BOUCHER IN BHUTAN: VISIT EXPLORES WAYS TO

C O N F I D E N T I A L SECTION 01 OF 03 NEW DELHI 000319

SIPDIS

DEPT FOR SCA/INS AND SCA/FO,

E.O. 12958: DECL: 02/19/2019
TAGS: PGOV PHUM KDEM PREF PREL IN BH
SUBJECT: BOUCHER IN BHUTAN: VISIT EXPLORES WAYS TO
INFORMALLY BROADEN RELATIONS

REF: A. NEW DELHI 02912

B. NEW DELHI 3187

Classified By: DCM Steven White for Reasons 1.4 (B and D)


1. (SBU) Summary. The February 9-11 visit to Bhutan of
Assistant Secretary Richard Boucher demonstrated continuing
U.S. support for the tiny Himalayan kingdom. In meetings
with the Prime Minister, the Minister of Economic Affairs,
and the Fourth King, Boucher addressed Bhutan's peaceful
transition to democracy and progress on its 10th Five-Year
Plan. They also discussed Bhutan's intentions to diversify
its economy from hydropower and agriculture to tourism and
the information technology industry. Bhutanese leaders were
keen to explore ways to informally expand bilateral
relations, especially through educational exchanges and
investment opportunities. End Summary.

Governing under the 10th Five-Year Plan
--------------

2. (U) During his February visit to the Land of the Thunder
Dragon, Assistant Secretary Boucher queried Bhutanese leaders
on the progress of the 10th Five-Year Plan, which began on
July 1, 2008. Prime Minister Jigmi Thinley reported the
government has made steady progress on the plan, but "the
most difficult" challenges lie ahead. The plan centers on
improving infrastructure across the mountainous country, as
Thinley believes isolation exacerbates poverty. He outlined
the government's goal to provide all districts with phone
connectivity and roads. Minister of Economic Affairs Khandu
Wangchuk detailed the government's efforts to provide
electricity for all
citizens within the next five years. He admitted the goal is
ambitious, but cautioned "we have to be ambitious to improve
the country's health, development, and productivity."
Additionally, the government aims to reduce unemployment to
2.5 percent.


3. (U) In his recent travel to eight of Bhutan's 12
districts, Thinley noticed a widening gap between the
country's rich and poor. Consequently, the 10th Plan focuses
on balanced development and economic diversification.
Thinley described his government's initiative to transform
Bhutan into a major exporter of organic produce over the next
12 to 15 years. The government predicts that Bhutanese
products will succeed in the growing middle class markets in
India and China. Thinley remarked that increasing revenue is
the only way farming can compete with other sectors and
remain "worthwhile" in Bhutan.


4. (SBU) In implementing the 10th Five-Year Plan, both the
civilian government and the monarchy confirmed that the
latter will continue to play a vital role in ruling the tiny
nation. Thinley assured his constituents that the monarchy
may play "an even greater role" as democracy continues to
take root in Bhutan. He noted that in Bhutan, "democracy
came from the throne," while other South Asian countries that
lack this "anchor" have witnessed a reversal in their
democratic fortunes. The Fourth King Jigme Singye Wangchuck
conversely commented that the monarchy must be "accountable
to the people," evident in the constitutional provision which
allows Parliament to call a vote of confidence against the
monarch. The King believes these checks and balances will
ensure that the Bhutanese system of governance will be
"better than any other in South Asia."

Hydro Headaches
--------------

5. (U) Bhutanese officials lamented the lack of snow during
the winter season, expressing their fear that the withdrawal
of the glaciers is well underway. Given that hydroelectric
exports to India account for 40 percent of the government's
revenue, the government initiated a study on the status of
Bhutan's 7,000 glaciers. Wangchuk, the Minister for Economic
Affairs, confided that "preliminary reports are worrying,"
and said Bhutan has begun collaborating with the Austrian
government on ways to combat "glacier lake outburst floods."
The melting glaciers prompted the Bhutanese to explore other
green energy alternatives such as solar and wind energy.
Wangchuck informed Boucher that during his last visit to
India, he asked the Indians to provide more information on
wind energy technology.


6. (U) Despite these concerns, the Bhutanese government is

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moving forward with plans for additional hydropower projects.
The Minister for Economic Affairs explained that the
"gestation period" for hydro projects is approximately eight
years. Thus, if Bhutan is to meet its production target of
10,000 megawatts by 2020, the contracts for hydro projects
must be completed within the next three years. The Economic
Minister said the government has created Druk Holding and
Investments Limited in 2007 to invest the funds from
increased power generation revenues. Boucher recommended
that Druk Holdings consider establishing scholarships for
Bhutanese students.

