terai in January.

Aid Continuing, Looking for Climate Change Partners
-------------- --------------


5. (C) Boucher pointed out that the United States had
maintained a high level of assistance to Nepal in 2008 of
approximately USD 70 million per year, even after the Maoists
took over the country's government. The Assistant Secretary
said the United States was keen to enhance its existing aid
coordination with the government and among donors. This was
especially important as the Nepal Development Forum
approaches in May. Boucher urged the Prime Minister and the
Finance Minister to create positive conditions for private
investment, particularly in hydropower, and remarked that
U.S. investors were interested. Democracy and development
would be the focus of the new U.S. administration. He added
that President Obama and Secretary Clinton were looking for
partners to address the issue of climate change and had
appointed a special envoy on the issue.

Foreign Secretary: Bhutanese and Tibetan Refugees
-------------- --------------


6. (C) In his meeting with Assistant Secretary Boucher on
February 11, Foreign Secretary Gyan Chandra Acharya
encouraged Boucher to urge the parties to stay the course on
the peace process and the constitution. The difficulty was
that the Government of Nepal was facing so many conflicting
demands at once. The biggest challenge is figuring out how
to improve the government,s delivery of services to the
people. Boucher reported that the Bhutanese Prime Minister
had told him during his visit that the Royal Government of
Bhutan was ready to deal with the Nepalis on taking back
refugees in categories 1 and 4, but it is most important to
establish the principle that some refugees had a right to
return. Acharya said that the Government of Nepal had told
the Royal Government of Bhutan in New York during the UN
General Assembly in fall 2008 and in subsequent meetings in
New Delhi that Nepal and Bhutan must take advantage of the
window of opportunity created by the U.S. resettlement
program. He worried that the Royal Government would want to
revisit the past, insisting on proof of physical eviction.
He expressed concern as well about the residual population of

KATHMANDU 00000129 003 OF 004


Bhutanese refugees. The Foreign Secretary stated that
starting an UN-administered registration program for Tibetan
refugees would be "difficult." Nepal was under tremendous
press from the Chinese Government not to change the current
arrangement. The Assistant Secretary countered that the
current arrangement left Nepal with a problem: many longtime
resident Tibetans with no legal status. He pointed out that
the United States was willing to take some.

Foreign Minister: Government, Constitution, Integration, Terai
-------------- --------------


7. (C) On February 11, Foreign Minister Upendra Yadav
detailed to Boucher that the governing coalition would stay
together, but more consensus was needed. Yadav, who is head
of the Madhesi People's Rights Forum, expected the Nepali
Congress to be a cooperative opposition. The parties lost
lots of time -- 8 months out of the 24 provided to draft the
constitution -- but Yadav indicated that the Assembly is
compelled to complete it on time. Public pressure, including
from civil society, will make sure of it. The Madhesi want a
presidential system of government with autonomous states.
The Foreign Minister praised the strength and democratic
principles of the U.S. Constitution and welcomed assistance
from U.S. experts. Regarding integration of combatants,
Yadav noted that the Madhesi had a different concept from the
Maoists: integration does not mean a merger of the two
armies. The character of the Nepal Army as a national army
needs to remain the same. Minors and other unverified
require vocational training and various options for
employment. The last option should be integration of
individuals into the Army. He blamed the Maoists for the
delay in getting started. With respect to the Terai, the
law-and-order situation is poor, but not out of control.
Most of the armed groups are criminals and have no political
agenda. The political groups must be brought into the
mainstream, and reasonable demands addressed. Prior
agreements with the Madhesis should be implemented. Finally,
to ensure security, the political parties have to be
persuaded to stop interfering with the police every time an
accused person is arrested.

