National Trade Data Bank ITEM ID : ST BNOTES NEPAL DATE : Oct 28, 1994 AGENCY : U.S. DEPARTMENT OF STATE PROGRAM : BACKGROUND NOTES TITLE : Background Notes - NEPAL Source key : ST Program key : ST BNOTES Update sched. : Occasionally Data type : TEXT End year : 1992 Date of record : 19941018 Keywords 3 : Keywords 3 : | NEPAL NEPAL BACKGROUND NOTES (AUGUST 1990) PUBLISHED BY THE BUREAU OF PUBLIC AFFAIRS US DEPARTMENT OF STATE August 1990 PROFILE Geography Area: 147,181 sq. km. (56,136 sq. mi.); slightly larger than Arkansas. Cities: Capital--Kathmandu (pop. 422,237). Other cities--Patan, Bhaktapur, Pokhara, Biratnagar, Birganj. Terrain: Three distinct topographical regions: flat and fertile in the south; the lower Himalayas and swiftly flowing mountain rivers forming the hill country in the center; and the high Himalayas forming the border with Tibet in the north. Climate: Ranges from subtropical in the south to cool summers and severe winters in the northern mountains. People Nationality: Noun--Nepalese (sing. and pl.). Adjective--Nepalese or Nepali. Population (1989 est.): 18 million. Annual growth rate: 2.6%. Ethnic groups: Brahmans, Chetris, Gurungs, Magars, Tamangs, Newars, Bhotias, Rais, Limbus, Sherpas. Religions: Hinduism (89.5%), Buddhism (5.3%), Islam (2.6%) and others (2.6%). Languages: Nepali and more than 12 others. Education: Years compulsory--3. Attendance--primary 77.4%, secondary 22.6%. Literacy--(1987) 33%. Health (1987): Infant mortality rate--107/1,000. Life expectancy--54.4 yrs. (male), 51.6 yrs. (female). Work force: Agriculture--91.1%. Industry--2%. Services--5%. Other--1.9%. Government Type: Monarchy. Constitution: December 16, 1962; first amendment--Jan. 27, 1967; second amendment--Dec. 12, 1975; third amendment--Dec. 15, 1980. Branches: Executive--king (chief of state), prime minister (head of government). Legislative--Rastriya Panchayat (National Parliament). Judicial--Supreme Court. Subdivisions: 14 zones and 75 districts. Political parties: In transition. Suffrage: Universal over 21; September 1990 constitution expected to lower age to 18. Central government budget (FY 1989-90): $733.4 million. Defense (FY 1989-90): $40.4 million or 5.5% of government budget. National Day: December 29, King Birendra's birthday. Flag: Two blue-edged red triangles pointing away from staff, with symbols of the sun and moon in white. Economy GDP (FY 1989-90) $2.7 billion. Annual growth rate: 4.8% (at constant 1974-75 prices). Per capita income: $150. Avg. inflation rate (1985-89): 10.1%. Natural resources: Water, timber, hydroelectric potential, scenic beauty, limited but fertile agricultural land. Agriculture (60% of GDP): Products--rice, wheat, jute, millet, maize, sugarcane, oilseed, potatoes. Land--16.5% cultivated (1981 est). Industry (5.7% of GDP): Types--cigarettes, garments, soap, matches, bricks, sugar, lumber, jute, hydroelectric power, cement. Trade (FY 1987-88): Exports--$187.0 million: agricultural products, timber. Major market--India. Imports--$630.4 million: textiles, other manufactured goods. Major supplier--India. Official exchange rate (Aug. 1989): 27.70 Nepalese rupees=US$1. Fiscal year: Mid-July to mid-July. Membership in International Organizations UN and all but two of its specialized and related agencies, including the World Bank and the International Monetary Fund (IMF), Nonaligned Movement, Colombo Plan, Asian Development Bank (ADB), and Economic and Social Commission for Asia and the Pacific (ESCAP). South Asian Association for Regional Cooperation (SAARC). GEOGRAPHY The Kingdom of Nepal is located in central Asia on the southern slopes of the Himalayan Mountains. This landlocked country of 965 kilometers (500 mi.) by 161 kilometers (100 mi.) is bordered by India and the Tibetan region of China. Nepal has three distinct topographical regions, each running laterally through the country. In the south, a flat, fertile strip of territory called the Terai is part of the Ganges Basin plain. Central Nepal, known as the "hill country," is crisscrossed by the lower ranges of the Himalayas and by swiftly flowing mountain rivers. The high Himalayas form the border with Tibet in the north. Eight of the world's ten highest peaks are in this area. The highest, Mt. Everest, is 8,847 meters (29,028 ft.) above sea level. Kathmandu, the capital, is in a broad valley at 1,310 meters (4,300 ft.) elevation in the middle hill region. Nepal's climate ranges from subtropical in the south to cool summers and severe winters in the northern mountains. At Kathmandu, the average high temperature is 30 0C (86 0F) in May, and the average low is 1.6 0C (33 0F) in December. The monsoon season is from June through September and brings 75 to 150 centimeters (30-60 in.) of rain. Showers occur almost every day and can continue for several days. From October through March, sunny days and cool nights prevail. PEOPLE The Nepalese are descendants of three