Political, Economic and Social Development in Nepal in the Year 2007

The Year 2007 was highly turbulent for Nepal. It faced many dangers- national security deficit, sporadic violence, continued poverty and the unfamiliar developments of a fragile peace process. The ruling Seven-Party Alliance (SPA) could not muster the strength needed to draw a coherent vision to steer the nation toward political stability, robust economy and good governance. Cross-party rifts forced it to amend the Interim Constitution three times in eight months-on 9 May to adopt a federal structure to respond to the agitation of Madhesi People's Rights Forum (MPRF), on 14 June to empower the parliament to abolish the monarchy if found conspiring against the Constituent Assembly (CA) elections and on 28 December to declare the country a federal democratic republic subject to ratification by the elected CA, or even before that if the King poses a threat to the elections. The MPRF has been demanding a fourth revision to address the grievances of the Madhesis-people living in the southern plains.

Extra-parliamentary protests of marginalized groups-- women, Dalits, ethnic and indigenous people and Madhesis-- for proportional representation, regional autonomy, self-determination and separatism and insurrectionary activities of two-dozen mutually competing armed but non-state actors have set the tone for the political dynamics to follow. As a result, the SPA missed three deadlines (June 14, June 20 and November 22) for CA elections that is supposed to draft a new constitution. The SPA's 23-point accord reached on 23 December spells a ray of hope as it decided to set up the basic pillars of peace within a month. It activated the political process and vowed to hold the CA elections by April 10, 2008. Newly formed Tarai-Madhesi Loktantrik Party (TMLP) accused the SPA of turning the parliament into its "puppet," expressed its desire to have its own state organs for the plains and sought coalition with other groups for a decisive protest. Diverse ethnic groups and monarchist parties have threatened to wage struggle for an inclusive regime. To them, the SPA rules the country through agreements, docile legislature and judiciary and emasculated opposition.

The embattled political class has shown no signs of statesmanship to institutionalize the democratic system and bring the myriad of rebel groups towards dialogue. Its poor performance is aggravated by the scarcity of gas, water and power, job opportunities and social security. Business confidence is waning. Swirling around clientalistic politics of the ruling parties and divided along partisan lines, the bulk of the civil society, media and professional groups are engaged in undermining the fault lines of the nation's geopolitics rather than engaging in public action for service delivery and public communication. This year, 130 civilians got killed. Human rights failures risk causing further violence, corruption, impunity, deepening social and political divisions and erosion of the public sphere. Conflict-affected people have yet to receive transitional justice to reengage in peace building, economic reconstruction and transformation of the patriarchic and feudal order.

International community has to constructively engage in state-building, create human right-based code of conduct for various actors and support local initiatives for peace and development process. Expansion of development space requires reconciliation to enable the state perform core functions and foster regional and international cooperation.

Political Development

The year 2007 remained highly turbulent for Nepal despite many achievements, such as the promulgation of an Interim Constitution (IC), formation of the interim parliament and the interim government, which included representatives of CPN (Maoist), and legislating progressive measures for participatory democracy. The government led by the SPA has postponed constituent assembly (CA) elections three times. The opposition is skeptical about its ability to hold it on April 10, 2008, which the alliance has promised to do. Its pledge to do so comes at a time when the power struggle among them has intensified and the security and authority vacuum remains. The state has lost its legitimate monopoly on power and politics based on grievances has pushed the political system to a disequilibrium thus tilting the entire power equation towards SPA. Executive control over the appointment of judges, neglect in the execution of their verdicts and obligation of the Supreme Court to submit its annual report to the executive head have damaged the separation of powers and flagged public trust in the justice system. The watchdog agencies too reflect certain type of discourse, the one that feeds them, rather than engaging in public duty to shape public opinion and democratic will-formation.

