European Union

Nepal is a landlocked country in the eastern Himalayas, extending over an area of 147,181 square kilometres and with an estimated population of 29 million. The country is bordered by the Tibet region of China in the north and by India in the east, west and south. Due to its difficult geography and tormented history, socioeconomic progress has not been rapid and Nepal remains an LDC with a per capita income of $420. Nepal is the poorest country in South Asia. The country’s real annual economic growth has averaged about 4-5 percent over the last two decades, but in the past four year Nepal's GDP has declined, mainly as a result of labor unrest and frequent closure of industries coupled with failure to chart out timely development plans through widespread consensus. The restoration of peace following the successful people’s revolution (Jana-Andolan) in April 2006 and the Comprehensive Peace Accord signed in November 2006 has yet to impact positively on the economy, which grew only by about 3 percent in 2006/07 and is projected to be not more than 3.8 percent in 2010/2011. There is huge potential for exporting hydropower and for tourism which is still largely untapped.

Nepal’s main difficulty is building the foundations for its new nationhood. Besides achieving lasting peace, the country urgently needs a solid and robust democratic system of good governance and a sustainable economic development strategy based on a comprehensive and inclusive social framework and dialogue. The country will also have to adjust rapidly to post-Multi Fiber Arrangement, to the new India trade policy with LDCs and to WTO obligations. Nepal has to implement the current reform policy in a vigorous manner in order to improve its competitiveness and investment opportunities.

With time running out for completing the new constitution within the extended deadline of 28 May 2011, the CPN (UML) led government backed by the UCPN-Maoist has the onus of holding extensive political dialogue with parties in the opposition, the Nepali Congress, to accomplish the twin tasks of statue drafting and conclusion of the peace process. It needs to hold political dialogue to address the issue of army integration urgently and assist the Election Commission to prepare for a fresh round of elections to usher in political and economic stability in the country.

In July 2007, Nepal’s 10th Five-Year Plan (2002-2007) was followed by a Three-Year Interim Plan (2009-2010) which continues to adhere to the objectives of the existing Poverty Reduction Strategy Paper. The national poverty rate in Nepal - at 31 percent - remains high. Remittances income, agricultural productivity and satisfactory access to public services (schools, etc.) will play key roles in the transformation process. In the long term, Nepal’s development strategy will focus on achieving the MDGs by 2015.

In an effort to support the GON’s development objectives and in line with the 1996 EU-Nepal Framework Co-operation Agreement, the EU’s assistance to Nepal during the period 2007-2013 will have an estimated budget of €120 million and will target the following three areas:

• Education (with human rights, conflict prevention and good governance as crosscutting issues): assist Nepal in the education sector, by creating an enabling environment to achieve the MDGs.
• Stability and peace building: the Government of Nepal has underlined the importance of this sector and is directing the  process of change; this will be an important sector for EU support that could  be coordinated with other Nepal Development Partners.

• Trade facilitation and economic capacity building.

The complete Country Srategy Paper 2007-2013 is available here .