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Nepal-PROBLEMS AND PROSPECTS, NEPAL





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Nepal Index

Nepal was a resource poor country. Although it had made some progress since the 1950s, it still was well behind most countries in the world as of 1991. Among the issues it needed to address were changes in economic policy, international debt, low labor productivity, income distribution, and population growth.

In the economic policy area, the performance of public enterprises needed improvement. Most of the country's large-scale firms were in the public sector, and many of these enterprises either were protected or subsidized, which inhibited their efficiency. Most public enterprises also lacked a sound financial footing. More than fifty public enterprises dominated major sectors of the economy. These enterprises included energy, basic utilities, oil, telecommunications, water supply, cement, jute, tobacco, and sugar. Some of these enterprises, for example, the Agricultural Inputs Corporation and the Nepal Food Corporation, incurred losses year after year.

Foreign indebtedness was also problematic. Compared with many less-developed countries, Nepal's foreign debts were not very high. However, these debts were increasing. At the end of the 1980s, the value of merchandise imports was more than three times that of merchandise exports, a situation that could create future problems in the balance of payments. Many analysts believed that domestic borrowing for development expenditures would better serve development.

Labor productivity needed to increase to improve the well-being of the people. Nepal suffered, however, from technology deficits, as well as from shortfalls in its literacy rate, basic science education, and technical training. Although there had been some progress in raising the literacy rate, properly trained technicians remained in short supply.

Income distribution data on a large scale were not available. Nonetheless, some sample studies had been made. In 1990 Dr. B.P. Shreshtha found that 75 percent of the families accounted for less than 35 percent of income. A 1983 study by Blaikie et al. noted that more than 50 percent of the family landholdings in the Hill Region amounted to less than half a hectare. Only in the western Tarai Region were landholdings generally much bigger. In a country where 90 percent of the population was largely dependent on agriculture, few families had landholdings exceeding four hectares, largely because of the shortage of land.

The need for greater agricultural and labor productivity, as well as employment opportunities, to offset the demands of a growing populace was paramount. Of primary importance, however, were increased efforts at controlling population growth. With an annual growth rate of 2.6 percent, per capita resources were reduced--another obstacle to growth.

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For general background material on the state of the economy prior to 1970, Yadav Prasad Pant's Problems in Fiscal and Monetary Policy, Rishikesh Shaha's Nepali Politics, and Badri Prasad Shreshtha's The Economy of Nepal provide useful information. Pierce M. Blaikie et al.'s Nepal in Crisis details the status of the economy in the 1970s, although it focuses on the western and central parts of the country. Mahesh Chandra Regmi's books on Nepal's economic history are valuable for their perspective and insight into continuing problems. For more recent assessments of the economy, Badri Prasad Shreshtha's Nepalese Economy in Retrospect and Prospect, Babu Ram Shrestha's Managing External Assistance in Nepal, and the Far Eastern Economic Review's annual Asia Yearbook are helpful. Shrestha's book also details the extent of foreign assistance in Nepal and provides some data on expenditures in some of the development plans. Economic Survey, 1987-88 and Economic Survey, 1989-90, published by Nepal's Ministry of Finance, and Statistical Pocketbook, 1988 and Statistical Pocketbook, 1990, published by Nepal's Central Bureau of Statistics, provide the most current statistical data.

Yadav Prasad Pant and Badri Prasad Shreshtha, professional economists from Nepal, have held several posts in the government and have also written extensively about Nepal's economy. Although the aforementioned texts by Shreshtha and Pant's Problems in Fiscal and Monetary Policy are difficult to obtain in the United States, they provide useful information. (For further information and complete citations, see Bibliography.)