Insecurity in the Tarai has forced VDC (Village Development Committee) secretaries, the only civilian representative of the state in the grassroots, to resign en masse. The political representatives have been absent since the VDCs were dissolved several years ago. People of hill origin have migrated from the Tarai to safer places and programs of development organizations shifted to secure areas. Governance of the transition has been tarnished by regular breakdown in the political process, deadlocks over power-sharing, legacy of impunity, absence of law and order and the incubation of a neo-patrimonial regime where state power and positions are largely distributed among the three main parties-NC, CPN (Maoist) and CPN-UML, in spite of the fact that there are seven alliance constituents. The state's capacity has been confiscated thus provoking the growth of competitive and armed violence coupled with extra-parliamentary opposition of subsidiary identities. As political transition became protracted, the SPA's transformative potential dissipated because it failed to provide incentives to the critical masses and its rivals and excluded forces for becoming agents of change. Independent civil society groups have begun to articulate the voice for a national government. Following are the major issues influencing the political transition to a New Nepal:

Assertion of Identity Politics
The promulgation of IC on January 15 ignited a semi-militant political mobilization by the Madhesi People's Rights Forum (MPRF) in the Tarai for a federal structure of state, a separate identity for Madheshis, fully proportional representation system of election and self-governance. The identity claim of the Madhesis-- roughly a third of Nepal's population-- gained ground as the only glue of a common Hindu identity between the hill and Madhesi people was torn apart following the declaration of a secular state. Articulation of land reforms by the SPA frightened them further. Due to frustration with the SPA leadership, Madhesi SPA politicians united to create a moderate TMLP under the leadership of Mahanta Thakur. They want their own "legislative body, government and judiciary" made up of Madhesis and ally with all subsidiary Madhesi identity groups for a decisive political movement. The militant Janatantrik Tarai Mukti Morcha (JTMM-Singh) has declared complete independence of the Tarai. The United Madhesi Front (UMF), an alliance between Nepal Sadbhavana Party (NSP) and MPRF led by Uprendra Yadav, wants unity of all forces in the Tarai. The muscle flexing exercise between CPN (Maoist) and MPRF cadres caused a series of clashes, kidnapping and brutal acts. These include the Gaur massacre on March 21 where 28 Maoists and two civilians were killed and the communal riot in Kapilvastu in September following the murder of Mohit Khan, leader of a former anti-Maoist group. More than six people were killed, 123 houses were burnt and 140 vehicles wrecked.

Communal violence has already claimed over 100 lives in the Tarai and there is no sign that the killing, kidnapping and extortion will abate anytime soon. The government's inability to respond timely and treating the voice of the people as a law and order problem has alienated the Madhesis. This violence has forced the hill people to create Chure Bhavar Unity Society (CBUS), in the foothills bordering the Terai and the mountains, for autonomy and self-defense. The CBUS is demanding the government to implement the accord it signed earlier. But, Madhesi politics faces a new polarization. The TMLP is dominated by high caste elites, MPRF leadership is dominated by intermediary caste groups and JTMM (Singh) is manned by lower caste groups. The re-codification of social boundaries might be a source of future conflict. MPRF has warned of peaceful protest if it does not implement the 22-point accord signed with it on August 30. Citing security reason the government has deployed a Special Task Force (STF) in Kathmandu and eight Terai districts - Siraha, Saptari, Bara, Parsa, Rautahat, Mahottari, Dhanusha and Sarlahi. It is authorized to arrest and initiate legal action against those suspected of involving in criminal activities and possessing arms. Local people, however, argue that the reach of the state on security matters has not improved much. Similar is the case with regards to service delivery, market exchange and voluntary spirits of civil society.

