Democracy and Economic Reform in Nepal:
CONFLICT AND CONSEQUENCES FOR DEMOCRACY
Reagan-Fascell Democracy Fellow National Endowment for Democracy
The views expressed in this presentation represent the analysis and opinions of the speaker and do not necessarily reflect those of the National Endowment for Democracy or its staff.
Outline of Presentation
Political Forces in Nepal History of Economic Reform Political Resistance to Economic Reform Today: Financial Sector Labor Law Governance Public Expenditure
Consequences for Democracy
Political Forces of Nepal
Nepali Congress Communist Party of Nepal (UML) Communist Party of Nepal (Maoists) Monarchy
The Nepali Congress
1946: Nepal’s largest political party, the Nepali Congress, founded 1950: Plays a lead role in toppling the Rana regime and establishing constitutional monarchy 1959: Secures an absolute majority in Nepal’s first-ever multiparty elections 1960: King overthrows government in a military coup & imposes direct rule under single-party Panchayet regime for 30 years. 1990 and 2006: Congress plays a key role in pro-democracy movements of 1990 and 2006. 2007: Following suspension of the monarchy in December 2007, president of Nepali Congress G .P. Koirala becomes both head of state and of government.
Since its founding in 1949, the communist movement has been characterized by numerous mergers and splits 1991: Nepal’s largest communist party CPN (United Marxists Leninists) formed 1995: CPN (Maoists) formed. 1996: Launches armed insurgency to establish a communist state 1990 and 2006: Communist parties collaborate with Nepali Congress to play major roles in movements to restore democracy
1769: King Pritivi completes conquest to unite Nepal 1846: Rana regime captures power in bloody military coup 1960: King overthrows the first democratic government and imposes direct rule under the single party Panchayet regime for 30 years 1990: Democracy restored 2001: Royal Massacre, Crown Prince kills royal family 2005: King Gynendra stages military coup and imposes direct rule for 15 months 2006: People’s uprising forces King abandon his direct rule 2007: Interim parliament votes to abolish nearly 240 yearold monarchy.
Nepali Economy at a Glance
Population GDP (current US$) GNI Per capita (US$) Life expectancy at Birth (years) Military expenditure (% of GDP) Internet users (per 1000 people) Primary school completion rate (%) Nepal(2005) India(2005) China(2005) 27.1 million 1.1 billion 1.3 billion 7.1 billion 805.7 billion 2.2 trillion 270 730 1,740 62.7 2.0 4.1 74.4 63.5 2.09 54.8 89.8 71.8 2.0 85.1 -
Source: World Bank Indicators
Economic Reforms before Democracy (1985–1990)
A serious financial crisis in the mid-1980s brought the IMF and World Bank to the rescue with conditional economic assistance. The early reforms were focused mainly on the financial and trade sectors. Financial sector Removal of entry barrier for joint-venture banks Deregulation of interest rates Allowing private sector to establish financial institutions Trade sector Devaluation of Nepali currency to check imports and make exports competitive Introduction of import license auction system to replace quota system
Economic Reforms Before Restoration of Democracy (1985–1990) The Impact Number of banks increase from 2 to 5 Deposits increase by 160 percent Lending increase by 150 percent With increases in both imports and exports, total volume of international trade doubles
Reforms After Restoration of Democracy (1990–2006)
Market-oriented, liberal economic policy, with limited government intervention in the private sector Almost all sectors are opened up to foreign investment and policies are announced to lure foreign investments: Further privatization of public enterprises (PEs) Exporters allowed to retain their foreign exchange earnings Entry for private sectors’...
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