US embassy cable - 05KATHMANDU2733

UNCLAS KATHMANDU 002733 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR SA/INS, EB 
PLEASE PASS TO USTDA - CARL KRESS 
 
E.O. 12958: N/A 
TAGS: ECON, EAID, EFIN, ETRD, ELTN, EAIR, PGOV, NP 
SUBJECT: USTDA IDENTIFIES PROFITABLE TRANSPORTATION PROJECTS 
 
 
SUMMARY 
-------- 
 
1. (SBU) In separate meetings during her recent mission to 
Nepal, U.S. Trade and Development Agency (USTDA) contractor 
Judy Chang found that U.S. companies may have a competitive 
advantage in transportation projects in Nepal dealing with 
cargo rail development, the upgrading of airports, and 
intermodal logistics expertise.  His Majesty's Government of 
Nepal (HMGN) officials flagged other possible transportation 
projects, for which funding had not yet been identified. 
Chang discussed plans for a South Asian regional 
transportation conference that will bring together private 
U.S. transportation companies and public/private sector 
individuals from the seven SAARC countries and Afghanistan, 
tentatively scheduled to be held in Mumbai in March 2006. 
END SUMMARY. 
 
PROFITABLE PROJECTS IDENTIFIED 
------------------------------ 
 
2. (SBU) In meetings with HMGN and private sector 
transportation officials, Chang identified three project 
areas where she thought U.S. companies could have a 
competitive advantage. 
 
Cargo Rail 
---------- 
 
3. (SBU) Chang noted that the U.S. had a strong cargo rail 
industry, which could potentially be interested in Nepal's 
future rail projects.  Tanuk Lal Yadav, Joint Secretary for 
the Ministry of Works and Physical Planning, noted that in 
the last fiscal budget HMGN announced plans for a north-south 
(Birgunj-Kodari) rail link for which HMGN was seeking private 
funding.  Bhagwati Kumar Kafle, Joint Secretary of the 
National Planning Commission, commented that under current 
laws 100 percent foreign ownership was allowed in the 
transportation sector.  Yadav described an additional plan 
for an east-west rail link that would follow Nepal's existing 
southern east-west highway.  He said HMGN's budget suggested 
the east-west rail line could be funded through a Build, 
Operate, Transfer (BOT) scheme.  (Note: In a BOT scheme, 
private industry would build and operate the rail line, and 
eventually, after recuperating costs and profiting from the 
venture, transfer operations over to HMGN.  End Note.)  Other 
than the BOT suggestion, HMGN had specified no funding or 
time frame for either project. 
 
Airport Upgrades 
---------------- 
 
4. (SBU) Chang assessed that U.S. companies could have a 
competitive advantage in some future projects to upgrade 
Nepal's airports.  Rajesh Raj Dali, Director General, Civil 
Aviation Authority of Nepal (CAAN), discussed CAAN's long 
term desires to upgrade Nepal's major regional airports so 
that they would be capable of handling short regional 
international flights of up to four hours operated with 
Boeing 737 or 757 type aircraft.  Costs for the projects 
varied from USD 5 million to USD 50 million; he said HMGN 
envisioned building a new airport for the regional center of 
Pokhara, which would cost approximately USD 50 million; a 
runway extension project in Bhairahawa would cost 
approximately USD 5 million.  There was also a USD 17 million 
project for unspecified upgrades at Tribhuvan International 
Airport in Kathmandu.  Dali noted that CAAN would need 
funding to undertake the projects.  (Note: Dali stressed that 
he preferred money from donors go directly to CAAN as HMGN 
required an initial take of 10.25 percent of the donated 
funds.  He expressed some interest in the BOT scheme but said 
current HMGN policy did not make BOT an attractive option. 
End Note.) 
 
Intermodal Logistics 
-------------------- 
 
5. (SBU) Chang noted that U.S. companies have expertise in 
intermodal logistics, which could benefit Nepal in dealing 
with domestic and bi-lateral issues such as security and 
liability of shipments.  (Note: Intermodal logistics is the 
shipment of cargo involving more than one mode of 
transportation during a single, seamless journey.  Nepal, as 
a landlocked state, normally imports and exports its products 
using trucks and trains to and from Indian ports.  End Note.) 
 Mr. Surya Bahadur Manandhar, Executive Director of the Nepal 
Intermodal Transport Development Board, explained that there 
were not smooth and coordinated transitions between the modes 
of transportation needed for Nepal's imports and exports.  He 
added that HMGN was considering approval of a Multiple 
Transport Act, which would address liability issues.  Rajan 
Sharma, General Secretary of the Nepal Freight Forwarders 
Association commented that issues of security and liability 
of shipments hampered efforts to use a shipping route through 
Nepal's eastern border into India, over a narrow strip of 
India, and down to the Bangladeshi port of Chittagong. 
Numerous officials lamented that shipment of cargo was a 
difficult issue for their poor, landlocked country, and 
stressed that they would welcome any assistance in improving 
their current systems. 
 
6. (SBU) Chang commented that the improvement of management 
at the ports in Calcutta and Haldia, India, could be one 
profitable project for U.S. companies that would also benefit 
Nepal.  Vishnu Das Dangol, General Manager of the Trade, 
Transit & Warehouse Company in Nepal, added that funding for 
additional forklifts and stackers was needed for the two 
ports to make more efficient use of their existing facilities. 
 
HMGN's OTHER FUTURE TRANSPORTATION WISHES 
----------------------------------------- 
 
7. (SBU) HMGN officials noted other future transportation 
projects that are planned, but have no funding.  These 
include plans for eight north-south roads, aimed at helping 
Nepal become a major Chino-Indo trade transit link; a new, 
more direct highway connecting Birgunj and Kathmandu to 
replace the present circuitous route; a container freight 
station warehouse in Kathmandu for the loading and unloading 
of goods shipped by truck (a facility that currently does not 
exist); and a new international airport located somewhere in 
the lowland Terai region to make it possible for larger cargo 
flights to take off with full loads without having to worry 
about the weight and altitude issues that exist at the 
current international airport.  Chang commented that U.S. 
companies would not be competitive in building roads or the 
freight station warehouse, but could be for a new 
international airport. 
 
USTDA REGIONAL TRANSPORTATION CONFERENCE 
---------------------------------------- 
 
8. (SBU) After attending numerous meetings with public and 
private transportation officials, Chang was to recommend 
potential participants for the regional transportation 
conference in a report to USTDA.  The conference is 
tentatively scheduled for March 2006 in Mumbai.  The goal of 
the conference is to facilitate business for U.S. 
transportation companies by bringing them together with 
government and key public sector individuals from the seven 
SAARC countries and Afghanistan.  Chang agreed with the 
suggestion of members of the Nepal-U.S. Chamber of Commerce 
that a delegation of public and private sector individuals, 
headed by the Foreign Minister, would make an effective group 
of representatives for Nepal. 
MILLARD