US embassy cable - 03KATHMANDU25

UNCLAS SECTION 01 OF 03 KATHMANDU 000025 
 
SIPDIS 
 
STATE FOR SA/INS 
LONDON FOR POL/REIDEL 
DEPARTMENT PASS TO USAID-DCHA/OFDA 
 
E.O. 12958: N/A 
TAGS: EAID, PGOV, PTER, NP, U.S-Nepali Relations 
SUBJECT: MAJOR ACHIEVEMENTS OF AMERICAN ASSISTANCE TO NEPAL 
OVER 50 YEARS: PROTECTING THAT LEGACY 
 
 
Summary 
------- 
 
1. Nepal emerged from its feudal isolation in the 1950s with 
virtually no modern economic infrastructure and little 
intellectual capital.  Development, while still very uneven, 
has improved the lives of many Nepalis, whose number has 
tripled in the past half century.  The US Government, as one 
of the country's leading donors, has achieved an impressive 
list of accomplishments in assisting Nepal's development. 
Although the Maoists orignally capitalized on popular 
frustrations with the pace of development, they are now a 
main cause of lagging indicators.  Continued US assistance is 
essential to protect these achievements and strengthen the 
capacity of the Government of Nepal to address the political, 
administrative, and developmental causes of the insurgency. 
End Summary. 
 
Out of the Mountains and Jungles . . . 
-------------------------------------- 
 
2. In February 1951, King Tribhuvan opened Nepal's borders 
and invited international assistance.  Responding aid 
agencies and charitable organizations found a nation with a 
highly centralized government, focused on law and order and 
taxation; a subsistence, agrarian economy, dominated by large 
landowners adverse to change; and a near total lack of 
physical infrastructure, including roads, telecommunications, 
hospitals, and schools.  The Government of Nepal (GON), 
moreover, had no programs in place to address the human 
development needs of the Nepali people.  Government 
bureaucrats were incapable of formulating and directing 
policies to transform Nepal's economy and improve basic 
social services. 
 
3. In 1951, Nepal's literacy rate was 2 percent.  The country 
of 8 million had only 300 college graduates.  Infant 
mortality stood at 255 per 1,000 live births, and life 
expectancy was a short 28 years.  Electricity served only an 
elite few in the Kathmandu Valley, and even this limited 
capacity was subject to frequent brown-outs and generator 
breakdowns.  Throughout the country, 92 to 96 percent of the 
population worked in agriculture.  A 1961 census found only 6 
cities of 10,000 or more people and 10 towns of 5,000 to 
10,000 people.  It is estimated that Nepal had no more than 
400 kilometers of roads, of which a mere 4 to 5 kilometers 
were paved. 
 
. . . Into Internet Cafes and Five-Star Hotels 
--------------------------------------------- - 
 
4. Nepal, on the cusp of 2003, has lept into the internet age 
in the span of two generations.  Large cities boast internet 
cafes, five-star hotel accommodations, and services on par 
with the developed world.  Rural areas are still largely 
reliant on rain-fed agriculture, but some now supplement 
their incomes with light industries powered by electricity. 
Government services have been made available at the village 
and district level, and local governments have been given 
greater authority and fiscal responsibility.  The nation has 
produced a class of technocrats, now numbering 10,0000, which 
are better able to plan for and respond to long-term 
development needs.  The same crop of educated Nepalis has 
organized an estimated 25,000 non-governmental organizations 
addressing a wide range of social, economic, and educational 
issues. 
 
5. The statistics on Nepal's development show impressive 
progress.  Nepal has built 25,689 public schools and 8,547 
private schools, sufficient to provide 88 percent of 
households with access to primary schools within half an hour 
of travel.  Adult literacy has risen to 62 percent for men 
and 28 percent for women, with 12,000 Bachelor of Arts 
degrees awarded per year.  Before the destruction of medical 
facilities by Maoist terrorists, 45 percent of Nepali 
households had access to basic health facilities. Infant 
mortality has dropped to 64 per 1,000 live births with life 
expectancy doubling since the 1950s.  The segment of the 
population that continues to work in agriculture has dropped 
to 78 percent, and the Kingdom attained self-sufficiency in 
food in the mid-1990s.  These gains are more astounding in 
the face of a population that tripled in fifty years to 24 
million. 
 
6. In addition to improvements in social statistics, Nepal 
has made significant gains in infrastructure: 69 percent of 
households live within one hour of a motorable road; 
telephone services connect 250,000 households, and rapid 
cellular deployment in 2003 will connect another 80,000 
throughout the Terai; electricity serves 18% of the 
population with sufficient surplus to allow export to 
neighboring countries; and nearly every district headquarters 
boasts a hospital.  Civic and political awareness have also 
burgeoned with the dramatic increase in media sources. 
Nepal's public is now served by 22 radio stations (from its 
first station established in 1951), three national television 
stations, and 1,750 newspapers (including 12 broadsheets). 
 
