Updated October 10, 2019
Nepal
Overview
the two-thirds of Nepal’s workforce that rely on agriculture
Nepal faces many challenges as it seeks to develop its
for their livelihood.
economy while consolidating its relatively new democracy.
Nepal’s status as a poor, relatively small, landlocked buffer
Figure 1. Nepal in Brief
state between China and India largely defines the context of
its foreign policy. U.S. policy objectives with respect to
Nepal include supporting democratic institutions,
promoting regional stability and security, alleviating
poverty, promoting human rights and sustainable economic
growth, and helping build resilience to deal with climate
change and natural disasters.
Background
Nepal is a poor country of an estimated 28 million people
that has undergone a significant political transformation
since 2006, when a 10-year armed struggle by Maoist
insurgents ended after claiming at least 13,000 lives. Rising
democratic sentiment curbed the king’s powers in 2006.
Following the Maoists joining the political process and their
electoral success in 2008, Nepal declared itself a republic
and the Constituent Assembly (CA) was directed to write a
new constitution. A subsequent CA elected in 2013 ended
years of political deadlock by agreeing to a new
constitution in September 2015. Local, provincial, and

national elections were held in 2017 and 2018. Nepal now
U.S. Relations & Assistance
has a bicameral legislature with 275 Members in the House
of Representatives and 59 Members in the National
The United States and Nepal established diplomatic ties in
Assembly, the body’s upper house. Though the process of
1948, and relations between the two countries are generally
democratization begun in 2006 has not been smooth,
friendly. There appears to be a lack of clarity with regard to
Nepal’s
Nepal’s government has brought former insurgents into the
approach to the United States’ Indo-Pacific
political system, conducted peaceful elections, and, in a
strategy. Co-chair of the ruling Nepal Communist Party and
broad sense, has taken large steps toward establishing a
former leader of the Maoist insurgency, Pushpa Kamal
functioning democracy. Ethnic, religious and caste
Dahal, reportedly stated, “If the Indo-Pacific strategy is to
target China, we cannot accept it.” Dahal has also urged
identities are important for many in Nepal, where 81% are