For various ethnic groups, identity assertion has become the core of politics. Tharu Kalyankari Sabha (TKS) and Nepal Loktantrik Tharu Sangh (NLTS) demand a federal state, proportional representation and their own Tharuhat, a autonomous region for Tharus. Nepal Tamang National Liberation Front (NTNLF), United Democratic Dalit Liberation Front (UDDLF) and Federal Limbuwan State Council (FLSC) have come up with similar demands and even gone a step further to claim the right to self-determination. After a series of protests and negotiations, NEFIN, a loose coalition of 54 ethnic groups, singed a 20-point deal on August 7. The accord guarantees the representation of 59 out of 102 ethnic groups in the CA elections and endorses ILO Convention 169 on the Rights of Indigenous People. In the eastern hills of Panchthar and Ilam districts FLSC and CPN (Maoist) collect livestock, road and export tax. Kirant Workers' Party (KWP) demands a separate "Kirant republic." Calls for negotiation initiated by the government with FLSC, Khambuan Rastriya Mukti Morcha (KRMM), Federal Democratic National Forum (FDNF), Tamangsaling Autonomous State Committee (TASC) and Joint Dalit Struggle Committee (JDSC) failed to yield any dividend. If the strategy of the government to shelve all issues until the CA elections a rejection of realpolitik, the politicization of CA along ethnic, class and communal lines will surely erode the sense of national identity.

Institution of Monarchy
On November 4, CPN (Maoist) and CPN-UML passed two motions in parliament by a majority voice vote -adoption of proportional representation and declaration of republic before the CA. The interim parliament dominated by left forces instructed the government to implement the motions. The republican consensus of SPA, however, reverses a clause of the Interim Constitution which says that the fate of monarchy must be decided by the elected CA. Critics, therefore, believe that CA has been reduced to an implementing agency rather that one that charts out the course for the nation. This has brought the deep rifts among the political forces between those for the republic and those who want the people to decide the issue. Dissident NC members, a section of CPN-UML, RPP and Rastriya Janashakti Party (RJP) expressed discontent over the motions fearing that Premier Koirala is fated to follow the footsteps of CPN (Maoist) to stay in power, without accountability and legitimacy as regards the people. RPP-Nepal on the other hand wants a constitutional monarchy and staged a demonstration in Kathmandu against the SPA. Founding member of NC, K. P. Bhattarai and a section of legislators have talked of reconciliation with the King to give continuity to the monarchy as a symbol of national unity.

A whip issued by Koirala to party cadres to go for a republic angered Bhattarai and he resigned from the party. The government has already removed the linkage of the palace with the Nepalese army (NA), nationalized the property of late King Birendra and his family and property inherited by King Gyanendra. It cancelled the public holiday customarily given on the national unification day, changed the national anthem and allowed the destruction of idols of national poets, heroes and builders including those of former kings and burning of the national flag. RPP, RJP and Madhesi groups call it a "SPA dictatorship." India's main opposition Bharaiya Janata Party (BJP) has also opposed the unilateral declaration of a republic. Many doubt that NA will de-link itself from the monarchy though the latter remains aloof from the power struggle. Even the Maoist leader, K. B. Mahara, said, "Pro-monarch elements are present in all the political parties including CPN (Maoist)."

Management of Arms and Armies
The Nepalese army has expressed its commitment to democracy and a nationally-owned modernization of the security sector. But, Chief of Army Staff, Gen. Rookmangat Katawal clearly said No to the proposal to integrate a politically indoctrinated Maoist People's Liberation Army (PLA) into the NA affirming that the issue should be left to an elected government. Premier Koirala agrees and has given an alternative- to absorb PLA into industrial security groups or accord them priority for foreign employment.

The United Nations Mission in Nepal (UNMIN) recently revealed that out of 32,240 registered Maoist combatants only 19,602 could be verified, while 2971 were child soldiers, 4,008 were found to be recruited after the verification process started and 8,640 skipped the verification process altogether. The media speculate that those skipped have joined the Maoist- Young Communist League (YCL). While Maoist leader Prachanda has said that integration of PLA will take place after elections, other parties believe that without a farewell to arms, a level playing field for others cannot be created. The existence of two adversarial armed forces has blocked the confidence-building process for a sustainable peace. Similarly, discharging those disqualified PLA fighters without any adjustment plan might pose the risk of their engagement in violent activities.

