Nepal ranks 25th in the Failed State Index 2009, released by The Fund for Peace, a Washington DC-based institution. It is in a level of Alert. TFP rates leadership as poor, military, police, judiciary as weak and civil service as moderate. The following is the profile on Nepal:

Core Five State Institutions Leadership (poor), Military(weak), Police (weak), Judiciary (weak), Civil Service (moderate)

Overview
Nepal is a small landlocked country located between India and China (autonomous region of Tibet), with a population of 29 million. The northern section of Nepal is dominated by the Himalayas; seven of the world’s ten highest mountains are located within Nepalese territory. The south consists of fertile and humid plains with great rivers running north to south. Up until 2006, Nepal was the world’s only country with Hinduism as the state religion, until it was declared a secular state in an effort to bring an end to the civil war and restore democracy. The Nepalese are descendents of immigrants from India, China (Tibet and Yunnan) and North Burma, creating an ethnically diverse society. The majority of the population (80.6%) is Hindu, but there is also a large Buddhist minority (10.7%) together with a Muslim and a Kirant group of 4.2% and 3.6%, respectively. The country was created in the latter half of the 18th century, when several small kingdoms were united by Prithvi Narayan Shah. The economy is still primarily agricultural, and the GDP per capita (PPP) is $1,000.

Social Indicators
Nepal has many of the demographic characteristics of a developing country. It has a large youth bulge, with 38% of the population under the age of 15, a high population growth rate of 2.1%, and almost one in five is undernourished. These factors accounted for the score of 8.1 for demographic pressures in both the Failed States Index (FSI) 2007 and FSI 2008. Nepal is home to over 100,000 Bhutanese refugees of Nepalese descent who were forced out of the country by the Bhutanese government in the early 1990s in an effort to defend their Buddhist culture. The U.S. is involved in mediating the situation and after unsuccessful attempts to convince Bhutan to allow the return of the refugees, there have been negotiations over repatriating them in the U.S. Such offers have not been received with overwhelming enthusiasm by the refugees, who are now divided between those who wish to resettle and those who would consider it giving up their fight against the Bhutanese authorities. This has lead to instability, violence and harassment, causing people to flee from the refugee camps. The worsening situation has caused the indicator for refugees and IDPs to worsen from 5.2 in the FSI 2007 to 5.5 in the FSI 2008. There are also between 50,000 and 70,000 IDPs remaining from the civil war that officially ended in 2006. The indicator for group grievance received a score of 9.0 in the FSI 2008 due to the legacy of Nepal’s 10-year civil war. Although the abolition of the monarchy and the launch of a new democratic government, in which the Maoist movement was granted seats, were intended to relieve some of these grievances, the different ethnic groups have now started to reassert their ethnic identities. The Muslim minority has, for instance, become increasingly vocal in their demands for parliamentary representation within the interim government and the Chepang community of 52,000 people is requesting “self determination with autonomy”, while other groups pursue an outright secessionist agenda. This development is blamed on what has been called exclusionist policies by the government, in which the upper caste (16% of the population) is said to be privileged at the expense of the rest of the population. Remittances are a major economic factor, constituting a vital source of income for more than a third of Nepali households. The importance of remittances to Nepal’s economy indicates that a significant number of Nepalese are living abroad, which accounted for the score of 6.1 for human flight in the FSI 2008.

Economic Indicators
Even though the degree of poverty has been slowly declining, around 30% of the population is still living below the poverty line. Wealth also continues to be unevenly distributed along ethnic and caste lines, which contributed to the score of 9.2 for uneven development. The incidence of poverty is much less common among Hindus than Muslims, especially Hindus of higher caste. Nepal received a high score of 8.2 for the economy in both the FSI 2007 and FSI 2008. It is considered one of the poorest and least developed countries in the world with a GDP per capita (in PPP) of $1000, similar to the GDP per capita of many sub-Saharan African countries, and an average annual GDP growth rate of only 2% since the early 1990s. Agriculture remains the primary occupation, and the Nepalese industrial activity mainly involves the processing of agricultural products. Textiles such as carpets and clothing are the main export commodities. The tourism sector, once an important part of the economy, has suffered significantly due to the insecurity brought on by the civil war.