Finance Minister: Government, Constitution, Maoist Violence
-------------- --------------


8. (C) In a separate meeting with the Assistant Secretary on
February 12, Finance Minister Bhattarai confided that he is
optimistic that things are "moving in the right direction."
There were ups and down, but this is to be expected after 10
years of civil war. However, if the Government of Nepal
failed to create jobs, and absorb the youth into productive
activities, the country would face a crisis. The Finance
Minister averred that schoolteachers in the villages would
contribute useful ideas to Members of Parliament as they fan
out across the country seeking suggestions for the new
constitution. Drafting will start in earnest after the teams
return to Kathmandu in March. Boucher raised again the issue
of violence by the Young Communist League. While the Prime
Minister characterized it as a matter of a few incidents, the
United States sees it as a much more widespread problem.
Bhattarai responded that the Maoist party was frankly
concerned. "Some bad elements" had infiltrated the party.
At the same time, the Maoists recognized the League's
paramilitary style must change. The difficulty was that the
League consists of full-time members of the party who had
left homes and family during the insurgency. They expect the
party to look after them. The Maoists are developing
projects such as road construction to keep them busy. The
Assistant Secretary reiterated that the U.S. would be
conducting the review of the Maoists' terrorist designations,
watching the level of violence. The Finance Minister
promised a general statement against terrorism soon.

Economy, Trade
--------------


KATHMANDU 00000129 004 OF 004



9. (C) Bhattarai stated that internal funds were not enough
for the Government of Nepal to complete all of the required
reconstruction. Nepal needs donor funds, including for big
projects in areas such as energy (hydropower) and tourism.
Boucher encouraged Bhattarai to work with the World Bank and
Asian Development Bank (ADB). The United States does not
have the money for big projects, but is actively engaged with
the Bank and the Bank, and the involvement of the
international financial institutions will also attract the
needed private capital. The Finance Minister noted that
Nepal had not yet been greatly affected by the global
financial crisis, but observers fear that remittances will
fall and overseas workers will be sent home. In a subsequent
meeting that Bhattarai arranged in his office, Nepali
business leaders appealed to the Assistant Secretary for
duty-free status for ready-made garments. Boucher replied to
them, as he did to the Prime Minister, the Finance Minister,
the Foreign Minister and the President: the expansion of U.S.
trade preference to Nepali textiles was extremely unlikely.

President: Government, Rule of Law, Ordinances
-------------- -


10. (C) On February 12, President Ram Baran Yadav
characterized Nepal as a country in transition, which has
achieved a democratic republic. The issue is how to
stabilize that republic. Consensus among the major political
parties, including the Nepali Congress, is essential. The
Special Committee has been formed; now it has to act fast to
deal with the Maoist insurgents who are still in cantonments.
President Yadav said the Maoist-led government is not
serious about dealing with widespread violence, about the
rule of law. Yadav pointed out that the Parliament had been
in session for five months, and yet the Government had waited
until one week after Parliament was on recess to present him
with three ordinances for his signature. Yadav stated that
he had told the Prime Minister that ordinances were to be the
exception, and Dahal had agreed to use them sparingly.
(Comment: Dahal assured Boucher on February 11 that the
Government of Nepal will present all the ordinances, as
required, to the Parliament for debate and approval when it
reopened in a month and a half.) Yadav urged the United
States to promote democracy in Nepal, denounce violence,
encourage development, and continue support for the Nepal
Army.

Comment
--------------


11. (C) Prime Minister Dahal's reaffirmation to Assistant
Secretary Boucher of the Maoists' commitment to multiparty
democracy was timely given the continuing predilection of
senior Maoist leaders, including Dahal, to engage in
revolutionary rhetoric when speaking to Maoist cadres, and
ongoing abuses by the Maoists' Young Communist League. His
promise of a broad statement against terrorism is also
welcome. Boucher took the opportunity to acknowledge limited
progress by the Maoist-led government in drafting the
constitution and bringing the peace process to a conclusion,
but also to push for continued progress and consensus, as
well as end to violence. The Assistant Secretary's February
11-12 visit, which received widespread, positive attention in
the Nepali print and broadcast media, also served to reassure
an anxious Nepali public that the United States is committed
over the long-term to Nepal's democracy and its development.



12. (U) Assistant Secretary Boucher has cleared this cable.
POWELL