Nepali Times: How does the United States evaluate Nepal's political transformation over the past two years, and in particular the post-election scenario? 
Nancy Powell: The United States regards Nepal's political transformation over the past two years from a state wracked by insurgency without a democratic government to its current situation of relative peace with a popularly elected Constituent Assembly and Parliament as a tremendous and very positive achievement for which all Nepalis should be proud. However, almost 12 weeks have passed since the April 10 election. There is an urgent need for the political parties to find a way to establish a new government which can address the many pressing concerns of the country's citizens, particularly the need for security through the rule of law. The Constituent Assembly needs to begin its important work of drafting a new constitution.
That being said, what pitfalls do you see ahead?
Nepal has made huge strides, but the country's transformation is far from complete. The challenges of providing economic prosperity, truly participatory democracy, security, and lasting stability are enormous. Some of these challenges are the result of global issues such as the food crisis and petroleum prices, but others are due to deeply rooted domestic inequities and patterns which will be difficult to change. Nepal needs to figure out ways to attract foreign and domestic investment so it can begin to create the jobs its young population requires. It also needs to find a way to satisfy the understandable demands of the country's many different groups while at the same time creating a national sense of identity that unifies all Nepalis.
Are you concerned at all that democratic values and press freedom may be threatened in the near future?
I am very concerned and have been meeting with representatives of the parties and the media to register that concern and discuss how the United States can assist in promoting a free press in Nepal. Reports of on-going threats and self-censorship as the result of political intimidation are very worrying and need to be addressed by all Nepalis who hope to see democracy sustained. We will continue to work with the media to strengthen its professionalism and to protect the freedom of the press.
How closely has the United States been working with India to coordinate policy towards Nepal?
The United States consults regularly with the other countries with interests in Nepal, including, of course, India, but we formulate our own policy.
So, would you say that geostrategically there has been a change in the United States' perception of Nepal?
There has been no change.
There have been attacks on the IOM office managing resettlement of refugees from Bhutan. How seriously do you take the opposition to the resettlement program?
The United States joins IOM, UNHCR, and WFP in strongly condemning attacks against the refugees and infrastructure used to support them. A small group of violent extremists has shown contemptuous disregard for the free choice for resettlement being made by the refugees. The Nepali government must put an end to this violence, protect the refugees and the international community that is providing assistance, and prosecute the criminals responsible.
Don't you think your resettlement lets the Bhutan regime completely off the hook?
The US and many other nations continue to push Bhutan to accept repatriation. Resettlement is offered by the US and other countries only as a last resort and so that people whose lives have been in limbo for more than 17 years have some opportunity for a normal life.
Your government and the Europeans have expressed concern about the arrest of Tibetan activists here. But shouldn't you try to understand Nepal's sensitivities and geopolitical compulsions on this issue?
We expect the Nepali government to adhere to international and Nepali human rights obligations regarding the detention of individuals and the humane treatment of peaceful protesters. We understand and respect Nepal's national security concerns and, certainly, the importance of protecting diplomatic premises, but believe the recent arrests and the harsh treatment accorded peaceful protestors violate Nepal's own laws.
Once and for all, can you clarify for us what the status of the Maoists is in the State Department's terror watchlist?
The CPN-Maoists are currently designated on the Terrorist Exclusion list and Specially Designated Nationals list. They are not and never have been on the Foreign Terrorist Organisations list.
How are US-funded projects in Nepal now going to be handled? Are the priorities going to change?
US foreign assistance programs will continue to support the government's most important development priorities. We, like all Nepalis and other donors, are anxiously awaiting the formation of the new government and the enunciation of its development priorities. We currently have three assessment teams in Nepal to review priority needs in the democracy and governance, economic growth, and peace building areas. While these teams have been meeting with government officials, civil society leaders, rural communities and other donors, they have not had an opportunity to benefit from meeting the new ministers.
We plan to continue our collaboration with government, beneficiaries, and other partners as we implement future programs. The US provided more than $75 million in foreign aid to Nepal last year, which is the highest level of US foreign assistance funding allocated to Nepal in recent years. We expect our fiscal year 2008 budget to reach similar levels. In fact, our Congress just appropriated an additional $7 million in fiscal year 2008 funds for Nepal to support the democratic transition and promote economic growth. We plan to maintain our support for the implementation of the peace process and the transition to a more representative democracy and support the Nepali government's plans to provide health services to all citizens. In addition, we have just begun programs to increase agricultural productivity, to repair public infrastructure in flood and conflict-affected areas, and to increase rural incomes through vocational training.
But are there concerns about the new government's commitment to the private sector, free market and FDI?
I firmly believe that only higher levels of inclusive growth can deliver lasting poverty reduction which will help to stabilise Nepal, and only the private sector can deliver that growth. The Communist Party of Nepal (Maoist), which we expect to lead the new government, has expressed a commitment since the CA election to support the private sector, the free market and foreign direct investment, but its actions and those of its supporters will need to match that rhetoric. The government will play a very important role in creating the policy environment in which the economy can grow. We strongly hope that the new government will recognise that the private sector is by far the most powerful engine for economic growth.
On a slightly more personal note, people here have remarked on your low-key style compared with your predecessor. How much of a difference does the personality of the ambassador make in diplomacy?
When I arrived in August 2007, I noticed that Nepalis were speaking out with a great deal of courage and force to protect their rights and to move the country toward elections. I did not want to drown out those voices with mine and hope that I have successfully found other ways to express my support for their efforts.