that Nepal’s projects under China’s
Hindu and 9% Buddhist. Nepali is the official language,
Belt and Road Initiative
should not be delayed. Nepal’s Foreign Minister Gyawali
though many regional and indigenous languages are also
spoken. The three main geographic divisions of the country
has also reportedly refuted assertions that Nepal is part of
include the low-lying and agriculturally productive Terai
the U.S. Indo-Pacific initiative. The U.S. Department of
region, which borders India, an intermediate central hill
Defense Indo-Pacific Strategy Report states, “Within South
Asia, we are … pursuing emerging partnerships with Sri
zone and more mountainous parts of the country. Never
Lanka, the Maldives, Bangladesh, and Nepal.” Nepal
colonized, Nepal was largely isolated until the early 1950s.
may
continue to find itself pressed by China to distance itself
Environmental factors are a key challenge for Nepal. A 7.8
from the U.S. Indo-Pacific strategy.
magnitude earthquake struck Nepal in 2015. By some
estimates, 9,000 people were killed, 22,000 were injured,
Nepal has significant need for economic development and
and 755,000 homes were destroyed. Nepal was criticized
foreign assistance. The United States has provided over
for its slow response to the crisis. Temporary Protected
$1.6 billion in assistance to Nepal since 1951. U.S.-Nepal
Status (TPS) for Nepal, which had been granted following
cooperative efforts include the Peace Corps. U.S. assistance
earthquakes there, was scheduled to expire in June 2019.
programs focus on agriculture and food security;
The June expiration date was suspended until further notice
democracy, human rights and governance; education;
in May 2019. Nepal is particularly vulnerable to rising risks
environment and global climate change; gender equality
brought on by climate change. The need to build climate
and social inclusion; global health; and working in crisis
resilience is growing due to the impact that rising
and conflict. H.R. 2740, pending before the Senate, would
temperatures, shifting rainfall, and drought are having on
appropriate $6 million “for programs to promote and
preserve Tibetan culture, development, and the resilience of
Tibetan communities in India and Nepal, and to assist in the
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Nepal
education and development of the next generation of
domestic constitutional debate and its imposition of the
Tibetan leaders from such communities.” The Millennium
blockade. Oli signed a trade and transit agreement with
Challenge Corporation’s Compact with Nepal, signed in
China in 2016 in an effort to end India’s monopoly over
September 2017, includes $500 million to “spur economic
trade with Nepal. As a result, Oli was seen as tilting
growth and reduce poverty in Nepal.” The compact’s $398
towards China.
million electricity transmission component “will expand
and strengthen the high voltage electricity transmission
Indian Prime Minister Narendra Modi has sought to mend
network to support new investments in generation.” A
ties and restore India’s influence with Nepal. During a May
bilateral Trade and Investment Framework Agreement
2018 visit to Kathmandu, Modi spoke of “initiatives in
entered into force on April 15, 2011. Agreement objectives
agriculture, inland waterways and railways [that would]
include the expansion of trade, investment, and technical
increase mutual connectivity of people and businesses of
cooperation, and strengthening economic relations between
both the countries,” and added that a “survey for new
the two countries.
railway link between Raxaul and Kathmandu will start
soon.” Modi reiterated his commitment to “work with
Recent Political Developments
Nepal to further strengthen the traditionally close and
Nepal’s continuing democratic development was
multifaceted partnership between India and Nepal” during
demonstrated by successful local, provincial, and national
Prime Minister Oli’s May 2019 New Delhi visit.
elections in 2017 and 2018. The “Left Alliance” of the
Communist Party of Nepal United Marxist Leninist (CPN-
China has in recent years made significant inroads in
UML) and the Communist Party of Nepal Maoist Centre
developing ties with Nepal. This appears to have been made
(CPN-MC) won parliamentary elections held between
possible by the unofficial 2015 blockade of Nepal by India
November 2017 and February 2018. As a result, the new
and significant Chinese investment in infrastructure in
Left Alliance now has a majority in both the House of
Nepal as part of its Belt and Road Initiative. China and
Representatives and the National Assembly. It has also
Nepal also held their first-ever military exercises in April
formed governments in six of the seven provincial
2017 and China reportedly constructed a $350 million
assemblies. Pushpa Kamal Dahal (a.k.a. Prachanda) of the
facility for the Nepal Armed Police Force. Nepal and China
CPN-MC and Prime Minister Khadga Prasad Sharma Oli of
signed a Memorandum of Understanding on the Belt and
the CPN-UML reportedly have a power-sharing agreement
Road Initiative in May 2017. Beijing has pledged to invest
under which Oli is to serve three years as prime minister
$8.3 billion in road and hydropower projects in Nepal and
and Prachanda is to serve for two years. While some
has proposed building an $8 billion railway from Lhasa to
observers are optimistic that Nepal could be entering a
Kathmandu. Chinese President Xi Jinping reportedly will
period of political stability, the potential for political rivalry
visit Nepal in mid-October 2019 and inaugurate the Jhor-
remains. The next elections are due in 2022. Potential
Gurjebhanjyang tunnel that will connect Nepal’s capital
agitation by the Madhese ethnic group of the southern Terai
Kathmandu and Kerung in Tibet. Nepal and China
region may be a potential source of instability.
reportedly have been having talks aimed at expanding BRI
projects between the two countries. The CPN and the
Nepal’s Relations with India and China
Communist Party of China signed a Memoranda of
Nepal’s ties with India historically have been closer than its
Understanding establishing fraternal relations between the
ties with China largely due to geography and shared Hindu
parties, and a Symposium on Xi Jinping Thought was held
traditions, but Nepal is expanding ties with China as it
for NCP leaders in Khatmandhu in September 2019.
seeks to reduce its overreliance on India. Nepal is
experiencing more diplomatic and economic engagement
HRs, Trafficking & Migrant Workers
from both India and China than in past years, as its
The State Department’s 2018 Country Report on Human
neighbors seek to protect their interests and expand their
Rights Practices: Nepal found reports of “unlawful or
ties to Nepal. While the Himalayan mountain range along
arbitrary killings; torture; cruel, inhuman or degrading
Nepal’s northern border has historically limited interactions
treatment, and arbitrary detention.” The State Department’s
with China, the 500-mile southern plains border with India
2019 Trafficking in Persons report found that Nepal, a Tier
is relatively open. India and Nepal have had a tradition of
2 country, “does not fully meet the minimum standards for
close coordination in the areas of defense and foreign
the elimination of trafficking but is making significant
affairs. The India-Nepal Treaty of Peace and Friendship,
efforts to do so.” Over 7,000 women and girls are
signed in 1950, has served as a basis of the relationship.
reportedly trafficked to India each year, where they are
Nepal also depends on India as its primary source of
forced to become prostitutes. Nepal also has the third-
imports and its main market for exports, and for access to
highest rate of child marriage, with 37% of girls marrying
the sea through the port of Kolkata. An estimated 32,000
before age 18 and 10% by age 15. Many Nepalis go abroad
Nepalese Gurkha troops serve in the Indian Army.
in search of work. Many of those working in the Middle
East and Southeast Asia labor under harsh conditions and
Relations between Nepal and India cooled after India
some are subject to abuse and exploitation. Remittance
unofficially blockaded Nepal in 2015 in response to Nepal’s
inflows to Nepal were estimated to be the equivalent of
adoption of a constitution that India asserted did not
28% of Nepal’s GDP in 2018. Approximately 10% of
adequately take into account the interests of ethnic Madhese
Nepal’s population works abroad.
of the Terai, who have close ties to India. Prime Minister
Oli (2015-2016 and 2018-present) was critical of the New
Bruce Vaughn, Specialist in Asian Affairs
Delhi government’s decision to become involved in Nepal’s
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Nepal


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