Election for CA
While the CPN (Maoist) perceives a looming threat of "reactionary and regressive forces" to the new order and wants to abolish the monarchy to guarantee the elections, the RPP, RJP, RPP-N, various Tarai and ethnic groups perceive the SPA as a destabilizing force bent on turning Nepal into a failed state and inviting foreign intervention. The latest 23-point agreement among the seven parties resulted in the amendment of the interim constitution to expand the number of CA members to 601-- 240 members to be elected through first-past-the-post, 335 to be elected in proportion to the popular votes garnered by the parties and the remaining 26 to be nominated by the cabinet. Ethnic groups and Madhesi are still demanding a fully proportional election system. CPN (Maoist)'s slogan to create a "patriotic, republican and leftist front" for the election campaign demonstrates the fragility of government. The SPA is organizing seven public rallies in various parts of the country to call upon the public to participate in the elections. A badly designed election can easily fragment the political sphere and institutionalize sub-national conflicts.

Federalism
The conflict in Nepal has given more prominence to the voices of women, Dalits, Madhesis and Janajatis and indigenous people, changed perceptions about the state and empowered them to negotiate solutions to deep-rooted structural problems. The SPA talks about restructuring the state along federal lines to accommodate class, gender, caste and ethnic concerns. But, it has left the issue to be decided by the yet to be formed State Restructuring Commission. NEFIN wants the country restructured on the basis of ethnicity, language and territory. NC wants federalism based on territory, history, population, language, economy, cultural identity and self-determination. CPN-UML wants it on the basis of caste-based population, use of mother tongue, culture and geography. CPN (Maoist) wants to federalize the state on the basis of territory and ethnic autonomy. The UPF and a number of small parties prefer decentralization of power, fearing that federalism will unleash balkanization tendencies, fragment the internal market and erode its competitive edge in the international market. The NC, CPN-UML and Maoists advocate three languages-Nepali as a language of the nation, English as an international language, and one more provincial language. Without mutually satisfying political bargains, compromise and institution-building, the emotive issues of federalism, language and ethnicity might weaken the capacity of the state to hold societies together and enable their collective action.

New Consensus
Aside from republican consensus, the new 23-point accord empowers the prime minister to assume the duties of the head of state and provides measures for running the government through a SPA High-Level Committee which will be headed on a rotational basis. Similarly, it agreed to set up six commissions--Disappearance, Truth and Reconciliation, State Restructuring, Study and Recommendation Commission for Scientific Land Reform, Monitoring Committee for the Effective Implementation of the Peace Accord and Other Agreements and a High Level Peace Commission. These are to be set up within a month to work in coordination with the Peace and Reconstruction Ministry. Accordingly, the National Human Rights Commission of Nepal (NHRC) has been assigned to probe into rights violations during emergency rule, managing cantonments and providing remuneration to Maoist combatants, withdrawal of illegally seized public property, ending forced donation, etc. The parties also agreed to consult the stakeholders on issues regarding the electoral system through civil society, assigning human rights activist Padma R. Tuladher for holding a civil society conference. CPN (Maoist) that walked out of the government in September rejoined the cabinet after the new accord and expressed its verbal commitment to CA election and the peace process.

Peace Process
The Comprehensive Peace Agreement (CPA) signed in November 15, 2006 talks about the "management of conflict" through social, economic, cultural and political transformation. But, conflict management requires reducing the causes of conflict, enabling critical masses to engage with key actors in assessing vital issues and formulating options to peacefully settle them. The binary nature of a state-centric CPN (Maoist) conflict has now shifted to a multi-level conflict inducing transformation in various domains-discourse, context, actors, issues and rules. So far, the SPA has not bridged the gap between its revolutionary and reformist strategies. Top CPN (Maoist) leaders are facing a continuous pressure from middle-level cadres who, if necessary, prefer to return to conventional guerrilla warfare because they believe that traditional mode of settling disputes are status quo-oriented and cannot solve the problems of poverty, inequality and exclusion. They also opposed Prachanda's statement to mobilize the army and PLA to resolve the problems of the Tarai.

