Country Profile 2006 Nepal This Country Profile is a reference work, analysing the country’s history, politics, infrastructure and economy. It is revised and updated annually. The Economist Intelligence Unit’s Country Reports analyse current trends and provide a two-year forecast. The full publishing schedule for Country Profiles is now available on our website at www.eiu.com/schedule The Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. 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Comparative economic indicators, 2005 Gross domestic product Gross domestic product per head (US$ bn) (US$ ’000) China 2,224.9 China India Bhutan (a) Pakistan India Bangladesh Pakistan Nepal (a) 6.7 Mongolia (a) Mongolia (a) 1.5 Bangladesh Bhutan (a) 0.7 Nepal (a) 0 200 400 600 800 1,000 0.0 0.5 1.0 1.5 2.0 (a) 2004 (a) 2004 Sources: Economist Intelligence Unit estimates; national sources. Sources: Economist Intelligence Unit estimates; national sources. Gross domestic product Consumer prices (% change, year on year) (% change, year on year) Mongolia (a) Mongolia (a) China Pakistan India Bangladesh Pakistan Bhutan (a) Bhutan (a) India Bangladesh Nepal (a) Nepal (a) China 024681012 024681012 (a) 2004 (a) 2004 Sources: Economist Intelligence Unit estimates; national sources. Sources: Economist Intelligence Unit estimates; national sources. Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006 Nepal 1 Contents Nepal 3 Basic data 4 Politics 4 Political background 5 Recent political developments 10 Constitution, institutions and administration 11 Political forces 14 International relations and defence 16 Resources and infrastructure 16 Population 17 Education 18 Health 19 Natural resources and the environment 19 Transport, communications and the Internet 22 Energy provision 23 The economy 23 Economic structure 24 Economic policy 26 Economic performance 27 Economic sectors 27 Agriculture 28 Mining and semi-processing 29 Manufacturing 29 Construction 30 Financial services 31 Other services 32 The external sector 32 Tra d e i n go od s 33 Invisibles and the current account 33 Capital flows and foreign debt 34 Foreign reserves and the exchange rate 35 Regional overview 35 Membership of organisations 37 Appendices 37 Sources of information 38 Reference tables 38 Population 38 Energy consumption 39 Government finances 39 Gross domestic product at factor cost 39 Gross domestic product by expenditure © The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 2006 2 Nepal 40 Gross domestic product by sector 40 Consumer prices, national data 40 Money supply and interest rates 41 Production index of manufacturing industries 41 To u r i s m 42 Foreign trade 43 Balance of payments, IMF series 43 External debt, World Bank series 44 Foreign reserves 44 Exchange rates Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006 Nepal 3 Nepal Basic data Land area 147,181 sq km Population 26.59m (2004) Main towns Population in ‘000, 2001 estimates (Central Bureau of Statistics) Kathmandu (capital) 671.8 Biratnagar 166.6 Birgunj 112.4 Lalitpur 162.9 Pokhara 156.3 Climate Temperate (cool with extreme cold at high altitudes) Weather in Kathmandu Hottest month, July, 20-29°C (average daily minimum and maximum); coldest (altitude 1,337 metres) month, January, 2-23°C; driest month, December, 3 mm average rainfall; wettest month, July, 373 mm average rainfall Languages Nepali (official). There are other languages, and English is widely used in commerce Measures Metric system; local units also used include 1 seer=0.933 kg; 1 maund=40 seer; 1 ropani=0.05087 ha; 1 bigha= 0.6773 ha Currency Nepali rupee (NRs)=100 paisa. Effectively pegged since 1993 to the Indian rupee at a rate of NRs1.6:Rs1. Annual average exchange rate in 2005: NRs71.4:US$1. Exchange rate on April 19th 2006: NRs72.4: US$1 Fiscal year July 16th-July 15th Time 5 hours 45 minutes ahead of GMT Public holidays in 2006 National Unity Day, January 11th; Vasant Panchami, February 2nd; Martyrs! Day, January 29th; National Democracy Day, February 19th; Shivaratri, February 26th; Holi, March 14th; Women’s Day, March 8th (women only), Ghodejatra (Kathmandu Valley), March 29th; Solar eclipse, March 19th; Chaite Dashain, April 5th; Birthday of Lord Ram, April 7th; Nepali New Year, April 14th; Buddha’s birthday, May 13th; King Gyanendra’s birthday, July 7th; Rakshya Bandhan, August 9th; Festival of cows, August 10th (Kathmandu Valley); Krishna’s birthday, August 16th; Teej (women only), August 26th; Rishi Panchami (women only), August 28th; Indrajatra (Kathmandu Valley), September 6th; Ghatasthapana, September 23rd; Dasai, September 29th-October 7th; Festival of Lights, October 21st-24th; Constitution Day, November 9th; various regional holidays. © The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 2006 4 Nepal Politics Nepal is going through the biggest political crisis in its history. A protracted war between the army-backed monarch, King Gyanendra, and Maoist rebels has already undermined the political system, severely damaged the economy, terrorised vast parts of the civilian population and affected relations with India and the West. Since late 2005 the three-way tussle has turned into a two-way fight between the monarch and his supporters and an emerging alliance of the seven main political parties and the Maoists. The violent insurgency led by the Maoist rebels first emerged in 1996 and has claimed over 13,000 lives. The Maoists’ ultimate aim, in theory, is to establish a “peasant-led revolutionary communist regime”. In practice, they want a new constitution written by members of a new constituent assembly that ends Nepal’s monarchy and establishes some form of republic. It is estimated that Maoists have strong influence in over two-thirds of the country. The insurgency has been strengthened by the lack of a unified front to deal with it. Apart from the rebels, three key domestic players exist"the king, the political parties and the army. Politics has traditionally been unstable, with a number of shaky coalition governments collapsing frequently. Faced with this perpetual instability, in October 2002 the king suspended Nepal’s normal democratic procedures and began appointing prime ministers by royal decree. Going one step further, in what was widely referred to as a “royal coup”, on February 1st 2005 the king dismissed the prime minister and government, placed leading politicians under house arrest and declared a state of emergency. Since then, King Gyanendra has ruled directly as chairman of a council of ministers, appointed directly by him. The king had given himself three years to restore multiparty democracy. To date he has the strong support of the army. Nevertheless, the triangular, tense and unstable relationship between the king, the politicians and the Maoists make the future of Nepal highly uncertain. Political background The Gorkha principality The modern history of Nepal dates from the second half of the 18th century, unites Nepal when one of the many small hill principalities of the region, Gorkha, began to expand under the leadership of Prithivi Narayan Shah, conquering Kathmandu in 1768. By 1814 more than 75 principalities had succumbed to the Gorkha armies, bringing all of the sub-Himalayan hill areas between Bhutan in the east and the Sutlej river in the west under Gorkha’s control. Jung Bahadur Rana began gaining political control in 1846. He later extracted a decree from the king that left the monarchy with only nominal power and transferred all sovereign power to the Rana family, who ruled as hereditary prime ministers and presided over an isolationist regime that kept most Nepalis in dire poverty. The system lasted until 1950 when King Tribhuvan fled to India and sparked a revolt against Rana rule.