Nepal – History and Economy

Nepal is a multi-ethnic Asian country situated between Tibet and India. For several decades, the country has experienced political instability. Economic development is slow, despite international aid, including from Germany. Its main exports are wool carpets and finished textiles.

General
Nepal is a country in South Asia, bordered by Tibet to the east and India to the east. The northern part of the 147,181 km² country lies in the Himalayas and includes Mount Everest. The capital is Kathmandu. Nepal has a population of approximately 25 million people belonging to a variety of ethnic groups. The official language is Nepali, but only about 48% of the population speaks it as their first language. The majority of the population is Hindu, while about one-sixth are Buddhist.

Story
Nepal first emerged as an independent state in 1768, after the Gurkhas established a Hindu kingdom in the Kathmandu Valley and parts of India. In the mid-19th century, the Shah kings were overthrown by the Rana family, who established the hereditary office of Prime Minister. Around a hundred years later, in 1951, the kingdom was re-established with Indian support. Several political changes followed until a democratic constitution was finally adopted in 1990. Nepal is now a constitutional monarchy with frequently shifting coalition and minority governments. In 1996, the Nepali Maoist Communist Party launched a civil war. Peace negotiations were not initiated until years later (2006). Following a massacre of the royal family on June 1, 2001, the king's only surviving brother, Gyanendra Bir Bikram Shah Dev, ascended the throne. He attempted to seize more power, but in 2006 he was forced to reinstate the dissolved parliament. A transitional constitution has been in effect since the beginning of 2007.

Business
Nepal is one of the poorest countries in the world. Ongoing political upheaval hinders economic development. Economic policy is development-oriented and aims to strengthen the market economy. However, efforts toward liberalization and privatization are hampered by bureaucracy and stringent social welfare regulations. Future growth potential lies primarily in the use of hydropower and tourism.

Most of the workforce is employed in the agricultural sector and engages in substitution farming. The manufacturing sector accounts for approximately 10% of the gross domestic product. Competition from India, a weak domestic market, and the lack of land access hinder growth. The production of primarily low-value goods largely takes place in cottage industries. Wool carpets, finished clothing, and cashmere shawls constitute the largest exports.

Relations with Germany
Diplomatic relations between the two countries have existed since the mid-20th century. Furthermore, Germany is one of Nepal's most important markets for carpets and textiles. An investment agreement has been in place since 1996. The German-Nepalese Chamber of Industry and Commerce in Kathmandu promotes Nepal's commercial interests. Nepal is also a priority country for German development aid. In addition, there are contacts that foster cultural exchange. For example, a cultural agreement has existed since 1992, and there is a Goethe Center in Kathmandu. The Friedrich Ebert Foundation and Deutsche Welle are actively involved in cooperation. The German Research Foundation (DFG) also funds scientific research projects in collaboration with Nepal.


Sources:
German Federal Foreign Office: Country and travel information Nepal (as of March 2007)
http://www.auswaertiges-amt.de/diplo/de/Laender/Nepal.html
Country Information Pages (LIS) of InWent: Nepal (as of April 2007)
http://www.inwent.org/v-ez/lis/nepal/index.htm