On August 19 the Maoist's plenum formulated a 22-point demand for the conduct of a credible CA election and also organized a series of protest programs by mid-September as part of its strategy to push for the declaration of a republic. Other demands included formation of a commission of inquiry on disappeared persons, roundtable conference of government and all agitating sections of society including ethnic groups and Madhesis, release of all political detainees, start of the process for integrating the PLA into the NA by forming a special cabinet committee, withdrawal of NA from the royal palace and nationalization of the properties of the King. Non-response of the government forced the Maoists in September to walk out of government thus leaving the peace process in the doldrums. The new consensus has, however, fulfilled its major demands.

Party Politics
Nepali political parties have split, reunited themselves and have been weakened again by factionalism. Mainstream parties are facing challenges from underclass social groups, women and youths for representation, democratization and institutionalization. The merger of NC and NC (Democratic) on September 25 increased its confidence in national politics. But, 29 ex-district presidents dubbed the unification process faulty as the party did not care about their "sincerity, loyalty and contribution." Due to the looming fear of left unity, RJP and RPP have removed references to constitutional monarchy from their party statutes, decided to reunify and have proposed Premier G. P. Koirala to lead a democratic alliance.

RPP (Nepal) led by Rabindra N. Sharma, RPP (Nationalist) led by Rajeshwor Devkota and Nepal Bidwat Parishad led by Jit Bahadur Arjel have decided to create a new party with the objective to "make Nepal strong and prosperous, maintain Nepal's identity as a multi-ethnic, multi-lingual, democratic, independent and sovereign Hindu Kingdom." The parties that suffered split due to intra-party feuds are: United Left Front (between C. P. Mainali and Rishi Kattel factions), the UPF (between Sherchan, Chitra B. KC and Pari Thapa), NSP (A) (between Mahato and Gupta), MPRF (Yadav and Bishwas) and TJMM (between Singh, Bisfot and Goit). CPN (Maoist) is also getting the heat from ethnic, territorial and ideological groups. Democratization of politics in Nepal requires the transformation of authoritarian, personality oriented parties into democratic, program-based and mass-membership organizations.

Foreign Affairs
International community (IC) has committed the government and CPN (Maoist) to accept its Basic Operating Guidelines (BOG) to expand the development space, but non-state armed actors, the real hurdle to development, are not a party to it. The UNMIN has been trying for one year to build confidence among Nepalese political actors and move the peace process forward by providing logistical as well as technical support in areas such as monitoring of ceasefire, armies and arms, human rights and electoral process. It is now expecting to play a role in the implementation of the peace process, the future of the country's security sector, including a managed transition of the Maoist armed force from the current temporary cantonments, restriction of the NA personnel in their barracks and greater advisory support for promoting public security. But, China and India are unhappy with the enlargement of its role along their borders.

Nepal's foreign policy is now governed by its needs to find an adjustment with its giant neighbors-India and China, before it looks elsewhere. There is a convergence of the Chinese and the Indian policy to ward off external interference but they are fearful of each other's role. On June 10, India for the first time said the outstanding Bhutanese refugees issue is an international problem, a marked departure from what it has maintained so far. Earlier, it dubbed the fate of refugees as a bilateral issue between Nepal and Bhutan. On June 17, Chinese Ambassador to Nepal, Zheng Xialing, said, "China will not tolerate any foreign intervention in Nepal" and showed interest to actively involve itself in Nepal's peace process. China has invited a senior member in the Maoist hierarchy, Barshaman Pun (aka Ananta), to China twice. It is worried about the events taking place in Tarai and asked the Nepalese to take independent decisions depending less on outside forces.

