Identifier
Created
Classification
Origin
09KATHMANDU456
2009-06-02 08:48:00
UNCLASSIFIED
Embassy Kathmandu
Cable title:  

NEPAL: SCENESETTER FOR A/S BLAKE

Tags:  PREL PGOV PHUM PTER EAID KDEM IN NP 
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INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 6972
RUEHLM/AMEMBASSY COLOMBO PRIORITY 7294
RUEHKA/AMEMBASSY DHAKA PRIORITY 2616
RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 5338
RUEHLO/AMEMBASSY LONDON PRIORITY 6477
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 3051
RUEHCI/AMCONSUL KOLKATA PRIORITY 4612
RUEKJCS/SECDEF WASHDC PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 3535
RHEFDIA/DIA WASHDC PRIORITY
RHMFIUU/CDR USPACOM HONOLULU HI PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
UNCLAS SECTION 01 OF 02 KATHMANDU 000456 

SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV PHUM PTER EAID KDEM IN NP
SUBJECT: NEPAL: SCENESETTER FOR A/S BLAKE

Introduction
------------

UNCLAS SECTION 01 OF 02 KATHMANDU 000456

SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV PHUM PTER EAID KDEM IN NP
SUBJECT: NEPAL: SCENESETTER FOR A/S BLAKE

Introduction
--------------


1. (SBU) U.S. Mission Kathmandu warmly welcomes you to
Nepal. Your visit follows A/S Boucher's visit in February
2009, and is the first since the Maoist-led government fell
in early May and a new government was formed May 23.

Political Situation
--------------


2. (U) On May 23 members from 22 of the 24 political parties
represented in the Constituent Assembly (CA) elected veteran
Communist Party of Nepal - United Marxist Leninist (UML)
leader Madhav Kumar Nepal as Prime Minister. (Note: The
election was necessitated by PM Dahal's resignation on May 4
after President Yadav thwarted his attempt to fire Chief of
Army Staff Katawal.) MK Nepal and two other senior UML
leaders (placeholders at Defense and Finance) were sworn in
on May 25; negotiations to fill out the cabinet are ongoing.
The new government faces a daunting set of challenges -
including poor security, a weak economy, and unresolved peace
process issues, notably how to proceed with integration and
rehabilitation of Maoist combatants. Meanwhile, the
government is faced with keeping the large, unwieldy
coalition intact amidst intra-party bickering and differences
over key constitutional and policy issues. The need to come
to some broader political arrangement with the Maoists, who
are now in opposition, further complicates matters.

Security Situation
--------------


3. (SBU) The law and order situation in Nepal, especially in
the Terai, continues to be poor. The previous government
appointed teams to negotiate with the various armed groups.
While some of the groups sent delegates to talks, little
progress was made. The Maoist-affiliated youth wing, the
Young Communist League (YCL),continues to engage in illegal
activities such as threats, extortion and extra-judicial
killings throughout the country. The YCL also clashes with
the police and other party-affiliated youth wings such as
UML's Youth Force.

Economic/Development Situation
--------------


4. (U) One of the poorest countries in the world, the World
Bank estimates Nepal's per capita GNP at $340. There are

huge discrepancies in social and economic standing depending
upon geographic location, gender, ethnicity and caste. GDP
growth in FY 2008/09 is projected to be 3.5 per cent,
slightly better than the 10-year average. Insufficient
physical infrastructure, lack of a skilled workforce,
domestic labor-management disputes, chronic load-shedding
(which reached 16 hours per day last winter),frequent
general strikes, poor security, and political instability all
contribute to a challenging economic environment. With
unemployment around 40 per cent, the country's most valuable
export is labor; an estimated 3 to 4 million people are
employed abroad, half of them in India. Remittances account
for approximately 25 per cent of GDP and are a major source
of spending on consumer goods, land/housing, health services,
and education. Agriculture's overall contribution to GDP has
diminished in recent years, but still provides a livelihood
for about three-fourths of the population. A severe drought
this past winter reduced agricultural production, placing
more than 2 million people at high risk of food insecurity.
Rising food prices have helped push inflation to 11.9 per
cent during the first nine months of FY 2008/09.

Military Issues
--------------


5. (SBU) The collapse of the Maoist-led government stalled
recent limited progress by the Peace Ministry in formulating
plans for the discharge of the disqualified and minors from
People's Liberation Army (PLA) cantonments. The Special
Committee for Supervision, Integration and Rehabilitation of
Maoist Army Combatants (SC),which was headed by PM Dahal and

KATHMANDU 00000456 002 OF 002


included representatives of the four largest parties, is on
hold. The Technical Committee, established in April 2009 to
provide options for integration and rehabilitation to the SC,
has not convened since the collapse of the previous
government. The new Defense Minister has announced she
intends to grant term extensions to eight Nepal Army (NA)
brigadier generals, whose extension was the subject of
dispute, along with NA recruitment, between the previous
Maoist Defense Minister and the Army Chief. Prime Minister
Nepal has said that he will decide this issue and the future
of the Army Chief once the full cabinet is in place. Several
related cases are currently pending in the Supreme Court.

USG Role
--------------


6. (SBU) Diplomatically, the USG continues to encourage all
parties to participate in the peace process and constitution
drafting. (Note: The new constitution is supposed to be
finished by May 2010.) We work closely with the rest of the
international community, notably India, the EU, especially
the British, and the United Nations. The U.S. provides
assistance of approximately USD 70 million a year, with the
largest amount in health, but also funds for peace and
democracy and a new five-year program envisioned to boost the
economy.

Conclusion
--------------


7. (SBU) You may wish to stress to the government and
political leaders you meet that the United States fully
supports Nepal's transition into a peaceful, stable,
prosperous democracy. You may further choose to emphasize
that, while the U.S. is encouraged by the formation of a new
government, we believe it is necessary for all parties to
maintain a commitment to the peace process and drafting the
new constitution, and, in the meantime, to begin to address
the other economic and law-and-order concerns that affect the
lives of Nepal's citizens.
POWELL