Content

Nepal

A young girl attends a school near Bhairawaha, Rupandehi, Nepal. Copyright: Kate Holt/IRIN

Content

Slowdown of economic growth
De­vel­op­ment potential
Priority areas of German co­op­er­a­tion with Nepal
Promotion of local self-government and civil society
Promoting renewable energies and energy efficiency
Promoting the health system

Situation and cooperation

Nepal is the poorest country in South Asia. Gross national income per capita per annum is below 500 US dollars. Almost half of all children are undernourished or malnourished. Only around 60 per cent of adults are able to read and write. Nepal ranks 157th out of 187 countries on the 2011 Human De­vel­op­ment Index (HDI).

Madhesi people demonstrating in Birgunj city in Nepal. Copyright: Subodh Singh/IRINThe long years of armed conflict with Maoist in­sur­gents has mas­sive­ly im­ped­ed de­vel­op­ment in Nepal. Although a peace process was launched in 2006, the busi­ness environment has barely improved. Growth rates are too low to make any in­roads into poverty, which has in fact worsened as a result of rising food and fuel prices. The worst affected are women and children and also members of minorities and traditionally dis­ad­vant­aged castes such as the Dalits. The Dalits, or "untouchables" as they are sometimes known, make up around ten per cent of the population.

In the face of frequent wildcat strikes and disruptions to public life, the state actors have so far been unable to ensure law and order across the country. The Terai, the southern lowlands that border on India, have been the scene of frequent violent hos­til­i­ties between different political and ethnic groups, the local pop­u­la­tion and the official security forces. In view of the instability in the country, the mandate of the United Nations Mission in Nepal (UNMIN) was repeatedly extended. It did, however, finally come to an end in January 2011.

When the civil war ended, a provisional constitution was initially adopted in 2007. Since then it has proved impossible to produce a definitive constitution. A whole series of crucial issues remain unresolved, with differences persisting, for instance, on gov­ern­ment reform, the electoral system and the future federal struc­ture of Nepal.

The country has not yet launched judicial measures to address the legacy of the civil war: many human rights violations com­mit­ted by the army and the Maoists have not yet been investigated. In November 2011 the four major political parties in Nepal agreed to put in place a Truth and Reconciliation Commission.

Slowdown of economic growth

All governments over the last few years have pursued de­vel­op­ment-oriented policies based on the market economy. The current government too, under the leadership of the Maoists, is en­dea­vour­ing to liberalise Nepal's economy, to achieve pro-poor eco­nom­ic growth, to close the wide urban-rural gap and to rebuild the ruined infrastructure. However, the country's de­vel­op­ment is being held back by political instability, the lack of the rule of law, bureaucratic inertia, serious energy shortages, an inadequate education system and a shortage of skilled labour, all of which are also a deterrent to investors. Nepal also faces strong eco­nom­ic competition from its powerful neighbours, India and China.

Widespread corruption is another obstacle to economic growth. The Corruption Perceptions Index for 2010 published by the non-governmental organisation Transparency In­ter­na­ti­o­nal ranks Nepal 154th out of 182 countries. It has thus slipped back more than 30 places over the last three years.

Child workers in the Nepalese carpet industry, Copyright: Photothek.netSome 90 per cent of Nepalese en­ter­prises are small. While they make an im­por­tant contribution to job creation, these en­ter­prises generate only four per cent of Nepal's gross domestic product. One third of the national budget is financed by the in­ter­na­ti­o­nal donor community as part of de­vel­op­ment co­op­er­a­tion. Another important source of funding is remittances sent home by the 2.5 to 3 million Nepalese who live and work abroad. It is estimated that the financial transfers of these migrant workers account for up to 25 per cent of Nepal's gross domestic product. The mi­grants' families use most of the money simply to meet their costs of living though – there is little left over for pro-de­vel­op­ment investments.

Nepal is still an agrarian state that relies heavily on agriculture and subsistence farm­ing. Although only around 17 per cent of the land area is suitable for farming and agriculture is heavi­ly dependent on the monsoon, just under 70 per cent of those gainfully employed work in this branch of the economy. As farming is increasingly being extended to land that is ill-suited for agricultural use, erosion damage is occurring. This is increasing the risk of landslides and flooding.

A man rides his ox cart through a river, with his wife walking behind in Nepal. Copyright: Kate Holt/IRINThe situation is further ag­gra­vat­ed by global cli­mate change. According to a study published in 2010, Nepal will be one of the countries in Asia worst affected by the consequences of climate change – in the form of more frequent storms, droughts and flooding, for instance.

De­vel­op­ment potential

Nepal's greatest asset is its mountainous terrain. The rivers flowing south from the Himalayas offer great potential for ge­ne­rat­ing power, for which there is great demand, especially in India.

The Himalaya Mountains, including Mount Everest and other "eight-thousanders" such as Annapurna, are also a very popular destination for mountaineers and trekking tourists. Growth in socially sensitive and environmentally sound eco-tourism could bring the country important foreign exchange earnings.

A woman at a Buddhist temple in Kathmandu. Copyright: David Longstreath/IRINNepal is an ad­vo­cate of greater regional co­op­er­a­tion and is en­gaged, for ex­amp­le, in the South Asian Association for Regional Co­op­er­a­tion (SAARC) and the In­ter­na­ti­o­nal Centre for Integrated Mountain De­vel­op­ment (ICIMOD). Both institutions have their headquarters in Nepal's capital city, Kathmandu. Nepal has also been a member of the World Trade Organization (WTO) since 2003.