Foreign Minister Sahana Pradhan asked her Indian counterpart to immediately vacate the Nepalese land in Susta illegally being occupied by India which caused the displacement of 50 Nepalese families. On November 30, the foreign minister requested the visiting Chinese delegation led by Minister for International Department of the Central Committee of the Communist Party of China, Wang Jiarui, to link Nepal with the Chinese rail network through Lhasa which is expected to facilitate the import of petroleum products from China. She also sought Nepal's observer status in the Shanghai Cooperation Organization. The Chinese delegate assured all sorts of assistance to make the peace process successful.

The United States has supported Nepal's peace but it has, not removed the Maoists from the U.S. list of terrorist organizations. The CPN (Maoist) leaders view that their relations with the US is improving with the two visits of former US President Jimmy Carter to Nepal. On November 2, visiting US Assistant Secretary for Population, Refugees and Migration Ellen Sauerbrey said, "As India has influence on both Nepal and Bhutan, a permanent solution of the refugees crisis will depend on the role of India. The US would also continue its effort to resettle 5,000 Tibetan refugees in the US. For resettling refugees, the host country, Nepal, has to cooperate." But, this has evoked Chinese sensitivity.

Scandinavian countries have invited top Maoist leaders to gain knowledge about their state system, democracy and economy. The European Union (EU) has supported Nepal's return to peace and democracy, ending impunity and linking concerns about the political and security situation, rule of law, human rights and peace building measures.

Economic Development

Economic Review
Nepal is among the poorest countries in the world. With a per capita income of US $311, human poverty index value for Nepal is 38.1 and power purchasing parity is $1 a day. The human poverty index puts Nepal 84th among 108 developing countries. Nepal's population is 28m with a growth rate of 2.1% while GDP growth rate stands at 2.3 %. It ranks 141st out of 177 countries in the Global Human Development Report 2007. The Human Development Index stands at 0.534. Life expectancy at birth is 60.56 years (male 60.78: female 60.33). Adult literacy stands at 51.4 % (62.7% for male and 34.9% female). Agriculture provides livelihood for 80% of the population and contributes 38 % to Gross Domestic Product. Agriculture production this year declined by 0.7 % due to adverse weather such as droughts and floods and caused food insecurity in many remote districts. Industrial growth has been reduced to 2.2%. Its contribution to GDP is 20%. Service sector growth stands at 4.1% and contributes 42% to GDP. Total tourist arrival reached nearly half a million. Inflation remained 7-8%. Increment in remittance by 21.4 % contributes 17 % to GDP. The current level of foreign currency reserve is sufficient for financing merchandise imports of 9.7 months.

Nepal's trade deficit rose over 11 times to $ 400.79m in 2006-07. A whopping decline in the exports of carpets and garments contracted Nepal's total exports to $96.49m, while the total imports crossed $ 304.29m for the same period. Nepal's share of total foreign trade with India constitutes more than 63%. Till mid-October its trade with India recorded a deficit of $33.13m while third country trade deficit crossed $81.90m. In order to relieve this situation, the central bank was compelled to buy Indian currency worth $32.54m. The balance of payment recorded a deficit of $9.33m.

Nepal's annual budget stands at $260million, $153m will be borne by current sources of revenue, $42.25m from foreign grants while $26.71m from foreign loans-a total of $68.95m in foreign aid. The net budget deficit of $31.54m will be financed by domestic borrowing. Priorities areas are peace, poverty alleviation, investment promotion, human resource development and reconstruction and relief. Sectoral allocations are: education $43.68m, health $18.74m, defense $16.75m, police $14.7m, local development $21.23m, agriculture $8.97m, hydropower $ 14.7m, CA elections ($5.38m) and roads ($14.37m).

Foreign Direct Investment (FDI) saw a marginal rise, $ 4.75m. India topped the list with 343 projects, or 31% of the total. Other investors are the U.S., China, Japan, South Korea, UK and Germany. Only 20% of people have access to banking services. Nepal needs to rectify its structural defects on economic reforms as prosperity has been confined largely to major cities whereas rural areas remain neglected.