Significant American Contribution 
--------------------------------- 
 
7. The USG has been one of the largest, most consistent 
donors in Nepal.  The US helped the GON write its first 
regular budget in 1952.  The US Operation Mission (later 
USAID) and the Peace Corps have addressed the underlying 
factors of poverty, enhancing education, good governance, 
agriculture, and health care.   Among the outstanding 
contributions of USAID-Nepal are the following: 
-- nearly eliminating malaria from the Terai, which is now 
the home of half of Nepal's population and source of 65 
percent of Nepal's foodgrains; 
-- reducing the fertility rate by 20 percent since 1991; 
-- expanding access to child health programs; 
-- providing Vitamin A supplements to 3.5 million children, 
thereby saving 50,000 young lives a year; 
-- assisting in raising the literacy rate from 2 percent in 
1951 to 57 percent today; 
-- providing technical and academic training to about 5,785 
Nepalis, from 1952 to 2002; 
-- diversifying and commercializing agriculture, reducing 
malnutrition; and 
-- attracting over $300 million in private investment in 
hydropower, which has brought electricity to 18% of the 
population. 
Current programs focus on tackling the poverty, weak delivery 
of social services, and poor governance that abetted the 
insurgency. 
 
Poor Governance has Delayed Progress 
------------------------------------ 
 
8. Nepal's giant developmental leap from near stagnation in 
1951 unfortunately has not kept pace with the development 
pace of its regional neighbors and the expectations of the 
Nepali people.  Much of the blame falls upon slow advances in 
governance and the difficult topography of Nepal.  On 
December 9, the United Nations Development Program (UNDP) 
praised Nepal's 2001 Human Development Report for identifying 
the challenges in meeting the country's Millennium 
Development Goals.  (The UN's Millenium Development Goals 
establish targets for specific indicators of development to 
be met over a fifteen year period.)  The report recognizes 
the progress made in improving the human condition in Nepal 
and challenges the government to reduce the misuse of public 
resources by increasing transparency and accountability. 
 
9. On December 19, the World Bank completed a review of its 
Country Assistance Strategy and found that Nepal had made 
significant strides in governmental reform--specifically, the 
hiring of new management for the two large government-owned 
banks and significant progress in corruption arrests and 
investigations.  The Bank elevated Nepal's lending profile 
from "low case" to "base case" with the condition that the 
GON continue its drive to improve governance and financial 
sector reform.  The World Bank's Country Director stated, "It 
is obvious that there are serious security concerns and 
political uncertainty, but when one looks past them, one sees 
an impressive record of reforms sustained by successive 
governments over the last year or so."  Looking past 
day-to-day security and political crises, the Bank credits 
the valuable work accomplished in Nepal over the last year. 
 
Nepal's Maoists: A Symptom and Cause of Lagging Development 
--------------------------------------------- -------------- 
 
10. Frustration with the pace and distribution of development 
underlie Nepal's Maoist insurgency, whose bases of support 
are found in the most isolated and poorest parts of the 
country.  The Maoists originally based their call for 
revolution on the glaring inequities in Nepal's society that 
development aid had not succeeded in redressing.  Over the 
past two years, savage violence has cost the Maoists their 
early image as socially conscious "Robin Hoods".  With 
systematic attacks on infrastructure and health services, 
seizure of private food supplies, impressment drives 
targeting children, and extortion, they increasingly appear 
to be ruthless opportunists with little concern for the 
long-term consequences of their actions.  Definitive 
statistics measuring the effects of the Maoists' destruction 
and intimidation will not be available for some time. 
However, the Maoists have destroyed 700 schools (affecting 
over 100,000 children), 505 post offices, 14 bridges, and 
nearly half of all local government offices (including 1,529 
Village Development Committee offices and significantly 
damaged 14 health posts adjoining those offices).  The 
growing toll of the insurgency is scaring away donor projects 
in needy conflict areas, delaying private sector investment, 
and dampening demand for Nepal's manufactured goods.  Reports 
of bombings, arson, and extortion have dealt a body blow to 
Nepal's important tourism industry, with arrivals falling to 
216,000 in 2002 from their high of 400,000 in 2000. 
 
Comment 
------- 
 
11. Despite fifty years of growth, Nepal still does not have 
the resources to finance its own development. The Government 
of Nepaql still counts on donor countries and international 
non-governmental organizations to fund improvements in basic 
social infrastructure and poverty alleviation.  The US 
Government's contributions since 1951 have played a major 
role in preventing a disastrous collision between Nepal's 
limited resources and expanding population.  The current 
insurgency is, in part, a manifestation of increased popular 
awareness and rising expectations.  The cumulative results of 
US and other outside assistance could be swept away by a 
rising tide of Maoist violence, if traditional donors do not 
maintain their support during the current security crisis. If 
anything, the Government of Nepal needs more--not 
less--assistance to re-establish the administrative 
infastructure being destroyed by the Maoists. 
MALINOWSKI