Political/Military Indicators
Legitimacy of the state worsened from an 8.9 in the FSI 2005 to a 9.2 in the FSI 2005. There has The score for legitimacy of the state improved slightly from 8.5 in the FSI 2007 to 8.3 in the FSI 2008 as a result of the end of the 10-year Maoist insurgency and the integration of the Maoists into the government. However, the recent history of Nepal has been turbulent. In 1994 the country became the world’s first communist monarchy, with a minority rule by the Maoist party. But, after several years of unstable coalitions, a Maoist insurgency erupted in 1996 and caused as many as 13,000 deaths before a permanent cease-fire was declared in 2006. During this time, King Gyanendra dismissed several prime ministers and eventually the entire cabinet, shortly after assuming executive power in 2002. In 2005 he declared a state of emergency, suspended almost all fundamental rights, and declared himself chairman of the Council of Ministers in an attempt to halt political instability and violence in the country. Democracy was restored after massive countrywide demonstrations and the declaration of unilateral cease-fires by both the Maoist insurgents and government forces. An interim constitution replaced the constitution of 1990 after being unanimously endorsed by the parliament. On April 1, 2007, the ruling eight-party government formed an interim Council of Ministers through political consensus, including five Maoist ministers. However, three bombs went off in Katmandu in September 2007, demonstrating that the situation had yet to stabilize fully.

The score for public services worsened from 6.6 in the FSI 2007 to 7.0 in the FSI 2007. The government has recently approved projects to drill for ground water in order to alleviate a water shortage in the capital of Katmandu. Ground water extraction is now taking place at a rapid pace, despite the fact that it is contaminated by seepage from septic tanks, and few can afford to purify the water. Nepal was also struck by a severe fuel-shortage in 2007 as a result of the Nepalese government’s unpaid debts to the country’s only fuel provider, Indian Oil Corporation, and a blockade by a secessionist movement in the Terai region through which 90% of imports from India must pass. There were reports that the blockade resulted in record-high food prices and insufficient oxygen supplies in the hospitals. The human rights score remained at 8.8 in the FSI 2008 as a result of abuses that include “disappearances”, torture, illegal detainment, and restricted liberties, especially for the Tibetan community in Nepal. The score for the security apparatus was expected to improve as a result of the incorporation of the Maoist insurgents into the parliamentary system, but instead there were reports of Maoist militias still harassing civilians, causing the score to increase to 8.5 in the FSI 2008. Factionalization remained a problem among Maoist leaders, ethnic group leaders, traditional upper-caste leaders and the royalty, but a slight reduction in tensions caused the indicator for factionalized elites to improve slightly to 8.3 in the FSI 2008. Nepal was subject to influence from India and especially China, which pressured Nepal not to recognize the Tibetan community as refugees, but rather illegal Chinese immigrants. The score for external influence remained at 7.2 in the FSI 2008 as Nepal remained dependent on foreign aid.

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Core Five State Institutions Leadership (poor), Military(weak), Police (weak), Judiciary (weak), Civil Service (moderate)

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Nepal’s interim leadership has apparent weaknesses and lacks the unity to bring stability to the country. The Maoist party left the government in September 2007, but rejoined in December after successfully pushing through demands to abolish the monarchy. In 2008, the government continued to be characterized by major disagreements between ruling Maoists and the opposition centrist party.

The RNA (Royal Nepalese Army) was a strong supporter of the king, and was the only force that the Maoist insurgents actually feared. But with the end of the civil war and the abolition of the monarchy, the RNA has been transformed into a 95,000 strong Nepalese Army and is in the process of incorporating the Maoist militia. The merging of royalist soldiers with Maoist militiamen is putting a strain on the capacity of the military and the cohesiveness of its ranks.

Compared to the military, the 25,000-strong police force is ill-equipped and poorly trained. During the civil war, it had been accused of frequently using torture and committing extra-judicial killings. With an end to hostilities, the unified Nepali government hopes to bring increased accountability to law enforcement. Many concerns remain over its ability to become depoliticized.

Even though the Supreme Court is relatively independent, the lower courts remain subject to corruption and political pressure. Many Nepalese have very limited access to the judicial system.

The Nepalese civil service is accused of being bloated and inefficient. The Royal government had very little transparency and it was hoped that democracy will create a more effective civil service. Currently, lingering animosity between former Royalists and Maoist appointees is creating something of a deadlock in a number of government departments.

Prognosis
Nepal has been plagued by internal conflict for many years. Although the recent end of the fighting and the incorporation of the Maoists into the government is a step in the right direction, Nepal remains far from stable. Tensions remain between the Maoists and those loyal to Nepal’s recently abolished monarchy, and with the end of the conflict, divisions have begun to emerge among the country’s various ethnic groups. In addition, Nepal is confronting many economic challenges, as well as a need to improve public services, reduce human rights abuses, and care for the large number of refugees and IDPs who remain in the country.