major migrations from India, Tibet, and central Asia. Among the earliest inhabitants were the Newars of the Kathmandu Valley and aboriginal Tharus in the southern Terai region. The ancestors of the Brahman and Chetri caste groups came from India, while other ethnic groups trace their origins to central Asia and Tibet, including the Gurungs and Magars in the west, Rais and Limbus in the east, and Sherpas and Bhotias in the north. In the Terai, a part of the Ganges Basin plain, much of the population is physically and culturally similar to the Indo-Aryan people of northern India. People of Indo-Aryan and/or Mongoloid stock live in the hill region. About one-half of Nepal's population lives in the Terai--about 20% of the land area--while the other half lives in the central or hilly region. The mountainous highlands are sparsely populated. Kathmandu Valley, in the central region, constitutes a small fraction of the nation's area but is the most densely populated, with almost 5% of the population. Religion is important in Nepal. Kathmandu Valley has more than 2,700 religious shrines. Temples, stupas, and pagodas vary in size and shape; some are austere in their simplicity, while others are ornate. Officially, Nepal is Hindu, with about 90% of the population nominally Hindu. However, Hinduism has been influenced by and has influenced a large Buddhist minority; the result is a synthesis of the two. Because of this relationship, Hindu temples and Buddhist shrines are mutually respected, and Buddhist and Hindu festivals are occasions for common worship and celebration. In addition, Nepal has small Muslim and Christian minorities. Certain animistic practices of old indigenous religions also exist. Nepali is the official language, although a dozen different languages and about 30 major dialects are spoken throughout the country. Derived from Sanskrit, Nepali is related to the Indian language, Hindi, and is spoken by about 90% of the population. Many Nepalese in government and business also speak English. HISTORY Modern Nepal was created in the latter half of the 18th century when Prithvi Narayan Shah, the ruler of the small principality of Gorkha, formed a unified country from a number of independent hill states. The country was frequently called the Gorkha Kingdom, the source of the term "Gurkha" for Nepalese soldiers. After 1800, the heirs of Prithvi Narayan Shah proved unable to maintain firm political control over Nepal. A period of internal turmoil followed, heightened by Nepal's defeat in a war with the British from 1814 to 1816. Stability was restored after 1846 when the Rana family gained power, entrenched itself through hereditary prime ministers, and reduced the monarch to a figurehead. The Rana regime, a tightly centralized autocracy, pursued a policy of isolating Nepal from external influences. This policy helped Nepal maintain its national independence during the colonial era, but it also impeded the country's economic development. In 1950, King Tribhuvan, a direct descendant of Prithvi Narayan Shah, fled his "palace prison" to newly independent India, touching off an armed revolt against the Rana administration. This allowed the return of the Shah family to power and, eventually, the appointment of a non-Rana as prime minister. The 1950s was a period of quasiconstitutional rule during which the monarch, assisted by the leaders of fledgling political parties, governed the country. At times, the government was led by prime ministers from these parties who represented a variety of views; during other periods the monarch ruled directly. King Tribhuvan was succeeded after his death in 1955 by his son, King Mahendra. During this decade, efforts were made to frame a constitution for Nepal that would establish a representative form of government, patterned on a modified British model. In early 1959, such a constitution was issued by King Mahendra, and shortly thereafter the first democratic elections were held for a national assembly. The Nepali Congress Party, a moderate socialist group, gained a substantial victory in the election. Its leader, B.P. Koirala, was called upon to form a government and serve as prime minister. Less than 18 months later, however, King Mahendra declared the experiment in parliamentary democracy a failure, dismissed the Koirala government, suspended the constitution, and again ruled directly from the palace. The king charged the Nepali Congress Party's government with corruption, misuse of power, and inability to maintain law and order. He declared that Nepal needed a democratic political system closer to Nepalese traditions. To meet this need, the King promulgated a new constitution on December 16, 1962, establishing a partyless system of panchayats (councils). This was a pyramidal structure progressing from village assemblies to a National Parliament (Rastriya Panchayat), with panchayats elected at the village, town, and district