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C O N F I D E N T I A L SECTION 01 OF 02 KATHMANDU 000004 
 
SIPDIS 
 
STATE PLEASE PASS TO USTR 
 
E.O. 12958: DECL: 01/02/2019 
TAGS: PGOV ETRD EAID EAGR PHUM PTER KTEX NP
SUBJECT: NEPAL: COMMERCE MINISTER STRESSES NEED TO HAVE 
NEPALI CONGRESS ON BOARD 
 
REF: 08 KATHMANDU 1162 
 
Classified By: Ambassador Nancy J. Powell.  Reasons 1.4 (b/d) 
 
Summary 
------- 
 
¶1. (C) On December 29, Minister of Commerce Rajendra Mahato 
of the small, Terai-based Sadbhavana Party told the 
Ambassador that it was essential for the Maoists to join 
hands with the Nepali Congress for the sake of Nepal's 
future.  Mahato indicated that it was primarily up to Prime 
Minister Dahal to get the peace process moving forward again. 
 Mahato was not very optimistic that the Government of Nepal 
talks with the Madhesi militant groups would be successful. 
The Commerce Secretary asked for U.S. assistance in reviving 
Nepal's trade with the U.S. and added that the Minister would 
be traveling to the U.S. at the end of January and was 
requesting appropriate meetings with U.S. officials. 
 
Need to Have Nepali Congress on Board 
------------------------------------- 
 
¶2. (C) During a courtesy call with Minister of Commerce and 
Supplies Rajendra Mahato on December 29, Mahato emphasized to 
the Ambassador that it was essential for the Maoists to find 
a way to work with the Nepali Congress (NC).  The peace 
process, the drafting of a new constitution and the future of 
the country depended on it.  Mahato, who is the President of 
the small, Terai-based Sadbhavana Party, urged the 
international community and the United States in particular 
to exert pressure on both sides to work together.  He stated 
that both Prime Minister Dahal and former Prime Minister 
Koirala had to put their past differences behind them. 
Koirala had to overcome his bitterness that the Maoists had 
not supported him becoming Nepal's first President.  As the 
head of the Government of Nepal (GON) and the Maoists PM 
Dahal bore the main responsibility to begin fulfilling the 
various peace process commitments on return of land, 
demilitarization of the Young Communist League, etc., which 
NC politicians kept raising. 
 
Success of GON Talks with Madhesi Militants Unlikely 
--------------------------------------------- ------- 
 
¶3. (C) Mahato stated he was not very optimistic the GON's 
talks with the Madhesi militant groups (reftel) would 
succeed.  He pointed out that the talks team had failed to 
entice the main militant leaders -- such as Jaya Krishna Goit 
and Nagendra Paswan (aka Jwala Singh) -- to the table. 
Meanwhile, the armed groups were asking why they should 
participate in negotiations when the GON had not yet 
fulfilled its February 2008 Agreement with the three main 
Madhesi political parties.  (Note: On February 28, 2008, then 
PM Koirala signed an 8-point agreement with the then United 
Democratic Madhesi Front, consisting of the Madhesi People's 
Rights Forum, the Terai Madhes Democratic Party and the 
Sadbhavana Party, by which the Front agreed to end its 
agitation in return for compensation of "martyrs," inclusion 
of more minorities in the bureaucracy and the Nepal Army and 
other promises.  End note.)  Mahato urged the U.S. and the 
international community, which had pushed the Madhesi parties 
to sign the agreement, to encourage the GON to fulfill its 
promises.  The Commerce Minister also asked the U.S. to boost 
its development assistance to the Terai. 
 
Trade with the U.S. 
------------------- 
 
¶4. (C) At the request of the Commerce Minister, Commerce 
Secretary Purushottam Ojha asked for U.S. aid in overcoming 
what Ojha characterized as Nepal's "marginalization" because 
of its commitment to free trade.  Ojha expressed concern that 
Nepal-U.S. trade continued to decline and reiterated the 
 
KATHMANDU 00000004  002 OF 002 
 
 
GON's request that the U.S. grant Nepal duty-free status for 
ready-made garments.  The Commerce Secretary also cited the 
fall in carpet and pashmina exports to the U.S.  Ojha listed 
several agricultural products, including honey, cardamom, 
coffee, tea, and cut flowers, that would benefit from U.S. 
technical assistance.  He also inquired about the status of 
the draft U.S.-Nepal Trade and Investment Framework 
Agreement.  The Ambassador strongly discouraged a trade 
strategy based on the export of garments: Nepal simply was 
not competitive.  She noted, however, that USAID was in the 
process of preparing a new economic development strategy that 
was looking at, among other things, helping Nepal add value 
to its agricultural exports.  The Ambassador explained that 
the new Administration would have to decide about the TIFA, 
but she added that the political environment in Nepal 
mattered.  Continued abuses by the Maoists would make such an 
agreement much less likely. 
 
Visit By Commerce Minister 
-------------------------- 
 
¶5. (C) Ojha reported that he would be accompanying the 
Minister to the U.S. at the end of January.  Following a 
two-day visit to New York to participate in a major gift 
trade fair, Minister Mahato is slated to arrive in Washington 
on January 27.  The Commerce Secretary said that the Minister 
is hoping to have senior-level meetings at State, Commerce 
and the U.S. Trade Representative's Office on January 28-29 
before departing the U.S. on January 30.  The Ambassador 
remarked that the timing of the Minister's visit is not the 
best because the new Administration will only have been in 
office for a week and many senior positions will still be 
vacant.  She promised, however, to assist to the extent 
possible.  (Note: Mahato was in Washington in 2007 in the 
same capacity. End note.) 
 
Comment 
------- 
 
¶6. (C) Mahato is not the only senior politician to stress the 
importance of a Maoist-Nepali Congress rapprochement. 
Minister of Physical Planning Bijay Gachhadar of the Madhesi 
People's Rights Forum made the same point to the Ambassador 
when they met December 23.  Gachhadar's desire to see the NC 
in the cabinet seems unlikely to be fulfilled any time soon, 
but we agree that cooperation between Nepal's two largest 
parties is indispensable.  Prime Minister Dahal's apparent 
willingness to give in to the NC demand for two seats on the 
Army Integration Special Committee for each of the major 
parties (septel) and his reported January 1 agreement to 
return seized land within three months (with the NC to end 
its boycott of the Parliament) would indicate that Dahal and 
Koirala have gotten the same message.  Post shares Mahato's 
pessimism about the ultimate prospects for Madhesi peace 
talks.  The situation in the Terai looks to get worse before 
it gets better.  The Embassy will provide additional details 
on the upcoming visit to the U.S. by the Commerce Minister 
closer to his departure. 
POWELL