The Asian Development Bank (ADB) granted $1m for improving livelihood. The World Bank approved a grant of $60m for education, $18.2m to minimize avian influenza, and $253m for development and $25.40m for poverty alleviation and rural infrastructure expansion. The International Monetary Fund provided $16.9m loan to Nepal for poverty alleviation. Denmark and Norway provided $4.76m aid for energy development, Japan provided $2.86m grant for food aid, Denmark $ 1.90m for Peace Trust Fund and $1.30m for the UN Peace Fund. China granted 50m yuan and agreed to a $12.70m soft loan, the British government's stands at $62.7m and the US development package stands at $37m. The US said that it is cutting its assistance to Nepal by 26% this year. India provided $20.32m for the peace process and $100m line of credit, waver of defense purchase outlays and several other development projects support.

Germany has provided over $7 million assistance for Nepal's ongoing peace process for 2007 and euro 120,000 for civic and voters education. Of that amount, more than $6 million is fresh money. In addition, the German government has provided an additional $4 million under the Nepal Peace Trust Fund (NPTF). The new German project," Support of measures enhancing the peace process" is meant for improving the living conditions in the cantonments of the Maoist combatants and the surrounding communities. Aside from its annual bilateral aid of euro 36.3m, it has also provided support to flood victims, World Food Program and the funding gap in the Middle Marsyangdi Hydel Project. EC has agreed to provide 60 m euros as its regular development assistance to Nepal from 2007-2013. Each year 15m euros will be spent on development.

Policy Reforms
The Approach Paper for the Interim Plan (2008-11) focuses on post-conflict reconstruction, reintegration, rehabilitation, economic recovery and social inclusion. Due to the ongoing conflict, Nepal would not be able to achieve a number of targets set by the Millennium Development Goals. On January 31, the government set up the Peace Trust Fund to support post-conflict management. On June 20, the government endorsed the Special Economic Zone (SEZ) Act which provides incentives to industries, such as reliable infrastructure, duty-free import of raw materials, exemption from the value added tax, five-year income tax holidays and market-friendly labor polices to encourage investment in Nepal and augment its international competitiveness. On August 14, the interim parliament passed the Non-Resident Nepalis (NRN) Bill which provides 10-year resident visas for them. It also passed the Foreign Employment Bill.

On August 3, it passed the Civil Service Act 1993 which guarantees promotion and trade union rights to civil servants and reserves 45% of bureaucratic positions for women, Janajatis, Madhesis, Dalits, handicapped and people from remote regions. The 12th amendment to Nepal Police Regulations provides for recruiting 32% indigenous nationalities, 28% Madhesis, 15% Dalits, 20% women and 5% from backward region. The CA also provides reservation of seats for five groups of people in the proportional election system, for example, women 50%, Madhesi 31.2%, Dalit 13%, ethnic and indigenous people 37.8%, backward region 4% and others 30.2%. But with the new amendment of the IC, this percentage might be revised as the number of seats to elect through proportional representation has increased from 240 to 335. Post-conflict planning requires public investment in building rural infrastructure and income and job-generating projects, rehabilitation and demobilization of affected communities and reconstruction of destroyed public assets and infrastructure and basic social services.

Social Development

Peace dividend to the conflict victims and the poor, through delivery of basic service and greater security, requires inclusive policies and programs. The number of disappeared people in the country reached 1,042 this year. Nepal's total fertility rate is 3.5 children while infant mortality rate is 61.87 for male and 65.54 female per 1,000 live birth. Maternal mortality ratio stands at 530 per 100,000 births. More than 89% of births take place at home with the help of untrained midwives. There are 75,000 cases of people suffering from HIV/AIDS. Among these 16,000 are women. Health facilities in rural and remote areas are declining due to waning interest of doctors, poor infrastructure and low investment. Insufficient food has caused widespread malnutrition and high mortality rate among the people of remote areas. It is estimated that over 200,000 Nepalese girls have been trafficked to India. Due to a poor law-enforcing mechanism, between 5,000 and 7,000 Nepalese girls are sold to India on a yearly basis. Although Nepal is endowed with ample water resources only 82% of population has access to safe and clean drinking water and only 40% has access to electricity.