Data as of September 1991



BackgroundIn 1951, the Nepalese monarch ended the century-old system of rule by hereditary premiers and instituted a cabinet system of government. Reforms in 1990 established a multiparty democracy within the framework of a constitutional monarchy. An insurgency led by Maoist extremists broke out in 1996. The ensuing ten-year civil war between insurgents and government forces witnessed the dissolution of the cabinet and parliament and assumption of absolute power by the king. Several weeks of mass protests in April 2006 were followed by several months of peace negotiations between the Maoists and government officials, and culminated in a November 2006 peace accord and the promulgation of an interim constitution. Following a nation-wide election in April 2008, the newly formed Constituent Assembly declared Nepal a federal democratic republic and abolished the monarchy at its first meeting the following month. The Constituent Assembly elected the country's first president in July. The Maoists, who received a plurality of votes in the Constituent Assembly election, formed a coalition government in August 2008, but resigned in May 2009 after the president overruled a cabinet decision to fire the chief of the army staff.
LocationSouthern Asia, between China and India
Area(sq km)total: 147,181 sq km
land: 143,351 sq km
water: 3,830 sq km
Geographic coordinates28 00 N, 84 00 E
Land boundaries(km)total: 2,926 km
border countries: China 1,236 km, India 1,690 km

Coastline(km)0 km (landlocked)

Climatevaries from cool summers and severe winters in north to subtropical summers and mild winters in south

Elevation extremes(m)lowest point: Kanchan Kalan 70 m
highest point: Mount Everest 8,850 m
Natural resourcesquartz, water, timber, hydropower, scenic beauty, small deposits of lignite, copper, cobalt, iron ore
Land use(%)arable land: 16.07%
permanent crops: 0.85%
other: 83.08% (2005)

Irrigated land(sq km)11,700 sq km (2003)
Total renewable water resources(cu km)210.2 cu km (1999)
Freshwater withdrawal (domestic/industrial/agricultural)total: 10.18 cu km/yr (3%/1%/96%)
per capita: 375 cu m/yr (2000)
Natural hazardssevere thunderstorms; flooding; landslides; drought and famine depending on the timing, intensity, and duration of the summer monsoons
Environment - current issuesdeforestation (overuse of wood for fuel and lack of alternatives); contaminated water (with human and animal wastes, agricultural runoff, and industrial effluents); wildlife conservation; vehicular emissions
Environment - international agreementsparty to: Biodiversity, Climate Change, Climate Change-Kyoto Protocol, Desertification, Endangered Species, Hazardous Wastes, Law of the Sea, Ozone Layer Protection, Tropical Timber 83, Tropical Timber 94, Wetlands
signed, but not ratified: Marine Life Conservation
Geography - notelandlocked; strategic location between China and India; contains eight of world's 10 highest peaks, including Mount Everest and Kanchenjunga - the world's tallest and third tallest - on the borders with China and India respectively
Population28,563,377 (July 2009 est.)
Age structure(%)0-14 years: 36.6% (male 5,327,484/female 5,127,178)
15-64 years: 59.2% (male 8,094,494/female 8,812,675)
65 years and over: 4.2% (male 566,666/female 634,880) (2009 est.)
Median age(years)total: 20.8 years
male: 19.8 years
female: 21.7 years (2009 est.)
Population growth rate(%)1.281% (2009 est.)
Birth rate(births/1,000 population)23.18 births/1,000 population (2009 est.)
Death rate(deaths/1,000 population)6.97 deaths/1,000 population (July 2009 est.)

Net migration rate(migrant(s)/1,000 population)-3.39 migrant(s)/1,000 population (2009 est.)
Urbanization(%)urban population: 17% of total population (2008)
rate of urbanization: 4.9% annual rate of change (2005-10 est.)
Sex ratio(male(s)/female)at birth: 1.04 male(s)/female
under 15 years: 1.04 male(s)/female
15-64 years: 0.92 male(s)/female
65 years and over: 0.89 male(s)/female
total population: 0.96 male(s)/female (2009 est.)
Infant mortality rate(deaths/1,000 live births)total: 47.46 deaths/1,000 live births
male: 47.4 deaths/1,000 live births
female: 47.52 deaths/1,000 live births (2009 est.)

Life expectancy at birth(years)total population: 65.46 years
male: 64.3 years
female: 66.67 years (2009 est.)