levels by their respective assemblies. With the panchayat system firmly established by 1967, King Mahendra began working out an accommodation with former political party members, and participation in the government by former political leaders was encouraged. The parties thereby gained a degree of legitimacy despite their official nonexistence--a situation which still exists. In January 1972, King Mahendra died of a heart attack and was succeeded by his 27-year-old son, King Birendra. In the spring of 1979, student demonstrations and antiregime activities led to a call by King Birendra for a national referendum to decide on the nature of Nepal's government--either the continuation of the panchayat system or the establishment of a multiparty system. In a December 1979 speech, the king promised to further democratize the constitution if the panchayat system was retained. The referendum was held in May 1980, and the partyless panchayat system won a narrow victory. The king carried out the promised reforms, providing for election to the Rastriya Panchayat by universal suffrage. The Panchayat also was granted greater power than it had previously, including selection of the prime minister. A second round of voting was held in the spring of 1981 to elect a new Panchayat. The election was boycotted by most of the major political groups, which had expressed unhappiness with the king's political reforms (political parties were still banned). Nevertheless, the election attracted a broad array of candidates and a good turnout at the polls. Surya Bahadur Thapa, prime minister from the time of the student uprisings in 1979 until the election, was renominated by an overwhelming majority of Panchayat members when they convened in June 1981. Thapa's government was removed following a "no confidence" motion in the Panchayat in 1983. He was replaced by Lokendra B. Chand, who continued as prime minister until announcement of the 1986 Panchayat elections. Negotiations to allow individuals to run who were identified as political party supporters broke down at the last moment. Major parties again sat out the election, with the exception of certain leftist groups. These groups managed to elect about a dozen candidates under the panchayat guidelines, which required running without party affiliation. A majority of the incumbents seeking reelection were defeated, including several veteran panchayat system supporters. Marich Man Singh Shrestha was named as the first ethnic Newar prime minister. April 1990 saw many democratic changes following an agitation movement led by the Nepali Congress Party and the United Left Front (a coalition of seven communist parties), which led to demonstrations and strikes primarily in the major cities of Nepal during February and March. The king responded by dissolving the panchayat system, lifting the ban on all political parties, and removing all references to the "partyless" structure from the constitution. At the same time, all political prisoners were released. An interim government sworn in on April 19th and headed by Prime Minister Krishna Prasad Bhattarai was charged with running the country and guiding democratic reforms until elections could be held. The interim government is made up of members of the Nepali Congress Party, the communist parties of Nepal, royal appointees, and independents. Members of the national Panchayat have formed at least two political parties. A Constitution Reforms Commission was named by the king in late May to draft a new constitution prior to holding elections, which are expected in early 1991. GOVERNMENT AND POLITICAL CONDITIONS Pending adoption of a new constitution resulting from a democratic reform process which began in April 1990, there is a multi-party political coalition leading a transitional interim government until democratic elections are held. The former "partyless" panchayat system of government, formally established in 1962, granted the king (chief of state) sole authority for all institutions. The government consisted of a Council of Ministers (cabinet), functioning as the executive arm, and the panchayat structure. The Rastriya Panchayat, the National Parliament, with 112 members elected by universal suffrage and 28 members appointed by the king, topped this structure along with a Raj Sabha (Council of State). Nepal is divided into 14 zones and 75 districts. Zonal commissioners and their assistants and chief district officers--all appointees of the central government--administered these areas. The post of zonal commissioner has now been abolished. The former system of local government consisted of town and village panchayats, with every citizen 21 and older being a member of one of these assemblies. At present, Prime Minister Bhattarai heads the interim coalition government. He also maintains his position as acting president of the Nepali Congress Party. Upon taking office on April 19, 1990, he