Every year, more than 300,000 youths enter the labor market. But, Nepal's domestic market is shrinking. More than 90% of the country's 11.11m workforce is employed in the informal sector without any social security. Due to lack of options at home, every year, 204,775 youths leave the country for jobs. They generate a remittance amounting to more than $ 161.9m. But, they do not have a proper mechanism to protect their rights and interests. This year alone, 754 Nepalese workers died abroad due to poor working conditions. The country has signed labor accords with South Korea (July 23) and the United Arab Emirates (3 July) which safeguards the rights of Nepali workers.

The parliament has created a "Labor and Industrial Relations Committee" and the IC provides rights to work, social security and other welfare benefits. Major Trade Unions of the country, such as General Federation of Nepalese Trade Unions (GEFONT), Nepal Trade Union Congress (NTUC) and Democratic Confederation of Nepalese Trade Unions (DECONT) are working together in a number of areas of common interests, such as organizing the informal sector, child labor, ILO core labor rights, democratization of unions, civic education for CA elections, globalization, etc. The latter two unions have even decided to merge. These unions have also agreed to share information with CPN (Maoist) affiliated union. On August 6, the parliament passed the Working Journalists Bill to protect the rights of journalists. It also ratified the ILO Convention on Abolition of Forced Labor (August 16).

Gender

Nepal's gender related development index (GDI) is 97.4% of its Human Development Index. Out of 177 countries, Nepal ranks 134th. Despite commitment by political leaders to provide women 33% of seats in all the public institutions, gender disparity persists in politics, economy, education and other empowerment measures. For example, in the total 301- member central committees of major political parties, the number of women is only 36. In the 324-member parliament, their number is 48, in the cabinet only 4, in higher level category of public administration they occupy only 6.2% and in the special class category 2.4%. In 83 % of the households, there is no property in women's' name. They occupy mostly informal and agricultural sectors where wage is relatively low, workload high and working conditions poor. After pressures, 4 women were included in the IC Drafting Committee and the National Women's Commission was formed.

On December 21, the Supreme Court recognized the rights of the third sex-lesbians, gays, bisexuals, trans-sexual and homosexuals and directed the government to frame laws to "safeguard their rights." Common effects of conflict on women are rape, widowhood, illness and disease, multiple burdens of the family and a reversal of role from private to public life. But, the conflict has also given women a certain confidence, brought them into leadership positions, legitimized widow marriages, provided opportunities to join politics, civil administration, the army and police and helped articulate the collective voice of women for reconciliation and social justice.

Regional Cooperation

Nepal believes that its national interests can be best served through a dense network of cooperation. But, South Asian cooperation is caged in by domestic political crises in various member countries and low level of inter-governmental confidence-building measures. Track II actors are, however, better positioned in fostering the scale of cooperation. On 21 November, India offered to waive duties on imports from South Asian least developed countries from 2008. On October 2, the process of SAARC Development Fund was finalized. It has three windows-- maternal and child health, women's empowerment, and capacity building for enhancing the quality of education.

Nepal is also a member of the South Asian Sub-Regional Economic Cooperation (SASEC) and is the beneficiary of four mega projects--information highway, tourism development, transport logistics and trade facilitation for deeper economic integration of the economies of India, Bangladesh, Bhutan and Nepal. Nepal's participation in another sub-regional organization, Bay of Bengal Initiative for Multi-Sectoral Economic and Technical Cooperation (BIMST-EC), is mainly functional to tap technical and development potential of the area through cooperative action. The 14th SAARC summit in Delhi (April 3-4) stressed intra-regional connectivity, decided to earmark one rural community as a SAARC Village in each member state to showcase these innovative models of development, included Afghanistan as a new member and Iran as an observer. Maldives will host the 15th SAARC summit in 2008.

Abbreviations

Cabinet List