Total fertility rate(children born/woman)2.64 children born/woman (2009 est.)
Nationalitynoun: Nepalese (singular and plural)
adjective: Nepalese
Ethnic groups(%)Chhettri 15.5%, Brahman-Hill 12.5%, Magar 7%, Tharu 6.6%, Tamang 5.5%, Newar 5.4%, Muslim 4.2%, Kami 3.9%, Yadav 3.9%, other 32.7%, unspecified 2.8% (2001 census)

Religions(%)Hindu 80.6%, Buddhist 10.7%, Muslim 4.2%, Kirant 3.6%, other 0.9% (2001 census)
note: only official Hindu state in the world
Languages(%)Nepali 47.8%, Maithali 12.1%, Bhojpuri 7.4%, Tharu (Dagaura/Rana) 5.8%, Tamang 5.1%, Newar 3.6%, Magar 3.3%, Awadhi 2.4%, other 10%, unspecified 2.5% (2001 census)
note: many in government and business also speak English (2001 est.)

Country nameconventional long form: Federal Democratic Republic of Nepal
conventional short form: Nepal
local long form: Sanghiya Loktantrik Ganatantra Nepal
local short form: Nepal
Government typefederal democratic republic
Capitalname: Kathmandu
geographic coordinates: 27 43 N, 85 19 E
time difference: UTC+5.75 (10.75 hours ahead of Washington, DC during Standard Time)
Administrative divisions14 zones (anchal, singular and plural); Bagmati, Bheri, Dhawalagiri, Gandaki, Janakpur, Karnali, Kosi, Lumbini, Mahakali, Mechi, Narayani, Rapti, Sagarmatha, Seti
Constitution15 January 2007 (interim Constitution); note - in April 2008, a Constituent Assembly was elected to draft and promulgate a new constitution by May 2010

Legal systembased on Hindu legal concepts and English common law; has not accepted compulsory ICJ jurisdiction

Suffrage18 years of age; universal
Executive branchchief of state: President Ram Baran YADAV (as of 23 July 2008); Vice President Paramananda JHA (as of 23 July 2008)
head of government: Prime Minister Madhav Kumar NEPAL (as of 25 May 2009); Deputy Prime Minister Bijay Kumar GACHHEDAR
cabinet: cabinet formed in May 2009 by a majority coalition made up of the Communist Party of Nepal-United Marxist-Leninist, Nepali Congress, Madhesi People's Rights Forum, and several smaller parties
elections: president elected by Parliament; term extends until the new constitution is promulgated; election last held 21 July 2008; date of next election NA
election results: Ram Baran YADAV elected president by the Constituent Assembly in a second round of voting on 21 July 2008; Ram Baran YADAV 308, Ram Jaja Prasad SINGH 282

Legislative branchunicameral Constituent Assembly (601 seats; 240 seats decided by direct popular vote; 335 seats by proportional representation; 26 appointed by the Cabinet (Council of Ministers))
elections: last held 10 April 2008 (next to be held NA)
election results: percent of vote by party - CPN-M 38%, NC 19%, CPN-UML 19%,Madhesi People's Right Forum 9%, Terai-Madhes Democratic Party and Sadbhavana Party 5%, other 10%; seats by party - CPN-M 220, NC 110, CPN-UML 103, Madhesi People's Rights Forum 52, Terai-Madhes Democratic Party 20, Sadbhawana Party 9, other smaller parties 61; note - 26 seats filled by the new Cabinet

Judicial branchSupreme Court or Sarbochha Adalat (the president appoints the chief justice is appointed by the monarch on recommendation of the Constitutional Council; the chief justice appoints other judges on the recommendation of the Judicial Council)

Political pressure groups and leadersother: several small armed Madhesi groups along the southern border with India; a variety of groups advocating regional autonomy for individual ethnic groups
International organization participationADB, BIMSTEC, CP, FAO, G-77, IAEA, IBRD, ICAO, ICC, ICRM, IDA, IFAD, IFC, IFRCS, ILO, IMF, IMO, Interpol, IOC, IOM, IPU, ISO (correspondent), ITSO, ITU, ITUC, MIGA, MINURCAT, MINUSTAH, MONUC, NAM, OPCW, SAARC, SACEP, UN, UNAMID, UNCTAD, UNESCO, UNIDO, UNIFIL, UNMIL, UNMIS, UNMIT, UNOCI, UNTSO, UNWTO, UPU, WCL, WCO, WFTU, WHO, WIPO, WMO, WTO
Flag descriptionred with a blue border around the unique shape of two overlapping right triangles; the smaller, upper triangle bears a white stylized moon and the larger, lower triangle bears a white 12-pointed sun

