Nepal Country Context

Nepal is currently ranked 157th place (out of 187 countries) on the Human Development Index (HDI) reported by UNDP, and is one of the least developed nations in the entire world.

Nepal’s GDP is primarily comprised of three parts, agriculture, services, and industry. The former two parts accounts for around 85% of its GDP. With Nepal’s opening up to the world, agriculture and industry is contracting, while the contribution by service sector is increasing.Tourism is one of Nepal’s new sources of income.It contributes nearly 3% of national GDP and is the second biggest foreign income earner after remittances.Yet tourism industry is stifled by political instability and poor infrastructure. Nepal’s GDP growth rate is as high as around 3.5%-5% in recent years. However, high inflation rate (i.e. 7%-10% yearly) threatens the living standards of people, and prohibits actualization of development outcome, due to wage pressures, fuel price hikes and continuous power shortage.

The structure of workforce in Nepal is quite simple. In 2012, 82.66% of whole population of Nepal lives in the countryside. Agriculture is the main source of making a living. Among its current 14 million labors, agriculture employs 76% of them. Nearly 10 million workforce suffers from a severe shortage of skilled labor. Unemployment is prevalent in Nepal. The rate of unemployment and underemployment approaches half of the working-age population. Thus many Nepali citizens move to other countries in search of work.Top destinations include India, Qatar, and the United States.

Nepal’s economic growth looks vulnerable because it is continuously adversely affected by the political uncertainty. Rapid political changes have taken place during the last two decades. The political pattern has moved from a Monarchy under sole control of the King, to a Republic country with Monarchy and Parliament ruling together, after communism influences in the past decades. However, Nepal’s government is criticized of being corrupted and ineffective, and reckoned as the root of development hindrance of Nepal.

Nepal is still suffering from many severe social problems. It lacks of reliable technical infrastructures of basic electricity, internet, communication facilities. There are few highways, and hygiene water supply is limited. Economic environment is not sustainable, with unsound legal systems which cannot secure financial outcomes of people, and investment channels are few. Education system is poor, without critical thinking cultivation and freedom of speech. The country receives foreign aid from India, Japan, the UK, the US, the EU, China, Switzerland, and Scandinavian countries.

Though being one of the poorest countries around the globe, the proportion of poor people in Nepal has declined substantially in recent years. The percentage of people living below the international poverty line (i.e. people earning less than US$1.25 per day) has halved in only seven years — the percentage of poor people declined from 53.1% in 2003/2004 to 24.8% in 2010/2011. If the progress of reducing poverty continues in this rate, then it’s predicted that Nepal will halve the current poverty rate and eradicate poverty within the next 20 years.