Silicon Dragon?
--------------

7. (U) The melting glaciers have also encouraged the
Bhutanese government to consider other sectors for the
country's economic future, namely information technology and
conference-based tourism. Prime Minister Thinley conveyed the
success of last November's National Association of Software
and Services Companies conference in Thimphu, which was
attended by 22 of the 24 Indian IT giants. Thinley remarked
the companies were "enchanted" by Bhutan's green energy
initiatives and close bilateral ties with India. At the
conference, Infosys offered 100 scholarships for Bhutanese
students to attend its Bangalore training center and the
Indian Institutes of Technology pledged to train 2,000
Bhutanese IT professionals. The Economic Minister indicated
the first park will be located south of the capital, but
future parks would be spread out throughout Bhutan to
encourage "balanced development." The Bhutanese government
also wants to move away from cultural tourism, which limits
revenues to the brief festival season, to conference-based
tourism, which would attract visitors year-round.

Refugee Roadblocks
--------------

8. (C) Prime Minister Thinley thanked Boucher for the
U.S.-led refugee resettlement program, calling it "the
greatest gift" Bhutan received in 2008. Thinley
characterized the refugee problem as a "humanitarian,
political, and security" impediment to Bhutan's democratic
transition, especially given "increasing levels of militancy
in the camps." Both the Prime and Economic Ministers
admitted that talks with Nepal regarding accepting a token
number of refugees to Bhutan had not progressed, despite
meetings with Nepalese leaders at the UN and the South Asian
Association for Regional Cooperation meetings. Thinley
believes the "very weak" Prachanda government does not have
the mandate to "seriously negotiate" with Bhutan on this
issue. Acting Foreign Minister and Economic Minister
Wangchuk commented that Nepal is "preoccupied with trying to
govern itself." Boucher urged both officials to continue
negotiations as "it is important to the United States that
there is some flow of refugees back to Bhutan."

Regional Analysis
--------------

9. (C) The Fourth King Jigme Singye Wangchuck also commented
on the new Nepali government. A keen observer of the region,
the Fourth King described the political climate in Nepal as
"unpredictable" and argued that country's infrastructure and
economic progress were "sliding backwards." His Majesty
warned that the Prachanda government "will not last long,"
especially once the Nepalese people realize the Maoists "will
not deliver." Despite these criticisms, Bhutanese leaders
agree there are many areas for bilateral cooperation,
especially on hydropower projects.


10. (C) The Fourth King confided, "the Bhutanese have never
looked fondly on China" given its actions in Tibet in the
1950s and 1960s; consequently, the government pursues a
"cautious policy" with China. His Majesty also divulged that
negotiations on the demarcation of Bhutan's northern border
have not progressed because China has been "surprisingly
difficult." He explained many Bhutanese had expected greater
"generosity" from China given its relative size; however,
China has frustrated Bhutanese negotiators by offering to
return land that already belongs to Bhutan in exchange for
land in disputed areas. Stalled border talks have prevented
Bhutan from opening trade routes with its northern neighbor,
despite reports from the Economic Minister that China is
"very keen" to proceed.

Expanding Bilateral Ties

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

11. (U) Both the Prime Minister and the Economic Minister
were eager to discuss ways to broaden informal U.S.-Bhutan
relations, especially through educational exchanges and
investment in expanding sectors. Prime Minister Thinley
asked about expanding the Fulbright exchange program by
several student slots each year. Additionally, he conveyed
interest in having an American university establish a
satellite campus in Bhutan. Thinley remarked that a
management school of the quality of Harvard or Stanford
Universities is particularly appealing. Boucher suggested
that schools focusing on green energy may also be interested
in the Himalayan country.


12. (C) The Fourth King said he believes bilateral relations
are "extremely good...better than a lot of countries with
whom the United States does have diplomatic relations." He
added that his government thinks "the United States must play
a strong role in international relations to ensure peace and
stability." His Majesty pledged Bhutan's assistance whenever
required, especially in the UN General Assembly. The Fourth
King affirmed, "Bhutan is very happy to put aside its
national interest to vote with the United States."

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

13. (C) Boucher's meetings with Bhutanese leaders resumed
discussions held during the 2008 visits of Ambassador Mulford
(Reftel A) and CODEL McCain (Reftel B). Bhutan has already
honored the Fourth King's pledge to consider U.S. interests
by abstaining on important human rights votes at the UN
during the past two years. His Majesty's remarks may signal
that Bhutan would take a bolder step and vote with the United
States if pressed. End Comment.
MULFORD