Economy - overviewNepal is among the poorest and least developed countries in the world with almost one-third of its population living below the poverty line. Agriculture is the mainstay of the economy, providing a livelihood for three-fourths of the population and accounting for about one-third of GDP. Industrial activity mainly involves the processing of agricultural products, including pulses, jute, sugarcane, tobacco, and grain. Bumper crops, better security, improved transportation, and increased tourism pushed growth past 5% in 2008, after growth had hovered around 3% - barely above the rate of population growth - for the previous three years. The deteriorating world economy in 2009 will challenge tourism and remittance growth, a key source of foreign exchange. Nepal has considerable scope for exploiting its potential in hydropower and tourism, areas of recent foreign investment interest. Prospects for foreign trade or investment in other sectors will remain poor, however, because of the small size of the economy, its technological backwardness, its remoteness and landlocked geographic location, its civil strife and labor unrest, and its susceptibility to natural disaster.
GDP (purchasing power parity)$31.39 billion (2008 est.)
$29.81 billion (2007 est.)
$28.86 billion (2006 est.)
note: data are in 2008 US dollars
GDP (official exchange rate)$12.28 billion (2008 est.)
GDP - real growth rate(%)5.3% (2008 est.)
3.3% (2007 est.)
3.4% (2006 est.)
GDP - per capita (PPP)$1,100 (2008 est.)
$1,100 (2007 est.)
$1,100 (2006 est.)
note: data are in 2008 US dollars
GDP - composition by sector(%)agriculture: 32.5%
industry: 16.6%
services: 50.9% (FY07 est.)
Labor force14.6 million
note: severe lack of skilled labor (2008 est.)

Labor force - by occupation(%)agriculture: 76%
industry: 6%
services: 18% (2004 est.)
Unemployment rate(%)46% (2008 est.)
42% (2004 est.)
Population below poverty line(%)30.9% (2004)
Household income or consumption by percentage share(%)lowest 10%: 2.7%
highest 10%: 40.6% (2006)
Distribution of family income - Gini index47.2 (2008)
36.7 (1996)
Budgetrevenues: $1.7 billion
expenditures: $2.3 billion (FY08)
Inflation rate (consumer prices)(%)7.7% (2008 est.)
6.4% (2007 est.)

Stock of money$2.106 billion (31 December 2008)
$2.184 billion (31 December 2007)
Stock of quasi money$4.885 billion (31 December 2008)
$4.745 billion (31 December 2007)
Stock of domestic credit$5.556 billion (31 December 2008)
$5.636 billion (31 December 2007)
Market value of publicly traded shares$5.5 billion (31 December 2008)
$4.909 billion (31 December 2007)
$1.805 billion (31 December 2006)
Economic aid - recipient$427.9 million (2005)

Agriculture - productspulses, rice, corn, wheat, sugarcane, jute, root crops; milk, water buffalo meat
Industriestourism, carpets, textiles; small rice, jute, sugar, and oilseed mills; cigarettes, cement and brick production

Industrial production growth rate(%)1.8% (FY08)

Current account balance$241 million (2008)
$58 million (2007)
Exports$868 million (2008)
$830 million (2006)

Exports - commodities(%)clothing, carpets, leather goods, jute goods, pulses, grain
Exports - partners(%)India 59.2%, US 8.7%, Bangladesh 8.3%, Germany 4.3% (2008)
Imports$3.229 billion (2008)
$2.398 billion (2006)

Imports - commodities(%)petroleum products, machinery and equipment, electrical goods
Imports - partners(%)India 55.4%, China 13.3%, Singapore 2% (2008)