Priority areas of German co­op­er­a­tion with Nepal

Germany is one of the country's main bilateral donors. Following the conclusion of a peace agreement in 2006, Germany decided to increase its de­vel­op­ment co­op­er­a­tion with Nepal. The intention is to help stabilise the peace process and facilitate recovery from the aftermath of the civil war, as well as providing more effective support for the country's poverty reduction strategy.

Germany has pledged a total of 32.7 million euros to Nepal for de­vel­op­ment co­op­er­a­tion in the period from 2010 to 2011.

The two countries have agreed upon three priority areas for their de­vel­op­ment co­op­er­a­tion:

  • Local self-government and civil society

  • Renewable energies and energy efficiency

  • Health.

In addition to these priority areas, German de­vel­op­ment co­op­er­a­tion is also being used to provide broad-ranging support for Nepal's difficult peace process. These measures include advising and supporting the Peace Secretariat, the Nepal Peace Trust Fund and the Ministry of Peace and Reconstruction. Other pro­jects focus on the reintegration of ex-combatants and internally displaced persons and on conflict management.

Promotion of local self-government and civil society

Decentralisation and the promotion of civil society are major struc­tural pre­con­ditions for combating poverty in Nepal and build­ing a stable peace. In 1999, the Nepalese government passed the Local Self-Government Act (LSGA), the purpose of which is to transfer responsibility from central institutions to local gov­ern­ment, thereby also improving the political participation of the pop­u­la­tion. There are, however, still no democratically elected local government bodies.

A woman at a morning market in Kathmandu. Copyright: David Longstreath/IRINGermany is sup­porting municipal authorities and neighbourhood collectives in the planning and implementation of poverty re­duc­tion measures and for economic de­vel­op­ment. The Ne­palese con­fe­rence of municipal authorities also receives as­sis­tance for the important work it does in representing mu­nic­i­pal­i­ties' in­ter­ests. An autonomous corporation, the Town De­vel­op­ment Fund, pro­vides a means of supplying the towns and cities with funds for investment in municipal infrastructure such as marketplaces, schools and surface drainage.

One important objective of German-Nepalese co­op­er­a­tion is to ensure that economic de­vel­op­ment is socially balanced and thus that it helps build peace. The needs of young people and dis­ad­vant­aged poor groups in particular are to be taken into account. In order to achieve this objective, Germany is supporting the dialogue between the private sector, the state and civil society, and is promoting small and medium-sized businesses, chambers of trade and commerce and cooperatives at the local and regional levels.

Promoting renewable energies and energy efficiency

Nepal's economic de­vel­op­ment is being seriously hampered by shortages in the supply of electricity. Its hydropower potential is enormous but largely untapped. About three quarters of the country's energy is generated from wood. That is inefficient, poses a threat to forests, increases soil erosion and represents a health hazard due to the smoke in houses and huts.

Germany is supporting Nepal in harnessing its hydropower po­ten­tial. Two hydropower plants on the River Marsyangdi have been co-financed. Together they account for about one fifth of Nepal's power generation capacities. In remote rural areas, small, off-grid hydropower systems supply both the population and local in­dus­tries. Thus German assistance is making a sig­ni­fi­cant con­tri­bu­tion to economic growth and to creating additional employment.

To bring electrical power to inaccessible rural areas, Germany is also fostering the installation of solar home systems. These pro­vide electric light to households and give them access to in­for­ma­tion.

Biogas plant in Nepal. Copyright: KfWGermany has been successfully helping Nepal to build biogas plants for many years. More than 200,000 such plants have been built. The plants ferment manure to generate gas, which is then used for cooking, heating and lighting. Women and children are the main beneficiaries of these biogas plants, as the labour-intensive activity of gathering firewood and drying manure becomes redundant. Furthermore, connecting up domestic la­trines to such plants also improves hygiene and the resulting fer­ment­ed sludge can be used as a fertiliser on the fields.

The biogas programme is part of the Clean De­vel­op­ment Me­cha­nism (CDM). The use of biogas helps reduce emissions of dam­ag­ing greenhouse gases. This brings Nepal emission reduction credits which it can sell to industrialised countries. They in turn benefit, because they can more easily achieve their emission re­duc­tion targets. The revenue from the sale of emission re­duc­tion credits makes the biogas programme more financially sustainable.

Promoting the health system

The delivery of primary health care to the people of Nepal is in­a­de­quate. According to World Health Organization figures, there are on average only 2.1 doctors for every 10,000 inhabitants, and over half of the population has insufficient access to es­sen­tial drugs.

The Nepalese government is pursuing a long-term policy aimed at improving the provision of health care services, particularly to people in rural areas. It also wishes to curb the rate of pop­u­la­tion growth. Along with the World Bank, the United Kingdom and Australia, Germany has, since 2011, been involved in financing Nepal's National Health Sector Programme 2010 – 2015.

German experts are offering advice on the decentralised orga­ni­sa­tion of health care facilities to the Nepalese Health Ministry and several district administration, so far numbering ten. By financing essential drugs throughout Nepal, Germany is helping to provide the poorest people in particular with access to these. Public awareness campaigns, combined with the provision of contra­ceptives, are improving people's options in the field of family plan­ning. Thus German de­vel­op­ment co­op­er­a­tion is making a sig­ni­fi­cant contribution to achieving the health-related Millennium De­vel­op­ment Goals.

These efforts are gradually beginning to bear fruit and in Sep­tem­ber 2010, the United Nations awarded Nepal the MDG Achieve­ment Award for successfully halving maternal mortality (MDG 5) between 1996 and 2006.

Service-Links & Content-List

Ministry

What we do

Press room

Publications

Services

BMZ glossary
Close window

Facebook Twitter MySpace Favorites Mister Wong Google