announced three goals for the interim government: to establish a constitutional reform process, to resolve the dispute with India, and to guide the country to free and fair multi-party elections within 1 year. The king and members of the former government have given full and public support for the democratization process and the goals outlined by the interim government. Two of the goals have already been attained. In May 1990, a Constitutional Reforms Commission was established to oversee the drafting of a new constitution within 90 days. On June 10, 1990, India and Nepal agreed to restore economic relations to the way they were prior to April 1, 1987. Once the new constitution has been drafted, the Nepalese are expected to hold elections in March or April of 1991. Political parties were forced to operate underground from 1960 until the recent democratic reforms. The Nepali Congress Party, while maintaining a low-key public profile during this period, was the leading opposition against the panchayat system. The leadership of the Nepali Congress Party is elderly and cautious, and the party has historic ties with the Indian Congress Party. The communist groups cover a wide range of leftist political ideologies and, in the past, were unable to unite. In January 1990, seven of the nine leftist groups joined into a loose coalition called the United Left Front. The leftist groups, which had also previously been unwilling to unite with the Nepali Congress Party to form a broad-based front against the former government, agreed in February to support the Nepali Congress Party's "movement to restore democracy." This unprecedented alliance eventually negotiated with King Birendra, who agreed to the formation of an interim government. Both groups agree, however, that the institution of the monarchy should remian in some form because it lends stability to the political system and provides an important symbol of national identity for the culturally diverse Nepali people. Nepal's judiciary has been legally independent of the executive and legislative branches but generally was not assertive in challenging the executive. During the transition period beginning in April, the judiciary has remained legally independent. Under the 1962 constitution, appointments to the Supreme Court and the regional courts are made by the king, while appointments to the lower courts are made by the cabinet on the recommendation of the Judicial Service Commission. All lower court decisions, including acquittals, are subject to appeal, and the Supreme Court is the court of last appeal. The king has held executive privilege to grant pardons and set aside judgments. There are hundreds of small, privately owned newspapers which are now free to expound divergent viewpoints as a result of the elimination of all press restrictions following the change of government in April. The press had been strictly constrained by laws forbidding criticism of the monarchy and of the partyless system and by regulations requiring registration and fixed publication schedules. Interim Cabinet (formed April 19, 1990) Chief of State King--Birendra Bir Bikram Shah Dev Queen--Aishwarya Rajya Laxmi Devi Shah Council of Ministers Prime Minister, Royal Palace Affairs, Foreign Affairs, and Defense--Krishna Prasad Bhattarai (NCP) Home and Communications--Yog Prasad Upadhyaya (NCP) Finance--Dr. Davendra Raj Pandey (I) Industry and Commerce--Mrs. Sahana Pradhan (ULF) Agriculture, Land Reform and Management, and Forests and Soil Conservation--Jhala Nath Khanal (ULF) Law and Justice, Labor and Social Welfare, and Tourism--Nilambar Acharya (ULF) Health--Dr. Mathura Prasad Shrestha (I) Education and Culture and General Administration--Dr. Keshar Jung Rayamajhi (K) Housing and Physical Planning--Achyut Raj Regmi (K) Water Resources and Local Devlopment--Mahendra Narayan Nidhi (NCP) Supplies and Works and Transport--Marshal Julum Shakya (NCP) Key: NCP-Nepali Congress Party ULF-United Left Front K-appointed by king I-independent Other Officials Chief Justice--Dhanendra Bahadur Singh Chairman, Standing Committee of Raj Sabha (Council of State)--Anirudra Prasad Singh Chief of Army Staff--Gen. Satchit Shum-shere J.B. Rana Ambassador to the United States--Dr. Mohan Man Sainju Ambassador to the United Nations--Jai Pratap Rana Nepal maintains an embassy in the United States at 2131 Leroy Place, NW, Washington, DC 20008 (tel. 202-667-4550). The Nepalese Mission to the United Nations is at 300 E. 46th Street, New York, NY 10017. ECONOMY Nepal ranks among the world's poorest countries, with a per capita income of about $150. It maintained a self-imposed isolation until the middle of this century. When its modern era began in 1951 with the ouster of the Rana regime, Nepal had virtually no schools, hospitals, roads, telecommunications, electric power, industry, or civil service. Its economic structure was based on subsistence agriculture. A