In its fifth annual FSI released recently, the Washington DC-based research organisation has listed Nepal among the worst 38 countries, ranking it 25th. The level of statelessness in the 38 countries sends "warning" signal, according to Fund for Peace. While countries such as Iraq and Kenya are seen to be progressing, Nepal's position in the 2009 Index (95.4) is deteriorating compared to the 2008 Index (94.2), the study states.

Fund for Peace uses some 12 attributes broadly categorised under "neither exclusive nor exhaustive" social, economic and political indicators for its FSI analysis.

Nepal stands in the category that includes countries like Somalia, Zimbabwe, Sudan, Iraq, Afghanistan, Pakistan and North Korea, which make up the list of worst governed countries reeling under conflict, corruption, poverty, impunity and statelessness.  Countries like Norway, Finland, Sweden and Switzerland, which ranked 177th, 176th, 175th and 174th respectively are seen as best governed.