Debt - external$3.285 billion (2008)
$3.07 billion (March 2006)

Stock of direct foreign investment - at home$NA
Stock of direct foreign investment - abroad$NA
Exchange ratesNepalese rupees (NPR) per US dollar - 65.21 (2008), 70.35 (2007), 72.446 (2006), 72.16 (2005), 73.674 (2004)

Currency (code)Nepalese rupee (NPR)

Telephones - main lines in use805,100 (2008)
Telephones - mobile cellular4.2 million (2008)
Telephone systemgeneral assessment: poor telephone and telegraph service; fair radiotelephone communication service and mobile-cellular telephone network
domestic: combined fixed-line and mobile-cellular telephone service subscribership base only about 15 per 100 persons
international: country code - 977; radiotelephone communications; microwave landline to India; satellite earth station - 1 Intelsat (Indian Ocean) (2008)
Internet country code.np
Internet users499,000 (2008)
Airports47 (2009)
Roadways(km)total: 17,282 km
paved: 10,142 km
unpaved: 7,140 km (2007)

Military branchesNepal Army (2009)
Military service age and obligation(years of age)18 years of age for voluntary military service; 15 years of age for military training; no conscription (2008)
Manpower available for military servicemales age 16-49: 7,322,965
females age 16-49: 6,859,064 (2008 est.)
Manpower fit for military servicemales age 16-49: 4,886,103
females age 16-49: 5,525,764 (2009 est.)
Manpower reaching militarily significant age annuallymale: 365,567
female: 352,643 (2009 est.)
Military expenditures(% of GDP)1.6% of GDP (2006)
Disputes - internationaljoint border commission continues to work on contested sections of boundary with India, including the 400 square kilometer dispute over the source of the Kalapani River; India has instituted a stricter border regime to restrict transit of Maoist insurgents and illegal cross-border activities; approximately 106,000 Bhutanese Lhotshampas (Hindus) have been confined in refugee camps in southeastern Nepal since 1990

Refugees and internally displaced personsrefugees (country of origin): 107,803 (Bhutan); 20,153 (Tibet/China)
IDPs: 50,000-70,000 (remaining from ten-year Maoist insurgency that officially ended in 2006; displacement spread across the country) (2007)
Electricity - production(kWh)2.781 billion kWh (2007 est.)
Electricity - production by source(%)fossil fuel: 8.5%
hydro: 91.5%
nuclear: 0%
other: 0% (2001)
Electricity - consumption(kWh)2.243 billion kWh (2007 est.)
Electricity - exports(kWh)140 million kWh (2007 est.)
Electricity - imports(kWh)213 million kWh (2008 est.)
Oil - production(bbl/day)0 bbl/day (2008 est.)
Oil - consumption(bbl/day)18,000 bbl/day (2008 est.)
Oil - exports(bbl/day)0 bbl/day (2007 est.)
Oil - imports(bbl/day)16,920 bbl/day (2007 est.)
Oil - proved reserves(bbl)0 bbl (1 January 2009 est.)
Natural gas - production(cu m)0 cu m (2008 est.)
Natural gas - consumption(cu m)0 cu m (2008 est.)
Natural gas - exports(cu m)0 cu m (2008)
Natural gas - proved reserves(cu m)0 cu m (1 January 2009 est.)
HIV/AIDS - adult prevalence rate(%)0.5% (2007 est.)
HIV/AIDS - people living with HIV/AIDS70,000 (2007 est.)
HIV/AIDS - deaths5,000 (2007 est.)
Major infectious diseasesdegree of risk: high
food or waterborne diseases: bacterial diarrhea, hepatitis A, and typhoid fever
vectorborne disease: Japanese encephalitis, malaria, and dengue fever (2009)
Literacy(%)definition: age 15 and over can read and write
total population: 48.6%
male: 62.7%
female: 34.9% (2001 census)

School life expectancy (primary to tertiary education)(years)total: 9 years
male: 10 years
female: 8 years (2003)
Education expenditures(% of GDP)3.4% of GDP (2003)








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