US embassy cable - 04KATHMANDU1632

UNCLAS SECTION 01 OF 02 KATHMANDU 001632 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR SA/INS, DS/IP/SA 
LONDON FOR POL-GURNEY 
NSC FOR GREEN/DORMANDY 
 
E.O. 12958: N/A 
TAGS: PTER, PGOV, KTFN, ASEC, NP, Maoist Insurgency 
SUBJECT:  MAOIST BOMBS CLOSE SOALTEE HOTEL, COCA COLA CLOSES 
 
REF:  Kathmandu 1553 
 
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BOMBS EXPLODE 
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1.  (U)  Four bombs exploded in the backyard of Soaltee 
Hotel, a leading five star hotel in Kathmandu, Monday 
evening, August 16.  Nobody was injured and there was only 
minor damage, according to published newspaper reports.  The 
explosions preceded by one day the expiration of the demand 
by the Maoist affiliated All Nepal Trade Union Federation 
that more than a dozen companies, including Soaltee and Coca 
Cola, shut down operations for an indefinite period. 
Soaltee has responded to the explosion by indefinitely 
shutting down operations. 
 
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PLANTS CLOSE 
--------------------- 
 
2.  (SBU)  Similarly, Mr. N.N. Singh, Nepal Managing 
Director of Coca Cola, informed the Embassy that plants in 
Kathmandu Valley & the Terai (Bharatpur) would both be 
closed indefinitely.  On the evening of August 16, Maoists 
called the Terai plant at 5:30 pm and spoke with the 
security manager, human resource manager and others and 
threatened not only the employees, but also their families, 
if anybody came inside the plant.  Given the context of the 
Soaltee bombings, Coca Cola decided to shut the plant 
indefinitely, or at least until the situation improves.  Mr. 
Singh mentioned in prior conversations with the Embassy that 
Coca Cola's home office in Atlanta was considering 
suspending all operations in Nepal.  The Coca Cola decision 
to suspend operations came after Coca Cola, working with the 
Embassy, was able to get Royal Nepal Army assistance in 
patrolling both bottling facilities.  The Royal Nepal Army 
agreed to provide physical protection for the bottling plant 
in the Terai with five to six day patrols and three night 
patrols.  Coca Cola was satisfied with the protection given 
to its Kathmandu facility, but given the bombs at Soaltee 
and the fact that it could not protect its employees, it 
ultimately made a business decision to close its plant. 
Newspaper reports also suggested that other companies on the 
original list of threatened companies, including Surya 
Tobacco, Shanghai Plastic Industry, Elite Oil Store, and 
Macula Yamahas have also decided to suspend operations 
indefinitely.  The closure in total will affect several 
thousand Nepali employees and is estimated to cost the 
government over one hundred thousand USD per day in lost tax 
revenues. 
 
3.  (SBU)  According to a Soaltee Hotel group 
representative, the hotel would remain closed until the 
threat by the Maoist trade union is withdrawn.  She also 
informed the Embassy that all the guests of the hotel have 
been shifted to other hotels.  Mr. Sanjay Puri, Managing 
Director of Surya Tobacco, told us that the primary reason 
to close the factory was that defying the Maoists threatened 
the lives of the employees.  The factory will remain closed 
until at least the specific threat to the lives of their 
workers and their property is withdrawn. 
 
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MAOIST DEMANDS 
----------------------------- 
 
4.  (SBU) The companies report that the Maoists are 
following up on an eleven point ultimatum made a couple 
months ago.  In phone calls with various company personnel, 
it appears these threats boil down to three demands: 1) a 
minimum wage of 5000 rupees (twice what the unions and 
government agreed upon recently), which is less than what 
most of the employees make at the threatened industries; 2) 
a government announcement of the whereabouts of nine 
detained Maoists; and 3) a government removal of the 
terrorist label from the All Nepal Trade Union Federation. 
 
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THE RESPONSE 
--------------------- 
 
5.  (SBU)  The companies have been working under the 
leadership of FNCCI to press the government on these issues. 
Separately, the Industrial Security Group, which includes 
the U.S., U.K., French, German and Indian Embassies, along 
with the corresponding Binational Chambers of Commerce, will 
meet with Prime Minister Deuba on Wednesday morning to 
discuss security and the Maoists' political demands. 
 
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COMMENT 
--------------- 
 
6.  (SBU)  The bombs detonated at Soaltee, while they did 
not cause serious damage, demonstrated that the Maoists 
would enforce their threats against the companies.  This 
action differs from the pattern of the last ten months in 
which companies were extorted and warned to suspend 
operations without consistently enforced repercussions.  For 
Coca Cola and Soaltee, the nature of the threat has also 
fundamentally shifted.  While prior threats concentrated on 
the physical security of the plants, new threats 
specifically warned that workers and their families would be 
targets if the bottling plants remained operational.  Should 
Coca Cola decide to permanently close operations in Nepal, 
the GoN would not only lose one of its largest commercial 
tax payers, but other multinational firms may well follow 
suit. 
 
7.  (SBU)  In the current security environment, it is 
exceedingly unlikely that Nepal would be able to attract new 
large-scale foreign direct investment to offset the loss of 
Coca Cola.  The success of the Maoists in shutting down 
operations at major multinational companies is an ominous 
sign.  In the likely event that success breeds success, the 
Maoists may continue to terrorize large-scale commercial 
interests and further slow Nepal's limited economic 
activity.  END COMMENT. 
 
MORIARTY