In 1990, a new form of government, consisting of a multiparty democracy within the structure of a constitutional monarchy, was introduced in Nepal. But the new system did not bring the hoped for political stability, and in 1996 an insurgency led by Maoist extremists began that led to a decade-long civil war. The conflict resulted in over 13,000 police, civilian and insurgent casualties. In 2001, King Gyanendra declared a state of emergency and subsequently dissolved the House, resuming absolute authority over the nation.
Peace negotiations between the Maoists and government officials culminated in a November 2006 peace accord. Following a countrywide election in 2008, the newly formed Constituent Assembly declared Nepal a federal democratic republic and abolished the monarchy at its first meeting. The Maoists, who received a plurality of votes, formed a coalition government in August of 2008.
Nepal is still one of the poorest and least developed countries in the world. One-third of its population lives below the poverty line. Agriculture is the pillar of the economy, providing a livelihood for 75 per cent of the population and accounting for about one-third of the nation’s GDP. Most of Nepal’s industrial activity involves the processing of agricultural products, including sugarcane, tobacco and grain.
While bumper crops, improved transportation and increased tourism have had some positive growth impact in recent years, rates are still barely above the rate of population growth.
The global financial crisis has also brought new challenges to Nepal’s economy. The country has considerable possibilities for exploiting its hydropower and tourism potential, which are areas of recent foreign investment interest. However, the outlook for trade or investment in other sectors remains poor due to its small-scale economy, its lack of technological advancement, its landlocked geographic location, its civil unrest and its susceptibility to natural disasters.
Trafficking in women and child labour remain serious problems for Nepal. According to the US State Department’s 2008 Trafficking in Persons Report, 5,000 to 7,000 girls have been trafficked from rural parts of the country to Kathmandu, and there are over 20,000 domestic child workers in Nepal. Lack of prosecution and police complicity in trafficking cases remain major problems. The Nepali press is still frequently subject to violence and intimidation by political groups. Meanwhile, there are approximately 106,000 Bhutanese Lhotshampas who have been confined in refugee camps in south-eastern Nepal since 1990.