NEPAL: NEW PRIME MINISTER HOPEFUL HE CAN MAKE

C O N F I D E N T I A L SECTION 01 OF 03 KATHMANDU 000529

SIPDIS

E.O. 12958: DECL: 06/19/2019
TAGS: PREL PGOV PTER KDEM NP
SUBJECT: NEPAL: NEW PRIME MINISTER HOPEFUL HE CAN MAKE
PROGRESS

REF: A. KATHMANDU 522

B. KATHMANDU 455

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

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


1. (C) Newly elected Prime Minister M.K. Nepal told visiting
Assistant Secretary Robert Blake June 12 that he hoped his
government will take shape within "a few days." He admitted
that he is facing problems with the Maoists in the Parliament
and the street, but said he is trying to find a way to
accommodate their concerns. PM Nepal stated that his first
priority is to bring the peace process to a successful
completion, particularly managing the Maoist combatants. The
second is to draft the constitution. The third is to address
the needs of the Nepali people. The Prime Minister expressed
appreciation for past U.S. support and appealed for its
continuation. Assistant Secretary Blake encouraged progress
on government formation, the peace process and drafting of
the constitution and affirmed that U.S. support to Nepal
would continue.

New Government Soon
--------------


2. (C) During their June 12 meeting, newly elected Prime
Minister Madhav Kumar Nepal told visiting Assistant Secretary
of State for South and Central Asian Affairs Robert Blake
that he hoped to have a full cabinet within "a few days."
The Prime Minister was joined by his Foreign Policy Advisor,
Rajan Bhattarai, and by Foreign Secretary Gyan Chandra
Acharya. PM Nepal conceded that he had hoped to announce
additional portfolios and ministers that same day, but
problems had arisen. He claimed, "by Sunday (June 14),the
government will take shape." The Prime Minister explained
that it was not possible to find a ministry for all of the 22
parties supporting the governing coalition. The challenge is
to develop a formula so everyone will have some satisfaction.
(Note: On June 17, the PM named five new ministers and six
state ministers, bringing the total to 22. He also assigned
portfolios to six ministers who were without them. Another
cabinet expansion is needed. See Ref A.)

Accommodating the Maoists
--------------

3.(C) M.K. Nepal admitted that he is facing problems with the
Maoists in the Parliament and in the street, but is trying to
find a way to accommodate their concerns. But the Prime
Minister is firm that his government cannot agree to some
specific Maoist positions. First, the Maoists want the
Parliament to condemn the President's reinstatement of Chief
of Army Staff (COAS) Rookmangud Katawal as unconstitutional.
This is not possible. His party -- the Communist Party of
Nepal - United Marxist Leninist (UML) -- as well as other
parties supported the President's step. Second, the Maoists
want the new cabinet to uphold the removal of the Army chief,
but that was a Maoist decision; no other party supported it.
Nepal said he plans to let the Army's no. 2, Lt. Gen. Khadka
(whom the Maoists appointed Acting COAS),leave the Army
smoothly. Once Khadka retires, the Maoists will no longer be
able to use him to capture the state. The Prime Minister
indicated he would then consider taking some step short of
removal of General Katawal, whom he appreciated for accepting
the transformation of Nepal from a monarchy into a republic.

Completing the Peace Process
--------------


4. (C) According to the Prime Minister, his first priority is
to bring the peace process to a successful completion. The
main issue was managing the nearly 20,000 Maoist combatants.
Some will go into the Army, some will go into other security
forces. Others will be routed to private jobs inside and
outside the country or back to their homes. The Government

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of Nepal has to find out what they want. PM Nepal said the
work of the Special Committee for Supervision, Integration
and Rehabilitation of Maoist Combatants, and its Technical
Committee, should resume but did not indicate when or how.
The PM stated that General Katawal told him recently that, if
the Maoists were honestly committed to reaching an agreement
on the combatants, the entire process could be finished
within a month. Nepal noted that the presence of the UN
Mission in Nepal (UNMIN) is still needed and that he hopes to
see its term extended for another six months in July. The
Prime Minister remarked that he was eager to get the 4,000
minors and other disqualified out of the camps. The UN
Development Program and UNICEF have already developed
programs for them. The solution will probably involve six
months of technical training to help them transition back to
civilian life, with some receiving scholarships.

Drafting the Constitution
--------------


5. (C) The second priority for his government, the Prime
Minister said, is to draft and promulgate the constitution on
time -- by May 2010. When asked by Assistant Secretary Blake
whom the PM had in mind to head the main Constitutional
Committee, M.K. Nepal said he is still in charge for now, but
that there are several potential candidates. His first
choice was Nilambar Acharya, a nominated Member of the
Constituent Assembly (CA),who worked on the 1990
Constitution as the then Minister of Law. Both the Maoists
and the Nepali Congress are expressing interest in the
chairmanship. Baburam Bhattarai and Ram Chandra Poudel are
the names usually mentioned. If those two parties fail to
agree, UML President Jhalanath Khanal is another possibility.
The Prime Minister conceded that the May deadline is coming
soon, and that the CA has to work through major issues such
as the government structure, federalism and the type of
inclusive government. After the constitution is done, a
general election will have to be held.

Addressing the Needs of the People; U.S. Support
-------------- ---

6.(C) The Prime Minister's third priority is to address the
needs of the people. Nepalis want law and order. The Prime
Minister said he plans to strengthen the security sector and
prosecute those who violate the law. His coalition
government will try to bring the armed groups in the Terai
into the peace process, but there can be no compromise on
national sovereignty or Nepal's territorial integrity. In
the coming month, the Parliament will have its budget session
and may discuss a one-year plan on how to move ahead more
generally. PM Nepal expressed appreciation for U.S.
assistance to Nepal over the past 60 years, much of which had
targeted the basic concerns of the Nepali people. The PM
pointed out that his country offers great possibilities -- in
hydropower, tourism and agriculture as well as infrastructure
and human resources. He wants to move aggressively to
develop the sale of hydropower to India, but he is looking
for investment from several countries, not just from India.
His government also has ambitious plans for more East-West
roads and a rail line as well as another international
airport. Specifically, he requested trade preferences for
Nepal's ready-made garment industry, whose exports to the
U.S. have gone down sharply. He noted that the so-called
TRADE Act currently before the U.S. Congress would grant
those.

A/S Blake Urges Progress, Affirms Support
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7. (C) Assistant Secretary Blake encouraged Prime Minister
Nepal to form a complete cabinet as soon as he could. He
stated that the United States wants to see Nepal become a
stable, prosperous democracy. One of his messages to all of
the parties is to work together for the peace process. The
same is true for drafting the constitution. Blake expressed
the hope that the GON continue to work with UNMIN. He

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indicated stability is very important if Nepal hopes to
attract foreign investment. Noting that U.S. companies are
competing to sell aircraft to Nepal Airlines Corporation, the
Assistant Secretary requested an open and transparent process
allowing companies to compete fairly. Prime Minister Nepal
asked that Nepal not be overlooked, in spite of its small
size and its position between two big countries -- India and
China -- and Blake assured him that it would not be. U.S.
support will continue to be strong.

Comment
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8. (C) Prime Minister Nepal has set an ambitious agenda for
his government. Four weeks after he took office, however,
his coalition has yet to finalize the cabinet. Meanwhile,
although the PM claimed that the Maoist challenge to his
government can be managed, he recognizes it will not be easy.
Septels will report the Prime Minister's comments on the
Office of the UN High Commissioner for Human Rights and
refugee issues.
POWELL