The problems engulfing Nepal's polity and economy could have severe repercussions for the South Asian region as a whole.
NEPAL is one of the poorest countries in the world with a per capita income of only around $210 a year. It is also, currently, one of the most politically fraught and troubled countries in the world. Indeed, the turmoil is only increasing as the conflict between King Gyanendra, parliamentary opposition parties and Maoist insurgents reaches new and more complicated levels.
Nepal is a very young electoral democracy, emerging after a `People's Movement', in which all the main political parties were involved, successfully replaced King Birendra's rule with a multi-party political system in the early 1990s. But the experience with electoral democracy thus far has been volatile, to say the least - since the inception of a multi-party system, Nepal has been through three general elections, eight governments and seven Prime Ministers. In addition, the Maoist insurgency, which eschews parliamentary politics in favour of violent struggle, has gained substantially since 1996 and controls large swathes of territory across different parts of the country.
While the relationship between the king and the elected politicians was tense even during King Birendra's time, it has worsened since then. Gyanendra (Birendra's brother) came to the throne two years ago, after a mysterious and bloody massacre in which the former Crown Prince Dipendra was reported to have killed most of his family, including his father, King Birendra. Gyanendra has already indicated his lack of patience with the niceties and messiness of electoral democracy and his preference for more "directed" rule.
General elections were due in November last year and, instead of allowing them to take place, Gyanendra exploited the infighting and chaos in the ruling Nepali Congress by dismissing Prime Minister Sher Bahadur Deuba in October and giving himself executive powers. The man installed as the puppet Prime Minister was a loyal monarchist, who was appointed without any consultation with any political party. The King also favoured a much more aggressive militaristic response to the Maoist insurgents, rather than a political dialogue.
However, the situation proved to be completely unstable and growing violence involving the Army and the insurgents has caused massive disruptions to the lives of ordinary citizens, particularly the peasantry. The loyalist Prime Minister Lokendra Bahadur Chand became the focus of opposition attacks, especially as the talks with the Maoists proved to be fruitless despite the ceasefire. Five political parties - the Communist Party of Nepal-United Marxist Leninist (UML), the Nepali Congress (NC), the Nepal Workers Party, the People's Front of Nepal and the Sadbhavana Party - demanded that Chand resign and that the King reconvene Parliament or hold fresh elections under an interim government of all parties.
Weeks of protest culminated in the resignation of Chand in May. However, once again, Gyanendra effectively spoiled the possibilities of a viable solution to the conflict. The King called on opposition parties to submit the name of a replacement but when they proposed UML Secretary Madhav Kumar Nepal, the King ignored them and instead appointed Surya Bahadur Thapa, leader of the rightwing royalist Rashtriya Prajatantra Party (RPP).
Thapa had appealed to other parties to join his government but the offer has been turned down. Instead, there has been a groundswell of protests, organised by opposition politicians, against the King's undemocratic tendencies. The Maoist party has also declared its dissatisfaction. June was marked by numerous demonstrations and already in July, there have been a number of incidents of protest.
This government is not likely to last but this will only be owing to the domestic chaos that it is generating. It is clear that Gyanendra's ability to ignore popular opinion within his own country is based on the support he is receiving from abroad, especially from the U.S. and Indian governments.
The Bush administration has used the political instability and the rise of Maoist forces in Nepal as levers to get much more involved in the internal affairs of Nepal, which is seen as being of great strategic significance because of its geographical position with relation to India and China. The Communist Party of Nepal - Maoist (CPN-M) was declared a "terrorist organisation" at the end of April this year, even though the Maoists were formally implementing a ceasefire and negotiations with the government were on. The U.S. government has signed a five-year agreement with the Nepali government "for cooperation in fighting terrorism and preventing possible terror attacks". Military aid has been increased, both in terms of financial aid and hardware, along with the training of Nepali armed forces. Within Nepal, the U.S. support effectively strengthens the hand of the monarchy, which has traditionally relied upon and been associated with the dominantly royalist military.
The Indian government, also, has more or less declared its partisanship in Nepal's internal politics. This of course fits in with the current cosying up to Washington in foreign policy. It is true that Prime Minister Atal Bihari Vajpayee occasionally makes feeble and deliberately ineffectual appeals to restore a multi-party system in Nepal, even while "congratulating" the new Prime Minster on his appointment. But in effect, the Indian government has been providing a substantial amount of military aid to Nepal, which tilts the scales in favour of the monarchy in the current situation.
However, such external support to the monarchy is unlikely to make Nepal a more stable place in the near future, simply because the forces making for discontent are currently so pervasive and powerful. Nepal remains a poor agrarian economy and there has been very little in terms of either structural change or substantial development, which would have caused shifts in the pattern of employment or in labour productivity.
Poverty is widespread and most estimates put it at just under half of the population. The Nepal Living Standards Survey (1995-96) found 42 per cent of the population to be below the poverty line (44 per cent of the urban population and only 23 per cent of the rural population). The difference between Kathmandu and the rest of Nepal, including other urban areas, is very marked - the poverty ratio in the urban Kathmandu valley was estimated to be only 4 per cent. While open unemployment is low, underemployment (or disguised unemployment) is officially estimated to be slightly more than 45 per cent of total person-days.
Like several other South Asian countries, economic growth in Nepal did not translate into a decline in poverty or an improvement in living standards of the masses. Instead, inequalities are said to have increased substantially, even by World Bank estimates. Most of Nepal's 20 million people are subsistence peasants, who have experienced little or no improvement in their material conditions and therefore have been fertile soil for the spread of the Maoist influence.
Economic conditions have deteriorated in the recent past. The economy contracted by 0.63 per cent in the 12 months prior to July 2002, according to the Central Bureau of Statistics. The "modern" sector has been especially badly hit. Trade, manufacturing output and tourism all declined - by 11, 10 and 27 per cent respectively. The carpet industry, which employed 550,000 workers in 1992, was down to half its size in 2002. The garment sector's workforce of around 70,000 in the mid-1990s has also been halved over the past few years. A report published in May this year estimated that out of the 300,000 to 350,000 youth who enter the job market annually, only 10 per cent find work.
Some of this was actually the direct result of World Bank-style neo-liberal market-oriented reforms, which have involved trade liberalisation, privatisation and reduction or removal of subsidies, including food subsidies. These were not only counterproductive in terms of making it more difficult for the nascent industries to survive, but they also hit directly at agriculture and were insensitive to the requirements of a large subsistence-based pattern of cultivation. As a result, Nepal is now reduced to being a food-importer though it used to be mostly self-sufficient in grain before.
In such a context, it is hardly surprising that social unrest is so high and continues to increase. Apart from the Maoist insurgency, there are other indications of growing alienation and unhappiness of ordinary people. An attempt to raise petroleum prices by 65 per cent caused large demonstrations in Kathmandu. In mid-June, bonded labourers took to the streets demanding equitable resettlement, which has still not been granted.
It is clear that the possibilities for social, political and economic stability are still very distant as far as Nepal is concerned, and the chances for more egalitarian and democratic growth may be even more distant. Interference by outside powers - including India - may in fact only be prolonging the agony.