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Peace transformation and Nepal’s economy

Peace transformation and Nepal’s economy

Developing countries have always attracted the interest of investors. The economy here is not so stable, so it is worth relying not only on its most developed sectors, but also taking into account the general state of the country, its political background and development trends.

Relatively recent events in the South Asian country have had a significant impact on economic development. There has been a ‘reshuffling’ of the leading economic sectors and the emphasis is now on attracting foreign capital and businesses to work in Nepal.

History of the Kingdom of Nepal

Until late spring 2008, the institution of royalty flourished in Nepal. The kingdom had existed for 240 years since its founding date in 1768.

Until 1846, the ruling dynasty was the Shahs. Then power was seized by authoritarian tyrants from the Rana dynasty who ruled Nepal from 1847 to 1951. It was a time of restructuring and a highly unstable state of the country’s economy.

The monarch-shah was relegated to a purely ceremonial role, the rulers of the Rana dynasty exploited the population, and greatly disrupted Nepal’s calibrated economy.

In the mid-twentieth century, popular movements for the democratization of the country began to erupt. With the support of Britain and then independent India, the legitimate Nepalese government overthrew the Rana despots and began the transformation of the country.

The 1960s and 1970s were marked by the failure of reforms and the adoption of a new constitution. The failures of the 1980s led to an economic crisis, which also affected the government’s domestic political ideas. Therefore, in 1990 it was decided to adopt Nepal as a constitutional monarchy an

d to introduce parliamentary elections.

At the beginning of the 21st century, discontent among the population increased, which led to a ten-year civil war in Nepal (1996-2006). During the war there was also a change of government, which also dealt a decisive blow to the economy.

On January 14, 2007, Nepal’s parliament temporarily adopted a constitution which weakened the advantages of the king and his status in general. All functions of power now belonged to the prime minister. The fate of Nepal’s monarchy was in the hands of the members of the Constitutional Assembly, who constantly postponed elections indefinitely.

The government had no choice but to abolish the monarchical regime in the country, which happened on May 28, 2008, at the first session of the 1st Constituent Assembly of Nepal. The former kingdom was named the Federal Democratic Republic of Nepal.

It was the last remaining monarchy among the Hindu states. Nepal proclaimed itself a secular state in which religion did not interfere in the administration of the country and decisions were not made on religious grounds. This decision served as a booster for a new turn in the economy and political order of the country.

FDR Nepal in our times

Since May 28, 2008, an interim government was almost unanimously elected in Nepal with the goal of creating a new constitution for the country. The Constitutional (Constituent) Assembly of Nepal temporarily acted as parliament.

When the new government came to power, the popular unrest did not cease. The situation was exacerbated by the protracted economic crisis in which the state had already been in for a considerable period of time. Therefore, by May 2010, the interim government was unable to finalize the draft constitution.

Nepal’s new constitution saw the light of day in June 2015. The country proclaimed plans to build socialism. It was decided not to develop the economy according to five-year plans. The government now focused all its efforts on eradicating poverty among the population.

In 2018, the Economist Intelligence Unit (The EIU), a world leader in global business analysis, classified Nepal as a country with a “hybrid regime” of democratization. This meant that the South Asian state still had authoritarian features, such as political repression, overlaid with an unfinished transition to a democratic political system of governance.

In Nepal, democratic actions are more of a decorative nature. Thus, parliamentary elections do not lead to a significant change of power, the opposition has no opinion of its own, and multipartyism plays no role. All this does not prevent Nepal from developing, implementing policies to improve the economy and bringing new economic sectors to the foreign market.

Currently, the state has the status of a federal parliamentary republic, which is reflected in the economic development plans of the country. The tourism sector of the economy is the most developed. The capital of Nepal, Kathmandu, is also the historical center of the country, so thousands of tourists from all over the world flock here every year.

Agriculture plays a big role in Nepal’s economy. More than 76% of the working population of the country is engaged in the agricultural sector. However, gross domestic product figures are 40% higher in another sector, the service industry. Foreign tourism remains the main source of foreign exchange earnings.


Throughout history, the state of Nepal has undergone numerous changes of power, political regimes and the very structure of the country. But this has contributed to Nepal’s unique development, the formation of a “hybrid regime” in the country and taking the economy to a new level.

At the moment, Nepal is a potentially lucrative state for long-term foreign investment. Every sector of Nepal’s economy deserves attention, as experienced, skilled professionals can boost the country and increase its global influence in the years to come.