start has been made toward sustainable economic growth through government efforts and substantial amounts of external assistance, principally from India, the People's Republic of China, the United Kingdom, the United States, and several multilateral organizations (e.g., the World Bank, UN Development Program). Nepal has completed six economic development plans, and 1990 will be the final year of the seventh plan. The first four emphasized the development of transportation and communication facilities, agriculture, and industry. Plans since 1975 also have placed emphasis on improved government administration and on rural development efforts that respond more directly to the needs of rural people. The economic development plans have brought some progress, especially in social services and infrastructure. A countrywide primary education system is under development, and Tribhuvan University has several dozen campuses. Malaria was controlled in the fertile but previously uninhabitable Terai, although its resurgence is requiring additional control efforts. Kathmandu is linked to India, Tibet, and nearby hill regions by road, and the highway network is expanding. Major towns are now connected to the capital by telephone network and national airline service. A system of internal finance and public administration has been established. Industry, concentrated in the Kathmandu Valley and the southeastern part of the country, is small and generally produces items for local consumption. However, the garment and carpet industries, oriented toward exports, have experienced rapid growth in recent years. Efforts also are being made to develop a network of cottage industries specializing in textiles, furniture, and soap. Progress also has been made in exploiting Nepal's major economic resources--hydroelectric potential and tourism. Several hydroelectric projects have been completed. The swift rivers flowing south through the Himalayas to the plains afford considerable potential for developing hydroelectric power. India and Nepal have joint irrigation-hydroelectric projects on the Kosi, Trisuli, and Gandaki Rivers. A feasibility study is underway on a dam project to tap the enormous potential of the Karnali River in western Nepal. The 60-megawatt hydroelectric project at Kulekhani--funded by the World Bank, Kuwait, and Japan--began operation in 1982. Kulekhani II, adding 32 megawatts, went into operation in 1987, and work on the 69-megawatt Marsyangdi hydroelectric project is nearing completion. A national distribution grid is in place, and electricity consumption is increasing at 15%-20% per year. The next large hydroelectric project planned is the 402-megawatt Arun III Project. Engineering design works for the project should be completed in early 1991. Construction work should start in early 1992, with completion of the project in 1997. Agriculture is still Nepal's principal economic activity, employing more than 90% of the population and providing more than one-half of the country's income. Only about 20% of the total area is cultivable, while another 33% is forested. Rice and wheat are the main food crops. The Terai region produces an agricultural surplus, part of which supplies the food-deficient hill areas. Mineral surveys are underway, but the steep mountain terrain makes exploitation difficult; however, small deposits of limestone, magnesite, zinc, copper, iron, mica, and cobalt have been found. Royal Dutch Shell and a US company, Triton, have received a concession to explore for petroleum in southeastern Nepal. Nepal's foreign trade has continued to be seriously out of balance in recent years. In FY 1987-88 Nepal exported $187 million worth of goods, up from $139 million the year before. However, imports totaled $630 million in FY 1987-88, up from $507 million a year earlier. The structural adjustment program undertaken since FY 1986-87 to speed up economic development has slightly improved macroeconomic management. Gross domestic product (GDP) in FY 1987-88 grew by almost 10% at 1974-75 prices. Exports grew by 34% over the previous year, reaching 6% of GDP. Better use of foreign aid, along with increased exports and earnings from tourism and other services, improved balance of payments and increased international reserves through FY 1989. As a result, Nepal's balance of payments showed a small surplus, with foreign exchange reserves raised to the equivalent of about 7 months' imports. However, a trade embargo imposed by India in March 1989 because of lapsed trade and transit agreements greatly set back economic growth in Nepal and placed an enormous financial burden on the economy. Population pressure on natural resources will increase in Nepal. The country's population probably will reach 20-22 million by the turn of the century. Overpopulation is already straining the "carrying capacity" of the middle hill areas. Forest reserves have been depleted for crop land, fuel, and fodder, contributing to land erosion and flooding. The government has approved a long-term policy for forestation and forestry management reform. DEFENSE Nepal's military consists of an army of about 35,000 troops organized into a royal guards brigade, seven infantry brigades, five battalions (parachute, artillery, Royal Military Police, engineer, and signal), and several separate companies. There is a modest army air wing but no navy. Training assistance is provided by India and the United Kingdom and by the United States through a $100,000 International Military Education and Training (IMET) Program. The Royal Nepalese Army has served with distinction in three UN peacekeeping missions and currently has a battalion-sized contingent attached to the UN Interim Force in Lebanon (UNIFIL). Nepalese troops have fought in the British Army since the early 19th century and for the Indian Army since 1947. Agreements allowing the British and Indians to recruit in Nepal still are maintained. FOREIGN RELATIONS As a small, landlocked country wedged between two larger and far stronger powers, Nepal seeks good relations with both India and China. Nepal formally established relations with China in 1955 and since then their bilateral relations have generally been very good. Because of strong cultural, religious, linguistic, and economic ties, Nepal's association with India traditionally has been closer than with China. In March 1989, however, the trade and transit agreements regulating commerce between Nepal and India lapsed and were not renewed by India. The Chinese have contributed large amounts of economic assistance to Nepal and in mid-1988 provided, for the first time, some military assistance as well--antiaircraft weapons, small arms, and trucks. The 1989 dispute appears to be related to India's security concerns over Nepal's relations with China, and this arms delivery reportedly was one of the factors which precipitated it. This dispute abruptly decreased bilateral cross-border trade, leading to severe shortages in Nepal of petroleum, oil, lubricants, spare parts, and raw materials. Nepal and India agreed in June 1990 to restore relations to what they were prior to April 1987, and they expect to renegotiate trade and transit terms. Nepal and the United Kingdom have maintained various forms of representation for more than 150 years. For many years, the British were the only foreign power permitted to maintain a mission in Kathmandu. Nepal's relations with the United Kingdom continue to be quite friendly. The Soviet Union opened an embassy in Nepal in 1959 and during the 1960s provided Nepal with economic assistance, largely in industry and transportation. In recent years Soviet aid has been inconsequential, limited mainly to training and technical assistance. A significant number of scholarships in the USSR are offered to members of the Communist Party of Nepal. On international issues, Nepal has followed a nonaligned policy and often votes with the nonaligned group in the United Nations. Nepal participates in a number of UN specialized agencies and was president of the UN Security Council during the month of February 1989. US-NEPALESE RELATIONS US-Nepalese relations, formally established in 1947, have been friendly. The US Embassy was opened in Kathmandu in 1959. King Birendra made a state visit to the United States in December 1983. US policy toward Nepal has three objectives: support for peace and stability in south Asia; support for Nepalese independence and territorial integrity; and support for one of the world's least developed countries in meeting its development needs through selected programs of economic aid and technical assistance. The United States has provided more than $300 million in economic assistance to Nepal since 1951. In recent years, bilateral U.S. economic assistance through the Agency for International Development (AID) has averaged $15 million a year. AID supports agriculture, health, family planning, and reforestation efforts in Nepal. The United States also contributes to international institutions and private voluntary organizations working in Nepal. These multilateral contributions to date have exceeded $250 million, including humanitarian assistance. The Peace Corps has projects in Nepal in agriculture, education, health, and other rural programs. The first Peace Corps volunteers came to Nepal in 1962, and currently there are about 140 volunteers posted there. Principal US Officials Ambassador--Julia Chang Bloch Deputy Chief of Mission--Albert A. Thibault, Jr. Political and Economic Officer--Todd Greentree Economic and Commercial Officer--Carol Tyson Reynolds Administrative Officer--Norma L. Kleiber Consular Officer--Charles Parish AID Director--Kelly Kammerer Public Affairs Officer--Janey Cole Peace Corps Director--Jonathan Darrah The US Embassy in Nepal is located in Pani Pokhari, Kathmandu (tel. 411179 or 412718).